Strategic Management for Nestle Company - Case Study Example

Nestle Company Name Institution Strategic management for Nestle Company Introduction Nestle is a food and beverage company which has been in existence in Australia for more than hundred years. Her origin was Switzerland but recently the company has made Sydney her headquarter for some of its IT support centres. Moreover, as a way of capturing the attention of its customers the company has also chosen Australia as its operations headquarter. (Heslin & Ochoa, 2008) Nestle is the largest food company in the world which began just as an infant cereal meal producer in India. Today the company has gained fame in the entire world with its quality food and beverage products. In Australia the company has about fifteen factories and around 8 distribution centres. About 5,700 workers in more than fifty offices have been employed by the company in the region. Globally the company has about four hundred and eighty one factories offering employment to around 265,000 workers. By 2007 the company had made revenue totalling to about A$2.8 billion in Australia alone. The main products that the company sells in Australia and its environs include; ice creams, Kit Kat chocolate bars, Allen’s confectionaries, Purina pet foods, Ski yoghurts, Milo, Maggi seasoning and sauces, Nescafe coffee, Lean Cuisine frozen foods among others. Industry Analysis Product Nestle company produces a wide range of products that suits its consumers. This advantage makes it possible for the company to reach many and varied customer base. Moreover the company has embarked into a continuous product development a strategy that has enabled the company even to market some of its products overseas. An example of a product that was developed by the company and caught the international market attention was Milo. Milo which is a powdered chocolate drink product was developed in early 1934 in Australia. Today the product is sold in more than 30 countries. In addition Milo has been able to generate about A$500 million earnings annually to the company (Nestle, 2006). The wide range of products from the company has also been a good marketing strategy for the company since through those products the company is able to acquire different market segment. The Allen’s confectionary as well as the Kit Kat chocolate bars has been a big catch for the children and school-going students’ market segment. This group of customers is quite large and given the quality of the company’s products most of the customers often goes for them. Maggi seasoning and sauces is another catching point which does not only win the attention of teenagers but also that of the adults too. Nestle company products can be categorised in terms of age, time of taking the products as well as seasons. For example there those products which been made tailored for certain group of consumers while there are others which have been made to be consumed at given times of the day or the year. This helps in capturing different types of consumers at all times. (Khamis, 2009) Corporate Governance and Sustainability, Goals, In Australia the company is well suited as far as corporate governance is concerned. According to the company’s Director of corporate and external Relations the country is versed with well educated, highly skilled and well trained workforce who helped in improving the company’s effectiveness. Moreover, the country offers a sound entrepreneurial environment that enhances the company’s productivity and smooth performance. The Director describes the country’s regulatory practices as well as the tax system as a conducive and a wise investment destination for the company to thrive well. Nestle Company has been able to establish an excellent relation with the country’s state government departments especially the infrastructure and the regional development sector. The friendly relationship that the company has been able to create with the Australian state government has made it easy for the company to work towards attaining its goals and objectives. For example Nestle works hand in hand with the National Food Industry Strategy which is a mutual venture between the government of Australia and the food industries in the country that enhances industry’s export effectiveness. This has also eased the company’s ability to comply with the country’s R & D reductions. Business and Corporate Level Strategies Under the company’s principles one of its core duties is creating a shared value in the countries where the company operates. In bid to achieve this, Nestle aims at carrying out its analysis so as to establish the areas of great potential in order to capitalise on a mutual value optimisation with the society in that particular area. The main areas of concern for the company to the community are water, Nutrition and rural development upon which Nestle has maximized its efforts on. The Company is currently rated the best health and nutrition provision company worldwide. Nestle company does everything in reference to satisfy their customers. A research is carried out frequently in their market to find out the needs of their customers so as to tailor their commodities in that line to make sure they satisfy each and every customer. Due to its outstanding qualities in customer service, the company have been able to expand its markets oversees which comprises of up to 12 factories and 6000 employees. (Smith, 2007) Nestle company offers to its companies the best qualities in the current market as far as beverages like Nescafe, Milo, and Purina among others are concerned among others that are consumed worldwide among them being confectionery products (Jones & Reid, 2010). Nestle does business by creating shared value to its customers. The company aims at creating new value for its customers and at the same time building sustainability while trying to exceed compliance. The company also looks at the welfare of its shareholders the society as a whole. The mission of Nestle Company “Good food, Good life” sells the company the best way possible to its customers. Nestle provides foods that are healthy and balanced so that each and every one finds the joy of life. Also the company assures its customer of foods with great tastes and safety to bring fulfilment to all. (Jones & Reid, 2010) In their customer service, Nestle Company create ways of achieving sustainable and improved value of life. Good customer service has helped the Nestle Company in the marketing of its products and as a result the organization stands out the best performer worldwide (Singh, Smith & Sohal, 2005). To build even more credibility to their customers, Nestle Company builds partnerships with the society and the community in Oceania to improve the life quality standards of the society. Another commendable element in the company’s customer service is that they render the service in all honesty to make sure the close all loopholes of mistrust that may arise. They Cleary indicate every ingredient that they use in the preparation of their products. Fairness and integrity is also observed in their activities to create a win-win situation hence creating a balanced atmosphere. The organization works under business principles that they seek to stand for to enhance good governance and commitment to their customers. This helps the company to have a good report on their progress. (Rugman, 2005) Nestle organizes for competitions that enhance quality life of people, helps develop their talents and most importantly it enhances their marketing skills. This is because, during these promotions, awareness to the community is highly created. This boosts the organizations sustainability and its relevance to the society in which it operates. Some of the outstanding qualities in the company’s customer service is that it have been able to identify their customers’ needs and responding accordingly. The organization has learnt the value of keeping a healthy customer service which translates to a wide market and in return there is quality goods and service. (Grünig & Gaggl, 2005) Networks, Partnerships and Alliances Nestle company always seeks to partner with those firms or stakeholders who help in maximizing the company’s positive impact on the focused areas. The company considers leveraging its core activities in order to establish a mutual benefit of the society and the communities in which it operates. This ensures a long-term perspective and concept on business growth and development thus leaving an open door for dialogue with any external party that is committed to principled performance and a constructive engagement. The partnerships engagements range from regulatory bodies, governmental and non-governmental organizations, academic and professional bodies as well as local communities. (Svensson & Wood, 2008) Values and Performance The companies is guided by a set of principles and values upon which the employees and any other body that partners with the company is compelled to abide to and follow to the letter. These principles outline the company’s aims and objectives as well as the actions that the company undertakes as far as the community in the areas of operation is concerned. (Bahrami, 2009) These principles provides a clear guidance on how the employees of the company are supposed to offer their activities as a far as quality results are concerned. The chairman and the chief executive officer of Nestle company puts it that, “Our internal rules not only require strict compliance with the law, they guide our actions even if the law is more lenient or where there is no applicable law at all. For Nestlé, upholding compliance goes beyond keeping checklists. It requires steadfast principles that apply across the whole Company, providing clear guidance to our people.” (Matzler, Bailom, Friedrich & Kohler, 2013) The performance of the Nestle Company has been very commendable in terms of producing quality products and serving the customers appropriately. This is because the company is committed to innovation and renovation, consumer engagement as well as operational efficiency. These competence pillars help the company to drive product development, good consumers’ interactive relations, operational performance as well as differentiation platforms from the competitors. Nestle believes that excellence in such areas makes the company consumer-centric and able to accelerate its performance in various strategic areas thus generating excellence in performance. (Frankenberger, Weiblen & Gassmann, 2014) The Nature and Sources of Competitive Advantage The company produces unmatched products giving it first-hand competitive advantage as far as those who produce closely related goods are concerned. Moreover, Nestle has a brand portfolio that cannot compare with any other in the market. The R $D capability of the company is also unmatched. This qualities of the Nestle Company makes it ability to out-do any competition in the region. Another advantage that the company has had especially in Australia is that it the company of its kind in the region. In addition the company has really gained favour from the citizens of that country making its strategic marketing practices very successful. (O’Riordan & Fairbrass, 2008) The culture of the Australian people has always been in the favour of the company. The preference of the company’s products by the community as well as people from the neighbouring countries is also excellent. Its values have been embraced by the company to an extent that the ability to market the products has been quite easy. This has resulted into a positive attitude from the consumers towards the company products. The products that Nestle Company sells are nutritious, healthy and attractive to the consumers. This is a marketing strategy by itself. This because the company has been able to take up its positioning so well that it has gained great popularity in the region. The Motto Good Food, Good Life has defined the company’s ability as well as its objectives. The analysis of the Nestle Company can be presented using the porter’s five forces competition model as illustrated below; Macro environmental factors Low consumers’ income is the main threat to the purchasing power of the country’s local consumers of Nestle company products. The high living standards have compelled the consumers to be very conservative as far as their spending is concerned. This means that consumption of luxury goods has highly been affected by the low levels of income among the Australian consumers. In bid to curb this eventuality the company has introduced products that can be afforded at very friendly low prices. Moreover, the company has classified its products depending on various market segments so as to reach different groups of consumers in the region. The Porter’s five forces of competition for the Nestle Company can be represented as shown below; Threat of entry Australia offers a very conducive business environment coupled by limited government regulators. This encourages investors to venture into any industry. The food and beverages industry is usually crowded with entrepreneurs including the hotels and restaurants. This means that there are no barriers to entry into the food and beverages industry if only a firm has followed the little requirements by the Australian government. However, Nestle strategic positioning has enabled it be the only outstanding company with products packaged and differentiated in its own way. (Kapferer, 2012) Power of buyers This refers to the willingness and capability of the consumers to purchase the company’s products. Through the marketing strategies that Nestle has employed in the region where it operates, the purchasing power of the consumers has been excellent. The company has been able to achieve this through the establishment of as many factories closer to her consumers as possible. For instance, the company has about 461 factory outlets in around 83 countries. (Indulska, Chong, Bandara, Sadiq & Rosemann, 2006) Threat of substitutes This is quite high given the fact that food and beverage industry is highly crowded by investors who include hotels and restaurants. The products that are directly similar to the Nestle Company products are numerous. This has posed a competitive platform for the company. However, Nestle Company has embarked on improving its products to meet the direct needs and demands of her customers. For example recently the company has majored on products that focus on consumers’ health and wellness. (Frankenberger, Weible & Gassmann, 2014) Power of suppliers The company has been able to establish a quality relation with her suppliers especially due to the fact that her products are highly demanded by the consumers. For this reason Nestle continues to build up a good and efficient interaction with her suppliers as well as the consumers so as to ensure that the products offered are the most relevant. (Welch & Welch, 1996) Rivalry As discussed earlier rival competitors in the food and beverages industry are quite many. The major rival competitors to Nestle Company include the Kraft Foods and the Group Danone companies (Grant, Butler, Orr & Murray, 2014). However, Nestle has been able to establish its brand positioning so well that none of her rivals poses a big challenge to the company. It should be noted that the competition that these companies engages in is usually a healthy competition. A lot has been spent in marketing and advertising of these company’s products. (Porter & Kramer, 2011) Conclusion The strategic management of a company determines its ability to excel in the business. This can be evidenced from the Nestle Company excellence. The company has been able to gain its positioning because of the various strategic market planning activities that have enabled the company to rise into such heights. For example, the Company is currently rated the best health and nutrition provision company worldwide. Nestle company does everything in reference to satisfy their customers; researches on customer needs and preferences are often carried out to ascertain on the products that the company is offering at any given time are the best. Moreover, the company produces a wide range of products that suits its consumers. This advantage makes it possible for the company to reach many and varied customer base. In addition the company has embarked into a continuous product development a strategy that has enabled the company even to market some of its products overseas. All these market strategies coupled together are the reason behind the company’s success. References Bahrami, B. (2009). A look at outsourcing offshore. Competitiveness Review: An International Business Journal, 19(3), 212-223. Frankenberger, K., Weiblen, T., & Gassmann, O. (2014). The antecedents of open business models: an exploratory study of incumbent firms. R&D Management, 44(2), 173-188. Grant, R., Butler, B., Orr, S., & Murray, P. A. (2014). Contemporary strategic management: An Australasian perspective. John Wiley & Sons Australia, Ltd.. Grünig, R., & Gaggl, R. (2005). Process-based strategic planning. Springer Science & Business Media. Heslin, P. A., & Ochoa, J. D. (2008). Understanding and developing strategic corporate social responsibility. Organizational Dynamics, 37(2), 125-144. Indulska, M., Chong, S., Bandara, W., Sadiq, S., & Rosemann, M. (2006). Major issues in business process management: an Australian perspective. ACIS 2006 Proceedings, 66. Jones, S. C., & Reid, A. (2010). Marketing to children and teens on Australian food company web sites. Young Consumers, 11(1), 57-66. Kapferer, J. N. (2012). The new strategic brand management: Advanced insights and strategic thinking. Kogan page publishers. Khamis, S. (2009). " It Only Takes a Jiffy to Make": Nestlé, Australia and the Convenience of Instant Coffee. Food, Culture and Society: An International Journal of MultidisciplinaryResearch, 12(2), 217-233. Matzler, K., Bailom, F., Friedrich von den Eichen, S., & Kohler, T. (2013). Business model innovation: coffee triumphs for Nespresso. Journal of Business Strategy, 34(2), 30-37. Nestle, M. (2006). Food marketing and childhood obesity—a matter of policy. New England Journal of Medicine, 354(24), 2527-2529. O’Riordan, L., & Fairbrass, J. (2008). Corporate social responsibility (CSR): Models and theories in stakeholder dialogue. Journal of Business Ethics, 83(4), 745-758. Porter, M. E., & Kramer, M. R. (2011). Creating shared value. Harvard business review, 89(1/2), 62-77. Rugman, A. M. (2005). The regional multinationals: MNEs and'global'strategic management. Cambridge University Press. Singh, P. J., Smith, A., & Sohal*, A. S. (2005). Strategic supply chain management issues in the automotive industry: an Australian perspective. International Journal of Production Research, 43(16), 3375-3399. Smith, J. (2007). The contribution of infant food marketing to the obesogenic environment in Australia. Breastfeeding Review, 15(1), 23. Svensson, G., & Wood, G. (2008). A model of business ethics. Journal of Business Ethics, 77(3), 303-322. Welch, D. E., & Welch, L. S. (1996). The internationalization process and networks: a strategic management perspective. Journal of international marketing, 11-28. Read More