PESTLE and Marketing Strategies - Essay Example

? PESTLE and Marketing Strategies 9 December INTRODUCTION Nestle's marketing strategies differ across the globe and the success of its numerous brands at the international scale demonstrates the insight of the business maxim that local is global. Nestle is known for understanding its local environment and designing local marketing strategies that effectively target the market. Needham and Dransfield (2000) stress the role of external scanning in devising effective marketing strategies: “Examining the business environment helps an organisation develop appropriate marketing strategies, including the marketing mix” (p.305). They note that the external environment impacts the following: customers, industry, competitors, government, and regulating bodies. Choosing the best marketing mix requires aligning external realities and the internal resources and capabilities of the organisation (Needham and Dransfield 2000, p.305). Dickinson and Ramaseshan (2008) agree with Needham and Dransfield (2000), but the former also emphasise that other factors also impact marketing strategy, such as the company's cooperative arrangements. This report believes that a company cannot generate effective marketing strategies, if it is only focused on its internal environment in planning these strategies. It must consider the external business environment, so that it can respond to the threats and challenges that are embedded in the outside world. Nevertheless, it does not postulate that only the external environment can assure the success of a firm's marketing strategy. Other factors will also impact the outcome of marketing strategies. One important framework for analysing the external environment is through the PESTLE analysis. This report will use PESTLE analysis on Abu Dhabi, where its main goal is to help Nestle generate a marketing mix that will introduce a new line of food product for toddlers. SITUATIONAL ANALYSIS AND MARKETING MIX The PESTLE analysis is one of the most prominent external scanning tools. It analyses the political, economic, social, technological, legal, and environmental factors that can impact a company's marketing strategy by affecting consumer behaviour and choices, as well as their income levels. PESTLE analysis also reveals opportunities and threats that can shape future marketing strategies (Needham and Dransfield 2000, p.305). PESTLE analysis is also not a one-time event. It has to be done regularly, because the environment constantly changes and it will be critical to respond to these changes that can impact the business. This section analyses these factors in Abu Dhabi and relates it to the marketing strategy of Nestle. PESTLE Analysis Political factors. The government of Abu Dhabi promotes economic sustainability through diversifying its industries that will ultimately reduce its dependence on oil revenues. This economic diversification scheme can have a positive effect on Nestle’s brand extension scheme, because it can improve the reception for its new product line. In addition, after the Arab spring (Anderson 2011), the U.A.E. government aims to enhance the conditions of liberal human rights, so that its citizens will not think of being involved in political and economic sabotage and other economically-ruinous activities. The political environment can affect the marketing strategy of the company, because it will provide the political and economic stability needed to expand in this market. The political environment also regulates companies and competition. The political condition of the U.A.E. is considered as stable, in general, so it will not be risky for Nestle to expand business in the region. The U.A.E., in addition, pursues Emiratisation to enhance the employment of its citizens. This will impact Nestle's employment of expatriates in the long run. It would have to prepare nationals to handle critical management and marketing positions. Economic factors. Abu Dhabi is implementing its long-term economic development plan, which follows this formula: Development= Sustainability + Economic Diversification (UPC n.d.). This formula is embedded in the Abu Dhabi 2030 Urban Structure Framework Plan (UPC n.d.). The development initiatives have the goal of increasing GDP growth by 7% until 2015, and 6% for the following 15 years, through a widespread economic diversification program (UPC n.d., pp.165-166). A good economy means that there is a potential market. Economic factors can impact the market's ability and willingness to buy. An improving economy is even better, because it also bids a growing market. Abu Dhabi's development plan is good for Nestle, because a strong economy means that there will be a market for its products. It will directly affect the pricing strategy of the company. A strong economy can also fuel the organic growth of the company, as it expands product lines and brands. Socio-cultural factors. The middle class of the Abu Dhabi is growing, which is the primary target market of Nestle's new food products for toddlers. Some of the prominent social factors in Abu Dhabu are urbanisation, increasing disposable income levels for men and women, more women are joining the workforce, and high population of non-nationals (Dairy Foods 2011). Nationals are becoming more and more open to Western food and processed products too (Dairy Foods 2011). More professionals are working in both the private and public sectors (Dairy Foods 2011). The new middle-class consumers are also interested in food safety, healthy lifestyle, and environmental preservation (Dairy Foods 2011). Abu Dhabi is also racially diverse. Only 20% of the population are nationals, while majority are composed of Asians and Westerners. Many Westerners and expatriates/immigrants have well-paying jobs and some already have their children and families with them. In terms of food consumption of nationals, there is high demand for milk in Middle Eastern nations, especially since Muslims do not drink alcohol and prefer to drink tea and milk over alcohol beverages. The Dairy Foods website (2011) also stated that there is increasing demand for milk products for the past three years, especially in China, India, Southeast Asia and the Middle East/North Africa. Milk is a good ingredient that can be added to Nestle's new food product. Socio-cultural factors will impact Nestle's marketing mix, because they can directly affect the product, pricing, placing, and promotion of its new product. These factors can affect consumer attitudes and behaviour. For instance, culture frequently impact what people prefer to eat. It will also affect their product choices. For instance, Nestle will have to put several translations on its boxes, because it will be selling to several nationalities. Nestle should also create a product that can fit the diverse tastes of its market. The diversity of nationalities further means that Nestle should examine the best advertisement that will suit different cultural values and beliefs. In addition, it should consider different distribution strategies, since different cultural or racial groups may be hanging out or spending time in different places. Their presence in different locations can impact the distribution strategy of Nestle too. Technological factors. Research and Development (R&D) can help prepare food products in an efficient and hygienic manner (Mashia 2011). It is also important to practice preparing products, where equipment and utensils will not come in contact with pork, because that is halal or alllowed for Muslims. Other food companies are also improving their research and technology transfer in the food industry, specifically in areas where there is a high demand for nutritious and low-cost food products (Mashia 2011). In addition, the Middle East is embracing social media as part of its way of life. Generation Y is particularly well-versed in using technology, including telecommunication and computing devices. They are also active in the social media and participate in social networking sites. Technology can impact how Nestle communicates with its consumers and other stakeholders. It can also improve its product, by using technology that will create exciting new tastes and scents. Nestle can review its R&D and ensure it is applying halal in all its premises, so that it will no alienate Muslim consumers. It can also use the local social media to market its new products. Legal factors. Abu Dhabi has no law that regulates marketing to children, although the Gulf Cooperation Council (GCC) (2009) signed a marketing pledge with Nestle and other companies. This pledge states that companies that are party to it will not advertise to children under 12 and that there will be no communication of products in schools, except for certain considerations, such as for products that meet nutritional criteria with scientific evidence and when schools cooperate with these companies for educational purposes. Legal factors will directly impact the marketing mix in direct and indirect ways. Nestle should follow these laws, as well as laws concerning food safety and marketing to children. It should also avoid violating laws that can malign its reputation, because this can affect the outcomes of its marketing strategies. Environmental factors. Abu Dhabi has protective environmental regulations. Environmental factors will affect Nestle's marketing strategy, especially through environmental regulations. It will also indirectly affect Nestle if it becomes involved in unethical environmental practices. When this happens, even an effective marketing strategy can have low outcomes, because people will no longer support Nestle's products. Nestle should consider how it can create, market, and distribute products that are environmentally friendly. It can even proactively promote environmental concerns, which will be good for its brand equity. Strong brand equity can enhance the outcomes of its marketing strategies. Conclusion The external environment can impact the marketing strategies of Nestle, because they also influence and describe consumer choices and industry characteristics. Political, economic, socio-cultural, technological, legal, and environmental environments can make or break Nestle's marketing strategies and outcomes. If the company will not consider these factors, either it will make an incompletely “wrong” product that does not culturally fit the tastes of its market, or it will use “wrong” marketing language and tactics that will offend the market. Or it may not use effective distribution strategies, because it did not study the economic conditions of its market. Thus, it is important for any company to study its external environment, before producing and marketing any product, so that it can generate successful marketing strategies. References Abu Dhabi Urban Planning Council (UPC), 2011. Plan Abu Dhabi 2030: Urban Structure framework plan. Available at: http://www.dot.abudhabi.ae/download.do?loc=stmp/&file=PlanAbuDhabi2030.pdf [Accessed on 29 October 2011] Ameinfo.com, 2008. Abu Dhabi 2030: The blueprint. 24 March. Available at: http://www.ameinfo.com/186745.html [Accessed on 29 October 2011] Anderson, L., 2011. Demystifying the arab spring. Foreign Affairs 90 (3) 2-7 Available through: EBSCO database [Accessed 29 October 2011] Dairy Foods, 2011. The demand for dairy is overseas. 9 September. Available at: http://www.dairyfoods.com/Articles/Departments/BNP_GUID_9-5-2006_A_10000000000001100969 [Accessed on 29 October 2011] Datamonitor, 2010. Nestle SWOT Analysis Datamonitor Available through: EBSCO database [Accessed 29 October 2011] Dickinson, S.J. and Ramaseshan, B., 2008, Maximising performance gains from cooperative marketing: understanding the role of environmental contexts. Journal of Marketing Management 24 (5/6) 541-566 Available through: EBSCO database [Accessed 29 October 2011] Gulf Cooperation Council (GCC), 2009. The GCC food and beverage pledge on responsible marketing and advertising to children Available at: https://www.ifballiance.org/sites/default/files/IFBA%20GCC%20-%20Marketing%20to%20Children%20Pledge%20-final%20%20signed.pdf [Accessed on 29 October 2011]. Mashia, N., 2011. Israel/neighbours must cooperate to stop the food crisis. Common Ground News Service. 6 September Available at: http://www.commongroundnews.org/article.php?id=30325&lan=en&sid=2&sp=0 [Accessed on 29 October 2011] Needham, D. and Dransfield, R., 2000. Advanced business. UK: Heinemann Educational Publishers Read More