Company Analysis - Nestle - Essay Example

? Company analysis - Nestle case study The aim of this paper is to highlight Nestle’s case starting from its history and background and the incidences that contributed to the formation of the company. The paper will then shift its focus to the company’s SWOT analysis, which outlines the strengths, weaknesses, threats and opportunities of the company (Ferrand, Torrigiani, and Povill, 2006). Additionally, the paper will evaluate this SWOT analysis in order to identify the impacts of the analysis to the company. The evaluation of the SWOT analysis will help in weighing the competitive position of the company and how the company can improve the identified weak points. The paper will eventually conclude by offering recommendations based on the analysed findings, which will help in solving strategic problems that affect the company. Introduction The history of nestle company began in 1860s when a trained pharmacist named Henri Nestle began researching for healthy economical alternatives to breastfeeding for mothers who could not lactate due to various reasons. Henri Nestle began by carrying out experiments of various combinations of cow’s milk, sugar and wheat flour with an aim of curbing the problem of infant mortality caused by malnutrition. The outcome of Henri’s combination was called the New Product Farine Lactee Henri Nestle (Klopping, 2013). Nestle’s first customer was a premature infant who could not consume the breast milk or any other conventional substitute, and even the physicians could not solve the infant’s case. The infant’s positivity towards Henri’s food exposed the product to the people who had earlier had negative perceptions towards the product. The company began adding chocolate to its food lines and from then on, the product hit the European market. In 1874, Jules Monnerat purchased Nestle Company, and it began condensing its own milk production in order to compete with its then competitor the Anglo-Swiss Condensed Milk Company (Klopping, 2013). However, the rivalry ended when the two companies decided to merge in 1905. The newly formed company operated in Britain, Spain, USA and Germany, but several years down the line, the company ventured Far East towards Australia, India, Hong Kong and the general pacific. The onset of world War I brought along severe disruptions that interrupted the smooth running of businesses. For instance, acquiring raw materials and distributing products became extremely difficult leading to shortages in food supply, which led Nestle to purchase several factories in the US so as to meet up the demand for condensed milk and dairy products. This fostered business boom and by the end of the war, Nestle had made a good fetch. After the end of the World War, milk became available and the situation, combined with post War economic recovery led Nestle into dept slip. However, the company through the help of a baker strategized on ways to reduce debts, and in 1920, the company came up with another product line of new chocolate and powdered beverage product. In 1930, Nestle invented Nescafe and Nestea, which hit the market throughout even in the onset of World War II because Nescafe became a favourable beverage for servicemen in Europe and Asia (Smith, 2007). In 1947, the company continued to portray its progress by merging with Alimentana, a soups and seasoning manufacturing company. Prior to the food market, the company expanded by becoming a major stakeholder in L’Oreal cosmetics by the year 1974, but the progress was cut short later when Nestle suffered due to global economic crisis like hiking oil prices, unstable exchange rates, and the rise of raw material prices that included beans and cocoa. The situation forced Nestle to venture into Alcon Laboratories, Inc. In turn of events, Nestle’s food products faced an international boycott. The boycott arose after the company introduced its products to the developing countries where illiteracy was high and the misuse of formula was misused. Most mothers from these countries mixed the food products with contaminated water, while others used lesser formula than recommended. This led to malnutrition and even deaths and Nestle’s products were greatly criticised resulting to boycotts (Smith, 2007). The worst of the situation arose in 1984 when the World Health Organization came up with allegations that misquoted Nestles stand on the importance of breast-feeding, but Nestle set its records straight. More so, Nestle accepted to abide by international Code in developing countries and stopped all its advertisements that took effect for a long time, hence, suspending the boycott. Nevertheless, things turned around in 1990s when Nestle picked up its pieces and moved on towards progress. Currently, the company has opened trade with Europe and China, where it ventured to both food products and other products business. Nestle can now boast of four hundred and seventy factories globally, and approximately eighty one billion Dollars in overall sales. Nestle’s SWOT analysis Strengths Nestle has an extremely reputable brand and the company still offers the widest portfolio of food and brewery products considering that it has eight thousand products and twenty nine brands that earn more than a billion dollars annually. This makes it hard for other corporate to compete with Nestle due to its strong market position. More so, Nestle runs in more than a hundred countries and posses a wide distribution channel globally (Jacob, 2003). Nestle has also invested more than two billion dollars in R&D in 2011. The other strength that Nestle posses is that it is capable of introducing new and redesigned products yearly, hence laying a platform for the company’s competitive advantage (Ferrand, Torrigiani, and Povill, 2006). The other major asset that Nestle has is its focused team who engage in innovative research and the company’s policies that abide by the international governing laws of different countries. Globalization has also brought in new changes to Nestle who is focusing on reaching large consumer markets by introducing markets that attract consumers from all spheres and geography of society. Weaknesses In spite of the booming prosperity, Nestle has its own weaknesses which include food contamination especially on infant food which results to negative effects (Nestle, 2011).The situation usually tarnishes the image of the company and hurts the sales. Nestle’s other weakness is its inability to comply with its programs that include eco friendly programs that were enacted years back and no implementation has taken place. The company also lacks efficient transportation and poor warehousing. Opportunities Customers’ trends change in buying and consuming healthy food products, which shift the customer taste and opens up more markets hence, giving Nestle company room to introduce more healthy food products in response to the trend (Jacob, 2003). Joint ventures are another platform for growth, and Nestle is an involved successful partner in major world companies like Colgate-Palmolive, Coca-Cola and others. This means that the company has room for expansion in terms of profits due to partnership with giant companies. Threats Among the threats posed to the company are food contamination cases, which might result to company reputation and loses (Ferrand, Torrigiani, and Povill, 2006). More so, the fact that the company supplies chocolates and chocolate drinks that contain high cholesterol may soon face demand declines because consumers are becoming more health conscious hence, might change their consumption trend. Additionally, current rising raw food prices will result to higher material costs for Nestle hence; affecting the production costs and products prices in general (Russell, 2013). Evaluation of SWOT Analysis The findings from Nestle’s SWOT analysis portray different aspects about the company (Ferrand, Torrigiani, and Povill, 2006). However, the positive aspects seem to surpass the negative ones in Nestle case analysis. Generally, it is obvious that the company has managed to build a strong brand loyalty, which is the major weapon that keeps it going. Nestle is in an overall competition position because of various reasons. To begin with, Nestle has pitched tents globally meaning that its products are consumed far and wide because statistics claim that the company operates in more than a hundred countries. This not only means that Nestles brand sells internationally, but also that the overall sales are promising. Still on diversity, the company has the widest portfolio of food and beverages, which mean that the company has a strong competitive position since all of its vast products compete in the market (Jacob, 2003). More so, the company manages to top up the already existing food and beverages by introducing new ones each year. Amazingly, the new products sell in the market, portraying that customers’ posses solid brand loyalty towards Nestle, and this practice of brand loyalty contributes to the fact that Nestle posses an overall competitive position. Nestle can continue pursuing its current strategies profitably because the company has strategized on ways to meet customers’ demands by identifying their changing trends and tastes, and that is why the company successfully introduces new products yearly (Jacob, 2003). More so, Nestle is able to pursue its current strategies profitably because it has acquired a unique trend of merging with similar minded companies. Nestle is aiming at turning its weaknesses into strengths by proving that its products are hygienically up to standard in order to curb contamination cases . More so the products bearing contamination cases especially infant food will posses instructive attachments on the packages for the customers to understand the formulas (Nestle, 2011). On the other issue of lack of planned establishment, Nestle looks forward to evaluate all the necessary measures, so as to enact these proposed programs through its efficient research team. The company is planning to turn threats into opportunities by considering all the possible measures (Ferrand, Torrigiani, and Povill, 2006). The chocolate and health threat is under research where the company plans to replace the sugar percentage by up to 90% with stevia as well as reduce the calories by 30%. On the issue of rising food prices due to global economic waves, Nestle looks forward to chairing the issue with concerned federal policy makers in the agriculture section. Generally, Nestle can develop new vast strategies that can accomplish these changes if the research team find ways of innovating the strategies, given that the team posses efficient experience. Conclusion Nestle is the largest food and beverage company globally, but the analysis depict few negativity that needs change. This means that the company should critically re – examine its weak points and identify fast and necessary measures that befit the situation by enabling the company to increase its productivity. This is because mending these patches will enable Nestle to deal with its weaknesses and strengths (Ferrand, Torrigiani, and Povill, 2006). The major problem that poses threats to Nestle is raising food prices, which turn out to raise the cost of production and the overall prices of Nestle’s products (Russell, 2013). To curb this, Nestle should look for a long term strategic solution to raw material inefficiency by establishing its own agricultural projects like own farming so that it can acquire sufficient and efficient raw products. In order for Nestle to increase its future profitability, it will need to keep up with the pace of customer tastes, given that most of its products are beverages (Jacob, 2003). More so, the company should attach formulas that direct the customer to appropriately use its infant food products. This is because proper formula of the infant products will result in satisfying results to both the mothers and the infants (Nestle, 2011). This will foster more consumer trust and loyalty and its result will benefit the company in terms of profits. Lastly, the company should increase its marketing campaign by looking for marketing options that fit different categories of customers. The company can also consider the modern advertising options of internet marketing because it is the current trend that can reach vast and diverse customers. References Ferrand, A,. Torrigiani, L., and Povill, A, C. (2006). Routledge Handbook of Sports Sponsorship: Successful Strategies. Routledge. Jacob, N. (2003). Intercultural Management. London: Kogan Page Stylus. Klopping, L. (2013). Nestle - A Global Company Comes Under Fire. GRIN Verlag. Nestle, M. (2011). Infant Formula. Food Politics. Retrieved on October 16, 2013, from http://www.foodpolitics.com/tag/infant-formula Russell, M. (2013). Nestle Comments Spark Debate Over Global Food Prices. Just Food. Retrieved on October 16, 2013, from, http://www.just-food.com/the-just-food-blog/nestle-comments-spark-debate-over-global-food-prices_id2377.aspx Smith, A. F. (2007). The Oxford Companion to American Food and Drink. New York: Oxford University Press. Read More