Strategic Management Nestle free essay sample

This report will focus on Nestle SA and will look into the industry the company is competing in. Based on various strategic analysis models the report will evaluate why the company has been so successful over the past century and how is Nestle managing to sustain constant growth and achieve great performance in the food and beverage industry. Company Background The Nestle Company started in 1866 with a one man’s idea and then it turned into one of the world’s biggest corporations. Henri Nestle was a pharmacist and he decided to develop a formula for a substitute of the mothers’ milk. The formula was so successful that there was a demand for it on different markets and it was attracting interests from different companies that wanted to merge or participate in Nestle’s business. Throughout the years the company has gone trough many different stages, mergers and name changes to come to the name Nestle SA at the end and to become the world’s biggest beverage and food company. We will write a custom essay sample on Strategic Management Nestle or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The Nestle headquarters are located in Switzerland in the relatively small city called Vevey, but the company had manufacturing units all over the world in almost every country they operate in. There is a Nestle case that has been published in 1996 that states the company employed 230,000 people with $71. 7 billion in sales (Rodgers, 2000). Going into 2012, nestle has increased their employees 328,000 people worldwide and reporting just over $83. 3 billion in sales for 2011. The Nestle Company is expanding and developing year after year. They are expanding the wide range of products and brands they are offering on the market. They are participating in different industries by offering variety of products as ready foods, soft drinks, chocolates and ice creams, breakfast cereals, bottled water, pet care, dairy and pharmaceutical products. Nestle’s main business strategy is to achieve growth through product innovation and renovation. This particular strategy has enabled Nestle to be a step ahead of the competition and to meet consumers’ expectation through delivering affordable healthy products Nestle’s Corporate Mission Nestle’s brand and products are the focus of continual innovation and renovation so that they meet and exceed our consumers’ expectations. We seek to ensure that our products are available whenever, wherever and however our consumers want them. (NESTLE. COM) Nestle’s Objectives Nestle’s main objectives are to offer convenient, tasty, and nutritious and safety products to help consumers’ all over the world and from all ages to improve their health and well-being. As well as to meet the needs and desires of today and tomorrow’s consumers, Nestle is strongly committed to Research and Development to improve existing products and develop new foods with specific health benefits. (NESTLE. COM) SWOT Analysis: Internal External Exhibit 1 Strengths The sales of Nestle are showing that the company is one of the largest food and beverage companies. Having and established and strong brand name the products are easily accepted on the market. Therefore reducing the risk of investments and pushing the strong brand awareness as one of the major competitive advantages for Nestle. The company had set a transparent manufacturing process in order to promote nutrition and consumers’ satisfaction and well-being. On the other hand Nestle has a very strong distribution channels ad very good suppliers relations, which leads them toward growth in sales year after year. Further strengths of the company are the skilled and educated labour they are employing. The wide range of products Nestle has on the market is also a very big strength because anything a consumer might need they can find in the face of Nestle. Other strength of the company is the product innovation, Nestle has been constantly introducing new products to their market, therefore expanding the product range and attracting new customers from different backgrounds. Research and development is also a major strength of Nestle. There are centres in 17 locations worldwide that are concentrated on researching new technologies and ways of innovative new products or to improve already existing ones. Weaknesses One of the major weaknesses that Nestle is facing is the mature market they are operating in. When the market is mature it can give stronger competition to the new entrants. As well the company should focus on consumer research on different target markets for different products. Not every product is right for every market and Nestle should focus on consumer research in order to avoid that weakness. Russia had been a very difficult market for Nestle and because of the big area the Russian market is covering it is always affecting the general performance of the company. Opportunities The world is now recovering from a very bad recession from the past few years. Thus the demand for Nestle products should increase as customers’ budgets are increasing too. Because the consumers’ budgets are increasing customers are getting more and more health oriented and health conscious. Therefore there is a big opportunity for Nestle to introduce more health-based products before the competition. On the other side in some South Asian countries like Pakistan and Bangladesh, consumers are mainly driven by the price rather than health or nutrition and there is a opportunity for Nestle as well to introduce a variety of affordable products for the appropriate markets. About 70% of the countries are developing at the moment and there is a massive opportunity for worldwide companies like Nestle to enter these markets and capture the full potential first. Threats Many of the markets that Nestle is in or entering are already mature, which rises security and health issues as well as speeding the product life cycle process. Others major threat is the devaluation of different currencies against the dollar that can affect Nestle’s prices. A slow down in local economy can affect sales, prices and overall performance of the company. STARS The stars are representing a high market growth and a high market share. In the case of Nestle, all the beverage products they are manufacturing are the Stars of their company. By building a strong brand name and being a leader in different sectors with brands like Nescafe, Nestea, Milo and DANONE the beverages are the strongest wing of Nestle. Capturing the biggest market share in comparison with the rest of their products. As of 2010 the sales of Nestle beverages were 18,114 (millions), in 2011 18. 204 (millions) so there is a constant growth and market expansion. CASH COWS The cash cows of Nestle are the baby food products and the dairy products which are in the growth stage at the moment so the company has to focus on them in order to make them Stars too. DOGS The dogs represent a low market share and a low product growth. In the Nestle organisation the pharmaceutical products are the Dogs. In 2010, the sales of pharmaceutical products and cosmetics were reported just over 5,109 (millions). The company should focus on that market and look for ways to penetrate it with different tools in order to be able to capture the full potential of the industry. The question marks have low market share and high market growth. Nestles breakfast cereals are their question marks. In the question mark section the company should pick the products they think have best performance and drop slower selling products or renovate them in order to be boosted to Stars. Mckinsey’s 7-S Framework of Nestle: The main purpose of the 7S model is to present a company as a combination of its parts and to show that the organizations’ ability to compete is based mainly on its internal dynamics. The McKinsey framework shows that the structure and the strategy both influence the overall performance and the management effectiveness of an organization. (P. T. Joseph) 1. Shared values of Nestle: Nestle’s organisation is sharing the same values in all of the countries they are operating in when of course considering the local culture and adapting to the environment they are in. One of Nestle’s main objectives is to produce and distribute products that create and add value for their stakeholders. Nestle realizes that consumers invest a lot of trust in their brands and that they should be corporate social responsible in order to retain their customers and keep the good company image. They do not tolerate short-term profits that will affect the corporation overall image and might put distrust in their consumers. They are also committed to respect and follow all the laws of the different markets they are operating in. The company is very aware of the fact that their positive performance is mainly depending on the management and their employees. Therefore the Nestle organisation is focusing on recruiting, sourcing and training employees in order to ensure that everyone is professional and has the right knowledge and attitude for their position. 2. Structure of Nestle: The Nestle organization is divided into 3 separate zones based on continents. Every zone has their own directors. The company has functional and decentralized organizational structure. 3. Strategy of Nestle: Nestle as an organisation is using a 4-pillar strategy that gives them the opportunity to achieve profits over their weighted cost of capital. Nestle’s business strategy consist of the following parts: †¢Whenever, wherever, however †¢Innovation and Renovation †¢Communication and commitment to consumers †¢Efficiency in their operations Nestle is focused on moving from slow growth product portfolio to a fast high volume based growth portfolio. Therefore the company is constantly innovating and renovating their already existing produ cts in order to meet all of their customers needs. 4. Skills in Nestle: Nestle’s main skills are concentrated in technology and Research and Development that helps develop new innovative products or re-engineer existing ones. All of their laboratories and manufacturing units have the latest technologies and equipment. All of the products they are manufacturing pass a long series of tests to ensure that all quality standards are met in the production process. Other main skill is the ability to penetrate new markets through again strong market research. Nestle managed to build strong brand awareness and a positive image in difficult markets like the Pakistani, the Bangladeshi and in the African market. 5. Staff in Nestle: Nestle is the biggest food and beverage company.