Coping with Threats from Internal and External Factors

To overcome internal and external threats, Nestle's management can adopt an empathetic approach to understand dissenting employees or management personnel, logically present the benefits of change, and use conflict resolution processes like the Collaborative Approach. To deal with competitive rivalry, the company should conduct market research to determine changing consumer tastes and preferences, identify key competitors' strategies, and develop differentiated strategies such as innovative customer relationship management or services that offer something unique to consumers. Nestle's success can be attributed to its effective leadership styles, organization culture, and management practices.

Running Head: Strategic Management
Strategic Management

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Table of Contents
1. Introduction:......................................................................................................................3
2. Evaluation of success of the company:.............................................................................3
3. Reasons behind the success of the company:.................................................................5
4. Detailed analysis of the company’s strategic capabilities-Value Chain-VRIN evaluation: 6
5. Evaluation of contribution of leadership to the company:.................................................8
 Leadership.....................................................................................................................8
 Management theories....................................................................................................8
 Organization culture......................................................................................................8
 Decision making............................................................................................................9
6. Analysis of business strategies:........................................................................................9
 Business competitive strategies consistent with strategic capabilities..........................9
 International strategy.....................................................................................................9
 Innovation strategy......................................................................................................10
 Collaboration...............................................................................................................10
7. Analysis of any external/internal factor posing threat to future success:........................11
Suggestions:.......................................................................................................................11
8. Conclusion:.....................................................................................................................12
References:............................................................................................................................13

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1. Introduction:
The organization that has been chosen to develop this strategic analysis report is Nestle that
is a reputed Swiss food and drink company across the globe. In terms of revenue and other
factors, it is the biggest food company on this earth. The firm was founded in the year 1866.
Paul Bulcke is the Chairman and Ulf Mark Schneider is the current CEO of the company.
The brand sells various products such as chocolates, baby food, dairy products, ice cream,
coffee, bottled water, cereals for breakfast, etc. The company can be regarded as one of the
most popular brands in confectionery and the major reason of its success is the able
leadership from the management and prudent strategic decisions taken by the management
from time to time. For the year 2017, the Net Profit stood at CHF 7.2 billion that shows the
immense volume of business achieved (Nestle, 2018).
2. Evaluation of success of the company:
The performance results of the company in 2017 can be used as the tool to evaluate the
success on a global scale. The group sales achieved by Nestle in the year stood at CHF
89.8 billion and the Trading Operating Profit was calculated at CHF 13.2 billion (Nestle,
2017). Though it was learnt that the organic sales growth was below the expected margin in
2017, but yet it was within the range to be considered as a profitable year for the
organization.
Product Portfolio of Nestle for 2017
It can be seen from the above data that Nestle offers high quality of nutritional and hygienic
products for individuals as well as families around the world. There are seven categories of
products sold to the global consumers of all ages. Hence, it can be comprehended that the

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company is extremely successful in its strategic decisions as it has come up with an array of
products for the consumers of different age, tastes, preferences and culture all around the
world. In the year 2017, the product that was most sold by Nestle was the Powdered and
Liquid Beverages category. Hence, it is not too difficult to comprehend the success of Nestle
as a global food and beverage brand. The company is operating for more than 150 years
across the global market and serves around 189 nations currently. In terms of global reach
and expanse it is probably the most successful of the confectionary companies in the world.
Global Sales of Nestle products
From the chart above it is possible to observe the global sales of Nestle across the world. It
can be seen that in the AMS or Zone Americas the sales value was CHF 40.7 billion, in AOA
or Zone Asia, Oceania and sub-Saharan Africa the company sold CHF 23 billion and in the
EMENA or Zone Europe, Middle-East and North Africa the company sold CHF 26.1 billion
(Nestle, 2017). Therefore, the success of Nestle as a global brand is well-established
through the reports studied in this section. Going by the huge success of the company in the
year 2017, the Board has proposed a dividend amounting to CHF 2.35 each share that was
an enhancement by 5 centimes (Nestle, 2018). The company has ‘Nutrition’ at the core of its
heart as a strategic tool with which it wishes to serve the consumers across a wide age
range around the world.
The modern consumers are extremely cautious about their consumption and lifestyle and
they will only consume foods and beverages from a trusted brand that has been operating
for decades in the global market. This is an area where Nestle management has exploited to
its advantage. The company has been offering the nutritional products to these customers
according to their tastes and preferences such that the needs of quality, health and taste of

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the consumers are satisfied adequately. Looking at these results and the strategic choices
taken by the management of Nestle it is evident that the company is highly successful in the
global market and is endeavouring to achieve more in the years to come.
3. Reasons behind the success of the company:
The major reasons of success in business for Nestle over the years can be classified into the
following strategic decisions taken by the management:
1. Global Marketing Strategy- Nestle uses various segmentation strategies for its
several global markets. The segmentation strategies those are mainly used by the
company are the Demographic, Geographic and Behavioural Segmentation
strategies. These different types of segmentation have helped the organization cater
to the changing tastes and preferences of the consumers. The differentiation in
targeting strategies has helped the firm target the customers having identical needs
in terms of the products. The company deploys a blend of product-based and value-
based positioning techniques, depending on the product they are planning to brand
and the target market in which such products are to be sold.
2. Cross-cultural Exposure- The company serves to almost 190 countries globally and
thereby it is exposed to a large number of cultures around the world, each having
different needs to be satisfied. Thus, the company has been successful in identifying
the varied and differentiated tastes and preferences of the global consumers owing to
which it has been able to differentiate some of its products to match the local needs.
3. Glocalization Strategy- Nestle is a brand that serves the global market with its
exclusive range of products. The company follows the strategy of ‘Thinking global
and acting local’ in case of many of its products. (Luigi & Simona, 2017). The firm
produces various edible products for the adults and for the children and babies. In
many of these products, Nestle has implemented the local tastes and preferences of
the consumers in order to meet their demands. This has been one of the most
significant successful business strategies for the brand.
4. Wide Product Portfolio- Nestle has one of the broadest product portfolios among its
competitors and this is one of the most essential success strategies of the company.
The wide range of food and beverage products is meant to serve customers with
varied tastes and preferences across a large age range starting from the infants to
the elderly people. This large pool of products is one of the major reasons of the
company having such a large pool of customers.
5. Effective Research & Development- The highly efficient research and development
department of Nestle is one of the key reasons of success of the brand globally. The

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research and development team is into the domains of FMCG sector as well as the
health and wellness sector with more than 5,000 scientists and researchers working
across the world. The research and development network is engaged in conducting
various studies and analyses for the purpose of ascertaining the tastes and
preferences of the global consumers, identifying the strategies of the competitors and
planning on applying some differentiated strategies helping the brand to gain
competitive edge over the rivals across the global market.
6. Brand Equity- The brand equity of Nestle is one of the prime reasons of its global
success. The company has been operating in the sector for over 150 years. It has
dedicated its services towards the achievement of health and wellness of the global
community be serving the diversified needs of the consumers across different
cultures. Nestle is a Fortune 500 brand and it engages in individual branding of all
the brands that makes it possible in developing high visibility of each of its products
and generating effective brand awareness in the target segment of the consumers
(Bhasin, 2017).
4. Detailed analysis of the company’s strategic capabilities-Value
Chain-VRIN evaluation:
Value-Chain Analysis of Nestle:
The Value Chain Analysis by Michael Porter (1985) is a collection of strategies those are
inter-linked and are implemented by an organization for achieving competitive advantage
(Mind Tools, 2018). Porter’s Value Chain Analysis of Nestle depicts the following results:

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 Inbound Logistics- The inbound logistics consist of the various inputs those are
received by the company such as raw materials from the suppliers. The chief
activities are warehousing of the raw materials and management of inventory. The
inventory control system is automated. This ensures that there is no scarcity in the
supply of the products across the global markets.
 Operations- The operations strategies consist of transforming the raw materials into
finished products which are extremely healthy and nutritional. This way Nestle
creates value for its customers across nations.
 Outbound Logistics- The outbound logistics refer to the methods used by the
company to make the end-products reach the sellers across the nations. From the
retailers, the products are sold directly to the customers. The production plant is such
set up in all the countries that there is easy transportation of the finished products to
the retailers and distributors.
 Marketing & Sales- The marketing and sales activities of Nestle constitute of making
the products reach the target customers across all the nations in which the company
serves. It consists of all the marketing and promotional strategies undertaken by the
brand for creating the brand awareness and pushing the products to the customers.
 Service- The customer service is one of the prime strategies of the management and
the company focuses on serving the customers in a prompt manner to create
enhanced customer satisfaction.
VRIN/VRIO Analysis of Nestle:
The VRIO/VRIN Analysis is conducted for the purpose of analysing the internal resources of
the firm. This technique was developed by J. B. Barney in the year 1991 in his seminal work
titled ‘Firm Resources and Sustained Competitive Advantage’ (Strategic Management
Insight, 2013). According to this tool, in order to gain competitive advantage for a sustainable
period of time, there should be four elements in the resources of an organization such as
Valuable, Rare, Costly to Imitate and Organized. The analysis on Nestle revealed the
following outcomes:
Valuable- The resources of Nestle are one of the best in the food and beverage industry
worldwide. Both the human and the non-human resources are instrumental in delivering the
high success rate to the brand across the world. The resources are secured from the best
suppliers and other sources to ensure that the brand has a high customer perceived value.
Rare- The resources used by Nestle to manufacture its wide portfolio of products are
selected from some of the best suppliers of raw materials worldwide but it cannot be said

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that the resources are extremely rare. There are other competing firms such as Nestle which
also have access to similar quality of resources and hence the resources lead to competitive
parity and not rarity in case of the company.
Costly to Imitate- The products offered by Nestle can be considered as costly to imitate
because the products and services offered by the brand cannot be easily substituted by the
competitors.
Organized- The resources utilized by Nestle are organized in such a way that they add
value to the firm. Apart from ensuring that the resources procured are of the highest possible
quality, the management ensures that such resources are organized and utilized most
effectively to add value to the products and services of the firm.
Hence, the VRIO/VRIN Analysis of Nestle has revealed that the resources are capable of
offering sustained competitive advantage to the company worldwide.
5. Evaluation of contribution of leadership to the company:
 Leadership
Leadership is one of the most strongpoints for Nestle due to which it has been able to
achieve extensive success worldwide. The management demonstrates traits of
Transformational Leadership from the CEO and the other people in the higher management.
The Transformational Leadership is about guiding and inspiring the subordinates in the path
of achieving something new. The transformational leaders are the charismatic individuals
implementing their confidence, knowledge and exuberance to lift the morale of his followers
(Burns, 1978).
 Management theories
The management theory defines the ways in which the management of an organization
undertakes strategic decisions. It forms the theoretical basis for the practical applications of
management strategies. Nestle management utilizes the Scientific Management Theory
which implements scientific principles in production. It was developed by Frederick Taylor
which highlighted the implications of measurements and analyses in terms of data. The
system supports automation of various functions and this approach is followed by Nestle
management (Bizfluent, 2018).

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 Organization culture
The organizational culture at Nestle supports multiple cultures and this is one of the reasons
of immense success of the operations worldwide. There are employees belonging to diverse
cultures and ethnicities and the diversities are respected by each other. There are strict
protocols against the racial or gender-based discriminations within the management and this
is the reason the company is considered as one of the most preferred employers worldwide
and it has received various awards as the best employer in various countries (Forbes, 2018).
 Decision making
The decision-making capability of the management is one of the major reasons of global
success for Nestle. The helm of the organization has a large number of capable leaders
starting from the CEO, Chairman, down through the senior management and middle
management. These people are the key decision-makers. The employees are also made
part of important decision-making processes as the management believes in employee
engagement and employee participation. This is a major cause of having adequate
employee satisfaction within the organization owing to which the company has a high
retention rate due to a host of happy employees (Nestle Professional, 2015).
6. Analysis of business strategies:
 Business competitive strategies consistent with strategic capabilities
The business competitive strategies those are undertaken by the management are
developed after a comprehensive market analysis of similar products and services in order
to determine the offerings by the rival brands across the international markets. The strategic
capabilities of Nestle consist of the various forms of resources those are utilized to deliver
some of the best category of food products to the consumers across the world. The
company secures the best possible quality of raw materials used in producing its various
categories of healthy and nutritious food items those are meant for a diverse range of
customers with different needs and belonging to a wide age group starting from the infants to
the senior citizens in the target market segment. The human assets are also the drivers of
the huge organizational success that Nestle has over the countries of its operations. The
competitive advantage is gained by the brand through undertaking differentiated services for
the consumers across various nations. The standardization strategy is followed by the
company but with certain elements of localization so that it can offer the products and
services according to the tastes and preferences of the customers in all the countries it
operates (Google Sites, 2017).

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 International strategy
The international strategy is undertaken by Nestle management after a careful analysis of
the various external and internal factors those might impact the business in its course of
operations. The SWOT Analysis is used for identifying the internal strengths and
weaknesses of the brand in the foreign market. It also reveals the opportunities and threats.
The external factors impacting the business are identified with the help of external analyses
such as the PESTLE Analysis. The PESTLE Analysis is composed of the analysis of several
factors such as Political, Economic, Social, Technological, Environmental and Legal. All
these factors impact the international business prospects of Nestle and therefore are of key
importance for analysis. The other tool that is implemented by the management to determine
the industrial competitiveness in the foreign markets is the Porter’s Five Forces Analysis. It
consists of analysing the impact of five major factors in the industry such as Threat of New
Entrants, Threat of Substitutes, Bargaining Power of the Suppliers, Bargaining Power of the
Consumers and Industrial Rivalry (Team FME, 2013).
 Innovation strategy
Innovation has been at the heart of Nestle since its inception. The management is always on
the lookout of adopting innovation not only in the products and services offered but also in
the techniques and business operations undertaken on a regular basis. The research and
development department conducts extensive research work to identify the scopes of
innovation those are required to offer competitive edge to the company among its rivals. The
innovation at Nestle is adopted in developing the current production and operative functions
by undertaking the services of the most modern technologically advanced machines and
equipment ensuring much faster production with the least possible errors in production. The
products produced by the brand are also innovative in terms of their features and their
capabilities of attracting customers with varied tastes and preferences (Drucker Society, N.
D.).
 Collaboration
The management of Nestle believes in the importance of collaborative strategies with
several partners for the purpose of enhancing the brand value and achieving more customer
recognition and expanding the business likewise. The management enters into partnerships
with other organizations from time to time for creating, sharing and applying knowledge
related to health and nutrition. There are partnerships with several public organizations and
academic institutions those help in creating wider scope of business and culminating new
ideas. Some examples of partnerships are with Imperial College London, A*STAR and
EpiGen Consortium (Nestle, 2018).

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7. Analysis of any external/internal factor posing threat to future
success:
An internal factor of concern for Nestle management is the conflict of opinion among the
various senior management personnel and the employees those might occur any time in
course of the business operations. The management often has to face some resistance from
the several employees at the time of undertaking the change management strategies. This
often creates problems in adopting much needed change strategies by the organization. It
affects the daily productivity of the employees as the conflicts create an unsound ambience
within the organization and disrupts the normal flow of works. This is a major area that often
causes problems in the operating activities of the company and therefore requires proper
intervention.
One of the external factors that might cause threat to the future success of the organization
is the industry rivalry that is a constant cause of concern for the brand. There are various
global companies which are also operating in the global industry since a long time such as
Cadbury, Mars, Mondelez International, Hershey, Godiva, Kellogg’s, Danone, etc (Owler,
2018). These are the leading brands in this sector and there is fierce rivalry between Nestle
and these competitors. Hence, the management of Nestle should always be careful about
the competitive strategies to undertake such that the brand can successfully negotiate with
the rivals in terms of products offered.
Suggestions:
The plausible suggestions those can be offered to the management of Nestle in order to
cope up with the threats from the internal and external factors are enumerated as follows:
 In order to ensure that the resistances to change management situations are handled
effectively by the management, there should be an empathetic approach by the
management to understand the grievances of the dissenting employees or
management personnel. Then, the management should logically place the needs for
the change and the benefits available to the firm, its employees and the
stakeholders. A fruitful and constructive conflict resolution process must be adopted
such as the Collaborative Approach where the interests of both the employer and the
employees are taken care of by striking an effective balance.
 To deal with the threat from competitive rivalry from the different players in the
industry, the management should undertake in-depth market research from time to
time in order to determine the changing tastes and preferences of the consumers and
also identify the strategies of the key competitors. Then, differentiated strategies

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should be undertaken by Nestle in order to offer something unique to the consumers
apart from the wide portfolio of its products. It can be innovative customer
relationship management or customer services which will be able to draw more
customers towards the brand as compared to the rivals.
8. Conclusion:
The analysis of one of the successful organizations in the global scenario has been done in
this report. Nestle is one such successful company on the international platform which has
proved that right leadership in the strategic management is highly significant. The report
presents the various reasons which are responsible for the success of Nestle. The
leadership styles contribute to the overall organizational achievements. The organization
culture and management practices get impacted by the leadership styles and behaviours.
The organisation has been able to implement different suitable and workable strategies for
its international business activities. The innovation has been a major part of the strategies to
make the company highly competitive. The business practices and strategies need
leadership guidance so that they could become able to bring in the desired success. The
success of the organization is because of its effective value chain strategies and sustainable
resources which offer competitive advantages. The company has been able to frame its
business strategies based on its core competencies and resources which have supported
the company to achieve competitive advantages successfully. The value chain of the
company is structured in such a way that it can ensure value to its deliverables and to its
various activities and practices including marketing and post sale services. The resources of
the company have been analysed and it is found that they are much valuable and
sustainable and the major reasons behind its remarkable success. The company leadership
has been able to make the optimum utilization of the resources to create value to its
customers. The business strategies have been well coordinated and aligned with every
segment of business activities and comprehensively they have enabled the company to
reach its desired success.

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Acquisitions. Retrieved from owler: https://www.owler.com/company/nestle

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