Business Strategies of Nestle Company

This report discusses the different business strategies considered by Nestle Company, including the Nutrition, Health and Wellness Strategy, long term value model, and portfolio management.

Nestle

Nestle
Executive summary
This report is commissioned to emphasize on the different business strategies considered by the
Nestle Company. Nestle is one of the successful company in the market and the main reason
behind this success relates with the different business strategies. In this paper, the discussion is
made on the different business strategies that have helped to attain growth in the business world.
The strategies that are discussed in this paper are The Nutrition, Health and Wellness Strategy,
Strategy of long term value model and Portfolio management. These business strategies have
helped the company in boosting the market and also it is analyzed that these strategies are
designed by considering the different models.
The paper has also highlighted the different models that are used by the company such as
PORTER FIVE FORCE, SWOT ANALYSIS, VRIO Analysis, value chain and also Pestle
analysis. So, it can be said that these tools are also used by the Nestle Company at the time of
implementing the business strategy which helped to attain success in the competitive market.
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Table of Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................2
Business strategy of Nestle Company.............................................................................................3
1. The Nutrition, Health and Wellness Strategy.......................................................................3
2. Strategy of long term value model........................................................................................4
3. Portfolio management...........................................................................................................4
4. Strategy related with investing in high growth categories and regions................................5
Porter five force model of Nestle.............................................................................................5
5. Innovating products and the business models......................................................................7
1. Pestle analysis...................................................................................................................7
6. Focused on the digital opportunities.....................................................................................8
7. Improving the operational efficiency....................................................................................9
SWOT ANALYSIS OF NESTLE............................................................................................9
Critical success factors related with the success of the Nestle Company......................................10
 Localization amidst Globalization......................................................................................10
 Global brand strategy..........................................................................................................11
 Successful M&A.................................................................................................................11
 Nestle Roadmap to Good Food, Good Life........................................................................11
Resource-based view and strategic capabilities.....................................................................11
VRIO ANALYSIS OF NESTLE COMPANY..............................................................................12
Value chain analysis......................................................................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
Introduction
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Nestle
In this paper, the company that is selected for the task is NESTLE COMPANY. It can be said
that Nestle is one of the successful companies in the highly competitive market. The company is
known as the Swiss multinational food and Drink Company. Nestle is known as the largest
company with the market capitalization of 231 Billion Swiss Francs which is more than US$247
Billion. In 2018, the net income of the company was CHF 10.468 BILLION. The mission of the
company makes the food better so that individuals can live a better life. The vision of Nestle
emphasizes on meeting the needs of the customers on the daily basis and it is done by offering
quality goods in the market. It can be said that the mission and vision set by the company also
reflects towards the success of the company attained in the market (Nestle, 2019).
Figure 1
(Source: Revill, 2019).
The reason behind the success of the company relates with the different business strategies that
are considered to attain the competitive advantage. The strategies that helped the company to
achieve success are related with Nutrition and wellness strategy. Nestle also focused towards
investing in the high growth categories and regions which helped to boost the market share of the
NESTLE. Innovating products and business model is considered as the best strategy that
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enhanced the overall success ratio of the company among the different competitors present in the
market. Creating the shared value is also the business strategy that helped the company to
accomplish the set goals. So, these are the strategies that helped the business to attain growth and
success in the market (Nestle, 2019).
Business strategy of Nestle Company
1. The Nutrition, Health and Wellness Strategy
Nestle focuses towards success that is built by considering Nutrition, health and wellness
strategy. It is examined that company deals in the food sector in which the main emphasis is on
offering the tastiest and healthiest choices of food and at different stages of the life. Nestle
focuses on capturing the premiumizaton opportunities at the end of the spectrum and to offer the
good nutrition value. In relation to this strategy, the main focus of the Nestle is to improve the
taste and convenience of the products. Management of the company also placed to boost and
share the awareness of the nutrition from the first 1000 days of life through healthy aging and
also it enhances the nutrition to support the good health of the people. By considering this
strategy, it can be said that the company emphasizes on the mindset of the employees so that
growth can be attained. In the present scenario, the individuals are more conscious towards their
health, so they only prefer the products that are of good quality. So, the company promoted the
products in such a manner that it created the positive image among customers that Nestle offers
quality products in the market. This is one of the effective strategies that has helped to attain the
positive outcome and also boosted the growth opportunity for business to maintain its
competitive advantage (Nestle, 2019).
2. Strategy of long term value model
This is also one of the effective strategies that are considered by the company and it focuses on
the balanced pursuit of the resources well-organized that focuses on the top and bottom line
growth. The company creates value by boosting the growth through innovation, differentiation
and also by satisfying the needs of the customers. The company has aimed to reach to the mid
single digit organic growth by 2020. One of the reasons behind the success of the company is
bringing improvement in the operational efficiency. The company brought changes in the
operational efficiency with the aim to boost the trading operating profit margin between 17.5%
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and 18.5% from 16.0% in 2016. It can be said that company also emphasized on allocating the
resources and capital with proper discipline and work priorities. In relation to this, the main is to
focus on acquisitions and divestitures. This has attracted the large customer base towards the
services of the company offered in the market (Nestle, 2019).
3. Portfolio management
The overall portfolio of the company is also well positioned that helped in boosting the success
rate in the competitive market. In last year, the company offered organic growth at high and also
there was a clear path of attaining the mid single digit organic growth by the year 2020. It is seen
that Nestle evolved the business portfolio towards the high growth in the competitive market. It
is investigated that in 2018, Nestle has strengthened the position in Coffee by having proper
acquisition in relation to the global license. The company also divested towards USA and Gerber
life insurance businesses. To maintain the overall portfolio, the company also emphasizes on
reducing the potential disruption and they boosted the overall value of the existing businesses.
4. Strategy related with investing in high growth categories and regions
The company attained growth by focusing o the five growth food and beverages categories that
considers the attractive growth rates in context to coffee, pet care, nutrition and Nestle health
science. In the present market, the sales of 57% have been showed up and thee trading operating
profit is 61%. In 2018, the overall organic growth was 4.0%. The company maintained the strong
position and highly differentiated the entire offerings. Nestle also emphasized on the different
aspects such as research and development and external growth. Nestle is now also focusing on
the enhancing the presence in the high growth regions. In 2018, the products of the company
grew organically by 4.9% which has also underlined the overall profit margin of the company.
To support this strategy, Porter Five force model is considered so that it could be easy to focus
on different factors that have helped the company to achieve success (Media marketing, 2019).
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Figure 2
(Source: Seeking Alpha, 2019).
Porter five force model of Nestle
Threats of new entrants
It can be examined that it is low as to enter into the market and to maintain the customer base
requires a huge investment. There are many companies who try to enter into the market but they
are not able to achieve success as there is high requirement of the financial capital for the
business. Nestle has attained success among the competitors, so it is not easy for organization to
compete with the company over the products quality. So, it can be said that threat of new
entrants is low in relation to Nestle Company (Kotler and Armstrong, 2015).
Threat of substitute products
The company faces the issue of threat of substitution and it can be said that it is high. There are
many companies who are present in the market and offering similar types of products in the
market. But it can also be stated that Nestle has attained success as the products that are provided
to the customers for use are innovative and also best in terms of quality (Bahadir, Bharadwaj and
Srivastava, 2015).
Bargaining power of the suppliers
The bargaining power of the suppliers has an essential role in managing overall activities of
company. Nestle maintains strong relations with the suppliers as it is important for the
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management to boost product quality. Nestle offers guidance to the suppliers to work in a
proficient manner as it helps in maintaining the quality of the products (Kotler et al., 2015).
Bargaining power of customers
This plays an essential role in relation to the overall performance of the company as it helps in
maintaining the position of the company. It has been observed that clients have a high bargaining
power that focuses on the utilization of different utilization of products. The customers of the
Nestle Company have influential choices but still the company maintains the quality so that
success can be attained among the competitors. It is necessary to have proper understanding of
customer’s power as it will assist in enhancing the satisfaction of customers. The main objective
behind achieving success is that Nestle always focuses on caring about the customer’s health and
wellness programs. The demand of the products has been enhanced because the customers are
more conscious towards their health (Chokshi et al., 2016).
Competitive rivalry within the industry
It can be stated that this is high as there is high competition level present in the market. Nestle
company also enjoys strong position in the food sector but there are few rivals who exist in the
market such as Kraft Foods and Groupe Danone. The food sector is large so that it is seen that
the competitors present in the market are competing with each other and also customers are
focusing towards improving the quality of the products in the market. So, it can be stated that
Nestle attained success by maintaining the competition level that is present in the market (Baines
et al., 2017).
5. Innovating products and the business models
It can be stated that rapid innovation and offering more products in the market are the major
dimensions of the overall growth agenda of the company. Nestle also focused on investing in the
cutting edge in relation to science and technology and it has helped to consider the needs of the
customers at the time of offering the new products. In 2018, almost 22% of the sales have been
enhanced of the premium products and now the major emphasis is on the personalized and direct
consumer’s offerings. At the time of innovate products, the company focused on Pestle analysis
model. This model has provided the in-depth understanding of the market (Jain, Sanbonmatsu
and Posavac, 2015).
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1. Pestle analysis
Political factor
Political factor has a major role in the food sector. The policies of the company are affected and
it has been seen that Nestle offer food assurance to maintain the assurance with the customers.
The company products always have seal of guarantee on products. Quality control is also the
factor that relates with the political aspect, in which the company maintains the quality that
cannot be different from the other countries.
Economic factor
It has been analyzed that company collaborates with the local government that offers the
technical support to the farmers in relation to planting and harvesting plants. In present era, the
company started the local production in which there is no need to trade the raw resources from
one country to other. The company now is not liable to import the raw materials from any
country and this has saved the money. It has also offered the advantage to the customers in which
they are free to like local productions with the fewer prices. There will be customers who will be
using products but then also the company will attain profits.
Socio cultural environment
It has been observed that a good diet and also proper food supply has boost the health and
wellness of the individuals. The generation Y focuses on the acceptance of change and also o the
latest technologies. So, these types of factors helped the company in booting their growth rate in
the competitive market.
Technological factor
Internet and Mobile technology has helped the company to boost the growth rate in the market.
With the help of this, the company is emphasizing on using the technology to boost the products
offered to the customers. Nestle Company employees uses the internet service to connect with
the activities operated in the other countries such as in Australia, Singapore and UK.
Legal factor
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The activities that are conducted on the global platform need legal capabilities. So, it can be said
that at the time of entering into acquisition business it is important for the business to attain the
positive results. This strategy has also helped the company in entering into the new markets
which maintained the competitive edge (SaVinhas and Heide, 2014).
Environmental factor
Nestle is engaged in different programs that focuses on making the company eco friendly by
considering the different CSR initiatives. The company focused on maintaining the overall
activities by emphasizing on the environmental aspects that helped to boost the success ratio in
the competitive market.
6. Focused on the digital opportunities
It can be said that the digital transformation has been considered by the company in which the
personalized messaging and products to the customers are offered at the high scale. With the help
of the digitalization strategy, Nestle focused on bringing changes in the existing brands and also
in the digitally centric business models. There are almost 10% of the consumer contacts that are
personalized. At last, it has been seen that in 2018, the overall sales on the e-commerce platform
has been enhanced five times faster and it reached 7.4% (Baker and Saren, 2016).
7. Improving the operational efficiency
It is also known as the effective strategy that focuses on the growth agenda and the company
boosted the commitment level by the operating profit margins from 16% to 17.5% by 2020. In
relation to the growth agenda, it is seen that the company focused on reducing costs in relation to
the non consumer who are facing the structural cost between CHF 2.0 and 2.5 Billion. The
company also focused on boosting the focus of the business by Nestle Business Excellence
program to simplify the overall standardization process which also minimized the administrative
costs. The company has enhanced the penetration of the shared service centers from 17% to
35% by 2020. Nestle also invested in the organic growth by R&D and capital expenditure. The
company also pursued the disciplined acquisition policy in relation to price. It is examined that
Nestle prioritize the high growth categories and region to boost the integration plans with proper
accountability and precise goals (Qiao et al., 2017). The operational business of the company has
been improved by considering the SWOT ANALYSIS TOOL. The company focused on this tool
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so that so that the strength, weakness opportunities and threats can be analyzed. This is one of
the strategic tools that boosted the success ratio.
SWOT ANALYSIS
Strength
1. Have maintained good brand image in the market.
2. Focuses on the quality products.
3. Loyalty of the customers
4. Manage the activities in more than 77 countries
5. Innovative leader in food sector
6. Adopted the new technologies
7. Strong workforce
Weakness
1. Less customer base
2. Boost product recalls and hampers the brand equity
3. Entered into the different markets where there is high competition
4. Distribution cost is high
Opportunities
1. Strong brand name
2. Focuses on healthy products
3. Market leader in product segments
4. Offered incentives to the retailers to boost the sales.
Threats
1. Global competitors
2. High competition.
3. High price of raw materials
4. Present companies are enhancing the product line
5. Other companies are well organized.
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So it can be stated that with the help of SWOT ANALYSIS tool the company accessed the
different aspects and considered the right strategies that are beneficial for the growth. This tool
have maintained in depth understanding of the different factors through which company attain
the set goals and objectives in the market. It is the effective models that has helped company in
maintaining the large market share and also boosted the success ratio in comparison to
competitors (Peck et al., 2013).
Critical success factors related with the success of the Nestle Company
 Localization amidst Globalization
It has been analyzed that successfully attaining localization in the increasing globalized food
sector has helped the company to achieve success. Product planning production and marketing is
known as the form of the strategy that has helped to attain the successful localization in relation
to the different organizations. The company has 2 companies that emphasizes on leveraging the
overall reach to attain the efficiencies such as Globe and GNBS, company and technology
infrastructure to assist the company to leverage the size on the global platform to boost the
efficiency and effectiveness in the emerging markets. It has been seen that companies has
emphasized on generating demand and on boosting profits. The company sales are only 2% of
the overall worldwide sales (Ahmed and Rahman, 2015).
 Global brand strategy
The company has various products that are resonated on the global platform and also it is
considered as the unified brand. The brands are considered as unified under the banner of the
company which is offered at maximum value. It can also be said that large brand was considered
as the brand platform for offering the localized products and brands. The company created the
large brands related to Nescafe, Nesquik and also Nestea (Liu et al., 2017).
 Successful M&A
The company has boosted their activities through different organic growth but it is successful
M&A. The company attained the emerging and developed markets in relation to the new product
categories. The main aim of the company is on the Food and beverages, nutrition and also on
health and wellness. It has been analyzed that company focused on maintaining the M&A which
also helped in boosting the demand of the products and services (Saluja and Mahajan, 2017).
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 Nestle Roadmap to Good Food, Good Life
It can be investigated that company has more than 468 factories that manages the activities in 86
countries on the global platform. The main shareholder of the company is L’Oreal which is the
biggest cosmetic company. It can be considered that it has helped the company in maintaining
the trust and behavior of the individuals for the long term. The long term corporate objectives of
the company are recognized as the largest and branded food manufacturer. In the present era, the
company has pursued a life time policy of expansion and diversification. The diversification of
the company is done through acquisition that has assisted the company in considering the
balanced structure that boosted the position in the global infant nutrition (Abril and Rodriguez-
Cánovas, 2016).
Resource-based view and strategic capabilities
Tangible resources of the company relates with total revenue such as CHF 83.64 Billion. The
operating income is CHP 12.538 Billion and the total assets of the company are CHF 111.64
Billion. The organizational resources of the company relate with the governing body which
focuses o the annual general meetings of the shareholders. The most relevant organizational
measure of the company is Local application centers and Clusters. The physical resources of the
company relates with Coffee, water, ice cream and healthcare nutrition. The technological
resources of Nestle emphasize on the latest technology through which it is easy to produce the
convenient products. In the company there are more than 330000 individuals who manage the
routine operations of the business. In relation to the innovation resources, the company focuses
on generating the innovative science and technology boosted the overall demand of the products
provided in the market.
VRIO ANALYSIS OF NESTLE COMPANY
This model is considered by the company to manage the overall resources of the company. This
is the effective tools that have provided in-depth analysis of resources that are possessed by the
company. If there are sufficient resources with the company then it would be easy to attain the
positive outcome. The same goes with the company in which it has been seen that company
considered this tool to manage the overall operations in the competitive market.
 VALUE
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Resources are considered as a valuable part that assists the companies to boost the customer
value. In 2006, Nestle is known as the first organization who introduced the approach in relation
to the shared value. The company also emphasizes on the shared value by considering the
different sectors such as rural development and nutrition. This has also built a strong
performance based in the environment sustainability (Dadzie et al., 2017).
 RARENESS
Nestle company is considered as the leader in this sector and also it has been seen that there are
nutritional technologies such as Foam booster and healthy fats and portion distribution. It is
examined that company has maintained the base of scientists who helps in maintaining the
competitive advantage in the market.
 Inimitability
The company has valuable, rare and costly to imitate resources that can help in attaining the
sustained competitive advantage. Nestle is known as the leader of the market in the food sector
and also inimitability is low. The company has attained success by considering the latest R&D
strategies in the market.
 Organization
The company has recognized the management systems, processes and policies that help in proper
utilization of the resources and capabilities. The strategy of the Nestle Company always guided
the basic principles that have also helped in attaining growth through innovation and renovation
at the time of maintaining the geographic operations and product line. The priority of the
company is to focusing on bringing the best so that it could be easy to maintain the difference in
the lives of the people.
It has been seen that business strategies of Nestle is considered by emphasizing on the different
aspects such as inbound logistic, operations, outbound logistics, marketing and sales and also the
after sale services. These factors can be elaborated with the value chain analysis model in
relation to the Nestle Company (Payaud, 2014).
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Value chain analysis Primary activities
Inbound logistics states that the company considers a supplier code that helps the suppliers to
create sustainable and ethical practices. There is also transparency I the overall transactions of
the IT. Operations in Nestle Company emphasizes on transforming the raw materials into
commodities related with customers. Outbound logistics relates with the distribution channels in
which the production plant is set to ensure delivery. Marketing and sales take into consideration
end to end marketing in the three key aspects such as brand management, communication and
customer insight. The after sale service of Nestle relates with the call centers numbers that cater
to the complaints of the customers. The supporting activities focus on procurement in which
there is high grade quality of products offered among the customers (Datta, Ailawadi and van
Heerde, 2017).
Conclusion
It is concluded that Nestle is the biggest company in the food sector. It is examined that company
has attained growth in the highly competitive market. Nestle has the large market share that has
helped the business to boost customer satisfaction. There are many strategies that are considered
by the company and due to this the success has been attained among the competitors who are
present in the market. The different business strategy helped the company in maintaining the
competitive advantage and also positively affected the operational activities. It is necessary for
the companies to consider the business strategies so that growth can be attained. In relation to
different business strategy the company also considered the different models such as PORTER
FIVE FORCE, SWOT ANALYSIS, VRIO Analysis, value chain and also Pestle analysis. These
different tools or models assisted the company in focusing on the set goals and objectives in the
competitive market. Therefore, it is said that Nestle achieved growth in the market and presently
it is one of the famous or popular corporation who captured the large market area.
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