Value Chain Analysis of Nestle: Primary and Supporting Activities

Strategic Management

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Answer 1.
A value chain is an activity which includes production, distribution, and marketing. It is a
process of organising these activities in order to analyse them. The main aim of this process
is to establish communication between the leaders of each stage to ensure the process of
organising the activities is effectively and efficiently. Value chain analysis helps the
organisation to understand the key capabilities easily and it also analyses the challenges
which require the improvement. It also helps to understand the competitors create value and
to decide to extend the particular activities. Michael E. Porters introduced the concept of a
value chain to analyse the situation and process of organisation. Porter also developed the
five forces model which helps the organisation in measuring the position of the company as
compared to the competitors in the current marketplace. Competitive advantage cannot be
gain by the one activity. The discrete activities of the organisation contribute to the gain of
competitive advantage such as producing, delivering, marketing, designing, and supporting.
Porters split business activities into two categories such as primary and support. Primary
activities of the company include the main activities which are used by the organisation such
as inbound logistics, operations, marketing sales, and many others. The support activities of
the company help the primary functions and compromise the activities such as human
resource management, procurements, technology and development, and many others. Primary
and support activities are used by the company to ensure the activities that operate effectively
and efficiently (Mudambi, & Puck, 2016).
Primary activities of Nestle
Inbound logistics
It is related to the process of receiving, storing and distributing of raw material which is
used in the production process. Nestle receives, stores and distribute the material at the

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warehouse. It has been seen that the company receives the stock from outside which is not
available for the production in Malaysia and its main headquartered is also located in Mutiara
Damansara. That is why the company has to stores the production material in warehousing
and later on distribute the product in the market. The manufacturing facilities of Nestle are
available at the Shah Alam, Kuching, Chembong, and Petaling Jaya. The company has a
National distribution centre which is located at Bukit Raja, Klang from which the company
distributes the products in the operational areas. It has factories in Malaysia from where the
company manufacture the product and then it distributes the product in the different region
(Christopher, 2016).
Operations
It is the stage in which the company turns their raw material into the final product for the
consumers. Nestle manufactures the various types of food which include junior foods,
culinary products, ice cream, chocolates, coffee, and many others. The company manufacture
the product and convert the raw material into the finished product for the consumers. For
each product the company requires the different ingredients and raw material for the
production such as manufacturing the chocolate; the company requires the Cocoa, milk and
many others as an ingredient. It has been seen that the process of manufacturing the chocolate
will be done by using the machine for whipping the ingredients then froze them for ready the
chocolate in the chiller. Then the output will be ready and then it packed in their size and
brand (Bee, Diby, Mbacké, & Wettstein, 2015).
Outbound logistics
It is a stage in which the products are distributed to the consumers. Nestle distribute their
product by using the land transportation rather than the rail transportation because the risk of

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damage the product is less. The other groceries products distributed by the Tesco and many
other grocery shops (D'heur, 2015).
Marketing and Sales
This stage involves advertising, distribution channels, pricing, promotions, sales-force
organisation, and many others. The most important thing of Nestle is that the food should be
approved by the higher authorities so that the consumers can officially consume the product
peacefully (Doz, 2017). The product of the company is labelled with the important
information related to the product for the consumers. The company is brilliant in attracting
the customers. The company uses the many types of Advertisement that are made by Nestle
such as television commercials and flyers are passed around at the shopping mall.
Services
It refers to the activities which are required for the company to maintain the product
quality with the process which includes the installation and training maintenance, repair and
after-sale services. Nestle provides the official website to the consumers to review its product
and the services. It has been seen that it is beneficial for all the functions and purposes of the
product because it provides the satisfaction to the consumers. The company produces a
product which makes the consumers feel happier and prevent them from getting diseases. The
company tries to produce low sugar content so that every consumer can inhale the product
(Jenkins, & Williamson, 2015).
Supporting Activities
Procurement
It is the process that the how the raw material for the product is obtained. Buying process
of raw material helps the company in carrying out the primary activities. Nestle finds the