Nestle's Decline in Growth: Shift to Cost Management

Nestle, the largest consumer goods manufacturing organization in America, has faced a decline in growth due to various reasons. This decline has led to a reduction in earnings per share from 58.42% in 2015 to 48.50%, which may affect shareholder rates of dividend. The company's net profit growth decreased by 6%, operating profit by 4%, and return on equity by 7%. To improve its financial position, Nestle should focus on estimating the cost of its products and enhancing its pricing power through offering high-quality products and conducting a cost measurement system.

Nestlé’s Growth Warning Shifts Focus to Costs
Nestle is considered as the largest consumer goods manufacturing organization of America.
Recently, it is facing a decline in its growth for different reasons. Nestle earning per share was
more than 58.42% in 2015 which reduced now and reach at 48.50%. This will influence the
shareholder rate of dividend. Due to this decline in share revenue the investors of the
organization may not interested in investing in further activities of the organization (Wilmot,
2016). Decline in growth mainly reduces the overall assets and profitability of the organization.
Net profit growth of the organization decreased with 6%, operating profit with 4%, net sale by
8% and return on equity reduced with 7%. This completely change the financial position of the
market. A firm should be financial strong if it wants to survive for long time. But change in the
financial situation of organization reduce overall attractiveness and brings down its share prices
in market. Nestle was earning more than 88.8 billion profit every year which reduces ultimately
with a decrease in the sale of its products. This influence the overall business strategy and market
value of the organization. Nestle should estimate cost of its products which enable the
organization in gaining high shares of market. It takes various initiative to reduce the effect of
sale changes. However, management of the organization also blamed a more general slowdown
in consumer demand across developing and developed markets. This will influence the
perspective of investors towards nestle in largest manner. Market value of the shares can
enhanced by focusing on shareholders. Dividend rate should be enough so that they don’t feel
any disappointment. It has occurred because Nestle does not have the pricing power in its
competitive market. Pricing power only created through offering high quality products and
conducting cost measurement system. If it will not manage efficiently, it sluggish down
consumer demand and profitability of the organization reduced. This could be a big problem for

the organization in future which influences the overall financial position. The management of the
organization should identify the areas which require scrutiny. Earnings per share amount should
improve by the organization by restructuring the overall product manufacturing structure.
Earnings per share enhance the market value of the organization in existing market. This will
facilitate organization to overcome its risk factors in an efficient manner.

References
Wilmot, S. (2016). Nestlé’s Growth Warning Shifts Focus to Costs. WSJ. Retrieved from
http://www.wsj.com/articles/nestles-growth-warning-shifts-focus-to-costs-1476973563