Strategic Analysis of Nestle: An Application of Porter's Five Forces

This report provides a strategic analysis of Nestle using Porter's Five Forces model to evaluate the competitive forces within its industry. The analysis assesses the threat of new entrants as low due to the significant capital investment required and Nestle's strong market position. Competitive rivalry is high, with major competitors like Kraft Foods and P&G necessitating substantial marketing investments to maintain market share. The bargaining power of suppliers is low due to Nestle's large-scale operations and emphasis on long-term relationships. Conversely, the bargaining power of buyers is high due to intense competition and low switching costs. The threat of substitutes is also high, with numerous alternatives available for products like packaged water and pasteurized milk. The report concludes that Nestle can maintain a strong customer base by focusing on innovation and leveraging the insights from the Porter's Five Forces framework to make informed strategic decisions and enhance its market share. Desklib provides access to similar solved assignments and study resources for students.

Strategic management

Nestle
Post 2
Porter five force analysis
Introduction
One of the best competitive strategies is Porter five forces model are considered as one of the
important competitive analysis as it can help in evaluating the overall factors related to the
competition level. It can be stated that through this strategic analysis the company can easily
evaluate the market conditions.
Threat of new entrants- Low
By considering the overall activities of the company, it can be stated that threat of new
entrants is low. It is not possible for all the companies to invest the huge amount in the
operations. Like small scale companies are not able to invest in the activities of comparison is
made with a Nestle company. The company also gives tough competition to the new entrants as
the focus is given on maintaining the quality of the products (Nestle, 2013).
Competitive rivalry- High
The competition level is high in this sector. There are many competitors present in the market
like Kraft food and P&G. In breakfast segment the competitors are Kellogg’s. To maintain the
overall competition level the company also spends the large amount on marketing as it helps in
enhancing the overall market share in the competitive market (Laforet, 2015).
Bargaining power of suppliers – Low
It can be stated that bargaining power of the suppliers is low as the company holds the large
market share. Therefore, the requirement is more of the suppliers so that large quantities of the
products can be maintained. It can be analyzed that if the suppliers focus on the starting the
process of supplying then they will never bargain in relation to the prices. The company also
emphasizes on the suppliers as it can help in maintaining the relations for long time. Nestle also
focuses on maintaining proper relations with the suppliers as it can help in maintaining the good
quality of the products (Noton & Elberg, 2017).
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Nestle
Bargaining power of buyers – high
Due to high competition the bargaining power of the buyers is high. It can be seen that buyers
can easily switch from one product to another. It is important to emphasize on the prices of the
products as it can help in retaining the customers for the long run. The cost of switching can also
be low for the customers, as they have various products from which they can choose the best.
Nestle emphasizes on increasing the overall satisfaction level of the customers by offering
quality products which can also be the reason of achieving growth in the market (Nestle, 2018).
Threat of substitute- high
There are various products of the company like packaged water bottle and also pasteurized
milk which have proper substitution in the market. For example: the substitute of Maggi is Knorr
noodles (Windsor, 2017).
Conclusion
Therefore, by considering the overall framework it can be stated that with this it can be
simple to focus on the innovative ideas. If there are innovative ideas considered by the company
then it can be easy to maintain the large customer base in the market. The factors related to
Porter five force models can help the Nestle Company to consider the right decisions as it can
assist in achieving the large market share.
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Nestle
References
Laforet, S. (2015). Managing brand portfolios: audit of leading grocery supplier brands 2004 to
2012. Journal of Strategic Marketing, 23(1), 72-89.
Nestle, M. (2013). Food politics: How the food industry influences nutrition and health (Vol. 3).
Univ of California Press.
Nestle. (2018). Good food, Good life. Retrieved from: https://www.nestle.com
Noton, C., & Elberg, A. (2017). Are supermarkets squeezing small suppliers? Evidence from
negotiated wholesale prices. The Economic Journal, 128(610), 1304-1330.
Windsor, D. (2017). Value Creation Theory: Literature Review and Theory Assessment.
In Stakeholder Management (pp. 75-100). Emerald Publishing Limited.
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Nestle
Appendix
Threat of new entrants- Low
a.) Huge investment
b.) Tough competition
Competitive rivalry- High
a.) Kraft food and P&G
Bargaining power of suppliers – Low
a.) requirement is more of the suppliers
Bargaining power of buyers – high
a.) retaining the customers for the long run
Threat of substitute- high
a.) like packaged water bottle and also pasteurized milk
b.) the substitute of Maggi is Knorr noodles
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