This article discusses the Porter Five Force Analysis for Nestle and evaluates the market conditions. It analyzes the competition level, bargaining power of suppliers and buyers, and threat of new entrants and substitutes. The article concludes that innovative ideas can help maintain a large customer base in the market.
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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). 1
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. 2
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. InStakeholder Management(pp. 75-100). Emerald Publishing Limited. 3
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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 4