LGO5203 - Nestle Strategic Planning: Environmental Analysis Report

This report provides a comprehensive analysis of Nestle's business strategy, examining both the macro and micro environments that influence its operations. It begins with background information on Nestle, highlighting its global presence and diverse product portfolio. The report then delves into a PESTLE analysis, evaluating the political, economic, social, technological, environmental, and legal factors impacting Nestle. Following this, the internal environment is assessed using a value chain analysis, identifying key primary and secondary activities that contribute to Nestle's competitive advantage. The report also touches upon Porter's Five Forces, objective setting, strategy development, tactical plans, and control measures. The analysis aims to provide insights for strategic planning, enabling Nestle to navigate the complexities of the business environment and enhance its competitive edge. Desklib provides access to similar solved assignments and resources for students.

Business
strategy
Name-Yadanar Soe
| [Company Address]
ID- LGO5203

Table of Content
s
Background information of Nestle......................................................2
Analysis of macro environment and its impact and influence upon
the organization and business strategies...........................................3
Value Chain......................................................................................... 5
Porter five forces.................................................................................8
Internal situation..............................................................................11
Objective setting...............................................................................12
Strategy development........................................................................13
Tactical plan......................................................................................13
Control.............................................................................................. 14
Conclusion.........................................................................................14
References......................................................................................... 15
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I am appointed as a business analyst of Nestle who have responsibilities to
evaluate the environment and improve strategic planning. Thus, this
assignment will present the analysis of internal and external environment
for the development of strategic plan in order to survive and success within
an organization. After this, this assignment will evaluate most appropriate
strategies for an organization to improve competitive edge.
Background information of Nestle
Nestle is known as the largest food and beverages organization in the
world. At first, this company sold only infant’s cereal but has now branched
out to contain different products like chocolate, coffee, and soup. Its
headquarter is in Vevey, Switzerland and has over 308000 employees
around the world. Generally, this company has about 447 production
facilities and has operations in more than 189 countries They aim to have a
product line for each stage of a consumer's life cycle from their infancy to
their retirement stage. Nestle's mission of “Good food, Good life” is to make
hygienic food with the best tasting and provide eating occasions, from
morning to night. So that people can possess a better life. Top competitors
involve Unilever, Mars, and PepsiCo (Luenendonk, 2020).
Analysis of macro environment and its impact and influence upon
the organization and business strategies.
There is no doubt that business is greatly influenced by its environment.
There are many strategic tools that a firm can use. Among them, PESTLE
analysis is more common to use for detailed analysis of the macro
environment to know the opportunity and threats that are present among
the market in which the business operates. Following are the pest analysis
of Nestle (pratap, 2020):
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Politic and Legal factors
As Nestle works across 190+ countries, it is heavily influenced by politically
due to different regulations and rules of each country. Regulation in
accounting standard taxation requirements, tax rate changes are heavily
influenced on Nestle business. It is necessary to accept legal formalities of
each country in where Nestle is currently operating. Main concerned laws
to look after for nestle is health and safety law, consumer protection law,
laws association with control of environment and labor laws for smooth and
constant growth. If a company break any rule, a company had to pay a large
sum the form of court cases and public trials. These things can be
threatening for the profitability and market position of nestle. It is why a
large company like nestle spends a lot on legal compliance (pratap, 2020).
Brexit ( exit of British from EU) is an example of recent political factor
impacting the growth of company. Many FMCG and beverage businesses
lose their skilled professional EU workers in the UK because of Brexit deal.
It created a gap of a non-skilled workforce, and it has become very difficult
to hire skilled professionals (Shaw, 2020).
Economic
It is very crucial for a company to have enough information about the
country inflation rate, economic growth rate, and national per personal
capital income which all are vary in each country. Besides, multinational
company has to deal with many exchange rates of different countries. Even
a small change in the price of exchange rate would have a huge impact on
the revenue of the company. According to research conducted by Mintel
Global Food and Drink Trends in 2020, the trend of fast and comfort food is
growing, and it continues to grow in the next 10 years. This is an
opportunity for the company to increases it sales in this category (Shaw,
2020).
Social
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The social and cultural environment that impact on Nestle which are
constantly changing. Every country had different culture associated with
beliefs, lifestyle, food, and their language. Moreover, different countries
have different consumer taste and behavior. As company is completely
dependent on the consumer attitude and lifestyle, company need enough
information about the consumer lifestyle before launching the product. Now
most of the people becoming health conscious so a company has an
opportunity to fulfill their needs by operating low fat and sugar containing
product categories (pratap, 2020).
Technology
Technology is an essential factor for both the internal and external
integrity of an organization. Because it creates opportunities for new
product, process improvements and advances marketing techniques such as
social media and e-commerce are also effective platforms for Nestle market
expansion. (pratap, 2020). Nestle spends a plethora of resources on
research and development of finding more efficient ways of preparing
quality and healthier products to the customers. That conducting research
is much easier because of digital, technology and social media marketing.
More, blockchain technology helps business to have full control over and
access from production facilities to the delivery of the products. It would
help nestle to follow newer ways although it’s a bit costly project (Shaw,
2020).
Environment
As a multinational company, environment factor is a big concern for Nestle.
Nestle adopt eco-friendly options in its business process and products to
reduce negative impact on environment. They are reducing the use of
plastic in their products and trying to create 100 percent recyclable
packaging. Moreover, a company also claims zero-waste production in their
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manufacturing goods. In short, they are trying their best to fulfill the
environmental laws. These things contribute towards the sustainability of
and welcoming for eco-conscious people (pratap, 2020).
There is no doubt that business is greatly influenced by its environment.
Business has two types of environments known as internal and external
environment. Here will discuss about internal environmental analysis. An
internal analysis examines an organization’s internal components, both
tangible and intangible, including resources, assets, and processes. This
analysis helps an organization decision-maker accurately identify areas for
growth or revision to form practical business plan. There are many
strategic tools that a firm can use. Among them, value chain analysis is
more common to use a detailed analysis of the internal environment to
determine the company’s assets, threats, or opportunity.
Value Chain
A value chain is a business attempt that can evaluate the entire field of
internal activities which required to manufacture product or provide
service. A value chain consists of the steps which include production of
products to distribution and value creation activities such as marketing
activities and customer service.
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Figure: Porter's generic value chain model (Dudovskiy, 2020)
In a view of value chain, Porter separate business’s activities into two
categories, “primary” and “secondary”. Primary activities include five
components, and these are
Inbound logistics: Functions such as buying raw materials, warehousing,
and managing inventory. As a global company, nestle has many suppliers
who are trustworthy to meet expected standard. This allows a company to
achieve effectively supply chain management to achieve quality product
(Byrne, 2020). Nestle source agricultural raw materials like herbs, milk,
cereals and vegetables from either through trade channels or directly from
farmers. Need to explain where Nestle suppliers from and how they
manage their inventories for effectiveness. For controlling inventory,
Nestle use Continuous Review which is the whole computerized
system. In this way they keep a continuous control over their
inventory. The stores officer not only maintains records but also
makes visits at the warehouses to see the actual situation of
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materials. The officer can review the inventory at any time.
Operations manager and the auditing people also check the
inventory and its records so that the risks of loss or manipulation
may be minimized.
e use a wide variety of different suppliers worldwide all of whom have to
comply with Nestlé quality standards.
We source our agricultural raw materials – principally milk, coffee, cocoa, cereals,
vegetables, fruit, herbs, sugar and spices – either through trade channels or directly
from farmers.
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Operations: Process of converting raw materials to finished product.
Nestle is relying on creating innovative products to meet or exceed
customers expectation. The increased productivity can help nestle to gain
consistent economic growth and raise profit. But if they are unable to
innovate effectively, its sales could be decreased. Therefore, operations of
nestle are mainly dependent on technological improvement, R&D and
management of information. In this stage, a company main challenge may
be the time it took to turn logical knowledge into successful products
(Byrne, 2020). Need to explain how Nestle operate
Nestle Operations
Initially, Nestle started functioning in Vevey, a town in Switzerland that offered baby
milk as substitutes for breast milk. Now, the Nestle group operates in different
Zones garnering billions of dollars in revenue and sales worldwide for the company.
The group’s operating Zones are:
 EMENA : Zone Europe, Middle East and North Africa
 AMS : Zone Americas
 AOA : Zone Asia, Oceania and Sub-Saharan Africa
The product it offers includes baby foods, nutritional supplements, breakfast
cereals, Confectionaries, ice-cream, frozen food, pet food and snacks.
Outbound logistics: Functions which focus to distribute final products to
customers. It includes some activities like material handling, warehousing,
scheduling, order processing and delivering to the end customers.
Customers can purchase nestle product from supermarkets, convenience
store, through online, wholesaler and retailer. The company need to
manage outbound logistics activities properly with minimal costs and
product delivery processes that can maintain the quality of product during
shipping and delivery (Byrne, 2020). Explain how Nestle manage outbound
logistics
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Sales and marketing: Strategies to target customers like advertising,
promotion, and pricing. This stage is very important since only producing
high quality product cannot create value until a company invests on
marketing and sales. A company need to avoid making false commitments
regarding with product features that cannot be performed by the operation
department. However,Nestle has strong capabilities in sales and marketing
as it understood its markets. Additionally, it has the ability to grow its
online retail which could open channels of for distribution of product such
as Amazon by passing traditional retailers (Byrne, 2020). Explain how
Nestle advertise and sales
Services: Programs to maintain a product, enhance customer experience,
repair, refund, and exchange. Regarding with nestle, it provides a training
center for internal chefs mainly to try out innovation products and maintain
existing product quality. This can maximize the customer satisfaction and
increases growth opportunities for the firm. Moreover, a company believe in
the importance of combining great products with great services. For
example, they provide a well-trained professional ready to trouble shoot and
resolve issues of their product over the phone or send out technicians if the
problem cannot be solved by phone (Byrne, 2020).
The secondary activities help primary activities to be more efficient. They
include,
Firm infrastructure: Company’s system and composition of its
management teams like planning, accounting, finance, and quality control.
With regards to Nestle, it has a strong financial backup to invest in high-
quality products with continuous value addition. The management of its
planning and financing also add values for their customers and
stakeholders. The risk can be the lost production time caused by delays due
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to unrealistic plans and lack of finances. What about the company
infrastructure of Nestle (Byrne, 2020).
Human resources management: This involves activities concerned with
recruitment, training, development, and compensation of employees. When
it comes to Nestle, it focuses strong on employees as they are key driver of
business success. And, they have taken broad approach to building
capabilities of their people. It contains to host of skills development
program for blue- and white-collar employees which aims to drive greater
interdependence and improve collaboration within an organization.
Therefore, their ability to attract, develop and retain the qualified people is
critical for effective implementation of the tasks required for organization
(Byrne, 2020).
Technological foundation: Activities that can improve the efficiency of
operation, accuracy in production and quality development. This associated
with the use of advanced electronic devices, computer system,
telecommunication and all other process and technical knowledge used to
support the primary activities. Nestle has also managed to build a
technological platform Name the platform where customer can ask
questions, provide suggestions, and share experience. Moreover, they have
been able to reduce waste in its operations in the outsourced production.
This has been because of the implementation of latest technology in its
mass production models (Byrne, 2020). Need to explain what technologies
that Nestle is using and their effectiveness.
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Procurements: Due to its link up with many value chain activities, nestle
carefully consider its procurement activities to optimize the inbound,
operational, and outbound processes. Nestle have many suppliers so that a
company can brake power of its suppliers and make them weaker to
negotiate at its own term. This gives a company a chance to change
suppliers easily. There can be possible that a supplier may join forces to
avoid price fluctuation which make supplier power may grow in the future.
Nestle, however, treat its supplier’s fairly to create more loyalty among
them (Byrne, 2020).
Porter five forces
Porter’s five forces are a simple but powerful tool for understanding
the competitiveness of the business environment. It can be used to identify
a business strategy to increase competitive advantage. Here will be
examined Porter five forces of Nestle: Need to explain more about why
porter five force is used.
Figure: porter five forces model (Kumar, 2020)
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Rivalry among existing competitors
The first of the five forces refer to the number of rivals and their ability to
undercut a company. The larger the number of competitors, along with the
same size and offering equivalent products and services, the lesser the
power of an organization. When it comes to Nestle, it can be said that an
organization faces intense competition. Suppliers and buyers may jump into
a company that can offer a better deal or lower prices. In this case, Nestle
should invest in research and development activities to identify new
customer segments and focus on the needs and expectations of its
customers and. In addition, Nestle has to invest in building good relation
with both customers and suppliers by using various ways to increase
customer loyalty (Murphy, 2020).
Bargaining power of suppliers
It refers to the pressure that the suppliers can apply to the manufacturing
business like Nestle by controlling the raw material availability which in
turn has huge impact on the quality and price of the final product. The
number of suppliers of key inputs of product or service, how much it would
cost a company to switch to another supplier, uniqueness of an input…are
influencing factor for bargaining power of suppliers. Since the suppliers of
agriculture commodities offer a non-unique product, the bargaining power
of Nestle’s supplier is high. Besides, nestle can more strengthen its position
against suppliers by reducing the dependency on one or a few suppliers.
Having suppliers in different regions not only lowers their bargaining power
but also allows a company to improve its value chain efficiency (Murphy,
2020).
Bargaining power of buyers
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This refers to the pressure that consumers can put on an organization to get
higher quality products, excellent customer service, or lower prices. High
bargaining power makes the industry more competitive, tend to more
innovative and lowers profitability. Since Nestle produces FMCG products
which is intensely competing industry, the bargaining power of buyer is
high which mean that customers can switch easily from one brand to other.
But as Nestle id global company it can take advantage of its economies of
scale to improve a cost advantage and provide affordable prices to attract
the low-income consumers of the industry. (Murphy, 2020).
The threat of substitute products
The threat of substitutes is that the customer can purchase instead of the
industry’s product. The availability of close substitute products can make an
organization more competitive and decrease profit potential for the firms.
As there are many similar products in the beverage industry, the threat of
substitutes is a high risk for nestle. In this case, nestle could attract those
consumers who are most likely to shift to substitutes, and target them for
enhanced service and marketing efforts, therefore, they are aware of the
unique value that a company brings to them. One of the ways nestle has
made its products unique is making them healthy compare to other food
products (Murphy, 2020)
The threat of new entrants
The threat of new entrants means the ability of new companies to enter a
market industry. If new competitors enter a market providing the same
products or services, a company’s competitive position will be high risk. It is
mainly dependent on how easily they can enter into the industry and
compete within the market with the existing rivals. Nestle has occupied the
market for more than a century, which mean it can produce better product
quality and can provide consumer satisfaction for a long time which makes
it quite difficult for the new entrants to compete. Moreover, Nestle can offer
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their products and services at an affordable price which is also a barrier for
new entrants. Therefore, the threat of new entrants is low risk for a Nestle.
(Murphy, 2020).
Need introduction about what is strategy development process and why it is
important and the steps that involve in strategy development process.
Strength
Nestle contains a culture that is cooperation and open-door policy which
stimulates the employees to motivate and satisfy in their work. It already
owns the world's most trusted and recognized brands. It mainly focused on
achieving higher sales volumes and profit penetrating existing products and
developing innovated new products. As their aim, consumers are addicted
to their products and not boring to consume again and again yet. In
addition, Nestle can serve many target customer segment by producing
variety of products (MAHAJAN, 2021).
Weakness
One major weakness of Nestle is that it is penetrating and entering the
marketplace which is already mature with an existing product. Therefore, it
can cause a tough competition when enter to new market. Much of its sales
depend upon a few well recognized brands. Milk Pak is one of the examples
of it, it always stands in the last comparing with different countries of milk
because of low advertising and marketing. As a company is heavily
dependent upon advertising to promote its products; it have to invest a lot
in marketing costs with a questionable return on investment. These all can
bring a negative effect on the long run of the company (MAHAJAN, 2021).
Opportunities
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Even a company owns its online stores in some countries, the company can
expand into e-commerce which already established a strong position in
different market. It would provide more opportunities to increase sale.
Besides, growing middle classes in nations like China and India is an
excellent opportunity for a company to expand its market. Furthermore,
changes in lifestyle like longer work hours, more women in the workforce,
and more single-person households, increase the demand for prepackaged
foods all of which has a great opportunity to develop new products for
Nestle (MAHAJAN, 2021).
Threat
Changes in climate directly impact on Nestle’s raw materials such as coffee,
wheat, and diary. They are heavily affected Nestle’s product production and
profitability in short to medium term. Moreover, growing suspicion of
prepackaged foods as unhealth in some regions like Europe and America is
becoming common. This increases the demand for fresh and natural foods.
Moreover, many companies such as Unilever and Mondelez provide similar
product categories with Nestle which becomes tough for the Nestle brand
to compete (MAHAJAN, 2021).
Objective setting
All successful organization has fixed set goals to achieve their specific
objectives. By applying the principles of SMART goal setting, the business
can certainly stand in the long term. People are recognizing that the use of
plastic is increasing day by day and its impact negatively on the world’s
ocean. As Nestle, they should notice these plastic problems and therefore
they need to plan to reduce the plastic straws on their products and to
develop a more market share of about 20% in global within 2021.
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Strategy development
The market development, the market penetration and product development
are the most suitable way for Nestle to reach the above objectives. Market
development is one of the Ansoff matrix strategies that develop new market
segments for current products. It targets new customers in their new
segments and expands sales through new uses for the product. Reversely,
market penetration is an effort to dig deeper within an existing marketplace
with their existing products. Moreover, product development is the process
of designing creating or updating their product to fulfill consumer’s needs.
In product development strategy, nestle should use differentiation focus to
satisfy customer needs. Differentiation focus is a method that offer a
product or service in their narrow market focus at the best price value
available on the market. It mainly exploits the special needs of customers in
certain segments. These all strategies are valued strategies for sustaining
and growing the business.
Tactical plan
Introduction
Product
Nestle should extend additional products which are latest trends in the
market. Since children obesity is raising, nestle should produce a chocolate
with less sugar. As a global business, nestle should prepare to use paper-
based alternatives instead of plastic straw in packaging. Similarly, this can
lead better for both consumers and environment.
Price
Nestle should allow discounts for constant consumers that can certainly
attract new customers also. It should introduce their new products with a
price penetration strategy by offering an initial lower price than
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competitors mainly to achieve market share. This can ensure that new
products are used by and be more popular among people.
Place
Nestle should established company-based retail shops to easily reach final
consumers. And, it can save costs of an entity as retailer and whole seller
margins does not exist. It should also focus on improving its online website
to easily communicate consumer via online.
Promotion
Nestle should persuade consumers by hiring social media influencers like
bloggers. They can give a chance to know taste of their products by offering
free products to students for a short term. By doing like this nestle can
possess more consumer.
Control
To achieve a company objective, a lot of rules are implemented. The
managers of Nestle company are responsible for all the management
activities like quality management, process management and control
management. And Nestle company should do research about what their
consumers want to try. Besides, nestle should listen feedback and
recommendation from their employees and consumers. If there has negative
feedback from people, then Nestle company must try to solve these
problems. And Nestle company should do research regularly about what
their consumers want to try something new. By comparing past report and
current report, they can know how exactly their company reach their
objectives.
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