Nestle: Organisational Analysis Report on Business Strategies

This report provides a detailed organizational analysis of Nestle, a leading food and beverage company. It begins with an executive summary and table of contents, followed by an introduction outlining the report's objectives. The report then delves into Nestle's company background, including ownership, history, size, business scope, and product range. The core of the analysis includes a macro-environmental assessment using PESTLE analysis, examining political, economic, social, technological, legal, and environmental factors. An industry analysis is conducted using Porter's Five Forces, evaluating competitive rivalry, threats of new entries, bargaining power of suppliers and buyers, and the threat of substitute products. The report identifies Nestle's core competencies and explores its business strategies. Finally, the report concludes by summarizing the key findings and insights into Nestle's market position and strategic approach. The analysis highlights Nestle's strengths, market strategies, and competitive landscape.

Running head: NESTLE ORGANISATIONAL ANALYSIS
Nestle Organisational Analysis
Name of the Student
Name of the University
Author note

1NESTLE ORGANISATIONAL ANALYSIS
Executive Summary:
This assignment is based on the organisational analysis of Nestle. Nestle is a food
company and have years of experience in this industry. They have a number of tough
competitors in the market but still the marketing strategy and the product quality of Nestle
helped them in acquiring the majority of market shares. Nestle has been in the top of the list in
terms of revenue earned, brand value and so on. To retain the place they are in a market analysis
of Nestle has been carried out. The macro environment analysis will be carried out with the help
of PESTLE analysis and the industry analysis will be carried out with the help of Porter’s five
forces theory. This paper also contains some of the core competency of Nestle and the market
strategy that is used by Nestle.

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Table of Contents
Introduction:....................................................................................................................................3
Discussion:.......................................................................................................................................4
Company background..................................................................................................................4
Ownership....................................................................................................................................4
History.........................................................................................................................................4
Size..............................................................................................................................................4
Business Scopes...........................................................................................................................5
Products.......................................................................................................................................5
Competition:................................................................................................................................6
Macro environment analysis of Nestle:.......................................................................................6
Industry analysis using Porter’s five forces theory......................................................................9
Core competency of Nestle........................................................................................................11
Business Strategy:......................................................................................................................12
Conclusion:................................................................................................................................14

3NESTLE ORGANISATIONAL ANALYSIS
Introduction:
In this paper, an organisational analysis of Nestle has been carried out. Nestle is a food
and drink company headquartered at Vevey, Vaud, Switzerland. Henri Nestle established the
company in the year 1867 with the help of Charles Page and George Page. Nestle is one of the
reputed and largest food and drinks company in the world. Earlier it used to trade with
condensed milk but then they bring more products into the market. The company serves
worldwide and has a good customer market. It has years of experience and have been remarkable
with their products and market domination. They hold a majority of market shares in the market.
They also have developed a good distribution channel all over the world. In this assignment, a
macro environment analysis of Nestle will be done with the help of PESTLE analysis. PESTLE
analysis will help to understand the Political, Economic, Social, Technological, Legal and
Environmental factors that affect the organisation. The industry analysis will be carried out with
the help of Porter’s five forces. Porter’s five forces will explain about the competitive rivalry,
threats of new entries, bargaining power of the suppliers, bargaining power of the buyers and the
threat of substitute products. This paper will contain some of the core competencies of Nestle.
This paper will also contain the market strategy that Nestle is using.

4NESTLE ORGANISATIONAL ANALYSIS
Discussion:
Company background
Nestle is a food and drink company headquartered at Vevey, Vaud, Switzerland. Henri
Nestle established the company in the year 1867 with the help of Charles Page and George Page.
Nestle is one of the reputed and largest food and drinks company in the world. Earlier it used to
trade with condensed milk but then they bring more products into the market. The company
serves worldwide and has a good customer market (Nestle.com 2018).
Ownership
 Ulf Mark Schneider (CEO)
 Paul Bulcke (Chairman)
History
In 1860, two Swiss enterprises were founded that in future led to the main structure of the
Nestle. Charles Page and George page established a company named Anglo-Swiss Condensed
Milk Company in Switzerland (Obladen 2014). In the year 1867, Henry Nestle created a milk
product, which is similar to the condensed milk and is mainly for the children. In that similar
year, Daniel Peter started working in perfecting the milk chocolate manufacturing procedure. In
1875, Henri Nestle retired but the organisation retained the name and it came to know as Nestle
(Biswas et al. 2014).
Size
The company is one of the leading producers of child drinks and other food items. Its
product range and quality helped them in creating a good customer base as well as helped in

5NESTLE ORGANISATIONAL ANALYSIS
increasing the goodwill of the company. The revenue of the company is recorded CHF 89.8
billion in the year 2017 and the operating income of the company is recorded as CHF 13.16
billion in the year 2016 (Saluja and Mahajan 2017). The company earned a net income of CHF
8.88 billion in the year 2016. Presently Nestle employs 335,000 employees in their organisation.
Nestle sells its product in 189 countries worldwide. In 2017, the company paid a corporate tax of
CHF 3.47billion (Smith 2013). Nestle also has a good amount of equity shares, which is recorded
as CHF 65.98 billion in the year 2016 (González-Benito, Martos-Partal and Fustinoni-Venturini
2015).
Business Scopes
Nestle has a very good infrastructure and has many high-end technologies. The company
is expected to expand their business processes in other countries as well and it is very much
possible as their distribution is channel is very superior (Rushton, Croucher and Baker 2014).
Nestle also has a very good brand awareness among people and this will help them in expanding
their business in different countries. Nestle can also diversify their product in the Sports drink
category, which can increase their revenue (Hutzschenreuter and Horstkotte 2013).
Products
Nestle has a wide range of product to offer to the customer (Payaud 2014). Some of the
products are listed below:
 Baby food
 Dairy products
 Breakfast cereals
 Pet foods

6NESTLE ORGANISATIONAL ANALYSIS
 Ice cream
 Bottled water
 Coffee
 Noodles
Competition:
Nestle has a number of competitor in the market who are competing hard expand their
own organisation. Some of the main competitor of Nestle are Britannia, GlaxoSmith Con, Varun
Beverages and soon (Nestle 2013).
Macro environment analysis of Nestle:
The macro environment analysis of Nestle can be done with the help of PESTLE
analysis. PESTLE analysis is a marketing tool that helps to understand the external factors that
influences the operation of an Organisation. PESTLE analysis will help to understand the
Political, Economic, Social, Technological, Legal and Environmental factors that affect the
organisation (Aithal 2016).
Political factors:
 Change in food standards: The change in food standards of different countries influences
the manufacturing process of the product (Heasman and Lanhg 2015). Food standards
means quality of the product or the materials, which are used in the product, should be of
higher quality. The product should not create any health issues to the consumer.
 Rules and regulations: Government rules and regulations highly influence the
organisations process of manufacturing the food products. Rules and regulations are set
differently in different regions by the government. Nestle should consider the

7NESTLE ORGANISATIONAL ANALYSIS
import/export duties, taxation, government permission for entering into a market and
should focus on bringing hygiene products that are allowed by the government.
 Government stability: The organisation should also make decisions considering the
government stability. Change is government mean change in policies, which will affect
the organisation.
Economic factors:
Change in consumer budget: With changing times, the habit of the customer is also
changing. Customer is becoming more cost-conscious and this is changing the think
process of many organisations (Hope and Fraser 2013).
Increased price of raw materials: The price of raw materials is increasing day by day this is
forcing the organisation to cut the cost of production. Nestle should make their
organisation strategy is such a way so that they can adapt to the rising price of raw
materials.
Other factors: Nestle should have proper knowledge about the changing inflation, economic
growth of the company and also about the income levels of the people.
Social factors:
 Changing consumer preference: With changing times, consumers are becoming more
health conscious and Nestle should emphasise on healthy drinks and products. It will help
nestle in retaining the customer market.
 Changing lifestyle: Changing lifestyle also affects the organisational functions. Instant
foods are making its own market. Nowadays people do not want to spend time on
cooking rather they like to have instant foods. Nestle has created its own product that

8NESTLE ORGANISATIONAL ANALYSIS
serves this purpose. The product is Maggie and it acts as an instant snacks/food to the
consumer.
 Cultural barrier: Cultural barrier is one of the problems for many organisations while
doing its marketing. Need of adapting to different cultural behaviour is a necessary steps
for the marketing strategy.
 Consumer behaviour: Consumer behaviour towards the product is a very necessary. The
organisation should understand how the market is taking their product, whether they are
satisfied with their product or not.
Technological factors:
 E-commerce: E-commerce has helped many organisations recently in increasing their
revenue and expanding the customer market. Nestle should focus on the E-commerce
strategies in this modern era as the company can get a number of benefits from that like
increased brand awareness, increased sales.
 Internet as feedback tool: Use of internet in getting feedbacks can attract more customers.
A positive feedback from the customer will force other consumers to try their product and
a negative feedback will help the organisation to reduce the issues. Internet has also
reduced the gap in direct communication between the customer and the company.
 Innovation: Advancement in technology has increased the level of innovation among the
organisation. The use of technology will help Nestle to innovate more and bring new
products in the market.
Legal factors:

9NESTLE ORGANISATIONAL ANALYSIS
 Safety standards: Nestle is a food product and mainly consumed by the children. The
main priority of Nestle should be health and safety rules for the employees and to
produce hygienic products for the consumer.
Environmental factors:
 Packaging: The concern of consumer for the environmental cleanliness is highly crucial
in case of packaging. Nestle should use Recyclable materials while packaging their
products. Corporate Social responsibility: Corporate social responsibility is important and Nestle
should understand the value of good corporate social responsibility (Schwartz 2017).
Valuing corporate social responsibility will help in customer retention, more media and
print coverage, rand differentiation and happier employees. Production process: The production process should be environment friendly. It should not
affect the environment in any way. The production process and technology that will be
used should follow proper environment guidelines.
From the above analysis, it can be stated that there are number of factors that are to be
considered during the activity of the organisation. All the factors are equally important and
Nestle should follow this factor to keep their place in the market.
Industry analysis using Porter’s five forces theory
Porter’s five forces theory will help to understand the five key driving forces that affect
an organisation. It will help to understand about the level of competitiveness, threats of new
entries, bargaining power of the suppliers, bargaining power of the buyers and the threat of
substitute products (Dobbs 2014).

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 Competitive rivalry (high): The level of competitiveness in this industry is very high.
Competitors like Britannia have also a good market share and good brand awareness in
the market. Nestle also faces a tough competition from the Kraft foods, Group Danone
and P&G. In breakfast cereal segment, Nestle faces competition from Kellogg’s
(Gallagher 2013). However, being a company of 150 years of experience Nestle is still
facing tough competition from its competitors. The competition is not based only on
price, product variety, promotional offer, creativity is also the main reason for this tough
competition in this industry.
 Threat of new entries (Low): Nestles industry is diverse thus making it tough for the new
entries to enter into this industry. There are many barriers to enter into this industry. One
of the main problems is that the existing firms hold a huge amount of market shares. The
existing companies have also made a good brand loyalty. Existing firms also have a good
distribution channel, which creates another roadblock for the new entrances growth.
 Bargaining power of Suppliers (Low): The bargaining power of the low supplier is low
for Nestle is because of the market shares that nestle holds. Nestlé’s market is the largest
among all its rivals. As a result, Nestle needs a huge amount of supplies of raw materials.
Therefore, if someone starts supplying Nestle does not interferes or try to bargain the
price. Nestle is a company who prefers to have a long-term relation with the suppliers.
This makes the bargaining power of the suppliers very low.
 Bargaining power of the buyers (High): The bargaining power of the buyer is high
because the existing amount of competition in the market. The competition for Nestle as
well as for other companies gives a bargaining power to the buyer. Buyers can easily

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move to other products, as there are number of similar kinds of product available in the
market.
 Threat of substitutes (High): Nestlé’s different product has different substitutes for
example pasteurized milk has a lot of different substitute. Baby products have homemade
substitutes. There also have been many allegations that many of Nestlé’s products are not
healthy and this has led to the increased sale of its substitute products (Porter and
Heppelmann 2014).
From the above Porter’s 5 forces theory it can be stated that Nestle has a number of
positive factors to run their organisation smoothly but at the same time they also have some
major negative areas that affects them. The competitive rivalry is high in this industry. The
threat of new entries and the bargaining power of the supplier are low. The buyer gets the power
to bargain due to the extreme competition. The threat of substitute product is also high as there
are many substitute products available in the market.
Core competency of Nestle
Nestle is a well known and reputed company and with years of experience Nestle has
gained a number of competencies that helped them in increasing their brand value as well as
helped them increasing their brand value. Nestle uses the differentiation strategy which not only
makes them a unique from others but also give them advantage over others. The main
competencies of Nestle are quality products, health and hygiene and the most important
competency is customer satisfaction. Nestlé also provide warranty to retailers regarding expiry,
after sale service and the delivery. Nestle provides superior product quality for the product
differentiation strategy. Nestle want to keep their customer base loyal. The product of Nestlé’s
are verified by international quality standards and by different health and safety standards. They

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also have a good distribution channel all over the world, which helps them in quick and fast
delivery of products to the customers (O’Neil and O’Neil 2014).
Strengths
 Tie-up with powerful brands like Coca
Cola
 Quality products
 Products are verified by international
quality standards.
Weaknesses
 As the product quality is better than their
rivals the commodities are slightly
expensive.
 Availability of substitute products
Opportunities
 Nestle can target the developed nations
and the underdeveloped nations as they
will be the highest grocer of their product
in few years.
Threats
 Competition from other brands
 False allegations are shifting the interest
of consumers.
The health and safety standard is one of their main competencies because consumers are
becoming more health conscious day by day. Consumers are preference healthy products and
Nestle is coming with more and more healthy products, which helps them in satisfying their
customer base and helps them in retaining the customer in the market. A good supply or
distribution channel always increases the brand goodwill and the brand value of the company.
The distribution channel of Nestle helped them in distributing their product in 189 countries
(Gillespie and Riddle 2015).

13NESTLE ORGANISATIONAL ANALYSIS
Business Strategy:
Nestle has been successful in maintaining the mission and the goals due to their amazing
business strategies. The business strategies of Nestle can be divided into three different strategies
(Joyce and Paquin 2016). They are listed below:
Operational pillars
 Innovation Consumer communication Whenever, However, Wherever Efficiency of the organisational operations
Growth drivers
 Growing markets, Positioning of popular products
 Health, Nutrition and Wellness
 Instant products
Competitive advantage
 Unique product and brand goodwill Geographical presence in 189 countries Culture, Attitude, Values and People Research and development
These are some of the strategies, which Nestle used to ensure they succeed in the
industry. The brand value of nestle gives them an advantage over other companies in the market.
Nestle uses their brand goodwill as the competitive barriers (Awan and Rehman 2014). The key

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reason for their success is the incredible marketing and consumer communication. The main
motive of their marketing is to provide cheaper but quality products ensuring total customer
satisfaction. Nestle has been consistent is maintaining the brand image due to their nutritional
products, which many other companies fail to provide to the customer. Nestle are also ahead of
their competitors sue to their research and development strategy. Nestle also have partnership
with other reputed organisation like Coca-Cola (Powell and Gard 2015). They have a unique and
different way of market research procedure. Nestle create regional heads who are able to give
information about local culture and markets. This helps them in gaining strategic knowledge
about global markets and helps them to attain better customer satisfaction.
Recommendation:
Though Nestle has years of experience and a market knowledge about how to strategies and
bring their products in the market but there are some areas in which Nestle can improve their
business. Nestle can diversify their products in the energy drinks category and can bring a
healthier option replacing the caffeine products like Coke Zero. They can tie up with big
organisations like KFC or McDonalds, which will help both the companies in expanding their
business. They should also bring new flavours in their products time to time so that the consumer
does not get bored with their same flavours. They should increase their promotional activity in
the developing countries because very soon the developing nations will be a leading consumer of
Nestle.

15NESTLE ORGANISATIONAL ANALYSIS
Conclusion:
This paper analyses about the organisational strategy of Nestle. Nestle is a food and drink
company headquartered at Vevey, Vaud, Switzerland. Henri Nestle established the company in
the year 1867 with the help of Charles Page and George Page. They are one of the most old and
reputed food companies in the market. They have a good market presence with the delivery of
their products in more than 189 countries. Their main products include Baby food, Dairy
products, Breakfast cereals, Pet foods, Ice cream, Bottled water, Coffee and Noodles. This paper
explains the macro-environment of Nestle with the help of PESTLE analysis. PESTLE analysis
helps to understand the Political, Economic, Social, Technological, Legal and Environmental
factors that affect an organisation. The political factors include Change in food standards, Rules
and regulations and Government stability, the economic factor includes Change in consumer
budget, rise in prices of raw materials. The Social factors that affect the work process of Nestle
include Changing lifestyle, Changing consumer preference, Cultural barrier, Consumer
behaviour. The technological factors include E-commerce, Internet as feedback tool, Innovation.
The legal factors and the environmental factors include Packaging, Corporate Social
responsibility, and Production process. The industry analysis has been carried out with the help
of porter’s five forces theory. Porter’s five forces are competitive rivalry, threats of new entries,
bargaining power of the suppliers, bargaining power of the buyers and the threat of substitute
products. The threat of Competitive rivalry, bargaining power of the buyer and the threat of
substitute product is said to be high. The other two forces bargaining power of suppliers and
threat of new entries is comparatively lower. This paper also contains some of the core
competencies of Nestle. Some of the core competencies of Nestle are brand value, healthy

16NESTLE ORGANISATIONAL ANALYSIS
products, good distribution channel and so on. The marketing strategy of Nestle has also been
discussed in this paper. The marketing strategy of Nestle can be divided into three parts
operational pillars, growth drivers and competitive advantage. To conclude, Nestle has years of
experience in this industry and there marketing strategy has been remarkable. They have the
majority of the market shares. They have major challenges like competition, government
policies, and false allegations but still they have expanded their Company and presently have a
global presence in 189 countries.

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