Nestle Strategic Management: Analysis, Direction, and Objectives

This report provides a comprehensive strategic analysis of Nestle, a leading international food and beverage company. It utilizes various strategic management tools and frameworks to evaluate Nestle's current position and future direction. The analysis includes a macro-environmental assessment using PESTEL, an industry attractiveness evaluation using Porter's Five Forces, and a SWOT analysis to determine Nestle's competitive advantages and strategic capabilities. Furthermore, the report explores strategic options for growth using the Ansoff Matrix, focusing on market penetration, product development, market development, and diversification strategies. Finally, it outlines SMART objectives for Nestle to achieve over the next five years, including growth through innovation, improvements in operating efficiency, and enhancement of the workforce.

RUNNING HEAD: STRATEGIC MANAGEMENT 0
Strategic Management
Student’s Details-
8/24/2019

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Executive Summary
Strategic Management is concerned with management of the strategies made and evaluation of
those strategies for the purpose of gaining the long term goals of the company. The report is
prepared on the strategic analysis of Nestle by making use of various tools and framework of
strategic management. For making the secondary research, various journal articles, academic
books and different sources from websites are utilized. The purpose of the report is to make an
analysis of environmental factors and industry attractiveness to determine the possibility of
making profits and also analyzing the strategic option through the identification of the various
growth strategies along with the discussion regarding the objectives that can be achieved in next
five years.

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Contents
Task 01........................................................................................................................................................3
Analysis of Macro-environment..................................................................................................3
Industry Attractiveness................................................................................................................4
Task 02........................................................................................................................................................4
Strength........................................................................................................................................5
Weakness.....................................................................................................................................5
Opportunity..................................................................................................................................5
Threats..........................................................................................................................................5
Task 03........................................................................................................................................................6
Market Penetration.......................................................................................................................6
Product Development...................................................................................................................7
Market Development....................................................................................................................7
Diversification..............................................................................................................................7
Task 04........................................................................................................................................................8
References...................................................................................................................................................9

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Task 01
Nestle is the international food and beverage company in the world. The products of the
company baby food, dog food, medical food, breakfast and other related snacks and dairy
products (Nestle., 2011). The Mission of the company is “Good Food Good Life" which is to
facilitate nutritious and healthy food to the customers with the wide range of food and beverages
products (Nestle.com, 2019). The vision of Nestle is to provide quality products to the
consumers by meeting the everyday needs of the consumers and to create trust in the consumers
which is the result of company’s many years of knowledge.
Analysis of Macro-environment
Macro environmental factors analyze the impact of external environment on the performance of
the company as the activities of the external factors can have a direct influence on the
profitability and sales of the company (Aragay, et al., 2011). Moreover, PESTEL Analysis can
be utilized for the analysis of the macro environment of the Nestle which can be understood by
the following points:
 Political factors can impact the operations of Nestle. The company has multinational
operations in more than 190 countries and hence the company faces risk due to changes
in policies and regulations of the government (Nestle, 2018).
 Economic factors such as foreign exchange rates greatly affected the profits of the
company. Further, due to the shits in the economy, it has increased the demand of the
products and also affected the company’s sales due to changing needs and preferences of
the consumers (Hanson, et al., 2016).
 Social factors include the attitude, behavior and changes in the trends cause impact on the
company. Due to healthy eating habits of the people, they are moving towards the Nestle
as it provides healthier and tastier snacks.
 Technological factors help a company to innovate their processes and mechanism.
Similarly, Nestle uses the technology to maintain the records of their operations through
software.

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 Nestle can be affected by the environmental rules and regulations. The company has to
develop environment friendly operations and also have to ensure the quality of the food
to meet the quality standards.
 There are various legal laws and regulations pertaining to the health and safety of the
consumers that the company has to adhere in order to be not affected by the legal factors.
Industry Attractiveness
Industry attractiveness is regarded as the possibility of making profit by making comparisons
with the risk involved and making an analysis of the industry or market to be invested (Aithal,
2017). For this, Porter’s five force model can be used to understand the industrial parameters
and implementing business strategy. Moreover, Porter’s five force model for Nestle is discussed
in the following points:
 When the market is attractive, then it attempts to have threat of new entrants. Nestle has
an established brand name and have lower threat of new entrants as the company is leader
in the market.
 There is high threat of substitute products when the product is of daily consumption.
Therefore, Nestle have to innovate their products and offer discounts to stay ahead in the
market.
 The bargaining power of customers should be given value for maintaining the
performance. However, the products of Nestle have high bargaining power and because
of that the company is engaged various health and wellness programs.
 Bargaining power of suppliers is needed to be maintained as it is regarded as the strength
of the company. Nestle maintains stronger relationship with the suppliers.
 As Nestle is into the products of daily consumption, it faces strong competition with the
rival firms.
Task 02
Strategic positioning is concerned with making a choice that could add value to the customers
and which provides an opportunity for standing against the rival firms. It helps in getting
competitive advantage and can be analyzed by developing SWOT Analysis which defines the
capabilities of the company that can be used against the competitors. It helps in determining

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internal strategic factors that are needed that can be used to overcome the competitors
(Phadermrod, et al., 2019). SWOT analysis of Nestle is explained in the following points:
Strength
Strength is concerned with the capabilities of the company that makes them different into the
market. Nestle have wide range of products categorizing into food and beverages which has led
to increased brand awareness and have established brand name due to their diverse product
portfolio consisting of different variety of products. The company has made renovation in the
products to satisfy the diverse needs of the customers. Nestle have huge research and
development experience in terms of nutrition and food and have involved around 5000 people
into the research partnership with 21 research centers globally.
Weakness
Weaknesses of the company refers to the negative points of the company which cam affect their
reputation and the companies make efforts to convert their weakness into strengths to grab the
attention of potential customers. The brand name of the company was affected by the
controversies related to maggi which is the popular product of the company (Dhanesh &
Sriramesh, 2018). Maggi was recently banned as it was containing of harmful preservative in it.
However, it was re-launched into the market. There are various brands under Nestle which leads
to the conflict of interest within those brands.
Opportunity
It defines the area where a company can expand their business or can adopt a new technique for
their product in the market for the purpose of making profits. However, Nestle has many
opportunities like it has healthy breakfast to offer to the customers and they have robust supply
chain which led to growth in the market. The company has made strategic partnerships with
Coca-Cola that has been an opportunity for the company.
Threats
Threats include factors that can cause harm to the organization and hence the strategies are made
by the companies to avoid the threats. Nestle faces threats in terms of increased competition as
there are various food brands that are existing in the market. It persuades the company to cut the

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prices of the product. Nestle has been facing problems due to the increase in the price of coffee
beast due to changing weather conditions.
Task 03
Strategic direction refers to the inclination of the forces into the company which enables a
company to achieve the objectives of the company. Strategic direction provides the mission,
vision and core values that are crucial for the achievement of the end goal (Peterson, 2019).
ANSOF matrix can be used for the strategizing the plan or activities for the growth of the
company also making an analysis of the risk associated with each strategy made. Four strategies
are included in the ANSOF matrix which are market penetration, product development, market
development and diversification strategy.
Source: (Vlieger, 2019)
ANSOF matrix of Nestle which offers the various strategic choices for the company to attain the
objectives of the company which is as below:

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Market Penetration
This strategic choice is concerned with concentrating on the current position of the company by
selling more existing product in the existing markets to the target audience (Alkasim, et al.,
2018). Similarly, Nestle can use the market penetration strategy by encouraging the promotion of
the existing products through advertising in newspapers, internet and other sources to recall the
customers regarding their product and trying to influence customers to buy the product. Nestle
has strengthened the milk and nutrition products to get a satisfactory growth of the company.
Product Development
Product development is used by the companies to produce new and innovative products to serve
the needs of the existing markets. In this, the company can give extra services to the customers.
Similarly, Nestle has made exciting innovations in the existing products which can be seen from
their new introduced products such as NESPLUS Breakfast Cereals, Maggi nutria-licious,
Nescafe smart Coffee machine and Everyday Chai life that has grabbed the attention of many
consumers (Nestle, 2018). Nestle strives to enhance the quality of their products by making them
healthier and tastier.
Market Development
Market Development is used as a growth strategy to sell the existing products to the new market
segments. In this, companies identify and explore new markets to sell the existing products and
are considered as riskier strategy than the market penetration strategy. Nestle has targeted new
market segments. It seeks to understand the requirements of the new markets and their pattern of
buying to establish a proper strategy to survive in the new market.
Diversification
Diversification strategy is that part of growth strategy that is concerned with selling new and
innovative products in the new markets. In it, the companies either produce the products which
are related to their core competencies or produce the products that are unrelated for their core
business. Similarly, Nestle has made innovations their products under concentric diversification
approach where the company introduced plant-based coffees under the gold of Nestle called
Nescafe. The company has also launched yes snack bars that were offered to the customers in
recyclable paper wrapper (Industry, 2019).

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Task 04
In order to make SMART objectives for Nestle, the company can make an objective of increase
in the growth which can be achieved through innovations by 10% in next five years. Secondly,
the company can make an objective of improvements in operating efficiency which will increase
the profit margin. Hence, it can make the objective of enhancing the profits by 20% in next five
years. Nestle can make an objective of enhancing the workforce and must be focused on the
acquiring the right talent in future. Therefore, the company can aim at improving the efficiency
of human resource department by 20% in next five years.

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References
Aithal, P., 2017. The First Step in Business Management Scholarly Research. International
Journal of Case Studies in Business, IT and Education (IJCSBE), 1(1), pp. 1-13.
Alkasim, S. et al., 2018. The mediating effect of cost leadership on the relationship between
market penetration, market development, and firm performance.. Journal of Business and Retail
Management Research, 12(3).
Aragay, G., Pons, J. & Merkoçi, A., 2011. Recent trends in macro-, micro-, and nanomaterial-
based tools and strategies for heavy-metal detection. Chemical Reviews, 111(5), pp. 3433-3458.
Dhanesh, G. & Sriramesh, K., 2018. Culture and crisis communication: Nestle India's Maggi
noodles case. rnal of International Management, 24(3), pp. 204-214.
Hanson, D., Hitt, M. A., Ireland, R. & Hoskisson, R., 2016. Strategic management:
Competitiveness and globalisation. s.l.:Cengage AU.
Industry, C., 2019. Nestlé launches YES! snack bars in recyclable paper wrapper. [Online]
Available at: https://www.candyindustry.com/articles/88735-nestl%C3%A9-launches-yes-snack-
bars-in-recyclable-paper-wrapper
[Accessed 25 August 2019].
N., 2011. Nestle. Nutrition & Food Science, 41(6), pp. 101-105.
N., 2018. Building For a Healthier Future. [Online]
Available at: https://www.nestle.in/sites/g/files/pydnoa451/files/investors/stockandfinancials/
documents/annual_report/nestle-india-annual-report-final-2018.pdf
[Accessed 25 August 2019].
N., 2019. Mission & Vision. [Online]
Available at: https://www.nestle-esar.com/aboutus/missionvision
[Accessed 25 August 2019].

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Peterson, S., 2019. Advances in Information Technology Integrated with Strategic Direction. In:
Advances in the Technology of Managing People: Contemporary Issues in Business .
s.l.:Emerald Publishing Limited, pp. 13-24.
Phadermrod, B., Crowder, R. & Wills, G., 2019. Importance-performance analysis based SWOT
analysis.. International Journal of Information Management, Volume 44, pp. 194-203.
Vlieger, R. D., 2019. ansoff-matrix. [Online]
Available at: https://www.calltheone.com/en/consultancy/ansoff-matrix
[Accessed 25 August 2019].