Strategic Analysis of Nestle S.A. in a Changing Business Environment

This report provides a comprehensive strategic analysis of Nestle S.A., a global leader in the food and beverage industry. It begins with an introduction to strategic thinking and management, emphasizing its importance in today's dynamic business environment. The report then utilizes various anal...Read More

Thinking and Managing
Strategically

Table of Contents
INTRODUCTION...........................................................................................................................1
TOOLS ANALYSIS........................................................................................................................1
STRATEGIC FRAMEWORK.........................................................................................................2
RESOURCE ANALYSIS................................................................................................................5
CRITICAL REVIEW.......................................................................................................................7
REFLECTION...............................................................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
The volatility of market conditions and changing business environment has necessitated
the adoption of strategic thinking and management. It systematizes the organisational decision
making and actions towards the achievement of determined goals and objectives. For optimum
allocation of resources and maximization of profits, business organisations caters towards the
management in the strategic manner. It is the structured and planned approach towards realizing
the core competencies of the organisation and ensure hight growth and development. Present
report is prepared to elucidate different aspects of strategic management and its implementation
in organisations under different frameworks. For the purpose, world's leading nutrition, health
and wellness company, Nestle S.A. Is taken into account.
Overview of the company
Established in 1866, Nestle is the transnational food and drink company which serve
people in 194 countries through a wide product line. Its product range includes dairy products,
frozen food, baby food, snacks, coffee and tea, breakfast cereals and many others. It is the
recognized organisation with the number of credentials and global awards for the quality of its
products (Chapman, 2015). This profitable organisation is ranked number one in terms of
revenue generated by it in a year with the annual sales of around US$1.1 Billion.
TOOLS ANALYSIS
Pestle Framework
In order to analyse the competency of the working the tool of analysis used is PEST.
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Illustration 1: Nestle's Business
Strategy

POLITICAL: Nestle organisation is working in number of countries. Each country is having
different types of political scenario along with the framework of laws and regulations. In that
regard it is stated that organisation is complying with the legal and political framework prepared
at the place. In this way it enables its working in the legitimate manner.
ECONOMIC: With different economic conditional prevailing in varied geographical locations,
Nestle is making the financial and price decisions in accordance with that. In that regard it is
found that the profitability and revenue generation criteria differs as per the existing conditions.
SOCIAL: In order to satisfy the customers to the utmost level Nestle is many the wide range of
products and services as per the needs and wants of consumers in different sections. Along with
that special considerations are made with respect to the environmental needs and wants. In that
respect procedures are made sustainable and eco-friendly in all respects.
TECHNOLOGICAL: Nestle is using the high technology methods for all its operations. Such as
communication and connectivity is made smooth and effective through different manner.
Further, it enables the working in the fast and accurate way that derives the growth and
development in the larger extent.
STRATEGIC FRAMEWORK
Each organisation functions with the define format of strategy and the management tools
and techniques. It enables it to have the greater amount of growth and development. In order to
make the assessment of the strategic framework of the selected organisation SWOT analysis is
being performed.
Strengths
 With the history of working around 150 years and having more that 25 brands under it
has enabled it to have the great corporate image that has created the edge in terms of
reliability and quality (Ritter and Gemünden, 2014). It also has the brand reputation of
more than 7 billion.
 It has the wide stream of product portfolio that enables it to reach the customers in one o
the other form in the lucrative manner. It makes Nestle unmatched and unrivalled.
 Large presence with the efficiency and smooth distribution channels increases the
working quality and excellence.
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 It has increased its competency with certain mergers, acquisitions and alliances in
different manner. It has led it growth and develop in the larger manner (Adner and
Levinthal, 2014). Profound team of research and development has led it to become the leader in innovation
and bringing the new range of products. In that regard its is found that Nestle is the
pioneer or many product line.
Weaknesses
 Instability and inconsistency in the quality standards deviates the customers away from
purchasing of products offered by Nestle. It has failed in complying with the needs with respect to corporate social responsibility.
Opportunities
 Inclination towards the healthier options enables the organisation to have larger customer
base by providing products in the mentioned segment (Chapman, 2015).
 With the acquiring of organisations bringing well being products will accrue large growth
possibilities. New joint ventures with help in enhancing market share and profitability.
Threats
 Food inflation is the major threat that leads to the instability in the sales due to rising
prices and reducing profitability.
 Trends towards healthy eating restricts it to manufacture certain kind of product line.
 Food contamination is the greater threat for the organisation such as it directly hits it's
reputation for the product quality.
Nestle is using the following the systematic framework for the strategies in which three
levels are inculcated that are corporate level strategies and business strategies
Corporate Level Strategies
The strategies that provides the direction to the organisational working is referred as the
corporate level strategies. In this, decisions are being taken at the board of directors about the
financial performances, mergers and acquisitions, human resource management and allocation of
resources.
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Vision: Vision of the organisation is become the first choice of the customers in the food,
nutrition and wellness product market.
Goals
 It caters towards the achievement of the organic growth of 5-6 percent every year in all
the markets in which it is operating.
 It strives towards the achievement of the significant margin and EPS growth.
 With the adequate amount of the strategies used Nestle has the goal to increase the capital
efficiency of the resources used by it.
 To attain the market leadership with the quality products and wide range of product line.
Strategies and initiatives
 By making the global presence that is increase the domain of offerings around the globe
in different countries.
 Escalating the research and development capabilities by making more investments and
seeking more skilled researchers.
 Enhancing the stream of the products and brands.
 Establishing lucrative and proper people, culture and values at the organisation.
Business Strategies
Nestle adopts the two types of business level strategies that are differentiation and cost
leadership strategies.
Differentiation
Nestle is the company with the wide range of products and brands in which it offers the
different varieties. In this way it is able to satiate the needs and wants of customers in the larger
manner. For instance it has brands under it such as Cerelac, Gerber Graduates, Aero, Buitoni,
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Illustration 2: Corporate Strategies

Carnation, Juicy Juice, Milo, Maggi, Boost, Dryer's, Alpo, PowerBar, Jeny Craig and many
others offering baby foods, coffee, culinary, cereals, chocolate and confectionery, Dairy, Drinks,
Ice Cream, Food Service, Petcare and others.
Cost Leadership
In order to capture the attention of large number of people, Nestle is using the cost
leadership approach. In this it is offering the high quality products at affordable prices.
RESOURCE ANALYSIS
Each organisation uses number of resources in different operations and working context.
In that manner the analysis is done with the use of value chain analysis (Eshun, 2013). It
elucidates the working of organisation on the basis of its competency in primary activities and
the supporting activities.
Primary Activities
Inbound Logistics
Nestle with its working in around 194 countries has its large number of suppliers at every
place. From these suppliers they purchase the raw materials and other intermediaries to make the
final product at the manufacturing units. These suppliers are selected on the grounds of ethical
processing and the quality of products provided by them. In that regard it is found that it has
different warehouses at every location and manufacturing site where the dissemination of the
inputs is done.
Operations
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Illustration 3: Nestle's Business
Strategy

Efficiency of the operations play vital role in the organisational working such as it
determines the degree of the quality and excellence along with the manner in which it can attain
the profitability and revenue generation (Figge and et. al, 2012). It has adopted the process of
bringing improvements in operations through effective use of the raw materials and packaging
them. More efficient machinery is used to minimize the wastages and increase the production.
This escalates the manufacturing speed along with the complying of the international standards
in all departments. It includes different segments such as accounts, handling of the tangibles and
intangibles at the organisation and many other related.
Outbound Logistics
Nestle has excelled in the process of transportation, storage and delivery of the goods and
products manufactured by it (Haley, Haley and Tan, 2011). There is the systematic and
structured approach is sued in the process of transportation and delivery of the product in the
precise and prompt manner. This accounts the use of the proper management that delivers the
products as per the needs and wants of customers at the desired places. Along with this eco-
friendly and sustainable measures are being adopted for transportation for the protection of the
product and make them use for longer duration of time.
Marketing and sales
Nestle reach large stream of people with effective marketing and promotion methods. In
that there is integrated approach used in the organisation to capture the attention of people in
larger context. It is being found that with aggressive as well as rational marketing sales are being
increased such as it uses both the conventional and modern methods to promote the products and
services (Porter, 2014).
Support Activities
Procurement
Nestle, the company of food, wellness and nutrition offers the range of products for the
enhancement of health and goodness (Ritter and Gemünden, 2014). In that process there requires
the wide spectrum of raw materials. In that regard it is found that Nestle source its raw materials
from the ethically working agents such as for sugar, oil meat, spices and other ingredients. There
are different aspects that are being considered in the processing such as satisfaction of the
customers, quality of the products, qualities required to be delivered along with the minimization
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of the costs incurred on it (Salem Khalifa, 2012). This leads to the manufacturing of the products
with the utmost quality that satiates the needs of consumers in all respect.
Technological Development
With the use of advanced technology in all the processing sections the efficiency and
productivity can be enhanced such as connectivity and networking to bring coordination in
different components. Such as different advanced methodology has been adopted such as E-
collaboration with suppliers, Video conferencing and summits on digital platform and many
other related.
Human Resource Management
In order to extend the high degree of quality, Nestle training and development for
employees to increase their adaptability with market conditions and fulfil customer's needs and
wants. It conducts training and development programs in three stages that are induction training,
basic training and advanced training (Slack, 2015).
Firm Infrastructure
In order to support their core competencies and primary activities, it is build the effective
infrastructure in order to make the effective use of all the available opportunities.
CRITICAL REVIEW
VRIO ANALYSIS
In order to critically review the organisational operation VRIO analysis is being adopted
that make the assessment on the grounds of different parameters and tools.
Summary Of VRIO
Valuable? Rare? Costly to
Imitate?
Organized
Properly?
Competitive
Implications
Economic
Implications
FINANCIAL YES YES YES No Disadvantage Below Normal
PHYSICAL NO YES NO YES Parity Normal
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TECHNOLOGICA
L Yes NO No YES Temporary
Advantage
Above Normal
(at least for some
amount of time)
OPERATIONAL Yes NO Yes Yes Sustained
Advantage Above Normal
VALUE
In terms of value Nestle has the adequate amount of resources that enables it to have the
exploitation in the most lucrative manner. It is capable enough to deal with the environmental
threats and consequences.
RARITY
With the high degree of research and development options, organisation is having the
feature of rarity in the considerable amount. It enables it to have competed with the firms in
profitable manner. On terms of products and services it is lacking in rarity as there are so many
firms operating in same business.
IMITABILITY
Yes it is found imitable with regard to the business model used by it. Such as it is found
that with this it makes the sustenance difficult.
ORGANISATION
In orde to organise the resources it is lacking in the significant manner. Such as it is
found that it needs to have the more proper working and organisational operations.
Mergers and acquisitions
In the total product method in which an organisation comes in the integration with
another business entities on the horizontal and vertical basis. It is found that with this both the
concerned organisations achieve benefits in different aspects. Both the types of mergers and
acquisitions are adopted in different manner that derives the results in the appropriate manner.
Such as it can be stated that they accrue results and benefits in effective manner. These mergers
and acquisitions are made in the context of increasing the efficiency and productivity along with
different reasons (Porter, 2008). It includes the sharing of customer domain and enhancing the
market share in the significant manner. These alliances have benefited to the company
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considerable with the creation of profound brand image. For instance, partnership with the
general mills has enabled it to have the increased share in market of the cereal products which
has made it the leading organisation offering wide range of product line in it. Next big joint
venture partnership is with the coca cola company that has made it the famous beverage partners
around the world. With this customer base has been increased to the larger extent.
Other collaborations can be explained with the “model of differentiated branding”.
According to this model branding and collaborations are done in different contexts such as
product based, communication based, manufacturing based, sponsorship based and other related.
Such as it is found that with the product based branding in which Nestle has merged with another
company to brand a product. Example for this is the Pillsbury Company Limited- Nestle alliance
branding milk chocolate (Chapman, 2015). Secondly, communication based collaboration refers
to the process in which mergers are done to promote the product line such as alliance with
National Milo has enabled the company Nestle to capture the attention of large stream of
customers in considerable manner for the promotion of products such as Carnation, Milo,
Espresso, Nesta, Nescafe and many others. Further, few mergers enables the organisation to
manufacture the products with collaboration and cooperation such as making Dreyer's its
Subsidiary has made the manufacturing new and innovative products such as crunch bars. Lastly,
sponsor based branding refers to the process of partnerships that brings greater distribution and
sales.
Market segmentation
It is the process in which the organisation divides the potential customers into different
segments so that they can be targeted in the different manner. Such as at the elected organisation
the segmentation It is done on the basis of the demographic differences, psycho-graphic
differences and the geographic differences (Crumpacker and Crumpacker, 2015). Demographic
differences refers to the variation in the potential customer groups on the basis of age,
occupation, gender and other related. For instance, the products such as baby products are
targeting the segments that is the customers belonging to the age group of 0 to 3 years. Secondly,
snacks are the products that targets the people belonging to the age group of 7 to 30 years.
Further, the cosmetics has the wide product range that is focusing on the basis of gender that one
section focus on product offering to the women section and secondly the products are of men
domain.
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Further, the psycho-graphic segmentation refers to the process in which customers are
segregated on the basis of choices and preferences such as there are people who are more
inclined towards consuming the hygienic products and hence in that regard products are being
offered with the healthy choices and options (Eigenhuis and Dijk, 2016). Lastly, the
segmentation is done on the basis of the geographic basis that is on the basis of the regions and
countries. For instance, places with profound production of any fruit enables the organisation to
product related to it at that place such as drinks and juices. On the contrary, some products are
prohibited at some places due to restriction of some ingredients and raw material. And hence,
this strategy enables it to have the greater amount of satisfaction to their customers.
Innovation
In the present scenario it has been seen that the customers wants and desires are changing
with the very rapid pace. The market conditions varies on the frequent basis. In that regard, in
order to establish the prominent position in market organisations are required to adopt the
strategy of innovation so that it can be able to satiate the needs and wants of the customers on the
continuous basis (Flander, 2014). Further, it is found that organisations catering towards the
enhancement of the customer base and complying with their needs and wants in all regards it
makes the profound research and development that caters to introduce new and improved
products in terms of quality and safety long with nutrition and taste (Henderson, 2010). Different
methodology has been adopted in this regard such as extrusion, foam booster technology, malt
extraction, portion dispensing systems and fermentation and probiotics. Along with this there are
other methods invented on the continuous basis that leads to the enhancement of quality of all the
products available to it. This I the lucrative strategy proved for the organisation (Hills and Thom,
2015).
REFLECTION
Strategic management is the process in which an organisation enables its working and
operations in the defined manner. So far before going through the module, my knowledge was
confined to the limited area. With the conventional thinking, my perception was that there are
only few segments in which organisation has its focus that are manufacturing, marketing,
accounts, logistics and supply chain and human resource management. But after learning through
different aspects the horizons of my learning expanded and realized the need of strategic thinking
and management in an organisation. It is found that in place of following the same trend and
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policies, it is imperative to adopt the pragmatic approach and make changes in the plans prepared
to attain the determined goals and targets. This states that there is the requirement of changing
the plans as per the competency of the organisation needs and requirements as per the market
scenario present at that time. I have learned that strategic management is the set of activities
done in the step by step manner. It initiates with the analysis of the companies current situation
in terms of the strengths, weaknesses, future opportunities and threats encountered by it. It
enables the organisation to realize its core competencies and possibilities of growth and
development in future context.
With this overviewing of the organisation is done in the 360 degree manner. Further,
along with this I have realised that for the complete and in-depth insight of the organisational
capabilities, it is imperative to make the resource analysis, that I identifying the efficacy of each
resource used by the company. Along with developing the theoretical insight towards the
organisational working, it has also enhanced by critical thinking and ways to use the rational
approach towards management. In this analysis clear and profound analysis is made about the
resources used by the organisation and its relatedness in every aspect of the organisation's
working. It states that with this organisation is able to make the decision making more fast and
precise in the manner to escalate the productivity in every department. Such as it identifies the
existing flaws and areas of developments along with the knowing of lucratively benefiting
resources in all respects. It further, leads to the knowledge enhancement and better
understanding. On the last stage I have made the critical analysis of the strtaegy used by the
organisation. At this stage I have gone through different types of strategies used by varied
organisation in their framework. Reviewing each and every strategy against the suitability and
appropriateness of it, I have understood that it is used on the basis of different aspects and factors
affecting that. I have gained the thorough understanding of the use in the pragmatic manner.
The module prepared was having different segments that was supposed to be achieved in
the particular time frame. In that manner by comparing my current skills I have realized that I
have developed the talent of better time management with the use of strategies such as use of
effective planning tool, prioritizing work and avoiding the procrastination to the larger extent.
Along with that the module was prepared by conducting effective and precise research for which
I had to communicate with range of people in order to obtain the accurate information and
appropriate content. In that process the proficiency of my communication skills in both the
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verbal and written manner has increased to the significant level. Further, there is the essential
component of the module preparation that is making it with the providing of appropriate content.
While processing that I have to go through different issues and problems. In that respect, through
adopting different solutions as per the suitability and the requirement, I have developed the skill
of effective problem solving. With this my decision making has also been improved in the
significant manner.
CONCLUSION
In the present time with the aim to provide the optimum level of customer satisfaction
and attain the high degree of profitability it is being found that the organisations are being
thinking and managing more strategically. This is the systematic and planned approach to make
the operational working effectively and more appropriately. For the conducting of research,
Nestle has been taken into account. With the making of whole report on it certain inferences and
conclusions can be made. Such as it can be stated that it adopts the different strategies such as
mergers and acquisitions, market segmentation and innovation to increase the product sales and
profitability.
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REFERENCES
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application of real options to business strategy. Academy of management review. 29(1).
pp.74-85.
Adner, R. and Levinthal, D. A., 2014. What is not a real option: Considering boundaries for the
application of real options to business strategy. Academy of management review. 29(1).
pp.74-85.
Chapman, C. S., 2015. Controlling Strategy: Management, Accounting, and Performance
Measurement: Management, Accounting, and Performance Measurement. Oxford
University Press.
Chapman, C. S., 2015. Controlling Strategy: Management, Accounting, and Performance
Measurement: Management, Accounting, and Performance Measurement. Oxford
University Press.
Crumpacker, M. and Crumpacker, J. M., 2015. Succession planning and generational
stereotypes: should HR consider age-based values and attitudes a relevant factor or a
passing fad? Public Personnel Management. 36(4). pp. 349-369.
Eigenhuis, A. and Dijk, R. B., 2016. High Performance Business Strategy: inspiring success
through effective human resource management. Kogan Page Publishers.
Eshun Jr, J. P., 2013. Business incubation as strategy. Business Strategy Series. 10(3). pp.156-
166.
Figge, F. and et. al., 2012. The sustainability balanced scorecard–linking sustainability
management to business strategy. Business strategy and the Environment. 11(5). pp.269-
284.
Flander, J., 2014. Great strategists say “no”. Strategic Direction. 30(4). pp.31 – 32.
Haley, G. T., Haley, U. C. and Tan, C., 2011. The Chinese Tao of business: The logic of
successful business strategy. John Wiley & Sons.
Henderson, B., 2010. The logic of business strategy. Ballinger Pub. Co.
Hills, S. and Thom, V., 2015. Crossing a multicultural divide: Teaching business strategy to
students from culturally mixed backgrounds. Journal of Studies in International Education.
9(4). pp. 316-336.
Porter, M. E., 2008. Competitive strategy: Techniques for analyzing industries and competitors.
Simon and Schuster.
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Porter, M. E., 2014. Competitive strategy: Techniques for analyzing industries and competitors.
Simon and Schuster.
Ritter, T. and Gemünden, H. G., 2014. The impact of a company's business strategy on its
technological competence, network competence and innovation success. Journal of
business research. 57(5). pp.548-556.
Salem Khalifa, A., 2012. Mission, purpose, and ambition: redefining the mission statement.
Journal of Strategy and Management. 5(3). pp. 236-251.
Slack, N., 2015. Operations strategy. John Wiley and Sons, Ltd.
Wankel, C., 2010. Alleviating poverty through business strategy. Palgrave Macmillan.
Online
Nestle. 2016. [Online]. Available Through:<http://www.nestle.com/>. [Accessed on 18th July
2016].
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