Strategic Management Report: Nestle Company Analysis

This report provides a strategic management analysis of Nestle, a leading food and beverage company. It begins with an introduction to strategic management and then presents Nestle's vision, mission, and objectives. The report conducts an environmental analysis using PESTLE and Porter's Five Forces models, identifying political, economic, social, technological, legal, and environmental factors affecting the company. It also examines the competitive landscape, including threats from new entrants, substitute goods, and competitors, as well as the bargaining power of suppliers and customers. Furthermore, the report analyzes Nestle's capabilities through a value chain analysis, evaluating inbound logistics, operations, outbound logistics, marketing and sales, service, procurement, human resource management, technological development, and infrastructure. The analysis highlights Nestle's strengths, opportunities, and threats, providing insights into its strategic position and challenges. The report concludes with a summary of the key findings and recommendations for Nestle's strategic management.

Strategic
management
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TABLE OF CONTENTS
Introduction......................................................................................................................................3
4.Vision mission and objective statement of Nestle....................................................................3
5. Environment analysis ..............................................................................................................4
6. Capability analysis...................................................................................................................7
7) Propose strategy.......................................................................................................................9
8) Strategy evaluation................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
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INTRODUCTION
With the context of any organisation, strategic management is the process of formulating
the strategies and implementing them with the purpose to achieve organisational goal and
objective. Strategy management evaluate and control business activities with the purpose of
achieving the organisation goal (Yorio, 2015). The present report is based on the Nestle
Company. It found in the year 1866 and it is a food, beverage organization having it’s
headquarter in velvety, vaud, Switzerland. It is the largest food company in the world measured
by revenue. Nestle products produces e baby food, medical food, breakfast, cereals, coffee,
frozen food, snack etc. In this project report, discussion is done regarding company’s strategic
statement and environmental audit is further carried out.
In present scenario, company is facing various strategic challenges which directly affect
the company profitability. The major challenge which has been faced by Nestle is high rate of
employee turnover. The business is required to focus on the reason behind turnover of employees
and make effort to overcome this issue as early as possible.
4.Vision mission and objective statement of Nestle
Vision- Nestles vision is to be the leading food and beverage organization by providing
high quality product and services. This can be achieved with the help of competitive prices,
ensuring long term viability and profitability of the organisation.
Mission- With the help of its mission of 'Good food, Good life ', the brand is looking
forward in providing consumers with the best taste, nutrition choice in a wide range of food and
beverage categories.
Objectives- Company’s objectives are to be the world largest and best branded food
manufacturing firm and to achieve compatibility with international voluntary standards on the
environmental management systems.
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5. Environment analysis
For survive in the competitive environment, the firm has to carry out the environment
audit with the help of PESTLE trend analysis. It identifies number of forces which have
influence on industry dynamics.
Political factors It refers to changing global regulations
standardised practice and political forces.
Changing regulation food standards and tax
rates also affect Nestle production and
operation(Knies, and et.al., 2015).
Economic factors It includes changing consumer budgets, rise of
cost of product and services and raw material
goods etc. all these activities affects operations
and activities of the business(Benner, and
Tushman, 2015)
Social factors Nestle has to evaluate the social factors by
analysing consumers changing attitudes
towards healthier products in the line, changing
life style, new adaptation of different cultures
etc.
Technological factors High rate of technological advancements
allows the company to lower down its cost of
production and enhance profit margin.
Legal factors Changing nature of regulation and
modification across different international
markets also affect the firm’s growth(Mak,
and et.al., 2013).
Environmental factor It includes increased attention directed towards
corporate social responsibility. Changing
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climate and weather also affect firm’s growth.
Economical factor- Nestle company is highly affected by economic factor because
changing country's economic growth rates and income levels of consumers directly affect the
company’s turnover. So the company is required to make efforts for understanding and analyzing
country’s economic condition which includes changing consumer budgets, rising price of raw
material goods etc.
Social factors- To survive in the competitive environment Nestle is required to evaluate
environment analysis. It includes changing consumer’s attitudes towards healthier products,
changing life styles etc. firm is required to focus on the consumer behaviour because it is
affected by the different languages, religions and culture. And it also affect the preferences of the
consumer regarding their product (Morris, and et.al., 2015).
Industry issue-
Nestle always focuses on consumer’s needs and wants. It has satisfied its customers by
innovation and other strength of the company. Portal five force model is very important to
evaluate internal and external environment of the company(Tonge, Ryan, Moore and Beckley,
2015). The business enterprise can use porter five forces model. The description of this model is
as follows
Threat of new entrants-
Nestle has made a strong name in the market and it is not easy for new firms to enter the
market. As there are many firms who already came in this market and are giving good
competition to Nestle but they are operating at large scale. Every year, many organization
attempts to enter the market and strive for their profit share and productivity but very few survive
in this competitive environment (Mihalic, 2016). The threat of new entrants will very low
because large amount of investment is required.
Threat of substitute goods-
As we know that Nestle produced dairy products and there are various dairy product are
available in market so threat of substitute is high for company, so Nestle is required to focus on
new development and innovation so that its products can compete in the market.
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Bargaining power of suppliers
Bargaining power of the supplier is very important factor to be considered in any industry
as they are the main strength of company (Chen, Delmas, and Lieberman, 2015). Nestle is well
known for its strong relationship with the suppliers. It always focuses on strong and effective
relations to maintain the quality of the product. Nestle also gives guidance to its supplier on how
to work more effectively and efficiently in the market along with reducing the expenses.
Bargaining power of the customer
With the context of Nestle, bargaining power of customers is high because there are
various dairy product and substitutes of Nestle are available in the market so the customers have
choice for the product(Rajesh, 2013). The brand has maintained a strong image in customers
mind by delivering quality products and services to them
Competitors
Nestle is a food and beverage organization so many new major rivals has entered in the
market like kraft food and group danone. These companies are fighting continuously with nestle
in the market. So it can be stated that threat of competitor for nestle is high in the market.
Opportunities: From the analysis done is can be stated that Nestle has a high goodwill
because of which they are able to provide better services to customers (Siddiqui and Basha,
2013). This a type of opportunity which firm has. As the customers have a positive image among
towards the product and mind. Further , the bargaining power of suppliers is high because of
which organization is able to make their delivery of product as per the customers demand.
Moreover , cited firm deals with variety of product because of which they are able to develop
strong customers base.
Threats: There are many organizations which provide their customers with similar
product and services like Nestle. In this context, this is a type of threat which cited firm face. The
main aim of any organization is to gain maximum profit and this is only possible when they
provide their customers with high quality services (Liem. 2014). With this respect, there are firm
which make use of strategies which enable to attract service users. Further, the threat of new
entry is very high. Every year many organization enter into this market.
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6. Capability analysis
In order to manage the capacity of organization , there are different set of techniques
which are helpful in evaluating the capability. In this context, following are the Porters value
chain analysis done for Nestle and Dutch Lady:
Below given are the primary activities which are included in value chain:
Inbound logistics: This shows the relationship with the suppliers. In this context, it includes all
the activities like disseminate inputs, receive and store (Jiang and Su, 2014). It is important for
the organizations to develop strong relationship with suppliers so they they will be able to
provide their better services to customers. As per the case, both Nestle and Dutch Lady have
strong relationship with their suppliers and they always aim at providing their service users with
products according to demand.
Operations: Suppliers are the one who provide material which are helpful to develop the
product. However, there are many activities which are required by the organizations in order to
make the raw material into finished product (Palomino Jr, Medina and Arellano, 2013). There
are different type of strategies or activities which are used by the companies with the help of
which they are able to provide products to their customers. Both Nestle and Dutch Lady are able
to provide their customers with high quality services and they have a systematic process through
which they are able to transform inputs into outputs.
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Illustration 1: Porters value chain

Outbound Logistics: This is a type of process in which they make sure that all the other
activities like distribution, storing and collection. When a product has to be developed, then there
are certain set of activities like collection of materials, storing it and distributing the output to
ultimate customers (Yorio, Willmer and Moore, 2015). Both the firms have a systematic
distribution of work as it enables them to operate their business operations effectively.
Marketing and sales: This is type of activity in which organization aim at providing
information related to their products and services. In this context, Nestle make use of television,
newspaper, internet and social media. On the other hand, Dutch Lady make use of similar
strategies like Nestle however, Dutch Lady do not make high investment compared with Nestle
in marketing and sales.
Service: This is the relationship with customers even after the product is being delivered
to customers. It is the responsibility of the organizations to provide their service users with after
sales services. As per the case, Nestle, make sure that they fully satisfy their customers even after
they buy the product (Spenceley,2012). On the other hand, Dutch Lady are not much concern
towards the after sales services. They do provide their customers with high quality services but
do not focus much of after sales services.
Below given are the secondary activities included in value chain:
Procurement: Resources are very important which enables the organization to provide
their customers with high quality services. In this context , it is the responsibility of firm to make
use of resources so that they will be able to provide better services. As per the case, Dutch Lady
and Nestle make use of resources so that will be able develop huge number of products and that
also with high quality.
Human resource management: Employees are the face of organization and it is the
responsibility of management to make sure that they manage employees so that they will be able
to provide better services to customers (Rajesh, 2013). In this context, both Nestle and Dutch
Lady do understand the importance of employees and accordingly they are able to provide their
service users with improved services. Further, HRM has services like recruitment, training,
retention, etc.
Technological development: Changes in technology takes place frequently and it is
important that management make sure that they provide their customers with better and
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improved services so that they will be able to develop strong customer base. Nestle and Dutch
Lady make use of updated and new technology and aim at delivering high quality services.
However, there are cases in which Dutch Lady fail to make use of new or updated technology so
that they will be able to provide better services to their customers.
Infrastructure: There are different set of departments within the organization which
enables to perform business operations effectively. As per the case, in both the organizations that
is Dutch Lady and Nestle has departments like finance, marketing, operations, HR, etc. (Morris
and et.al., 2015). In addition to this, it includes general management, quality assurance, public
affairs, planning, etc.
VRIO analysis: This can be determined as process in which organization identifies the
analytical technique it includes Value, Rareness, Imitability and Organization.
Value: The resources which are used the organizations are easily made available in order
to develop products of Dutch Lady and Nestle.
Rareness: Resources used by the firm is same but the quality of services is different by
both the organizations.
Imitability: Resource used for making dairy products can not be imitated.
Organization: Both the firm make use of the resources effectively and they are able to
proved their customers with high quality services (Mihalic, 016).
Strengths: Both organizations have systematic distribution of work and this enables them,
to perform their roles and responsibility effectively. Further, both firm make use of their
resources effectively and aim at providing their customers with high quality services. Moreover,
they also make use of marketing and sales strategies with the help of which they are able to
provide better services to their service users.
Weakness: The resources are limited and so there are cases in which management fails to
provide their customers with adequate services. Further, the investment made by Dutch Lady on
marketing is very low because of which they are not able to develop a strong customers base.
7) Propose strategy
TOWS analysis can be determined as acronyms related to different arrangement of
weakness, opportunities, strengths and threats. Opportunities and threats fall under external
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environment and weakness and strengths analysis internal environment. In this context,
following are the internal and external analysis of Nestle:
External Opportunities:
 Business expansion
 Growth in online retail
 Increasing middle classes in countries like India and China
 Changing lifestyle Raising awareness in nutrition and health.
External threats:
 Raising competition
 Increasing pressure from large retail
 Changing technology High government interventions
Internal strength:
 Highly diversified organization.
 Well established relationship with customers.
 One of the most trusted and recognized brands. Has strong development and research
Internal weakness:
 Sales in major markets are concentrated in few giant retailers like Kroger and Walmart
(Mak and et.al., 2013).
 Some of its products like Carnation milk has not able to influence high impact over
modern lifestyle.
 They mainly focus on advertisement and this leads to high marketing cost.
 High cost to launch new product.
There are different set of strategic options which organization may have in this context,
following are few of them:
 Low cost
 Business expansion
 New product development
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Among all the above provided strategic options, business level strategies will be adopted with
the help of which they will be able to make their business effective. In business level strategy,
firm will aim at providing their products and services at low cost (Knies and et.al., 2015). In
order to do it effectively , the organization will focus on making use of their resources effectively
further, they will make use of new technology and employees will be trained this will enable to
provide their services at low cost.
As given in value chain, the relationship with suppliers is very good and this way
management of Nestle will be able to reduce the cost of materials by negotiation. This way firm
will be able to provide their customers with low cost products. As stated above there are many
organization which provide their customers with similar products and services (Handfield and
et.al., 2015). When nestle provides their low cost product, then they will be able to develop
strong customer base. In addition to this, the use of resources made by Nestle is very high .
However, when organization will make use of their resources in such a way that in minimum use
huge amount of units are developed. This way firm will be able to provide their products to
customers at low price.
All the strategies which are developed are aligned with the mission/vision and objectives
as these boost up the moral of employees and enables them to develop path on which they will be
able to achieve their goals.
8) Strategy evaluation
As per the strategy which is to be implement can be done with the help of SAP
evaluation. Which is given below:
Suitability: Adopted strategy will be able to increase the profitability and customer base.
All the activities which are involved adopting this strategy will be done effectively.
Acceptability: As stated above, there are many departments which work together to make
make the business achieve their goals and objectives (Costanzo and Di Domenico, 2015). The
applied strategies will be adopted effectively and this will enable to help the firm to achieve their
goals and objectives.
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Profitability: With the help of this strategy organization will be able to increase its
profitability. As the cost of product will be reduced and this will enable to increase customers
base and more and more customers will prefer to buy the products of Nestle.
The current strategy would enable to make the organization raise its profit and enable the
firm to develop a strong customers. This will also help the company to develop trust and
confidence among customers mind (Chettiparamb and Kokkranikal, 2012). The main aim of any
organization is to gain maximum profit and this is only possible when firm satisfy their
customers. This will also increase the goodwill of the firm.
In order to implement the strategy, the resources are available and they will be able to
make their firm to achieve the organizational goals and objectives. As stated above, firm will
aim at optimum utilization of resources. This way management will be able to make use of
strategy effectively and efficiently. Moreover, there are professionals who will provide their
employees with the help of which they will be able to use resources without any wastage and
high quality services can be provided to service users.
CONCLUSION
For any organization it is important to provide their employees with proper training so
that they will be able to provide better services to customers. In addition to this, research and
surveys should be conducted so that firm gets to know the areas in which fulfilled and customers
can be satisfied. There are many cases in which employees face issue in adjusting with the
change. When new strategies are adopted, then it creates issues for few of the employees. In such
situations employees should be provided with proper information related to the benefits of
changes. Further, there are different tools like PESTLE, SWOT, Porters five forces, etc. which
are helpful to analyze the business environment.
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