Strategic Management Report: Business Unit Analysis of Nestle

This report provides a comprehensive strategic management analysis of Nestle, a leading food and beverage company. It begins with corporation identification, defining Nestle's product portfolio and service offerings. The report then delves into business unit research, identifying strategic business units (SBUs) like chocolate and confectionery, and their respective product and service lines. An analysis of business unit revenue, focusing on revenue centers like chocolate sales, is presented. Furthermore, the external environment is examined through a PESTEL analysis, considering political, economic, social, technological, environmental, and legal factors influencing Nestle's operations. The report also identifies Nestle's sources of sustainable competitive advantage, including its brand image, asset-driven approach, and difficulty in imitation by competitors. Finally, the report concludes with recommendations for Nestle's future strategic direction, aiming to maintain its competitive edge in the market. This report is designed to provide students with a comprehensive understanding of strategic management principles through a real-world case study.

Running head: STRATEGIC MANAGEMENT
Strategic Management
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Table of Contents
2. Corporation identification......................................................................................................2
a. Identifying a company with product or service portfolio...................................................2
3. Business unit research............................................................................................................2
a. Business unit identification.................................................................................................2
b. Identifying product and service lines.................................................................................3
4. Business unit revenue.............................................................................................................4
a. Identifying revenue centre..................................................................................................4
5. External environment analysis...............................................................................................4
a. Identifying PESTEL of the company.................................................................................4
6. Source of sustainable competitive advantage........................................................................6
a. Identifying source of sustainable competitive advantage...................................................6
7. Strategic direction..................................................................................................................8
a. Recommendations for future strategic direction.................................................................8
Reference....................................................................................................................................9

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2. Corporation identification
a. Identifying a company with product or service portfolio
The term corporation can be used to define a large company that is authorised to act
as a single entity. These companies are recognised by the court of law and rules and
regulations need to be maintained in order to remain successful (Peppard and Ward 2016).
The report identifies a company with a product portfolio that helps it to expand it in the
business. For this purpose, the report focuses on Nestle. Nestle is a food and drinks company
that is situated in Vevey, Vaud, Switzerland. It is the largest as well as the most reputed food
company in the world. Nestle owns over 8500 brands in over 80 countries (Nestle.com 2017).
In this regard, the product and service portfolio of the company can be analysed. A
product portfolio refers to the overall collection of the various products and services that are
offered by a particular company. According to Visnjic, Wiengarten and Neely (2016), the
product portfolio analysis provides a subtle view based on stock type and growth prospects of
a company. Similarly the service portfolio of a company include providing a storage place in
which information about the services of an organisation are maintained. In the case of Nestle,
the service provided by the company to all areas of business are maintained using the current
status and the history of the services. In the case of product portfolio, Nestle excels in
maintaining various types of products like baby food, coffee, dairy products and so on.
3. Business unit research
a. Business unit identification
According to Rothaermel (2015), Strategic Business Unit refers to the profit centre
which deals with the product offering and market segment. Commonly, Strategic Business

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Unit (SBU) can be considered as a business unit that is under a large corporation. SBUs have
a marketing plan that helps in the analysis of the competition and the marketing campaign.
However, SBUs can be composed of more than one business unit that is responsible for
profit-making activities. Nestle, is one of the most reputed companies in the world. The
company is famous for manufacturing products that are of high demand in the market. One of
the SBUs of the company is the manufacturing unit of chocolates and other confectionery and
baked goods. Apart from producing coffee and tea, the company produces a large brand of
chocolates in the world. In this regard, the profits that are gained by the sale of the chocolates
are attributed to the particular SBU of the company (Nestle.com 2017).
b. Identifying product and service lines
According to Albrecht et al. (2016), product line refers to the group of related
products that exist under a particular brand. However, the brands are sold by the name of one
company. Most companies tend to sell products by creating multiple product lines. The
product lines under various brands provide an opportunity for one company to establish a
stable growth in the market. In the case of Nestle, the product lines that are followed by the
business unit include chocolates and confectionaries. The business unit sells varieties of
chocolates as its product line under the name of Nestle. This is one of the reasons behind the
popularity of the company as it consists of products that are of varied range. In this regard,
the service line of the company can also be analysed. The service line of a company is the
grouping of the products as well as the services that are related to one particular division of
an enterprise (Hill, Jones and Schilling 2014). This can be seen in hospitals in which there are
many divisions under one building. Nestle also maintains these divisions focused on
employees as well as customers. Services to employees include encouraging and motivating
them to perform good work. In the case of customers it includes evaluating the demand of the
customers and trying to keep them satisfied.

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4. Business unit revenue
a. Identifying revenue centre
Revenue can be defined as a term used to define income that an organisation gets by
normal business activities. The revenue of an organisation is earned by manufacturing and
selling goods and services. According to Dhangwatnotai, Roughgarden and Yan (2015)
revenue can be received of a company can be earned by interest, royalties and fees. Revenue
centre is a division within an organisation or unit that gains revenue from the products that
have been sold or the services that have been provided. The revenue centre is a separate
department within the organisation wherein the manager of the department are accountable to
the revenue collection of the firm. In the case of Nestle, the largest revenue of the company
comes from the sale of chocolate products. The target market of Nestle, in terms of selling
chocolates is the children. They also target more sales of chocolates during special events.
Hence, the revenue earned from selling chocolates contributes to about 45% of the total
revenue of the company (Nestle.com 2017).
5. External environment analysis
a. Identifying PESTEL of the company
Political factor: Political factors refer to the intervention of the Government in the
market. Political factors such tax policy, labour law and environment law and so on makes it
difficult for companies to set up business. The political relations that exist with various
countries also affect the trading in business. In the case of Nestle, the political factors of the
countries do not pose huge threat for the company. This is mainly because the products of
Nestle do not contain any harmful ingredients that may be banned by the Government.

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Economic factor: This includes the growth in the economy and the fluctuations that
take place. The economic factor of a country plays a major role in the decision-making
activities of a company. For example, the capital cost of a company is affected by the interest
rate. Hence, it is necessary to analyse the economic scenario of a country before making
business investments (Anton 2015). Nestle needs to analyse the economic factors that may
affect the competition of the company. The import and export of goods from other countries
provide for a significant economic development of the company.
Social factor: The social factor involves the cultural aspects of the demography.
According to Grünig and Kühn (2015), the type of people that reside in a neighbourhood and
the lifestyle of these people need to be analysed. This can help in formulating the target
market and manufacture products based on the interests of the customers. Nestle need to
estimate the younger people that exist in a society so that it can launch various products of
chocolate. The social factor also helps in recruiting employees for the company willing to
work as per job description. Hence, this can be considered as one of the important factors for
setting up a business.
Technology factor: In the modern days, technology plays a huge role in the
development of a society and organisation. The organisation relies on technology for
purposes such as manufacturing products, making strategic decisions and analysing the
competitors. According to Eden and Ackermann (2013), the innovation of products, research
and development plans are all made with the assistance of technology. Nestle uses the
technologies in order to identify the competitors in the market and manufacture products with
less minimum effort. However, sometimes technological dependence can also lead to
problems related to costs and consistency of the products.

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Environment factors: The environment factors include natural events that may affect
business. Climatic factors such as a change in weather may cause harm to various industries.
The growing awareness about the effects of climatic change affects the decision of expansion
of a company. Companies either accept the random climate change or make decisions
regarding ceasing business deals in the country (Hatch and Howland 2015). However, for a
company like Nestle, the environmental factor does not cause much hindrance. This is mainly
because of the fact that the products manufactured by Nestle can be consumed irrespective of
the climatic factor.
Legal factors: The legal factors include the laws and regulations of a country. Every
country has a set of laws that deal with the legal rights of the people. The laws ensure that the
people are not violated under circumstances that deal with the selection and recruitment of
people (Bennett and Chorley 2015). Policies regarding the safety of employees, consumer
law, employment law vary from one country to another. The managers of Nestle need to
ensure that the laws regarding employment or consumer protection are not violated. In order
to maintain this, the company need to be aware of the different laws that govern the country.
6. Source of sustainable competitive advantage
a. Identifying source of sustainable competitive advantage
The manner, in which a company manages its assets, attributes and abilities contribute
to a sustainable competitive advantage of the firm. The management of these attributes needs
to be such that it becomes difficult for the competitors to duplicate or follow the strategies.
Hence, competitive advantage can be attained in order to ensure that the company remains
the best in the market (Grant 2016). Nestle has a reputation in the international market that
helps it to remain competitive in the business world. The powerful brand image that has been
developed by the company provides the source of sustainable competitive advantage. In this

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regard, four factors can be considered that help in attaining sustainable competitive advantage
for an organisation.
Asset-driven: A company can be competitive if the assets possessed by the sector are
powerful. The assets that a company can possess include the employees as well as the
customers. The loyalty of these stakeholders forms the catalyst that leads to gaining
competitive advantage in the market. The brand of followers in Nestle is high due to the
various ranges of products they sell in the sale in the market. The developed brand image has
helped the company to edge out competitors like Unilever, Amul and Hersey's and so on.
Difficulty in imitating: This is considered to be the most significant sustainable
development factor. Organisations need to focus on manufacturing products and formulating
strategies that cannot be copied by other competitors. Wagner and Hollenbeck (2014) stated
that if the strategies and product designs that are adopted by the company is easy to replicate
then the company cannot attain competitive advantage. In this regard, some of the products of
Nestle remain difficult to imitate. This provides an advantage for the company.
Branding: Jahanshani et al. (2017) stated that branding also contributes to building
competitive advantage for a company as it is a source of identification of the products. The
higher the brand value of a company, the higher is the popularity among the customers.
Nestle is one of the most reputed companies in the world. The company has favourable
partnerships that help it to remain competitive in the market.
Enduring: Endurance of a company is necessary for customers to perceive the value
of a company. The impact of patents and trademark helps a company to maintain the
uniqueness of the products (Wheelen and Hunger 2017). Nestle develops such patent rights
that help the company to brand its products and strategies effectively. Thus, the company can

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develop advantages that go beyond raising hopes among the customers. It provides customers
with a sense of assurance about the products that they manufacture.
7. Strategic direction
a. Recommendations for future strategic direction
According to Hill, Jones and Schilling (2014), strategic direction refers to the actions
that lead to attaining the goals of an organisation. The strategic direction helps to guide a
company in the right position in the market. These decisions are based on the resources and
capabilities of an organisation. Nestle needs to analyse the factors that may affect the
business. For example, Nestle needs to ensure that the countries they select for expansion are
technically developed. This can help the company to address the richness of the society and
improve the employment ability so that competitive advantage can be maintained in the
future.

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