Nestle International Business Strategy Essay Example
Nestle International Business Strategy Essay Example

Nestle International Business Strategy Essay Example

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  • Pages: 14 (3836 words)
  • Published: July 29, 2017
  • Type: Case Study
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Company Introduction:

Nestle is one of the world’s largest and most known companies. It is a Swiss company with its central offices located in Vevey. Switzerland. The company was inaugurated in 1866 ( Nestle 2012 ) and since its origin has grown through springs and bounds to go the world’s largest nutrient and nutrition company ( Cnn money 2011 ) . The company is besides a major stakeholder in the decorative company. L’Oreal. For a company to get down from a little domestic town and so spread out internationally. the strategic vision of the company plays a cardinal and cardinal function. The subsequent chapters shall discourse the company’s internal ends and scheme and how that scheme paves manner for Nestle to construct its competitory advantage in all the markets it operates in.

Vision and Valuess:

The vision of Nestle reflects thoughts of


equity. honestness and long-run thought. These thoughts are reflected in the company’s corporate concern rules that have shaped the company civilization and scheme for the past about 140 old ages. The nucleus values that the company has are its people. the quality of its people and trade name. the company’s trade name portfolio. their consumers. their clients and the company’s sustainable public presentation. ( Nestle. 2012 )

Company Objectives:

The chief aim of Nestle can be suitably summed up by the phrase ‘Creating Shared Value’ ( Nestle. 2012 ) This rule at Nestle can be described as holding a strong belief to construct long term and good relationships with their stakeholders. comply with all legal demands and guarantee all activities that the concern undertakes are sustainable and consequence in value creative activity for both the company and the

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society at big.

A scheme that the company has developed to tag their accomplishments is that they would wish to go the benchmark of ( Nestle. 2012 )
1. Nutrition. Health and Wellness
2. Sustainable Fiscal Performance
3. Trust by all stakeholders.

In order to accomplish these benchmarks Nestle underwent heavy outgo in Research and Development and relies greatly on new research and invention. both in footings of nutrient production and procedures. Strategic Analysis:

The Pestel analysis is a tool made for analysing the Political scenario. the Environmental scenario. Socio political scenario. technological scenario and legal scenario of a the macro environment of a concern. This is a direction method that examines the consequence that events or influences from exterior may hold on the public presentation of a company or organisation ( CambridgeDictionary 2012 ) . Pestel analysis is normally conducted maintaining in head the state of affairs of a peculiar part. For the interest of this selling program. the pestel analysis of Nestle will be conducted maintaining in head the market of Great Britain.

PESTEL Analysis

Political: England is a member of the European Union every bit good as being a senior member of the United Nations. Because the state is portion of two large political blocks. it allows it the freedom to merchandise expeditiously both domestically and internationally. Despite holding both a monarchy and a parliamentary signifier of authorities. the governmental system is good balanced and the common jurisprudence is practiced. Nestle being a Swedish state ; besides belonging to the European Union has a great relationship with the authorities of Great Britain ( EuropeanUnion 2012 ) . Economic: United kingdom is the 3rd largest economic system in Europe after Germany

and France nevertheless Economists within the UK market predict a mild faux pas back into recession for the state in the twelvemonth 2012 ( bbc. co. uk 2012 ) . Due to the economic system soon being in a low growing phase it is really indispensable for Nestle to understand the market and come up with merchandises and processes where it could go on to offer the same high criterion of merchandises that it offers and yet seek and minimalise costs.

United Kingdom was besides hit by the recession of the twelvemonth 2007 and there was a just sum of occupation loss. Keeping this in head If Nestle were to put up more production programs and hired local population. it would lend to value creative activity. Social: Around 66. 2 % of the Population of UK lies between the age brackets of 15-64 old ages. This means that there is a big labour force available nevertheless a bulk of population is besides aging. For Nestle this could be an chance if it decides to present a line of merchandises that are compatible with its competitor’s merchandises such as high fibre cereal offered by Kellogg’s or protein bars. With a big immature population. nestle can present new spirits of its cocoa line with added wellness benefits every bit good ( Hill. T. & A ; R. Westbrook. 1997 ) . Technological: The UK is a technologically advanced state with heavy focal point on research and development and computed assisted simulations and plan This is a positive point for Nestle as Research and Development is a cardinal competitory advantage for the company.

Without heavy disbursal incurred in this section.

the company would non hold been able to make the planetary figure one place that it has acquired today. With a technologically friendly environment in UK. Nestle has the options of presenting new engineering and carry oning better research without the fright or incurring excessively high costs or the consumers happening it hard to accommodate ( bbc. co. uk 2012 ) . Environmental: The authorities of the United Kingdom pays emphasis on companies making their operations on environmental friendly rules. Because Nestle is a company that is within the nutrient and nutrition industry therefore the environmental conformity is highly indispensable for it to provide to.

These include the correct and green procedures through which the company manufactures ( Environment protection act. 1990 ) . every bit good as guaranting that all the comestible merchandises meet the wellness criterions as set by the authorities of the United Kingdom. Legal: With respects to the legal state of affairs of United Kingdom the company needs to pay attending to assorted sorts of Torahs that are prevailing. These include wellness and safety Torahs. consumer Torahs. and employee Torahs every bit good favoritism Torahs. For operations within the united Kingdom it is indispensable for companies to non merely aline their procedures with the legal standing of the authorities but besides their direction manner and organisational civilization to guarantee that all employees are treated every bit and reasonably. there are no reported instances of torment of any sort and that the merchandises have a wellness and safety confidence otherwise the company is apt to be sued.

SWOT Analysis:

The grind Analysis is portion of a strategic planning procedure for little and average sized organisations

largely ( Houben. 1999 ) . The analysis measures the company on two foreparts ; internal and external. In the internal country the strengths of the concern and the failings it posses in its ain operations are analyzed while in the external analysis. the chances and menaces faced by the concern in its macro environment are analyzed. Strengths: One of the biggest strengths of Nestle is the trade name image that it has. Its trade names such as Kitkat. Nescafe. Nesquick are about synonymous with the trade name name. The company besides has the heavy fiscal musculus to put in its research and development which can further heighten its merchandise line every bit good as invest in selling. It besides has a really strong planetary presence both in footings of production capacities every bit good as market portion.

Failings: One failing of the company is that it has had to remember many of its merchandises due to bad quality and that has greatly hampered its trade name image. For a company every bit large as Nestle the clients do non anticipate such a unsafe error to be made particularly since it operates in the nutrient industry. The company besides is the mark of being boycotted because of media force per unit areas and conservationists for prosecuting in non-green patterns and use of child labour ( ILRF. 2005 ) . Opportunities: The fact that Nestle has gone from being simply a nutrient trade name to being nutrition and good being trade name is a good chance for the company as it opens many new countries for merchandise line extension.

Entering into emerging markets and set uping fabrication workss

besides helps the company in cut downing its costs. Menaces: The nutrient industry is likely one of the most concentrated industries in the universe. Keeping this in head Nestle faces the really strong menace of competition. This competition can emerge both from international trade names every bit good as local trade names of the market in which Nestle enters and attempts to run. The lifting monetary values of natural stuffs. fuel every bit good as the political instability in many 3rd universe states where cuddle has set up their production workss besides threatens to do undependability in the supply line ( Lin. 2007 ) .

Porters 5 forces:

Michael Porter ( 1979 ) gave a model by virtuousness of which the competitory advantage of companies can be assessed in the market in which they operate in. The model includes an analysis of five concurrent forces that affect a business’ ability to vie ( Michael Porter 1979 ) . Keeping in head the planetary market in which Nestle operates in. the Porters five forces analysis will be carried out maintaining a general position of the full universe as the possible market for Nestle. Threat of New Entrants: Nestle despite being in a nutrient and nutrition industry faces the serious menace of new entrants in the market. Weather this menace is domestic or from international houses. it exists because it is an industry where the barriers to entry are really low. If we discuss Nestle in India for illustration there are low barriers to entry and many little domestic participants can come in the market and dispute the market of cuddles through their pricing or merchandise offering which is

tailored to the local civilization and gustatory sensations.

Dickering Power of Suppliers: The dickering power of providers of Nestle is really low particularly in parts where the states are economically backwards such as Pakistan or Bangladesh. That is because Nestle being such a elephantine in the market has the ability to convey tonss of new concern to the providers and therefore the providers have to bring forth the natural stuffs harmonizing to the lineations set by the company or they can be replaced. Dickering Power of consumers: The dickering power of the clients of Nestle is high. That is because it is a trade name which greatly relies on consumer grasp for the merchandise. If a merchandise is launched in any portion of the universe where the consumers do non like the gustatory sensation. they will decline to purchase it. Similarly in 3rd universe states the consumer base is really monetary value medium.

This raises their bargaining power if Nestle wants to perforate. so it will hold to cut down its monetary values to their affordability degree. Menace of Substitutes: Menace of replacements for Nestle is besides really high. In all countries of its operations there are multiple other houses that are offering either similar merchandises or replacement merchandises. For this purpose Nestle has to guarantee that it offers a merchandise experience that can non be imitated and is demanded by its consumers. Industry Rivalry: Industry competition for Nestle is really high in no affair what portion of the universe it operates in. In United Kingdom it faces menace of competition from trade names like Kellogs. in India it faces competition from local trade names and trade

names such as Knorr which are get downing to venture into the nutrient industry.

Porter’s diamond and competitory advantage:

Michael Porter presented his theory about the competitory advantage of Nations through the usage of this ego designed diamond theoretical account. Harmonizing to his theory. states can make a sustainable competitory advantage for themselves if they use the undermentioned four factors expeditiously. It is called a diamond theoretical account because the consequence of one variable causes a alteration in the other variable. Harmonizing to Porter. a state can make competitory advantage for itself instead than simply trusting on natural gifts. Keeping Nestle in head. Switzerland has created a planetary acknowledgment for itself based on this immense multinational giant’s image ( Economics-papers 2012 ) .

Factor conditions talk about the state making its ain factors of production. Japan for case does non hold any local metal or steel nevertheless it has become synonymous with the fabrication of metal autos. Similarly. factor conditions include constructing up on a country’s skilled resources and seting them to outdo usage such as Nestle has done by geting natural stuffs from other parts of the universe and handling them through advanced procedures to accommodate its ain demands ( Nestle. 2012 ) . Demand conditions mean that when the demand of a certain merchandise is high locally. the company can concentrate on it and construct that as its competitory advantage.

The demand for healthy nutrient was really high In Switzerland and taking that demand Nestle construct its company and has now succeeded in making such a planetary giant. Because Nestles related and back uping industries are besides booming and are competition with each other. this gives Nestle

the chance to construct on its cost advantage and concentrate on its invention so that it can go on its distinction scheme in the market. The local conditions affect the house scheme and civilization. Within Switzerland there was high focal point on making things after thorough research and hence the same Ideas were built-in since the origin of Nestle. ( NestleCompanyStrategy. 2012 ) .

Nestle operates in a battalion of different markets. Keeping each market in head it develops different schemes. The Ansoff matrix shows four different sorts of schemes that companies can follow in order to accomplish their ends. The first is the market incursion. In this scheme companies lower their monetary values so that they can come in into the market more rapidly. In the instance of Pakistan it was seen that when Nestle entered Pakistan. they introduced their existing merchandise Milo at really low-cost rates. even in smaller bomber sizes so that the market can readily accept the merchandise. In Market development scheme. the company takes an bing merchandise into a new market.

This can be seen as when Nestle took Kitkat to foreign markets or when it launched Nescafe java in China. Product development is when a company remains in the same market it is soon runing but starts to spread out its merchandise line. Nestle was seen utilizing merchandise development when it remained in the European market but started embarking into wellness and nutritionary merchandises and spread outing its merchandise line. Nestle besides has a diversified portfolio as it invested in the decorative company L’Oreal and is besides the stakeholder in a figure of pharmaceutical companies worldwide ( Bonn. I. 2001 )


Boston Matrix:

( Mayareynoldswriter 2008 ) .

Nestle is a house of trade names. It consists of over a 100 different merchandises and each merchandise is at a different phase in the market depending upon the part in which it is being sold. By and large the merchandise lines of cuddle can be divided into large bomber classs such as babe nutrients. which includes Cerelac and Nestum. Cereals and Bottled H2O. cocoa points. Dairy merchandises. drinks. ice pick etc. Each merchandise from each of these different classs is topographic points on a different point in the BCG matrix. For the interest of simpleness of the undertaking we will merely discourse a few of the known and flagship merchandises of Nestle ( Boston Consulting Group. 2011 ) . The hard currency cattles of Nestle are really easy most of its cocoa trade names and babe nutrient points. Cerelac is a cosmopolitan hard currency cow every bit good as Kit Kat that has a really strong trade name presence worldwide ( Reuters. 2012 ) . Nido is fast turning nutritionary milk that is deriving popularly in the Asiatic part and in the twelvemonth 2010 ( New York Times. 2012 ) . a new Kit Kat fabrication works was set up in United Kingdom that was to bring forth over 1 billion bars of the cocoa each twelvemonth.

The Stars are those merchandises which have potency in the market and Nestle’s lines of frozen merchandise are speedy to capture a worsening cookery market within the United States. Nestle with its trade name Stouffer. is turning its attending to stop dead pizza in an attempt to capture more of the market portion

( Bryson. 2011 ) . Dogs are those merchandise lines which do non convey in excessively much of gross and are hard to turn around. These merchandises are those that should be discarded or sold off so that they do non squash the company net incomes.

For Nestle. many attribute its investings in the pharmaceutical concern to be a Canis familiaris and that the company should draw out and concentrate more on its nutritionary merchandises. Question Markss are those merchandises whose hereafter is slightly unsure. They can be turned out into positive hard currency cattles or could cut down to the Canis familiaris stature for the company. With respects to the Indian market. the breakfast cereals of cuddles are inquiry Markss. Keeping in head the civilization of India. the breakfast is a wholesome repast and the civilization of cereals is really low ( New York Times. 2012 ) . The peculiar merchandises in the Indian markets are still fighting to calculate out their hereafter.

Value Chain Analysis:

A value concatenation analysis is a specific set of activities that are linked together and through their usage the house can bring forth a competitory advantage for itself. This value concatenation analysis was besides developed by Michael Porter and can be summed up by the undermentioned representation ( Porter. 1985 ) :

If we conduct the value concatenation analysis for Nestle we can see that it has a really good supply concatenation and integrating of all operational concern units otherwise it would be really hard for the company to accomplish planetary laterality. The inbound logistics include warehousing and stock list control. In Nestle it is a computerized and machine-controlled system of stock

list control that is different for each state. This is why the supply of Nestle merchandises is barely of all time scarce in the market.

The operations of cuddles are really successful as they transform a batch of natural stuff into really nutritionary merchandises and make value for their clients. Outbound logistics is the procedure by which finished goods are transferred to the Sellerss. For this purpose Nestle has started to put up distribution channels in each state where its production works is set up so guarantee timely bringing. Selling and Gross saless of nestle aid in making the trade name that Nestle has evolved into today. The service country is that which responds to concerns and after sale service and Nestle tries its best to supply good client service to any clients that may be dissatisfied by the merchandise ( Bonn. I. 2001 ) .


Nestle has a really constituted apparatus of both its operations and selling. What the company should nevertheless put in is constructing its public image as a corporately responsible company every bit good. As it has already been pointed out above Nestle is one of the world’s most boycotted companies because of a certain perceptual experience that it commits corporate offenses when coming to environmental patterns. The company needs to do certain that that peculiar image is altered. Besides. the merchandises of Nestle which are non making so good in certain markets should be pulled out instead than invariably passing more on them to turn their value about. Some merchandises are hard to sail because of the civilization of the market that Nestle operates in and therefore should be avoided to guarantee

sunk costs do non happen.

Evaluation & A ; Decision:

In decision it is safe to state that Nestle has a batch of positive properties endorsing its larger than life merchandise portfolio and therefore the company has managed to prolong its place in the list of the luck five hundred companies. The company through the usage of efficient direction processs. invention. capital extract and research and development continues to spread out its portfolio and besides serves as an illustration of non merely a an exceeding nutrient and nutrition supplying company but besides a existent transnational corporation. There are many cases against the company and it is besides by and large considered to be one of the world’s most boycotted companies and despite all off that the grosss of the company have barely slumped since its origin. That is a testament to their value concatenation creative activity and streamlined procedures that guarantee that nestle becomes a portion of the support of the people of the 130 states it serves.

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