SWOT and PESTEL analysis of Nestle
Nestle began in Switzerland in the mid 1860s when founder Henri Nestle created one of the first baby formulas. Henri thought the need for a healthy product to serve as an alternative for those mothers who could not breastfeed their babies. Henris first product was a mixture of cow’s milk, flour and sugar which was called Farine Lactee Henri Nestle. In a few years the first product of Nestle captured market in Europe.
In 1874 the Nestle’s Company was purchased by Jules Monnerat and developed its own milk to compete the Anglo-Swiss Condensed Milk Company.
Difficulties for nestle start at the begaining of First World War. And nestle was unable to purchase products or distributes. For the sack of their reputation and to maintain in market they start buying factories in U.S with the help of government. And they start the prodction in huge amount at the end of the war, and after the war the market of nestle was down because of the new milk which came in the market.
To improve their market reputation the nestle merged with Anglo Swiss Milk Company. And after that nestle added chocolate to the food product.
Nestle was badly effected by World War II and the profit of nestle decrease from $20 million to $6 millon between 1938 and 1939. And the company transfer most of their offices in Stamford, Connecticut.
At the end of the war which is also called global conflict. To control the problem of distribution in Asia and Europe, the establishment of the companies came into beings in developing countries, specially in America.
Ironically, World War II helped speed the introduction of the Company's newest product, Nescafe. After the United States entered the war, Nescafe became a staple beverage of American servicemen serving in Europe and Asia. Annual production levels reached one million cases by 1943.
At the end of World War I, there was dramatic increase in the production and sale during the time of war economy. In 1938 the total sale of Nestle was $100 million and it increase upto $225 million in 1945. The executives of the Nestle were not expected thus situation which happened suddenly in war time.
Nestle baby milk
The Baby Milk issue
For the first time it was written in 1973 about Nestle in a booklet and in magazine The Baby killer, which was published in British non-governmental agency. Nestle was badly effected by this statement which was published in British The Baby Killer.
One of the big failure of Nestle was that milk must be mixed water but with the lake of education in developing countries this was a reason of different diseases. Most of the people were saying that Nesle baby milk is a cause of several diseases and also a cause of death. So Nestle was facing many problems because of illiteracy and lake of education.
General Manager of Nestle, Arthur Furer stated, it is important to develop an effective counter-propaganda against the baby milk. For this we need the promotion of budget to $8 billion, for the first time Nestle got advantage that produce breast milk.
Nestle is trying to bring those foods for consumers which are of high quality, safe and the physiological needs. The aim of nestle is to meet the requirements of the customers all the time with a high quality.
“Nestle is dedicated to providing the best foods to people throughout their day, throughout their lives, throughout the world. With our unique experience of anticipating consumers' needs and creating solutions, Nestle contributes to your well-being and enhances your quality of life.”
Nestle is not only Switzerland's largest industrial company, but it is also the World's Largest Food Company. The mission statement emphasizes on the fact that Nestle products are available in nearly every country around the world. Whatever one may live, only Nestle can provide the best and good quality food and drinking products to meet the customer needs and demands.
They are often reassured that they will find well-known brands out of home. This statement also reflects the image of high quality products that nestle offers. Nestle has the benefits that it offers caterers, fast food chains and other restaurants of high quality, base products and meal components, as well as consumer brands. Everyday millions of people all over the world show their trust in the company by choosing nestle products. This trust comes from a quality image that has been built up for over a century. Therefore the quality of the products ultimately enhances the quality of the consumer’s life.
Nestle is struggling to maintain the position as in the past. So nestle is going to launch a new product and want to gain the value once again in the market. In addition, the mission statement declares that nestle has the ability to anticipate consumer’s needs and solutions. Nestle has proven this ability a number of time by introducing new products that required by consumers. Especially, the launch of Nestle Pure Life in Pakistan proves the accuracy of this fact.
The biggest strength of nestle is it includes team focused and good policy. Nestle looks on collective and oriented employees to work hard. And second thing is Nestle has a big brand name because of their high level of market share and the trust of the people from all over the world. Nestle is trying all the time to achieve bigger volumes by renovating existing products and innovating new products. Because of low cost operators by which Nestle not only compete with others but also taking ahead.
Strengths are internal factors. For example, strength could be your marketing expertise.
One of the major weaknesses of Nestle is Nestle Baby Milk because those babies who fed on baby milk are become sick. And so many babies were died because of nestle baby milk and then people boycott to buy nestle.
Weaknesses are internal factors. For example, a weakness could be the lake of new product.
Opportunities are external factors, for example developing a distribution channel such as Internet; change in the lifestyle of consumer is possible to increase the demand for company’s products.
A threat could be a new competitor in an existing market or a technological change that makes existing products possible out of date.
The main theme of PEST analysis is to measure market potential and situation, by indicating growth or decline. PEST analysis can be used for marketing and business development assessment and decision-making, and the PEST analysis encourages proactive thinking, rather than relying on habitual or instinctive reactions.
1: Political analysis:
Nestle’s baby milk can be affected by political change in several different ways i.e. political change can influence public priorities and funding arrangements. Nestle has to operate within the framework of laws set by Parliament, and that’s why it depends on political considerations.
Government plays vital role by imposing the law and regulation on the companies. Government set standard laws for companies that has to met otherwise they have to pay fines.
Nestle is trying to met all the standard laws which are set by the government. For example Health and Safety Act, Disability Act but unfortunately Nestle break the law. Government laws and regulation in accounting standards, taxation requirements, including tax rate changes, new tax laws and revised tax law interpretations are highly influenced on Nestle business.
Nestle is also very keen about stability of government stability in countries where they are trying to get in (especially in underdeveloped countries where political stability is at risk).They are also subject to state, local, foreign environmental laws and regulations.
2: Economical Environment:
Nestle needs to have enough information about the country inflation rate, economic growth rate, and national per person capital income, in which they are willing to start their business. Economic condition varies from country to country. Before starting the baby milk has focus on the above factors. These are the factors that Nestle has to consider before setting corporate objectives. Global economic turmoil has major influence on Nestle business because customers are spending less and they have to adopt different strategies in order to run business smoothly.
3: Social analysis
Social or cultural environment had great impact on Nestle. The main focus of social/ cultural includes the Social change involves changing attitudes and lifestyles. The social and cultural environment is constantly changing. Different countries had different culture (language, religious beliefs, food, family, clothing and their lifestyle). Nestle has to developed strategies which are according to belief and culture in multicultural country like UK. Every country has different consumer taste and lifestyle and Nestle has to develop effective strategies in order to met different lifestyle consumer behaviour. Company is totally dependent on the consumer lifestyle and their attitude. Product or services cannot be successful until company has enough information about the consumer lifestyle. Nestle has to take social and cultural factors under consideration in order to achieve their strategic objectives.
Technological change has the most rapid, persistent and profound effect. It creates opportunities for new products and product improvements and of course new marketing techniques- the Internet, e-commerce. Technology creates opportunities for new product or product improvements and new techniques of marketing such as internet and e-commerce. Technology has great influence on business operations and overall decisions. Nestle uses technology by taking orders via telephone and online by internet. Moreover, Nestle uses technology in various business activities such as record of their customers and employees.
For any firm it is important that corporate objectives are consistent with the overall marketing objectives. Taking corporate objectives and strategy, a company might want to give a description to the Ansoff’s Matrix, Boston Matrix to establish that where the company is and in which way it wants to lead.
Nestle’s corporate objective is one of the world best and largest branded food industry. It is very important that the corporate objectives are fully practical for each product line with the overall objectives of the firm as a whole.
Nestle can set marketing objectives in the business for their product and also for their profit centre. The primary objectives for baby milk to improve its position as the world’s number one selling product. To achieve this position Nestle has to develop a marketing strategy, product development, distribution and promotion. For the improvement of baby milk these strategies must be flexible and at the same time it is important to take care and avoid the damage of the product.
In the business Ansoff’s Growth matrix helps to decide the growth of product and market strategy. We can suggest by Ansoff’s Growth that product or market depends on whether in new or existing markets.
1: Market Penetration
Market penetration means that a growth strategy where the business emphasis on selling existing products into existing markets.
By market penetration main objectives can be achieved.
1: By maintaining and increasing the current product’s market share, this can be achieve by a mixture of attractive pricing strategies, e.g. sales promotion, advertising
2: Secure production of genetic feature of growth market.
3: Spread usage of regular customer, for example by loyalty schemes
2: Market Development
In marketing development we can sell the existing products into new markets. To approach this strategy there are so many ways, including
For example exporting to a new country, new packaging, new distribution channels, pricing policies to create new market segments.
3: Product Development
Introducing a new product into existing marketing is known as product development. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.
Diversification is the name given to the growth strategy where a business markets new products in new markets.
This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience.
For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks.
1: Cost Leadership Strategies
Companies can acquire competitive advantage via a cost leadership strategy. This is usually gained by companies that are able to achieve economies of scale in production and marketing. Such companies buy raw materials in bulk and they produce on a large-scale. They are thus able to market at low prices and this is usually to the mainstream food retailers.
France and the UK have organic juice companies that have gained market leadership via this strategy. Conventional juice companies undertake this strategy in the organic juices market because of their large production capacity and established contacts. This strategy is not viable for new entrants that have low financial resources and specialized products.
2: Differentiation Strategy
A differentiation strategy involves companies marketing a product that is clearly distinguishable from others in the marketplace. In the market, this means the product has attributes that are distinct from others, which can be in the form of flavor juice type pr other characteristics. Examples of companies undertaking this strategy are those that specialize in Not From Concentrate (NFC). Competitive advantage is gained by these products positioned differently from those that compete on price (-Cost Leadership Strategy).
3: Focus Strategy
Whereas the previous two strategies are industry-wide strategies, this involves a segmentation approach. This strategy involves companies focusing on specific segments of the market, and segments can be in terms of flavors, juice type, or marketing channels. Competitive advantage is gained via a Cost Focus or a Differentiation Focus.
Application of 7P’s
A product must provide value to a customer but does not have to be tangible at the same time. It introduces a new product or improving the existing products. New product development refers to the ability of an organisation to introduce new products into the market sometimes referred to as innovation.
A new product takes time to find acceptance and there is a slow growth in sale. Until cost is high because of low output and process may be high to cover production and sales promotion costs. The company needs to spend heavily on promotion to inform the target market about the product existence and benefits.
At decline stage many producers are reluctant to leave the market despite falling profit. When the demand is greater for the product sell it in international market.
This implies that the price should be set based on what the competitor are charging in the market. The method for setting prices should based on demand, because when demand is high the price will be high and low demand may lead to a low price. Pricing strategy for a new product for the first time lead to a high price for those buyers who are ready to pay a higher price and then after some time reduce the price.
It refers to the place where the customer can buy the product and how the product should be reach there. This can be done through different channels like wholesalers, Internet and retailers. The channels of distributions based on intermediaries and middlemen who serve as links between the user of the product and the manufacturer.
It is about the benefits of using a service and a particular product. It includes many ways to dealing with customers for which the company has to offer. The purpose of promotion is explained by the best way which is DRIPE model.
Differentiate- it means that the product must be unique from others.
Remind- the customers have short memory so in this case we should remind those customers who use it before means the regular customers.
Inform- who are not using the product and unaware about the benefits of the product and have never used before we will inform those people.
Persuade- it means convinces and motivate the people about the product.
Engage- in the last part of the dripe we will maintain a long term relationship with our customer.
People refer to the management, employees, customers and everyone who are involved in it. In this part of 7p’s the selection of employees should be done with careful and also the selection of policies is very important so all the members should be aware of these information. And establish effective policies and effective motivational programmes.
It talks about the process of providing a service in which the marketer’s task is achieved and should have the knowledge about the service which provide to the customer, are helpful to the customer, the time of delivery and the customers are informed about the service.
7: Physical Evidence:
It refers method of using a service and product. The physical evidence relates to those aspects that customers can feel and see. For example pamphlets, logos, labels, packaging, colours.
After doing marketing strategies and tactics, it becomes necessary to turn them into action plans.
For each strategy outline the steps involved in actioning the strategies, and allocate responsibility with a time frame (start date and completion date).
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Monitoring and Control
After the implementation of marketing plan the duty of managers are to monitor and control what is going on.
Outline controls that need to be put into place prior to executing your marketing plan. These controls will monitor your strategies to ensure you are meeting your set objectives and financial targets.
In monitoring it is to be checked that everything is going in the right direction according to the plan. In control the correction of the wrong plan as early as possible.
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