STRATEGIC BUSINESS MANAGEMENT AND PLANNING OF NESTLE

INTRODUCTION: –

Nestlé was founded in 1866 by Henri Nestlé and is today the world’s biggest food and beverage company. Sales at the end of 2005 were CHF 91 bn, with a net profit of CHF 8 bn. Nestlé employ around 250,000 people from more than 70 countries and have factories or operations in almost every country in the world.

The history of Nestlé began in Switzerland in 1867 when Henri Nestlé, the pharmacist, launched his product Farine Lactée Nestlé, a nutritious gruel for children. Henri used his surname, which means ‘little nest’, in both the company name and the logotype. The nest, which symbolizes security, family and nourishment, still plays a central role in Nestlé’s profile. (Bountypat, 2008)

Nestlé has about 250 000 shareholders, none of whom individually own more than 3% of the shares. As of December 31, 2003, Swiss investors held the major part of the stock (42%) followed by US citizens (22%) and British (10%), French (8%), and German (5%) shareholders. Unfortunately, shareholder identities are not made public under Swiss law, but we do know that Liliane de Bettencourt, heiress to the L’Oréal fortune and the richest woman in France, has a holding in Nestlé. Nestlé and L’Oréal have a close relationship dating back to a shareholder pact made in 1974. Nestlé holds a 26.4% stake in the world’s largest cosmetics group and has right of first refusal over the Bettencourt family’s 27.5 percents take for 10 years, but with no obligation to buy. Whilst it is unlikely that Nestlé will take over L’Oréal in the immediate future, it could well do so in a few years. It already has cosmeceutical joint ventures with L’Oreal through Galderma and Innéov.

Nestlé’s vision of making good food central to enjoying a good healthy life for consumers everywhere. This implies gaining a deeper understanding in many areas of nutrition and food research and transforming the scientific advances into applications for the company. (Parakhiya, 2009)

Having a broad vision the company is doing its best for their consumers to show the great sense of responsibility. Nestlé’s aim is to meet the various needs of the consumer every day by marketing and selling food of a consistently high quality. The confidences that consumers have in our brands is a result of our company’s many years of knowledge in marketing, research and development, as well as continuity -consumers relate to this and feel they can trust our products. Nestle mission is to strive to bring consumers foods that are safe, of high quality and provide optimal nutrient to meet physiological needs. Nestle helps provide selections for all individual taste and lifestyle preferences (Parakhiya, 2009)

(http://www.scribd.com/doc/21544545/

Introduction-Nestle-Was-Founded-in-

1866-by-Henri-Nestle-And

LITERATURE REVIEW

Since Nestle began over 143 years ago, Nestlé’s success with product innovations and

business acquisitions has turned it into the largest Food Company in the world. As the years have passed, the Nestlé family has grown to include chocolates, soups, coffee, cereals, frozen products, yoghurts, mineral water and other food products. Beginning in the 70s, Nestlé has continued to expand its product portfolio to include pet foods, pharmaceutical products and cosmetics too. (Bountypat, 2008)

Today, Nestlé markets a great number of products, all with one thing in common: the

high quality for which Nestlé has become renowned throughout the world. The Company’s strategy is guided by several fundamental principles. Nestlé’s existing products grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Long-term potential is never sacrificed for short-term performance. The Company’s priority is to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives. Taste of Nestlé in each of the countries where Nestlé sell products. Nestlé is based on the principle of decentralization, which means each country is responsible for the efficient running of its business – including the recruitment of its staff. That’s not to say that every operating company can do as it wishes. Headquarters in Vevey sets the overall strategy and ensures that it is carried out. It’s an approach that is best summed up as: ‘centralize what you must, decentralize what you can’. Nestlé is a company which is present in all over the world but It has difference and unique motto to deal in all over the world. Nestlé believes that they should think about their organizations globally but they deal with people by interacting with them locally.

“Thinking globally – acting locally”

.´

SWOT ANALYSIS OF NESTLE

Strengths:

Nestlé’s has much strength.

Their first is that they have a great CEO, Peter Brabeck. Brabeck emphasizes internal growth, meaning he wants to achieve higher volumes by renovating existing products, and innovating new products. His explanation of renovation is that “to just keep pace in the industry, you need to change at least as fast as consumer expectations.” (Novak, 2008)

Parent support – Nestle India has a strong support from its parent company, which is the world’s largest processed food and beverage company, with a presence in almost every country. The company has access to the parent’s hugely successful global folio of products and brands. (Amit, 2005)

Brand strength – In India, Nestle has some very strong brands like Nescafe, Maggi and Cerelac. These brands are almost generic to their product categories. (Headonist, 2009)

Product innovation – The Company has been continuously introducing new products for its Indian patrons on a frequent basis, thus expanding its product offerings. (Headonist, 2009)

His explanation of innovation is “to maintain a leadership position, you also need to leapfrog, to move faster and go beyond what consumers will tell you.” Brabeck has led Nestle into a position to better achieve the internal growth targets (Novak, 2008)

Another strength that Nestle has is that they are low cost operators. This allows them to not only beat the competition by producing low cost products, but by also edging ahead with low operating costs. (Novak, 2008)

Partnership with other large companies’ strategy that has been successful for Nestlé involves striking strategic partnerships with other large companies. In the early 1990s, Nestlé entered into an alliance with Coca Cola in ready-to-drink teas and coffees in order to benefit from Coca Cola’s worldwide bottling system and expertise in prepared beverages

Acquire local companies -In Asia, Nestlé’s strategy has been to acquire local companies in order to form a group of autonomous regional managers who know more about the culture of the local markets than Americans or Europeans. Nestlé’s strong cash flow and comfortable debt-equity ratio leave it with ample muscle for takeovers. Recently, Nestlé acquired Indofood, Indonesia’s largest noodle producer. Their focus will be primarily on expanding sales in the Indonesian market, and in time will look to export Indonesian food products to other countries.

Relation with Farmers – Acknowledging the impact of growing food demand and intensifying water scarcities in its future business, Nestle seeks to improve supplying farmers productivity environmental practices and water usage. The group network of 675 agronomist and 5000 extension workers offer free supporting and training assistance to 112,800 farmers in 21 countries. (Harkort, 2008)

Weakness:

1. The main weakness of Nestle is that they were not as successful as they thought they would be in France. The launch in France was in 1994, but since the late 1980s, Danone had already entered the market with a health-based yogurt. (Nazir, 2009)

2. The second weakness is that LC-1 was positioned as too scientific, and consumers didn’t quite understand that LC-1 was a food and not a drug (Nazir, 2009).

3. Exports – The company’s exports stood at Rs 2,571 m at the end of 2003 (11% of revenues) and continue to grow at a decent pace. But a major portion of this comprises of Coffee (around 67% of the exports were that of Nescafe instant to Russia). This constitutes a big chunk of the total exports to a single location. Historically, Russia has been a very volatile market for Nestle, and its overall performance takes a hit often due to this factor. (Headonist, 2009)

4. Supply chain – The Company has a complex supply chain management and the main issue for Nestle India is traceability. The food industry requires high standards of hygiene, quality of edible inputs and personnel. The fragmented nature of the Indian market place complicates things more. (Headonist, 2009)

5. Nestle also has multiple critical resources. They have a great research and development team. James Gallagher and Andrea Pfeifer were the masterminds behind the research on the La-1 cultures in the LC-1 yogurt. They were also the two that decided on selling LC-1 as a functional food. This enabled Nestle to position the product in a way that differentiated it among the other products in the market. They also have four pillars that Brabeck, Nestlé’s CEO has identified he believes will help their internal growth worldwide. These are operating excellence, innovation and renovation, product availability, and communication. (Nazir, 2009)

OPPORTUNITIES-:

Expansion – The Company has the potential to expand to smaller towns and other geographies. Existing markets are not fully tapped and the company can increase presence by penetrating further. With India’s demographic profile changing in favour of the consuming class, the per capita consumption of most FMCG products is likely to grow. Nestle will have the inherent advantage of this trend. (Headonist, 2009)

Product offerings – The Company has the option to expand its product folio by introducing more brands which its parents are famed for like breakfast cereals, Smarties Chocolates, Carnation, etc. (Headonist, 2009)

3. Global hub – Since manufacturing of some products is cheaper in India than in other South

East Asian countries, Nestle India could become an export hub for the parent in certain

product categories (Headonist, 2009)

4. Nestle also has an opportunity of being even a larger market leader in Germany with LC-1. Within two years of launching the product in Germany, they had captured 60% of the market. This was due to the fact that they differentiated the product, and Germans simply preferred the taste. (Nazir, 2009)

4. Another opportunity of LC1 is that, because they are a market leader, they can introduce more health-based products in Germany. (Nazir, 2009)

5 As nestle has more then 9000 brands all over the world .they are increasing their products day by day. With very new changes, like now they are introducing Nestle LEMU Malta

Threats:

1. A threat to Nestle is the fact that some markets they are entering are already mature. Danone had an established leadership position in the yogurt market in France. Since Danone was the first to arrive in the market, they have always been the market leader there. (Novak, 2008)

2. Also consumers in France liked the taste of LC-1, but researchers believe they did not repurchase the yogurt because they preferred the taste of DANONE products better. (Nazir, 2009)

3. Competition – The Company faces immense competition from the organised as well as the unorganised sectors. Off late, to liberalise its trade and investment policies to enable the country to better function in the globalised economy, the Indian Government has reduced the import duty of food segments thus intensifying the battle. (Headonist, 2009)

.4. Changing consumer trends – Trend of increased consumer spends on consumer durables resulting in lower spending on FMCG products. In the past 2-3 years, the performance of the FMCG sector has been lack luster, despite the economy growing at a decent pace. Although, off late the situation has been improving, the dependence on monsoon is very high. (Headonist, 2009)

5. Sect oral woes – Rising prices of raw materials and fuels, and in turn, increasing packaging and manufacturing costs. But the companies’ may not be able to pass on the full burden of these onto the customers. (Headonist, 2009)

6. Another threat to Nestle is that there is intense competition in the United States yogurt market. General Mills’ Yoplait division is the leader in the yogurt market in the United States. Yop lait has been the leader for years and is constantly innovating new health products. (Nazir, 2009)

7. The main threat of Nestle these days is the campaign led by the International Nestlé Boycott Committee primarily targets Nescafe, the corporation’s flagship product. To boycott Nestlé products until the company stops promoting its baby milk. (Novak, 2008)

Another threat now a days is in nestle pure life. As it’s the leading brand and people prefer Nestle pure life but their may be a threat from Aquafina which is introduced by Pepsi

Global competitors:

Nestlé towers over its competitors as the world’s largest food company, proudly

proclaiming “good food, good life” Not so good is Nestlé’s reputation for corporate

abuse throughout its operations, ranging from the marketing of infant formula to the

production of its chocolate and bottled water. Nestlé has been the target of strong

international criticism for its aggressive marketing of infant formula in countries with

scarce potable water, leading to a reduction in breast feeding and increased risk for

infants. Nestlé is one of the top four water bottling companies in the world,

contributing to the problem of plastic waste as well as the usurping of water that

should remain a shared resource. (Raj, n.d.)

Competitors

– Cadbury Schweppes – Sara Lee

-Campbell Soup – Smithfield Foods

– Chiquita Brands – Starbucks

– Coca-Cola – Tyson Foods

– ConAgra Foods – Unilever

– Danone -Vivendi Universal S.A.

– Dean Foods -Dole

– General Mills – Hershey

-H.J. Heinz Company – Kellogg

– Kraft Foods – McDonald’s

– PepsiCo – Procter & Gamble

Porter’s five forces analysis:

Analysing the above from the porters framework

As we can see above that the company is facing an intense competition in the market by its existing competitors all over the world and is facing a lot of problems because of this in terms of its market share and reputation like in the yoghurt market it is facing intense competition from DANONE along with this it is also facing the threat from substitute products like the Aquafina arising as the competitor of pure life. Hence analysing it from the porter’s framework we can state that nestle is facing an intense rate of competition from the existing competitors with a fear of losing the market share.

CONCLUSION

Nestlé’s overarching principle is that each employee should have the opportunity to develop to the maximum of his or her potential. Nestlé do this because they believe it pays off in the long run in their business results, and that sustainable long-term relationships with highly competent people and with the communities where they operate enhance their ability to make consistent profits. It is important to give people the opportunities for life-long learning as at Nestle that all employees are called upon to upgrade their skills in a fast-changing world. By offering opportunities to develop, they not only enrich themselves as a company, they also make themselves individually more autonomous, confident, and, in turn, more employable and open to new positions within the company. Enhancing this virtuous circle is the ultimate goal of their training efforts at many different levels through the thousands of training programs they run each year.

Suggestions and recommendations:

As Nestle is the best company all over the world but there is some recommendations and suggestions.

1. Their prices are little bit higher so they should low their prices to increase their Customers.

2. About 70 % people use their products why the rest don’t use them they should conduct survey and concentrate on those facts why they are not using their products.

3. They should also improve their advertising. Their advertising doesn’t pay long term effect in the mind of customers.

4. About 17% people are not satisfied from the taste of Nestle so nestle has to improve its taste.

5. Due to a great demand of nestle Milk now a days there is a shortage of nestle milk in shops sometimes they have to consider this aspect too.

REFRENCES:

Amit, 2005. My Dream Company Nestle. [Online] Available at: http://www.scribd.com/doc/14155655/My-Dream-Company [Accessed 5 February 2011].

Anjaria, H.T.A.J., 2008. Distribution management. [Online] Available at: http://www.scribd.com/doc/37532156/Distribution-Management-Nestle-Ppt [Accessed 06 February 2011].

Bountypat, 2008. Nestle History. [Online] Available at: http://www.oppapers.com/essays/Nestle-History/173749?read_essay [Accessed 03 February 2011].

Gerry Johnson, K.W., 2005. In Exploring Corporate Strategy. 7th ed. Prentice Hall.

Harkort, F., 2008. In ood Business and the Global Water Challenge: Exploring the Link Between Food Business, Environmental Stakeholders, Farmers, and Water Resources. 2008th ed. Grin Verlag.

Headonist, 2009. Nestle SWOT Analysis. [Online] Available at: http://www.scribd.com/doc/16728461/Nestle [Accessed 02 February 2011].

Kumari, D., 2008. Strategic Management. [Online] Available at: http://www.slideshare.net/deepakumari/nestle-sm-presentation [Accessed 29 January 2011].

Nazir, U., 2009. SWOT Of Nestle. [Online] Available at: http://mgmt280.blogspot.com/2009/11/swot-of-nestle.html [Accessed February 2011].

Novak, D.J., 2008. Nestle SWOT. [Online] Available at: http://marketingteacher.com/swot/nestle-swot.html [Accessed 4 February 2011].

Parakhiya, V., 2009. Nestle Stratigic Management. [Online] Available at: http://www.slideshare.net/vparakhiya/nestle-2464286 [Accessed 3 February 2011].

Raj, L.P., n.d. Nestle. [Online] Available at: http://www.scribd.com/doc/28910655/Nestle [Accessed 28 January 2011].

W, R., n.d. Nestle global Stregy. [Online] Available at: http://www.directessays.com/viewpaper/92539.html [Accessed 8 February 2011].