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This report presents a strategic analysis of Nestlé. Critically analysing the internal workings of the firm, this report presents a SWOT analysis to
reveal an identification of the internal strengths, weaknesses, opportunities and threats seen within Nestlé. Nestlé is a company with a varied
brand portfolio consisting of a wide range of products including a number of household brands: Nescafe, Rowntree’s Fruit Pastilles and Nesquik.
Earlier this year, Forbes (2014, p.1) referred to Nescafe, one of Nestlé’s core brands as the 27th most valuable brand in the world.
Employing over 8000 employees, Nestlé is present in a number of domestic and international markets. With their headquarters in Switzerland,
Nestlé is a firm, which in total operates within 86 countries of which North America is their largest and most profitable market (Shotter, 2012, p.1).
The firm’s strong internationalisation strategy reflects the firm’s commitment to resource and capability development in the external
environment. This will be explored further through the use of a PESTLE analysis to determine the key external forces present within the macro environment
and, how importantly Nestlé respond to such forces in a strategic manner.
A look back at the history of the firm reveals a strong commitment to product development. It all began back in the mid-1860s when Nestlé created a
new baby formula to offer to the market. Seeing a gap in the market underpinned by those mothers who could not breastfeed, Nestlé developed a formula
to be offered to the European market. This very early development within Nestlé soon developed to include an expansion of products within the firm
with chocolate being added to milk products to reach a larger target market. Since its first product offerings, Nestlé has gone on to have a varied
brand portfolio with annual sales of $100.64 billion (Nestlé, 2014, p.1).
Nestlé’s mission statement is supported by the expression ‘good food, good life’ (Nestlé, 2014, p. 1). Meaning more than the
nutritional values of the food they produce, Nestlé support the need to show a commitment to quality, safety and ultimately convenience for the
consumer to enhance enjoyment. The notion of the creation of ‘shared value’ is a main focus of the firm and is an area which is supported by
the firm’s ability to ‘go beyond compliance and sustainability and create new and greater value for our people, our shareholders and society as
a whole’ (Nestlé , 2014, p.1). This statement supports the integrated approach Nestlé adopt through their commitment to recognising the
responsibility the firm has to the wider external environment, which moves beyond a simple aspiration of profit.
This section presents a SWOT analysis to review the micro environment of the firm reflecting specifically upon the strengths and weaknesses of Nestlé
and the opportunities and threats the firm must respond to through an alignment of firm strengths to such forces. A SWOT analysis is often used, as a
strategic tool to allow a presentation of the firm’s resources and capabilities, which can be further, developed to aid competitive advantage. A SWOT
analysis therefore underpins the development of future strategic options. As seen within the work of Barney (1991, p. 99) and Teece (2009, p. 12) a
desirable competitive advantage is one obtained through a minimisation of threats aligned with the seizing of opportunities.
Table One: SWOT analysis
Table one below reveals the internal dynamics of Nestlé and the opportunities/threats facing the firm.
The SWOT analysis above reveals that Nestlé have a number of strengths, which translate into the development of core resources and capabilities, which
aids their competitive position. Notably, one of the core strengths of Nestlé is the strong brand image they have which inspires trust in consumers.
Nestlé are able to build on this reputation to extend their brand categories. Further, recent efforts to follow corporate social responsibility
strategies have heightened the firms approach to sustainability, which is aligned to current expectations from the consumer market for firms to take a
greater responsibility towards the wider macro environment. Moving on to a critical analysis of the weaknesses of the company, one of the core weaknesses
of Nestlé is the content of some of their products, which marks a move away from healthy eating initiatives. For example, Nestlé produce a number
of confectionary goods including sweets and chocolate bars. Nestlé will in the future have to work with the UK government to ensure that a clear
marketing message is put across for such treats to only be enjoyed alongside a balanced diet. Overall, however, Nestlé’s strengths overshadow
their weaknesses and many of the weaknesses are being tackled by strategic actions. Recognition of the firm’s opportunities and threats leads to a
discussion of the value of internationalisation and in particular the opportunities present within emerging economies. Further, the development of
capabilities and thus the translation of strengths into intangible and inimitable capabilities is an area, which could see the firm, further develop their
sustainable competitive advantage. Developing from the opportunities of the firm, it is also necessary to consider the threats, which face Nestlé. The
SWOT analysis revealed one of the core threats is the increasingly competitive nature of the industry and the challenges, which arise from this level of
competition. As a result, a great threat facing the firm is the level of dynamism and turbulence to contend with which influences the nature and direction
of strategic choices.
A PESTLE analysis is used as a strategic tool to measure industry dynamics through recognition of the core political, economic, social, technological,
legal and environmental forces/changes having influence on the industry (Henry, 2007, p.23). Table two below presents a PESTLE analysis for the industry
Nestlé are present within and this information is then used to form a critical discussion for the future strategic options available to the firm.
Table Two: PESTLE analysis
The PESTLE analysis below identifies a number of forces, which have an influence on industry dynamics. Of these forces, perhaps the most prominent are
social forces, which relate to differences in consumer behaviour. As an international firm, Nestlé have to be able to ensure a level of adaptation,
which is appropriate to different markets driven by different cultures and consumer preferences.
1.Changing nature of regulation.
2. Need to adhere to global regulations and changes across different international markets (Schaffer et al, 2014, p. 12).
It is important that an alignment exists between corporate objectives, brand image and firm activities (Cornelissen, 2014, p.55). Commonly used as a
strategic tool to support this analysis, Ansoff’s matrix can be applied to Nestlé to review the different strategic options available to the
firm (Ansoff, 1980, p. 133). The overall corporate objective of Nestlé is to be one of the world’s best and largest brands in the food industry.
To break this down further, there is a need to apply individual firm level marketing objectives to a specific brand within their portfolio. This section
focuses upon the presentation of marketing objectives and strategies for Nestlé’s baby milk products.
Marketing objectives identify a target market and market need and apply this to the brands they are offering. With regards to the baby milk products
Nestlé offers, one of their core marketing objectives should relate to improving sales through the use of social media outlets. Aligned to the rise of
relationship marketing and the need to develop a deeper, emotional connection with consumers it is argued that one of the marketing objectives for
increasing sales of this product needs to be related to understanding the consumer base. The following marketing objectives are proposed in relation to the
firm’s baby milk products:
To increase interaction with consumers using social media as a platform.
To increase sales by 10% through a promotional campaign across an integrated set of marketing platforms.
To follow a relationship marketing campaign to increase interactions with consumers to enhance understanding of the consumer base.
Ansoff’s growth matrix is a marketing tool often used to understand the different strategic options available to a firm (Ansoff, 1980, p. 131).
Looking at the opportunities available in both new and existing markets, emphasis within the matrix is placed on the benefits and challenges of each
strategic option and the extent to which the options are aligned to the internal resources and capabilities of the firm.
Market penetration is a strategy, which sees growth underpinned by pushing existing products to existing markets. Through a focus on market penetration the
firm would be able to maintain current product lines and focus upon increasing sales in this area through promotional activities and advertising. Market
penetration is a strategy, which would secure growth in the market and would allow the firm to draw on their knowledge of the market to expand sales in
The second strategic option refers to the use of selling existing products to new markets. A new market in this case could be a new consumer base or a new
geographical base. Reflecting upon the nature of the product, it is unlikely Nestlé would be able to target a new customer base and thus it is advised
that if this strategic option were to be followed emphasis would be placed on opening up to new emerging markets with existing products.
Moving away from a focus on the market, the third strategic option offered by Ansoff places emphasis on the importance of product development. This
strategic option would require the firm to develop new competencies, which would appeal to existing markets. Under this strategic option, Nestlé could
focus on the development of a new extension of products in the baby market to offer to the consumer base.
The final option outlined is that of diversification. Diversification is a strategy, which refers to growth achieved by offering new products to new
markets. This type of strategy would require a need for the firm to draw on their inherent strengths and capabilities to offer something new to the market.
Underpinned by high levels of innovation, this strategy would require both investment and an appreciation of risk. As such, before the adoption of this
strategy it would be necessary for the firm to have a clear vision of outcome.
Which growth strategy to follow?
Based on a discussion of the various growth options above, this report argues that Nestlé should focus upon market penetration through the use of
promotional activities and relationship marketing activities. This strategy would see Nestlé focus upon an existing product and market yet achieve
growth through marketing campaigns and a greater utilisation of social media. Through the use of social media and relationship marketing it would be hoped
that Nestlé would be able to develop a stronger connection with their consumers, which is fundamental when needing to gain the trust of new mothers
(Iglesias et al, 2011, p. 632). Strength in the baby market is underpinned by the potential for growth due to this being a growing market.
In support of an identification of growth strategies, there is a need to recognise the importance of competitive strategies. Three core competitive
strategies are identified within the literature: Cost leadership, differentiation and focus (Ortega, 2010, p. 1275). Despite a traditional view that
different competitive strategies couldn’t be mixed, recent literature has supported the use of a hybrid competitive strategy, which combines cost
leadership and differentiation to support a competitive strategy, which balances the actions of each strategy (Baroto et al, 2012, p. 120).
Cost leadership is a strategy, which places emphasis on lowest cost and thus sees the firm seeking to compete with their competition on the basis of price.
Cost leadership strategies therefore require an efficient approach to the supply chain to ensure that raw material costs are kept to a minimum. Emphasis
within this strategy is placed on the need to focus upon gaining economies of scale and thus low costs.
Differentiation involves firms seeking to distinguish themselves from their competitors (Armstrong and Cunningham, 2012, p. 71). For this to be the case,
emphasis is placed on the development of a competitive advantage through something others cannot imitate.
The final competitive strategy is a focus strategy where a segmentation approach is followed (Weinstein, 2013, p. 51). A firm following a focus strategy
would firm to choose a niche market and therefore have specific offerings to a specific target market.
In light of the identification of the competitive strategies and the discussion above, it is advised that the firm should follow a hybrid strategy
reflecting on both cost leadership and differentiation to ensure growth. A hybrid strategy would require Nestlé to seek lowest cost where possible
through economies of scale and efficiency in their supply chain whilst also seeing the firm differentiating through the culture of the firm and the
relationships developed with consumers.
7p’s of marketing
A final consideration for Nestlé is an identification of the 7p’s of marketing and in particular an understanding of what their product offers
to the market (Armstrong and Cunningham, 2012, p. 34). The 7p’s of marketing is an important marketing tool outlining a focus on a clear
understanding of each factor:
Product: Baby formula, nutrients to enable a progression from breast milk to formula or formula for those mothers choosing not to breastfeed.
Price : Price relatively low to competitors. It is important to balance the need here between low cost and the influence this has on trust.
Place: Supermarkets, place of convincing.
Promotion: Relationship marketing principles used to engage the consumer. Nestlé will interact with consumers during a shopping mall road show to showcase their
product offerings and the value of their products.
People: Employees within the firm used to support the growth strategy of particular products. Company objectives and marketing objective translates into
performance goals for teams within the firm.
Process: Customer service is important and a key determinant of trust. As a result of this, emphasis should be placed on the role of employees in educating the
consumer and therefore translating the core elements of the brand.
Physical evidence : Physical evidence in the form of packaging and promotional tools will be used to support the development of the growth strategy employed.
Monitoring and controlling
As a closing point, there is a need to consider the importance of the ongoing monitoring of any marketing plan. Long after the implementation, emphasis
should still be placed on monitoring to ensure that controls are put in place to review the success of a given marketing campaign (Simons, 2013, p. 14).
For example, in relation to the use of social media, particular controls can be put in place to monitor the success and thus levels of integration taking
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