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Requirement
Write a Research Report on NESTLE COMPANY.
Solution
Introduction
In this present paper, we will discuss the analysis of the nestling company. The paper also analyzes the company by pestle analysis and porters five forces model. On the basis of the analysis, recommendations have been made.
Nestle company is a transnational drink and food company that lies in food processing industry. Headquarter of the company is in Switzerland, and it is the largest food processor company according to the revenue of the company. The company produces medical food,coffee, breakfast cereals, ice cream, tea, and others. The total revenue of the company in 2015 is 88.8 Billion. The company was founded in 1905 by the merger of Anglo-Swiss Milk Company (v et al., 2016) .The company is primarily listed on the SIX Swiss exchange and then secondary listed on the Euro next. The company is having a wide range of portfolio which includes the huge range of products such as Nesquik, Nescafe, and others. The total employees of the company in 2015 were 335,000. The company serves its product across the world. The company operates in eighty countries, and the most profitable market is North America. The company has strong internationalization strategy which shows the commitment of the company towards its resources and development of the capability to the external environment.
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Pestle Analysis
The pestle analysis reflects the various external forces which influence the dynamics of an industry. These forces impact on the behavior of the consumers. The company has the ability to ensure a level of adoption, which is required for the various markets driven by different consumer behavior and cultures.
1. Political segment
The political segment of the company is changing regulation which is surrounded by the actions of markets and foods standards. The international process is facing the risk due to the government stability in new emerging economies. The changes in the standardized practice of global regulation lead to the adoption by various political forces. The company faces various problems due to regulations in various countries which do not allow come products in various markets. The company has to follow different political changes in the developing countries due to which the price of the product become expensive and citizens of developing country are not capable of buying various products (Steger et al., 2015).
2. Economic segment
The knowledge of the change in economic rate, inflation rate, a level of income is required because it impacts on the economic stability of the company. The alteration in the budget of consumers and increase in the cost conscious consumer impacts on the profit margin of the company. The rise in the cost of raw material or increase in the demand of suppliers due to which price increases it leads to decrease the profitability of the company. The company faces the problem of economic changes in different countries due to which the problem of supplying the products to the consumers is faced by them. The price of raw material also increase due to which can cost of raw material also increases and selling price of the product is not afford by the consumers in developing countries (Loughlin et al., 2015).
3. Social segment
It includes the change in the attitude of the consumers towards the nutrition and healthier products within the same product line by the initiatives of the government. The change in the lifestyle of the consumers by preferring home made products which impact on the sales volume of the company. The company needs to adapt various cultural settings which help to attract a large number of consumers. The personal approach should be used by the company for various promotional activities which help to understand the behavior of consumers. The company is viewed by the consumers as an agency for power in the large external environment. The consumer awareness is increased by social media due to which they want to probe in the manufacturing process. The company is using international standard of product manufacturing which helps to build the trust among the consumers towards the quality of the product (Macdonald et al., 2012).
4. Technological segment
The rise in technology creates a large number of options for the consumers which develop the huge competition for the company to sustain in the market. The technical department of the company must be fuelled with innovation which helps to differentiate the product and create the brand image in the eyes of the consumers. The electronic commerce is the platform for the company which helps to develop the brand image through various promotional activities (Petruškevi?ius et al., 2014).
5. Legal segment
The legal segment includes a change in the regulations and laws which impact the overall performance of the company. The company needs to adhere to global regulations and amendments across varied international markets (Modi et al., 2013).
6. Environmental segment
The company must increase its attention towards the corporate social responsibility such as initiatives to the protection of the environment. The company also considers the packaging of products which must be recycled and does not harm the environment (Babatunde et al., 2012).
Porter’s five forces Model
1. Bargaining power of buyers
The consumers play an important role in terms of company’s performance so the reasonable value should be to the consumers at the time of accessing the position of the company. The bargaining power of consumers is very high in utilizing the various products of the company. The quality of productsmaintained by the company influences the choice of consumers despite various products served by the competitors. The consumer needs must be satisfied which helps to survive in the market by maintains a brand image in the eyes of the consumers. The company also cares about the health of consumers which is reflected in health and wellness programs of the company. Thus the bargaining power of buyer is high (Shankar et al., 2014).
2. Bargaining power of Suppliers
The suppliers play an important role in building the brand's image in the eyes of the consumers by supplying raw material on time. The company is having the strong relationship with the suppliers which are necessary for producing agricultural and dairy products. The company is also focusing on developing a strong relationship with help to deliver the strong quality of its products. The company also guides the suppliers for working in an efficiency and effective manner which helps to reduce the redundant expenses. Thus the bargaining power of suppliers is high.
3. Threat of substitute
The threat of substitutes is high because from bottled water to milk based products are a threat of substitute goods. The similar products are the arrays which compete directly with the products of the company. The local competitors of china in the same industry compete with the milk based products, so the must innovate their products continuously which helps to sustain in the market. The company has worked on the health and nutrients of the product for maintaining the customer loyalty and competitive edge in the market.
4. Threat of new entrants
The company has the very large portion in food processing industry, and it is not common for the companies to quite well. Many companies try to enter into the same industry for gaining some amount of profit but still a threat of new entrants is low because the company is serving from decades by its superior quality of products which satisfies the need of consumers and which enables the company to get a high market share in the food processing industry. The company has constructed sixteen factories in china in 2000 (Njambi et al., 2015). The new entrants must attempt to seize a portion of company’s market share for its survival which is very difficult for the new entrants. The company is constantly targeting and producing its products through consumer focused strategy thus the threat of new entrants is low.
5. Threat of existing competitors
The company is having very strong position in the industry of food processing, but the company has major competitors such as Group DANONE and Kraft foods. The companies are continuously competing with each other by its innovation and technology. The marketing and promotional activities of the company help to promoting the product effectively. The competition in food processing industry is violent which benefits the consumers to enjoy innovative products. The improvement in product qualities is persistently enjoyed by the consumers. Thus the threat of competitors is low (Robertson et al., 2014).
Recommendation
From the above analysis Following are the four recommendations:
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1. From the pestle analysis it is reflected that environmental factors is the main problem of the company so it is recommended that the company should adopt various corporate social responsibilities which helps to resolve the environmental problem by contributing towards the environmental health from various activities such as Go green campaign. The packaging must be recycled so that environment must not be harm.
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2. Arising from porters five forces model it is reflected that legal factor is the main problem so it is recommended that the company should emphasize on strong business ethics in order to avoid various legal issues such as difficulty in adopting country’s laws and regulations.
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3. The company must generate the intensity to rivalry by providing high quality of product and services by adopting customer concentric strategy which helps to compete among the competitors in the same industry. The personal marketing must be done in order to understand the behavior of consumers which helps to satisfy their needs and demands. The company must use cost competitiveness which enables to generate higher revenue.
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4. The bargaining power of consumers is high, so the company must provide speed service in order to satisfy the need of consumers which helps to build brands image in the eyes of consumers.
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5. The threat of substitutes is also high so the company must continuously improve its product which helps to maintain the competitive edge in the market.. The strategy of the company must be created in such a manner which do not majorly impacted by the political, economic, legal and social environment.
Conclusion
Nestle is the transactional food and beverage company which was founded in 1905. The company lies in the food processing industry. The company produces ice cream, coffee, tea, cereal breakfast and others. The portfolio of the company is very huge which consists of various companies such as Nescafe, Nesquik, and others. The pestle analysis describes that the change in government stability impacts on the operations of the company in various countries due to which the selling price increases which is not afforded by consumers thus the revenue of the company adversely affected. The changes in the rate of inflation and other economic factors increase the supply rate of raw material which impacts on the sales volume of the company. The consumer awareness is increased towards the healthy products by social media which impacts the taste and preference of consumers. The technological department of the change must continuously innovate in order to sustain among the competitors in the market. The global regulations must be adhering to the various international markets. The environment factors must be considered at the time of production. The bargaining power of buyers is high because it directly impacts on the demand for products. The bargaining power of suppliers is also high because they directly impact on the supply chain. The threat of substitute is also high because there is a large number of competitors who are providing the same quality of products. The threat of new entrant is low because the company is constantly focusing and satisfying the demand of consumers. The threat of existing competitors is also high because the competitors are also producing with innovative technologies.
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Steger, J. (2015). Strategic Management of Mars Inc. A Combination of an Innovative Management Philosophy and Familial Eccentricity.
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Macdonald, R. (2012). Unilever. A Strategic Analysis.
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Babatunde, B. O., & Adebisi, A. O. (2012). Strategic environmental scanning and organization performance in a competitive business environment. Economic Insights-Trends & Challenges, 64(1), 24-34.
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Shankar, N., & Perumal, P. V. (2014). A comprehensive strategic evaluation of success of Amul model. EXCEL International Journal of Multidisciplinary Management Studies, 4(6), 222-232.
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Njambi, E., Lewa, P., & Katuse, P. (2015). Porter’s Five Forces Influence on Competitive Advantage in the Kenyan Beverage Industry: A Case of Large Multinationals.
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Robertson, D., & Caldart, A. A. (2014). The Dynamics of Strategy. Journal of the Operational Research Society, 62(5).
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(2016). Nestle.com. Retrieved 19 October 2016, from http://www.nestle.com/
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Petruškevi?ius, J., & Granskas, J. (2014). Reducing “NESTLE BALTICS” vending machines idle time. Petruškevi?ius, J. Reducing “NESTLE BALTICS” vending machines idle time: bachelor thesis [Manuscript]. Vilnius, ISM University of Management and Economics, 2012.
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Modi, S. (2013). Study on Food and Dairy Industry.
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Loughlin, D. (2015). Global Summit of Pest Management Services.International Pest Control, 57(4), 216.
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