Company Analysis: Nestle

Introduction

PESTLE Analysis of Nestle assesses the brand on its commercial approaches. Nestle PESTLE Analysis evaluates the major external aspects like political and economic issues which effects its company along with legal environmental issues (Varma et al.,2017). Nestle now operates in 190 countries, influencing several political aspects. The organization must keep track of changes in import, export, tax, and environmental rules. These changes may benefit the corporation, but they may also limit regional productivity.

Changes in labor rules prohibiting/shunning underage labor in cocoa plantations may impact the company’s operations. Globally stable multinationals like Nestle flourish. Nestle faced a lot of pressure throughout the Brexit process. Due to the conditions, the company considered leaving the country and going to Poland. Many individuals would lose work, adding to the anxiety. When food standards change, the corporation must rethink and test the product to satisfy customers. Maggi has back with the same lead content worry. India cut corporate tax in its latest budget, benefiting Nestle. To produce more high-quality things at lower prices, and therefore better serve society.

Economic Factors

Nestle must adapt its economic practices to each country’s economic circumstances since it operates in so many. Food security is a major concern in a market where raw material prices vary due to political and environmental challenges. Feedstock prices have grown owing to continuing trade wars between China and the US. A major difficulty is producing high-quality food at a reasonable cost. Western Europe’s deflationary trend continues with a 0.7% drop (Busco et al,2006). Currency exchange rate fluctuations or political unrest in the region cause this. Nestle has taken several initiatives to increase agricultural efficiency in its various markets. Improved economic activity leads to better performance, sales, and profits.

Nestle analysis using Porter’s Five Forces Framework

1. High-level competition

Nestle competes in the highly competitive consumer food sector. Nestle’s rivals include Kraft Foods and Group Danone. Kellogg’s, for example, is a strong rival in some items, such as morning cereal. Notwithstanding being one of the industry’s largest firms with over 120 years of expertise, Nestle faces competition from these brands. They have a substantial market share (Dooley,1997). The release of new merchandise is a major occasion for all of these companies. The competition includes, among other things, product diversity, distinctiveness, and promotional incentives. All businesses in the industry must battle to maintain market share. Nestle is up against some formidable rivals.

2. Low Threat of New Entrants

The foodservice industry is diverse, making it tough for beginners to join. Various challenges await. Existing firms have a large share of the market. They are well-versed in their consumers’ needs. Customer loyalty is earned. Every year, a wave of new enterprises enter the market, competing for market share even locally.

3. Suppliers have a low bargaining power.

Nestle dominates the market, as a result, large supplies are necessary. This makes it a great buyer and since Nestle never bargain or attempt to influence price, suppliers never interfere or haggle. Nestle also works closely with suppliers which guarantees product quality of its items.

4. High Threat of Substitutes

Numerous Nestle commodities are reasonably . Many goods, such as baby food, may be replaced with homemade alternatives. In a number of cases, Nestle items have indeed been suspected of being detrimental to human health. As a result, demand of substitutes among health-conscious clientele have soared. Nestle, for example, puts a priority on the nutritional value of its products. Nestle faces a severe assault from alternatives.

5. High Bargaining Power of Buyers

Buyers have a lot of negotiating power due to fierce competition. Nestle or any other brand tries to influence the market or hike pricing. Consumers have a cheap switching cost. Several firms offer comparable items. Nestle appreciates the power of the buyer and seeks to keep its customers happy. These features have helped Nestle gain consumer loyalty.

Conclusion

Mondelezis is a major competitor of Nestle. Chocolate, beverages, cookies, and confectionary are all produced by the company. Their operations are international, and they earn money from sources outside than the United States. Their brands generate almost $30 billion in sales and are present in around 1655 countries. Nestle, on the other hand, has shown to be superior than Mondelezis because it is continuously releasing new appetizing things that everyone appreciates. Furthermore, the certainty of long-term availability of raw materials and water, as well as a more secure supply of higher-quality raw materials and the production of goods with superior environmental performance, have helped Nestle compete successfully, resulting in a rise in yearly profit.

References

Varma, G. R., & Ravi, J. (2017). Strategic Analysis on FMCG Goods: A Case Study on Nestle. International Journal of Research in Management Studies, 12-22.

Dooley, L. (1997). Dynamics of business-government relationships: the case of Nestle in Asia. In Government and the Food Industry: Economic and Political Effects of Conflict and Co-Operation (pp. 345-353). Springer, Boston, MA.

Busco, C., Frigo, M. L., Giovannoni, E., Riccaboni, A., & Scapens, R. W. (2006). Integrating Global Organizations through Performance Measurement Systems: How systems of performance management helped GE and Nestlé Waters achieve cultural alignment. Strategic Finance, 30-35.