Nestle Strategic Analysis

Introduction

Nestle is a multinational corporation headquartered in Switzerland. This company is the biosphere’s largest and most recognized firm. This phenomenon results from its revenue and data gathered in 2018, meaning Nestle is the world’s biggest drink and food processing corporation. Nestle was inaugurated in 1866, and since its inception, it has developed through bounds and leaps to become the biosphere’s largest nutrition and foodstuff firm. The corporation is also a significant shareholder in the cosmetic company L’Oreal. Generally, the strategic vision of a firm is vital for it to begin from a small domestic municipal and expand globally. This paper discusses Nestle’s SWOT, STEEPLE, ANSOFF, and BCG-Matrix.

SWOT Analysis

SWOT analysis is a strategic planning procedure for medium and small-sized companies. This examination measures a corporation on various fronts, including external and internal. In the external analysis, experts analyze the threats and opportunities experienced by the company in its macro setting. However, these professionals evaluate the firm’s strengths and weaknesses in the internal examination.

Strengths

• Fast Innovation: Nestle can innovate swiftly and more domestically using science across each platform (Agwu and Onwuegbuzie). This phenomenon helps the company to work with local shareholders to maximize productivity and increase profits.
• Cash flow rising: Nestle’s cash flows increased by 10.9% in recent years, demonstrating that its finances are in excellent shape (Nestle Global). Therefore, Nestle can invest more cash and expand rapidly than in previous years.
• With the company’s investment in the digital revolution, it has become extra information-driven in fields like social media, manufacturing, marketing, supply chain, and e-commerce (Leliga et al.). This situation helps Nestle grow and increase its customer base, leading to increased profits.
• Well-oiled supply chain: Nestle promotes domestic innovation and integrates technology. It also makes monitoring the origins of its products’ raw materials straightforward, ensuring quality goods and services.
• Brand reputation: The corporation keeps attaining high marks on varying criteria. This situation permits Nestle to possess an excellent reputation in its sector. For example, Nestle has become the biosphere’s most valuable brand, the best employer for females, diversity, and Americans (Agwu and Onwuegbuzie). This company is among the best-achieving firms globally. Typically, reputation is vital because it is a determining aspect of driving Nestle’s value.
• Product diversity: This firm is the owner of numerous brands, each providing its line of products. For example, Nestle owns Nescafe, Cheerios, and Cerelac, where every brand offers various products.
• Strong R&D: The company has created one of the most superior networks in the R&D area. It has invested around $1 billion annually. This constant innovation helps Nestle to improve its services and products.

Weaknesses

• Organizational structure: Nestle’s organizational arrangement remains separated on its product portfolio instead of its regional operations. This phenomenon hinders operational agility and choice-making in the firm (Agwu and Onwuegbuzie). The initiative is a significant roadblock for Nestle as it looks to grow its business.
• Product marketing issue: Many consumers worldwide have accused Nestle of not excelling in marketing its products. This situation sometimes leads to decreased customers.
• Nestle has raised marketing costs that result in a higher peril of returns. These aspects contribute to the company’s reliance on advertising (Birahim). As a result, this technique will jeopardize Nestle’s long-term viability in the face of imminent disruptions.
• In the recent past, Nestle had to recall numerous of its products because of bad quality. This issue significantly disadvantaged the firm’s brand image (Leliga et al.). Consumers never anticipate such a severe fault for a corporation as large as Nestle, particularly in the food sector.
• Nestle is the target of getting boycotted due to environmentalists and media pressures because of participating in child labor and non-green practices.

Opportunities

• This company has a substantial chance to grow its business in Sub-Saharan Africa, Oceania, and Asia because of the increasing average family incomes (Agwu and Onwuegbuzie). In this case, Nestle can utilize fresh or present products to broaden its product offering. The initiative will lead to Nestle’s market presence and financial success.
• Raising transparency: Customers have access to extra information than in previous periods. This openness will be helpful to Nestle as the internet becomes more extensive.
• Nestle has the potential to diversify its product portfolios by entering new markets. In this case, strategic contracts will assist the firm in expanding outside the beverage and food fields, reaching fresh customers.
• Incorporating and functioning sustainably will help Nestle reduce expenditures, boost efficacy, and appropriately use labor.
• Strategic alliance: In 2019, Nestle established a coalition with Starbucks (Nestle Global). This initiative allows the firm to market Starbucks packaged products, helping develop and capitalize on competencies and experience for both companies.
• Online retail: Nestle has the opportunity to invest in online retail options. The phenomenon will help the company bypass numerous retailers striving to control and make profits from household items like brands owned by Nestle (Agwu and Onwuegbuzie).

Threats

• The firm’s customer trust and reputation have been tainted due to foodstuff safety rules and regulations violations.
• Alterations in the climate and their impacts on raw materials utilized in numerous Nestle products are evident (Birahim). Generally, climate change has influenced the availability of ingredients like dairy, wheat, and coffee.
• The company’s product line competes against various regional and global rivals. Therefore, Nestle is frequently in peril of losing its current consumer base because of market alterations and technological advancements (Leliga et al.).
• Nestle’s diverse product-run group permits strategic investment choices to get out of sync. This phenomenon leads to the corporation losing its name recognition and significant cash.
• Consumer protection groups: Customer protection and well-being are determining aspects nowadays. As a result, these groups will continue to monitor and question Nestle regarding the manufacturing of its products. Still, this corporation will experience ethical problems in production, such as using plastic in wrapping its products.

STEEPLE Analysis

Social Factors

Nestle is a huge corporation; therefore, customer trends affect its large-scale business. To adhere to the rising trend of good health, Nestle makes low-sugar, sodium, and saturated fats (Birahim). This organization’s strong points include processing, quality control, and production systems. Generally, the company’s items decrease health risks and provide an excellent supply chain and storage network. This firm’s significant success involves superior strategy and planning because it understands clients’ necessities.

Technological Aspects

The company believes in digital models, solutions, and service incorporation. Nestle’s external and internal integrity relies on these aspects. This firm has a robust strategy to secure the system in an emergency (Agwu and Onwuegbuzie). The phenomenon occurs because of the rising cyber-attack instances, security problems, privacy challenges, and reliability. Nestle has also invested in initiatives that assist in checking products’ nutritional facts (Birahim). The firm has collaborated with various agencies to achieve the objective in this case.

Economic Factors

Nestle is a multinational firm with operations globally. Typically, this company’s economic policies should adapt to the economic conditions of every nation. It is challenging to create extra affordable products when raw material prices fluctuate due to political and economic considerations (Birahim). Still, cash is a hindrance to high-quality products. Currency fluctuations and political upheavals also influence Nestle’s operations. In this case, Nestle strives to reduce manufacturing expenditures by promoting domestic production.

Environmental Aspects

Nestle strives to operate in ways that have zero influence on the environment. As a result, it is pursuing eco-friendly practices to lessen its ecological effects. For example, Nestle offers 100% recyclable packaging and decreases plastic usage (Birahim). This initiative is helpful to the environment and eco-friendly individuals. Thus, the company is promoting plant-founded and sustainable products. If environmental regulations alter, Nestle’s operations will get negatively affected.

Political Factors

This firm’s foremost and primary obligation entails keeping records of every alteration made in its policies (Birahim). These changes can relate to import, taxation, and export. Generally, some transformations can make Nestle’s workers jobless, establishing a tense circumstance.

Legal Factors

Legal necessities in the numerous nations where Nestle operates are crucial. The company should examine these requirements to check on employees’ safety and regulations linked to labor and maintaining product quality and hygiene. The rules help in protecting workers and consumers. Therefore, a competent legal group must monitor all the legalities and develop solutions for Nestle’s success (Birahim). Nestle should observe every national law and norm for a balanced and even development. Nevertheless, this firm must regularly observe environmental, trademark, and IPO necessities.

Ethical Aspects

Social values are the most integral and vital of any firm’s ethics. They govern the organization’s behavior. This company developed strategies to improve its ethical policies. For example, Nestle established policies regarding its workers’ tendencies, morality, integrity, and behavior toward communities (Birahim).

ANSOFF

Market Penetration

In this stage, Nestle selects to sell its current products in the existing market in large quantities. The company also develops smaller packages, ensuring individuals from varying financial sections can purchase without decreasing prices. This firm conducts the plan using aggressive marketing. For example, Nestle pushed early nutrition and baby food products by advertising the more infants consume these foodstuffs, the faster they grow (Singh et al.). Still, the corporation utilized numerous channels to market its products using varying sizes and flavors. This strategy is excellent because it enables customers who cannot access the multi packets to purchase in smaller measures (Wood et al.). In this plan, firms lower their prices to enter the market more swiftly. For example, Nestle entered Pakistan by introducing its product Milo at affordable rates and in smaller sub-sizes. As a result, the market readily accepted Nestle’s product.

Market Development

The matrix shows that Nestle frequently expands its geographical boundaries. This firm targets new market development by launching the current products in fresh markets. In this case, when entering a new market, Nestle must ensure the availability of its products and affordability to consumers through effective distribution channels (Wood et al.). The corporation also markets its products and its presence through numerous advertisement sources.

Product Development

Nestle’s core business plan is innovation. The firm has shown its abilities across numerous nations in launching fresh products that conquered the market for an extended period. Nevertheless, Nestle has conducted specific product developments instead of fully going innovative. For example, the company introduced a mixture of ice cream on its mars and snickers, enticing many consumers (Singh et al.). Also, this corporation has established new developments in its product line, like breakfast cereals, early nutrition for children, and varying drinks. Nestle always emphasizes client accessibility and affordability to its products whenever it conducts additions to product development.

Diversification

The most crucial Nestle strategy other than innovation is product diversification. In this case, the company utilizes horizontal diversification. Nestle conducts product adjustments and introduces fresh products to new markets (Wood et al.). For example, this firm launched numerous male grooming products in the market in addition to its Gillette shaving foam. Typically, these products relate to shaving. Nestle sells formula milk for babies and infant food. It also has diapers and other children’s products concerning the earlier baby product category. Thus, this company frequently checks and launches numerous market-oriented goods (Singh et al.). Still, Nestle also used product diversification by investing in the cosmetic firm L’Oreal. The corporation is a shareholder in various pharmaceutical firms globally.

BCG Matrix

Cash Cow

Cash cows are products with higher market share in a low-growth marketplace. In this case, Nestle’s Maggie noodles are the cash cows. These products have a market share between 80 and 85% (Leliga et al.). This phenomenon means that Maggie noodles have a high consumer loyalty and a robust market share. Therefore, Nestle requires minimal investment to maintain Maggie noodles’ market share and rival any competition. Still, Maggie noodles experienced more family intake in India. Thus, the preference of Indian kids is just a cash cow and never a star. The growth among new consumers is never high though the number of re-buyers is high in Maggi’s situation.

Dog

Dogs are products considered to possess growth potential. However, these products never create magic because of slow market growth. Generally, such a product becomes a source of loss for the company if it fails to attain the anticipated outcomes. As a result, the firm’s management withdraws the product’s future investment in the combined project. Because the company does not expect this product to yield substantial capital, it regards future investments as a waste of resources (Leliga et al.). Therefore, the firm invests such a product in star or question mark classes. Nestle initially introduced Milo as malt powder and water and milk chocolate. However, this product never attained any substantial impact on Nestle. In this case, the corporation placed Milo in the Dog Quadrant of its BCG matrix.

In the morning, Nestea taste-conscious Indian customers fundamentally, people must take a cup of tea that fits their tongue first. However, individuals find uniqueness in the varying domestic tea flavors. This phenomenon demonstrates that folks and companies who desire to win the brand should be perfect. Generally, Nestle has some issues. For example, though this firm has drink units globally, Indian customers never adopt one product for everybody. This situation explains the reasons Indian consumers are yet to recognize Nestle.

The most enthusiastic Indian customers’ effort is the Nestle Milky Chocolate Bar. This product is a sweet, creamy chocolate. However, its acceptance by Indian consumers remains unfounded on its core qualities (Leliga et al.). In this case, Indian clients like the Nestle Milky Chocolate Bar because it has certain foundations, differentiating it from other products on a similar production line.

Question Mark

Some goods are part of the sector but remain in development. However, companies have not occupied a vital position in the industry. Nestle’s nutritional and milk products need significant investment by the brand to grow and maintain its market share (Leliga et al.). This situation arises due to the rising consumer demand and rivalry for healthy products. Also, Nestle’s Confectionary and Chocolate are in the question mark quadrant of this company’s BCG matrix. These products have a small market share and high competitiveness in the sector. Nestle has not eliminated Milo from the store shelf to meet customers’ necessities due to the absence of products with a similar design (Sultana and Zahan). Nestle cannot place Milo like a dog because it possesses the potential to expand in a market with high business growth rates.

STAR

Business units or products with higher market shares in extraordinary-growth sectors are the stars of a company. For example, Nestle’s Nescafe coffee and mineral water are within the star limit of this firm’s BCG matrix. The emerging markets and healthy lifestyle trends have stimulated Nestle to invest, differentiating the bottled water brand from rivals in mature marketplaces. This situation has also raised brand awareness in emerging markets. Cerelac is among the leading baby foodstuffs. This product has varying variants and a continuous basis for five consecutive years, discouraging rivals. Cerelac is accessible and available to nearly every temporary or ordinary shop in the Indian market (Sultana and Zahan). This phenomenon makes Cerelac the primary contributor to this company’s Indian returns. Nescafe is a leading coffee brand in the Indian market. The product has a central position that other brands in India can never attain. Still, Nescafe has a substantial growth rate, placing it in the star quadrant of Nestle’s BCG matrix.

Works Cited

Agwu, M. E., and H. N. Onwuegbuzie. “Effects of International Marketing Environments on Entrepreneurship Development.” Journal of Innovation and Entrepreneurship, vol. 7, no. 1, 26 Sept. 2018, innovation-entrepreneurship.springeropen.com/articles/10.1186/s13731-018-0093-4, https://doi.org/10.1186/s13731-018-0093-4.

Birahim, Shaikh Afnan. “Internal and external factors of Nestle and comparison with Unilever.” (2020).

Leliga, Felicia Juliani, Janet Devina Koapaha, and Anastasia Cherry Sulu. “Analysis of Internal Factor Evaluation Matrix, External Factor Evaluation Matrix, Threats-Opportunities-Weaknesses-Strengths Matrix, and Quantitative Strategic Planning Matrix on Milk Products and Nutrition Segment of Nestlé India.” East African Scholars Journal of Economics, Business and Management 2.4 (2019): 186-191.

Nestle Global. “Nestlé Publishes 2020 Annual Report, Spotlights Sustainability at the Annual General Meeting.” Nestlé Global, www.nestle.com/media/pressreleases/allpressreleases/nestle-annual-report-2020.

Singh, Padmalini, et al. “A study on Nestle promotion strategy.” International Journal of Accounting & Finance in Asia Pacific (IJAFAP) 4.1 (2021): 60-70.

Sultana, Zulfa, and Zim Zahan. “Local versus Global Brands: The Internationalization Process in Food and Beverage Industry.” The Business and Management Review, vol. 10, no. 5, 2019, cberuk.com/cdn/conference_proceedings/2020-01-05-09-21-02-AM.pdf.

Wood, Benjamin, et al. “Market Strategies Used by Processed Food Manufacturers to Increase and Consolidate Their Power: A Systematic Review and Document Analysis.” Globalization and health, vol. 17, no. 1, 26 Jan. 2021, https://doi.org/10.1186/s12992-021-00667-7.