Nestle International Business Strategy Essay

Compe origin wholey Introduction nose is unitary of the worlds largest and most known companies. It is a Swiss political helpingy with its headquarters machinate(p) in Vevey, Switzerland. The play along was inaugurated in 1866 ( near 2012) and since its inception has grown done leaps and move to be hap the worlds largest provender and aliment ph atomic number 53r (Cnn notes 2011). The play along is similarly a major stakeholder in the cosmetic party, LOreal. For a come with to start from a sm t emerge ensemble domestic townspeople and then lard internation all in ally, the strategic vision of the company plays a profound and detect role. The subsequent chapters shall discuss the companys internal goals and dodging and how that dodging paves way for snuggle to figure of speech its matched advantage in all the foodstuffs it operates in.Vision and ValuesThe vision of cling to reflects ideas of fairness, h sensationsty and semipermanent thinking. These ideas be reflected in the companys corporate business principles that select shaped the company coating and strategy for the past nearly one hundred forty years. The core honors that the company has atomic number 18 its people, the quality of its people and give away, the companys brand portfolio, their consumers, their guests and the companys sustainable performance.( cuddle, 2012)Company ObjectivesThe important objective of come near base be appropriately summed up by the phrase Creating Sh ard Value ( clutch, 2012) This principle at Nestle can be described as having a conviction to build immense term and beneficial relationships with their stakeholders, comply with all legal requirements and ensure all activities that the business undertakes be sustainable and result in value introduction for both(prenominal) the company and the society at large.A strategy that the company has developed to mark their achievements is that they would like to become the benchmark of (Nestle, 2 012)1. Nutrition, Health and comfortablyness2. Sustainable Financial Performance3. Trust by all stakeholders.In site to achieve these bench label Nestle underwent heavy expenditure in seek and Development and relies greatly on new research and innovation, both in terms of food proceeds and memberes.Strategic epitomeThe Pestel summary is a rooster made for analyzing the Political scenario, the Environmental scenario, Socio political scenario, technological scenario and legal scenario of a the macro environment of a business. This is a management method that examines the core group that howeverts or influences from outside may befuddle on the performance of a company or organization (CambridgeDictionary 2012). Pestel analysis is usually conducted keeping in mind the situation of a particular region. For the sake of this foodstuffing plan, the pestel analysis of Nestle forget be conducted keeping in mind the securities industry of Great Britain.PESTEL AnalysisPolitical E ngland is a member of the atomic number 63an pith as well as creation a senior member of the United Nations. Beca wasting disease the acres is part of two big political blocks, it al belittleds it the granting immunity to trade efficiently both domestically and internationally. Despite having both a monarchy and a parliamentary form of government, the governmental system is well equilibrize and the common law is practiced. Nestle be a Swedish rustic excessivelybelonging to the European Union has a great relationship with the government of Great Britain (EuropeanUnion 2012). Economic UK is the third largest economy in Europe later Germany and France however Economists in spite of appearance the UK market place predict a soft slip back into deferral for the country in the year 2012 (bbc.co.uk 2012). over referable to the economy presently being in a low harvest-festival stage it is rattling infixed for Nestle to understand the market and come up with convergences a nd processes where it could continue to offer the same high standard of growths that it offers and b arly try and minimalise cost.United soil was too hit by the recession of the year 2007 and thither was a fair amount of job loss. keeping this in mind If Nestle were to set up more produceion plans and hired local population, it would contri preciselye to value creation. Social Around 66.2% of the nation of UK lies between the age brackets of 15-64 years. This means that there is a large chore force available however a majority of population is also aging. For Nestle this could be an opportunity if it decides to introduce a line of products that are compatible with its competitors products much(prenominal) as high reference cereal offered by Kelloggs or protein parallel bars. With a large little population, d birthday suit close can introduce new flavors of its deep brown line with added health benefits as well (Hill, T. & R. Westbrook, 1997). Technological The UK is a technologically advanced country with heavy snap on research and development and computed aided simulations and designs This is a positive point for Nestle as Research and Development is a key competitive advantage for the company.Without heavy expense incurred in this department, the company would not have been able to r apiece the spheric number one position that it has acquired today. With a technologically friendly environment in UK, Nestle has the options of introducing new technology and conducting better research without the fear or incur too high costs or the consumers finding it difficult to line up (bbc.co.uk 2012). Environmental The government of the United Kingdom repairs stress on companies doing their operations on environmental friendly principles. Beca office Nestle is a company that is within the food and nutrition industry because the environmental compliance is highly essential for it to cater to.These accept the correct and green processes through which t he company manufactures (Environment protection act, 1990), as well as ensuring that all the edible products digest the health standards as set by the government of the UnitedKingdom. level-headed With regards to the legal situation of United Kingdom the company needs to pay attention to various kinds of laws that are prevalent. These include health and guard duty laws, consumer laws, and employee laws as well discrimination laws. For operations within the united Kingdom it is essential for companies to not only align their processes with the legal standing of the government provided also their management style and organizational culture to ensure that all employees are treated equally and fairly, there are no inform cases of harassment of any kind and that the products have a health and safetyty assurance otherwise the company is liable to be sued.SWOT AnalysisThe swot Analysis is part of a strategic planning process for small and medium coat organizations mostly (Houben, 19 99). The analysis measures the company on two fronts internal and away. In the internal area the strengths of the business and the weaknesses it posses in its own operations are analyzed while in the external analysis, the opportunities and banes faced by the business in its macro environment are analyzed. Strengths One of the biggest strengths of Nestle is the brand image that it has. Its brands such as Kitkat, Nescafe, Nesquick are almost synonymous with the brand name. The company also has the heavy monetary muscle to rank in its research and development which can kick upstairs enhance its product line as well as invest in marketing. It also has a real well-set global social movement both in terms of production capacities as well as market share.Weaknesses One weakness of the company is that it has had to recall many of its products due to bad quality and that has greatly hampered its brand image. For a company as big as Nestle the customers do not expect such a dangerous mistake to be made especially since it operates in the food industry. The company also is the target of being boycotted because of media pressures and environmentalists for engaging in non-green practices and usage of child labor (ILRF, 2005). Opportunities The fact that Nestle has gone from being only a food brand to being nutrition and well being brand is a good opportunity for the company as it opens many new areas for product line extension.Entering into emerging markets and establishing manufacturing plants also helps the company in reducing its costs. Threats The foodindustry is probably one of the most saturated industries in the world. Keeping this in mind Nestle faces the precise strong threat of competition. This competition can emerge both from international brands as well as local brands of the market in which Nestle enters and tries to operate. The rising prices of raw cloths, fuel as well as the political instability in many third world countries where approach ha s set up their production plants also threatens to cause unreliability in the supply line (Lin, 2007).Porters 5 forcesMichael Porter (1979) gave a framework by virtue of which the competitive advantage of companies can be assessed in the market in which they operate in. The framework includes an analysis of five concurrent forces that tint a business ability to compete (Michael Porter 1979). Keeping in mind the global market in which Nestle operates in, the Porters five forces analysis will be carried out keeping a general position of the entire world as the potential market for Nestle. Threat of hot Entrants Nestle despite being in a food and nutrition industry faces the serious threat of new entrants in the market. Weather this threat is domestic or from international firms, it exists because it is an industry where the barriers to entry are very low. If we discuss Nestle in India for example there are low barriers to entry and many small domestic players can enter the market a nd challenge the market of nestle through their pricing or product offering which is tailored to the local culture and tastes.Bargaining Power of Suppliers The negotiate power of suppliers of Nestle is very low especially in regions where the countries are economically backwards such as Pakistan or Bangladesh. That is because Nestle being such a giant in the market has the ability to grow lots of new business to the suppliers and therefore the suppliers have to make the raw materials according to the outlines set by the company or they can be replaced. Bargaining Power of consumers The bargaining power of the customers of Nestle is high. That is because it is a brand which greatly relies on consumer appreciation for the product. If a product is launched in any part of the world where the consumers do not like the taste, they will move around away to buy it. Similarly in third world countries the consumer base is very price sensitive.This raises their bargaining power if Nestle wants to penetrate, then it will have to reduce its pricesto their affordability level. Threat of Substitutes Threat of substitutes for Nestle is also very high. In all areas of its operations there are multiple other firms that are offering either similar products or substitute products. For this purpose Nestle has to ensure that it offers a product experience that cannot be imitated and is necessitateed by its consumers. assiduity Rivalry Industry rivalry for Nestle is very high in no matter what part of the world it operates in. In United Kingdom it faces threat of competition from brands like Kellogs, in India it faces competition from local brands and brands such as Knorr which are starting to venture into the food industry.Porters diamond and competitive advantageMichael Porter presented his theory about the competitive advantage of Nations through the use of this self designed diamond model. match to his theory, nations can create a sustainable competitive advantage for th emselves if they use the following four factors efficiently. It is called a diamond model because the effect of one variable causes a change in the other variable. According to Porter, a country can create competitive advantage for itself rather than merely relying on natural endowments. Keeping Nestle in mind, Switzerland has created a global recognition for itself based on this huge multinational giants image (Economics-papers 2012).Factor conditions talk about the country creating its own factors of production. lacquer for instance does not have any local metal or steel however it has become synonymous with the manufacturing of metal cars. Similarly, factor conditions include building up on a countrys clever resources and putting them to best use such as Nestle has through by acquiring raw materials from other parts of the world and treating them through innovative processes to suit its own needs (Nestle, 2012). Demand conditions mean that when the demand of a certain product i s high locally, the company can focalisation on it and build that as its competitive advantage.The demand for healthy food was very high In Switzerland and taking that demand Nestle build its company and has now succeeded in creating such a globalgiant. Because Nestles connect and supporting industries are also thriving and are competition with each other, this gives Nestle the opportunity to build on its cost advantage and focus on its innovation so that it can continue its diametriciation strategy in the market. The local conditions affect the firm strategy and culture. Within Switzerland there was high focus on doing things after thorough research and therefore the same Ideas were inherent since the inception of Nestle. (NestleCompanyStrategy, 2012).Nestle operates in a volume of assorted markets. Keeping each market in mind it develops different strategies. The Ansoff matrix shows four different kinds of strategies that companies can follow in order to achieve their goals. The first is the market penetration. In this strategy companies lower their prices so that they can enter into the market more quickly. In the case of Pakistan it was seen that when Nestle entered Pakistan, they introduced their existing product Milo at very affordable rates, even in smaller sub sizes so that the market can readily accept the product. In Market development strategy, the company takes an existing product into anew market.This can be seen as when Nestle took Kitkat to impertinent markets or when it launched Nescafe coffee in China. Product development is when a company remains in the same market it is presently operating but starts to expand its product line. Nestle was seen using product development when it remained in the European market but started venturing into health and nutritional products and expanding its product line. Nestle also has a diversified portfolio as it invested in the cosmetic company LOreal and is also the stakeholder in a number of pharmaceut ical companies worldwide (Bonn, I. 2001).Boston Matrix(Mayareynoldswriter 2008).Nestle is a house of brands. It consists of over a hundred different products and each product is at a different stage in the market depending upon the region in which it is being sold. largely the product lines of nestle can be divided into big sub categories such as baby foods, which includes Cerelac and Nestum. Cereals and Bottled water, chocolate items, Dairy products, drinks, ice balm etc. Each product from each of these different categories is places on a different point in the BCG matrix. For the sake of simplicity of the project we will only discuss a few of the known and flagship products of Nestle (Boston Consulting Group, 2011). The notes cows of Nestle are very easily most of its chocolate brands and baby food items. Cerelac is a universal cash cow as well as Kit Kat that has a very strong brand presence worldwide (Reuters, 2012). Nido is fast growing nutritional milk that is gaining popu larly in the Asian region and in the year 2010 (New York Times, 2012), a new Kit Kat manufacturing plant was set up in United Kingdom that was to produce over 1 billion bars of the chocolate each year.The Stars are those products which have potential in the market and Nestls lines of frozen product are quick to capture a declining cooking market within the United States. Nestle with its brand Stouffer, is spell its attention to frozen pizza in an effort to capture more of the market share (Bryson, 2011). Dogs are those product lines which do not take away in too much of revenue and are difficult to ecstasy around. These products are those that should be discarded or sold off so that they do not squeeze the company profits.For Nestle, many attribute its investments in the pharmaceuticalbusiness to be a dog and that the company should spin out and focus more on its nutritional products. Question marks are those products whose future is somewhat uncertain. They can be turned out in to positive cash cows or could reduce to the dog summit for the company. With regards to the Indian market, the breakfast cereals of nestle are question marks. Keeping in mind the culture of India, the breakfast is a wholesome meal and the culture of cereals is very low (New York Times, 2012). The particular products in the Indian markets are close up struggling to figure out their future.Value Chain AnalysisA value chain analysis is a specific set of activities that are linked together and through their use the firm can produce a competitive advantage for itself. This value chain analysis was also developed by Michael Porter and can be summed up by the following representation (Porter, 1985)If we conduct the value chain analysis for Nestle we can see that it has a very good supply chain and integration of all operational business units otherwise it would be very difficult for the company to achieve global dominance. The inbound logistics include repositing and memorandum contr ol. In Nestle it is a computerized and automated system of inventory control that is different for each country. This is why the supply of Nestle products is simply ever scarce in the market.The operations of nestle are very successful as they transform a lot of raw material into very nutritional products and create value for their customers. Outbound logistics is the process by which finished goods are transferred to the sellers. For this purpose Nestle has started to set up statistical distribution channels in each country where its production plant is set up so ensure timely delivery. Marketing and Sales of nestle help in creating the brand that Nestle has evolved into today. The service area is that which responds to concerns and after sale service and Nestle tries its best to provide good customer service to any customers that may be dissatisfied by the product (Bonn, I. 2001).RecommendationNestle has a very established setup of both its operations and marketing.What the compa ny should however invest in is building its public image as a corporately responsible company as well. As it has already been pointed out above Nestle is one of the worlds most boycotted companies because of a certain perception that it commits corporate crimes when coming to environmental practices. The company needs to make sure that that particular image is altered. Also, the products of Nestle which are not doing so well in certain markets should be pulled out rather than constantly spending more on them to turn their value around. Some products are difficult to sail because of the culture of the market that Nestle operates in and therefore should be avoided to ensure sunk costs do not occur.Evaluation & ConclusionIn conclusion it is safe to say that Nestle has a lot of positive attributes backing its large than life product portfolio and therefore the company has managed to sustain its position in the list of the fortune five hundred companies. The company through the use of efficient management procedures, innovation, capital infusion and research and development continues to expand its portfolio and also serves as an example of not just a an transcendent food and nutrition providing company but also a real multinational corporation. There are many lawsuits against the company and it is also for the most part considered to be one of the worlds most boycotted companies and despite all off that the revenues of the company have hardly slumped since its inception. That is a testament to their value chain creation and streamlined processes that ensure that nestle becomes a part of the livelihood of the people of the 130 countries it serves.List of References1. bbc.co.uk (2012) the world of technology. online usable at http//www.bbc.co.uk/news/technology/ Accessed 5th imposing 2012.2. Belch, G & Belch, M. 2003. Advertising and procession an Integrated Marketing Perspective, 6th edition, Mc-H Companies.3. Bonn, I. (2001), Developing Strategic Thinking as a Core Competency, Management Decision, 39(1), 63 76.4. Boston Consulting Group. (2011), nearly BCG. Online. Available at http//www.bcg.com/about_bcg/history/history_1968.aspx. Accessed 6th tremendous, 2012.5. Bryson York. 2011. Nestle Aisles to go with products. Available http//articles.chicagotribune.com/2011-03-10/business/ct-biz-0311-frozen-food-sidebar-20110310_1_pizza-nestle-usa-chairman-cooking. Accessed 6th Aug 2012.6. CnnMoney.2011. Global500. Availablehttp//money.cnn.com/magazines/fortune/global500/2011/snapshots/6126.html. Accessed 6th August 2012.7. Dictionary.Cambridge (2012) muser analysis. online Available at http//dictionary.cambridge.org/dictionar0y/business-english/pestle-analysis?q=pestle+analysis Accessed 6th august 2012.8. Economics-papers (2012) The sight and Review on Michael Porters the Competitive Adv. Online Available at http//www.economics-papers.com/the-study-and-review-on-michael-e-porters-the-competitive-advantage-of-nations.html Accessed 7th aug ust 2012.9. Europa.eu (2012) Policies and activities of the European Union. online Available at http//europa.eu/policies-activities/index_en.htm Accessed 6th august 2012.10. Hill, T. & R. Westbrook (1997). SWOT Analysis Its Time for a Product opine. Long Range Planning 30 (1).11. Houben, G, 1999. A knowledge-based SWOT-analysis system as an instrument for strategic planning in small and medium sized enterprises. Journal of Applied Economics, Online. 26, 125-135. Availableathttp//www.cuaed.unam.mx/puel_cursos/cursos/d_gcfe_m_dos/modulo/modulo_2/m2-10.pdf Accessed 04 August 2012.12. International bray Rights Forum. 2005. The 14 Worst Corporate Evildoers. ONLINE Available athttp//www.laborrights.org/creating-a-sweatfree-world/ethical-consumerism/news/11434. Accessed 04 August 12.13. John Katsaros & Peter Christy 2005. Getting It Right the First Time How mod Companies Anticipate Demand. Westport, CT Praeger14. Legislation.gov.uk. 2011. Environmental Protection Act 1990. ONLINE Availa ble at http//www.legislation.gov.uk/ukpga/1990/43/contents. Accessed 04 August 12. 15. Lin, J.N, 2007. SUSTAINABLE SUPPLY CHAINS IN THE fare AND BEVERAGE INDUSTRY. Masters. Michigan University of Michigan.16. Mayareynoldswriter (2008) Applying the Boston Matrix to Publishing. online Available at http//mayareynoldswriter.blogspot.co.uk/2008/12/applying-boston-matrix-to-publishing.html Accessed 6th august 2012.17. Michael, Kathleen, Goold, Sommers Luchs, 1996. Managing the Multibusiness Company Strategic Issues for Diversified Group. 1st ed. capital of the United Kingdom Routledge.18. Michael, Porter, 2008. The Five Competitive Forces That Shape Strategy. Harvard Business Review, 15 January 2011.19. Nestle.com.2012. explanation. ONLINEAvailable at http//www.nestle.com/AboutUs/History/Pages/History.aspx. Accessed 03 August 12.20. Porter, M.E. 1985. Competitive Advantage, Free Press, New York, 1985.21. Reuters. 2012. Chinas moms key to Nestle baby milk deal. ONLINE Available