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Name: Adil Salim Roll No: BX509785 Subject: Strategic Management Course Code: 5

Name: Adil Salim Roll No: BX509785 Subject: Strategic Management Course Code: 5574 Semester: 4th Assignment No: 02 (Strategic Management Case Study Analysis of Nestle) Tutor: Syeda Atia Rahat 1 Strategic Management Case Study Analysis of Nestle Topic Page No Introduction 01 Task 1  Environmental and Competitive analysis 01  Political 01  Economical 01  Socio-Cultural factors 02  Technological factors 02  Description of Industry Structure 02 Issues/problems facing the industry 02 Industry Prospect and overall attractiveness 03  Attractiveness 03  Unattractiveness 03 Analysis of Competitive forces 03 PORTER’s five forces analysis 03  Threat of new Entrants 03  Bargain Power of Customers 04  Competitive Rivalry 04  Bargain power of suppliers 04  Threat of Substitute 04 Competitor analysis 05 Task 2 Strategic performance Indicators 05 Internal analysis drawing on relevant models 05 SWOT analysis of Nestlé Company 06 Competitive strength versus Key rivals 06 Strategic Issues 07 Task 3 Strategic plan and Action recommendation 07  Basic strategic direction 07  Differentiation strategy by Nestlé 07  Cost-Leadership strategy 07 Economic analysis 08 Ratio and Liquidity Analysis 09 Nestlé’s strategic trajectory 11 Major functional support strategy 11  Information technology and Control system 11 Eminent failure 12 Recommendation 13  Short-term action recommendation 13  Long term action recommendation 13 Reference List 14 2 Strategic Management Case Study Analysis of Nestle Introduction Nestlé Company was founded by Henry Nestlé who was a Swiss Pharmacist, who was focused on producing the first milk food for infants. The production of milk food was aimed at combating the problem of infant mortality as a result of malnutrition. Soon, the product became popular in Europe, which in turn has created a legacy of shared value embedded within their corporate business principles and values (Boyd, 2012). With its efficient and humble beginning, the company is dedicated to grow its business as the leading nutrition, health and wellness company. Headquartered in Switzerland, Nestlé operates in more than 150 countries having around 465 factories and employs around 339000 people globally. Experience of Nestlé over the years makes it imperative that it takes decades to build a real competitive advantage. Nestlé’s powerful establishment in the industry is a result of its inimitable strength of strong R&D, product value chain, efficient entrepreneurship, wide geographical coverage, significant corporate values and great people working together. Task 1  Environmental and Competitive analysis The strategic analysis of an organization usually starts with the evaluation of its external environment. PESTLE analysis is one of the main tools for conducting micro-environmental analysis that will investigate on the political, economic, social and technological aspects of the environment in which the firm is operating. The main purpose of this tool is to identify the possible threats and opportunities offered by the whole industry.  Political In reference to the political aspects the bureaucratic regulations, political stability and taxation policies play an essential role in international business operations. Moreover, Nestlé generates steady sales in its targeted market, in presence of political stability. The strict governmental laws in certifying the use of safe and natural raw materials, public financial disclosure and regulations on fraud and bribery has significant influence on each phase of Nestlé’s strategic planning and organizational performance. In respect to the Chinese market, Nestlé’ has been facilitating a lower corporate tax with the preferential policies offered by the municipal or central government to huge MNCs. As a result of which Nestlé has expanded its growth at an unprecedented rate over a period of 20 years in the region of greater China.  Economical The economic factors vary from one country to another and mainly deals with the components related to inflation and exchange rate, economic growth, rate of interest which tends to have significant impact on the decision-making processes and business strategies planned by the company. Nestlé’s entrance to a new market or launching of a new product in a particular region has been planned by considering the disposable income and purchase power of its consumers. Recent statistics on Global food industries reveal that Nestlé is focused on expanding its business in the Middle East markets by shifting its focus from Europe and America due to the increasing number of middle class population and growth in disposable income within their economies. 1 Strategic Management Case Study Analysis of Nestle  Socio-Cultural factors With effective business strategies across the global market, Nestlé is likely to capture the consumer behavior which in turn increases its operational efficiency and productivity. The success of Nestlé in Africa country respective to their socio-cultural aspects is presented as an example. The production of chicken bouillon cubes by Nestlé is widely used to enhance the flavor of dish in developed countries; however, the low income groups in Africa directly mix rice with this cube. Hence, to customize the product with the local consumption habit and storage conditions, Nestlé has focused to introduce small packets of bouillon chicken cube, so that the middle group can easily have one piece in their meal.  Technological factors Nestlé is the proud owner of the largest R&D department for its wide range of food that are served across the world. The company has been consistent in producing healthy and nutritious food as a result of its strong capacity and great benefits its potential from its capacity and associations of strong research centers. With the advancement in technology, Nestlé has experienced opportunities for its new product lines, improvement in product, innovation marketing and promotion strategies such as online stores and e-commerce. Nestlé leverage its competitive advantage of efficient world-class R&D to become the lead in food and beverage industry.  Description of Industry Structure Nestlé is a Swiss multinational company mainly manufactures health and nutritional goods. The wide product range of Nestlé include breakfast cereals, baby food, confectionery, ice-cream, bottled water, snacks, pet food and coffee, dairy products, etc. Nestlé’s vast industrial spread across 150 countries, include 461 factories that employs more than 330000 people. The corporate business principles of Nestlé are entirely based on their culture, that was developed 140 years ago, that reflects the ideas of honesty, long-term thinking and fairness. The history of Nestlé dates back in the year 1866, when the Swiss condensed milk company developed the first European condensed milk factory in Cham Switzerland. (Pritchard and Fagan, 1999). The main objective of Nestlé is to provide safe, nutritional and tasty food to its consumers so as to improve the health and wellbeing of its consumers. Nestlé is committed to its huge network of R&D to develop new food products with significant health benefits, in order to meet the changing taste of consumers. The food and beverage industry is highly competitive due to the presence of potential players such as Kraft foods, Danone, etc. The competition becomes stiffer, with equal strength of competitors in the market. For instance, the joint venture between Nestlé General Mill could bring significant changes in the breakfast cereal; hence, such collaboration is successful, which in turn makes the industry all higher performing. One of the main shareholders of Nestlé is L’Oréal, the leading cosmetic company, whose collaboration has significantly enhanced their operational efficiency. Issues/problems facing the industry Majority of consumers are motivated to purchase nutritional products that are closely aligned with their health and well-being. Manufacturing of such products are done by eliminating artificial 2 Strategic Management Case Study Analysis of Nestle ingredients, pesticides or GMO’s, etc. Such consumption behavior has resulted in the development of cleaner labels, thereby increases products in the non-GMO and organic segments. This puts more pressure on the food and beverage industry as majority of companies find it difficult to adapt the trend. Unlike the industries of consumer appliances, electronics and household products those have already gained a firm establishment in the e-commerce space, food and beverage manufacturers are significantly slow in their propagation towards e-commerce. As more number of consumers are shifting their preferences towards the online shopping, the manufacturers are lagging behind until they find ways to adapt e-commerce as the key part of their marketing and sales. Industry Prospect and overall attractiveness  Attractiveness The food and beverage industry is characterized by oligopoly, with the intense presence of Nestlé, Kraft Foods, Danone performing well. With the advancement in technology, faster information technology and better infrastructure has increased the invention of newer products thereby facilitating the manufacturers to establish their brand image more firmly. The enhancement in consumers’ standard of living, especially in the emerging markets is another great prospect for the producers.  Unattractiveness Unlike the electronics, consumer appliance and household product industries that has developed a strong presence online through e-commerce, Nestlé is slow in developing their presence online. The increasing preference of consumers for online shopping is making the industry unattractive to a great extent. In addition, major organizations like FDA and WHO is appearing with policies against high sugar intake and thereby recommending a cap of no more than 10% of daily calories. As a result, consumers are not purchasing foods uploads/Geographie/ 5574-assignement-no-2.pdf