Nestlé S.A Product Launch: Strengths, Weaknesses and Strategy
Nestle S.A.: Strategy
Today, with increased development, increased advancement in the field of technologies, and also due to increased globalization, it is found that the companies are aiming for expansion. However, before expanding their operations, these companies need to analyze the culture of new locations, need to determine the needs of the people, need to adhere to the local environment, and also follow the legal requirements of these nations (Boyd, 2012).
Only then they will be able to achieve desired objectives of the organization. Even. the Human Resources (HR) department of the organization needs to train the employees to make them work in a new environment. This report will analyze the case of Nestlé S.A. and will determine their strengths and weaknesses in a given working environment.
It will thereby carry out analysis for the purpose of introducing new product in the market, which will help them gain substantial market share. It will also include SWOT analysis, PESTEL analysis, and Porter’s Five Forces analysis for the purpose of determining the factors that could impact on the performance of the organization. It will subsequently determine their strengths and provide recommendations through which they will be able to introduce new products in a given market.
Nestlé S.A. is one of the leading companies in the food processing industry across the world. It is a Swiss transnational company headquartered in Vevey, Vaud, Switzerland. It is also ranked No. 64 in the Fortune Global 500 companies list in 2017. It is serving different food products across the world. The major food products served include - baby food, coffee, breakfast cereals, confectionary items, ice cream, dairy products, pet foods, and several others (McPhee et al., 2015).
As per the financial reports of the company of 2017, the total revenues of the company were around CHF 89.791 billion. Also, the total number of employees working for the company were around 323,000 across the world. The company is however focusing on strategic operations through which it will be able to generate more revenues for the organization.
It is deploying new and innovative marketing campaigns through which they can lead the market in the entire world. Nestlé S.A. was formed in 1905 by the merger of Anglo-Swiss Milk Company, established in 1866 by George and Charles Page, and Farina Lactee Henri Nestle founded by Henri Nestle (McPhee et al., 2015). Since then the company has grown and is offering products beyond the geographical territories in the entire world.
It is also listed on SIX Swiss Exchange and is a major constituted of the Swiss Market Index (McPhee et al., 2015). It is a highly diversified company operating in different parts of the world. Also, the company has customized their products to serve as per the tastes, preferences, and demands of the local people in a given local environment.
It is also having well-established relationships with powerful brands such as Colgate Palmolive, Coca-Cola, and General Mills (McPhee et al., 2015). It is also considered as one of the most recognized and trusted brands by the people across the world. It is due to these reasons that Nestlé S.A. has progressed a lot over these periods.
Today, with more powerful research and development capabilities they are not only focusing on their products but also on their services, specifically the supply chain and logistics to improve the delivery time of the products across the world. However, with increased competition, the management of the organization needs to analyze on the perspective of introducing new product in a given market.
PESTEL analysis refers to the Political, Economic, Social, Technological, Environmental, and Legal factors that can affect the organization in several ways. To define the scope of this report, the analysis of Nestlé S.A. will be carried out with respect to the United States. Now, from the political perspective, it is found that there are several changes made in the regulations for the companies not belonging to the US.
Also, due to lobbying operations, it is found that the operations are halted several times and the company is not able to proceed with their daily operations. Further, from the economical perspective, there is impact of factors such as increased unemployment, wage stagnation, increased disposable income that could directly effect on the purchasing power parity of the customers.
The customers will thereby prefer to buy these products based on their requirements and also based on their daily monthly consumption needs in a given environment. From the social perspective, it is important for Nestlé S.A. to introduce products that will cater to the changing demands and requirements of the customers (Arie, 2013).
Today, with increased competition, there are several players that have introduced similar products but have associated social values for the purpose of selling them. Hence, beyond the tastes and preferences, it is important for Nestlé S.A. to add the social elements in their products to achieve desired sales in a given working environment.
From the technological perspective, Nestlé S.A. needs to focus on improving their business units and business processes by implementing a proper Enterprise Resource Planning (ERP) solution. They need to not only improvise the overall operations but will also save other efforts in managing the different operations of the organization.
Through deployment of such IT controls, the top-level management will be able to monitor the practices and accordingly suggest changes in a given operational environment. They also need to link the Consumer Engagement Center with this solution to support the customers in their queries and thereby solve them (Warren & Nestle, 2010).
From the environmental perspective, Nestlé S.A. needs to focus on strategies of water conservation, recycling of coffee grounds, and also ensure of packaging materials that will not harm the environment. Finally, from the legal perspective, they need to ensure overcoming of the issues such as water controversies, magi scandal, and child slavery. Instead, for the purpose of expansion, they need to adhere to the rules and regulations of employment law, minimum wages law, and equal opportunities to all in a given environment (Marshall, 2013).
SWOT reflects to the strengths, weaknesses, opportunities, and threats for a given organization. In this case, the major strengths of Nestlé S.A. include - world renowned brand name, extensive distribution system, diversified product portfolio, large workforce, research and development centers to cater to the changing needs of the people, and brand equity.
It is thereby important for the senior management at Nestlé S.A. to utilize these strengths in developing new products and subsequently capture additional market share in a given environment. On the other hand, the major weaknesses of the products include - magi controversies, brand structure, and legal and consumer issues.
It is thereby important for the senior management to first overcome the market controversies and then focus on re-defining the brand structure in the organization. From the opportunities perspective, they need to expand their distribution system in the developing economies of the world (Richter, 2011). They further need to improve their brand image to increase their visibility in a given operating environment.
They can introduce new healthy breakfast items that will act as alternatives to already available such options in the market. However, it will pitch the healthcare quotient of Nestlé S.A. to the customs in a given environment. They can also choose for strategic alliances and joint venture partnerships in developed nations along with established brands for serving new and innovative products in a given market.
Finally, from the threats' perspective, the major ones include - increased competition in the market, pricing issue, and power of buyers in the market. The failure of their complex supply chain suggest a need for deploying the ERP solution to improve their business practices, control their costs, and also overcome the competition in different product segments (Richter, 2011). Thus, considering this analysis, it is important for the organization to tackle with the weaknesses and threats, and instead focus on their strengths to capture desired opportunities in a given working environment.
Porter's Five Forces Analysis
There are five major forces as per this analysis model that can affect the business operations from different perspectives. First, from the perspective of bargaining power of suppliers, it is found that it is moderate as Nestlé S.A. needs to establish strong relations with them for the purpose of their dairy and milk products.
Nestlé S.A. needs to focus on developing strong and sturdy business relations to improve the quality of the products provided to them. Also, as they are relying on several indecent retailers, it becomes easy for them to exercise the control over such operations. Further, from the competition perspective, it is found that the rivalry is high in a given market.
There are several international and local players that can pose direct challenges and threats to Nestlé S.A. in a given working environment. The major players include - Kraft Foods, Group Danone, Hindustan Lever, Patanjali Group, and several others that are increasing their market share in the present time (Richter, 2011).
It is thereby important for the top-level management of Nestlé S.A. to not only deploy innovative strategies but also introduce new products that will help them capture desired market share in a given environment. The market is still in the growth stage but Nestlé S.A. needs to capture untapped markets of the developing and the under-developed economies of the world.
Now, from the perspective of threats of new entrants, the threat level is moderate. Although Nestlé S.A. has an accomplished brand name, people can still choose for new products if found in the market. Every year, there are several companies that are entering into this industry but due to high capital requirements and a need to follow the legal and regulatory requirements makes the task challenging for them (Richter, 2011).
From the perspective of bargaining power of buyers of US, it is strong as the end-consumers are dominating the entire market. They can easily switch from one product to another based on their needs and preferences. It is thereby important for the management team of Nestlé S.A. to retain these customers by deposing specific strategies toward them in a given environment (Richter, 2011).
From the perspective of threats of substitutes, it is high, as there are several substitute products available in the market of US. The customers, based on their needs and expectations can choose any products from a given market (Richter, 2011).
The product is common and also used for daily purpose, hence, will be easy for the customers to switch to another product, if they are not satisfied with the products of Nestlé S.A. in a given environment. It is thereby important to innovate the products as well as develop new products to not only overcome the market competition but also to ensure sustainability in a given environment.
Need for Introducing New Product
Also, it is important to note that core competencies such as - uniqueness in their products and services, perceived quality, awareness levels, and loyalty toward their products are assisting the organization to achieve desired sales objectives in a given challenging environment. Further, the top-level management has deployed appropriate strategies as per the needs of the organization.
It helps them overcome the threats and other weaknesses in a given environment. However, the senior management needs to deploy performance tools as well for the purpose of analyzing these strategies in a given environment (Broad & Hite, 2014). It will subsequently help them modify the strategies to meet the needs of the near future.
Now, to tackle with the environmental challenges, it is found that the organizations need to use their resources and strengths for the purpose of introducing new product in the market. Today, with increased market competition and people looking for new and innovative products, it has become mandatory for every organization to introduce new markets in the environment (Broad & Hite, 2014).
However, to align to the objectives of the top-level management of Nestlé S.A. in US, the company needs to introduce new breakfast product that will cater to the healthcare needs of the people (Frisch & Huppenbauer, 2014). For this purpose, they can utilize their tangible assets and intangible resources in a given environment.
Today, the need of such health-based food products has increased in the environment as people have become more aware of their healthcare issues. Also, as per the recommendations from the medical community, it is important to introduce such products in the daily diet routine. It will ensure providing of desired nutrients to the individual that will be consuming such food items.
The target segment of the company includes - people that are looking for good quality and branded products related to food and dairy products. Also, the target group of the company includes the urban middle and upper middle class; hence, the marketing team can prepare the new marketing campaigns for the purpose of launching new food product in a given environment.
Nestlé S.A. has established as a world-class company in the US that provides good quality and healthy food as per the preferences of the customers (Donaldson, 2012). As per the financial reports provided, Nestlé S.A. is the biggest food company in the world, with market capitalization of around 231 billion Swiss Francs.
Also, as per the consolidated sales reports of 2014, the total sales of the company were around CHF 91.61 billion. The company is thereby investing more into research and developmental activities for the purpose of increasing their sales across the world. The US territory reports state that Nestlé S.A. comprises of 43% of the total sales in the United States (Liang, Marler, & Cui, 2012). Also, with their strategic joint venture partnerships with different companies, it will become easy to launch a new product in a given market.
It is found from the company reports that Nestlé S.A. is the leading brand in the food industry and has experience of more than 140 years in the industry. Also, it is one of the renowned brands in the entire world with a global reach in more than 86 countries of the world.
Nestlé S.A. is offering a wide range of products that include dairy products, baby food, confectionaries, beverages, pharmaceuticals, and pet food etc. However, considering the changing needs and presences of the people, they need to plan for introducing a new breakfast product that will cater to the healthcare needs of the people (Martín-Alcázar, Romero-Fernández, & Sánchez-Gardey, 2012). They already have the desired infrastructure for carrying their operations.
However, they can focus more on the quality programs and assurance for the purpose of delivering quality food items to the customers. Even, the employees need to be trained in this direction to ensure that they are performing as per the expectations of the organization.
Further, through their Strengths-Opportunities Model and through Stakhoelders’ Engagement, they will be able to manage the costs, improve utilization ratios, and also increase efficiencies of all the processes for the new product in a given operational environment (Guerci & Shani, 2014). However, the senior management needs to analyze these aspects and review the performance; they can thereby modify their present strategies as per the needs of the new product in the organization.
As recommended in the report, it is necessary for Nestlé S.A. to overcome the challenge of the workplace, focus on their core business processes, channelize the sales process, and thereby achieve desired objectives in a given working environment. Also, it is recommended to them to introduce new products in the market.
By considering the health and hygiene aspects, it will not only be able to introduce new products in the market but will also ensure of catering the health and hygiene needs of the customers (Devos, Tuytens, & Hulpia, 2014). They, however, need to plan for all the activities associated with the launch of these products in a given environment.
The top-level management at Nestlé S.A. however needs to monitor each of these aspects and accordingly frame the strategies for the introduction of new product in the market. They also need to overcome the market threats in the environment and through Strengths-Opportunities model need to launch the new product in the market. They can also make necessary changes in the strategies as and when required. It will ensure achieving of desired objectives in a given environment.