Nestle SA: Health & Wellness Strategy Harvard Case Solution & Analysis

Nestle SA: Health & Wellness Strategy Case Study Solution

Nestle SA: Health & Wellness Strategy Case Study Solution

Technological

In the development of business, strategic measures are somewhat mandatory. Nestle is one of the top famous multinational firm and by time it invests in different departments to take its products to new level. Nestle is spending more on its R&D to make its products healthier and nutritious providing consumers with health benefits.

Legal

There is no such impact of legal factors of Nestle as it is more concerned over its laws and regulations.

Environmental

Nestle, in terms of environmental impact is dedicated to work in eco-friendly environment with preservation of the natural resources and energy. As due to the manufacturing of larger number of products there might be a threat if the resources used are recyclable or not.

Competitive Forces Analysis (Porter’s Five Forces Model)

Nestle has acquired a number of companies that assisted it in diversification and growth of its product’s profile. This is the comprehensive explanation of the Porter’s model of five forces of Nestle Company, given in Exhibit B.

Competitiveness

There is extreme competition in the industry of food and beverages. Nestle is one of the top company in this competitive industry with a number of strong competitors like Unilever, Kraft foods and Group DANONE. Nestle is running well in this race for last 150 years. Each company has a definite share of market. This rivalry is not just limited to the price of the product but also for quality, innovation and variation. Every industry is striving hard for the maintenance of their market share. However, the competition of other companies with Nestle is quite high.

Threat of New Entrants

A number of barriers are there for the new entrants to take place in the consumer food industry. Only a few entrants succeed in this industry as there is a need to understand the consumer need which needs time while recent competitors are well aware and has progressed with the consumer loyalty over their products with time. There is low threat of new entrants to Nestle as it has quite large network of distribution globally dominating with well-reputed image.

Bargaining Power of Suppliers

In the food and beverage industry, Nestle owes the largest share of market requiring greater number of supply chains. This causes it to be an idyllic purchaser for the suppliers. Hence, any of the supplier has never expressed any complain about price and the bargaining power is also low. In response, Nestle has also been concerned for its suppliers as it believes in long-term relations.

Bargaining Power of Buyers

There is high bargaining power of the buyers due to great competition. Switching cost is quite low for the consumers as many companies sale a number of similar products. This seems to be a great threat for any company. Thus, Nestle makes sure to keep its customers satisfied. This has led Nestle to be one of the loyal company in eyes of its buyers.

Threat of Substitutes

There has been a great threat of substitutes as there are substitutes of some of the Nestlé’s products such as boiled water and pasteurized milk. There has also been a claim that some of its products are not safe to use resulting in the decreased sale. Thus, Nestle started highlighting the health benefits of its products to cope up with the substitutes.

Competitor Analysis

Nestles covers many of the popular consumer brands like Kit Kat and Nescafe etc. About 29 brands among all of its brands, each brand earned a revenue of about $1 billion in 2010. Its major part of sale is in North America constituting about 42% of its all sales. In Europe and U.S. the top major brands sold by Nestle in these states have a great reputable share of market. Likewise Nestle, Unilever and DANONE are two large industries of food and beverages as well as its main competitors. In the year 2010, Nestle had earned its annual profit by 26% increase because of its increased food and beverages sale specifically in cooking stuff, ice-cream, beverages based on tea, and frozen food. On the other hand, DANONE, due to the increasing prices of shares resulting an increase of 38% in its profits. Nestle lowered its sales cost by the adaptation of a new accounting procedure. Unilever has number of employees about 230,000 and functions in more than 160 countries and its London headquarter as well. It has become the second largest food and beverage market in the West Europe with a market share of about 8.6% with only a difference of 0.3 points with Nestle. Unilever shares a market share of about 7.7 with Nestle becoming first and ranking DANONE as third. Nestle attracts local costumers by its low cost of the product with the local taste of the products maintaining its first place in the global market. Nestle company has about 280,000 employees and functions in more than 197 countries edging its competitors in many regions. Nestle has also reduced its cost of supply by introducing E-marketing in contrast to its competitors.

Note: A brief comparison of Nestle with its close competitors is given in Exhibit C.

SWOT Analysis

The internal analysis and external of the company also can be done through SWOT Analysis, summarized in the Exhibit F.

Strengths

  • Nestle has an experience of about 140 years, enabling company to better perform, in various situations.
  • Nestlé’s has presence in about 86 countries, making it a global leader in Food and Beverage Industry.
  • Nestle has more than 2000 brands, which increase the circle of its target consumers. These brands include baby foods, pet food, confectionary products, beverages etc. Famous brands of Nestle include; Maggi, Kit-Kat, Nescafe, etc.
  • Nestle has large amount of spending on R&D as compare to its competitors, making the company to launch more innovative and nutritious products. This innovation provides the company a high competitive position in long run.
  • After adopting its NHW Strategy, the company has done large amount of mergers and acquisitions which increase the sales growth and improve market position of Nestle.
  • Nestle is a well-known brand with high consumer’s loyalty and brand recall. This brand loyalty of consumers increases the chances of easy market adoption of various new brands of Nestle.

Weaknesses

  • Acquisitions of those business, like; Kraft frozen Pizza business can give a negative signal to nestle customers about their compromise over their core competency of healthier foods.
  • The growth I sales as compare to the company’s investment in NHW Strategy are quite different. It will take long to change the perception of people ab out Nestle as a company selling healthy and nutritious products.

Opportunities

  • Introducing more health related products enables the company to capture the market in which consumers are quite conscious about health.
  • Developing countries like India and China has largest markets in the world. Hence expanding the market towards developing countries can boost the Nestle business by increasing sales volume.
  • Continue acquisitions and joint ventures increases the market share of the company.
  • Increased relationships with schools, hotel chains, restaurants etc. can also increase the number of Nestle consumers. For example, teachers can recommend their students to purchase Nestle products.

Threats

  • Economic instability in countries, which are the potential markets for Nestle, can create several issues for Nestle.
  • Shifting of products from normal to healthier, leads to additional costs and can lead to decline company’s profit margins.
  • As Nestle has a complex supply chain, therefore failure of any of the level of supply chain can lead the company to face certain problems.

Segmentation Analysis

Demographic Segmentation

The demographic segmentation of Nestle is based on four factors; age, gender, income and occupation. For example, Nestle produces several products related to babies i.e. Cerelac, Nido, etc. and related to adults i.e. confectionary products. Nestle products are quite affordable by almost all levels, but its major targeted customers, in terms of income level are middle and upper middle level customers……..

 

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