Nestle Market Analysis - Case Study Example

Running Header: Nestle Analysis Student’s Name: Course Code: Lecture’s Name: Date of submission: 1. Company Analysis i. Company Overview Nestle Australia is the largest food and nutritioncompany with subsidiaries across the country. The mother company, Nestle, was founded in 1905 following the merger of Anglo-Swiss Milk Company and Farine Lactee Henry Nestle, which were until then fierce competitors in the food and nutrition industry. Nestle Australia is headquartered in Sydney and operates food processing factories across all Australian territories (Gordon, 2002). A few years ago, Nestle Australia’s management reached a decision to diversify the range of products outside the food industry. As a result, the company started to buy stakes in cosmetics and medical companies. ii. Market Share Nestle Australia is the largest food and nutrition company in not only Australia but also in the entireSouth Pacific region. The company’s success in the competitive food industry is attributed to the company’s strong sense of efficiency and strategic formulation of business objectives (IBFAN, 2004). iii. Company Goals and Mission Objectives and Core Business Principles In its mission statement, Nestle Australia is committed to the following business principles: i. The company’s objective is to manufacture, distribute and market products in such a way as to create value that can be sustained for the local communities, employees, shareholders, consumers and business partners. ii. The company does not strive to gain short term profits at the expense of successful long-term development plans. iii. Nestle Australia recognizes that customers at the local market community are influenced by the company’s behaviors, beliefs and actions and, therefore, it has to act in a manner that best satisfies the interests of the customers (Gordon, 2002). iv. Service Quality Nestle Australia holds the conviction that observation of local laws, rules and regulations is critical for successful penetration of new markets. The company maintains a steadfast commitment to follow and respect all applicable laws in the Territories where it operates.The company is conscious that success in the domestic market is a product of professionalism, conduct and responsible attitude of employees. As such, the company recruits highly knowledgeable and skilled workers and offers routine training and development programs to its employees (Wiliam, et al. 2011). v. Market Positioning Nestle Australia targets its products through geographic and demographic segmentation. Regarding geographic segmentation, the company has implemented various strategies to ensure that its products are available countrywide with over 95% of supermarkets selling the product. The company has a large concentration of distribution outlets in major cities and urban centers where the product has a huge following (Wiliam, et al. 2011). Regarding demographic segmentation, Nestle Australia uses age as the primary segmenting parameter. The main target segments are children, youth and young urban families. vi. Nestle Australia’s HR Policies and Procedures Nestle Australia is one of the biggest employers in Australia. The company’s employees fall into two groups: factory workers and corporate staff. Factory workers are the most numerous and constitute entry level positions. The company manages its employees through training, education and benefits. All ends-level employees are taken through basic crew training programs which consist of on-the job training. Subsequent stages beyond crew level entail involve new training programs with skills becoming more generalized and complex (Marion, 2010). vii. Market Mix Strategies Nestle Australia’s market mix comprises of product, place and promotional strategies. An important aspect of Nestle Australia’s product strategy is packaging. The company’s packaging has been specially designed to fulfill four important functions: uniqueness, customer safety, easy to remove and promotion of product brand. Nestlé’s packages also offer useful nutritional information which enables customers to decide why they should consume the product. The company’s place strategy consists primarily of distribution channels as well as outlets through which the product is availed to customers. The place strategy is considered an important one because it connects the company to the customers. The baseline of Nestlé’s place strategy is to ensure that its products are available within a distance of 3 minutes in urban areas (Schwarz, 2003). viii. Financial Status Nestle Australia does not give details of its financial status. However, the parent company, Nestle had market capitalization of $200 billion as of November 2013. Because of its large market capitalization base, the company has severally been ranked as one of the most profitable companies in the world (Wiliam, et al. 2011). 2. Situation Analysis a. Strengths Nestle Australia is a leading manufacturer ofbranded processed food in Australia with a large market share in products such as weaning foods, instant coffee, milk products, instant coffee. The company also has a commanding share in semi-processed food products and chocolates. To strengthen its presence, Nestle Australia launches its products at a brisk pace and as a result, it has been successful in all its launches (Wiliam, et al. 2011).Another key strength of Nestle Australia is its strong association with the mother company. The company enjoys strong support from the mother company, which is the world leader in production of processed food and beverages. The company has a strong brand image with its well recognized products such as Maggi, Nescafe and Cerelac. In addition to a strong brand name, Nestle Australia continuously innovates and develops new products hence expanding product offering (Gordon, 2002). b. Weakness Nestle Australia operates under a very complex supply chain management system and hence the issue of traceability always pops up. The food industry requires high hygienic standards as well as edible inputs and personnel. These considerations are sometimes compromised by the fragmented nature of the Australia market place (Wiliam, et al. 2011).In the recent years, the company’s profits have been falling sharply because of the volatile domestic market. c. Opportunities Nestle Australia has the potential to expand into smaller towns and remote areas where its products are currently not marketed. Essentially, existing markets in Australia have not been fully tapped providing opportunities to increase presence by penetrating further (Philip, K. et al. 2008). With Australia’s demographic profile being in favor of the consuming class, the per capita consumption of food products is likely to remain high (Nestle Australia Limited, 2004). Nestle will certainly reap inherent advantages from this trend. Moreover, Nestle has the option to expand its product portfolio by launching new innovative products such as breakfast cereals. d. Threats Contaminations of Nestlé’s food supplies have occasionally been recalled resulting in massive losses and loss of brand image. The prices of raw chocolate ingredients are soaring at a higher rate; dairy costs arose by more than 30% in 2009, cutting heavily into the company’s profit margins (Nestle Australia Limited, 2004). The high level of market competition is a major threat facing Nestle Australia. Some of the company’s competitors include Hershey’s, Starbucks, Cadbury-Schweppes, Del-Monte, Kraft Foods, Unilever, General Mills and Frito-Lay. Compliance issues also result in heavy penalty payments which impact on the company’s profitably bottom line (Wiliam, et al. 2011). 3. Environmental Analysis a. Competition Analysis Nestle Australia faces strong competition from well established domestic and international companies. The company’s most important competitors include Nestle, Starbucks, General Mills and Cadbury-Schweppes. Some of these companies have huge market shares in several countries and hence operate under reduced expenses which enable them to offer reduced prices (William & Ferrell, 2008).The competition has been worsened by the Australian government’s decision to liberalize trade and investment policies for better participation in the global economy. Moreover the government has significantly reduced the level of import duty imposed on food products thereby intensifying the competitive battles in the food industry. b. Economic and Technological Analysis Nestle uses different marketing means and platforms to target potential customers. The primary objective of the company’s marketing efforts is to increase awareness in its customers about existing and new products. Nestlé has leveraged technology in its marketing efforts in order to reach out to a large number of potential customers. The new technologies of television and the internet which use special effects to advertise are widely employed by nestle. These technologies make products look attractive and hence are a major source of competitive advantages in marketing. In addition to the TV and internet, Nestle uses also uses billboards and newspaper to publicize its products(William & Ferrell, 2008). c. Political and Legal Analysis Because of the sensitive nature of the food industry, the government plays a crucial role in terms of regulations. The government sets fines and other penalties for not meeting specific health and quality standards. In addition, changes in laws and regulations including accounting and taxation requirements can potentially affect Nestlé’s business operations and the ability to meet its profit objectives (Marion and Malden, 2011). Political conditions in the domestic market including government restrictions on the ability to transfer capital across borders are a major negative factor in the company’s operations. Moreover, harsh economic conditions such as the current recession experienced in the country together with unstable interest rates are a major concern for the company. d. Customer Segments and Buyer Behavior Analysis Nestle offers a wide range of products which have been specially designed to meet the demands of young, medium aged and older consumers. In addition, some of the company’s products have been adulterated with medicinal substances to boost health and physical fitness. There are two main stimuli which insist on the consumer to purchase a product: consumer internal stimuli and consumer external stimuli (Schwarz, 2003). External stimuli are brought about by the influence of other consumers such as family members, friends or a reference group. Consumer internal stimuli are brought about by an internal desire to consume a product because it is good and offers certain satisfaction. For Nestlé’s products, internal consumer stimuli are driven mainly by taste and flavor, fitness for body consumption and the inferiority of alternative products (Gordon, 2002). Many Australian citizens are shifting to healthier lifestyles. This has affected the sale of some of Nestlé’s products which contain too much sugar or fats. The need for bottled water as well as other convenient healthy food products is important for many people. Consumers between the ages 40 to 60 are increasingly concerned with nutrition. Many of these consumers are increasingly concerned with healthy food products (Wiliam, et al. 2011). The future Political, economic and market forces will combine efforts to make Nestlé’s future business operations more challenging and extremely difficult. It is therefore imperative that the company develops short term and long term strategies to avert potential challenges in the future (Marion, 2010). In the short term, the company can develop more efficient and labor friendly production processes to help reduce production expenses. The company can also produce environmentally-friendly packages. In the long term, the company can develop new product lines and introduce healthier products to meet the demands of its diverse customers. The company can also acquire some of its competitors so as to reduce market competition (Nestle Australia Limited, 2004). Conclusion Nestle Australia is a well established food manufacturing company.Nestle produces a wide range of healthy food products for various groups of people including young children and the elderly. The company has a well developed market presence and countrywide recognized brands. Over the years, the company has registered impressive profit gains chiefly due to its superior marketing campaigns as well as high quality products. The company however faces stiff competition from well established domestic and foreign competitors. References Gordon, M. (2002). Retail Pricing Strategies & Market Power. Melbourne: Melbourne Univ. Publishing. International Baby Food Action Network, IBFAN. (2004). Nestle Breaking the Rules, Stretching the Rules 2004. Retrieved November 13th 2012 from http://www.ibfan.org/art/302- 17.pdf. Marion, N. (2010). Safe Food: The Politics of Food Safety. California: University of California Press. Marion, N. and Malden, N., (2011). Feed Your Pet Right: The Authoritative Guide to Feeding Your Dog and Cat. Boston: Simon and Schuster. Marion, N., (2007). What to Eat.Perth: Farrar, Straus and Giroux. Nestle Australia Limited. (2004). Nestle Write Around Australia Tenth Anniversary Story Collection. Sydney: Nestle Australia Limited. Philip, K. et al. (2008). Principles of Marketing. Melbourne: Pearson Education, Prentice Hall. Schwarz, F. (2003). Nestlé: the secrets of food, trust and globalization. N.Y: Key Porter Books. Wiliam, C. et al. (2011). Integrated Marketing Communications: Asia Pacific Edn. Cengage. Sydney: Cengage Learning. William, M & Ferrell, C. (2008). Marketing 2010. London: Cengage Learning. Read More