SWOT Analysis for Nestle - Case Study Example

NESTLE Student’s name Code & Course Professor’s Name University City Date Nestle Executive Summary The confectionery industry has faced increased competition given the number of increased players in the industry. In this respect, Nestle has emerged as a competitive industry leader in this market. Arguably, its competitive advantage has enabled it to gain consumer preference against other companies. Due to a robust brand name, the introduction of a new product can be realized. This retrospect paper therefore, seeks to analyze Nestle external market while presenting various challenges affecting its presence in the U.S. market. Contents Introduction 4 The U.S. Market 5 SWOT Analysis 6 Strength 6 Weaknesses 7 Opportunities 7 Threats 8 PESTLE Analysis 8 Political 8 Economic 9 Social 9 Technological 9 Legal 9 Environmental 10 New Product 10 Target Market 10 Product Market Mix 11 Customer Value Proposition 12 Comparison with SWOT 12 Reference List 13 Introduction With its headquarters in Veyvey , Switzerland, Nestle is among the largest food and nutrition company. This is supported by its global operations in over 115 countries, which employs over 280,000 employees. As such, it produces a range of diversified products that range from bottled water, chocolate, dairy of health and sports nutrition and baby food products. Renowned products such as Nespresso, Nescafe, Movenpick among others, are just a few of its global products. By 2009, ice cream, and milk products represented one-fifth of the company’s total turnover (Nestle Annual Report, 2013). According to the company’s reports its operation offices and manufacturing sites are present in all its 115 countries of operation, with a total of 449 factories in over 83 countries. Through various partnerships, the company has successfully engaged in a number of business enterprises to develop boards in creating a favorable image. In terms of its management structure, the company is governed by a board of directors while its executive board members are tasked with overseeing the company’s daily management. The food industry is highly delicate, therefore; it values research and development that it perceives as an important competitive advantage for the company. With over 29 research, development and technologies worldwide, it holds one of the largest R& D networks in any food company. Presently, the company’s goal is focused on nutrition, health and wellness trusted by all its stakeholders. Despite its major success in the food industry, it experiences a number of challenges which has seen it experience various controversies in recent years. In this respect, therefore, it needs to enhance its message translation and internal coordination in various constructs. Contrariwise, Nestle has struggled in maintaining its enterprise approach to CSR practices, where numerous controversies surround its operation; including but not limited to Nestlé’s bottled water ad, IUF-led Nespressure campaigns and deforestation linked to Nestle’s sourcing of palm oil. The U.S. Market Statistics showcases that the market share of the leading confectionery market, where Nestle holds approximately 5.2 percent in sales as of 2014. Mars and the Hershey Company were key competitors in the market (Statista, 2014). Evidently, the confectionery industry is robust with an average consumer spending of $ 102 on confectionery products as of 2013. The country’s confectionery has grown significantly over the past years at a steady rate of 2.5 %, translating to about $ 33.6 billion in sales. In this respect, seasons are an important driving force for the company’s sales, where 54 % of total annual sales are made of candy and gum purchases, happening at the peak seasonal selling weeks. Chocolates represent over 60 % of the confectionery sales in the U.S (National Confectioners Association, 2015). The confectionery manufacturers spend close to $ 4 billion annually in the commodities each year that consists of 2.2 billion lbs of sugar at $ 770 million, 1.9 billion lbs of cocoa beans at $ 2.3 billion, more than 800 million lbs of corn sweeteners at $ 240 million (National Confectioners Association, 2015). Nevertheless, the U.S. Confectionery market is expected to witness an unprecedented growth of $ 6 billion in increased sales within the next five year, where premium products are a driving factor to the increased growth. The industry is growing dynamically, where commodity costs have an impact on the costs from the farms to the finished products. Overall, the U.S. market accounts for over $ 33.6 billion in sales and anticipates to reach over 39.6 billion with nth next five years. The $ 6 billion is likely to decline to about $4 billion in additional chocolate sales (presently at $ 20.6 billion) $ 1.8 billion in non-chocolate sales and $ 400 million in gum sales (presently at $ 2.7 billion) (Lindell, 2014). Premium chocolates account for 6 percent of the U.S market, which grew nearly 15 %, in comparison to the 4 percent of all chocolate sales. Recent sales showcase the sales to shift up by 2.5 percent, with a slight 18 % increase in premium chocolates (Lindell, 2014). SWOT Analysis STRENGTH WEAKNESSES OPPORTUNITIES THREATS i. A strong Distribution Channel and geographical presence. ii. Strong brand name iii. Research and Design Capabilities CSR Implementation i. Mergers and Acquisitions ii. Product Development Rising Prices for Raw Material Strength Strong Distribution Channel The company has a global reach in over 100 countries. This advantage was gained through an increased advantage through decentralization since individual branches handle the product distribution in the region; hence are responsible for running the business efficiently. This approach extends to autonomy in employing staff and offering products ranges in suiting the cultural taste. Tentatively, Nestle has a medium-length supply chain, typified by between 3-4 intermediaries that guarantee their product coverage. In ensuring maximum effectiveness, the company implements standardization in criteria for the selection, with respect to the incentives and operations (Nadar, 2013). Research and Design Capabilities The company has an advanced research and design capability, where new products can be easily researched giving the brand a huge competitive advantage against competitors. Strong Brand Name The company has a strong and reputable brand name, where its products are well known by the majority of the consumers within the market; hence it is comparatively easier for the company to introduce new products. Increased Partnership In maintaining competitive advantage and leading position within the market, Nestle has not only been acquiring new partnership but also informing them on various developments. Weaknesses CSR Implementation Although the company has constantly implemented the eco-friendly packaging and improved on its nutritional value on its products, it has faced great criticism over a weak CSR implementation. Nestle has repeatedly faced criticism in its human rights risks with respect to the labor conformance, the environment and food safety (Rossman, 2013). Some of these examples include mass firing of union workers, palm oil trees deforestation in the Borneo and child labor in Ivory Coast. In addressing such challenges, Nestle always uses feedback control, where issues are handled when it is too late. Opportunities Mergers and Acquisitions The company has access to large income sources, with its brand recognition at its disposal, presenting an opportunity for acquiring startups (Nestle, 2014). This can be realized through increased product portfolio. Acquiring new startups that increased the products well-being can be done easily with minimal cost. Product Development Its highly specialized approach to research and development can be significant in creating new products within the market hence augmenting its propensity to introduce new products to the market. The company should utilize should exercise such capabilities in various dimensions. Threats Rising Prices for Raw Material As a result of stronger economies an increased population, the prices of raw foods and that are produced in developing countries. This is an issue that has to be considered by Nestle in the long term, given an increased production. The company will be forced to either to increase prices for its products. Prices increase my result to a lower demand for the products, reducing its profit margins. PESTLE Analysis Political i. The changing regulations have considerable impact on food standards and marketing actions ii. The government’s stability with respect to the new emerging economies impacts business. This questions the risks involved in part of the Nestle internalization process (Kumar et al, 2013, p. 206) iii. Changing global regulations on standardization while operating in various countries. As such the company has to adopt divergent strategies under different political factors (De Mooij, 2013, p. 60). Economic i. Knowledge of prevailing economic conditions is imperative, given that the changing inflation and economic growth rates impact their development to various levels. ii. A dynamic consumer budget is eminent in different markets, giving rise to cost conscious consumers. iii. Increased raw material on goods may impact their approach in sourcing from sustainable suppliers (Kumar et al., 2013, p. 208) Social i. Changing consumer attitude. In the case when consumers shift to healthier products with respect to government initiatives in support of consuming healthy products (Newman et al., 2014. P. 16) ii. The impact of changing consumer lifestyle. Consumers may opt to shift back to home cooking and promoting family time. iii. The need to adapt to diverse cultural setting that is language, family setting, and religious beliefs may impact purchase behavior. Technological The rise of social media has enhanced consumers’ interaction with the firms, hence a better correlation with the firms across multidimensional construct Innovations are supported by technological development The rise of e-commerce offers a platform for development (Lin et al., 2014, p.3) Legal i. The changing aspects of legal nature influence the approach ii. Need to conform to global regulations ion diverse international market (Schaffer et al., 2014, p. 14) Environmental i. Provisioning increased attention towards corporate social responsibility (Servaes and Tamayo, 2013, p. 1044). ii. The need to respond and act on environmental concern affecting the immediate community (Dubois, 2012, p. 36). New Product Given the demand witnessed in the U.S. market the introduction of a new product. It is evident that consumers are willing to purchase premium products. In this respect, a new chocolate bar product will be introduced into the market. The chocolate bar will be introduced as a premium product where consumers will be compelled to pay higher premiums for the product. The product will include ingredients from the full cream milk, cocoa butter, sugar, emulsification, milk solids and the flavors. This will be blended in a mix of peanuts to offer a crunchy taste. This crunchy taste will offer a unique taste to the target consumers. The products will come in a variety of flavors; crunchy, smooth almond (with almond) and berry crunch. All this products will be packed in different sizes ranging from 10 grams to 150 grams package. A cylindrical dark brown package will be used in packaging the product. Target Market In order to capture the market effectively, a must marketing strategy will be employed. Divergent approaches to the product line extension will be used to target the different target market. As such, the new products will majorly target young adults and children. These groups require divergent presentation of the products; where young adults necessities for a less colorful appeal contrary to children. In furthering its penetration, the various social class will be targeted, notably the lower middle class. Product Market Mix Product The product will be attuned to the market needs in various approaches. The packaging of the products will be efficient enough in attracting the entire target market. Different sizes of the products will be important in gaining significant market power. Promotion A number of integrated promotional strategies will be used in introducing the product. Given that the target populations are active participants in new media, a variety of new media strategies such as social media and online print will be used, in this regard. Additionally, outdoor advertisement such as billboards will be instrumental in marketing the product. Distribution The existing distribution channels will be used for distribution purposes. Convenient stores and hypermarkets will be important in reaching out to consumers. Price As premium products, the product will be used in responding to the scope of the market demand and consumer consumption behavior. A low-cost high-quality structure will be integrated with this regard. This is important in promoting the product. Customer Value Proposition The customer value proposition will be achieved through offering various flavors for the product. This offers a significant competitive advantage against rival products. This approach will position the product in a better position to compete favorably. Additionally, the consumers will have better value for the products, given that they can choose from numerous products flavors. Offering a quality product to consumers will offer better value for the money. Comparison with SWOT Since the company is renowned for quality product, the new product will be well placed in garnering consumer confidence and preference. Tentatively, the product will easily penetrate the market, given its robust brand name in the U.S. market. Reference List Dubois, M. (2012) Extended producer responsibility for consumer waste: the gap between economic theory and implementation Waste Management & Research, 30(9), 36-42. De Mooij. (2013) Global marketing and advertising: understanding cultural paradoxes. London: SAGE publications. Kumar, V., Mudambi, R., & Gray, S. (2013) Internationalization, Innovation, and Institutions: The 3 I's underpinning the competitiveness of emerging market firms’ Journal of International Management, 19(3), 203-206. Lindell, C. (2014) NCA: U.S. confectionery market to grow $6 billion in 5 years. Candy Industry’ [online] Available from . Lin, Y., Luo, J., Zhou, L., Ieromonachou, P., Huang, L., Cai, S., & Ma, S. (2014) The impacts of Service quality and customer satisfaction in the e-commerce context. In Service Systems and Service Management (ICSSSM), 2014 11th International Conference on (pp. 1-6). Newman, C. L., Howlett, E., & Burton, S. (2014) Shopper Response to Front-of-Package Nutrition Labeling Programs: Potential Consumer and Retail Store Benefits. Journal of Retailing, 90(1), 13-26. Nadar, S. (2013) ‘01 Nestle sales and distribution. 01 Nestle sales and distribution National Confectioners Association. (2015) Profile of the U.S. Candy Industry [online] Available from . Nestle Annual Report. (2013). Nestle.com. [online] Available from . Schaffer, R., Agusti, F., & Dhooge, L. (2014) International business law and its environment. London: Cengage Learning. Rossman, P. (2012) New downgrade for Nestlé CSR rating .www.iuf.org. [Online] Available from . Statista. (2014) ‘Confectionery market share in the United States in 2014, by company’ [online] Available from < http://www.statista.com/statistics/294497/us-confectionery-market-share-by-company/>. Read More