Table of Contents
- Background of Company
- Buy The Recommendations of the Marketing Strategy paper online
- Other drinks: COFFEE-MATE, NESQUIK, NESTEA
- Cereals: FAST
- Nestle SWOT Analysis
- Nestle PEST Analysis
- Political field
- Economic field
- Sociocultural field
- Technological field
- Industry Analysis – by Porter`s 5 Forces
- Incoming supplies
- Power of buyers
- Market entry
- Threat of substitutes
- Related Management essays
The purpose of this work is to develop the recommendations of the marketing strategy and to provide the general analysis of the company. The main objectives are:
1) to analyze the marketing micro and macro environment of Nestle;
2) to develop a marketing strategy of Nestle;
3) create the recommendations for the further development of the company.
Nestle is a producer of different types of food. The following market is very competitive, because the high quality food is always in demand. In addition, the world population is growing, thus the number of consumers is increasing.
Background of Company
The company was founded in 1866 by Swiss pharmacist Henri Nestle. Experimenting with different combinations of milk, flour and sugar, he created the product for the artificial feeding of infants, who does not receive the breast milk. His main goal was to help to solve the problem of child mortality due to insufficient and improper food. The new product was called Henri Nestle Milk powder (Fr. Farine Lactée Henri Nestlé), and after several years been actively marketed in most European countries. Henri Nestlé was aware of the importance to promote the brand products on the market. Thus, the first marketing trend was the usage a family coat of arms - a nest with birds – as a trade mark. In the 70s, fighting with rivals, the company has marketed its own brand of condensed milk (Volume 4, 1959, p.225).
In 1875 a Vevey resident, Daniel Peter, invented a method for producing milk chocolate by combining milk and cocoa powder, and founded a company that has quickly become a global leader in the manufacture of chocolate. Later it became a part of Nestlé Corporation. In 1882, the Swiss chef, Julius Maggi, developed a technology to produce the instant pea and bean soups, and founded the firm Maggie and Company, which, by the end of the century, was producing not only the soluble soups and bouillon cubes, but the sauces and condiments. It merged with Nestlé in 1947(Volume 4, 1959, p.227).
In the early 1900s Nestlé had the factories in the U.S., UK, Germany and Spain. In 1904 the company began to produce chocolate, and reached an agreement with the Swiss National Chocolate Company (Official press release).
Today Nestlé has over 6,000 brands of the consumer products. The company owns 513 factories and industrial plants in 86 countries around the world (BBC News. 19 January 2006). Currently, Nestlé operates the following brands (Nestle official site):
Other drinks: COFFEE-MATE, NESQUIK, NESTEA
Chocolate and other confectionery products: KIT KAT, NESTLE, AERO, NUTS, NESQUIK
Convenience products: Torchin, MAGGI.
Ice cream: 48KOPECKS, NESTLE, MAXIBON, EXTREME, MEGA, HEAVEN DREAM, BON PARI
Ready-made breakfasts: NESQUIK, KOSMOSTARS, NESTLE, FITNESS, CHEERIOS,
Baby food: NAN, NESTLE, NESTOGEN;
Clinical Nutrition: CLINUTREN, MODULEN, PEPTAMEN;
Water: PURE LIFE, Sacred Source, PERRIER, CONTREX, VITTEL S., PELLEGRINO;
Forages: PURINA VETERINARY DIETS, GOURMET, FRISKIES, DARLING, DOG CHOW.
The company`s revenue is 109,9 billion dollars, the operating income is 15, 68 billions, the profit is 18, 04 billion, the total asset is 106,2 billion, and the total equality is 54,92 billions. From this, it can be concluded, that Nestle is one of the leading food production companies worldwide (Annual report, 2011).
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Nestle SWOT Analysis
SWOT (Strength, Weakness, Opportunity, Threats) is performed to study the business environment, the legal environment, the strengths and weaknesses of the company and business competitors, as well as the complex interaction of the considered factors.
The company is already formed brand, and earns million of dollars only because of the name. Thus, MAGGY is the leader producer of the noodles in India, New Zeeland, and Indonesia. Nestle is known for producing the high quality products, that is why its baby food is very popular. Company has well-established distribution channels: the production of nutrition cosmetics with L`Oreal, the cereal producers General Mills, with soft drink producer Coca Cola, dairy producer Fonterra and others. The company has a great experience and works according the new quality standards. Due to the brand name, a lot of people want to work with the company, thus Nestle has availability of highly qualified personnel with experience in this area and knowledge of the market in which the company operates. Nestle has good business relations with customers and suppliers of raw materials and due to its active marketing policy, has a good segment production (Rapoport, 1994, p.147-148).
Even though Nestle is well known brand worldwide, one of its weaknesses is a possibility of the new competitors. Furthermore, it is the different tastes and preferences of the consumers, even though Nescafe has different types of coffee - light, dark, and classic – there are still some part of coffee consumers that would like to buy the other coffee. Another weakness is that inferior workers are not interested in the development of the company as much as superior, who do not promote the company and do not care much about its image. Finally, it is a high degree of deterioration of the equipment. In some fields of production the deterioration is up to 80% (Richards, 2005, p.12).
The major opportunity is an increase in demand, due to increasing the number of consumers. Secondly, it is expansion of the range. Thirdly, according to the statistic, provided by the Market Research Group, Nestle will increase the market share, in case for the current development. Finally, Nestle has an opportunity of expansion of the segment of buyers in relation to the growth of population (a new layer of customers).
The possible threats are the following: saturation of the market (a large number of competing companies, both domestic and foreign); the entry of the new competitors and the rise of the old ones; improving the quality requirements of the product; reduction in demand during the crisis; the depreciation of the currency (Templeman, Toy & Lindorff, 1993, p.50-51).
|Market leader||Some distributional problems||Unexploited competitors` market||Strong regional competitors|
|Brand Loyalty||Issues related to health||Increasing number of young workers||Competitive pricing|
|Distribution channels||Global hub|
After clarifying the strength, weakness, opportunity, threats we can come to the conclusion that favorable aspects own niche in the market, the high competitiveness of the manufactured goods, a small number of fairly strong competition, a lack of the product substitutes, strong demand. Among the unfavorable factors are unstable political and economic environment; dependence on the customers, dependence on the suppliers; instability in the economic, fiscal, banking and other laws.
Nestle PEST Analysis
The Macro environment of the company should be carefully analyzed, because any changes in the macro environment impact on the company's strategic position in the market. Therefore, the task of macro environment is tracking (monitoring) and analyzing the trends/events beyond the control of the company, which may affect the potential effectiveness of its strategy. PEST analysis provides the examination of the 4 fields: political, economic, sociocultural and technological.
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The political field covers the analysis of the governmental intervention of the work of the company. Today, the government doesn`t have the influence on the company. Even the probability of changing the composition of the government will have no impact on the company, as the food industry is not strategically important for the country. The government intervention, except for the indirect effect through legislation, is virtually equal zero. In connection with the economic crisis and falling the exchange rates, a small loss and difficulty in the firm may occur. However, the changes will not be significant, because Nestle is quite a large international company, which has been operating over the whole world. Talking about terrorism, in the present situation the threat of terrorism is too small to affect the food industry companies. In addition, Nestlé is adapted to the modern conditions and responds positively to the new standards of quality and production that is why is will be stable in the future. The inflow of imported goods, which has no analogues, strongly influenced by the fact that the company holds a leading position in the sales and has a high demand for its products (Tran, 2010).
The decline in the first quarter of 2009 was 7 per cent, compared to the same period in 2008 in February 2009, the selling prices for Nestle products have been increased from 4 to 14%, depending on the product category, due to the fact that most of the raw materials, mainly for the production of coffee, chocolate and spices, were imported. In response to the crisis in the economy, worsening economic conditions lead people to buy the essential goods (Tran, 2010). Thus, the amount of sales of the coffee, chocolate and other products of the company can be decreased.
Currently, the world`s population is growing. As the result the company consequently receives a new layer of the potential buyers. Each person almost every day consumes the production of Nestle: chocolate, candies, ice tea, coffee. Urbanization leads to the rapid development of the enterprises, increasing the number of organizations, accelerating rhythm of life. That is why the Nestle products will always be in demand.
Nestle maintains the bilateral relations with scientific and professional organizations for the purpose of continuous renewal and updating the knowledge that enables the company continually improve its products and quality of the services. Globally Nestle focuses on the SAP solutions. The long-term goal is to transfer the maximum number of business processes to informational support. In addition, Nestle runs a program called Global Business Excellence, or GLOBE, which helps to centralize the information on the clients (Nestle Official Site).
PEST analysis includes the examination of the level of the products:
The major value of the Nestle production is an excellent quality produced instant coffee Nescafe.
The main product is instant coffee Nescafe, which helps people to maintain the vigor of sleepless nights, and work hard every day.
The expected product is a strong, rousing coffee with a rich flavor and delightful aroma.
The improved product is more flavor and aroma of the coffee granules of instant Nescafe Classic coffee
The potential product is more instant coffee in granules.
Industry Analysis – by Porter`s 5 Forces
According to M. Porter, the main activities are grouped into five areas: incoming supplies, power of buyers, market entry, rivalry, and threat of substitutes.
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Nestle seeks to work only with the reputable suppliers who are prepared to use, established by the company Nestle, quality standards. In order to continuously improve the product quality and service, it makes and analysis and evaluation of the supplier relationships. Depends on the level of relationships, the supplier may obtain the status of preferred supplier. Nestle verifies the suppliers working with the company on a contract basis, in order to determine whether their activities are the fundamental principles of Nestle. If the provider does not work according to the principles of Nestle, the company will always require the adoption of the measures to eliminate the violations. The staff of the company must demonstrate the highest level of integrity and professionalism in all business relationships. The company insists on honesty, integrity, and fairness in all aspects of its activities and expects the same from the business partners and suppliers (Urry& Hall, 1998)
Power of buyers
The existence of the company is possible only if its products (goods or services) will be needed to the consumers. On how the consumers behave (active or passive) the success of the company depends. The scheme is simple: the more consumers buy, the greater the profit is. Therefore, the objective of the company is to attract the largest possible number of clients. Nestlé's goal is to create a high quality product, secured and unchanging over time, serving the needs of consumers (Nestle Official Site).
Portrait of the consumer:
1) age: the company's products focus on people of either sex, ranging from infants (baby food) to the elderly (mineral water, various cereals, sweets);
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2) sex: has almost no effect on the consumption of the products. Perhaps in recent years, due to "dietary boom", the girls and women use fewer products.
3) geographical indication: the basis of the company is the urban population of consumers. In the small towns and villages there is no need to use the products.
4) income: the company's products is available to any person of the middle class. Since coffee is not a product of the first necessity, the poor people will not buy it because they can replace it with the cheaper products.
Nestle has one of the highest market entry. Thus, the company has different branches and sub brands worldwide. Thus, the company has already introduced the new brand in the European market – Purina, which becomes of the leaders in France (Nestle Official site).
Mars is a traditional rival in the sector of chocolate bars. Its main advantage is the possibility to concentrate on its direction. Speaking of drinks - coffee and tea – the main competitor is Kraft Foods (Helmut, 1994, p.95). A few years ago the company Kraft Foods bought the coffee production companies Jacobs and Maxwell. In addition, Kraft acquired Stollwerk, and this is the market leader in cheap chocolate. The competitor in the coffee market is Tchibo, as well as the newcomer company Elite or the Ambassador. In the sector of noodles the competition to Nestle brand Maggi broths Gallina Blanca (Helmut, 1994, p.118). However, Nestle is very competitor and won`t lose its positions in the nearest future.
Threat of substitutes
In order to be successful Nestle tries to strike the balance between the development of new territories and expanding the production. The long-term liabilities will never be sacrificed for short-term profits. The priorities of the company will always be the production of high quality products for people, regardless of where they are located, as well as the manufactured products according to the needs of man from birth and throughout his life. Thus, the key success factors of the company are: strong brand; active competition policy; high quality products; great experience; highly qualified personnel; clear identification of goals and strategies; successful pricing policy.
In order to be developed company in the future, the company should improve some strategies. Judging from the weaknesses and threats, the company has to follow the further recommendations:
Firstly, it should be established a better contact with the customer trough the good advertisement style. In the communications with the customers the company should support the principles of moderation in eating, and do not encourage overeating. This is especially important in the nutrition market. Due to this, the company will gain the trust and loyalty of the customers. In addition all advertisements should be focused on the healthy and vigorous life, and avoid demonstrations of sedentary lifestyles, combined with the wrong diet. One of the biggest advantage of the company is that it doesn`t have any advertisements in the suspicious magazines, newspapers, which do not promote the healthy lifestyle. However, the company fails in collaboration with the events, which promote the healthy lifestyle. Thus, the general rating and the number of consumers could be increased if Nestle would be one of the sponsors during the Olympic Games in London in 2012.
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Secondly, the company should follow the attacking strategy in the market, which aim is to conquer and expand a niche of the market (market share to achieve optimum or exceed it). The optimal share of the market is determined by the number of buyers in the market. The optimum is a segment where there 20% is the regular customers, who purchase 80% of the products, offered by this company. Thus, the company has already an advertised brand and gained the loyal customers.
Thirdly, the Commodity strategy should be improved. It is necessary to break an established list of the associations, connected with a brand. It would deliver a new perspective and refresh the brand. Due to the used commodity strategy, the introduction of a new product is not perceived appropriately. The output may be improving the old products and "refreshing" the brand, however not losing and maintaining the high quality standards. In addition the stress should be made on the width and depth of the company`s products. As it has been mentioned in the paper, Nestle is a one of the leaders in the market of instant coffee, but even this is not enough for the future development. The recommendation may be the introduction of the new technology – the coffee sublimation on those enterprises, where this technology is not used. Due to this, the company protects its own market share. One of the approaches is to provide a complete range of products. A particularly important recommendation is to retrofit and upgrade the packages of coffee, in order to eliminate the problems, but at the same time, to maintain the corporate identity. It also may include the recommendations on the development of the good reinforcement.
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Fourthly, as it was mentioned in the paper, the company`s pricing strategy is based on the average market price. This strategy is stable for a profit, so it can be left unchanged. The "insurance prices" is missing, but in light of the recent events, namely the "jumps" in the relations of the exchange rates, in order to reduce the risks of activities, as well as reduce the costs, it is recommended to use the "moving the price" tactic.
Fifthly, talking about the developing strategy, the company has used the pulling strategy in selling the products. However, it is recommended to use a combination of: pushing and pulling strategies. As a result of this combination, the company will focus its efforts on stimulating the demand from users, which in turn, stimulates the demand in the subsequent links between the user and the manufacturer. BTL-events (or “below the line” events - a complex of marketing strategies, which are different to general ones; it can be a straight contact with the customers or some promo actions, which are not commonly used by the company. ) can be added to the recommendation to maintain the level of promotions and publications in specialized publications, which often contacts the user.
Furthermore, the marketing differentiation that will work in the most attractive segments, can reduce the risks of the company, increase the competitive advantage and weaken the competitive pressures. Thus, the system of the price modification, based on the same market conditions, would be a good variant for the company. This pricing system takes into account the possible differences in the range, the product modification, and the difference in the external conditions of the implementation, the intensity of the demand for various market segments, and etc.
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Finally, expanding the range of goods, quality improvement through improved production technologies will decrease the degree of threats from the competitor companies. In order to fight with the competitors, Nestle should consider mergers and acquisitions as a means of improving the business performance, rather than a restriction of competition.
To make the long story short, Nestle is a stable company, however the micro and macro analysis have shown that the company has its own weakness` and threats. Among them the major ones are the new competitors, especially local one, competitive prices, and some distributional problems. However, thanks to the timely updating assortment, as well as the need for analysis of the selected segments, the company maintains the stable sales volumes. With regard to the competitive environment, the company should focus primarily on its major competitors, improving the quality of the products, using all kinds of BTL-events, providing and introducing.