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Nestle: Global StrategyGood food, Good life

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History

Nestle’s Head Office & Factory In London

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In 1866 Henri Nestlé, a pharmacist developed a food that made from powdered milk, baked food, and sugar for babies who were unable to breastfeed. Henri Nestlé founded Nestlé’s headquarters in Vevey, Switzerland in 1866. People quickly recognized the value of the new product, after Nestlé's new formula saved the child's life, and soon, Farine Lactée, Henri Nestlé was being sold in much of Europe. And Nestlé’s first foreign office established in London in 1868. With so many ups and downs now Nestlé emerges its existence throughout the world.

Peter BRABECK-LETMATHE is the present Chairman & CEO; Chairman of Chairman's and Corporate Governance Committee

ESATBLISHMENT

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Nestlé is one of the world's oldest and largest multinational businesses. Nestlé covers nearly every field of nutrition foods: infant formula, milk products, chocolate and confectionery, instant coffee, ice-cream, culinary products, frozen ready-made meals, mineral water etc. they are also a major producer of pet food.

BUSINESS TYPES:

They have “Expatriate Army” around 247,000 employees. 500 factories are extending the whole world to deliver the customers needs.

RESOURCES :

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SALES :

Sales at the end of 2004 were CHF 87 billion, with a net profit of CHF 6.7 billion. Roughly 38% of its food sales were made in Europe, 32% in the American and 20in Africa and Asia.

Africa & Asia20%

America32%

Europe38%

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Nestlé committed to offering consumers high-quality food products that are safe, tasty and affordable. The Nestlé Seal of Guarantee is a symbol of this commitment. Nestlé's existing products grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Now a day the company focuses on new technology platform such as non-animal protein resources or agricultural biotechnology products.

EXPANSION PLAN :

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SWOT Analysis

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Strengths :

In 1938, Nestlé had been effected by the effects of 2nd World War. Their profits had dropped down from $20 million to $6 million in the time duration by 1938-1939. After that Nestlé started its most revolutionary journey with Nescafé, the world ‘s first soluble coffee drink. In that time Nestlé's production and sales rise in the wartime economy. Still now Nescafé is the most offered and prominent coffee in throughout the world.

1. Pioneer of soluble coffee drink

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Nestlé - the world's largest food group, not only in terms of its sales but also in terms of its product range and its geographical presence. Nestlé covers nearly every field of nutrition; infant formula, milk products, chocolate and confectionery, instant coffee, ice-cream, culinary products, frozen ready-made meals, mineral water etc. they are also a major producer of pet food.

2. Nestlé owns Massive brands

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Nestlé is present in different markets with the following main brands:

Coffee Nescafé, Taster’s Choice, Ricoffy, Bonka, Nespresso, Zoégas,

Loumidis

Water Nestlé Pure Life, Nestlé Aquarel, Ice Mountain, Nestlé Vera, Deer

Park,

Other beverages

Nestea, Milo, Carnation, Libby’s, Caro

Shelf stable Nestlé, Nido, Milkmaid, Klim, Nestlé Omega Plus, Bear Brand,

Coffee-Mate

Shelf stable Nestlé, Nido, Milkmaid, Klim, Nestlé Omega Plus, Bear Brand,

Coffee-Mate

Chilled Nestlé, Ski, Yoco, Svelty, Molico

Infant nutrition

Nestlé, Nan, Lactogen, Nestogen,

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HealthCare nutrition

Nutren, Peptamen, Modulen

Ice cream Antica, Maxibon, Mega, Mövenpick,

Frozen foods Stouffer’s, Hot Pockets, Maggi

Chocolate, confectionery and biscuits

Cailler, Milkybar, Kit Kat, Smarties, Baci, Butterfinger,

Polo

Foodservices and professional products

Chef, Minor’s, Santa Rica

Pet care Fancy Feast, Alpo, Mon Petit, Dog Chow, Cat Chow, Pro

Plan,

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Though Research & Development operation is a common functional department in every company but at Nestlé it took a special place. 3,100 employees dedicated to these functions. They covered 18 different groups in 11 countries through out the world. They spend approximately 1% of its annum sales amount. Around 70% of R&D budget spend on development initiatives that is new products and fulfill rising needs.

3. Extensive R&D

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4. Good number of acquisitions.Two-third of Nestlé’s growth has come from acquisitions. Some are as follows;

1977 Acquisition of Alcon

1985 Acquisition of Carnation

1988 Acquisition of Rowntree

1992 Acquisition of Perrier

1998 Acquisitions of San Pellegrino and Spillers Petfoods

2000 Acquisition of Power Bar

2001 Acquisition of Ralston Purina

2002 Acquisition of Schöller and Chef America

2003 Acquisition of Mövenpick, Powwow and Dreyer's

2004 Acquisition of Valio (ice cream activities)

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Weakness :1. Inadequate infrastructure of China.

In 1990 Nestlé opened up a new plant to produce powder milk and infant formula in china. But soon they realized that there were no adequate infrastructures to collect the milk and deliver the finished goods.

2. Improper forecasting

Nestlé had a good sales and position in Japan. Japanese were accepted the instant coffee that helped them to be the dominant coffee product in Japan. But to compete with soft drinks they launch a new canned coffee that was not accepted by the Japanese like instant coffee. Because it was just a coffee flavored drinks rather than real things.

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Opportunity1.Growth possibilities in different zones.

Development in economic and population growth simply provide the opportunity to increase the sales and market shares in some markets such as; eastern Europe, Asia and Latin America. Though many of these countries are relatively poor but when economy will be in the booming condition then the income level of the people will be rise.

2. Government paid less to the farmers

Every developed country’s government helps its farmer by giving incentive in different terms to increase the productive capacity of that particular sector. In china the government had reluctant to pay the incentives. This opens the door for Nestlé to work out their objectives.

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Threats :

1. Cannibalizing.

2. Strong competition.

3. Price war.

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Corporate level strategy that has taken

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Nestlé goal is “to evolve and adapt to a changing world continuously and reflects the basic ideas of fairness, honesty, and a general concern for people.”

On the basis of this goal Nestlé formulate its strategies. Such as,

1. Nestlé owns enormous brands

Nestlé wants “to evolve continuously” that is visible in their enormous brands extension. 8500 brands help them to be one of the largest MNC through out the world.

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2. Global adaptationNestlé wants “to adapt in changing world continuously”. Nestlé uses the global brand (Nescafe) in some developed countries but when they went to a developing country they must try to fit processing technology and ingredients with that particular local condition.

3. Good number of acquisitions

Nestlé’s two- third growth comes from their constant acquisition activities, which is a critical function for any company.

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4. Decentralize management structure

It depends on the company’s policy whether it follows centralization or decentralization management system. Nestle follows decentralization management system that increase the efficiency of each level of the company. Though separate regional office reports to the head office but it operates and takes action according to the local policies and values to achieve the company goal. It reduces the decision making process and develops the accountability among the executives.

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5. Growth possibilities in different zones:

To grab the opportunities of Eastern Europe, Asia and Latin America, nestle initially focus on niches rather than expose with handful strategic brands. The goal is to building a commanding market position of these niches.

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Business level strategy that has taken

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Corporate strategies are formulating from corporate levels managers and translate by individual business level managers to implement in individual division to direct functional level managers so that goals can be achieved.

1.Extensive R&D

Nestlé’s 3100 employees dedicated to this function. They covered 18 different groups in 11countries through out the world. They spend approximately 1% of its annum sales amount and allocate around 70% of R&D budget spend on development new products. Now a –days they concern with the development of non-animal protein sources or agricultural biotechnology products.

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2. Inadequate infrastructure of China

Nestlé established own distribution network among 27 villages to collect milk. Managers also offer the farmers vans to carry out the milk promptly. The network known as “Milk Roads” and the factory collection points known as “Chilling Centers “3. Government paid less to the farmers

When Government paid less to the farmers it gave a opportunity to the Nestle to work out the farmers for themselves. They paid the farmers payment appropriate and promptly. Farmers become motivated and got encourage to buy another cow. As a result within 18th month the numbers of cow increase from 3,000 to 9,000. So more cow helps nestle to get more milk to produce powder milk.

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Recommendations

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1.Improper forecasting & Cannibalizing

Nestlé forecasted that Japanese will easily accept canned coffee instead of taking Coca-cola whenever they want soft drinks. To protect instant coffee form industry competition in Japan nestle launch a flunk product that is canned coffee. Because Coca-cola is a strong brand and posses highest brand loyalty in the soft drinks industry. But they became fail and loose market share because Japanese didn’t like the canned coffee since that not give the real taste of coffee. Now nestle can take the following steps;

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2. Price war

To keep them away from the price war, Nestlé can manage their sales and profit by sticking with its price level. Because consumers must know that quality products require its real price. People perceive that high price indicates high quality. So nestle should not involve in price gambling game.

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Thank you