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Introduction

Nestlé Company was founded by Henry Nestlé who was a Swiss Pharmacist, who was focussed on producing the first milk food for infants. The production of milk food was aimed at combating the problem of infant mortality as a result of malnutrition. Soon, the product became popular in Europe, which in turn has created a legacy of shared value embedded within their corporate business principles and values (Boyd, 2012). With its efficient and humble beginning, the company is dedicated to grow its business as the leading nutrition, health and wellness company.

Headquartered in Switzerland, Nestlé operates in more than 150 countries having around 465 factories and employs around 339000 people globally (Akhtar, 2016). Experience of Nestlé over the years makes it imperative that it takes decades to build a real competitive advantage. Nestlé’s powerful establishment in the industry is a result of its inimitable strength of strong R&D, product value chain, efficient entrepreneurship, wide geographical coverage, significant corporate values and great people working together.

Task 1

Environmental and Competitive analysis

The strategic analysis of an organisation usually starts with the evaluation of its external environment. PESTLE analysis is one of the main tools for conducting micro-environmental analysis that will investigate on the political, economic, social and technological aspects of the environment in which the firm is operating (Almohammad, 2010). The main purpose of this tool is to identify the possible threats and opportunities offered by the whole industry.

 

Political

In reference to the political aspects the bureaucratic regulations, political stability and taxation policies play an essential role in international business operations. Moreover, Nestlé generates steady sales in its targeted market, in presence of political stability. The strict governmental laws in certifying the use of safe and natural raw materials, public financial disclosure and regulations on fraud and bribery has significant influence on each phase of Nestlé’s strategic planning and organisational performance (Boyd,2012). In respect to the Chinese market, Nestlé’ has been facilitating a lower corporate tax with the preferential policies offered by the municipal or central government to huge MNCs. As a result of which Nestlé has expanded its growth at an unprecedented rate over a period of 20 years in the region of greater China.

 

Economical

The economical factors varies from one country to another and mainly deals with the components related to inflation and exchange rate, economic growth, rate of interest which tends to have significant impact on the decision-making processes and business strategies planned by the company. Nestlé’s entrance to a new market or launching of a new product in a particular region has been planned by considering the disposable income and purchase power of its consumers (Bradley, 2014). Recent statistics on Global food industries reveal that Nestlé is focussed on expanding its business in the Middle East markets by shifting its focus from Europe and America due to the increasing number of middle class population and growth in disposable income within their economies (Vrontis and Vignali,2015).

 

Socio-Cultural factors

With effective business strategies across the global market, Nestlé is likely to capture the consumer behaviour which in turn increases its operational efficiency and productivity. The success of Nestlé in Africa country respective to their socio-cultural aspects is presented as an example (Davies, 2000). The production of chicken bouillon cubes by Nestlé is widely used to enhance the flavour of dish in developed countries; however, the low income groups in Africa directly mix rice with this cube. Hence, to customize the product with the local consumption habit and storage conditions, Nestlé has focussed to introduce small packets of bouillon chicken cube, so that the middle group can easily have one piece in their meal.

 

Technological factors

Nestlé is the proud owner of the largest R&D department for its wide range of food that are served across the world. The company has been consistent in producing healthy and nutritious food as a result of its strong capacity and great benefits its potential from its capacity and associations of strong research centres. With the advancement in technology, Nestlé has experienced opportunities for its new product lines, improvement in product, innovation marketing and promotion strategies such as online stores and e-commerce (Harzing, 2004). Nestlé leverage its competitive advantage of efficient world-class R&D to become the lead in food and beverage industry.

 

Description of Industry Structure

Nestlé is a Swiss multinational company mainly manufactures health and nutritional goods. The wide product range of Nestlé include breakfast cereals, baby food, confectionery, ice-cream, bottled water, snacks, pet food and coffee, dairy products, etc (Vrontis and Vignali, 2015).Nestlé’s vast industrial spread across 150 countries, include 461 factories that employs more than 330000 people. The corporate business principles of Nestlé is entirely based on their culture, that was developed 140 years ago, that reflects the ideas of honesty, long-term thinking and fairness. The history of Nestlé dates back in the year 1866, when the the Swiss condensed milk company developed thefirst Eur`opean condensed milk factory in Cham Switzerland. (Pritchard and Fagan, 1999).  The main objective of Nestlé is to provide safe, nutritional and tasty food to its consumers so as to improve the health and wellbeing of its consumers. Nestlé is committed to its huge network of R&D to develop new food products with significant health benefits, in order to meet the changing taste of consumers (Vrontis, D. and Vignali, 2001).

The food and beverage industry is highly competitive due to the presence of potential players such as Kraft foods, Danone, etc. The competition becomes stiffer, with equal strength of competitors in the market. For instance,  the joint venture between Nestlé General Mill could bring significant changes in the breakfast cereal; hence, such collaboration is successful, which in turn makes the industry all more high performing (Saphan,2014).

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