Case Brief for Nestle
Introduction
Nestle inc. may have been founded in 1905, but its humble history goes back some years before then. It started in 1866 when the Anglo-Swiss Condensed Milk Company, the first European Condensed milk factory, was opened. A year later, Henri Nestle launched his company, which was focused on creating condensed milk foods for infants. These two companies merged in 1905 to form Nestle Inc., which aimed to build a business as the world’s leading nutrition, as well as health and wellness Company, based on sound human values and principles. With time, the company has rapidly expanded and grown its market to become one of the biggest companies in the world in terms of its products and its business turnover. However, the food processing industry is filled with many competing companies, some of which have a big share of the market. In order to maintain its competitiveness in the highly competitive industry, the company has used effective strategic management strategies and policies in its business operations. However, the company still faces many challenges in both its internal and external environment that limits its attainment of full potential. This case brief identifies the major problem issues in the management of its operations while providing recommendations and implementation actions to help fix the organizational issues.
Analysis
One of the business’s major operational strategies is investing in its brand. This is seen in its The company recognizes that its brand is its most valuable asset and has majored in investing in it in its years of operation. Investing in the brand has increased its share of the market by increasing consumer’s awareness of the product and create a positive perspective of the people towards the brand. However, while this strategy has been essential in the past, the company should now adapt to new strategies. The food processing is presently crowded by competitors who are employing the same tactics in a bid to gain a share of the market. To be able to stay ahead of its competition, Nestle needs to do things differently. Furthermore, consumers are now aware of many different brands due to the rise in the use of technology, which has made it easier for companies to marketing their brands in different parts of the globe. Also, markets for Nestle products are declining due to consumer demand being redirected to healthier products in the market. No amount of brand promotion, therefore, will make consumers that want alternative products to buy the products being offered by the company. The move by consumers to healthier products being offered in the market has resulted in reduced sales by the company hence reduced profitability.
Nestle company has a large network of suppliers for its raw materials. In most of the country’s it purchases its products form, the company is mostly a monopoly, which means that farmers depend on the company alone for the purchase of its products. The company, therefore, has a lot of power over its suppliers, meaning that it has a bigger bargaining power for the price of the products. This has been an advantage in helping the company save on the cost of goods in that the farmers do not charge very high prices as opposed to when there would have been competition for their products from many companies. However, contrary to its business principles, the company’s practices have led to poor relationships with the suppliers. This is because its business practices give the suppliers very little opportunity to bargain with the company. In its efforts to save on the cost of acquiring the products, the company is leaving its suppliers dissatisfied. While this is not ethical, it may also lead to suppliers looking for other companies to supply their products to leave the company with little suppliers. Poor relations with suppliers have also resulted in pressure by advocacy teams. This eventually results in negative public image, and consumers will opt for other brands reducing the company’s market share in the long-run.
Another strategic management issue that is affecting the growth of the company is basing a majority of its sales in European countries and the United States. While the company has done a lot in increasing its market share and maintaining market dominance in the food processing industry, there are a lot of untapped markets for the company’s products. Currently, the company is using policies that allow for most of its consumer market to be in Western countries. Compared to its overall market share, a very small percentage of its products are sold in the African and Asian continents. Unlike Nestle, competing companies are looking to expand their markets in all areas globally, especially in markets outside the U.S. and Europe. This is because there exists a very big potential for markets outside these areas that are yet to be exploited by the company. The company’s current strategy for future growth is primarily focused on taking the market share from current competitors and expanding product lines through acquisitions. However, failure to focus on the global markets and finding new markets in other countries will make the company lose a big percentage of its market share to its competitors.
Recommendations and Justifications
With consumers shifting their demand to healthier products, the company should reinvent their strategy form investing primarily on its brand to creating products that meet the needs of the consumers instead. In order to achieve this, the company needs to allocate more funds into investments on new and innovative products. Since they are various companies offering the same products, increasing its brand awareness will do little in increasing its sales volumes. People now need a brand that offers unique products to the ones they are used to. Companies, therefore, need to be able to come up with new products that meet the evolving needs of the consumers. To do this, the company will need to major in conducting extensive market research for the development of new and innovative products. Innovating new products that are healthy will increase its consumer resulting in increased market share and growth of the company.
Creating a healthy relationship with suppliers is also crucial for growth. This is because suppliers are an essential part of the business in that they provide the raw materials for the company’s product. In order to maximize growth, the company needs to increase its relations with suppliers, especially in pricing the products. Nestle should increase the bargaining power of the supplier so that they do not feel like the company is forcing them on issues such as pricing of their produce. The company should stop taking advantage of the poor states of farmers and their lack of alternative buyers to set poor prices for their produce. This will not only improve the relationships of the company with the suppliers but will also improve its but also its public image. Improved public image will result in more consumers preferring its products hence increased growth in the long-run. Additionally, the company should also consider increasing its sales in Asia, Africa, and Oceania instead of focusing on Europe and the U.S. only. This will result in a bigger market hence increased sales and revenue.
Conclusion
In order to respond to the global economic downturn and increase its competitiveness in the industry, Nestle has invested a lot of funds in its brands. The company has also adopted an external growth strategy through diversification and numerous acquisitions of various companies. However, to stay ahead of competitors, the company needs to switch to innovative strategies and expand its markets to untapped regions to maximize its growth potential.