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Transcript of NESTLE
GENERAL EXTERNAL ENVIRONMET
POLITICAL / LEGAL
THREAT OF NEW ENTRANTS/BARRIERS TO ENTRY
POWER OF SUPPLIERS
POWER OF BUYERS
INTENSITY OF RIVALRY AMONG COMPETITORS
SUMMARY : ATTRACTIVENESS OF EXTERNAL ENVIRONMENT
KEY SUCCES FACTOR
SUSTAINABLE COMPETITIVE ADVANTAGE
Nestle have 8000 brand
Each household have at least 7 product of nestle at their house
minimum product of nestle at every row at any mall or supermarket are 8 products
MULTINATIONAL FOOD AND BEVERAGE COMPANY
Location Vevey Switzerland
Founder Henri Nestle (German Pharmacist)
Factories 468 factories
Operation 194 countries
No. Employees 339,000 employees world wide
Shareholder L’Oreal (world’s largest cosmetic company)
Sales by Geography Europe = CHF 26 billion
America = CHF 41 billion
And Africa = CHF 25 billion
Unmatched product and brand portfolio
Distribution channels and geographic presence
Competency in mergers and acquisitions
Inability to provide consistent quality in food products
Weak implementation of CSR
Increasing demand for healthier food products
Acquiring startups specializing in producing well-being products
Establishing new joint venture
Trend towards healthy eating
Growth of private labels
Rising raw food prices
- An important element to determine the profitability is the number of competitors within an industry who compete for an industry profits and market share leader
- Nestle is the company that has been around for over a century and boasts a long history of quality products and consumer satisfaction which has allowed the company to obtain a considerable share of the market
- Nestle stands a leader against its immediate competition including Unilever Plc., Kraft Foods Inc. and Tyson Food
- Although the industry is very competitive and is constantly evolving with entrants, Nestle has an advantage of holding majority of the market share
-With substantial brand and a base of loyal customers, Nestle is at an insignificant risk from entrants
- Nestle creating and maintaining good relationship with its suppliers all over the world
Nestle owns great power as the biggest supplier in the nutrition industry, for its differentiation strategy for the products in nutrition and health industry, the switching cost in changing suppliers in nutrition industry are high because of the strong brand of Nestle
-The power of buyers is the power to force down prices or demand better quality and generally negotiate leverage to industry participants
-Customers of Nestle products have a large amount of bargaining power regarding their consumption products
-Nestle provides substitute products in the market ranging from baby food to weight management which allows for the customers’ preference to the familiar brand
- Brands of Nestle cover almost every food and beverage category in the market, from the baby food like cerelac, beverage like Milo, Nestea, chocolate like Crunch, Kit Kat, coffee like Nescafe Classic, ice cream
- The products are target to adapt to local consumers’ tastes
- Nestle should continuously support its R&D for gaining competition with new introductions and to improve its products to fit the consumers’ preference.
- Nestle is a global power in the nutrition and foods industry, same as Krafts and Group of Danone
- These companies spend hundreds of millions of dollars in product innovation or R&D to appear more desirable than the other companies
- R&D also plays an important role in creating products that have a proven taste advantage plus a specific nutritional advantage over competitors’ products
Environment Life Cycle of Product
Understanding the life cycle impact will give Nestle to optimize the environmental performance of the products by systematically assessing product categories along the whole value chain
Partnering to improve environmental performance of consumer products
They support several initiatives around the world to spread understanding of environmental life cycle impacts. In 2012, they joined a new research partnership between industry and academia that aims to improve the environmental performance of consumer products and services. The group is run by the Interuniversity Research Centre for the Life Cycle of Products, Processes and Services (CIRAIG) in Montreal, Canada.
Packaging: Recyclable packaging
They use polyethylene terephthalate (PET) for water packaging and ready-to-drink products in a number of countries because it is a light-weight material that is easy to recycle in many countries.
Raw Material: Improving the environmental sustainability of milk production
They use RISE (Response-Inducing Sustainability Evaluation), an indicator and interview-based method to assess the sustainability of farm operations across economic, social and environmental dimensions. Environmental issues considered as part of the RISE assessments include soil use, nutrient flows, water use, energy use and our impact on climate change and biodiversity and plantlet production. A new version, RISE 2.0, was developed between 2009 and 2011 to further improve the tool and make it available in different languages
Manufacturing: Production outputs versus environmental impact
For many decades, they’ve focused on making their manufacturing sites more eco-efficient. Since 2002, they’ve reduced water withdrawal by 29% and direct greenhouse gases emissions by 24%, while increasing production volume by 53%.
Promoting sustainable consumption: Enhancing consumer understanding
Nestle Brand and Creating Shared Value ( CSV) Advisory Team shares its consumer insights and provides guidance on how best to communicate with consumers.
In France, they continue to promote an interactive Nescafé life cycle assessment (LCA) communication tool. Users can learn about the environmental impacts at each product phase, or across the full life cycle
They launched their Beyond the Label initiative to give consumers more product information transparency. The UK Kit Kat pilot encourages consumers to scan a QR code on the package to discover more about the product and its impacts on nutrition, environment and society.
Resource consumption and waste generation versus production volume
Transport and Distribution: Electric trucks
-In 2012, as part of their aim to reduce greenhouse gases (GHG)emissions, they began testing electric trucks for customer deliveries. Nestlé Switzerland piloted two new electric trucks for ice cream and frozen food delivery, and optimised delivery routes.
Water and Recovery: Waste disposal and recovery from the factories
-Since 2002, they have almost halved the amount of waste for disposal generated in their factories per tonne of product. They are still on target to meet our 2015 goal of reducing waste for disposal on a comparable basis by 5% by 2015
Water: Helping the hospitality industry save water
-Nestle Professional launched a free, online water management course in 2012. Developed in association with the Food and Drink Federation, the course is designed to raise operators’ awareness of the value, use and management of water.
Nestlé's largest international competitors are PepsiCo, Kraft Foods, Unilever and Mars Incorporated. It also faces competition in local markets or specific product ranges from numerous companies, including Cadbury and Danone
Nestle Vs Kraft Foods
- Nestlé is a Nutrition, Health and Wellness company and the biggest food corporation in the world with its largest market in Europe
-The headquarters is based in Switzerland, Nestlé has 29 billionaire brands altogether, including Nespresso and Nescafé
Nestlé only has two coffee brands, whereas Kraft ́s coffee business consists of nine different brands
- Nestlé also differentiate between the Nescafé product variations. Nestlé ́s two coffee brands are Nescafé and Nespresso
Nescafé, the non-portioned soluble coffee, can be further divided into product groups: Nescafé Cappuccino, Nescafé Classic and Decaff, Nescafé Gold and Nescafé Green Blend.
Nescafé Dolce Gusto and Nespresso are the coffee capsule systems from Nestlé and Krups.
Kraft Foods is the world ́s second-largest food company. The corporation is based in the USA, its biggest market.
Kraft Foods has 11 billionaire brands, two of them being coffee brands Jacobs and Maxwell House
Kraft ́s non-portioned coffee brands are Carte Noir, Gevalia, Grand Mère, Jacobs, Kenco, Onko and Maxwell House.
Kraft has a brand of single-served coffee pads called General Foods International and a coffee capsule system in cooperation with Bosch, called Tassimo.
Nestle Vs. Unilever
Nestlé's origins date on 1866 : one man’s ideal.
Nestle grew under his brand as family brand
1980s NestléInternal adjustments and diversificatons
- End of 90s / 2000: Nestlétowards Health and Wellness
Unilever’s origins date on 1930: Merger between two existing companies active in two different fields, but with same raw materials
Unilever grew under individuals brand
1980s as sleeping giant
- End of 90s / 2000: Unilever: total restructuring: path to growth, radical brand cutting
Today: both multinational companies operating worldwide
Brand Positioning of Kit Kat
Kit Kat is owned by Nestlé SA
Target market: Women and Men of all ages, focused on consumer segment who love chocolate
In 2012, Nestlé’s company share in Singapore’s confectionary market was 9.4%
This has remained fairly constant since 2009, following a drop from 10.1% in 2007 to 9.6% in 2008. This shows us that introduction of competitor brands, as well as increased in market share in existing competitor brands such as Ferrero Group since 2009 has led to a drop in brand share for Nestlé.
competitor fact sheet
Kit Kat vs. Ferrero Rocher vs. M&M’s:
Bar chart showing company shares by global brand owner. As can be seen, overall since 2007, Ferrero Group and Mars Inc.’s brand shares have increased whereas Nestlé SA’s brand shares have reduced.
To recognized as the world leader in nutrition, health and wellness trusted by the stakeholder
Good Food, Good Life
To be leading competitive nutrition, health and wellness company. Delivering improve shareholder value by being a preferred corporate citizen, preferred employer, preferred supplier, selling preferred product.
The announcement by the world’s leading health, nutrition and wellness company on a Washington conference about the dietary salt consumption organised by the Pan-American Health Organization (PAHO), the regional Americas Office of the World Health Organization.
Nestle is the 1st company to pledges ambitious salt reduction to meet WHO goal.
Release of Android KitKat
Nestle have engineers working in R&D
from packaging and equipment to food processing technologies and manufacturing new beverage systems
Develop different technologies
hot extrusion (Infant, Breakfast cereal)
co-extrusion (Filled bars and snacks)
cold extrusion (ice-cream and chocolate)
GROUP MEMBER :
SITI SYAKIRAH BINTI YUSOH
NUR EDZIANI BINTI ROSELI
NUR LAILI ASYIKIN BINTI MOHD RESLI
NURUL IFFAH BINTI AHMAD
Due to people with different country and culture now very concern with healthier food thus Nestle offer product the meet the taste of different country
Launch special T at Japan
Offer new Nescafe recipe to meet Chinese consumers changing taste
Demand of the nutritious food
Offer variety of product from infant to the older people.
Because of want to be a market leader, Nestle provide product that can be consume at any level of people.
Global Economic Meltdown
- Customer prefer for the convenience food and ready to serve product.
- Thus Nestle provide instant product such as Nestum, instant porridge, instant cereal. Which is affordable for their customer and at the same time full with nutritious.
May exacerbate for Nestle such as:
the availability of clean water and may directly affect the long-term provision of continuous, safe, high-quality raw materials.
THE EXTERNAL ENVIRONMENT
a ) Strengthen innovation to create product differentiation
2) Strong budget in R & D to improve its operating
3) A Number of organizational changes were made to improve R & D connection with the markets.
B) Using acquisition as external growth to support internal growth
1) Set the company’s activities challenging target
To gain a critical mass of market share and size to
provides economies of scale in the food industry.
- Acquisition of Dreyer
- help Nestle to be market leader in US ice cream business.
- Acquisition with Ralston Purina
- to be global leader in pet care.
- Acquisition with Jenny Craigh
- gain the world’s largest nutrition and weight management market
C) Introduce 2 (two) venture funds to gainexpertknowledge to create new
products using acquisition, licensing, minority investment and joint venture
- Life Venture Fund (CHF 235million)
create innovation process
- Nestle Growth Fund (CHF 790million)
invest with products or processes in
the final testing stage or about to enter the market
D) Effective acquisition strategy - patient
- Issues are successfully eliminate:
> Ample time to identify synergies and select most appropriate integration approach
> Retaining acquired company’s employees
> Acquired company’s employees distinct culture
> Readiness to promote managers from acquired company to its head office
E) Divestiture to align the group’s product portfolio to the objectives of sustainable organic growth
- Divested numerous activities that low margin & profits such as canned food, chees and meat, parts of frozen food & confectionary business (chocolate etc.)
- Focused on consumer and added-value areas of the food industry value chain from commodity food processes (raw material conversion) and divested manufacturing asset and process to acquired company.
how nestle can be recognised as the world leader in nutrition, health and wellness, rusted by all its stakeholders, and to be the reference for financial performance in its industry?
INTEGRATED COST LEADERSHIP & DIFFERENTIATION
Adaptability to environmental changes.
Learn new skills and technologies
More effectively leverage core competencies across business units and products lines which should enable the firm to produce produces with differentiated features at lower costs.
Standard Cycle Market
In standard cycle markets, a company's strategy and organization are designed to serve high volume or mass markets. Generally, it is difficult to enter standard-cycle markets because of competitive intensity. However, competitors may be able to imitate a company's source of advantage and increase the level of competition.
True competitive advantage comes from a combination of hard-to-copy advantages throughout the value chain, built up over decades.
There are inherent links between great products and strong R&D, between the broadest geographic presence and an entrepreneurial spirit, between great people and strong values
Nestle’s corporate strategy is focused on adopting a related constrained diversification strategy to improve its geographic presence around the world through a strong presence in emerging markets, and transitioning itself into a primary focus on health as opposed to just food and beverages.
Nestle do power purchase agreement with Mexican wind-turbine company CISA-GAMESA, 85% of the total electricity consumed by factories in Mexico is now supplied by wind power.
Committed to lowering the greenhouse gas (GHG) emissions associated with the production and distribution of food and beverages, by improving energy efficiency, switching to cleaner fuels and investing in renewable sources.
Competing with other competitor
- Capable to reducing marketing expenditure by exploiting the synergies between brands.
- Brand strategies were centralized to drive synergies and easier to control.
- Allocate 127,000 products to six (6) strategic brands:
- Nestle, Buitoni, Maggi, Nescafe, Nestea & Purina.
- Succeed to have 70% company’s portfolio belonged
one of these 6 brands. Example Nescafe generate CHF 15 billion.
To strengthen operational efficiency
Integrated cost leadership/differentiation-Wide range of products (over 20 categories: coffee, milk, mineral water, pet foods, cereals). More on marketing , R&D and built several programs
1) Program MH97:
to reduce raw material cost and optimize production process. 165 factories closed , generate saving CHF 4 billion.
2) Program target 2004+ :
improving operating performance by creating a regional manufacturing network (network cooperating strategy) – as to benchmark and best practice transfer. By refocus on a small number of high-performing factories, saving many cost.
4) Program Operational Excellence 2007 :
redeploy many of the prior project’s concept and improve supply chain activity, optimize planning, eliminate overhead and reduce product complexity.
manufacturing-related efficiency programs to drive efficiency in the groups’ administrative process.
Create wellness and nutritious products as a value added in mainstream food & beverages
Reinforce the company’s leading position regarding specialized nutritional products
Built 2 units Corporate Wellness Unit and Nestle Nutrition Unit to achieve this goals.
1) First mover incentive
Use product innovation and aggressive R&D activities.
2) Organizational Size is “Big”
easier to create competitive actions and responses
Create initiative business transformation- Global Business Excellence (GLOBE) to covers strategic objectives & improve operational efficiency to the global scale.
Establishes best practices in business process
Align data standard
Install common information system
3) Established good quality product
through product innovation based on customer preferences with localization approach.
4) Standard cycle market :
have to innovate and renovate products each year to sustain in competitive environment.
- Related constrained diversification strategies was used to share where all Nestle business units share product, technological and distribution linkages.
3) Joint ventures
- Cooperation with L’Oreal : to produce nutricosmetics products & create new brand name Inneov
- Combines Nestle knowledge of nutrition with L’Oreal expertise in beauty products to improve the quality of skin, hair and nails.
FINANCIAL RESOURCES –
use 2 venture funds to access new technology & know-how from acquisitions, minority investments, joint ventures and licensing.
Life Venture: to accelerate Nestle innovation process & invested 8 business naturally derived bio actives, phytonutraceuticals and health care nutrition.
Nestle Fund Growth: to entering the market with their products.
ORGANIZATIONAL RESOURCES -
formal reporting structures using cluster-cross divisional project structure: 7 SBUs (improve knowledge sharing for R&D to create new products)
PHYSICAL RESOURCES –
enter potential market using merger & acquisitions
TECHNOLOGICAL RESOURCES –
have certain patents, trademarks, copyrights, and trade secrets
HUMAN RESOURCES -
skills; collaborative abilities ( have 3500 scientist for R&D)
INNOVATION RESOURCES -
scientific capabilities; capacity to innovate
REPUTATIONAL RESOURCES -
brand name (Nescafe); good perceptions of product quality, durability, and reliability; positive reputation with stakeholders, e.g., suppliers/customers
Flow of food production process,
Starting from understanding consumer culture, behaviour and needs -> innovation process from ideation to product conception, development and launch -> test and validate that it satisfies their needs and expectations.
1- Consumer Needs
Nestle adapt products to fit different lifestyles, cultural considerations, nutrition needs, budgets and taste preferences. Have to know WHAT CONSUMERS WANT & understand what consumers define as Good Food, Good Life.
2- Nutrition Research
“Food and nutrition are the basis of health and of our business - it is the reason we exist.”
The best and most flavourful ingredients must be selected to make food and beverages of the highest quality
R&D plays a significant role in enhancing existing technologies and creating new ones to optimize production processes
4- Quality & safety
Nestlé scientists develop and validate methods to test ingredients and products throughout production, from raw materials to finished products. -> then be implemented by Quality Managers in Nestlé laboratories, factories and distribution channels worldwide -> ensure that all Nestlé products are nutritious, safe, and comply with local regulations
Nestlé employs its 60/40+ initiative, involving rigorous consumer product testing of all products to guarantee that consumers are happy.
Four criteria for sustainable competitive advantage
- Valuable, rare, costly to imitate and non-substitutable
Methods (1):Improvement of Strategic Leadership
To force the businesses to become more efficient.
To create a regional manufacturing network.
To integrate the company’s business on a global scale.
To reduce marketing expenditures by exploiting the synergies between brands
Methods (2): Strategic Entrepreneurship
Develop R&D network
2.1- Develop R&D network
>3,500 scientists work on improving existing products and creating tomorrow’s nourishments
Two thirds of company’s R&D activities are dedicated to renovating existing products, the remaining third is reserved for radical product innovations.
Improve on operational level
A number of organizational changes
Reaching a critical mass in terms of market share and the acquisition of Dreyer’s, Ralson Purina, Jenny Craig and etc..
Gain expert knowledge for further expansion into new product segments from venture funds.
Life Ventures fund
The Nestle Growth fund
Have a products portfolio for every eating occasion and for every age (young to old people).
Producing products with reduced energy, Nestlé is able to market their products for a very low price.
Most countries all over the world are affected by the global economic crisis.
More countries join WTO which is allow more free trade across the nations.
People are care more about their health & nutritious foods, especially with foods and beverages.
Use most of latest technology( in researching, producing) and try to find new way of create new product to improve the quality of products.
Create information system to integrated data across 77 countries.
Improve operational efficiency by integrating the company’s businesses on a global scale.
“We’re now transitioning to become a genuinely global food company, to behave as one”
Mature markets in food production and limited potential for organic growth. For example leading market such as US, Rusia & Japan also have lower growth rates.
Have to analyze 5 force model:
Treats of new entrants
: Nestle sustain its quality products & customer satisfaction and its allow the company to obtain a large market share. New entrants have to compete with it. Multinational companies & more companies joint in domestic market.
Threat of substitute products :
Nestlé’s threat of substitute goods is high. It's important to Nestle to make new innovation products constantly focus on health and wellness aspects for consumers.
Diversity products, Confectionery, instant foods, Not many firms focus on pet foods, average pressure
Bargaining power of suppliers:
Nestle create supplier intimacy all over the world to create and preserve long term relationships with its suppliers as this helps to ensure the quality of the raw materials being purchased. Due to the large purchasing power of Nestle and the fact that the suppliers of agricultural commodities offer a product that is far from unique, Nestle holds more bargaining power than its suppliers & offer advice to its supplier on how to perform more efficiently to minimize cost.
Sign contracts with farmers, Stable suppliers, Trust to the big firm & Low pressure
Bargaining Power of Customers:
Nestle understands the power of the customer and has taken specific steps to meet the needs of its products consumers. For example, Nestle is incorporating health and wellness into the creation of its products as society has begun to grown more health conscious.
Variety demands, Different tastes, Need to attract customers, High pressure
Competitive Rivalry within the Industry :
Nestle is a powerhouse in the food processing industry but so are PepsiCo, General Mills, and Mondelez International. Rivalry in this industry is very high which benefits the consumers. As long as these companies continue to improve to obtain competitive advantage, consumers will continue to enjoy the improved products.
Have fierce competition example from Dannon & General Mills great competitors for yogurt products
Dannon, another major food company, had already established their market earlier than Nestlé and their product of nutritious, healthy and cheap yogurt had claimed many loyal Dannon branded customers. Therefore, Nestle have low bargaining power of customer.
General Mills is their strongest competitor, which owns Yoplait. They are good competitors because they have tried to get a competitive advantage through their customer relationships creating a brand loyalty and through their innovative products.
Another food-producing rivals: Kraft, Masterfoods & Unilever
Strong competition at the national and regional level.
Consumers are reaching smaller snack-based meals rather than traditional time-consuming dinners. Some of the main players on the global snack and sweets market include Nestle, PepsiCo, General Mills, and Mondelez International.
To strengthen product identity and to communicate product characteristic such as :
SUSTAINING GROWTH IN MATURE MARKETS