GUIDED BY:
PROF. RACHNA GANDHI
PESTEL ANALYSIS OF NESTLE
PREPARED BY:
AKSHAY DUGAR
MAHIMA JHANWAR
KRITIKA MAHESHWARI
PRAGYA PIPADA
VISHAL GARG
POLITICS - Akshay Dugar
Nestlé operates in more than 194 countries each with its regulatory environment that can have an impact on operations. The political environment can especially be problematic for multinational firms because it can throw up political bottlenecks in form of new governments or a tough regulatory environment that can hinder business development.
POLITICS
Rules and Regulation & Tax Policies
1. Rules and regulation & tax policies
Nestle serves in several countries. The rules and regulations set by the government are different in different regions. Nestle should focus on these political dynamics like taxation, import export excise duties, government permission to enter in to the target segment and also to introduce hygiene products allowed by the regulated bodies.
Moreover, in the contemporary trends keeping in view the government stability, Nestle should consider and recognize all the related risks that could be involved. Nestle should also consider the changing global regulations which are yet to adopt by the company. Albeit nestle is such an organization which in real sense promote the government health policies by maintain the quality standards and rules and regulations.
Political Stability
Political stability is the ability of a people's government to share, access, or compete for power through nonviolent political processes and to enjoy the collective benefits and services of the state
For Example: It has chosen Malaysia to be the regional manufacturing centre for NESCAFE, it should be very careful dealing with emerging economies for political stability is weak.
2. Political stability
Due to some reason in Malaysia Government increase the tax in 2015.
The campaign allows customers to save on more than 11 million Nestle promotion packs on brands such as MAGGI, MILO and NESCAFÉ. Meanwhile, retailers can also customise promotions for customers purchasing Nestlé products.
Nestlé (Malaysia) managing director Alois Hofbauer said, “This is part of Nestlé’s ongoing efforts to maximise value for our consumers. Now with our biggest promotion ever, Malaysians can enjoy savings of 8% to 33% on our extensive range of products.”
He added that the company will be having promotions and campaigns running throughout the year to keep true to its principles.
Malaysia Campaign
Lobbying in United States
3. Lobbying in United states
Lobbying, persuasion, or interest representation is the act of attempting to influence the actions, policies, or decisions of officials in their daily life, most often legislators or members of regulatory agencies. Governments often define and regulate organized group lobbying that has become influential.
In 2016, Nestlé’s spent about $60,000 lobbying Congress about environmental issues relating to the production of bottled water, filed in two separate lobbying reports.
Corruption Faced by Company
4. Corruption faced by company
'90 Advertisement in Africa
The problem was the need for water sanitation. Most of the groups they were targeting – especially in Africa – didn’t have access to clean water (many don’t to this day), so it was necessary for them to boil the water. But due to low literacy rates, many mothers were not aware of this, so they mixed the formula with polluted water which put the children at great risks. Nestle seems to have knowingly ignored this and encouraged mothers to use the formula even when they knew the risks. Breastfeeding, one of the most important aspects for an infant, especially in unsanitized areas, was cast aside. Baby formula was “the nearest thing in the world”, and this “splendid triumph of care and science” is “so like mother’s milk that the tiny stomach won’t notice the difference”. But the tiny stomach did notice the difference.
Their corruption lead to most hated brand in Africa.
ECONOMICS - Mahima Jhanwar
Different countries have different level of development. Economy of countries differs everywhere. So, Nestle has to set different economic policies for different targeted segments. The price of the product is an important decision to take while strategizing the economic policies according the inflation rate and the buying power of the segments. Nestle company should made an analysis report on frequent basis to get the knowledge of the inflation rates and different income levels. Nestle is contributing a lot in promoting the economic worth of farmers by producing the products at a local level for the satisfaction of the consumer.
ECONOMIC
1. Effective supply chain: Supply chain professionals at Nestlé play a critical role in ensuring quality products reach our customers and consumers. nestle has proved to be one of the most of accessible brands to the customers with a strong supply chain.
2. Impact of Growth rate: with a 18% downfall of the pound value after brexit occurred, nestle faced a price rise and consequently a reduced growth rate because of the low of demand in its major product in EU market such as kit-kat, shredded wheat a and dozens of other brands as a whole by 1.5 % points.
3. Maggi ban impact: nestle faced a decline of 17.2% in its sales after one of biggest charge of excess lead content in nestle. Nestle Asian head claims that it could take 3 years for the company to recover in this market segment.
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5. Changing inflation, rise of price: the rise in price inflation due to the decline in the value of the pound is also affecting living standards because real income growth among wage earners has fallen, squeezing household incomes. Nestle is contributing a lot in promoting the economic worth of farmers by producing the products at a local level for the satisfaction of the consumer.
6. Change in farmer earnings: nestle gives opportunity to earn income farmers and women for their living standard, to help them for increasing yields utilizing the same amount of land that is under coffee cultivation and to diversify their activities, giving them higher incomes and improving their living standards.
SOCIO-CULTURAL - Kritika Maheshwari
SOCIAL
• Customer Satisfaction – Because it is a producer of finished consumer goods so customer satisfaction is important to achieve success, to maintain brand image and enhance product desirability.
• Healthier products – Because of the increasing trend of the people towards healthy eating, so Nestle has committed to reduce salt, sugar, sodium and trans-fats content in its product for the Indian consumers keeping their health in mind.
• Helping the Society - Nestle has undertaken many projects to help the society. The Cocoa Plan project to facilitate African cocoa farmers and encouraged the society to take advantage of mounting market prices by increasing their productivity. As a result of The Cocoa Plan initiatives, many have benefited. Nestle, as a partner of International Cocoa Initiative and the World Cocoa Foundation tackled problems such as child labor and lack of excess to health and education.
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• Values and Principle - The Company adheres to its strong values and principles in order to build the trust of its consumers.
• Preserving the taste – There is a growing interest from the public towards additive free products made from natural ingredients. Nestle is aware of this and this can be seen in few of their products, in Germany, china and Indonesia they have different flavors and textures to meet local taste.
TECHNOLOGICAL - Kritika Maheshwari
TECHNOLOGICAL
• Use of Social Media - With the help of social media, Nestle should try to penetrate different segments and create awareness about its products through various campaigns. For example, #WeMissYouMaggi campaign was used to revive Maggi Noodles after it was banned in India. Tie up with Snapdeal to facilitate the comeback of Maggi Noodles.
• Technological advancements - Nestlé announced that its researchers have discovered a way to restructure sugar. This will allow the confectioneries of nestle to reduce the sweet stuff in the products up to 40%.
• Operations – To ensure that the products are produced in the safest and most effective way while meeting the constantly changing needs of the consumers. And also to add value beyond the physical product they sell.
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• Redesign – Since the competition is very high in this sector so the requirement of research and development is high leading to frequent introduction to new and innovative products and redesigning of products.
• Technology – Use of technology has narrowed the gap between the direct interaction of the company and the consumers.
• Reduced Cost - The use of the internet through online grocery retailing directly influenced the supply chain, operations and processes of grocery and food retailers.
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• Nestle is uses the state of the art technology for the production of various products, they are meeting the global standards by installing the contemporary plants.
• E-Commerce – For Marketing it can use E commerce as platform.
ENVIRONMENTAL - Pragya Pipada
Today the world is more conscious to have clean environment. Nestle need to focus on these rules and regulations also to produce healthy food with environmentally friendly operations. Several countries set different rules, so to increase the acceptance of the products by the targeted segment the rules are significant to follow. Nestle has also been taking into account the considerable attention towards the social contribution. The other related concerns are the realm of recycling and the issues pertaining to the packing.
ENVIRONMENTAL
The transition to a low carbon and resource - Efficient future is underway, affecting almost every sector of the global economy. However, for the world’s biggest soft drinks brands, the biggest environmental issues they continue to grapple with are local environmental considerations especially the impact of their waste from all the plastic and aluminium packaging used for their products. According to Greenpeace (2017), the top six global soft drinks firms; Nestlé, PepsiCo, Coca-Cola, Suntory, Danone and Dr Pepper Snapple use a combined average of just 6.6% recycled plastic in their bottles with Coca-Cola alone producing more than 100 billion plastic bottles annually, much of it ending up in the world’s oceans rather than plastic recycling systems (Taylor and Laville, 2017). Nestle has however fared better and even received praise from numerous NGOs such as Greenpeace for its efforts in tackling climate change, its commitment to zero deforestation in countries where it operates, and its overall sustained efforts in cleaning clean up its supply chain (Moodie 2016).
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EXAMPLE
Here are the few images which are recycled by Nestle into Plastic Drinking Water Bottles:
LEGAL - Vishal Garg
• Changing nature of legislative rules and regulations - Amendments are usually made before it is finally passed. Government legislative priorities often determine whether a given bill is proposed and enforced as law. Legislation is a directive proposed by a legislative body while a regulation is a specific requirement within legislation
• Need to adhere to global regulations and changes across different international markets according to respective country.
For Example:
- Infant milk formula scandal (Discussed by Akshay Dugar)
- Child slavery
- Water controversies
- Maggi Scandal
Child Slavery
- Children younger than 15 continue to work at cocoa farms connected to Nestlé, more than a decade after the food company promised to end the use of child labour in its supply chain.
- A new report by the Fair Labor Association (FLA), commissioned by Nestlé, saw researchers visit 260 farms used by the company in Ivory Coast from September to December 2014. The researchers found 56 workers under the age of 18, of which 27 were under 15.
- At one farm in the Divo district of the country, the FLA found evidence of forced labour, with a young worker not receiving any salary for a year’s work at a farm.
- Ivory Coast is the world’s largest producer of cocoa, the raw ingredient that makes chocolate. The industry is estimated to be worth close to £60 billion a year.
Water Controversies
- The controversy over Nestlé’s bottled water operation in the San Bernardino National Forest has prompted a review of the company’s federal permit, a lawsuit and an investigation by California regulators.
- Now, Nestlé’s continued piping of water out of the San Bernardino Mountains has become an issue in a congressional campaign.
- Ahead of the June 5 primary in the 8th Congressional District, Democratic candidate Marge Doyle is criticizing Rep. Paul Cook, the Republican incumbent, for supporting water legislation that she says would undermine the ability of state and federal authorities to limit how much water the company uses from the national forest.
Water Controversies [Continued]
- Doyle has criticized the federal water bill HR 23, which was cosponsored by Cook (R-Apple Valley) and passed by the U.S. House in July 2017. She argues portions of the bill would hinder state authorities from restricting Nestlé’s water use to avoid potential harm to public lands, and would prevent federal agencies from putting limits on water use when issuing federal permits.
- Backlash is growing over where the world's top bottled water producer gets its supplies. Nestlé collects millions of gallons a year from springs in Southern California, an area prone to drought.