Nestle - A SWOT analysis

Nestle India Limited is the Indian arm of Nestle SA, which holds a 51% stake in the company. It is one of the leading branded
processed food companies in the country with a large market share in products like instant coffee, weaning foods, instant foods,
milk products, etc. It also has a significant share in the chocolates and other semi-processed foods market.

Nestlé's leading brands include Cerelac, Nestum, Nescafe, Maggie, Kitkat, Munch and Milkmaid. To strengthen its presence, it
has been the company's endeavor to launch new products at a brisk pace and has been quite successful in its launches.

Strength

Parent support - Nestle India has a strong support from its parent company, which is the world’s largest processed food and
beverage company, with a presence in almost every country. The company has access to the parent’s hugely successful global
folio of products and brands.

Brand strength - In India, Nestle has some very strong brands like Nescafe, Maggi and Cerelac. These brands are almost
generic to their product categories.

Product innovation - The company has been continuously introducing new products for its Indian patrons on a frequent basis,
thus expanding its product offerings.

Weakness
Exports – The company’s exports stood at Rs 2,571 m at the end of 2003 (11% of revenues) and continue to grow at a decent
pace. But a major portion of this comprises of Coffee (around 67% of the exports were that of Nescafe instant to Russia). This
constitutes a big chunk of the total exports to a single location. Historically, Russia has been a very volatile market for Nestle, and
its overall performance takes a hit often due to this factor.

Supply chain - The company has a complex supply chain management and the main issue for Nestle India is traceability. The
food industry requires high standards of hygiene, quality of edible inputs and personnel. The fragmented nature of the Indian
market place complicates things more.

Opportunities
Expansion - The company has the potential to expand to smaller towns and other geographies. Existing markets are not fully
tapped and the company can increase presence by penetrating further. With India's demographic profile changing in favour of the
consuming class, the per capita consumption of most FMCG products is likely to grow. Nestle will have the inherent advantage of
this trend.

Product offerings - The company has the option to expand its product folio by introducing more brands which its parents are
famed for like breakfast cereals, Smarties Chocolates, Carnation, etc.

Global hub - Since manufacturing of some products is cheaper in India than in other South East Asian countries, Nestle India
could become an export hub for the parent in certain product categories.

Threat
Competition - The company faces immense competition from the organised as well as the unorganised sectors. Off late, to
liberalise its trade and investment policies to enable the country to better function in the globalised economy, the Indian
Government has reduced the import duty of food segments thus intensifying the battle.

Changing consumer trends - Trend of increased consumer spends on consumer durables resulting in lower spending on FMCG
products. In the past 2-3 years, the performance of the FMCG sector has been lackluster, despite the economy growing at a
decent pace. Although, off late the situation has been improving, the dependence on monsoon is very high.

Sectoral woes - Rising prices of raw materials and fuels, and inturn, increasing packaging and manufacturing costs. But the
companies’ may not be able to pass on the full burden of these onto the customers.
Term Papers - Business Topic

Coca-Cola Case Study

1. SWOT ANALYSIS: Strengths Coca-Cola has been an intricate part of American culture for over a century. The
product’s image is laden with sentimentality, and this is an image many people have taken deeply to heart. The Coca-
Cola image is displayed on T-shirts, hats, and collectible memorabilia. This extremely recognizable branding is one of
Coca-Cola’s greatest strengths. “Enjoyed more than 685 million times a day around the world Coca-Cola stands as a
simple, yet powerful symbol of quality and enjoyment” (Allen, 1995).

Additionally, according to Bettman, et. al, (1998) Coca-Cola’s bottling system is one of their greatest strengths. It
allows them to conduct business on a global scale while at the same time maintain a local approach. The bottling
companies are locally owned and operated by independent business people who are authorized to sell products of the
Coca-Cola Company. Because Coke does not have outright ownership of its bottling network, its main source of
revenue is the sale of concentrate to its bottlers (Bettman, et. al, 1998).

Weaknesses: Although domestic business as well as many international markets are thriving (volumes in Latin
America were up 12%), Coca-Cola has recently reported some "declines in unit case volumes in Indonesia and
Thailand due to reduced consumer purchasing power." According to an article in Fortune magazine, "In Japan, unit
case sales fell 3% in the second quarter [of 1998]...scary because while Japan generates around 5% of worldwide
volume, it contributes three times as much to profits. Latin America, Southeast Asia, and Japan account for about 35%
of Coke's volume and none of these markets are performing to expectation (Mclean, 1998).

Opportunities: Brand recognition is the significant factor affecting Coke’s competitive position. Coca-Cola’s brand
name is known well throughout 90% of the world today. The primary concern over the past few years has been to get
this name brand to be even better known. Packaging changes have also affected sales and industry positioning, but in
general, the public has tended not to be affected by new products (Allen, 1995).

Coca-Cola’s bottling system also allows the company to take advantage of infinite growth opportunities around the
world. This strategy gives Coke the opportunity to service a large geographic, diverse, area (Bettman, et. al, 1998).

Threats: Currently, the threat of new viable competitors in the carbonated soft drink industry is not very substantial.
The threat of substitutes, however, is a very real threat. The soft drink industry is very strong, but consumers are not
necessarily married to it. Possible substitutes that continuously put pressure on both Pepsi and Coke include tea,
coffee, juices, milk, and hot chocolate (“Cola Wars”, 1991).

Even though Coca-Cola and Pepsi control nearly 40% of the entire beverage market, the changing health-
consciousness of the market could have a serious affect. Of course, both Coke and Pepsi have already diversified into
these markets, allowing them to have further significant market shares and offset any losses incurred due to
fluctuations in the market (“Cola Wars”, 1991).

Consumer buying power also represents a key threat in the industry. The rivalry between Pepsi and Coke has produce
a very slow moving industry in which management must continuously respond to the changing attitudes and demands
of their consumers or face losing market share to the competition. Furthermore, consumers can easily switch to other
beverages with little cost or consequence (“Cola Wars”, 1991).

PEST ANALYSIS

The PEST analysis examines changes in a marketplace caused by Political, Economical, Social and Technological
factors.

P: Political change, from one party to another in control- for example the rise in private healthcare and privatisations
under Conservative governments.

Political Analysis for Coca-Cola

Non-alcoholic beverages fall within the food category under the FDA. The government plays a role within the
operation of manufacturing these products in terms of regulations. There are potential fines set by the government on
companies if they do not meet a standard of laws.

The following are some of the factors that could cause Coca-Cola company's actual results to differ materially from the
expected results described in their underlying company's forward statement:-

? Changes in laws and regulations, including changes in accounting standards, taxation requirements, (including tax
rate changes, new tax laws and revised tax law interpretations) and environmental laws in domestic or foreign
jurisdictions.

? Changes in the non-alcoholic business environment. These include, without limitation, competitive product and
pricing pressures and their ability to gain or maintain share of sales in the global market as a result of action by
competitors.

? Political conditions, especially in international markets, including civil unrest, government changes and restrictions
on the ability to transfer capital across borders.

? Their ability to penetrate developing and emerging markets, which also depends on economic and political
conditions, and how well they are able to acquire or form strategic business alliances with local bottlers and make
necessary infrastructure enhancements to production facilities, distribution networks, sales equipment and technology.

E: Economic change, for example a recession creating increased activity at the lower ends of product price ranges.
Rate of interest rises depressing business and causing redundancies and lower spending levels.

Economic Analysis for Coca-Cola

Last year the U.S. economy was strong and nearly every part of it was growing and doing well. However, things
changed. Most economists loosely define a recession as two consecutive quarters of contraction, or negative GDP
growth. On Monday 26, the government officially declared that the U.S. has been in recession since March. (CBS
Market Watch. " U.S. Officially in a recession." Rex Nutting. [nov 26,2001]. www.cbsmarketwatch.com)

However, because of aggressive action by the Federal Reserve and Congress it will be short and mild. The economy
will return to sustained, positive growth in the first half of 2002.

Future Outlooks

The Federal Reserve is doing all that it can help the economy recover. They have cut the interest rate ten times this
year. The rate now lies at a 40-year low of 2%. Lowering the interest rates will ultimately excite consumer demand in
the economy. Companies will expand and increase use of debt as a result of the low borrowing rates. Coca-Cola can
borrow money for investing in other products as the interest rates are low. It can use the borrowing on research of new
products or technology. As researching for new products would cost less the Coca-Cola Company will sell its products
for less and the people will spend as they would get cheap products from Coca-cola.

Before the attacks on September 11, 2001, the United States was starting tot see the economy recover slightly and it is
only just recently that they achieved the economic levels. Consumers are now resuming their normal habits, going to
the malls, car shopping, and eating out at restaurants. However, many are still handling their money cautiously. They
believe that with lower inflation still to come, consumers will recover their confidence over the next year.

The non-alcoholic beverage industry has high sales in countries outside the U.S. According to the Standard and Poor's
Industry surveys, "For major soft drink companies, there has been economic improvement in many major international
markets, such as Japan, Brazil, and Germany." These markets will continue to play a major role in the success and
stable growth for a majority of the non-alcoholic beverage industry.
S: Social change involves changing attitudes and lifestyles. The increasing number of women going out to work, for
example, led to the need for time-saving products for the home.

Social Analysis for Coca-Cola

Many U.S. citizens are practicing healthier lifestyles. This has affected the non-alcoholic beverage industry in that
many are switching to bottled water and diet colas instead of beer and other alcoholic beverages. Also, time
management has increased and is at approximately 43% of all households. (http://www.cdf-mn.org). The need for
bottled water and other more convenient and healthy products are in important in the average day-to-day life.

Consumers from the ages of 37 to 55 are also increasingly concerned with nutrition. There is a large population of the
age range known as the baby boomers. Since many are reaching an older age in life they are becoming more concerned
with increasing their longevity. This will continue to affect the non-alcoholic beverage industry by increasing the
demand overall and in the healthier beverages.

T: Technological change - creates opportunities for new products and product improvements and of course new
marketing techniques- the Internet, e-commerce.

Technological Analysis for Coca-Cola

Some factors that cause company's actual results to differ materially from the expected results are as follows:

? The effectiveness of company's advertising, marketing and promotional programs. The new technology of internet
and television which use special effects for advertising through media. They make some products look attractive. This
helps in selling of the products. This advertising makes the product attractive. This technology is being used in media
to sell their products.

? Introduction of cans and plastic bottles have increased sales for Coca-Cola as these are easier to carry and you can bin
them once they are used.

? As the technology is getting advanced there has been introduction of new machineries all the time. Due to
introduction of this machineries the production of the Coca-Cola company has increased tremendously then it was few
years ago

? CCE has six factories in Britain which use the most stat-of the-art drinks technology to ensure top product quality and
speedy delivery. Europe's largest soft drinks factory was opened by CCE in Wakefield, Yorkshire in 1990. The
Wakefield factory has the technology to produce cans of Coca-Cola faster than bullets from a machine gun.