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Introduction

This report presents a strategic analysis of Nestl. Critically analysing the internal workings of
the firm, this report presents a SWOT analysis to reveal an identification of the internal
strengths, weaknesses, opportunities and threats seen within Nestl. Nestl is a company with a
varied brand portfolio consisting of a wide range of products including a number of household
brands: Nescafe, Rowntrees Fruit Pastilles and Nesquik. Earlier this year, Forbes (2014, p.1)
referred to Nescafe, one of Nestls core brands as the 27th most valuable brand in the world.

Employing over 8000 employees, Nestl is present in a number of domestic and international
markets. With their headquarters in Switzerland, Nestl is a firm, which in total operates within
86 countries of which North America is their largest and most profitable market (Shotter, 2012,
p.1). The firms strong internationalisation strategy reflects the firms commitment to resource
and capability development in the external environment. This will be explored further through
the use of a PESTLE analysis to determine the key external forces present within the macro
environment and, how importantly Nestl respond to such forces in a strategic manner.

A look back at the history of the firm reveals a strong commitment to product development. It all
began back in the mid-1860s when Nestl created a new baby formula to offer to the market.
Seeing a gap in the market underpinned by those mothers who could not breastfeed, Nestl
developed a formula to be offered to the European market. This very early development within
Nestl soon developed to include an expansion of products within the firm with chocolate being
added to milk products to reach a larger target market. Since its first product offerings, Nestl
has gone on to have a varied brand portfolio with annual sales of $100.64 billion (Nestl, 2014,
p.1).

Nestl's mission
Nestls mission statement is supported by the expression good food, good life (Nestl, 2014,
p. 1). Meaning more than the nutritional values of the food they produce, Nestl support the need
to show a commitment to quality, safety and ultimately convenience for the consumer to enhance
enjoyment. The notion of the creation of shared value is a main focus of the firm and is an area
which is supported by the firms ability to go beyond compliance and sustainability and create
new and greater value for our people, our shareholders and society as a whole (Nestl , 2014,
p.1). This statement supports the integrated approach Nestl adopt through their commitment to
recognising the responsibility the firm has to the wider external environment, which moves
beyond a simple aspiration of profit.

SWOT analysis
This section presents a SWOT analysis to review the micro environment of the firm reflecting
specifically upon the strengths and weaknesses of Nestl and the opportunities and threats the
firm must respond to through an alignment of firm strengths to such forces. A SWOT analysis is
often used, as a strategic tool to allow a presentation of the firms resources and capabilities,
which can be further, developed to aid competitive advantage. A SWOT analysis therefore
underpins the development of future strategic options. As seen within the work of Barney (1991,
p. 99) and Teece (2009, p. 12) a desirable competitive advantage is one obtained through a
minimisation of threats aligned with the seizing of opportunities.

Table One: SWOT analysis


Table one below reveals the internal dynamics of Nestl and the opportunities/threats facing the
firm.

Positive Factors Negative Factors

Internal Strengths Weakness


Factors
1. Strong cultural values 1. A number of Nestls
stemming from the firms products have faced
integrated approach to criticism as a result of
business and commitment to their nutritional value.
their stakeholders (Schein, Increased emphasis has
2012, p.3). been placed on healthy
2. Current strategic position of eating through
Nestl supported by three government initiatives
key areas of business and Nestl would
quality leadership, benefit from reviewing
customer satisfaction and a number of their
sustainability (Business products to support
Green, 2013, p. 1). their mission of good
3. Nestl have a strong food and good life in a
commitment to corporate changing social
social responsibility with environment i.e. rising
reference being made to levels of child obesity.
long term commitment 2. The past of Nestl is
never being sacrificed for tainted in parts by
short-term performance negative public
(CSR Wire, 2014, p. 1). relations as a result of
4. Diversified and varied brand what is referred to as
portfolio. the baby milk scandal.
5. Global recognition driven by Noted in a recent article
the number of strong brands by Muller (2013, p.1) it
within the firms portfolio. was stated that the
6. The reputation of Nestls scandal had grown up
brand is estimated to be but not gone away.
valued at $7billion (Nestl, 3. Recognising the need
2014b, p.1). for stability and
7. Nestl has a place in the consistency in the
heart of consumers due to its processes found within
longstanding history. the companys global
8. Development of trust and supply chain.
loyalty highlighting the International standards
capability development of demand a need for
the firm. standardisation yet this
9. Strong teamwork within the has to be balanced with
firm promoting good levels the firms strategic need
of job satisfaction and for adaptation to
employee commitment. different cultural
environments.

External Opportunities Threats


Factors
1. Ability to reach new 1. Higher levels of buyer
consumer markets and in power within the
particular new international industry fuelled by
markets i.e. Nestls work in greater choice and
emerging economies. lower loyalty (Porter,
2. Further internationalisations 2008, p.12: 2011, p.5).
with a particular focus on 2. Variability in raw
the BRICS economies material prices
(Brazil, Russia, India, China influencing the firms
and South Africa) these ability to sustain prices
economies are noted as in light of a
being current growth spots commitment to wider
(Wilson and responsibilities aside
Purushothaman, 2003, p. 1). from profit i.e. CSR
3. Development of intangible initiatives (Servaes and
capabilities to aid Tamayo, 2013, p.1047).
competitive advantage. 3. Increased dynamism in
Barney (1991, p.100) argues the external macro
that competitive advantage environment fuelling
is achieved through short-term decision
inimitability and this should making and heightened
be a focus of the firm. competition (Teece,
4. Backwards integration to 2009, p.15).
gain more control over the 4. Technological change
supply chain of the firm driving both innovation
(Martin and Eisenhardt, and associated
2010, p.1105 ). challenges.
5. Innovative development of 5. Ageing population
distribution channels. shifting the
demographics of the
workforce (Kooij et al,
2014, p. 2192).

The SWOT analysis above reveals that Nestl have a number of strengths, which translate into
the development of core resources and capabilities, which aids their competitive position.
Notably, one of the core strengths of Nestl is the strong brand image they have which inspires
trust in consumers. Nestl are able to build on this reputation to extend their brand categories.
Further, recent efforts to follow corporate social responsibility strategies have heightened the
firms approach to sustainability, which is aligned to current expectations from the consumer
market for firms to take a greater responsibility towards the wider macro environment. Moving
on to a critical analysis of the weaknesses of the company, one of the core weaknesses of Nestl
is the content of some of their products, which marks a move away from healthy eating
initiatives. For example, Nestl produce a number of confectionary goods including sweets and
chocolate bars. Nestl will in the future have to work with the UK government to ensure that a
clear marketing message is put across for such treats to only be enjoyed alongside a balanced
diet. Overall, however, Nestls strengths overshadow their weaknesses and many of the
weaknesses are being tackled by strategic actions. Recognition of the firms opportunities and
threats leads to a discussion of the value of internationalisation and in particular the opportunities
present within emerging economies. Further, the development of capabilities and thus the
translation of strengths into intangible and inimitable capabilities is an area, which could see the
firm, further develop their sustainable competitive advantage. Developing from the opportunities
of the firm, it is also necessary to consider the threats, which face Nestl. The SWOT analysis
revealed one of the core threats is the increasingly competitive nature of the industry and the
challenges, which arise from this level of competition. As a result, a great threat facing the firm
is the level of dynamism and turbulence to contend with which influences the nature and
direction of strategic choices.