The food market has always been a very vital part of our day to day lives and is mostly affected by emerging trends. Nestle being a food producing company has more than kept up with the market trends but is strategizing to be the market trend setter. From its inception by Henri Nestle, the company has been focused on nutrition and has invested quite a lot in research on ways to improve the nutritional value of its products. As a matter of fact Nestle operates the world’s largest nutrition based science research unit which is situated in Lausanne Switzerland. Its strategies are guided by three main steps; discovering what customers, spotting causes of change and acting on the changes in the market place an art that was perfected during Brabeck’s reign through restricting of the research and development department ( Bell & Shelman, 2009).
Having this in mind any alternative strategy should be more than product development and brand customization which Nestle are specialists in (Bell & Shelman, 2009). The company states that its strategy in emerging markets is ‘Customization rather than globalization.’ The company can however build on their strength which is nutrition which reflects on good health to reach to new financial heights. The company may have invested a lot in nutrition and research but is this reflected on its advertisement campaigns? This is a strategy that will definitely fit in the Nestle Model which aims at a 5-6% annual organic growth (Jones, 2012).
The media is filled with information and lessons on how to stay healthy, how to eat, what to eat, what exercises to take and much more health related information. Nestle being a product that has been in the market for a long time and this comes with a lot of trust. Nestle can therefore use this competitive advantage as a tool for improving their sales. In SWOT analysis done by most researchers, among the company’s opportunities is an opportunity to make a positive impact on people’s health. The current trend of healthy living is therefore a major opportunity for Nestle to exploit.
Nestle needs to come up with a health campaign that will not only expand its market penetration but also develop its brand name. There have been great success stories throughout the history of advertising but most of them were developed in a neutral market. However in this case the market is in an apprehensive mood and what a better way to sell than giving the consumers just what they want; the information and the product all in one package. Through its vast research resources Nestle can customize its product for the various markets and target audience but all under the context of healthy living. Such a campaign should have a substantive impact on the growth of the company as an entity and not the various brands.
The company’s other alternative strategy is to focus its growth in emerging markets. This is a strategy that has been adopted by many companies that want to expand their revenue. The logistics both in the economy and population all favor the sales of the company. The company however should have a different approach in the implementation of their programs in this market. For effective implementation, there need to be research, development & customization, evaluation & re-evaluation and mergers and partnerships. The company whose motto in emerging economies is customization rather than globalization through their research they can always have a competitive edge over the local companies which may not have the expertise. The level of inequality in terms of income however may slow down the impact to limited growth in the short run but as the economies mature much more revenues are to be expected.
The future of Nestle is actually brighter than most analysis may view it. The company is focusing on local production, innovation and improving health credentials of its products. In a recent interview, Nestlé’s CEO Paul Bulcke indicated that one of its future strategies has almost been actualized since 95% of its products are produced locally (Quinn, 2013). He went further and defended the company’s acquisition of Kraft Foods pizza business in North America which may have had a negative impact on the companies endeavor to produce healthy products. He argued that Nestle was only promoting their customers ‘lifestyle’ by making their food healthier (2013).
The local manufacturing of Nestlé’s products maybe the strategy that will make a cut above all its competitors in the near future. In its introduction to China in 1987, Nestle faced lots of challenges especially in transportation but today the coffee business is booming with the coffee consumption rate increasing at 25% to 30% which is 10 times more than the average world growth rate (Hong, 2013). This is the strategy that Nestle ought to stick to. The emerging economies will soon be no longer be third world countries, the spending power will rise offering a ready market to Nestle. What Nestle should therefore be focusing on is customization of high end market products. Products that the emerging generation of young and rich will be in a position to identify with, as was the case with Starbucks in China (Hong, 2013). In an Analysis done by Derek Abell on how some Multinational organizations view the future, one of Nestlé’s managers stated that having a competitive advantage for over a year is by sheer luck (1993). Therefore if Nestle have to take advantage of their position, their actions have to be swift.
Strategy implementation is the most crucial part of any project, however good it may seem on paper if it cannot be implemented then it is just an idea. Various actions are required for a successful implementation; however they are subject to the overall organizational factors such as management system, culture, structure and leadership (Abell, 1993). Implementation is actually at the heart of the strategy; all actions are based on their level of applicability.
Nestlé’s strategy implementation process is usually a complex affair regarding on its magnitude. This is because of the regional administrative structure which makes the approval of the strategy quite a process. The process involves a big percentage of the departmental heads that actually facilitate the process by communicating the expected changes and adjustment when the strategy is implemented. Communication is however most effective when it’s done through broad participation in the planning process itself (Abell, 1993). This makes the staff feel that they are part of the process and are part and parcel of the change. However in cases where participation in the strategy formulation process is either undesirable or impossible, clear information should be given and all members involved in implementation should have their specific roles in the implementation process (Abell, 1993).
It should not escape the implementers’ minds that the impact of the strategy will not only be felt within the organization. The strategy is subject not only to the company’s objectives but also to the company’s environmental responsibilities, values and principles. For instance a strategy that is aimed at developing a specific product it should follow Nestlé’s long standing principle of meeting consumer’s needs for nutrition, enjoyment and quality they can trust. Nestles key strategy is customization and branding. In each of its main markets, Nestle has customized each of its coffee and tea, ice cream, bottled water, breakfast cereals, milkshakes & other beverages and chocolate & confectionery and frozen foods products thus giving it a unique edge in each market. The differentiation of the products has made the responsibilities of each department in the local factory distinct.
Nestle being a manufacturing company; each strategy that is implemented involves a long process of planning and endless estimates. The budgeted expenses in the manufacturing process, the budgeted increase in input requirement and the estimated revenue are all essential components of the strategy. However what is more important are the resources. The enterprise is the heart of the strategy since it is the risk bearing that is associated with the business. The enterprise in this are the shareholders however they have placed their trust on the managers who are involved in the day to day running of the company and therefore responsible for approval or disapproval of such strategies.
Land forms the second most important resource in implementation of Nestle strategy is land. Being dependent on agricultural inputs, lack of land can be nightmare for Nestle. Since most strategies are focused towards increasing the market share of Nestle and as a result increased output, the demand for input rises automatically. Cocoa which forms a major part of its inputs is a plant that needs land to be grown on. An interesting factor to note is that Ivory Coast is a crucial part of Nestle activities as it produces 40% of the world’s total cocoa output.
Labor is the other very crucial resource of the strategy implementation. The importance of labor is in all the sectors and processes of strategy implementation. Labor is very crucial in the growing of cocoa which depends on manual labor in West Africa, South America and South East Asia. In the manufacturing process labor is very crucial all the way from the transportation of input to plant, monitoring the manufacturing process, quality check at the end of manufacturing and marketing of the product.
Taking an example of the production of new product or renovation as our strategy, we shall analyze the process involved identifying the resources involved. The first process involves research and development. This may be research from consumer feedback or a product of sheer innovation and creativity of the employees. The department provides the factory with a clear brief of the product which includes all the fine details from salt, fat levels and final price range. In this process enterprise in form of research money and labour are involved. The second process will be creation of samples and tasting. In this case only labor is used. This process is followed by feedback and observations are given culminating in fine tuning of the product after interactive discussions. This also involves labor alone. The final step which is sign off then follows. In this case the factory will produce about 1 tonne of the new product as sample. This involves labor, enterprise and land.
The world economic waters have been harsh in the recent past. Since the recession most economies have been slow to recover a factor that has led to a reduced purchasing power which has been reflected on low revenues for most organization. Nestle has not been spared either, experiencing sluggish growth in revenue in most cases below the estimates. This has prompted the company to come up with a short-term plan to counter the economic sluggishness as well be a step further from its competitors. This was done through price cutting.
In short term targets which are usually either a year or half a year, Nestle decided to reduce the prices of its emerging markets which account for 45% of Nestle sales. This was a strategy to increase the quantity of sales that will result to increased revenue. Moreover, this strategy has given Nestle an edge over its main competitors who are Danone and Unilever. This strategy resulted to sales growth increasing from 8.2% to 8.8%. Though the growth might have been seen as small, European head of Nestle noted that the company was still growing an economy that is not growing (Koltrowitz, 2013). At the end of the financial year, an average of sales from each region is calculated then compared to the long-term growth objective of 5 to 6% growth in the next 10 years.
‘Good food, good life’ is the motto of Nestle a Swiss company whose global vision is to be the leading health, wellness and nutritional company in the world. A company that sales are not at the top of each agenda but health, nutrition and wellness are the backbone of the company. Guided by its principle of customization rather than globalization, Nestle has made strides in emerging markets and has created a brand name for itself. The strategic analysis of the company has proved that there is still a lot of potential both in the short and long-term and potential is there to be exploited. I believe that if the company implements the stated strategies not only will its fortunes increase but it will also have more competitive advantages over its competitors.
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