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Company Introduction:
Nestle is one of the
worlds largest and most known companies
. It is a Swiss companywith its headquarters located in Vevey, Switzerland. The company was
inaugurated in1866 (Nestle 2012) and since its inception has grown through leaps and bounds to
become the worlds lar
gest food and nutrition company (Cnn money 2011).

Thecompany is also a major stakeholder in

the cosmetic company, LOreal.
For a company to start from a small domestic town and then expand internationally,
thestrategic vision of the company plays a central and key role. The subsequent chapters
shall discuss the companys internal goals and strategy and how that strategy paves
way for Nestle to build its competitive advantage in all the markets it operates in.
Vision and Values:
The vision of Nestle reflects ideas of fairness, honesty and long-term thinking. These
ideas are reflected in the companys corporate business principles that have shape
d thecompany culture and strategy for the past nearly 140 years. The core values that the
company has are its people, the quality of its people and brand, the companys brandportfolio,
their consumers, their customers and the companys sustainable perfor
mance.(Nestle, 2012)

Company Objectives:
The main objective of Nestle can be appropriately summed up by the phrase CreatingShared
Value (Nes
tle, 2012) This principle at Nestle can be described as having aconviction to build long term and
beneficial relationships with their stakeholders, complywith all legal requirements and ensure all
activities that the business undertakes aresustainable and result in value creation for both the
company and the society at large.

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A strategy that the company has developed to mark their achievements is that the
ywould like to become the benchmark of (Nestle,
2012) 1. Nutrition, Health and Wellness2. Sustainable Financial Performance3. Trust by all sta
keholders.In order to achieve these benchmarks Nestle underwent heavy expenditure in
Researchand Development and relies greatly on new research and innovation, both in terms
offood production and processes

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1990), as well as ensuring that all the edible products meet the health standards as setby the
government of the United Kingdom.
Legal:
With regards to the legal situation of United Kingdom the company needs to payattention to
various kinds of laws that are prevalent. These include health and safetylaws, consumer laws,
and employee laws as well discrimination laws. For operationswithin the united Kingdom it is
essential for companies to not only align their processeswith the legal standing of the
government but also their management style andorganizational culture to ensure that all
employees are treated equally and fairly, thereare no reported cases of harassment of any kind
and that the products have a healthand safety assurance otherwise the company is liable to be
sued.
SWOT Analysis:
The swot Analysis is part of a strategic planning process for small and medium
sizedorganizations mostly (Houben, 1999). The analysis measures the company on twofronts;
internal and external. In the internal area the strengths of the business and theweaknesses it
posses in its own operations are analyzed while in the external analysis,the opportunities and
threats faced by the business in its macro environment areanalyzed.
Strengths:
One of the biggest strengths of Nestle is the brand image that it has. Itsbrands such as Kitkat,
Nescafe, Nesquick are almost synonymous with the brand name.The company also has the
heavy financial muscle to invest in its research anddevelopment which can further enhance its
product line as well as invest in marketing. Italso has a very strong global presence both in terms
of production capacities as well asmarket share.
Weaknesses:
One weakness of the company is that it has had to recall many of itsproducts due to bad quality
and that has greatly hampered its brand image. For acompany as big as Nestle the customers

do not expect such a dangerous mistake to bemade especially since it operates in the food
industry. The company also is the target of

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being boycotted because of media pressures and environmentalists for engaging innon-green
practices and usage of child labor (ILRF, 2005).
Opportunities
: The fact that Nestle has gone from being merely a food brand to beingnutrition and well being
brand is a good opportunity for the company as it opens manynew areas for product line
extension. Entering into emerging markets and establishingmanufacturing plants also helps the
company in reducing its costs.
Threats:
The food industry is probably one of the most saturated industries in theworld. Keeping this in
mind Nestle faces the very strong threat of competition. Thiscompetition can emerge both from
international brands as well as local brands of themarket in which Nestle enters and tries to
operate. The rising prices of raw materials,fuel as well as the political instability in many third
world countries where nestle has setup their production plants also threatens to cause
unreliability in the supply line (Lin,2007).
Porters 5 forces:
Michael Porter (1979) gave a framework by virtue of which the competitive advantage
ofcompanies can be assessed in the market in which they operate in. The frameworkincludes an
analysis of five concurrent forces that affect a business' ability to compete(Michael Porter
1979).Keeping in mind the global market in which Nestle operates in, the Porters five
forcesanalysis will be carried out keeping a general view of the entire world as the
potentialmarket for Nestle.
Threat of New Entrants:
Nestle despite being in a food and nutrition industry faces theserious threat of new entrants in
the market. Weather this threat is domestic or frominternational firms, it exists because it is an
industry where the barriers to entry are verylow. If we discuss Nestle in India for example there
are low barriers to entry and manysmall domestic players can enter the market and challenge
the market of nestle throughtheir pricing or product offering which is tailored to the local culture
and tastes.

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Bargaining Power of Suppliers
: The bargaining power of suppliers of Nestle is verylow especially in regions where the countries
are economically backwards such asPakistan or Bangladesh. That is because Nestle being such a
giant in the market hasthe ability to bring lots of new business to the suppliers and therefore the

suppliers haveto produce the raw materials according to the outlines set by the company or they
canbe replaced.
Bargaining Power of consumers:
The bargaining power of the customers of Nestle ishigh. That is because it is a brand which
greatly relies on consumer appreciation for theproduct. If a product is launched in any part of the
world where the consumers do notlike the taste, they will refuse to buy it. Similarly in third world
countries the consumerbase is very price sensitive. This raises their bargaining power if Nestle
wants topenetrate, then it will have to reduce its prices to their affordability level.
Threat of Substitutes:
Threat of substitutes for Nestle is also very high. In all areas ofits operations there are multiple
other firms that are offering either similar products orsubstitute products. For this purpose
Nestle has to ensure that it offers a productexperience that cannot be imitated and is
demanded by its consumers.
Industry Rivalry:
Industry rivalry for Nestle is very high in no matter what part of theworld it operates in. In United
Kingdom it faces threat of competition from brands likeKellogs, in India it faces competition from
local brands and brands such as Knorr whichare starting to venture into the food industry

Value Chain Analysis

:
A value chain analysis is a specific set of activities that are linked together and
throughtheir use the firm can produce a competitive advantage for itself. This value
chainanalysis was also developed by Michael Porter and can be summed up by the
followingrepresentation (Porter, 1985):If we conduct the value chain analysis for Nestle we can
see that it has a very goodsupply chain and integration of all operational business units
otherwise it would be verydifficult for the company to achieve global dominance. The inbound
logistics includewarehousing and inventory control. In Nestle it is a computerized and
automatedsystem of inventory control that is different for each country. This is why the supply
ofNestle products is hardly ever scarce in the market. The operations of nestle are verysuccessful
as they transform a lot of raw material into very nutritional products andcreate value for their
customers. Outbound logistics is the process by which finishedgoods are transferred to the
sellers. For this purpose Nestle has started to set updistribution channels in each country where
its production plant is set up so ensuretimely delivery. Marketing and Sales of nestle help in
creating the brand that Nestle hasevolved into today. The service area is that which responds to
concerns and after saleservice and Nestle tries its best to provide good customer service to any
customers thatmay be dissatisfied by the product (Bonn, I. 2001).
InboundLogisticsOperationsOutboundLogisticsMarketing& SalesService

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Recommendation:

Nestle has a very established setup of both its operations and marketing. What thecompany
should however invest in is building its public image as a corporatelyresponsible company as
well. As it has already been pointed out above Nestle is one ofthe wor
lds most boycotted companies because of a certain perception that it commits
corporate crimes when coming to environmental practices. The company needs tomake sure
that that particular image is altered. Also, the products of Nestle which arenot doing so well in
certain markets should be pulled out rather than constantlyspending more on them to turn their
value around. Some products are difficult to sailbecause of the culture of the market that Nestle
operates in and therefore should beavoided to ensure sunk costs do not occur.
Evaluation & Conclusion:
In conclusion it is safe to say that Nestle has a lot of positive attributes backing its largerthan life
product portfolio and therefore the company has managed to sustain itsposition in the list of the
fortune five hundred companies. The company through the useof efficient management
procedures, innovation, capital infusion and research anddevelopment continues to expand its
portfolio and also serves as an example of not justa an exceptional food and nutrition providing
company but also a real multinationalcorporation. There are many lawsuits against the company
and it is also generally
considered to be one of the worlds most boycotted
companies and despite all off thatthe revenues of the company have hardly slumped since its
inception. That is atestament to their value chain creation and streamlined processes that ensure
thatnestle becomes a part of the livelihood of the people of the 130 countries it serves.