Summary of Case
Nestl with headquarters in Vevey, Switzerland was
founded in 1866 by Henri Nestl and is today the world's biggest food and beverage company.
Nestl has around 468 factories, operates in 86
countries around the world, and employs around 330,000 people
An overview is presented on the division of products of
the company which include the history of brand. It also talks about the Gene technology in food production, their business principles, the companys commitment to Africas economy.
SWOT of Food Industry
Strengths Abundant availability of raw material Vast network of manufacturing facilities all over the country Vast domestic market Weaknesses Low availability of adequate infrastructural facilities Lack of adequate quality control & testing methods as per international standards Inefficient supply chain due to a large number of intermediaries High requirement of working capital. Seasonality of raw material
SWOT of Food Industry
Opportunities
Rising income levels and changing consumption patterns Favorable demographic profile and changing lifestyles Integration of development in contemporary technologies such as electronics, bio-technology etc. offer vast scope for rapid improvement and progress Opening of global markets
Threats
Affordability and cultural preferences of fresh food High inventory carrying cost High taxation High packaging cost
SWOT Analysis of Nestle
Strengths
1. Unmatched product and brand portfolio 2. R&D capabilities 3. Distribution channels and geographic presence 4. Competency in mergers and acquisitions 5. Brand reputation valued at $7 billion
Weaknesses
1. Inability to provide consistent quality in food products 2. Weak implementation of CSR
Opportunities
1. Increasing demand for healthier food products 2. Acquiring startups specializing in producing well-being products 3. Establishing new joint ventures
Threats
1. Food contamination 2. Trend towards healthy eating [Link] of private labels 4. Rising raw food prices
Porters Five Force Model
Threat of New Entrants Threat of Substitute Goods Bargaining Power of Suppliers Bargaining Power of Customers Competitive Rivalry within the Industry
Why did nestle follow a variety of strategies of merger and expansion?
List of Mergers and expansions
1905 anglo swiss condensed milk
1947 maggi seasoning
1960 - Crosse and blackwell 1963 findus 1971 libbys 1973 stouffers 1997 san pallegrinos 1998 spillers petfoods 2002 ralston purina 2002 dreyers 2002 chef america
Reasons for merger and expansions
To enter into global markets via brownfield strategy To grab the maximum market share within the industry Focuses on the culture and locality aspects To serve the world in number of products which had
nutritive value
Diversification:
Entering new markets with new products
Related diversification: A process that takes place when a business expands its activities into product lines that are similar to those it currently offers
Unrelated diversification It is a form of diversification when the business adds new or unrelated product lines and penetrates new market
Benefits of Related Diversification
Share assets, skills, or capabilities Combine operations to achieve lower cost Exploiting the well-known brand name Spread investor risks over a broader base
Related Diversification
Baby Milk Products Condensed milk
Chocolates
Coffee Ice - Cream
Unrelated Diversification
Prepared Food Breakfast Cereal
Pharmacy Frozen Food
Mineral water
Main driver of globalization
Cost Drivers,
Government Drivers,
Market Drivers, Competitive Drivers Technological Drivers
Government factors
World War 1
Demand for diary products Government contracts
World War 2
Introduction of Nescaf
LPG MODEL in the 1st half of 1990
Market Drivers
Started with food for babies Operating in US Britain Germany and Spain Merger with Anglo-Swiss condensed milk company I.e.
first merger
Merger with Maggi seasonings and soup, crosse and
Blackwell, findus, Libby's, stouffers.
Acquisition of CARNATION, American food giant
Diversification
Introduction with baby milk products Condensed Milk chocolates Nescaf a coffee drink 29% stake in Loreal Acquiring Alcon laboratories Mineral Water Ice cream business
Technological factors
Gene technology
Why did Nestle concentrate on responsibility to the community ?
Nestle believes in fairness, honesty & general concern for
people. Nestle aims to serve its customers with best quality food products with nutritive element.
Corporate Social Responsibility followed by Nestle
Nutrition Water Rural development
Responsible sourcing
Environmental sustainability Human rights & compliance
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