STRATEGIC MANAGEMENT PROCESS: A Case Study of NESTLE

Presented by:

Swati Singla

Mayank Aggarwal

Himanshu Sabharwal

INTRODUCTION

• Strategic Management is the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance.

• Strategic Management Process of NESTLE is referred to as an illustration.

Model of Strategic Management

NESTLE & Strategic Management Process

• Nestle is a Swiss multinational nutritional and health-related consumer goods company headquartered in Vevey, Switzerland. It is the largest food company in the world measured by revenues.

• Nestlé’s products include baby food, bottled water, breakfast cereals, coffee, confectionary, dairy products, ice cream, pet foods and snacks.

Vision, Mission, Objectives & Goals

• VISION: to meet the various needs of the consumer everyday by marketing and selling foods of a consistently high quality.

• MISSION: they strive to bring consumers foods that are safe, of high quality and provide optimal nutrient to meet physiological needs.

• OBJECTIVE: to deliver the very best quality in everything they do, from primary produce, choices of suppliers and transport, to recipes and packaging materials.

• GOAL:To meet the needs and desires of today’s and tomorrow’s consumers

EXTERNAL ENVIRONMENTAL ANALYSIS

• The general environment is composed of dimensions in broader society that influence an industry and, indirectly, the firms within it.

• They group these dimensions into six environmental segments such as demographic, economic, political, socio-cultural, technological and global.

Porter’s Five Forces Model

• The Porter’s Five Forces Model depicts a competitive, but profitable market for the food processing industry.

• The model notes a moderate threat of new entrants into the market and a substantial threat of substitute goods. In addition, the model shows that Nestlé tends to maintain the upper hand over its suppliers as commodities have exact substitute in the market. And also, their customers have a considerable amount of bargaining power, as Nestlé must adhere to consumer wants and needs because there are so many close substitutes.

Opportunities & ThreatsOpportunities

1.High credibility

2.Potential to expand to smaller towns

3.Improving trends

4.Industry leadership

5.Increase the partnership

6.Product diversity and offerings

Threats1.Highly competitive market

2.Increasing prices of raw materials

3.Strong rival like Kraft, Masterfoods, and Unilever

4.Threat of substitute products

5.Bargaining power of buyers

INTERNAL ANALYSIS

• It discusses the techniques firms can use to identify and evaluate resources and capabilities and the criteria for selecting core competencies from among them.

• It also discusses the value chain concept and examines four criteria to evaluate core competencies that establish a competitive advantage to Nestlé Company.

Resources of NESTLETANGIBLE RESOURCES INTANGIBLE RESOURCES

Financial ResourcesTotal Revenue : CHF 83.64 billion (2011)Operating income : CHF 12.538 billion (2011)Profit : CHF 9.487 billion (2011)Total Equity : CHF 62.60 billion (2010)Total Assets : CHF 111.64 billion (2010)

Human ResourcesApproximately 330,000 people have been employed by Nestlé Company.

Organisational Resources : Nestlé’s governing body is the Annual General Meeting of shareholders. Leading the company is the Chairman of the Board and CEO.The most relevant of Nestlé’s organisational measures were the creation of Product Technology Centres, Local Application Centres and Clusters.

Innovation ResourcesNestlé R&D generates the innovative science and technology needed to build nutritional and health benefits into products offerings Nestlé legendary sensory excellence.

Physical Resources :Coffee, Water, Ice Cream, Baby Food, Healthcare nutrition, Confectionary, Pharmaceuticals

Technological Resources : Nestlé moved from being a technology led company that produced convenient, tasty foods and beverages for sustenance, to being a science driven, health and wellness company.Continual involvement of rapid technological change.

Reputational ResourcesNestlé scientists play their part in communicating the health and wellness benefits of products to consumers.From consumer need into research priorities.From emerging science into consumer benefits and services.

Capabilities of NESTLECapabilities are often based on developing, carrying and exchanging

information and knowledge through the firm’s human capital and also often developed in specific functional areas, such as R&D, marketing, manufacturing, management and so on.

Distribution: Nestlé distribution network ensures that every day more than 100.000 tonnes of products are transported to customers from their factories and distribution centres.

Management Information SystemBy using their research for Information Technology, control all aspects more efficient.

MarketingFamous brand name and efficient strategy to meet the taste of each type of consumers.

Management: The day to day management of Nestlé business is taken care of by Executive Board members composed of company executives and department heads.

Manufacturing: Nestlé produced a probiotic especially for all infant formulas and created and patented a spray drying process, used in manufacturing milk powders and Nescafe was first used to make powdered paint dispersions.

R&D: Nestlé’s is boosting its research and development in Switzerland by extending its Product Technology Centre (PTC) in Konolfingen.

VALUE CHAIN ANALYSIS

SWOT Analysis

• Some markets they are entering are already mature

• Global competitors• Increasing prices of raw

materials• Highly competitive market,

multinational companies are very organized and financially strong

• Well-known company and strong brand name

• Health based on products are becoming more popular in the world, including United States

• Ranked first in nearly all the product segments in which it operated (market leader)

• Less consumer research in few areas.

• Increasing instances of product recalls hampering brand equity

• Entering into markets that are already mature and can give a tough competition to new entrants.

• Have a very long history over 140 years

• Operated factories in 77 countries in all six continents, a truly global company

• Considered the innovation leader in the global food and nutrition sector with 3500 scientists in company R&D network

• Offering thousands of local products, research and development capabilities.

• Have a great CEO, Peter Brabeck and very strong workforce.

StrengthsWeaknesses

ThreatsOpportunities

Alternative Strategies• Long term objectives:

• 5-6% annual organic growth• Continued year-to-year improvement in EBIT

margin • Improved capital management • As well as be consistent with CEO Bulcke's

stated mandates of stressing internal growth as the primary source of future growth, using GLOBE as a vehicle for continuous improvement, and making the health, nutrition and wellness strategy the mainstream of Nestle's business.

Alternative Strategies

Adhere rigidly to Bulcke's basic outline with the 4 Complementary Platforms for growth.

Full support of Nestle's CEO.

Provides a moderate degree of consistency with the previous strategy.

Builds on some of Nestle's major strengths, including its broad product and brand portfolio and its strong international presence. 

Internal growth: forgoes possible benefits accrued through judicious acquisition as acquisitions might be able to counteract weaknesses (health & nutrition) more quickly than internal growth.

Health, nutrition and wellness a mainstream characteristic: many challenges can be faced in key divisions like confectionary, powdered and liquid beverages, ice cream, and many of the prepared foods.

Four complementary growth platforms :not yet proven to be complementary and at face value, seem to be on some levels contradictory

Build greater flexibility into the model, allowing for a slower transition to the company-wide health, nutrition and wellness model, and possibility of modification and/or elimination of one or more of the other three growth platforms (as well as the possible addition of a different growth platform). 

Increasing the potential of meeting growth and profitability goals

Possibility of "discovering" another potential growth platform.

Possibility of speeding growth and/or progress towards the goal of transitioning to the "health and nutrition" model via judicious acquisitions as opposed to a sole reliance on internal growth

CEO Buckle may not give it his full support because it is not fully consistent with his plan

May delay Nestle's progress towards the health and nutrition model

May foster inconsistencies in its business strategies and objectives and create confusion, conflicts and/or contradictions between product areas/business units.

Also provides an opportunity to backaway from health & nutrition model if it proves difficult to execute

Add a program of acquisition and divestiture to Bulcke's

basic model

Acquisition portion: allow for the addition of new resources, including new resources and businesses which may complement existing businesses and lead to synergies

Divestiture strategy: allow Nestle to exit businesses not meeting its overall guidelines and strategic objectives in a way which is likely to contribute favourably to both its financial objectives and its objective of building an integrated health, wellness and nutrition company.

As with alternative #2, this alternative carries the risk of failing

to attract support from core employees as well as the risk that

the CEO will oppose it.

• Recommendations:• NESTLE should combine the alternative #2

and #3 i.e. building flexibility into the strategy overall, slowing the planned transition time for moving to a unified health, wellness and nutrition company, and allowing the firm to focus on its core resources and business opportunities by using the tools of acquisition (adding strength in selected areas and/or counteracting weaknesses in some areas) and divestiture (shedding unprofitable businesses and products, getting rid of businesses which do not fit into the profile of a unified health, wellness and nutrition company.

STRATEGY FORMULATION & IMPLEMENTATION

• This involve a 5 step process (Grant, 1991, p. 115):1.Identifying and classifying Nestle's resources within the three

primary categories of physical capital, human capital, and organizational capital and then do the SWOT analysis.

2.Identify Nestle's capabilities – what can Nestle do more effectively than its key rivals?

3.The strategy team should then appraise the rent-generating potential of resources and capacities.

4.Based on the preceding work, the Nestle strategy team should then select a strategy or collection of strategies which best exploits the firm's resources and capabilities relative to external opportunities.

5. Finally, Nestle strategy managers should identify resource gaps which need to be filled, as well as invest in replenishing, augmenting and upgrading the firm's resource base.

Once this initial assessment/strategy formulation is completed, the strategy team should:

1. Survey and assess the identified resources and capabilities in terms of their level of fit with Nestle's goal of transitioning from a food company to a health, nutrition and wellness company.

2. Target non-producing or inappropriate (those which don't fit with the rest of the portfolio or the strategic objects) for divestiture and develop a timetable and plan for such divestiture.

3.Examine the identified "resource gap" areas and determine if these gaps can be filled through internal development (e.g., R&D, internal growth) and/or strategic acquisition.  If acquisition, begin scanning the environment for likely acquisition targets.

REFERENCES

• Jones, S. (2012). Strategic Management at Nestle.

Retrieved JULY 23, 2015, from http://www.articlesbase.com/management-articles/strategic-management-at-nestle-5907881.html

THANK YOU!!

QUERIES ??