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1. External Environmental Analysis

  • Political: Since Nestle works across various countries, the company can be susceptible to variations in the political environments in those countries. Factors like international trade policies, government regulations and taxation systems can directly impact its global operations (Lund et al., 2020). For its uninterrupted supply chain and continuity of business the company needs political stability.
  • Economic: The performance of the company is closely related to the economic conditions. Factors like inflation, exchange rates and income levels of the consumers can impact profitability of the business. Downturns in the economy can limit consumer spending and therefore the economic performance of Nestle (Mariadas et al., 2021).
  • Social: There is a changing preference of customers towards the products which affects the product portfolio of Nestle. With customers becoming environmentally and health conscious, there is an increasing demand for healthier and environmentally sustainable food options (Santos, 2023). This prompts the company to align itself with these trends like organic food options.
  • Technological: In the food industry, innovation plays an important part.Technological advancements directly impact manufacturing processes as well as the distribution and packaging of products. Furthermore, the use of digital technologies such as digital advertising allows better engagement with customers and promotes marketing success (Ihinmoyan, 2022).
  • Legal: It is important for Nestle to comply with both international region legal regulations.This includes regulations on labeling, food safety, product quality and human resources. Protection of intellectual property is crucial for the brand as well (Chung et al., 2020).
  • Environmental: For Nestle sustainability is an important aspect as the increasing concern about environmental problems have demanded the materials being responsibly sourced, energy to be used more optimally and work towards reducing packaging waste. Inability to address these concerns can tarnish the reputation of the brand (Sathyan & SN, 2021).

2. Internal Environmental Analysis

2.1 Value chain:

Primary activities:

  • Inbound logistics: The company has a global network of suppliers which allows the raw materials to be steadily supplied which is supported by effective management of supply chain and logistics. This minimizes disruptions in production (Sultana, 2019).
  • Operations: the company has a strong focus on quality and efficiency of operations. To ensure this it has strict quality control measures to promote consistency and continuous quality improvement (Sawer, 2021).
  • Outbound logistics: The network of distribution is also highly extensive that spans across the globe allowing the company to reach out to the global customer base. The distribution is timely and efficient to ensure its availability in the market (Sawer, 2021).
  • Sales and marketing: Strong investments are made by Nestle towards its advertising and marketing activities. This ensures a strong presence of the brand in the market and engagement with the customers which promotes sales. It also adapts its marketing to the regional trends to attract customers (Wang et al., 2023).
  • Services: The company also values the importance of customer service and addressing customer feedback and grievances in a quick and responsive manner to gain loyalty of the customers (Cheng et al., 2023).

Supporting activities:

  • Infrastructure: The international presence of the brand is supported by its strong infrastructure that includes a network of research systems, manufacturing units and investment in information technology network systems (Ohwo, 2020).
  • Human resources: The brand values its human resources as one of the most important resources that supports the brand’s success. It invests in development of the best workforce talent and retains them to promote innovative ideas in the development of products (Gupta & Sharma, 2019).
  • Technology development: Innovation is considered to be an important factor that helps in the success of the brand and therefore it constantly invests in research and development to continuously improve its products and packaging as per customer and market demands (Ihinmoyan, 2022).
  • Procurement: Sustainable sourcing is a cornerstone of Nestle. It works closely with the suppliers to ensure procurement being done in an ethical and responsible manner (Basfore, 2022).

2.2 Dynamic capabilities:

  • Positions: The position of the brand includes both the intangible and tangible positions. The intangible position is supported by the organizationals skills, knowhow and knowledge that allows it to adapt strategic and sustainable practices for competitive advantage. The tangible position is supported by the efficiency of the human resource, strong relations with suppliers, the quality of products and diverse inventory that meet customer and market needs. This adds to the value creation of the brand (Pereire et al., 2015).
  • Process: The standards practices and operations routes used by the brand allows it to adapt the best practice in the management and industry as a result of which it can continuously develop, integrate, adapt and reconfigure its operations and resource use as per the needs of the market. This adds to the competitive advantage and value creation (Galli & Vousvouras, 2020).
  • Path: The company has a strong focus on the enhancement of the learning and work experience of its employees and the purchase experience of the customers. This factor acts as a core competency for Nestle that attracts loyalty from employees and customers which is the dynamic capability of the brand (Akpoviroro et al., 2019).

2.3 Ulrich and VRIO:

Ulrich Model

  • Strategist: The human resource plays an important role in shaping and developing the business strategy of Nestle. The HR works closely with Upper Management to ensure alignment of the HR practices and policies with mission and vision of the company such as Green recruitment and Green HR. They ensure optimal planning and management of talent and development of the organization (Olorounisola et al., 2022).
  • Executor: Being a dynamic organization, the company depends on the HR to promote and execute change throughout the organization. The HR acts as catalyst for managing initiatives of change for betterment and thereby allows Nestle to quickly adapt to changes in the market and customer expectations (Muntahana, 2021).
  • Talent manager: The HR of Nestle manages the talent force of the workforce to ensure that the organization has screening and access to the best talents and retains them for long term benefit of the company. This reduces recruitment risks (Aurthe, 2020). This allows the organization to maintain focus on the main operations.
  • Human capital developer: The HR also ensures the wellbeing of the employees and works towards the maintenance of a positive culture that values feedback of the employees, addresses their concerns and improves and stimulates engagement of employees with the organization (Mumtahana, 2021).

VRIO

  • Valuable: The capabilities and resources of Nestle are strategically positioned to constantly enhance the effectiveness and efficiency of its operations thereby adding value for the business (Lanzolla & Markides, 2021).
  • Rare: Even though the products of the brand can be imitated by the competitors of Nestle, the number of organizations that possess the necessary resources to create similar products is very limited due to the uniqueness of Nestle's procurement, supply relation, production process and packaging. This adds to the rarity of the brand's resources (Bren et al. 2016).
  • Imitable: Nestle has a very unique brand history and social engagement which cannot be imitated by its competitors (Lanzolla & Markides, 2021).
  • Organization specific: The resources are highly specific and tailored to organization needs therefore there is no strategic equivalent of those resources in the market which makes the resources both rare and valuable (Lanzolla & Markides, 2021).

3. Strategic Analysis

3.1 Business level strategy:

Generic strategy

Nestle primarily uses a Cost Leadership strategy where it optimizes its supply chain and production process to be done at a lower cost. This allows the brand to offer its products at a competitive price and still maintain its profit margin (Akpoviroro et al., 2019). It also utilizes the Differentiation strategy as it constantly diversifies its product portfolio and uses innovative ideas to improve its products. It allows the brand to introduce unique products in the market to address the diverse and evolving needs and expectations of the customers (Jalaludeen, 2022). Combining these two approaches Nestle maintains a competitive advantage in the market by reaching out to a large number of customers and maintaining its profitability. 

Strategic clock

Nestle can be seen to use a Hybrid strategy (of strategic clock) where it offers its products that have a higher perceived value compared to its competitors. This allows the products to be priced at a higher rate while maintaining its cost efficiency. This helps to avoid a higher price premium and is aligned with a Hybrid strategy for maintaining business advantage. This Hybrid strategy allows Nestle to provide a diverse range of high quality products that can justify a high pricing in some segments while being competitive in other segments (Eric et al., 2022).

Balance scorecard

  • Financial: The company places a strong emphasis on maintaining cost control while offering high quality products to ensure profitability and financial health (Akpoviroro et al., 2019).
  • Customer: The company fosters customer loyalty and therefore maintains its market share by addressing the diverse and evolving needs of the customers through a wide range of products (Kee et al., 2021).
  • Internal process: The company ensures and maintains sustainable sourcing, innovative practices and operational efficiency to constantly improve the quality of products and its production process (Myers, 2020).
  • Learning and growth: Continuous technological innovations and employee development practices helps the company to quickly adapt to market changes and changes in customer expectations (Reza, 2020).

3.2 Corporate level strategy:

BCG Matrix

Different products can be categorized in different quadrants of the BCG Matrix for Nestle. Example, Milo, failed to have a significant impact in the market and had low market growth and market share and therefore can be placed in the Dog quadrant. The mineral water and Coffee falls under the Star quadrant as it has high market share and high growth. Products like Maggi (Cash Cows) have a very strong position in the market and high customer loyalty therefore creating a strong market share but low potential for further growth. The confectionery and chocolate falls in the Question Mark category as their market share is relatively small (Business Mavericks, 2021).

Ansoff Matrix

Nestle uses a combination of Market Penetration and Product development strategy as identified on the Ansoff Matrix. As a part of the market penetration strategy, the company constantly increases its market share and line of product (in terms of variety and size), offers discounts, to increase its sales supported by innovative approaches in marketing and distribution (Bakare & Rahim, 2023). As a part of the Product development strategy, the company continuously develops new product lines and diversifies into new market segments like health focuses and organic products. It allows the brand to explore new product lines to increase growth in existing markets (Leliga et al., 2019).

Parenting Strategy

Nestle utilizes a strategic synergistic approach of parenting that involves looking for collaboration opportunities in an active manner and creating synergy across its portfolio of related brands. The brand focuses on the value of sharing knowledge, adopting best practices and efficiently allocating resources to maximize efficiency in operations and innovative ideas. The organization also leverages the advantages from its individual brands to develop a holistic competitive advantage within the market. Even though the individual brands maintain a certain degree of independence, the approach of strategic synergy helps to align the goal of each brand to the vision and mission of the company by developing a collective expertise and capability and maintain the position as a leader in the industry (Santos, 2023). 

4. Organization Structure

7s framework

  • Strategy: The organization uses the strategy of creating a diverse range of products that tends to the needs of diverse customers across the world in terms of beverage, food and health products (Kee et al., 2021).
  • Structure: A matrix structure is used by the organization which combines the geographical regions with product division to promote both local responsiveness and global coordination (Jia & Jia, 2020).
  • Systems: A sophisticated system of communication and knowledge sharing is used to promote coordinated decision making throughout its operations (Putri & Triyono, 2020).
  • Skills: The workforce is maintained at a diverse and high level of skills through strong training programs which empowers its employees to adapt to the changing market needs and customer demands (Oyedele, 2019).
  • Staff: The organization has a global workforce that works under a unified culture of customer centricity, sustainable mindset and innovation (Gupta & Sharma, 2019).
  • Style: The style of leadership used in Nestle promotes adaptability, innovation and inclusive culture where collaboration and customer centricity are valued (Benji, 2020).
  • Shared value: The core values of the company ensures customer satisfaction, responsibility and quality (Kee et al., 2021).

Change Kaleidoscope

  • Power: As a global brand, Nestle holds significant power within the industry which allows it to create changes in the market (Haldar & Damodaran, 2022).
  • Time: The brand ensures timely response to changes in market dynamics and customer demands to ensure continued success in the market and thereby ensure change management being timely (Zhai, 2022).
  • Scope: A comprehensive scope of change is maintained that involves various aspects like digital transformation, sustainability practices and product innovation for a holistic change (Eric et al., 2022).
  • Preservation: The brand values the importance of change while preserving organizational knowledge, heritage, history and reputation in its change management approaches (Chouthoy & Kazi, 2019).
  • Diversity: Nestle navigates a diverse market while adapting its operations and products to the market needs in various segments. It also maintains a diverse workforce and optimizes its decision making process (Omoyele & Olabisi, 2020).
  • Capability: Nestle continuously develops its organizational abilities to manage and implement various change initiatives across its global operations using continuous development and quality improvement framework.operations (Agotse, 2021).
  • Capacity: The organization always ensures optimal capacity to implement change through its diverse operations (Agotse, 2021).
  • Readiness: The brand also mentors its workforce in a proactive manner to enhance their readiness to change and overcome change readiness and thus facilitate the process of change management and implementation (Iskandar, 2021).

5. Strategy Formulation

5.1 Short term Strategy:

The short term strategy is to continuously improve the product lines in a manner that can help to meet the changing needs of the consumers and excite the preferences of the consumers. It involves balancing the company’s pursuit for financial development through optimal resource allocation, operational efficiency and rapid innovation (Nestle, 2023).

5.2 Mid-term Strategy:

The Mid term strategy of the company is to create value using a continuous focus on executional excellence, operational agility and customer satisfaction which inturn helps to achieve the long term values. This strategy ensures that the products are always right for the planet and are considered desirable while promoting the growth in business (Nestle, 2023). 

5.3 Long term Strategy:

The long term strategy of Nestle is to create value for the society and the shareholders. The long term strategic goals ensure that the brand is always able to deliver performance in a sustainable and consistent manner. The strategy is to create a positive change in the lives of the people, their pets while protecting and improving their environment by creating value for all stakeholders (Nestle, 2023). 

7. Appendix

7.1 Value Chain Analysis

Value Chain Analysis

Fig: Value chain analysis

(Source: Gandhi and Jain, 2011)

7.2 Dynamic Capabilities

Dynamic Capabilities

Fig: Dynamic Capabilities

(Source: Pereire et al., 2015)

7.3 Smallwood Ulrich Framework

Smallwood Ulrich Framework

Fig: Small Ulrich Framework

(Source: Sombongse and Tungkasmit, 2022)

7.4 VRIO framework

VRIO framework

Fig: VRIO Framework

Source: Bren et al. (2016)

7.5 BCG matrix

BCG matrix

Fig: BCG Matrix

Source: Mohajan (2015)

7.6 Ansoff matrix

Ansoff matrix

Fig: Ansoff Matrix

(Source: Chetty, 2020)

7.7 7s Framework

 Framework

Fig. 7s Framework

(Source: Hansenne and Hibner, 2023)

7.8 Change Kaleidoscope

Change Kaleidoscope

Fig: Change Kaleidoscope Model

7.9 Rockwell’s Balance Scorecard

Rockwell’s Balance Scorecard

Fig: Balanced scorecard

(Source: Yacob et al., 2016)

7.10 Generic Strategy

Generic Strategy

Fig: Porter’s Generic Strategies

(Source: Subrahmanyam and Azad 2019)

7.11 Parenting Strategy

Parenting Strategy

Fig: Parenting strategy

(Source: Beckman, 2016)

7.12 Strategic Clock

Strategic Clock

Fig: Bowman’s strategic clock

 (Source: Chauke, 2021)

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