Nestlé in 2008

Presented by:

Group U2

Content

Vision History of Nestlé Product Line SWOT Analysis PESTLE Analysis Porter’s Five Forces Problems Porter’s Generic

Strategy Nestlé’s Differentiation

Strategy

How did Nestlé Achieve Differentiation?

Value Chain and Differentiation

Sustaining Differentiation

Anshoff’s Matrix Profit Margin Operating Margins Revenue in 2007 Problem Resolution

To become the world’s recognized leader in nutrition,

health and wellness

Nestlé’s brands and products are the focus of continual innovation and renovation so that they meet and exceed our consumers' expectations. We seek to ensure that our products are available whenever, wherever and however

our consumers want them.

Vision and Mission

1867

• Nestlé was founded by Henri Nestlé in Vevey, Switzerland

• Nestlé's first product was Farine Lactée Nestlé

1905

• Nestlé merged with Anglo-Swiss Condensed Milk Company. This merger grew rapidly through other mergers, geographical expansions and product diversification

1900s

• Nestlé's operations spread across to United States, Britain, Germany, Spain, Australia. Manufacturing began in Australia, with warehouses across Hong Kong and Bombay

History of Nestlé

1920

• Establishment of Nestlé's first factory in  Brazil, leading to entry into the Latin American market.

1937

• Nescafé was invented, which revolutionized coffee drinking around the globe

1947

• Nestlé merged with Maggi, which led it's entry into the ready-made food market.

History of Nestlé

1974

• Nestlé expanded into markets beyond food by buying 25% stake in L'Oréal.

1977

• Acquired Alcon Laboratories to enter ophthalmology pharmaceutical market

1985

• $3 billion takeover of American food giant Carnation

History of Nestlé

2001

• Nestlé acquired Ralston Purina to enter pet foods market.

2006

• Nestlé entered the area of weight management by acquiring Jenny Craig.

2007

• Acquired Novartis Medical Nutrition• Acquired Novartis’ Gerber baby food business. • Strengthening position in healthcare, infant nutrition.

History of Nestlé

Powdered and liquid beverage Milk products and ice-cream Prepared food and cooking aids Pet care Pharmaceuticals Nestlé Waters Nestlé Nutrition

Product Line

SWOT Analysis

STRENGTHS:- Largest food & beverage co. Nestlé’s organization structure was

decentralized and flat - strong, local market team

Low manager turnover Strategic acquisitions Strong R&D dept, that not only

“renovates” existing products, but “innovates” new products -5000 scientists and technologists in top universities, research establishments and private firms

Revolutionary leaders like Helmut Maucher and P. Brabeck

GLOBE – Global Business Excellence – information system

Specialized products targeting specific customers

Health and wellness products Nutrigenomics

WEAKNESSES:- Being complacent Low inorganic growth

SWOT Analysis

OPPORTUNITIES:- Growth of health,

nutrition and wellness industry

Emerging markets Out-of-home

consumption Premiumization Opening coffee

chains and chocolate shops across nations

THREATS:- Getting involved in

lawsuits

Political/Legal trends:-Rise in Globalization Sociocultural trends: The world people care more about

their health, especially with foods and beverages. Technological trends:-

Use of latest technology( in researching, producing) Try to find new way of create new product Improve the quality of products (like 60/40

benchmarking) Global trends:-Improve operational efficiency by

integrating the company’s businesses on a global scale.

PESTLE Analysis

Intensity of Rivalry

(Unfavorable)

New Entrants

(Favorable)

Buyers (Favorable

)

Substitutes

(Favorable)

Suppliers (Favorable

)

Porter’s Five Forces for Nestle vis-a-vis the food industry

Increase in the prices of basic agricultural

commodities Local-Global balance Disinvestments Acquisitions

Problems

Porter’s Generic Strategy

15

Competitive AdvantageLower Cost Differentiation

Competitive Scope

BroadTarget

Cost Leadership (Unilever)

Differentiation(Nestlé, Kraft)

NarrowTarget

Cost Focus(General Mills)

Differentiation Focus(Group Danone)

Broad Differentiation Strategy created by targeting

consumers who want health, nutrition and wellness Under Brabeck, Nestle changed from a cost leader

strategy to a differentiation strategy   (transition from food and beverage company to a nutrition, health and wellness company)'Division of nutrition' was created that reported directly to the CEOAcquisitions of Jenny Craig(US chain of weight loss centers), Novartis Medical Nutrition(healthcare nutrition), Novartis Gerber (baby foods)

Nestlé’s Differentiation

Strategy

How did Nestlé Achieve

Differentiation? • Nestle bought from local

markets rather than world markets

Price Differentiatio

n

• Nestle provided a unique blend of taste and nutrition

• Huge Product and Brand Portfolio

Product Differentiatio

n

Value Chain and Differentiation

Firm infrastructure – top mgmt support in sales, GLOBE MIS

HR- Strong culture shared by Employees

Technology development- 1.75% of revenues on R&D, NRC

Procurement -Long term relations with supplier

Inbound

Half of factories in developing countries,60/40 &60/40+ benchmark

Out-bound logistics

Marketing – Positioned as Healthy, and Nutritious

Inter-relations : JV with General Mills for cereals

M A R G I N S

Sustaining Differentiation

Technical superiorit

y

• CHF 1.88 billion invested in R&D and out of which 60% to support food, nutrition and wellness

Product

quality

• Provided quality products with help of localization

Shared

value

• Added value to society and Nestle with the philosophy of  'shared value'

New product innovatio

n

• Nestle replaced salt, sugar and fat with whole grains, calcium and antioxidants

Value

delivery

• Providing a healthier profile of products

Anshoff’s Matrix

Market Penetration

Product Development

Market Development

Diversification (Nestle)

Profit Margin

Nestle Kraft

General MillsUnilever

Groupe Danone

0

2

4

6

8

10

12

14

Profit Margin [ in % ]

Profit Margin [ in % ]

Operating Margins

Nestle Kraft

General MillsUnilever

Groupe Danone

0

2

4

6

8

10

12

14

16

18

Operating Margins[ in %]

Operating Margins[ in %]

Revenue in 2007

Nestle Kraft General Mills Unilever Groupe Danone0

10

20

30

40

50

60

70

80

90

Revenue in $ bil

Revenue in $ bil

Problem Resolution

Acquire strategic players like Groupe Danone(before Kraft or Unilever) which can increase differentiation. Moreover, Nestle is good in developing people from acquisitions. Moreover, EBIT and inorganic growth are directly related.

Increase the use of GLOBE IS so that best practices could be shared

Divest in loss-making business units