Nestlé concentrates on: - Social class: lower, working, and middle classes - Interests: attract to innovation and health conscious - Attitudes • Behavioural: - Usage rate: Nestlé hol
Establishment history
Nestlé Group, a global leader in the food and beverage industry, operates a vast sales and production network with nearly 500 factories across 86 countries Offering a diverse range of 30,000 products, including soft drinks, baby food, coffee, and dairy items, Nestlé has established itself as a key player in the market Founded in 1866 by Henri Nestlé, the company's headquarters is situated in Vevey, Switzerland.
In the 1860s, Henri Nestlé developed a life-saving infant food for those unable to breastfeed, successfully aiding a premature baby This innovation led to the widespread popularity of Nestlé Farine Lactée, a milk powder that was distributed extensively across Europe and other countries, including Vietnam.
• 1992-1993: La Vie Company was created through a joint venture between Perrier Vittel (a member of the Nestlé Group) and Long An Trading Company
• 1995-1988: Nestlé Vietnam was born and started construction of a factory in Dong Nai
• 2002: Put into operation La Vie's 2nd factory in Hung Yen
• 2009: Expansion of MAGGI production line at Nestlé Dong Nai factory
• 2011-2013: Started construction of Nestlé Tri An Factory specializing in the production of NESCAFÉ and acquired Nestlé Binh An Factory from Gannon
• 2014: Expanding the production line Nestlé MILO
• 2015: Inauguration of the decaffeinated green coffee factory
• 2016-2017: Commencement of construction of Nestlé Bong Sen factory in Hung Yen
Nestlé operates six factories across Vietnam, employing nearly 2,300 individuals With an investment exceeding 600 million USD, the company showcases its long-term commitment to Vietnam's development and aims to enhance the quality of life for Vietnamese families, contributing to a healthier future.
Mission and Vision Statement
Nestlé, the world's premier nutrition, health, and wellness company, is dedicated to its mission of "Good Food, Good Life," which aims to offer consumers the tastiest and most nutritious options across a diverse array of food and beverage categories for every meal occasion, from breakfast to dinner.
Nestlé's vision statement emphasizes its goal to be a top-tier Nutrition, Health, and Wellness Company that enhances shareholder value The company aims to achieve this by being a preferred corporate citizen, employer, supplier, and by offering sought-after products.
Organization culture
Nestlé exemplifies a humane corporate culture by prioritizing the essential nutritional and health needs of individuals This commitment is reflected in the company's leadership principles and management style, which foster a supportive and caring environment for both employees and consumers.
Nestlé's office design embodies the concept of a "bird's nest," drawing inspiration from the company's logo This innovative workspace features numerous meeting rooms and convenient facilities, enhancing service efficiency and providing employees with a comfortable environment for both work and relaxation.
Nestlé has established a competitive salary culture and welfare regime, offering a dynamic compensation system that includes market-aligned salaries, short- and long-term bonuses, as well as additional financial and social benefits for employees.
Nestlé fosters a positive corporate culture through effective leadership, offering employees competitive remuneration, ample career development opportunities, and continuous training The company emphasizes key principles such as dynamism, honesty, hard work, and trustworthiness Additionally, a commitment to constant change, personal growth, and learning is integral to Nestlé's corporate ethos.
Target customers and customers segments
- Regions: The tastes of consumers in different regions of the country are very different => Nestle launched many product lines and gave different sugar content together
- Climate: Summer is often hot, and rainy; winter is dry and cold => Nestle launches many product lines suitable for each season
- Population: Large and rapidly growing population => there are many product lines suitable for all ages from adults to children
- Segment into different ages: Children and the elderly are the most important customer segments In fact, Nestlé has created many products specifically for these two audiences
Nescafe is designed for office workers, making it a popular choice among professionals seeking to stay energized throughout the day Nestle promises that Nescafe will help maintain freshness and productivity, catering specifically to the needs of those in demanding work environments.
- Income: Nestlé segmented their market based on customers’ earnings in an effective way => creating items that save money, and even the average person can buy them
• Psychographic: In the marketing world, lifestyle-oriented interests, activities, and opinions, are categorized under psychographic variables Nestle can use
NHTM Tổng hợp - commercial banking
• Today, Tv channels provide more men's…
Brainstorm and full essay (ls1)
3 psychographic segmentation to divide the potential buyers into different segments
- Social class: lower, working, and middle classes
- Interests: attract to innovation and health conscious
- Usage rate: Nestlé holds a large market share, launching many different types of products to meet different tastes of consumers
Vietnamese consumers exhibit significant price sensitivity, necessitating that Nestlé implement suitable pricing strategies As a result, Nestlé consistently evaluates and adjusts its selling prices to align with market expectations and consumer needs.
- Brand loyalty: The average value of consumer preference for Nestlé is 4.36, the highest compared to other brands.
Phases of global strategy
In 1867, Henri Nestlé, a German pharmacist and the founder of Nestlé, introduced a powdered infant formula in Vevey, Switzerland During this period, Nestlé implemented a cost-leading business strategy while maintaining a strong emphasis on product quality and value, which helped the company secure a competitive advantage in the food and beverage industry.
Nestlé's export strategy focuses on manufacturing products at its domestic factory in Switzerland and subsequently exporting them to countries lacking local production capacity.
Nestlé's international strategy focuses on producing goods at its domestic factory in Switzerland for export to countries lacking production capacity Currently, the company operates over 300 branches worldwide, enhancing its global presence and distribution capabilities.
Global strategy: The company established seven global strategic business units
(SBUs) responsible for business development and high-level strategic decision making.
Drivers of global strategy
Nestlé, established in 1866 in Switzerland, opened its first office in London in 1868 and expanded its offerings by merging with Anglo-Swiss Condensed Milk in 1905, adding condensed milk and infant formula to its product line Today, Nestlé ranks second in ice cream, breakfast cereals, and pet food markets, with food sales distribution of 38% in Europe, 32% in the US, and 20% in Africa and Asia.
ICT: build, deploy and maintain leading solutions, and internal and external communication programs; Plan and strategize to ensure consistent and reliable information is delivered to company stakeholders b Industry level
Nestlé is experiencing a surge in market potential across various regions, driven by its aggressive marketing campaigns that highlight the culture and values of its customers through innovative packaging.
Cost drivers have evolved due to rapid technological advancements and innovation, allowing companies to optimize product pricing for the benefit of both businesses and consumers Globalization has enabled developing countries to manufacture high-quality food products at lower labor costs, enhancing competitiveness in the market.
Vietnam is a key market for Nestlé, being the world's second-largest coffee producer and the leading producer of robusta coffee As the largest coffee buyer in Vietnam, Nestlé purchases 20-25% of the country's total coffee production annually Since its launch in 2011, the NESCAFÉ Plan has been recognized by the Ministry of Agriculture and Rural Development as a successful example of public-private partnership.
Nestlé, a leading multinational in the food and beverage industry, offers a diverse range of products, including globally recognized brands like Milo, instant coffee, and baby formula Despite its significant product differentiation, Nestlé faces strong competition with numerous substitutes available in the market To maintain its competitive edge, the company strategically targets small niche markets, striving to capture at least 85% market share with each new food product it introduces.
Global orientation: Business at Nestlé is conducted on the basis of Common
Value Creation (CSV) Nestle's activities and products always make a positive difference to society and contribute to the continued success of the business
From its inception, Nestlé sought growth opportunities internationally, beginning with its merger with Anglo-Swiss Condensed Milk By the late 1990s, the company had expanded significantly, operating 500 factories across 76 countries and selling products in 193 countries worldwide, establishing a global presence.
Opportunities and Threats
To enhance consumer trust and connection with the Nestlé brand, it is essential to increase transparency regarding the sourcing of raw materials By providing clear information about where, when, and by whom these materials are sourced, Nestlé can foster a stronger relationship with its customers in the digital age.
• Sustainability: Integration and operating sustainably will help the company reduce costs, increase efficiency and utilize labor properly Local integration and production will streamline processes, lowering long-term costs
Nestle has a significant opportunity to diversify its product portfolio by exploring sectors beyond food and beverages By forming strategic alliances, the company can expand its reach and penetrate new markets, enhancing its overall growth potential.
The rise in disposable income across Asia, Oceania, and Sub-Saharan Africa presents a significant opportunity for Nestlé to enhance its operations By introducing new products or expanding existing lines, the company can improve its market visibility and profitability in these growing regions.
The ready-to-drink (RTD) tea and coffee market is experiencing significant growth, with RTD coffees emerging as the fastest-growing liquid beverage sector in the U.S., expanding by an impressive 37% over the past three years, while RTD teas also see a steady annual growth of over 4% Despite the overall beverage industry showing only slight growth, this sector presents a unique opportunity for Nestlé, which currently lacks RTD tea and coffee products By leveraging its existing assets, Nestlé can strategically enter this underserved market and capitalize on the rising consumer demand.
• Online shopping: Very few consumer packaged goods (CPGs) offer online services to make the shopping experience more comfortable and pleasant
Although Nestle has its online stores in a few countries, expanding its online services to more areas will prove a rewarding decision for the company
In 2019, Nestlé strategically divested several underperforming brands, such as Herta Charcuterie, and has since shifted its focus towards growth through acquisitions The recent purchase of gastrointestinal medication brand Zenpep and The Better Health Company exemplifies this strategy By expanding its portfolio with high-performing acquisitions, Nestlé is poised to unlock significant growth opportunities.
Nestlé is strategically refocusing on its most profitable ventures by divesting from unprofitable brands, such as its North American water brands like Pure Life This shift aims to alleviate resource strain and enhance overall performance, allowing the company to concentrate on strengthening its best-performing brands within its portfolio.
The global demand for plant-based products is on the rise, with approximately 1.5 billion vegetarians worldwide, a number expected to grow steadily Nestlé has already embraced this trend by innovating plant-based alternatives to traditional goods, positioning itself to capitalize on the significant market potential these products offer.
The pandemic has heightened consumer health consciousness, leading individuals to prioritize their well-being and sanitation more than ever before Nestle can leverage this trend, as many of its products offer health benefits that align with the growing demand for nutritious options.
Climate change and global warming significantly affect the raw materials essential for Nestlé's products, such as coffee, wheat, and dairy These environmental shifts are likely to hinder Nestlé's growth in the long term, prompting the company to seek sustainable solutions to mitigate these impacts.
Nestlé's reputation and consumer trust have been significantly impacted by past food safety compliance issues, notably illustrated by the Maggi noodles incident in India, where failure to meet laboratory standards resulted in a substantial loss of market share.
Nestlé's operations are significantly impacted by water scarcity, as the company relies heavily on water resources for production Accessing affordable clean water has become increasingly challenging, leading to widespread criticism and negative publicity regarding its extensive use of drinking water in areas affected by drought.
Nestlé faces heightened competition as its product portfolio contends with numerous global and regional brands The ongoing innovation and market disruptions pose a continuous risk of losing its existing customer base.
Volatile consumer behavior poses a significant challenge for FMCG companies, as unpredictable purchasing patterns can impact market dynamics If Nestle does not meet consumer expectations for value, competitors can quickly exploit these gaps and capture market share.
The ease of product imitation in certain countries, exacerbated by minimal government regulations, allows local manufacturers to replicate Nestlé's offerings at lower prices However, these imitations often fall short in quality, posing a significant threat to Nestlé's brand image in those markets.
Consumers hold significant bargaining power in the FMCG sector due to the low switching costs and abundance of alternative brands available If a company fails to uphold quality standards or encounters issues—similar to the Maggi controversy in India—it risks damaging its market credibility and losing its customer base.
EFE Matrix
In conclusion, Nestlé's overall weighted score of 2.47 falls short of the 2.5 point average, highlighting the company's struggle to fully leverage opportunities and effectively manage threats To enhance business efficiency, Nestlé must implement necessary changes.
Diamond model
- Natural resources: beneficial geography locations (potential market with large food consumption)
- Capital resources: these are available through equity capital resources and debt financial resources
- Human resources: strong workforces; young, high quality
- Scientific knowledge: high level including top-notch laborers, senior specialists, and senior experts,
- Technological innovation: invested in blockchain technology to establish transparency in its supply chain; high technologies
- Size of domestic market: The large market size makes it possible for Nestle to assess, identify and manage its own growth-related strengths and weaknesses
- Sophisticated and demanding domestic customers: this motivates Nestle to utilize its resources to innovate and develop unique products that suit different tastes of customers
+ Create products of soy sauce, Maggi fish sauce with flavors and colors suitable for Vietnamese people
+ Exchange paper straws for Nestle bean milk, Milo milk When Vietnamese people move towards an environmentally friendly green lifestyle
Nestlé benefits from the availability of related industries in both domestic and international markets, enabling the company to source packaging and raw materials locally across various consumer markets This strategic approach helps Nestlé manage costs effectively while enhancing economic efficiency.
The growth and business expansion of Nestlé are significantly influenced by the presence of supporting industries in both domestic and international markets In the domestic market, these supporting industries contribute to the overall development of the sector, enabling companies like Nestlé to thrive, attract customers, and enhance product visibility.
- Having a strong network of global suppliers helps the company distribute its products to different consumer markets, making it easy for consumers to see and access the products
- Company strategy: Focuses on customers to provide them with highquality products The promise of customer satisfaction is the decisive factor of the company's strategy
The company's flat organizational structure fosters open communication between employees and leadership, promoting a flexible and trustworthy culture that enhances business development and growth.
The managerial system fosters employee development by ensuring consistent support from managers and supervisors Additionally, the company offers a range of training programs tailored to employees based on their performance levels and skill gaps.
- Intense competition between local rivals: made it possible for Nestle to create new processes and technologies that give differentiated costs and competitive advantages in attracting more customers
Nestlé's competition with global players enhances its understanding of diverse regional and international business customs and cultures This knowledge aids in the development of products tailored to specific markets, ensuring that Nestlé maintains a competitive profit position in the global arena.
- The Government always accompanies, supports, and creates the most favorable conditions for the production and business activities of enterprises, stabilizing jobs and incomes for employees
- Supports businesses through solutions to create favorable conditions for production, business, and goods circulation,
- Prioritizes the construction and improvement of institutions, reviews and cuts unnecessary administrative procedures to reduce costs and procedures for businesses
- Potential market Vietnam is the second Robusta coffee exporter in the world after Brazil but coffee consumption is low
=> Creates market expansion opportunities for Nestle
- Vietnam's science and technology are still low, inexperienced workers
=> Create opportunities to invest in Nestle's factory in Vietnam, train human resources, and build good relationships with consumers,
Competitive profile matrix (CPM)
The Competitive Profile Matrix (CPM) is a strategic tool that assesses a company's key competitors and evaluates its strengths and weaknesses compared to a benchmark firm For Nestlé, significant competitors include Kellogg's and Masan Consumer, highlighting the competitive landscape within the food and beverage industry.
Kellogg Company, commonly known as Kellogg's, is a leading American multinational food manufacturer specializing in cereals and convenience foods such as crackers and toaster pastries The company markets its products under several popular brands, including Corn Flakes, Rice Krispies, Frosted Flakes, Pringles, Eggo, and Cheez-It Kellogg's mission statement reflects its commitment to nourishing families and enhancing their quality of life through its diverse product offerings.
"Nourishing families so they can flourish and thrive."
Masan Consumer is a leading manufacturer and distributor of diverse food and beverage products, including soy sauce, fish sauce, chili sauce, instant noodles, instant coffee, instant cereals, and bottled soft drinks The company exports its offerings to various countries, such as the United States, Canada, France, Russia, the Czech Republic, Poland, Germany, Japan, the Middle East, Asia, Laos, and Cambodia Additionally, Masan Consumer is involved in sectors like packaging technology, food processing, information and communication technology, construction, investment, and mining.
Masan Consumer received a total weighted score of 2.54, indicating it is the weakest among competitors, while Nestle achieved the highest weighted score Nestle excels in "Product Variety" and "Product Quality," both rated at 4, showcasing the effectiveness of its strategy in leveraging strengths, seizing opportunities, and mitigating weaknesses and external threats.
Strengths and Weaknesses
Nestlé, boasting a market capitalization exceeding $330 billion, stands as one of the world's largest food companies, recognized for its popular brands such as Hot Pockets, Stouffer’s, DiGiorno, and Nespresso.
• Reputed brand name: Nestlé is the most renowned brand in the world It has developed a respected reputation in the food and beverages sector offering high
- quality products for everyday use across the globe
• Brand valuation: Nestle is well positioned for growth In 2021, Nestle ranked at #62 position by Interbrand - with a brand value of $10.6 billion, moved up
1 place compared with 2020 Nestle is preceded by:
Nestlé boasts a highly diversified portfolio, owning over 2,000 brands and renovating more than 8,000 products worldwide As one of the largest companies globally, it offers an extensive range of products categorized into seven distinct segments.
- Powdered and Liquid Beverages: this is the largest segment of Nestle and represents about 28% of total revenue
- Petcare second largest segment of Nestle and represents about 18% of total – revenue
Nutrition and Health Science accounts for approximately 15% of total revenue, offering a range of products including vitamins, minerals, and supplements that enhance health and wellness Notable brands in this segment include Illuma, Gerber, Nestum, Cerelac, Beba, Lactogen, Garden of Life, Pure, and Vital Proteins.
- Prepared dishes and cooking aids represents 14% of total revenue This – segment sells frozen food, chilled prepared food, culinary and cooking aids
- Milk products and ice cream
- Water products - represents 5% of total revenue Signature brands include Pure Life, S.Pellegrino, Vittel and Perrier
Nestlé has secured a perpetual license agreement with Starbucks to globally market its products, enhancing its coffee portfolio while enabling Starbucks to leverage Nestlé's extensive distribution network for international growth Furthermore, Nestlé maintains strong partnerships with reputable brands such as Colgate-Palmolive, Coca-Cola, General Mills, and L’Oréal, reinforcing its position in the market.
• World’s largest corporation: According to the Forbes Global 200, Nestle is among the world’s largest corporations and is ranked at 46th position in the
Nestle, a global leader in the food industry, has made significant strides in promoting health-focused breakfasts by reducing the sugar content in its popular Carnation Breakfast Essentials by 25% Additionally, the company is enhancing its sustainability efforts by introducing a new eco-friendly paper packaging for this product line.
Nestlé has secured a perpetual license agreement with Starbucks, enhancing its coffee portfolio while enabling Starbucks to leverage Nestlé's extensive global network for expansion This partnership not only solidifies Nestlé's position in the coffee market but also highlights its strong alliances with other reputable brands such as Colgate-Palmolive, Coca-Cola, General Mills, and L’Oréal.
Nestlé boasts the world's largest food and nutrition research organization, featuring 21 R&D centers and over 5,000 dedicated employees, making its research and development capabilities a significant competitive advantage Recently, the company has expanded its presence in the Greater China region by establishing 3 additional R&D centers and 4 product innovation centers.
Nestlé is committed to environmental sustainability, implementing innovative practices to enhance product quality while minimizing waste, water usage, and reliance on non-renewable energy The company has pledged to achieve net-zero greenhouse gas emissions by 2050 and is focused on creating a deforestation-free supply chain Additionally, Nestlé aims to reduce the use of virgin plastics by one-third, demonstrating its dedication to sustainable practices.
Nestle boasts a vast and diversified distribution system that effectively reaches both urban and rural areas By adapting local distribution methods and employing a decentralized approach, the company operates efficiently across various countries Additionally, Nestle has established strong relationships with suppliers, retailers, vendors, and distributors, enhancing its market presence.
Nestlé has raised prices by 6.5% on select consumer goods, driven by rising raw material and transportation costs, supply chain challenges, and the broader inflationary landscape.
Nestlé operates under a matrix organizational structure, encompassing a diverse array of brands within a single umbrella This complexity can lead to challenges in managing numerous individual brands, often resulting in discord and potential conflicts of interest.
• Water controversy: Nestle was accused of pumping millions of liters of water from the Canada reserve, where residents are deprived of drinking water
Nestlé has faced significant media scrutiny due to various social criticisms, including allegations of water privatization, misleading product labeling, and a lawsuit concerning the use of child and slave labor in chocolate production These controversies have severely impacted the company's market reputation.
In 2017, Nestlé faced a significant controversy in India when its Maggi Noodles failed a laboratory test, resulting in a public backlash and an 80% loss of market share Despite the company's claims of "No added MSG" in the noodle packets, subsequent tests revealed that the product contained lead levels 1,000 times higher than permissible limits.
Nestlé has faced backlash for using racially insensitive names for its products, particularly in Australia, where the company has been urged to eliminate racist implications from its sweets, specifically the names RedSkins and Chicos In response to the criticism, Nestlé recently announced plans to change the names of these two confectionery items.
Nestlé has a controversial history marked by a series of unhealthy products, including the notorious China Milk Scandal and contaminated cookie dough incidents Such events have fostered consumer distrust towards companies with a track record of selling harmful products.
IFE Matrix
In conclusion, Nestlé achieved a score of 2.97 in the Internal Factor Evaluation (IFE) matrix, indicating that the company is performing above average in developing its strategies by leveraging its strengths and addressing its weaknesses, positioning Nestlé as a stronger competitor compared to its rivals.
VRIO
• VRIO framework was first developed by Jay B Barney, this is a strategic resource analysis tool to help evaluate the relative relevance of resources to the firm
VRIO, which stands for Value, Rarity, Inimitability, and Organizational Support, is a strategic analysis tool used to evaluate a company's internal resources This analysis will focus on Nestlé, examining each of its resources to determine if they contribute to a sustained competitive advantage in the market.
The VRIO Analysis evaluates resources at each stage to determine their potential for improvement and greater competitive advantage It concludes by categorizing these resources based on their ability to provide sustained competitive advantage, reveal unused competitive advantages, offer temporary competitive advantages, establish competitive parity, or indicate competitive disadvantages.
Value chain
The value chain outlines the various activities within an organization that collectively contribute to the creation and delivery of a product or service It comprises five primary activities focused on the direct creation or delivery process, alongside four support activities that enhance the effectiveness and efficiency of these primary functions.
Inbound logistics play a crucial role in establishing robust supplier relationships, which are essential for the efficient receipt, storage, and distribution of products A lack of analysis in inbound logistics can lead Nestlé to encounter significant challenges during product development Key aspects of inbound logistics include sourcing raw materials, storing inputs, and distributing components internally to initiate production.
Analyzing operational activities is crucial for Nestle as it prepares to process raw materials into final products for market launch This encompasses both manufacturing and service operations, and effective analysis enhances productivity, maximizes efficiency, and ensures competitive success By improving productivity, Nestle can achieve sustained economic growth, boost profitability, and establish a strong foundation for competitive advantage.
Outbound logistics encompass the processes involved in delivering products to customers through various intermediaries Key activities in outbound logistics include material handling, warehousing, scheduling, order processing, transportation, and final delivery to the destination.
In the marketing and sales phase, Nestle emphasizes the unique benefits and differentiating features of its products to convince customers of their superiority over competitors Simply offering high-quality products at affordable prices is not enough; Nestle must also invest in effective marketing and sales strategies The roles of sales agents and marketers are crucial in this process Key marketing and sales activities for Nestle include leveraging a strong sales force, engaging in advertising, implementing promotional campaigns, setting competitive pricing, selecting appropriate distribution channels, providing accurate quotes, and fostering relationships with channel partners.
Nestlé's pre-sale and post-sale services are crucial for fostering customer loyalty, as modern consumers value post-sale support just as much as marketing efforts In today's technology-driven landscape, the impact of negative electronic word-of-mouth (e-WOM) from inadequate support services can be significant Therefore, it is essential for the company to evaluate its support activities to prevent harm to its brand reputation By providing quick, timely, and efficient support, Nestlé can transform potential negative feedback into positive word-of-mouth, enhancing customer satisfaction and loyalty.
The support activities play an important role in coordinating and facilitating the primary value chain activities Nestle can also benefit from analysis of its support activities as explained below .
Firm infrastructure encompasses various activities, including quality management, legal affairs, accounting, financing, planning, and strategic management By effectively managing its infrastructure, Nestlé can enhance the overall value of its value chain Controlling these overhead costs enables Nestlé to strengthen its competitive position in the market.
Nestlé can enhance its human resource management by thoroughly evaluating key HR aspects such as recruitment, selection, training, rewards, and performance management Effective HR practices can help Nestlé alleviate competitive pressures by fostering motivation, commitment, and skill development within its workforce Additionally, the company can achieve cost minimization by analyzing the costs associated with hiring and training in relation to their returns.
In today's technologically advanced era, nearly every aspect of the value chain relies on technological support, emphasizing the need for Nestlé to prioritize technology development Key areas such as production, distribution, marketing, and human resources are increasingly integrated with technology, utilizing automation software, tech-supported customer service, product design research, and data analytics to enhance efficiency and effectiveness.
Procurement within the value chain encompasses the processes involved in acquiring essential inputs such as equipment, machinery, raw materials, and supplies necessary for producing finished products Given its connection to various value chain activities, Nestlé must strategically manage its procurement to enhance the inbound, operational, and outbound segments of the value chain Additionally, support activities are crucial for coordinating and facilitating primary value chain operations, and a thorough analysis of these activities can provide Nestlé with significant advantages.
In conclusion, effectively applying the Porter Value Chain model requires a thorough understanding of the significance of each activity within the chain Nestle should focus on identifying key areas where value can be enhanced, costs can be reduced, differentiation can be established, and processes can be optimized to maximize overall efficiency and competitive advantage.
Entry mode analysis
There are many different ways a company can enter a foreign market such as:
- Exporting: selling goods directly to other markets Many companies, after establishing a sales program, turn to agents and/or distributors to represent them in that market
Licensing is a strategic arrangement where one company grants another the rights to utilize its product or service This approach is especially beneficial when the licensee possesses a significant market share in the target industry, facilitating easier entry into new markets.
Franchising is an effective strategy for businesses with repeatable models, such as grocery stores, that can easily expand into new markets Additionally, companies with strong brand recognition can leverage their name on an international scale, making franchising a valuable approach for growth and market penetration.
A joint venture is a unique partnership model where two companies collaborate to create an independently managed third entity This partnership focuses on a specific market, whether defined by geography or product, allowing the companies to pool resources and expertise In a joint venture, both parties typically share risks and rewards equally, fostering a balanced approach to business growth and opportunity.
Nes tlé’s entry strategy
Nestle is a leading global brand in the food and beverage industry, operating in around 130 countries As competition intensifies, Nestle seeks growth in emerging markets by employing flexible market development strategies Rather than investing heavily in brand establishment, the company often acquires local firms, which helps it navigate cultural barriers and consumer preferences Nestle initially focuses on essential consumer products like infant food before expanding into premium segments such as chocolate and beverages By adapting food ingredients and processing technologies to local markets, and utilizing regional brand names like 'Sveltesse' in Europe, Nestle enhances its local presence In Asia, the company emphasizes acquiring local businesses to leverage regional expertise Nestle's strong financial position allows for strategic acquisitions and a broad manufacturing approach, producing diverse products tailored to meet the needs of the regional market, such as soy sauce powder in Singapore and cereals in the Philippines.
Nestlé Vietnam Co., Ltd., established in 1995 as a 100% foreign-invested company, has significantly invested over 700 million USD by the end of 2019 This substantial investment reflects Nestlé's commitment to long-term development in Vietnam and its dedication to enhancing product quality, ultimately contributing to a healthier future for Vietnamese consumers.
Subsidiary level strategy
Cost - leadership strategy: is the main generic strategy that Nestle uses in various consumer markets
• The primary objective of using this strategy is to preserve the market leadership position through efficient value chain management
Nestlé's strategy focuses on expanding market share by targeting the middle class, which constitutes a significant portion of the consumer market in many countries This demographic prioritizes pricing, making cost leadership an effective approach to meet their needs.
• Nestle focuses on affordability and easy accessibility of its produce across the globe, which leads towards high brand awareness and high sales growth and provides a strong competitive advantage basis
Nestlé employs various strategies to maintain its competitive edge, including reducing production costs and enhancing supply chain efficiency to offer lower prices Additionally, the company frequently provides discounts and coupons to boost sales and counteract competition from its closest rivals These promotional efforts aim to enhance brand recognition and stimulate consumer demand.
Nestlé's cost leadership strategy provides numerous advantages, including rapid brand recognition, a broader customer base, increased consumption, and the achievement of sales targets through a focus on affordability and accessibility While cost leadership is identified as Nestlé's primary competitive advantage, the company also employs a differentiation strategy to establish a sustainable competitive edge in the highly competitive global consumer market.
Nestlé's differentiation strategy focuses on innovation and addressing consumers' increasing health concerns, allowing the company to stand out in a competitive market By combining differentiation with cost leadership, Nestlé has established a strong and loyal customer base This approach enables Nestlé to position its products uniquely, distinguishing them from available alternatives and enhancing brand appeal.
Nestlé employs a focus strategy that combines differentiation and low-cost leadership for specific products and brands By implementing a focused low-cost approach, the company effectively manages the significant manufacturing and marketing expenses associated with its top-selling brands This strategy aims to reduce the financial strain these leading brands place on Nestlé's overall profitability.
Corporate level strategy
Diversification strategy, the fourth intensive growth strategy in the Ansoff matrix, involves entering new markets with new products and is categorized into related and unrelated diversification Unrelated diversification carries higher risks, as it entails launching entirely new products in unfamiliar markets without prior experience In contrast, related diversification leverages a company's existing knowledge, resources, and infrastructure to support product portfolio expansion Nestlé prioritizes this strategy secondary to growth achieved through market penetration and product development.
Nestlé's portfolio diversification is driven by its cost leadership strategy, which enables the company to minimize expenses and leverage its existing infrastructure This approach allows Nestlé to explore new product opportunities and expand into emerging markets effectively.
The strategic objective of Nestlé's diversification intensive growth strategy is to expand its portfolio through effective acquisition strategies while minimizing risk by focusing on related diversification The company leverages its brand strength and awareness to introduce related products within the global drink industry, avoiding ventures into unfamiliar territories However, Nestlé also engages in unrelated diversification by offering a variety of merchandise, including fridges, shirts, glasses, and pens.
The related diversification strategy involves acquiring profitable businesses by analyzing market trends and evolving customer expectations For instance, in light of increasing criticism from environmental protection groups, the company sought to mitigate declining sales by investing in sustainable business practices and partnering with brands that have a positive image.
The strategic implementation of a related diversification growth strategy significantly boosts business sustainability and enables organizations to reach long-term growth goals, even amid market volatility By effectively managing a product portfolio with related diversification, companies can hedge against risks, as downturns in certain product sectors can be offset by rising trends in interconnected areas.
SPACE Matrix
IP average = 16: 4 = 4 x- axis = CP+IP = -3,75+4 = 0,25 y- axis = FP+SP = 3,25-3,75 = -0,25
QSPM Matrix
According to the Total Attractiveness Scores (TAS) of 1.99 and 3.63, Nestlé should prioritize a market development strategy over other strategic alternatives This growth strategy involves introducing existing products to new markets, enabling the company to capitalize on untapped sales opportunities and support its expansion during periods of growth.
=> This strategy means Nestle needs:
Research: Market research is the backbone of development strategy It’s vital to undergo continuous research to sustain in the competitive market
Establish growth goals: Nestle must ensure that their development strategy achieves market expansion growth goals
Allocation of resources: Nestle must carefully distribute resources as per development strategy
Marketing plan development: Nestle must create a strategy according to market needs
Product launch: Nestle must continually launch market development strategies and products
Result analysis: Nestle must analyze how effective the market development strategy has proven and accordingly modify plans
Since its inception, Nestlé has prioritized integrity, honesty, and fair dealing, ensuring full compliance with all relevant laws This commitment has been embraced by Nestlé employees globally in their daily responsibilities, reinforcing the company's reputation as one of its most valuable assets.
The CEO of Nestlé, the world's largest food company, has expressed concerns that excessive regulation in the food industry undermines personal responsibility As governments combat the rising obesity crisis through regulatory measures, Nestlé, alongside other food manufacturers, is advocating for self-regulation, including limiting advertising to children and reducing sugar and salt in products Paul Bulcke criticized these regulatory efforts, suggesting they promote a "nanny state" mentality that diminishes individual accountability He emphasized that there are no inherently bad foods, only poor dietary choices, and that consumers must take responsibility for their own eating habits.
Nestlé has faced numerous employer violations, including allegations from plaintiffs in the Republic of Mali who claim the company supported human rights abuses by sourcing cocoa from Ivory Coast, where child labor was allegedly employed for cheap labor Additionally, Nestlé is being sued in the United States for reportedly ignoring the use of slave labor in the supply chain of its Fancy Feast cat food, which contains fish ingredients from a Thai supplier This is not Nestlé's first encounter with legal troubles, as the company has previously been scrutinized for tax evasion and reputation damage.
Since 2013, Nestlé has faced allegations of tax fraud and transfer pricing in Vietnam, where the company reported significant losses while continuing to invest heavily in the market Additionally, Nestlé encountered scrutiny for unfair practices in the dairy sector, resulting in a fine of 45 million VND in 2013 for failing to declare 3 out of 24 dairy products.
Nestlé, a leading global food and beverage company, faces increasing competition as the industry evolves with modern technology and diverse offerings As the market demands stricter standards, Nestlé must navigate a landscape filled with established competitors.
Kellogg Company, commonly known as Kellogg's, is a leading American multinational food manufacturer headquartered in Battle Creek, Michigan The company specializes in producing cereals and convenience foods, such as crackers and baked goods, and offers its products under popular brands like Corn Flakes, Rice Krispies, and Frosted Flakes.
Pringles, Eggo and Cheez -It Kellogg’s mission statement is “Nourishing families so they can flourish and thrive.” Kellogg's products are manufactured and marketed in over 180 countries
The Hershey Company, widely recognized as Hershey's, is a leading American multinational corporation and one of the world's largest chocolate manufacturers In addition to chocolate, Hershey's produces a variety of baked goods, including cookies and cakes, and offers beverages like milkshakes, along with numerous other globally made products.
Ajinomoto Co., Inc is a leading Japanese corporation specializing in food and AminoScience, known for its production of spices, cooking oils, frozen foods, beverages, sweeteners, amino acids, and pharmaceuticals The company’s flagship product, AJI-NO-MOTO, is a popular monosodium glutamate (MSG) seasoning Headquartered in Chūō, Tokyo, Ajinomoto operates in 35 countries and employed around 32,734 people as of 2017, generating an annual revenue of approximately $10.5 billion in the same fiscal year.
Orion Corporation established a representative office in Ho Chi Minh City in 1997 and in Hanoi in 2002, marking its entry into the Vietnamese market The company officially launched Orion Vina Food Co., Ltd in 2005, with its headquarters in Ho Chi Minh City In December 2006, Orion inaugurated its first factory in My Phuoc 2 Industrial Park, Binh Duong Province, followed by a second factory in Yen Phong Industrial Park, Bac Ninh Province, three years later Renowned for the slogan “Orion is ChocoPie ChocoPie is Orion,” the company has dedicated over 20 years to localizing its products to resonate with Vietnamese cultural identity.
Masan Consumer, ranked 7th among Vietnam's Top 50 most valuable brands in 2016 and 2nd in the consumer goods sector, specializes in manufacturing and distributing a diverse array of food and beverage products Its offerings include soy sauce, fish sauce, chili sauce, instant noodles, instant coffee, instant cereals, and bottled beverages The company exports to various countries, including the United States, Canada, France, and Japan, while also engaging in industries such as packaging technology, food processing, information and communication technology, construction, investment, and mining.
Bibica Joint Stock Company is a prominent confectionery manufacturer and trader in Vietnam, renowned for its strong brand presence among consumers Annually, the company produces over 20,000 tons of various confectionery items, including Tet cakes, Hura cakes, biscuits, chocolates, moon cakes, hard candies, and soft candies, with notable brands like Hura, Goody, Orienko, Migita, Four Quarters, and Four Seasons leading the market Since its inception in 1993, Bibica has utilized advanced production technology, including a European-imported candy line, British APV technology for biscuits, and innovative malt processing techniques from Taiwan, making it a pioneer in the industry The company's products are widely distributed across Vietnam and are highly regarded for their exceptional quality by consumers.
Mondelez Kinh Do Joint Stock Company, a subsidiary of the global Mondelēz International group based in Chicago, Illinois, specializes in the production and sale of a variety of snacks Their primary offerings include cookies, fresh bread, sponge cake, moon cakes, chocolate, gum, and other confectionery products.
Vietnam Dairy Products Joint Stock Company, commonly known as Vinamilk, is a leading manufacturer and trader of milk and dairy products in Vietnam, along with related machinery and equipment As per the United Nations Development Program statistics, Vinamilk ranks as the 15th largest company in the country.
2007 Vinamilk is currently the leading enterprise of the dairy processing industry, accounting for more than 54.5% of the dairy market share water,
40.6% market share of powdered milk, 33.9% market share of drinking yogurt, 84.5% market share of edible yogurt and 79.7% market share of condensed milk nationwide
TH True Milk, officially known as TH Milk Food Joint Stock Company and part of the TH Group, is a prominent company based in Vietnam Established to provide high-quality dairy products, TH True Milk has gained recognition both domestically and internationally.
2009 in Nghe An This is a 100% Vietnamese dairy brand specializing in the production and supply of milk and dairy products