Nestle

Growth in Mature Markets

History & Growth

Nestle is the world's leading nutrition, health and wellness company Founded in 1867 Well-coordinated mergers , Innovative food products
Mission: "Good Food, Good Life" is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night

History & Growth

1997 Peter Barbeck Strategy 4% organic growth in a mature market through innovation Diversification Outperforming the food sector Product portfolio -19 categories

History & Growth

Pressure from growing competitors and weak profit margins (1997)-root cause: various acquisitions
Operational Efficiency Cutting down of investment budget Maximize existing assets Maximizing capacity utilization

History & Growth

Efficiency programs manufacturing, supply chain
Umbrella Branding: distribution of 127,000 products under six strategic brands First Movers Nutritional & Wellness Aspect Inorganic growth for gaining market share

History & Growth

Two primary strategic goals Introduce nutrition and wellness into mainstream Reinforce position in nutritional products category
Focused on strengthening innovation One-fifth of entire product range had to be innovated or renovated every year Creation of PTC, LAC, Clusters

Activity Map
Organic growth R&D innovation Growth

Diversification Nutrition initiative Strategic goals

Product Technology center

In-organic growth

Objectives

Operational efficiency

Increasing value through nutrition

Mergers & acquisition

External Environment

PESTEL ANAYLSIS

Political
Taxation policy Foreign trade regulations Social welfare policies

Subsidies policy

Economic
Volatility of food price Inflation Disposable income

Exchange rates

Socio Cultural
Population demographics Changing Lifestyle Working Women

Advertisements targeted to children

Technological
Globe initiative
Speed of technology transfer Rate of obsolescence Huge R & D spend Clusters

Environmental
Packaging of products
Pollution Global water crisis Carbon emissions from factories Use of palm oil - deforestation

Legal
Employment law Child labor Health and safety

Mergers and acquisitions

5 Forces
New entrants

Bargaining power of suppliers

The Industry (competitors)

Bargaining power of customers

Substitute products or services

Threat of Entry
Food Processing Industry Large & Competitive New Entrants Nestle has a Brand equity Long Presence History for quality products & Consumer Satisfaction

MODERATE

Threat of Substitutes
Nature of industry
Arrays of similar products that compete directly with Nestl Innovation to improve its products Focused on the health and wellness aspects of its products to maintain competitive edge HIGH

Power of Buyers
Close substitutes Nestl has taken specific steps to meet the needs of consumers

Incorporated health and wellness into the creation of its

products

HIGH

Power of Supplier
Nestl prides itself on creating and maintaining positive
relationships with its suppliers all over the world Large purchasing power of Nestl Low cost of production Suppliers of agricultural commodities offer a common

product
LOW

Competitors
Nestl is a powerhouse in the food processing industry but so
are Kraft Foods and Groupe Danone Continuous battle to outperform one another Rivalry is fierce which is good for consumers Consumers will continue to enjoy ever-improving product

lines
HIGH

Internal Environment

SWOT

Internal Environment
STRENGTHS Strong brand name Financial Strength & Scale Innovation Capabilities Localization First Mover Advantage Nutrition Diversified Portfolio OPPORTUNITIES

WEAKNESSES
Initially Heavy reliance on M&A Food processing Industry Small sale exposure to emerging markets

THREATS

Transition to a nutrition and wellbeing company Focus on enhancing business opportunities in emerging economies Booming eating out market

Lucrative markets for new companies Risk of strategically unviable reinvestments and acquisitions Switching cost is low

Strategies

Strategies

what makes the whole company greater than the sum of its business units.

Diversification
Related Diversification
Horizontal Integration Complementary Capabilities

Diversification
Unrelated Diversification Nutritional cosmetics

Inneov

Global Expansion
Leveraging skills of global subsidiaries
Idea Managerial skills Innovation

Pressure for Local Responsiveness

Consumer Taste & Preference Traditional Economic & Political Factor

Global Strategy
Pressures for local responsiveness Low High Localization strategy Transnational strategy

Pressures for cost reductions

Low

International Strategy

High

Global standardization strategy

Parent
Portfolio Manager (M&A)

Synergy Manager ( Capabilities Manager) Parental Developer (Value add)

Parenting Mix

Nutrition Business - Heartland

Strategy

Business Level Strategy Form basis of Competitive Advantage

Competitive Advantage
Twin objectives
Develop nutrition & wellness as a value add feature to mainstream F&B Reinforce companies leading position regarding specialized nutrition products

Bowmans Strategy Clock

Route 4 : Differentiation
Value Addition to Traditional Product Enhanced price for better margins Strategic Customers Health Conscious

Price Based Advantage

Stress on innovation & renovation Product proliferation Product development Efficiency programs

Blue Ocean Strategy

Blue ocean from within a red ocean
Created an uncontested market space for itself Nutrition & Wellness business Created & Captured new demand Generating Demand

Strategy

Combination of Distinctive Resources, capabilities & competencies to facilitate value creation and profitability

Functional Level Strategy

Operational Efficiency
Customer Responsiveness
Demonstrated Leadership Top positions in 6 Brands Customization- Think Globally Act locally Response time Disinvest in unprofitable business Quickly, Acquire profitable segment Local Application Centers

Innovation Capabilities

Improve R&D and marketing Efficiencies By cutting on Investment Budgets Maximum Capacity Utilization, Distribution Logistics PTCs Swift Link between R&D and Market

Material Management

Generate savings by closing 165 factories all over Regional Manufacturing Network Benchmarking Best Practice Transfer

Information Systems
Globe 2007 Initiative
Integrate Companies business on Global Scale Align data standards Common IS Clusters improve communication & knowledge sharing

Marketing Efficiency
Reducing marketing expenditure & Strengthen product Identity ( Piggybacking)
Exploiting synergies between the brands Most products under 6 strategic brands

Key Success Factor

Intended Strategy
organic growth more sustainable path of growth R &D Nutrition Logical Incrementalism Resource Allocation

Key Success Factors

Supply Cost Optimization -Operational Excellence 2007

Operational Efficiency MH97 - Manufacturing Target 2004+ Regional Manufacturing Networks GLOBE

Organic + Inorganic growth

Recommendation
Hybrid/ Mixed Structure Combines advantage of Centralized & Decentralized achieve economies of scale Identify market niche Creation of market intelligence and analysis units
70% sales coming from mature market - Untapped emerging market

Thankyou