ASSIGNMENT

 STRATEGIC GROUP ANALYSIS OF NESTLE.

 CHANGING BOUNDARIES OF THE INDUSTRY TO
WHICH NESTLE BELONGS

SUBMITTED TO: SUBMITTED BY

PROF. A.K Mitra Gaurav Kalra

Enrl No: 08bs0001061

Strategic Group Analysis of Nestle?
A strategic group is a concept used in strategic management that groups companies within an
industry that have similar business models or similar combinations of strategies. For example,
the restaurant industry can be divided into several strategic groups including fast-food and fine-
dining based on variables such as preparation time, pricing, and presentation. The number of
groups within an industry and their composition depends on the dimensions used to define the
groups. Strategic management professors and consultants often make use of a two dimensional
grid to position firms along an industry's two most important dimensions in order to distinguish
direct rivals (those with similar strategies or business models) from indirect rivals.

Strategic Group Analysis

Strategic Group Analysis (SGA) aims to identify organizations with similar strategic
characteristics, following similar strategies or competing on similar bases.

Such groups can usually be identified using two or perhaps three sets of characteristics as the
bases of competition.

Examples of Characteristics

 Extent of product (or service) diversity

 Extent of Geographic coverage

 Number of Market segments served

 Distribution Channels used

 Extent of Branding

 Marketing Effort

 Product (or service) quality

 Pricing policy

First of all considering the extent of diversification of Nestle, the company can be put in the
highly diversified range of products. Nestle, the world's largest food company, is so large that it
doesn't know exactly how many products it makes. Although the Nestle name goes on 8,500
food, beverage, and pharmaceutical brands, different packaging sizes raise the company's
estimated product total to 22,000. Though it may be best known in America for its chocolate
Nestle Crunch bars and NesQuik powder flavoring, the company makes products in 10
categories: baby foods and cereals, milk and dairy products, breakfast cereals, desserts, snacks
and ice creams, chocolate and other confectioneries, prepared foods, beverages, pet care, and
pharmaceuticals. Nestle is the worldwide leader in mineral water (Perrier) and coffee (Nescafe,
Taster's Choice) sales as well.

Pricing
Nestle has its own set of techniques for setting the prices of the product. It does not primarily
focus on the competitors pricing strategies. It emphasizes on the market demand of the product.
Nowadays market is going through tough recession, so they set their prices keeping in view the
purchasing power of the customers. Moreover the prices of the products are also subjected to the
type of consumer product. If the product is a daily use then it can have a minimum price to
attract the customer towards your product. Thus the company cannot influence much on the
prices.
Price Structure General: The prices of Nestle’s products are and they are within the customer’s
buying power. Nestle also give discounts to their regular customers. Nestle has set prices in such
a way that it offers the most quality products with acceptable prices. Its prices are very much
comparable with its competitors. It keeps in mind all the below line factors while setting the
prices of the products.

Quality and nutritional value are the essential ingredients in all of the nestle’s brands. Millions of
people prefer Nestlé products every day, happy with the addition to their wellness that they bring. If you
are looking for a specific brand our product, just use the alphabetical index below to jump straight to a
listing. Or you can explore by category

Baby Foods

The production of infant food goes right back to the origins of the Nestlé Company. Henri Nestlé's 'Farine
Lactée' was the first product to bear the Nestlé name.

In 1867 a physician persuaded Henri

Nestlé to give his product to an
infant who was very ill — he had been born prematurely and was refusing his mother's milk and all other
types of nourishment. Nestlé's new food worked, and the boy survived. From the very beginning, Nestlé's
product was never intended as a competitor for mother's milk. In 1869, he wrote: "During the first
months, the mother's milk will always be the most natural nutrient, and every mother able to do so should
herself suckle her children."
The factors that made baby foods success in the early days of the Nestlé company — quality and superior
nutritional value — are still as valid today for the wide range of infant formula, cereals and baby food
made by Nestlé. The World Health Organization (WHO) recognizes that there is a legitimate market for
infant formula, when a mother cannot or chooses not to breast feed her child. Nestlé markets infant
formula according to the principles and aims of the WHO International Code of Marketing Breast Milk
Substitutes, and seeks dialogue and cooperation with the international health community and in particular
with the WHO and UNICEF, to identify problems and their solution. Nestlé's expertise as the world's
leading infant food manufacturer, gained over more than 125 years, is put at the disposal of health
authorities, the medical profession and mothers and children everywhere.

Chocolate & Confectionery

The story of chocolate began in the New World with the Mayans, who drank a dark brew called
cacahuaquchtl. Later, the Aztecs consumed chacahoua and used the cocoa bean for currency. In
1523, they offered cocoa beans to Cortez, who introduced chocolate to the Old World, where it
swiftly became a favorite food among the rich and noble of Europe. Nestle forayed into
chocolates & confectionery in 1990 and has cornered a fourth share of the chocolate market in
the country.. It has expanded its products range to all segments of the market The Kitkat brand is
the largest selling chocolate brand in the world. Other brands include Milky Bar, Marbles,
Crunch, Nestle Rich Dark, Bar-One, Munch etc. The sugar confectionery portfolio consists of
Polo, Soothers, Frootos and Milkybar Eclairs. All sugar confectionery products are sold under
the umbrella brand Allen's. Nestle has also markets some of its imported brands like Quality
Street, Lions and After Eight. New launches such as Nestle Choco Stick and Milky Bar Choo at
attractive price points to woo new consumers. Chocolate confectionery sales registered a strong
21.5% yoy growth in 2001 aided by good volume growth in Munch, Kitkat and Classic sales.
Nestle relaunched Bar-One during the year.
From the beginning, turning raw, bitter cocoa beans into what one 17th century writer called "the only
true food of the gods" has been a fine art, a delicate mixture of alchemy and science.

Ice Cream

There are many myths and stories as to the invention of ice cream: was it Marco Polo who brought it back
from China (along with pasta)? Probably not, considering he most likely never visited China.

The story of its popularity is however connected with the invention of technology to make it on an
industrial scale, and to keep it cold once made. Before refrigeration techniques, food was frozen with the
aid of ice, mixed with salt, which was either stored in ice houses or shipped from cold countries. But then
at the end of the 19th century, both making and freezing it became easier, and together with the invention
of the ice cream cone, made the product boom.

Today, the United States is the absolute leader in terms of volume consumed, but the highest per head
consumers are in New Zealand. Flavors you'd never have thought of and yet they're commercially
available:

 Sorbets - Smoked Salmon, Tomato, Cucumber

 Ice Creams - Garlic, Avocado, Sweet corn.
The ice cream cone is the most environmentally friendly form of packaging. A Syrian from Damascus,
Ernest E Hamwi is credited with its invention. Apparently, during the 1904 St Louis World's Fair, his
waffle booth was next to an ice cream vendor who ran short of dishes. Hamwi rolled a waffle to contain
ice cream and the cone was born.

Prepared Foods

Convenience foods — packaged soups, frozen meals, prepared sauces and flavorings —date back more
than a century. With the Industrial Revolution came factory jobs for women and less time to prepare
meals.

The problem was so widespread that it became the object of intense study in 1882 by the Swiss Public
Welfare Society, which offered a series of recommendations, including an increase in the consumption of
vegetables.

The Society commissioned Julius Maggi, a miller with a reputation as an inventive and capable
businessman, to create a vegetable food product that would be quick to prepare and easy to digest. The
results — two instant pea soups and an instant bean soup — helped launch one of the best known brands
in the history of the food industry. By the turn of the century, Maggi & Company was producing not only
powdered soups, but bouillon cubes, sauces and flavorings.
.Maggi merged with Nestlé in 1947. Buitoni, the authentic Italian brand, which has been producing pasta
and sauces in Italy since 1827, became part of the Nestlé Group in 1988.

Beverages

Beverages like coffee, tea and health drinks contribute to about 30% of Nestle’s turnover.
Beverage sales registered a 15% yoy growth during 2001. While about 14% of sales come from
domestic market, exports contribute to about 16% of sales.

Nestle's Nescafe dominates the premium instant coffee segment. Nestle’s other coffee brand
Sunrise has also been relaunched under the Nescafe franchise to leverage on the existing equity
of the brand. Nestle has focused on expanding the domestic market through price cuts and
product repositioning. However it has been losing share in the domestic market, where it has a
37% market share. Milo, a brown-malted beverage was launched in 1996. It has an estimated
volume share of about 3% in the malted food drink segment. Nestle has launched non-carbonated
cold beverages such as Nestea Iced Tea and Nescafe Frappe during 2001.

Nestle is one of the largest coffee exporter in the country. Key export market is Russia, besides Hungary,
Poland and Taiwan. Nestle has received an award for highest export of instant coffee and highest export
of coffee to Russia and CIS for FY00 and FY01. Turnover contribution from exports registered a 17.5%
volume growth in F12/01.

Is the boundary of the industry to which the firm belongs changing ?

Today Nestlé is evolving and yet remaining loyal to its heritage as it develops from the world’s leading food
company into the world’s leading food, nutrition, health and wellness company.
Today the company caters to a vast number of customer needs. The company now not only into
chocolates and coffee but it is also coming up with pure drinking water, milk packs ,
confectionaries baby care products etc etc so we can say that the boundary of the industry to
which the firm belongs is changing. This fact can also be justified by the fact that the competitors
of Nestle in this industry are also coming up with such products.

Increasingly mobile and health-conscious consumers are forcing food and drink manufacturers to
become even more inventive when it comes to creating new products.

A new report from market analysts Datamonitor shows that the changing demographics and
lifestyles in much of the western world have led to the creation of products such as 'skingestibles'
and 'sippables' which increasingly blur the lines between what were once distinctive product
categories.

"The idea of manufacturers promoting products through the notion that what consumers ingest
can improve one's skin and the patina of their appearance is just one example of the growing
synergies between traditional categories and sectors in packaged goods

Until recently, skin health was still considered to be the domain of the cosmetics industry and
restricted largely to topical creams rather than internal nutrition. But consumer packaged goods
(CPG) developers are now promoting the idea that the outside of the body is a reflection of what
goes inside, tapping into the growing consumer concern about 'wellness'.

Datamonitor consumer surveys have found that 87 per cent of respondents across Europe and the
US already follow a health and beauty regime of some type, a large, receptive audience for
innovative food products.

Among the products targeting these consumers, Datamonitor has identified what it calls
'skingestibles' (healthcare supplements promising beauty benefits), beverages containing beauty
ingredients such as aloe and collagen, and drinks being co-branded with a spa or beauty salon. A
recently launched US product illustrating the concept is SkinCola. Described as an all-natural,
super-oxygenated drink, the beverage claims to be helpful in hydrating and beautifying.

As the connection between beauty and health grows, there is an opportunity for manufacturers
and retailers to develop sophisticated product offerings by promoting personal appearance
through food and beverages. Ultimately, successful innovation relies upon a clear understanding
of consumer needs and how to satisfy them with the appropriate product offering.

Positive nutrition

Ingredients with a positive effect on health are also increasingly being introduced in foodstuffs
rather than in supplements, Datamonitor said. Instead of focusing on what can be removed, such
as sugar or fat, manufacturers are embracing the concept of positive nutrition - what can be
added to foods to make them healthier.
Historically, products possessing ingredients with a health effect were related much more to
categories and product lines with a healthy image such as dairy products and fruit juices.
However, now they are increasingly being incorporated into categories such as biscuits and
sweets that have clearly sought to overcome negative consumer perceptions concerning health