CASE STUDY Nestle: Global

ANALYSIS

Strategy
INTRODUCTION

Nestlé S.A. is a Swiss multinational nutritional and health-related consumer goods

company headquartered in Vevey, Switzerland. It is the largest food company in the world
measured by revenues. Nestlé’s products include baby food, bottled water, breakfast cereals,
coffee, confectionary, dairy products, ice cream, pet foods and snacks. Nestlé employ around
330,000 people in over 150 countries and have 461 factories or operations in 86 countries.
Nestlé history begins back in 1866, when the first European condensed milk factory was
opened in Cham, Switzerland, by the Anglo-Swiss Condensed Milk Company. In Vevey,
Switzerland, Nestlé founder by Henri Nestlé, a German pharmacist, launched his Farine lactee, a
combination of cow’s milk, wheat flour and sugar, saving the life of a neighbor’s child. Nutrition
has been the cornerstone of the company ever since.
In 1905, The Anglo-Swiss Condensed Milk Company, founded by Americans Charles and
George Page, merged with Nestlé after a couple of decades as fierce competitors to form the
Nestlé and Anglo-Swiss Milk Company. The company grew significantly during the First World
War and again following the Second World War, expanding its offerings beyond its early
condensed milk and infant formula products.
Despite its undisputed success, Nestlé, by the early 1990s faced significant challenges in
maintaining its growth rate. The large Western European and North American markets were
saturated. In several countries, population growth had stagnated and in some there had been a
small decline in food consumption. The retail environment in many Western nations had
become increasingly challenging, and the balance of power was shifting away from the large-
scale manufacturers of branded foods and beverages and toward nationwide supermarket and
discount chains.
In 1997, Nestle was committed to a strategic vision of becoming the leading nutrition
health and wellness (NHW) company in the world. Then CEO and Chairman Peter Brabeck felt
this would help Nestlé build real differentiation with consumers and drive higher profit margins.
Over the next years, the NHW strategy guided strategic decisions and choices at Nestlé
including merger and acquisition choices, strategies for improving products, and packaging
innovations that helped Nestlé built credibility with the consumer in NHW, raised profit
margins continued strong growth and differentiated the firm.

TIME CONTEXT

Early 1990s to 2000s

VIEWPOINT

Nestle’s Strategic Management Team, who wants to meet growth and performance
goals at the same time achieving a sustainable competitive advantage.

STATEMENT OF THE PROBLEM

An article published in 2012 in Naturalsociety.com; Nestle has been using genetically

modified organisms in their products.
Please see: http://naturalsociety.com/corporate-giant-nestle-contradicts-gmo-stance/
These kinds of news, bring up the question of trust and contradicts with the Company
motto “Good Food, Good Life”. The fact that local markets are more in touch with their
residents; hence foreseeing the possible changes in the market, and increasing their
competitive advantages.
Another contradiction is that the increasing cost of raw materials may end up
increasing their product price; resulting in customers changing their decisions towards local
rivals. Although increase in “wealth” in poorer countries may help their sales, the increase in
prices may cause local rivals to be chosen against Nestlé’s products in such countries. For
example; in Pakistan; where Nestle sells its “Pure Life” the population without access to safe
drinking water cannot afford to buy it. All of which raises Human rights questions and obvious
contradiction to Nestle’s aid in United Nations.
OBJECTIVES

The Nestlé Corporate Business Principles are at the basis of the company’s culture,
developed over 140 years, which reflects the ideas of fairness, honesty and long-term thinking.
Nestlé believes that not only possible to create long-term value for their shareholders if their
behavior strategies and operations also create value for the communities where they operate,
for their business partners and of course, for their consumers.
Nestlé vision is to meet the various needs of the consumer everyday by marketing and
selling foods of a consistently high quality. Their objectives are to deliver the very best quality
in everything they do, from primary produce, choices of suppliers and transport, to recipes and
packaging materials.
Nestlé committed to a strategic vision of becoming the leading nutrition health and
wellness (NHW) company in the world. Then CEO and Chairman Peter Brabeck felt this would
help Nestlé build real differentiation with consumers and drive higher profit margins.
Nestlé purpose is to offer safe, tasty, convenient and nutritious foods to improve health
and well-being of consumers of all ages all over the world. To meet the needs and desires of
today’s and tomorrow’s consumers, Nestlé is strongly committed to Research and Development
(R&D) to improve products and develop new foods with specific health benefits.

AREAS OF CONSIDERATION/ANALYSIS

An analysis of the problem and an appraisal of Nestle are provided below with the
assistance S.W.O.T. (strengths-weaknesses-opportunities-threats) analysis.
SWOT

Upon the analysis made above; it’s been understood that even though a company
becomes one of the biggest in its sector; there is always room for change. This change could
not only be in terms of management, it’s also crucial for decision making and policy application
throughout the world.
ALTERNATIVE COURSE OF ACTION

The first priority on Nestle is to decide whether to increase efficiency or to reduce costs.
On one hand there is the resolve to improve efficiency in the factory and, on the other hand,
there is the resolve to reduce cost. Maintenance is crucial to doing a good job in the best
conditions but it has a cost, and there is pressure to reduce this cost.
Second priority is Nestlé’s production of ‘Pure Life’ and the related extraction of
groundwater are obviously exceeding the renewable volume and can therefore be considered
as not sustainable.
Although this finding is in contradiction with Nestlé’s own Corporate Business Principles, it only
raises certain human rights concerns while not automatically constituting a violation as such. In
order to judge these human rights concerns, one has to identify a direct impact of Nestlé’s
‘Pure Life’ production and distribution on peoples’ human rights, like the right to water, health,
food or freedom from discrimination.

RECCOMENDATION

It can be stated that the company can use some more energy and time to develop its
strengths and reduce the weaknesses which were mentioned in SWOT Analysis above. Even
though the company has a priority where the CEO states “…looking at deeper, scientific
solutions to personalized nutritional problems and answers to chronic diseases”, losing focus on
the local markets and niche markets; may cause redundancy on the work load and resulting in
declining efficiency.
Nestle may spare funds to research nutritional problems and chronical diseases, but the
funds will come from their sales.
Nestle should explain the R&D funds and their expenses and aims to the customers and other
stakeholders. If the company will not do this; this will cause lots of hostile debate against the
company worldwide.
The steps of applications are thought to be as such:
• Defining the expenses regarding the R&D fundings.
• Defining the food additives and/or GMO’s used in products
• Answering to the obvious breaches of human rights and sustainability approach
questions.

CONCLUSION/DETAILED ACTION PLAN

Nestlé’s objectives are to be recognized as the world leader in Nutrition, Health and
Wellness, trusted by all its stakeholders, and to be the reference for financial performance in
its industry. They believe that leadership is not just about size, it is also about their behavior.
They recognize trust is earned only over a long periods of time by consistently delivering on
their promises. These objectives and behavior are encapsulated in the simple phrase, “Good
Food, Good Life”, a phrase that sums up their corporate ambition.
In order to reinforce their competitive advantage, Nestlé created Nutrition as an
autonomous global business unit within the organization, and charge it with the operational
and profit and loss responsibility for the claim-based business performance by offering
consumers trusted, science based nutrition products and services.
Nestlé’s long-term goal remained to be the world’s leading NHW company. Bulcke
looked to refine that mission and find even better margins. “Nutrition, health and wellness has
been our basic agenda over the last few years. Now we are looking at deeper, scientific
solutions to personalized nutritional problems and answers to chronic diseases.
Nestlé’s ‘Pure Life’ production and distribution on peoples’ human rights, like the right
to water, health, food or freedom from discrimination.