Research Paper On Publicly Traded Corporation
Nestle is a multinational company that is publicly traded and is specialized in food and beverages sector. Nestle always tries to offer the best taste with the best quality for their loyal consumers. This paper focuses on various business and corporate level strategies adopted by the company. The Porter’s five forces analysis has been given in the paper. This analyses various forces or factors that lead to advantageous position for the business. Recommendations have been given at the end in light of all the analysis done for this business.
Impact of Mission, Vision, And Primary Stakeholders of company on Its Overall success
Nestle is a multinational company that is publicly traded and is specialized in food and beverages sector. Nestle has a clear mission statement that shows that their primary aim is to offer good and healthy food for the real life of the people. This company is a leading band in food and nutrition sector. According to its mission statement, Nestle always tries to offer the best taste with the best quality for their loyal consumers. According to the vision statement of Nestle, this company aims to provide nutritious food to their customers while maintaining the good corporate governance at the same time. They always try to give the value to their all shareholders. Nestle is enough able to create, share valued services around the whole world. For a successful business, it imperative to provide those quality products that the company has promised in its mission and vision statements. No doubt, Nestle is providing the best food products. For the successful business, it is necessary that all the strategies are made according to the mission and vision statement of the company. According to the report of half-financial year from January to June 2014, Nestle water has 10.4% operating profit margin. In developed markets, Nestle water showed double-digit growth.
Porter’s Five Forces of Competition
Five market forces must affect any business. These five forces are discussed below (Porter, 2006)
Threat of New Entrants
As far as there is a concern about the threat of a new entrant in the food industry, it is a fact that new entry in this sector is very easy. However, Nestle has a tremendous advantage that, it has earned a superb name in the food industry, and it has many loyal customers around the world. Nestle has a long list of its products. At some product category level, Nestle has this threat that other new entry may affect its sale level. These new entry may of any juice and water company at the local level that may compete based on price. There is always a threat of new entry in the market. Nestle knows this fact; therefore, it always tries to provide the best quality food in the market and no doubt still Nestle is the most selling food brand in the whole world. Nestle has 59 names of its products (Porter, 2006).
Threat of Substitutes
In every business, there is always a threat of substitute’s products. In addition, in a food industry it is very easy that alternative products may enter the market. Nestle has many product lines as if Nestle has dairy products, juices, cereals and bottled water. Like if we take an example of bottle water many local companies are now producing this bottled water. Still according to figures of 2013 market share of Nestle water is 11.7.So Nestle has to make innovation in its products by keeping its quality level best so that it can remove the threat of substitute product. Now there is a significant margin for the food industry to make innovations in products related to health consciousness (Porter, 2006).
Bargaining Power of Supplier
For any industry, bargaining power of the supplier is very critical. Nestle always has healthy, and strong relation with their suppliers as Nestle has significant purchasing power. In the food industry, the paramount factor is quality level; therefore, Nestle always has a strong relation with those suppliers that provide them safe, nutritious, and fresh raw material for the industry (Porter, 2006).
Bargaining Power of Customer
Rivalry among Already Existing Competitor
There is always a competition among competitor business, and if this contest is, healthy this may bring great success but in case of adverse competition, it may destroy the whole business. Nestle is a company that is serving in the food industry, and it has many large competitors at local and international level and a rivalry exists between them. To maintain the success level of business, every business tries to perform at their best level and for this purpose; companies spend a lot of money. If we see this competition from the perspective of the consumer, then it is a good thing that companies try to perform best to attain as many consumers as they can do (Porter, 2006).
SWOT Analysis Of Nestle
For the success in the market, it is necessary that every business must know about its strength and weakness to make its strategies that fit according to them. At the same time, every business must know about external opportunities and threats so that they make plans according to this external analysis.
Nestle is known as a leading brand in the food industry and has an extensive consumers across the world. Research and development center of Nestle is superb. Nestle spend a lot of money on research and development therefore they always come up with more nutritious food in the market. Distributing channel of Nestle is very high. Nestle make sure that Nestle products have their access to the maximum area around the whole world. Nestle products have no match to other food items when compared on the quality basis. Nestle always gives a large importance to their employees and spend a lot of money for training and learning of their employees. Net profit of Nestle in year of 2014 was 14456 million.
Many researchers observed that there is weak implementation of their corporate social responsibilities. Nestle has taken many actions that are not according to their corporate social responsibility. Another significant weakness in Nestle corporation is that it is increasing its food product list very rapidly and ion some countries their food quality is not maintained up to the mark. It is necessary that food quality of their all units must be equal and up to the mark.
Nestle has many possibilities in its business as there is an increasing demand for its products in the whole world. Nestle has an opportunity to establish joint ventures. As there are growing demand for the Nestle product, Nestle can increase its number of factories and apply new technologies in its factories to maintain quality level best and it. Nestle can hire new professionals and give them training according to their business culture and then make them an important part of their business and can get benefits from abilities of new and hardworking employees.
For any business, there are always some threats in the market and for the success of the company, it is very necessary that business analyzes those risks in time and make certain strategies to meet those challenges. There are much new food products that are continuously coming to the market and can give a tough competition to Nestle products; therefore, it is necessary that Nestle must consider this situation. There is a trend of growing of new private labels at the local level. Now people are becoming more health conscious, and they always try to eat that food that is good for health. There is a continuous increase in the prices of raw material, and Nestle has to manage its product prices according to its competitors. Buying power of consumers has always affected the success of any business.
According to SWOT analysis, Nestle should adopt the strategy of product development for the success of the business. As now, Nestle has spread its product almost across all area of the world now the primary focus of Nestle should be product development (Nilsson, 2006). Nestle should make innovative changes in their products according to changing demand of its customers. By following this strategy, Nestle can achieve tremendous success over its competitors (Beard and Dress, 1981)
Competitiveness and Profitability
There are two primary levels of strategies, Business level strategies, and corporate level strategy. At the business level strategies, business should satisfy its customers to attain the good level of profit. All the decisions about who what and how is taken place at this level. It is being determined that who will be our customers. What products we will give to our clients, and how we can satisfy our customers (Porter, 2008).
At the corporate level strategy, it is being focused that what will be the strategic scope of the business. It is a big view about the entire company (Beard and Dess, 1981).
At Nestle, business level strategies are to get more profit and corporate level strategies are to run the whole business at the same degree.
Nestle showed sale of CHF 92bn in the year of 2013, which is possible only due to the right strategies in the organization. At Nestle, there are many types of strategies to run business. These strategies are given below
This approach is used at the corporate level in Nestle. Nestle always try to come with new innovative product. Nestle company spend a lot of money on their research and development programs, and they always seek to fulfill the demand of customers. Nestle always introduces new products into new and existing markets.
Control Cost Strategy
With the passage of time, the cost of the raw material is increasing. Nestle has a significant challenge to maintain the best quality of products at the same prices. Now many products have many substitutes in the market. Therefore, Nestle has to focus mainly on the cost factor to make their customer happy. At the corporate level, his strategy is used (Beard and Dess, 1981).
Market Navigation Strategy
Nestle implement this strategy at their business level. According to this strategy, Nestle always tries to secure its competitive advantage in the market with the help of its existing products by making innovations into those products. This strategy is a big factor for the success of the business.
Communications Plan For Nestle To Communicate the Strategies to All Stakeholders
It is necessary for every business that it must tell about their strategies for its stakeholders. There should be a proper channel, through which stakeholders of the business can get information about all the strategies. At Nestle, almost 333214 employees worked in 456 factories located in 86 countries around the world. Therefore, it is necessary that there should be proper communication plan that engage all employees and stakeholders.
Communication plan for Nestle is its annual reports that present publically for its entire speakers. Financial statement including balance sheets, income statement and statement of cash flow and annual reports all publish annually to make the strategies for the business. Another communication plan can be a general meeting of all the main stakeholders to give proper guidance about the strategy of the company at all levels (Porter, 2008).
Nestle is known as a leading brand in the food industry, and it is a great success for the business. This success is due to the right decision of the management. Leadership plays a crucial part in the success of any business at any level. Decision made by leaders affects the overall performance of the employees also. We see that at Nestle, at the corporate level, all decision takes place. CEO and other major stakeholders make decisions about the firm. Nestle is considered as a most successful business in the whole food industry in the worldwide (Lorange, 2008).
Overall, all the leadership of Nestle is very effective and efficient. Only one recommendation is that now the food industry trends are changing very rapidly as now consumers are becoming more conscious about health. Therefore, they must come up with those products that fulfill the changing needs of customers. Now the prices of raw material are going to increase so it is necessary that Nestle make the good relationship with their suppliers so that they can manage the cost of products.
Corporate Responsibility and Impact on Organization
Nestle is considered as a company that cares about its corporate social responsibilities. Nestle always try to make value creation for its consumers. At the same time, Nestle tries to fulfill its economic, social, legal and ethical responsibilities at their level best. Nestle provide employment opportunities for many people in many underdeveloped countries to make their economic conditions better. Nestle always try to fulfill all its legal responsibilities. As well as there is a concern about the ethical responsibility Nestle always seek better ways to give a benefit to the society. They are now improving their technology in factories so that there will be minimum emission of smoke. Nestle is also fulfilling its philanthropy responsibility in a superb way. Under this strategy, Nestle runs many projects for social benefits from their resources. Much any new health and education programs start to make people healthy and educated.
Only one thing that many people criticized for Nestle is that Nestle has half ownership of L’Oreal Company that is particular for making cosmetic products. This company makes tests for their products on animals, as sometimes products can be harmful to the animals. Some external environments issues criticize for some factories of Nestle.
Overall Nestle is fulfilling its corporate social responsibility in the excellent way and has a good and positive image in the society.
Beard, D. W., & Dess, G. G. (1981). Corporate-level strategy, business-level strategy, and firm performance. Academy of management Journal, 24(4), 663-688.
Lorange, P. (2008). Thought leadership meets business: How business schools can become more successful. Cambridge University Press.
Nilsson, P. I. (2006). A Strategic Analysis of a Company Operating in Fiercely Competitive Environment.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 25-40.
Porter, M. E., & Kramer, M. R. (2006). The link between competitive advantage and corporate social responsibility. Harvard business review, 84(12), 78-92.
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