INTRODUCTION Nestle is a company that is operating in food and beverage market. In the last decade nestle is a leading nutrition and health corporation that promise a safe and high quality product to its customers. The company illustrates a significant profit ratio and therefore nestle become a role model for those companies that want to be successful. As a result this report is illustrating why and how nestle have achieved a superior performance VALUE CHAIN ANALYSIS OPERATION First of all the company have a operation in all around the world which means that they achieve an economy of scale.
Apart from this minor information in terms of product offering the company are currently developing a products that are requiring a similar tangible and intangible resources. As a result they are exchanging production equipment and workers between factories. So we can easily say that nestle are also achieving an economy of scope. In addition to this, capacity are being utilized by the department. Apart from those economic terms their labor are being highly trained and therefore they are highly specialized about what they are doing which also resulting in an another efficiency at the operational activities.
Moreover the department are frequently adapting its latest technologies that is reducing labor input and increasing its automation and mechanism of operations. However nestle brand express a quality and safety products to its customers. So its clear that the company company are not reducing its cost by buying a low quality raw materials and this means that they have integrated differentiation and low cost leadership strategy. We can easily conclude that this department are producing output much more efficiently than its competitors. MARKETING AND SALES
The company is heavily investing on research and development. For instance according to resources they invest 1. 5 million on this department every year. For example they employ more than 3 500 people and those employees are highly motivated labors that is helping nestle to adapt its dynamic and fast changing environment. In other words labors have a huge contribution to nestle to provide a new products quickly to its market. For example the employees latest innovation is pleelable ice cream which is a product that has a rich creamy flavor of a regular ice cream.
However it also contains a low fat in comparison to other brands . In addition to this the department have also invented a interesting flavors to this ice cream. Apart from this their research team have also found a actobacillas that contains a oriobitic agent which is improving human body’s immune system. As a result they are trying to inject actobacillas to their yogurt brand . employees also reported that actobillac is not changing the texture of yogurt. As a result those examples clearly illustrates that how well the company is adapting to its socio cultural environment.
As tidd and bessant illustrates the importance of product innovation by stating that(2009 p6)”new product development is an important capability because the environment is constantly changing. Shift in the socioeconomic field create opportunities and constraints . Legislation may open up new pathways or close down others for example, increasing the requirements for environmentally friendly products. Competitors may introduce new product which represent a major threat to existing market positions. In all these ways firms need the capability to respond through product innovation”.
Apart from innovation capabilities the company employee are also illustrating an effective performance in the international market. For example they are spending three days with the people that are living in the country that the corporation are planning to make an investment for this reason they are understanding their purchasing habits and motivations and therefore they are developing a product that is appealing to its people. In addition to this employees are also monitoring how consumers consider their brands in other words they are investigating if consumers are recognizing the values that the corporation is trying to convey.
So we can easily conclude that research department is one of the main factor that nestle is being successful in the market. INBOUND AND OUTBOUND LOGISTIC The most striking feature of inbound and outbound logistic are that the company does not use middle firm to its warehousing and distributing its products. Nestle international partner have their own distribution centre’s and warehouses in other words they are kind of integrated forwardly. In that way they are ensuring that all frozen products are remaining quality to its retailers.
As a result of this the inbound and outbound chains are running efficiently and therefore its not increasing its cost. Apart from this nestle also provide a special equipment for some of its products to its retailers. For example all retailers have a special freezers for nestle ice creams the reason that they are providing this equipment cause nestle want to also ensure that products are remaining quality and undamaged to its customers. So we can easily concluded that the corporation are really effective to keep products quality while transiting to its retailers and also to its customers.
PROCEREMENT The corporation promises high quality product to its customers and therefore supplying a quality materials are important. They don’t use vertical integration strategy instead they have a long term perfect relationships with its suppliers. In other words supplier power is not strong which means that they are all time providing a high quality materials at a reasonable price. In addition this\ farmers whom are supplying raw materials to the company are being supported by nestle research department.
The company researchers and scientists are working together with its suppliers. For example the department are helping farmers to implement their findings to the raw materials and as a result nestle is supplying all time quality products. Apart from increasing quality of raw materials nestle is also supporting sustainability in the supply of raw materials for example. The company has a more than 500 hundred agromist technical advisor and field technicians that are providing a assistance to its farmers.
Above all the company has a power to acquire its suppliers and clearly it requires a significant investment which also increases the exist barriers of industry. However by being a close and excellent relationship with its farmers they are ensuring the quality of raw materials. HUMAN RESOURCE DEPARTMENT HRM employees are frequently measures the employees performance and this measurement is resulting in an rewards. In addition to this they are providing an effective training programs to its employees. As a result human resource department are being unsure that they are attracting top employees in the industry.
For this reason they are adapting to new environment conditions and the firm innovating new products faster than its competitors. TECHNOLOGICAL DEVELOPMENT Needless to say that nestle are using the latest technologies in all value chain activities. But most striking feature of the technological analysis is that nestle are using its latest technology in order to study and adapt to fast changing business environment. So we can easily conclude that they are investing and closely monitoring the technological and its wider environment frequently.
NESTLE BUSINESS AND CORPORATE LEVEL STRATEGIES Clearly corporation’s general growth strategies are divided in to two categories which are concentrating on the existing industry and diversification. CONCENTRATION The company was being considered as a technology led corporation however changing social and cultural environment lead them to become a science driven nutrition health and wellness company. At the moment the market is dominated by extremely large companies so nestle can not drive out competition by using its aggressive promotional and pricing strategy.
Instead they are using other market penetration strategies suchas effective advertising methods and special promotions. However the most striking feature of the strategy in the existing market is that innovation. For example they are frequently working on scientific innovations to make their current products more healthier and contains low fat. As it mentioned in value chain analysis tasty low fat ice cream is an perfect example about how company is concentrating on the existing industry by innovating its existing products.
As a result of those kind of actions they are selling more things to same people but at the same time they also are targeting and attracting its new people. Apart from combining market development and product development strategy in the anosoff matrix tool European and American food industry are illustrates a strong threat of entry and there are a lot of substitute of products which is resulting in a strong buyer power. As a result nestle have perceived this market as a flat and highly competitive and therefore they are setting is sighs on new markets in order to enhance their profitability.
In other words they are investing highly on emerging markets for example eastern Europe asia and latin America that have a perfect potential to improve their profit ratios with their current products. However the most striking feature of the nestle international strategy is that Nestle are entering those markets through the takeovers and joint venture. This means that they are benefiting from local managers knowledge about culture language pestel and business systems and this clearly resulting in a faster adaptation to its environmental change.
Moreover they are also taking over the companies that they have a perfect background. According to resources the company is investigating the local companies carefully and they are picking the firm that have a perfect reputation in that way the company is ensuring that it is not damaging the nestle image. So its clear that they are using locally sourced raw materials and this means that they are facilitating their factories in those nations that they are selling its products to its customers As a result they are aiming of creating a share value to its all stakeholders.
The reason that they are creating a shared value for all shareholders that they are because The company found that creating a long term value for the countries in which they are marketing its products are helping them to making a more profit. So we can easily conclude that the company are highly concentrate on their existing products and in term of its international strategy nestle are using right way to be successful. RELATED DIVERSIFICATION Nestle have been increasing the variety in the distinctive products that they are offering.
In other words they are using its related and unrelated diversification strategies. However the company is mainly using its related diversification. For instance. The company has a well known existing brands such as kitkat lion nesquick and nestea and as a result of this the company are using this existed well positioned brands in the other sectors. for example kitkat is a chocolate but last year nestle create a kitkat ice cream(or nestle creal and crealbars) and in that way they are not creating new brands in order to extent their products and this clearly creates many benefits.
The most striking feature of the benefit is that nestle is achieving an incredible cost saving in terms of building a brand . In addition to this they are also operating within the existing operation capabilities which means that they are exploiting an economies of scope For example they are sharing technologies employees and even advertising campaigns between different businesses units. As bymike w. peng illustrates the benefits of related diversification by stated that(2009,p315)”firms benefit from declining unit costs by leveraging product relatedness.
The sources of operational synergy can be technologies(such as common platforms)marketing(such as common brands) and manufacturing(such as common logistics). As a result of this strategy clearly they are achieving a superior performance in the market because of the fact that related diversification strategy is considerably helping them to integrate its differentiation and low cost leadership strategy. Conclusion Above all nestle is operating in the highly competitive market.
In addition to this other environmental factors are also changing fastly. However nestle is a company that is using its highest technology as well as employing top employees in the environment. For this reason they have a perfect ability to adapt to its environmental change. For example the company have an outstanding research and development department. Apart from this success criteria the corporation is also significantly reducing its cost by using its effective operational strategies and its related diversification.
So we can easily conclude that nestle has achieved an superior performance because they have a perfect ability to innovate interms of its operation product service and its businesses processes as well as they have a right strategy in the international markets. ( e. q creating a share value and entry methods) REFERENCE LIST MANAGING INNOVATION JOE TIDD AND JOHN BESSANT 4TH EDITION JOHN WILER AND SONS,LTD Global strategic management mike w. peng second edition south western cengage learning