Question:
Discuss about the Strategic Management & Service Portfolio.
The term corporation can be used to define a large company that is authorised to act as a single entity. These companies are recognised by the court of law and rules and regulations need to be maintained in order to remain successful (Peppard and Ward 2016). The report identifies a company with a product portfolio that helps it to expand it in the business. For this purpose, the report focuses on Nestle. Nestle is a food and drinks company that is situated in Vevey, Vaud, Switzerland. It is the largest as well as the most reputed food company in the world. Nestle owns over 8500 brands in over 80 countries (Nestle.com 2017).
In this regard, the product and service portfolio of the company can be analysed. A product portfolio refers to the overall collection of the various products and services that are offered by a particular company. According to Visnjic, Wiengarten and Neely (2016), the product portfolio analysis provides a subtle view based on stock type and growth prospects of a company. Similarly the service portfolio of a company include providing a storage place in which information about the services of an organisation are maintained. In the case of Nestle, the service provided by the company to all areas of business are maintained using the current status and the history of the services. In the case of product portfolio, Nestle excels in maintaining various types of products like baby food, coffee, dairy products and so on.
Business unit identification
According to Rothaermel (2015), Strategic Business Unit refers to the profit centre which deals with the product offering and market segment. Commonly, Strategic Business Unit (SBU) can be considered as a business unit that is under a large corporation. SBUs have a marketing plan that helps in the analysis of the competition and the marketing campaign. However, SBUs can be composed of more than one business unit that is responsible for profit-making activities. Nestle, is one of the most reputed companies in the world. The company is famous for manufacturing products that are of high demand in the market. One of the SBUs of the company is the manufacturing unit of chocolates and other confectionery and baked goods. Apart from producing coffee and tea, the company produces a large brand of chocolates in the world. In this regard, the profits that are gained by the sale of the chocolates are attributed to the particular SBU of the company (Nestle.com 2017).
Identifying product and service lines
According to Albrecht et al. (2016), product line refers to the group of related products that exist under a particular brand. However, the brands are sold by the name of one company. Most companies tend to sell products by creating multiple product lines. The product lines under various brands provide an opportunity for one company to establish a stable growth in the market. In the case of Nestle, the product lines that are followed by the business unit include chocolates and confectionaries. The business unit sells varieties of chocolates as its product line under the name of Nestle. This is one of the reasons behind the popularity of the company as it consists of products that are of varied range. In this regard, the service line of the company can also be analysed. The service line of a company is the grouping of the products as well as the services that are related to one particular division of an enterprise (Hill, Jones and Schilling 2014). This can be seen in hospitals in which there are many divisions under one building. Nestle also maintains these divisions focused on employees as well as customers. Services to employees include encouraging and motivating them to perform good work. In the case of customers it includes evaluating the demand of the customers and trying to keep them satisfied.
Identifying revenue centre
Revenue can be defined as a term used to define income that an organisation gets by normal business activities. The revenue of an organisation is earned by manufacturing and selling goods and services. According to Dhangwatnotai, Roughgarden and Yan (2015) revenue can be received of a company can be earned by interest, royalties and fees. Revenue centre is a division within an organisation or unit that gains revenue from the products that have been sold or the services that have been provided. The revenue centre is a separate department within the organisation wherein the manager of the department are accountable to the revenue collection of the firm. In the case of Nestle, the largest revenue of the company comes from the sale of chocolate products. The target market of Nestle, in terms of selling chocolates is the children. They also target more sales of chocolates during special events. Hence, the revenue earned from selling chocolates contributes to about 45% of the total revenue of the company (Nestle.com 2017).
Identifying PESTEL of the company
Political factor: Political factors refer to the intervention of the Government in the market. Political factors such tax policy, labour law and environment law and so on makes it difficult for companies to set up business. The political relations that exist with various countries also affect the trading in business. In the case of Nestle, the political factors of the countries do not pose huge threat for the company. This is mainly because the products of Nestle do not contain any harmful ingredients that may be banned by the Government.
Economic factor: This includes the growth in the economy and the fluctuations that take place. The economic factor of a country plays a major role in the decision-making activities of a company. For example, the capital cost of a company is affected by the interest rate. Hence, it is necessary to analyse the economic scenario of a country before making business investments (Anton 2015). Nestle needs to analyse the economic factors that may affect the competition of the company. The import and export of goods from other countries provide for a significant economic development of the company.
Social factor: The social factor involves the cultural aspects of the demography. According to Grünig and Kühn (2015), the type of people that reside in a neighbourhood and the lifestyle of these people need to be analysed. This can help in formulating the target market and manufacture products based on the interests of the customers. Nestle need to estimate the younger people that exist in a society so that it can launch various products of chocolate. The social factor also helps in recruiting employees for the company willing to work as per job description. Hence, this can be considered as one of the important factors for setting up a business.
Technology factor: In the modern days, technology plays a huge role in the development of a society and organisation. The organisation relies on technology for purposes such as manufacturing products, making strategic decisions and analysing the competitors. According to Eden and Ackermann (2013), the innovation of products, research and development plans are all made with the assistance of technology. Nestle uses the technologies in order to identify the competitors in the market and manufacture products with less minimum effort. However, sometimes technological dependence can also lead to problems related to costs and consistency of the products.
Environment factors: The environment factors include natural events that may affect business. Climatic factors such as a change in weather may cause harm to various industries. The growing awareness about the effects of climatic change affects the decision of expansion of a company. Companies either accept the random climate change or make decisions regarding ceasing business deals in the country (Hatch and Howland 2015). However, for a company like Nestle, the environmental factor does not cause much hindrance. This is mainly because of the fact that the products manufactured by Nestle can be consumed irrespective of the climatic factor.
Legal factors: The legal factors include the laws and regulations of a country. Every country has a set of laws that deal with the legal rights of the people. The laws ensure that the people are not violated under circumstances that deal with the selection and recruitment of people (Bennett and Chorley 2015). Policies regarding the safety of employees, consumer law, employment law vary from one country to another. The managers of Nestle need to ensure that the laws regarding employment or consumer protection are not violated. In order to maintain this, the company need to be aware of the different laws that govern the country.
Identifying source of sustainable competitive advantage
The manner, in which a company manages its assets, attributes and abilities contribute to a sustainable competitive advantage of the firm. The management of these attributes needs to be such that it becomes difficult for the competitors to duplicate or follow the strategies. Hence, competitive advantage can be attained in order to ensure that the company remains the best in the market (Grant 2016). Nestle has a reputation in the international market that helps it to remain competitive in the business world. The powerful brand image that has been developed by the company provides the source of sustainable competitive advantage. In this regard, four factors can be considered that help in attaining sustainable competitive advantage for an organisation.
Asset-driven: A company can be competitive if the assets possessed by the sector are powerful. The assets that a company can possess include the employees as well as the customers. The loyalty of these stakeholders forms the catalyst that leads to gaining competitive advantage in the market. The brand of followers in Nestle is high due to the various ranges of products they sell in the sale in the market. The developed brand image has helped the company to edge out competitors like Unilever, Amul and Hersey’s and so on.
Difficulty in imitating: This is considered to be the most significant sustainable development factor. Organisations need to focus on manufacturing products and formulating strategies that cannot be copied by other competitors. Wagner and Hollenbeck (2014) stated that if the strategies and product designs that are adopted by the company is easy to replicate then the company cannot attain competitive advantage. In this regard, some of the products of Nestle remain difficult to imitate. This provides an advantage for the company.
Branding: Jahanshani et al. (2017) stated that branding also contributes to building competitive advantage for a company as it is a source of identification of the products. The higher the brand value of a company, the higher is the popularity among the customers. Nestle is one of the most reputed companies in the world. The company has favourable partnerships that help it to remain competitive in the market.
Enduring: Endurance of a company is necessary for customers to perceive the value of a company. The impact of patents and trademark helps a company to maintain the uniqueness of the products (Wheelen and Hunger 2017). Nestle develops such patent rights that help the company to brand its products and strategies effectively. Thus, the company can develop advantages that go beyond raising hopes among the customers. It provides customers with a sense of assurance about the products that they manufacture.
Recommendations for future strategic direction
According to Hill, Jones and Schilling (2014), strategic direction refers to the actions that lead to attaining the goals of an organisation. The strategic direction helps to guide a company in the right position in the market. These decisions are based on the resources and capabilities of an organisation. Nestle needs to analyse the factors that may affect the business. For example, Nestle needs to ensure that the countries they select for expansion are technically developed. This can help the company to address the richness of the society and improve the employment ability so that competitive advantage can be maintained in the future.
References
Albrecht, C., Albrecht, C., Holland, D., Holland, D., Peters, M. and Peters, M., 2016. Strategic revenue analysis. Strategic Direction, 32(7), pp.32-34.
Anton, R., 2015. An Integrated Strategy Framework (ISF) for Combining Porter’s 5-Forces, Diamond, PESTEL, and SWOT Analysis.
Bennett, R.J. and Chorley, R.J., 2015. Environmental systems: philosophy, analysis and control. Princeton University Press.
Dhangwatnotai, P., Roughgarden, T. and Yan, Q., 2015. Revenue maximization with a single sample. Games and Economic Behavior, 91, pp.318-333.
Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management. Sage.
Grant, R.M., 2016. Contemporary Strategy Analysis Text Only. John Wiley & Sons.
Grünig, R. and Kühn, R., 2015. Global Environmental Analysis. In The Strategy Planning Process (pp. 89-96). Springer Berlin Heidelberg.
Hatch, N.W. and Howland, C., 2015. When Does Competitive Advantage Improve Customer Welfare?. In Academy of Management Proceedings (Vol. 2015, No. 1, p. 18091). Academy of Management.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
Jahanshani, A.A., Hajizadeh, G.M.A., Mirdhamadi, S.A., Nawaser, K. and Khaksar, S.M.S., 2014. Study the effects of customer service and product quality on customer satisfaction and loyalty.
Nestle.com. (2017). Cite a Website – Cite This For Me. [online] Available at: https://www.nestle.com/ [Accessed 16 Nov. 2017].
Peppard, J. and Ward, J., 2016. The strategic management of information systems: Building a digital strategy. John Wiley & Sons.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Visnjic, I., Wiengarten, F. and Neely, A., 2016. Only the brave: Product innovation, service business model innovation, and their impact on performance. Journal of Product Innovation Management, 33(1), pp.36-52.
Wagner III, J.A. and Hollenbeck, J.R., 2014. Organizational behavior: Securing competitive advantage. Routledge.
Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. Pearson.
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