Business Plan Case Analysis: A Close Study On Nestle

Industry analysis

Founded back in the 1860s(“History”, 2018) in Switzerland, Nestle has evolved as one of the largest food companies in the world. The products range from medical, baby food and bottle water to pet foods and snacks. Specific fundamental rights guide the marketing and planning strategies of the company. Innovation and renovation of product ranges maintain the balance between product lines and geographic activities. The success probability is high since businesspotential (long-term) is never sacrificed for performance (short-term). The chief aim of the company is to meet the daily needs of customers all around the world by providing them with healthy and nutritious food. This report analyses the business plan of Nestle with close reference to the industry, marketing plan, operational plan, and financial plan. Following this, the paper assesses the probable risks the company is likely to face and concludes with suggestions that could help the company combat the risk factors.

In terms of production, Nestle is ranked fifth in the world and is currently world’s most diversified manufacturers of food. Nestle focuses on the efficiency of distribution and fast processing. Although Nestle is the undisputed leader in the industry of food processing, it faces minor challenges due to the global economic meltdown. At present, Nestle has about 30 brands that earn revenue independently, adding up to a billion francs each year. The company aims to create long-term value for catering to the needs of the customers and uses a decentralized approach for extending the scope of its business. The unique manufacturing operations of the company accounts for its competitor advantage, since everything from supply chain, plant processing and technology, to marketing is carried out in privatized plants. If innovation is all about creating value among society and customersas opined by Osterwalder, Nestle is on the right track of creativity and innovation. Moreover, the company does enough justice to its tagline “Good Food, Good Life”, by focusing it chief goal on advancing nutrition and health (Nestle, 2013). Nestle promotes the nutritional values of its products by expanding the product ranges to including more food items of nutritional value. The Health Science branch created by the company additionally validates the company’s commitment to creating pharmaceutical foods, health and nutrition. This subsidiary is dedicated to bridging the gap between food and pharmaceuticals, untying the accessibility of drugs and food. Technological innovation is the chief force driving the food processing industry. Nestle has invested about two billion dollars for new technologies that support freeze-drying, chilling and dehydrating. Nestle has therefore emerged as an impressive leader in the competitive market of food industry.

Political factors: · Unstable government regulations in different countries might be unfavorable for market sales. · Lobbyism in countries like the United States affect affects business growth and brand reputation. Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Economic factors: · The supply chain network of Nestle is efficient and is known as one of the most accessible brands for consumers. · The recent ban of Maggi led a sales decline of 17%.
Social factors: · Nestle organizes social programs in public interest. · The training programs for farmers and skill development for women are two good examples.	Technological factors: · Nestle has made valuable contributions in the world of food technology. · Probiotics, fermentations, foam boosters, material science were all initiated by Nestle.
Legal factors · News of using child Labor and the Maggi scandal have jeopardized the company’s legal proceedings. · The controversies concerning water supply and infant milk formula have caused legal troubles to the company.	Environmental factors: · Nestle has strived towards sustainable development as reflected in their environmental friendly manufacturing and packaging process. · Water conservation and eco-friendly packaging are notable actions aimed at environmental conservation.

Pestle analysis

Like most large-scale companies, Nestle has formulated a statement that distinguishes the activities and services provided by the company from rival firms and describes the benefits of the company’s offering. This is highly integral to the success of any business since the buyer decisions of consumers is heavily dependent on the product type; more unique the product, greater chances does it have at sales. The reliable and convenient delivery of top beverages both for home and business purposes is a point to note(Nestle.com, 2018). The new “anytime ordering” of facility enables the customers to avail services at any time of the day. The provision is ideal for planning events and special occasions since there is no limit for quantity of deliverables. The exclusive range of purified bottled water is enhanced with rich minerals for better taste. This is to help families adapt a healthier lifestyle and to make it enjoyable.

The consumer range for the product varies from high upper class to low middle class strata of the society. Consumers belong from all age categories, depending on their requirements. Most consumers at least have an average incomes, although people with high incomes opt for Nestle products. The diverse product ranges include beverages, milk products, cooking aids, prepared dishes, and chocolates. The price varies for each product, depending on the ingredients, quality, and cost of manufacturing. The packaging and sizing options also determine the pricing. Competitive pricing is offered for products like Munch and Kitkat, where the substitution threats are considerably high. Nestlé’s distribution strategy is based on the FMCG process of distribution. It follows the chain of: manufacturing, agent, distributorship, retailor, consumer manufacturing, bulk buyers and finally consumers(Bhasin, 2018). Nestle has two different distribution forms and introduces tactics such as trade discounts so that the channels remain motivated. The high recall value of the brand can be accredited to its strong marketing strategies. The Marketing Mix of Nestle are as follows:

Price- Products are priced according to quality and demand. Nestle offers a variety of packaging options and product sizes for consumers. Competitive pricing is offered for products like Munch and Kitkat, because of the tough competition.

Place-Nestle’s target audience is geographically dispersed in both urban and suburban crowds. For distribution, Nestle uses the FMCG strategy. The products of the company have a distinctive brand positioning while the trade discounts keep the channels motivated. The only challenge in terms of market place is convincing the retailers to sell Nestle products instead of Cadbury.

Determination of Nestle’s unique value proposition

Promotion- The advertising campaigns for Nescafe and Maggi have proved quite inviting in the past. The innovative and witty promotion tactics have seen the company to success. For instance, Kitkat’s “take a break” commercial  has done excellent marketing for the product, since it appeals to the elderly and a(“Kit Kat Digital Advert, 2018)aged alike.

Product- The diverse product range caters to the taste of a huge consumer base. Nestle offers large variety of FMCG products of premium quality. The wide array of products accommodates almost every kind of need.

The Premium Quality Policy of Nestle ensures food safety and builds trust by offering services and production that live up to the expectations of the consumers. The operational strategies are designed specifically to support people who are willing to adopt a healthy lifestyle. Industry-oriented research accompany the operations design of the management. Besides that, the development and research activities of the company focus on the exploration of the new nutritional therapies that enhance the improvement of health and lifestyle of the consumers. These activities are helping the company create awareness among different communities to take better care of aspects concerning health and wellbeing. The operations plan is hence largely based on informing the world about the impacts of their activities. For achieving the aim, the company shares insights concerning the health and welfare challenges, global nutrition, engages will key leaders, stakeholders, policymakers, and builds prospective partnerships with other large-scale companies. The several science-based programs organized by the company that promotes the importance of health and nutrition in regular life, have convinced many customers who are drawn towards the healthy products of Nestle and buy them for their nutrition value. Changes in government policies have caused significant modifications in the operational plans, but the company continues to evolve by making the company operations more transparent and affordable for global customers(www.coursehero, 2018).

The accounting policies of Nestle conform to the IFRS and the financial statements are applied to the policies. The income statement declares the revenue collected from sales when the rewards and risks of goods ownership are transferred to buyers via shipment. The cost of production determines the cost of the goods, which is adjusted for discrepancies of inventory. Any other expense concerning promotions and advertisement is included in the total cost of production.  The company also earns revenues from the contracts it has made with the customers. Nestle has more acquisitions than dispositions, although the financial statements of years 2016 and 2017 suggest that the cash inflow on certain disposals of the business were significant and could cost the company a minor debt.

Startup Expenses
Buildings / Real Estate
Purchase	$                       40,000
Construction	10,000
Remodeling	–
Other	500
Total Buildings and R / E	$                       50,500
Leasehold Improvements
Item 1	$                         5,500
Item 2	$                         5,500
Item 3	$                         5,500
Item 4	$                         5,500
Total L / H Improvements	$                       22,000
Capital Equipment List
Furniture	$                       55,000
Equipment	$                         1,500
Fixtures	$                         1,500
Machinery	$                         6,500
Other	$                         2,500
Total Capital Equipment	$                       67,000
Location and Admin Expenses
Rental	$                                  –
Utility Deposits	5,500
Legal and Accounting Fees	4,500
Prepaid Insurance	55,000
Pre-opening Salaries	5,500
Other	5,500
Total Location and Admin Expenses	$                       76,000
Opening Inventory
Category 1	$                         2,560
Category 2	$                         2,560
Category 3	$                         2,560
Category 4	$                         2,560
Category 5	$                         2,560
Total Inventory	$                       12,800
Advertising and Promotional Expenses
Advertising	$                         1,500
Signage	$                         1,500
Printing	$                         1,500
Travel & Entertainment	$                         1,500
Other / Additional categories	–
Total Adv and Promo expenses	$                         6,000
Payroll and payroll taxes
Expense 1	$                       25,000
Expense 2	25,000
Total Payroll and payroll taxes	$                       50,000

Marketing plan

Sources of Capital
Owners’ Investment (name & % ownership)
Your name & % ownership	$   6,000,000
Other Investor	25,000
Other Investor	2,500
Other Investor	–
Total Investment	$   6,027,500
Bank Loans
Bank 1	$           2,500
Bank 2	2,500
Bank 3	–
Bank 4	–
Total Bank Loans	$           5,000
Other Loans
Source 1	$         65,000
Source 2	25,000
Total Other Loans	$         90,000

		Year 1	Year 2	Year 3	Year 4	Year 5	Total
Operating activities
	Net income	$0	$0	$0	$0	$0	$0
	Depreciation	$27,900	$28,458	$29,016	$29,574	$30,132	$145,080
	Accounts receivable	$0	$0	$0	$0	$0	$0
	Inventories	$0	$0	$0	$0	$0	$0
	Accounts payable	$0	$0	$0	$0	$0	$0
	Amortization	5,000	5,000	$5,000	$5,000	$5,000	$25,000
	Other liabilities	25,000	25,000	$25,000	$25,000	$25,000	$125,000
	Other operating cash flow items	0	0	$0	$0	$0	$0
	Total operating activities	$57,900	$58,458	$59,016	$59,574	$60,132	$295,080
							$0
Investing activities						$0
	Capital expenditures	$0	$0	$0	$0	$0	$0
	Acquisition of business	15,000	15,000	15,000	15,000	15,000	$75,000
	Sale of fixed assets	$10,000	$10,000	$10,000	$10,000	$10,000	$50,000
	Other investing cash flow items	0	0	0	0	0	$0
	Total investing activities	$25,000	$25,000	$25,000	$25,000	$25,000	$125,000
Financing activities
	Long-term debt/financing	($95,000)	$0	$0	$0	$0	($95,000)
	Preferred stock	0	0	0	0	0	0
	Total cash dividends paid	5,000	5,000	5,000	5,000	5,000	25,000
	Common stock	0	0	0	0	0	0
	Other financing cash flow items	5,000	5,000	5,000	5,000	5,000	25,000
	Total financing activities	($85,000)	$10,000	$10,000	$10,000	$10,000	($45,000)
Cumulative cash flow	($2,100)	$93,458	$94,016	$94,574	$95,132	$375,080
Beginning cash balance	$0	($2,100)	$91,358	$185,374	$279,948
Ending cash balance	($2,100)	$91,358	$185,374	$279,948	$375,080

Despite being the leading brand in food industry, Nestle has been facing challenges that threatens the stability of the business. The company had been previously criticized for employing child labor, especially for the supply chain of cocoa. The developed media system and the surge of social awareness will ensure an unfavorable reputation of the company among the consumers. The boycott and ethical issue might drive the company to ruins. Nestle was accused of aggressive marketing, in the third world orders particularly, which has led to many conservative countries boycott some of the culture-sensitive product. There are considerable challenges with respect to the availability and sustainable usage of raw materials. Apart from natural disasters bad weather conditions, unexpected consumer demands and inaccuracy of received orders in inventory or in-hand stock. Restructuring the organization might also impose threats to the traditional employee contributions. The company also identified issues with the pyramidal model of organization and had to subsequently develop the “on the Move” program.

Conclusion:

According to the discussion under the specific sections, Nestle has a strategically formulated management plan which enhances its potential for achieving success. However, the operations manager must be cautions of the risks that threaten the stability and growth of the company. Some recommendations for avoiding the risks would be to support WHO campaigns while marketing complementary goods, advertising with free samples and make suitable provisions for building multiple relationships with other suppliers of raw materials. It must be noted that a majority of the success factors of the company lies with its efficient and tactful marketing strategies and financial plan. If there is one area that Nestle needs to work on, it is the aspect of risks and challenges associated with the operational functions of the business. Additionally, Nestle should also come up with more unique value propositions for extending the scope of the business. A company is characterized by its products and diversity in product range is the best strategy to extend consumer base.

References:

(“Kit Kat Digital Advert By Doubleyou: Take a break | Ads of the World™”, 2018)

Bhasin, H. (2018). Marketing Strategy of Nestle – Nestle Marketing Strategy. Retrieved from https://www.marketing91.com/marketing-strategy-nestle/

Cordón, C., Hald, K. S., & Seifert, R. W. (2013). Strategic Supply Chain Management. Routledge.

History. (2018). Retrieved fromhttps://www.nestle-ea.com/en/aboutus/history/history_detailed

Nestlé executive: ‘We are all facing risks of having supply challenges’. (2018). Retrieved from https://www.euractiv.com/section/agriculture-food/interview/nestle-executive-we-are-all-facing-risks-of-having-supply-challenges/

Nestle, M. (2013). Food politics: How the food industry influences nutrition and health (Vol. 3). Univ of California Press.

Nestle.com. (2018). Retrieved from https://www.nestle.com/investors/overview

Sarno, V., & Barmo, M. (2014). Sustainability Management in the Agri-Food Companies: A Practical Guide. Quality-Access to Success, 15(141).

www.coursehero. (2018). Retrieved from https://www.coursehero.com/file/11563244/Nestles-Strategic-and-Operational-Plan/