Environmental Review And SWOT Analysis Of Nestle And Its Key Competitors

Competitive Review

Market Analysis of a company is important as it helps an organization to formulate a profitable business strategy. This analysis is conducted via study of the market competitors, understanding the nature of the customers, their preference and then finally critically ascertaining and defining the target market. Study of the market contemporaries helps to build a strong business strategy via revamping the product portfolio altogether and outnumbering the competitors in the balance sheet. The study of customers helps a company to analyze their sources of income and the trending products. On doing this, a company can give further emphasis on the hot selling products and increase their annual turnover. Finally, analysis of the target customers helps to define the company their product range and product groups.

The chosen organization for this assessment is Nestle. Nestle is a renowned Swiss translational food and beverage company. The principal motto of this company is “Good Food, Good Life”. This report sheds light on the three different aspects of market analysis. The report starts with the assessment of the strongest market competitors of Nestle, their attributes, market positioning and target perseverance. The report then discusses the about its customers, their influence over market and loyalty towards the brand. It also gives a brief discussion on the famous Maggi controversy. The report also provides information on the product line and the services offered by Nestle along with pricing of the products. Finally, this management report sums up with a SWOT analysis of the company of interest, Nestle and another SWOT analysis of its competitor.

The main purpose of this report understands the trends in the business market. The report brings forward the toughest competitors of Nestle, the customer base, the market trends, strategy of pricing and then finally a detailed SWOT analysis of Nestle and one of its competitors.

Over the years, Nestle has achieved a strong foothold in the market. Nevertheless, since the FMCG industry is very lucrative in the market field and the product domain is very common, the new entrants are frequent and are always a threat for Nestle. Numerous competitors of Nestle have already entered in this competitive market and have succeeded to grab some market share (Varma and Ravi 2012). The principal market competitors of Nestle are PepsiCo, Kraft Food, Unilever, Amul, Baker Hostetler, Engro Foods, Heinz, Euro Africa, Glencore, Yinlu Foods and Mother Dairy.

The competitive advantage of Mother Diary, over Nestle is it has a vast range of dairy products in comparison to Nestle and offers products at low price range. On the other hand, Unilever is more popular among the households whereas the Nestle gain popularity among elite class and has lesser product variants than Unilever (Nisa 2016).Thus, the competitors of Nestle trying of outnumber the sales value of this renowned brand via offering customers low-cost products. Nestle is the market leader for centuries such that it has now become a difficult challenge for the new entrants to cut-short Nestlé’s market share.

All the products of Nestle are affordable priced and at the same time, the food or the health supplements are nutritionally enhanced. They never ever negotiate on the food safety grounds. Nestle even promotes the production of Iodine enriched Maggi and most of the people suffer from Iodine deficiency. Not only in product manufacturing, has Nestle also had position itself in the target market via appointing the local distributors (Management.net, 2017).  Over the years, Nestle has brought innovation in its product lineup and this has helped them to sustain in the market. Periodic innovations have also helped this brand to work with more efficacies via removing the threats and other market substitutes. Recent, Nestle has encouraged innovation in the field of health consciousness and wellness factor. Following such, initiatives have moistened the path of Nestle and have assisted them to go beyond the substitutes.

Attributes of the Competitors

In order to generate market awareness and to create brand promotion the first policy which is being followed by Nestle is customer satisfaction. The feedback of the satisfied customers facilitates the word of mouth promotion. Increase in the client satisfaction thus decreases the promotional cost and other orientation prices. Offering products at affordable cost is the another feature of indirect market promotion (Ahola et al. 2013). Most of the purchasers fail to afford high value products and due to this they switch towards affordable brand like Nestle.

Things Company needs to know about their customers

The first thing Nestle needs to know is the gender and the age bracket of their customers as this will help them to increase their sales target when they are selling the products directly to the customers. On the other hand, when they are selling their products to other business like in the case of B2B (Bussler 2013), Nestle needs to know about the history of the other business with whom they are operating. Knowing the biological history of the prospective customers are not enough, proper occupational history, their daily needs must also be taken into action. The reason for which customers buy or vouch for their products is the second most important thing. While doing this, they are further edit their product portfolio and manipulate it accordingly. The interface of purchase is also mandatory to analyze like whether the customer is purchasing on the ecommerce site, retail store, wholesale supplier or B2C sales. Finally, the brand needs know what the customer actually thinks about them. Moreover, if their target customers share certain preferences towards the competitor brand, then that thing must be taken into action in the first place (Djelassi and Decoopman 2013).

Consumer behavior and their decision making process is a vigorous process involving the critical analysis of the prospective customers and the product of interest. The consumer decision-making process (Solomon 2014) consists of five basic process, which are illustrated below, in a flow chart format.

Need for the Product

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Gathering Information about the Product

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Evaluation of other Market Alternatives

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Tally of the Price and Final Purchase of the Product

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Evaluation after Purchase

Consumers are the main showstoppers of the market place and their behavior is the principal defining process of the market trend. In the very first place, the consumers need to understand their needs. The executive always want generate an imbalance among the consumers like creating a mist between their present status and the preferred status. This imbalance leads to the development of the need and compels the consumers to hunt for their required product. A need can occur instantly like a basic impulse and it is known as internal stimulus. On the other hand, the external stimulus is the case when there are outside influences like provocation from the friends. Moreover, such external provocation can comes as a form of advertisement designed by the company. When the consumer becomes sure about buying the product, he/she then starts education himself/herself about the product. While doing this they become more attracted towards the product and develop an urgent urge to own the product. However, by the basic instinct of the human nature goes, they do not want to fool themselves and they search for the similar alternative, in order to make their deal a profitable and pocket friendly. Fetching profit involves comparison of prices between similar products. Finally, when the research and the market analysis is being accomplished by the consumers, then finally the customers take their first step towards buying the product.

Company Positioning with respect to Competitors

The most pressing issues faced by the marketers are the customer’s loyalty. Moreover, without a team of loyal customers, a company cannot survive neither can fetch long-term profit. Nestle is a stalwart brand with ocean wide product strength which drags customer from different sphere of countries and the brand itself is the biggest crowd puller. Nestle is also known for delivering compelling products, projecting customers as their hero, designing interactive campaigns and listening to customer’s feedback. All these have helped Nestle to remain on the upper side of the client satisfaction parameters and to enjoy the privilege of brand loyalty (Stevens et al. 2012).

On contrary, with the advancement in the social media, the customers are now having more options and this is diluting the factor of brand loyalty. However, several advertisement campaigns, good quality service are the two most important factors that have helped Nestle to retain their existing customers and on the same time have drawn new buyers.

During the end of 2016, Indian regulators have banned Maggi noodles (Garg 2015), one of the most popular instant noodles. The reason behind this certain ban is, food safety tests have discovered significantly high levels of lead in the noodles. Maggi noodles remained off the shelves for months and as a result, the brand reputation suffered a substantial damage. The after affect is, crisis brewed and the competitors suddenly gained popularity in the market. Under such crucial condition, Nestle and its PR department took careful yet effective steps, proved themselves true, and successfully regulated the lead content controversy via showing their own report.

Nestle is a global name and is famous for their dairy products, chocolates and beverages. It has more than a million of customers who are spread worldwide. Target market is segmented based on (Hassan and Craft 2012)

• Geographical area
• Demographic area
• Psychographic area
• Behavioral area

Nestle coffee market is famous in the cold areas and in the metropolitan cities where demand of coffee is high. On the other hand based on demographic area products like Cerelac, Lectogen, Koko Krunch, and Nido classified and their target customers are the parents of the newborn babies. The luxury products like pet care, weight management chilled and frozen food are targeted to upper middle class and the upper class who nurture the psychology of polished life. Behavioral products are like weight management products are for the health freak customers.

Company’s Product Portfolio

The company has a product portfolio consists of organic yogurt, milk powder, organic milk, concentrated milk products, baby food, instant coffee, iced tea, coffee machines, instant noodles, soups, spice mixtures, sauces, wafer chocolates, chocolates, milk chocolates, mint and food vending products.

The main service provided by the company is Vending and Food Services. This service is again divided into two parts. Beverage Systems consists of Nescafe Table Top Double Option, Nescafe Table Top Triple/Four Options, Nescafe Alegria 8/60, EZ Care, Quencher (Göltenboth 2013). Food Service Products consist of  Beverages and Culinary.

The chocolates like Kit kat and Milky bar and Nescafe are targeted for all section of customers, as they are low cost products. Powered and liquid milk along with Cerelac are designed for children and neonates. The Cornflakes are mostly targeted to the working professional who is always in a hurry to wrap up their breakfast and are health conscious. Besides there are pet products, which are targeted towards pet lovers.

Target Market Perseverance

Nestle Swiss Assorted Dark Chocolates is the lasted addition in the Nestle portfolio. Chocolates are always in demand in market as they are treated as gifts, snacks for quick break and as stress busters. Swiss chocolates are known as king among the chocolate fraternity and hence via introducing such a tempting product Nestle has further played a masterstroke in the marketing strategy. This is for sure outnumbers their tough competitors.

Nestle follows a marginal pricing for its entire product range. Some are cheap and some are costly depending on the demand of the product (Hinterhuber and Liozu 2012). Maggi and Nescafe being the leading sold product have a cheaper price, which makes the consumers not wanting to change the brand. The reasonable price is made in such a way that other competitors have similar products with the same price. The market is dominated by both price and quality competition. Products differ from producer to producer. This makes price a key fighting point. Nestle has a large array of products with different prices. They too differ in kinds of demand so, the demand cannot be said to be elastic or inelastic.

Nestle plans to become the world’s leading producer of food products. They have earned the trust and respect over a long period of satisfactory product delivery. The company is seeking to provide heir consumers expected products and to make their shareholders happy in all possible way (Moura, Branco and Camoesas 2015). They have priced their products in a similar comparison to their rivals. Making the price tag high would make them lose consumers.

Consumers relate price and quality equally. A high priced good is of good quality than the same type of product at a cheaper cost. Increasing the range of products rather than increasing the price of the existing one makes the company get higher profit. Competition in the market is an important factor in pricing. Making a product cheap would result in loss and costlier would make the product less sellable. Allowing promotional offers and discounts help to sell the product more. Elimination of intermediary would reduce the price of the product and would make the seller and the consumer happier. Keeping low prices or at a reasonable price attracts more consumers (YourArticleLibrary.com 2017). These strategies are all followed by Nestle to improve its strategies in the market.

Nestle SWOT analysis	PepsiCo SWOT analysis
Strength R&D investment Global diversity Range of products	Strength Brand equity Product range Supply chain
Weakness Criticism Contaminated foods	Weakness Unhealthy product Failed products Value added advertisements
Opportunities Proper labeling Ready to drink products	Opportunities Healthy options R&D investment Flavors enhancement
Threats Water scarcity Hike of coffee bean price	Threats Competitors Health factor Government norms

• Research and development expenditure – one of the key expenditure in the organization is the research and development expenditure. The company incurred a total of US$ 1.697 billion on R&D in the year 2015. This was 1.89% of the total revenue spent by the company. The company has the largest R&D cell in the worldwide market. This factor helps Nestle to have a long-term success in the competition (Jurevicius 2017).
• Geographically diversified – Nestle has a worldwide sale of its product. The company reached out to people of 189 countries. Nestle tries to earn not from a single location. Spreading its business to different regions in the world gives it an advantage over the rival companies (Mensi-Klarbach 2012).
• Range of product – There are about 2000 different products in the catalogue of Nestle (Kapferer 2012). The large portfolio helps the company to target a large range of customers cater to different needs. The company can easily change the taste of the products suiting to the customers’ needs.
• Environmental safety – Nestle has the pride of making the environment a cleaner place to thrive. They have reduced waste generation and using environmental safety packaging materials. The production line uses recycled products and renewable sources.
• Recognized brands acquisition – Nestle owns many globally acquainted brands. They include Nescafe, Maggi, Kit Kat and Purina. The company has brand recognition in all 189 countries.

• Criticism faced – A company, which is one of the largest food sellers, attracts a lot of attention. Over the years, the company has faced a lot of criticism. Marketing of baby food products in an unethical method, privatization of water usage (Bacher 2015), mislead advertisement, debt payment from a famine struck country and usage of child labor are some of the criticism that the company has faced.
• Contaminated food distribution – In 2014, Nestle was forced to withdraw all production of Maggi noodles from India (Sakunia and Jha 2016). This caused brand reputation damage. In the US, the company had to recall many pre-prepared dishes due to inclusion of broken glass pieces.

• Indication of harmful products – A survey declared that customers tend to buy products with clear labeling of ingredients in the product. Nestle as a global brand should see to this topic and make detailed labels indicating all the ingredients (Xiang 2017).
• Source of materials – consumers like products which are made from good quality products. Ethically grown products should be used in making food grade products. Nestle should start sourcing their raw materials from sustainable environment grown farm.
• Small food entrepreneurs – With a large number of food startups, Nestlé’s market may fall significantly if the threat is not taken in to account. Nestle should start producing such startups which will help them to increase sales.
• Ready to drink products – Ready to drink (RTD) products are a growing need in the modern society. Fast-paced lifestyle enables a man to make their drinks fast. RTD coffee and tea products should be introduced by Nestle in the market to cater to the needs of the consumers. Nestle is one of the largest producers of beverages in terms of coffee, then also they need to create products which are RTD (Köhler 2014).

• Water scarcity – A large part of production line in Nestle is of beverages. This makes large use of drinkable water. There is a large scarcity of fresh drinkable water and is increasing day by day. In the near future, Nestle may face complications due to water scarcity. The company can adapt to the use of reusing of water and water conservation mechanisms (Smith 2017).
• Beverage industry competition – Competitive rivalry makes a great threat to the company’s production line. Catering to the consumers need is important for an organization such as nestle to survive. Nestle will find it hard in the future to compete with the rivals if no new food and beverage items are not introduced in the market for the consumers.
• Coffee bean price hike – Coffee makes 10% of the total income for the company. Due to harsh weather conditions coffee bean prices has hiked (Jaffee 2014) a considerable percentage. On the other hand, there is also a large consumption of coffee in all sectors of the world. Nestle has to make amends in their coffee product production to compete with the price hike (Wolfe 2012).

The research and development program of nestle has all the resources flooded into it which is a good point. To have a geographically diversified range of business helps them to get profit from all over the world. With the amount of product portfolio there is little scarcity of products. People can opt for a similar product of nestle in case there is a scarcity of product in the market. They control their waste management progress in a tight process. In case of weakness, though the company has faced a lot of criticism and drawbacks they have still been able to hold up their brand value. The critical success factor for the company is the brand name in Nestle.

Customer Review

They have faces threats in the form of contaminated products and water scarcity. They have still managed to overcome such differences and made changes in their products so that the consumers can once again try out the products. The company at the earliest needs to monitor the water scarcity problem in the world and the rise in the price of coffee beans. Water is one of the most important commodity required in an organization.

In the future, the organizations can opt to buy out some of the coffee bean farms in Brazil or start their own production. They can shift to effective water management in forms of rainwater conservation and other procedures.

Figure : Porters five forces

(Source: E. Dobbs 2014)

• Threats of new entry – Food industry is an ever increasing and the most profitable market. New upcoming food companies have to tackle with existing branded organizations. The FDA approval (Collins and Hamburg 2013) is the main green light for the new startups to establish themselves.
• Threats of substitution – There are many companies who create same substitutive products like Nestle. This makes the company to remain innovative to compete with them. To make a product better means they need to make it healthier. This is a positive point for Nestle as the company already makes healthy products.
• Supplier power – In the food industry raw material is an important ingredient. Nestle follows a high rated raw material acquisition for its products. They seek for high quality suppliers and reduce wastage of raw materials.
• Buyer power – consumers has the power to stop buying a certain product and it will slowly disappear from the market. Nestle follows a competitive bargain with the consumers providing good quality products which leaves small gap for the consumers to complain. Innovation of new products keeps products on a constant roll.
• Industry rivalry – The market is full of competition. Kraft food maintains a constant rivalry with Nestle (Moodie et al. 2013). With the constant competition food grade of the products are increasing day by day and ensures the consumers get best quality products.

Porters 5 forces can be summarized by saying that even though there is constant competition in the market but still Nestle has been able to keep up their good product delivery to their customers.

Conclusion

Therefore, from the above discussion of this report, it can be concluded that Nestle is one of the most popular brands in the FMCG market. However, like other market stalwarts, it has its share of market competitors. However, via critical analysis of the market, customer’s feedback and the pricing strategy it has able to retain its strong foothold in the business field. The principal strength of this brand is geographical diversity, huge range of products and environmental safety packaging. However, certain market reports accuse Nestle for the use of contaminated foods and hence it can be treated as its weakness. Still then, if the Nestle influences the use of ethically grown raw materials then their negative image on above the market can be withdrawn. Finally, they need to keep an eye on the competitors and to strictly regulate their water usage during beverage production due to the latest burning cause of water scarcity. Moreover, the hike in the coffee bean has ignited a price surge upon one of their principal products, Nescafe coffee.

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