Launching A New Product In India By Nestle S.A – SWOT Analysis

About Nestle S.A and its products

Discuss about the Targeting and Positioning in Global Markets.

This report has chosen a particular organization and a country for launching of a new product in that market.  The organization chosen for the study is Nestle S.A and the country chosen of operation is India. The report will develop a new product that can be used to capture the operating market by identifying the strengths and weaknesses of the company and market analysis.  Therefore, the study will conduct a SWOT analysis which will provide details about the internal strengths, weaknesses, opportunities and threats of the organization. The SWOT analysis will facilitate in identifying the opportunities that the organization can capitalize on to launch a new product to maintain their sustainability and gain competitive advantage in the market.

Nestle S.A is one of the Swiss transnational companies serving drink and food in different countries. The company has its headquarters in Vaud, Switzerland and is the largest revenue generator in the food industry. Moreover, considering the other parameters it is the largest company in the global market. The product of the organization are diversified in nature and consist of products such as bottled water, baby food, breakfast cereals, medical food, confectionary, coffee, tea, ice cream, dairy products, pet food, frozen food and snacks. The majority of the products in the product line of the organization are sold for more than $ 1 billion (Nestle.com 2018). These will consist of products such as Nescafe, Nespresso, Smarties, Stouffer’s, Nesquik, magi and Vittel. The company consists of more than 400 factories operating in almost 200 countries. The growth of the company was favorable during the period of early 90’s due to implementation of free trade in the global market. Since then, the organization has made several acquisitions where the major acquisitions were made in the year of 2002 of the companies named Dreyer’s and Chef America (Nestle.com 2018). The organization has made acquisition and strategic mergers in the last decade frequently to gain competitive advantage in the market.  The organization has been focused on transforming their organizations into health, wellness and nutrition in order to compensate the decline in the confectionary sales. Moreover, the government threat of changing the rules and regulations for the confectionary industry also was a threat which led them to change their strategy. Therefore, the organization has aimed to develop food products having corrective and preventative health properties. Nestle developed products such as protein shakes a drinks in order to combat diabetes, malnutrition, obesity and digestive health. IN the past recent years, the organization has focused on developing healthy confectionary products reducing the amount of sugar content from all its products.

The growth in the global confectionary market is slow but India has been defying the odds by becoming fastest growing chocolate confectionary market in the world.  The sales of chocolate confectionaries increased in the year of 2016 by 13% which shows that along with Poland it is the only country to show positive growth in this department. The CAGR in the Indian confectionary market is strong at 19.9% in terms of retail value in the market between the year of 2011 to 2015 and the expected growth in the upcoming five years is 20.6% (Bhushan 2017).  The sales volumes of chocolate sales in India are 228,000 tons in terms worth of chocolate which when compared to the largest consumers of chocolate in the world are almost equal. There are global companies such as Hershey and Mondelez have experienced in the Indian market even after the demonetization of the Indian currency. The negative impact of demonetization increased the net revenue by 0.6 for Mondelez while the net revenue of Hershey’s grew by 20% in India (Yu 2017).

Growth of Confectionary market in India

The key reasons behind the growth of the confectionary market in India are convenience and health benefits. According to the research the consumers in the Indian market assumes the sugary snacks like chocolates to be healthy and others think that chocolates provides them with energy. The consumer behaviors in the Indian market have changed significantly and they think that these products are convenient for them. Moreover, the customers would like to consume natural and organic chocolate products. This has opened a greater opportunity for the companies in the market to develop product according to changing to capture a huge share in the market.  The market leader in this segment in India is Mondelez which has acquired almost 50% of the share in the market where as Nestle has almost 13% share in the market, Ferrero has almost 8% share in the market and the other companies have acquired the remaining share in the market. On that this Mars which is the largest producer of confectionaries in the world are in an intense competition with the Mondelez group to disrupt their position. Mars have shown higher growth and share in some of the categories such as candy bar segment where Mars product such as Mars, snickers, Twix and bounty have take over the market from Cadbury Fuse and Mondelez. There have been fierce competitions among the companies such as Mars, Ferrero, Mondelez, Amul and Nestle (Statista 2017). However, in this competitive environment, Mondelez is still holding onto the majority of the shares. Therefore, the Nestle has the opportunity of capitalizing on the growth in the market.

Strengths ·       Strong research and development background ·       Strong presence in the Indian market ·       Excellent  brand Image ·       The revenue sources are highly diversified which provides a balance in revenue generation streams. ·       Focus on developing healthy snacks	Weaknesses ·       Lower market share due to lesser variety in the confectionary segment ·       Multiple number of brands under the same group  ·       Involvement in various controversies ·       Less focus on the confectionary brand and its product
Opportunities ·       Nestle has the opportunity of capitalizing on the growth in the market. ·       The organization can form strategic alliance to increase their penetration in the market. ·       Market expansion ·       Development of new product suitable to current demand in the market	Threats ·       Strong competition in the market from Mondelez, Hershey and Mars ·       Changing behaviour of the market consumers ·       The buyer power is higher in the market due to the availability of large number of similar products in the market.

Table 1: SWOT

(Source: Moura, Branco and Camoesas2015)

Strength	Weakness	Opportunity	Threat
1	Strong research and development background	Lower market share due to lesser variety in the confectionary segment	Development of new product suitable to current demand in the market	Strong competition in the market from Mondelez, Hershey and Mars
2	Excellent brand Image	Involvement in various controversies	The organization can form strategic alliance to increase their penetration in the market.	The buyer power is higher in the market due to the availability of large number of similar products in the market.
3	Strong presence in the Indian market	Multiple number of brands under the same group	Nestle has the opportunity of capitalizing on the growth in the market.	Changing behaviour of the market consumers
4	The revenue sources are highly diversified which provides a balance in revenue generation streams.	Less focus on the confectionary brand and its product	Market expansion
5	Focus on developing healthy snacks

Table 2: ranking

(Source: As created by author)

The company has always been focused on using technological superiority to develop products that are healthier and better than the competitors in the market. Nestle has the largest research and development facilities where over 500 employees are employed.  They have developed research partnerships with various research institutes and universities to make sure of the fact that they can develop healthier and nutritious products. The organization has more than 21 research facilities globally. The organization has a diversified portfolio and has been providing various products in the food industry to the consumers (Manzaneque Corona 2014). They have been able to create their brand image due to their consistency in the products they offer and their sheer focus on developing nutritious products. The organization has been present in the Indian market for a long time and has been able to capture a large share in the market. The organization has been focused on providing the consumers with healthier products and the growth of the products in the Indian is due to the perception of the consumers that confectionary products are healthier snack compared to the other products available in the market. Nestle has diversified their product which has presented them with the opportunity of experimenting with new products.

Nestle does not have an extended product line as compared to their competitors which is the reason that other companies have gained competitive advantage in the market. The variety in their confectionary products are missing as compared to the competitors. The organization has been involved in various controversies in the recent years which have hampered the image of their brand. The maggi controversy has affected the Indian consumers highly as it one of the major selling products of the organization. This has affected the sale of the other products belonging to the same brand. The organization has a large number of products under the same brand umbrella therefore; the affect on one of the product will have an impact on the other which is the case of Maggi (Manzaneque Corona 2014). Moreover, it is difficult to manage so many products under the same brand name. The diversity in the product line of the company caused them to focus on different products rather than focusing on the confectionary market in India. This is the reason that they have less amount of market share in India even though having a great brand image.

Competition in the Confectionary market in India

The sudden growth in the confectionary market n India has presented Nestle with the opportunity of capitalizing on the market situation. The organization can form strategic alliance with other similar companies in the market to compete with the market leader Mondelez. The organization also has the opportunity of analyzing the current needs of the consumers to develop a product which will mitigate the needs of the consumers (Kotler 2015).  These will enable them to penetrate further into the market. According to the present studies, the Indian consumers chocolate products healthier than other snacks in the market. Therefore, as the organization has focused on developing healthier products in the past decade this will be provide them with competitive advantage in the market.

The Indian confectionary market is highly competitive and with the extensive growth in the market, it has become lucrative for the companies in the global market. Therefore, the competition in the Indian market is expected to intensify. Therefore, using innovation to create new products in the market is the only way to sustain (Armstrong et al. 2015). The buying behaviors of the consumers are changing rapidly so it is difficult for the organization to quickly adopt to the changing need. The buyer power in the market is high due to the availability of large number of complementary product therefore; the organization will have to develop their own market by creating premium priced products.

The new product that could provide the organization with a competitive advantage is a dark chocolate having high health benefits along with premium price. As the consumers in the Indian market are looking for healthier options, the organization will have to develop a separate market from rest of their consumers by developing a premium segment product.

Product	The product will belong to the premium category which will consist of attributes such as high health benefits and less content of sugar content. This will be an organic dark chocolate product which will provide value for money to the consumers.
Price	Nestle will be using premium pricing to create their own market segment where the products will cater to premium consumers in the segment. The organization has been using competitive pricing in this product category. However, in order to gain competitive advantage and market share premium pricing is required.
Promotion	Nestle will use both traditional and digital marketing strategy. IN traditional marketing the organization will use posters, road shows, product testing and advertisements. However, the majority of the focus will be on the digital marketing campaign. This will consist of promotion on social media websites, celebrity endorsements, search engine optimization and marketing and other online marketing strategies such as pop ups on popular websites.
Place	The billboards will be placed on premium locations which can grab the attention of premium consumers. Posters will be displayed on different malls where the consumers have a higher disposable income. Moreover, Nestle will use events to interact with the crowd and conduct product testing in order to increase consumer engagement.

Table 3: Marketing Mix

(Source: Huang and Sarigöllü 2014)

In order to identify the target market, Segmentation, targeting and positioning will be used.  The target segment will be the high end consumers that have a high disposable income. India being a developing country, they are different classes, culture and geographical regions. Therefore, Nestle will aim to target the premium consumers having fitness awareness and are willing to go lengths to be fit. Therefore, psycho graphically, the consumers more into living a healthy lifestyle will be targeted (Schlegelmilch 2016).  Nestle will aim to position the brand as a delicious healthy confectionary products ideal for consumers willing to lead a healthy lifestyle. Therefore, the organization will focus on quality and benefits that the consumers can avail by making purchase of this product.

Nestle will market the product as a healthy premium organic snack which is the best option for the consumers if they want to stay healthy and fit. The product will provide the consumers with energy and the consumers can consume before working out or even after a workout (Payne, Frow and Eggert 2017). Therefore, Nestlé’s value proposition is high quality organic chocolate at premium pricing which signifies value for money.

In order to identify the strategies that can be used to effectively launch the product into the Indian market TOWS matrix will be used. The TOWS matrix will develop strategies based on the SWOT analysis conducted at the first part of the report (Kim et al. 2015). There are four types of strategies that can be used; one is Maxi-Maxi, Maxi-Mini, Mini-Maxi and Mini-Mini.

Internal strengths	SO	ST
The organization can form a strategic alliance with complementary companies so that they can develop a product under a different brand name. This will enable to create a different market of the own. The companies has a strong and research structure which will enable to use their resources to increase their product line. The organization can also use their strong presence in the Indian market to penetrate into untapped market segments.	The research and development of the organization will facilitate them to study the buying behavior of the consumers to identify the patterns and their changing need. This will enable them to develop products that can mitigate the changing needs of the consumers and compete with the other major companies in the market. The organization can also create a different market segment of their product which will significantly reduced their buyer bargaining power in the market.
Internal Weaknesses	WO	WT
The organization will have to put more focus on their confectionary products so that they can capitalize on the market opportunities. The organization will have to be involved in health initiatives so that they can compensate for degradation of the brand image due to different controversies.	The organization can make joint ventures with other companies in the confectionary market so that double their resources to develop products that could take leading position in the market.

Table 4: TOWS

(Source: Rauch et al. 2015)

The SWOT strategy shows that out of these strategies the appropriate strategies are the maxi- maxi and maxi-mini strategy which could provide increased share in the market.

References

Armstrong, G., Kotler, P., Harker, M. and Brennan, R., 2015. Marketing: an introduction. Pearson Education.

Bhushan, R. 2017. Mars Chocolate over moon after toppling Mondelez in India in modern trade segment. [online] The Economic Times. Available at: https://economictimes.indiatimes.com/industry/cons-products/food/mars-chocolate-over-moon-after-toppling-mondelez-in-india/articleshow/59889028.cms [Accessed 11 Apr. 2018].

Huang, R. and Sarigöllü, E., 2014. How brand awareness relates to market outcome, brand equity, and the marketing mix. In Fashion Branding and Consumer Behaviors (pp. 113-132). Springer, New York, NY.

Kim, J., Kim, K.H., Garrett, T.C. and Jung, H., 2015. The contributions of firm innovativeness to customer value in purchasing behavior. Journal of product innovation management, 32(2), pp.201-213.

Kotler, P., 2015. Framework for marketing management. Pearson Education India.

Manzaneque Corona, E., 2014. Comparison of marketing policies applied by the same company in different countries and analysis of the reasons for the differences.

Moura, A., Branco, M. and Camoesas, M., 2015, June. NESTLÉ, A GLOBAL FIRM AND ITS CUSTOMER RELATIONSHIPS. In IMC 2015 International Management Conference 26th June 2015 (p. 96).

Nestle.com 2018. [online] Nestle.com. Available at: https://www.nestle.com/ [Accessed 11 Apr. 2018].

Payne, A., Frow, P. and Eggert, A., 2017. The customer value proposition: evolution, development, and application in marketing. Journal of the Academy of Marketing Science, 45(4), pp.467-489.

Rauch, P., Wolfsmayr, U.J., Borz, S.A., Triplat, M., Krajnc, N., Kolck, M., Oberwimmer, R., Ketikidis, C., Vasiljevic, A., Stauder, M. and Mühlberg, C., 2015. SWOT analysis and strategy development for forest fuel supply chains in South East Europe. Forest Policy and Economics, 61, pp.87-94.

Schlegelmilch, B.B., 2016. Segmenting Targeting and Positioning in Global Markets. In Global Marketing Strategy(pp. 63-82). Springer, Cham.

Statista 2017. India – chocolate confectionary market share by company 2016 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/725842/chocolate-confectionary-market-share-by-company-india/ [Accessed 11 Apr. 2018].

Yu, D. 2017. India ‘defying the odds’ as a fast growing chocolate confectionery market, Mintel. [online] confectionerynews.com. Available at: https://www.confectionerynews.com/Article/2017/05/02/India-is-one-of-the-fastest-growing-chocolate-markets-Mintel [Accessed 11 Apr. 2018].