External Analysis
Nestle Australia Limited is a food and beverage company with its products branding from chocolates, coffee, culinary products, and snacks. Nestle is also regarded as an agrobusiness company due to its large distribution of food systems. It focusses its initiatives on cocoa, milk and coffee.The company was founded in 1908 and has its headquarters in Rhodes, Australia. The company brands include; Nespresso, Kit Kat, Nesquick, Maggi, Nescafe uncle Toby’s, NAN, Cerelac, Bakers’ Choice, Plaistowe and Nestle Health Science among others (Nestlé 2017). Nestle has been operating for over 100 years, and its basic approach to business has always been a long-term relationship with consumers based on long-term values for the stakeholders. This involves not only consumers but also employees, shareholders, and the community. The major values of the company are long-term developments, long-lasting relationships, integration and reacting to different cultures values within the society. The success of the organization has always been due to the strategy of enhancing the quality of life through continuous contribution towards a healthier future (The Periodic Table of Food Tech, 2017)
Additionally, they have always been at the forefront when it comes to attending to the needs of the consumers. With this strategy, they are in a position to anticipate any consumer trend with the help of their innovative network in the food and beverage industry. According to their financial review in 2017, there was an increase in organic sales growth, but it was not as expected. Within the same year, Nestle collected total revenue worth $2,220,849,000 which included sales and other revenue. The increased revenue being collected by the organization has been due to the high number of merger acquisition which occurred two years ago (Beverage Marketing Corporation, 2016). In 2015, the company was able to acquire Merrick Pet Care. The company has also employed approximately 4500 employees. The CEO of the company is known as Trevor Clayton.
Analysis of the external environment will be based on PESTLE which is a strategic tool technique used by organizations to measure the potentiality of the market based on its operation and determine the position of the organization. The factors that will be analyzed include; political, economic, social factors, technological factors, and legal factors. The operation of Nestle Australia limited is not only in Australia but across the globe; it is bound to the different political environment and economic environment. The company has also had some challenges regarding the quality of its product hence leading to a negative corporate image. With the bad reputation, the company has been able to restore the confidence of the consumer in their products through a series of strategies that were implemented when the quality of the products being produced was being questioned.
Political factors
The political factors include the different jurisdiction, laws, and regulations that have been put into regulation the business operation. The political factor affecting Nestle Australia Limited include; the changes in regulation involving the quality standards of foods marketing actions. This has been affected when the company wants to launch a new product (Nestlé 2017). With these changing regulation, the production process of the company is always delayed to ensure that the standard of foods being released to the public is safe for consumption. Nestle is a global company. Therefore it is bound to be affected by the government stability in the emerging economies. With this, the company will be enjoying favorable trade regulation and tax regulation.
In Australia, the high tax regulation being imposed by the government reduces the total revenue that is to be collected by the organization. The changing global regulations are also affecting the sales that the organization is making. This regulation may not be favorable as they, may require additional expenses when it comes to business operations (Levi, Probst, Crino and Dunford 2018, p.203).
The economy of Australia has been growing, but with the hit of the global recession, there was a reduction in its economic growth. This resulted in an increased rate of inflation reducing the number of jobs. The company was affected in different ways. First, global recession affected the increased cost of factors of production such as labor and raw materials. The awareness that the inflation rates are changing, economic growth reducing and changes in the income levels continues to affect the cost of production of the company. With the changes in economic growth, consumers are also shifting their budget to purchase only the essential products (Ravuvu et al., 2017, p.33). When the buying power of consumers changes, the company experiences a reduction in sales hence leading to losses and total annual revenues. Since the global recession, there has been an increased price of raw material from suppliers.
Nestle is a company producing goods. This means that the success of the company lies in the level of customer satisfaction based on taste and preferences. The company has been forced to allocate adequate financial resources to help shape its competitive environment with an objective of maintaining the brand image and increase the attractiveness of its products. Maintaining a competitive advantage requires the organization to carry out detailed research on the tastes and preferences of consumers leading to the introduction of new products into the market. The consumer research will help in evaluating the changing consumer attitudes towards healthier products based on government regulations. With the changing consumer lifestyle across the globe due to lifestyle diseases such as obesity and diabetes, consumers have a high demand for healthier products (Levi, Probst, Crino and Dunford 2018, p.203). With this Nestle has to constantly meet the evolving needs which are costly when considering the production process.
Economic factors
To address the increased for healthier products, the company has acquired different forms and partnered with the different organization to help in sharing the cost of production and share ideas. This is a strategy that will help the organization anticipate the trends in consumer behaviors hence having a larger share of the market. Adapting to different needs of different cultures is a challenge to Nestle, however through many company researches conducted in the consumer segment, they have been able to divide their market segment and attend to the needs of consumers based on cultural needs.
The advancement in technology and associated capabilities have become a significant challenge to industries across the globe. Evolution of technology changes the market trend requiring the organization to adopt these technologies to avoid losing their competitive advantages when it comes to market competition. Nestle has dedicated adequate resources towards understanding and developing new ideas to integrate the latest technologies. As an illustration, the use of RFID has increased over the years, and the company has been able to keep an inventory of their products using the technology. The increased use of social media has led to nestle redefining their marketing strategy when it comes to advertisement and product promotion (Bell, Young, Hill, Banks, Comans, Barnes and Keller 2018, p.228). The social media is a tool that the company can use to interact with different consumers across the globe. With this, they can also be able to understand the behaviors of their consumer and make necessary changes to suit their needs.
Social media provides a one on one communication platform where customer relationship can be built easily as compared in the past. Technology has also revolutionized the E-commerce sector where consumer prefers making certain purchases through the internet in order to achieve technological satisfaction within the external environment (Renner and Ringquist 2016, p.33). The company has invested in different programs to make the company eco-friendly. However, it has faced criticism for its weakness when it comes to approaching the effectiveness of the programs. With the technological tools, the company can be able to use it to expand its product brand and increase awareness of the different products being sold by the company.
Business operations of the company are regulated by the law. With this, being a global organization, the company has to adhere to the different jurisdiction to ensure a smooth running of the business. Some of the legal factors affecting its operation include changing regulations and the needs to comply with different global regulations while penetrating a new market.
Social factors
A major challenge that Nestle has to deal with is redefining its corporate image when it comes to the production of quality products. This was after there were cases where contaminated products were being released to the consumers. This has been a major challenge especially when it comes to the operations involving the food and beverage industry. Other facts affecting the organization is the need to produce healthier products. This has been due to an increased rate of lifestyle diseases such as obesity and diabetes. Consumers are now advocating for minimal sugar content in products (Fayet-Moore, McConnell, Kim and Mathias, 2017, p. 608).
Additionally, these products should also have fewer calories content hence the company is dedicated to offering these products (Bell et al., 2018, p. 228). This has been possible through their team of scientific research where products are tested before released to the public. Nestle continues to pursue ecofriendly corporate social responsibilities.
Resources
The tangible resources include properties and assets. The company owns more than 29 research centers across the globe. The main function of these research and development centers is to ensure excellence in food products. This means that they have to help the company towards the production of quality products and services. Nestle has a net worth of $ 70 billion hence having a solid financial foundation. The company has a well-structured information technology that is used to run the operations within the organizations across the globe.
When it comes to the intangible resources, Nestle owns numerous brands which are competitive in the global market. The positive brand image helps in sourcing of consumers since their products have always been based on nutritional products which are a major concern across the global community consumer (Black, Makrides and Ong 2017).
Capabilities
The capabilities of the company include:
- Understanding the consumer market through market research leading to the creation of innovative and healthier products (Nestlé, 2017).
- Nestle has the capability of attracting quality human resources such as employees and also other companies where they can partner.
- Over the years, Nestlé has been able to win the confidence of consumers and trust making it have a strong consumer base (Nestlé, 2017).
- Strategically positioning its products in the market.
Core competencies
- The company has created a future action plan which will integrate the values and mission of the company towards reaching its goals. This will involve fully exploiting any opportunity presented for the company (Renner and Ringquist, 2016). Additionally, employees working for the company are in a position to do their best towards improving the overall performance of the organization. This will be achieved through its company values which promote the delivery of quality products to the consumers. Nestle has strategically planned to help in its capability of innovation and renovation. As an illustration, innovation offers a new path through a generation of new ideas whereas renovation is rejuvenating its products with an objective enhancing consumer experience (Nestlé 2017).
- Enhanced customer communication: Nestle is a position to create two-way communication between the customer and the company. With this, the organization will able to get consumer feedback and make necessary changes.
Competitive advantages
The competitive advantage of this company includes:
Nestle provides large economies of scale in manufacturing and marketing. Additionally, Nestlé produces products that are sold globally, and in most cases, some of these products are ranked in the top positions (Beverage Marketing Corporation, 2016). Nestle has a strong team of researchers able to collect information to be used in product renovation and innovation. This helps in improving product flexibilities.
Nestle being a food and beverage industry should emphasize on strengthening its nutrition and health strategies. This is because consumers are becoming aware of their health status through lifestyle eating habit. This means that most consumers will go products having low sugars and calories. The evolving needs of consumers rise due to increased awareness which the company should start keeping up with the pace. Secondly, the company should focus on understanding and serve the consumer (Black, Makrides and Ong, 2017). In business, the customer is always right, and through understanding the customer, it will help in establishing a long-term relationship.
Furthermore, consumers have different needs when it comes to product preferences, with the knowledge gained through customer interaction, Nestlé can generate new ideas that will lead to increased sales (Levi, Probst, Crino and Dunford, 2018, p. 203). Lastly, Nestle should advocate for the adoption of new technologies that will increase the production process and understand the changes taking place in the market. Technology will help in widening their market segment and also learning more about the consumers not only in Australia but across the globe.
Conclusion
According to the external environmental analysis, Nestlé continues to be affected by specific factors. However, the success of the company has always been based on its ability to handle the challenges brought about by external factors. The recommendation provided can be used by the organization to strategically place itself in the future based on its performances and market position. Additionally, the recommendation will help in maintaining its competitive advantage not only in Australia but across the globe
References
Bell, J.J., Young, A., Hill, J., Banks, M., Comans, T., Barnes, R. and Keller, H.H., 2018. Rationale and developmental methodology for the SIMPLE approach: A Systematised, Interdisciplinary Malnutrition Pathway for implementation and Evaluation in hospitals. Nutrition & Dietetics, 75(2), pp.226-234.
Beverage Marketing Corporation, 2016. Press Release: The U.S. Liquid Refreshment Beverage Marketing Accelerated in 2015, Reports Beverage Marketing Corporation, accessed August 24, 2018, Available at: https://www.beveragemarketing.com/news-detail.asp?id=335
Black, R.E., Makrides, M. and Ong, K.K. eds., 2017. Complementary Feeding: Building the Foundations for a Healthy Life: 87th Nestlé Nutrition Institute Workshop, Singapore, May 2016. Karger Medical and Scientific Publishers.
The Periodic Table of Food Tech, 2017, Corporate Innovation Trends, accessed August 24, 2018, from <https://www.cbinsights.com/blog/periodic-table-food-tech-startups>
Fayet-Moore, F., McConnell, A., Kim, J. and Mathias, K.C., 2017. Identifying eating occasion-based opportunities to improve the overall diets of Australian adolescents. Nutrients, 9(6), p.608.
Levi, R., Probst, Y., Crino, M. and Dunford, E., 2018. Evaluation of Australian soup manufacturer compliance with national sodium reduction targets. Nutrition & Dietetics, 75(2), pp.200-205.
Nestlé, 2017. Annual report 2015, accessed August 24, 2018, Available at: https://www.nestle.com/asset-library/documents/library/documents/annual_reports/2015-annual review-en.pdf
Ravuvu, A., Friel, S., Thow, A.M., Snowdon, W. and Wate, J., 2017. Monitoring the impact of trade agreements on national food environments: trade imports and population nutrition risks in Fiji. Globalization and health, 13(1), p.33.
Renner, B & Barb 2018, “Food Industry Consumer Trends: Shifting Consumer Value Drivers | Deloitte US,” Deloitte United States, accessed August 24, 2018, from <https://www2.deloitte.com/us/en/pages/consumer-business/articles/us-food-industry-consumer-trends-report.html>
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