Strategic Thinking at Nestle

•Leadership via acquisition and mergers•Developed - FDI/ economies of scale and developing country strategy – substitute products•Boycott and failures•Creation of Nestle Nutrition Unit/ Corporate Wellness Unit.•Currently Nestle owns 29 billionaire brands across the globe.

Overview

Bargaining power of suppliers

Threat of substitutes

Bargaining power of buyers

Threat of new

entrants

Competitive rivalry within the industry

•Supplier power is relatively low •Suppliers contractual relationship with Nestle•To ensure compliance

•Frozen entry market had high product differentiation• High barriers to entry in food industry

•Degree of competition from substitutes was relatively high•Diversity products•Confectionery, instant foods•Not enough focus on pet foods•Ex: from substitute products such as carob products, non chocolate candies and other sweet snacks (i. e cookies, ice creams and baked goods)

•Bargaining power of buyers was quite high.•Consumers of food products tend to be fairly price sensitive, so that customers influence pricingDifferent tastes of people

•Degree of competition is Quite intense•Nestlé's competition with Unilever and P&G

Porter’s Five Forces:

Portfolio AnalysisSTARS

BeveragesMilk Products, Nutrition and Ice creamPet care

QUESTION MARK

Pharmaceuticals

CASH COWS

ConfectionaryNestle Food Services (showing tendencies to be dog)

DOGS

Prepared dishes and cooking aids

M & AEconomies of Scope Economies of Scale

Knowledge:Tacit – Develop new products constantly and improve and adapt existing ones to suit changing consumer tastes.60/40 BenchmarkingFormal – Radical approach and staying focusedCompetency – Open innovation

Resources:Facilities: Local clustersHuman: Develop local management with training and cross culture experienceR&D: Achieving worldwide sustainable competitiveness through four strategic pillars.20-25 R&D conferences each year

Co-ordinated strategies:Knockout competitionGLOBEExploring new product categories

Vertical integration:Make – buy decisionmanufacture v/s supplier, eg. cocoa and diary processing plants.Adopted the GLOBE information systemEstablishing local supply chain but refraining from land ownership

New business development:Anglo-swiss mergerNutrition health and wellness company

Area of weight managementHealthcare nutritionBaby foods business

From infant to candy to pet food

Negotiation power:Companies portfolio was placed better than competitors

Stakeholder Analysis

Before boycott PassiveBoycott Defensive Resolving the issue Proactive

◦Containment ◦Co-Operation◦Compliance◦Consolidation

Resolving the issue

Influence

For

Against

Neutral

Low Medium High

Attitude

CRITICS

Shareholder vs Stakeholder

Creating Shared Value◦ Reconceiving products and Markets◦ Productivity in value chain◦ Local cluster development

2003 2004 2005 20060

2

4

6

8

10

12

14

Profit Margin

NestleLinear (Nestle)KraftGeneral MillsUnileverGroupe Danone

2003 2004 2005 20060

2

4

6

8

10

12

14

16

ROA

NestleLinear (Nestle)KraftGeneral MillsUnileverGroupe Danone

Conclusion

Strategic Thinking ◦Rational Thinking : Create shared/economic

value R & D M & A Product Diversification Stakeholder satisfaction

◦Generative Thinking Handling of boycott

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