03 Strategic Management Assignment Sample
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Introduction:
The objective of this project is to evaluate influences of industry attractiveness, resource based view and competitive advantage on strategic management of Nestle. Further, there are some recommendations in order to improve strategic management in Nestle. As per Cameron (2014), strategic management includes objective establishment, evaluation of competitive situations, evaluation of resources of the organization, analyzing strategies and ensuring about management rolls in improving these strategies.
Organizational Background: Nestle, the world’s largest food & beverage organization was established in the year1866, by its founder Henri Nestle. The sales turnover of the company in the FY 2016 was almost 90 bn, and the net profit figure was around 8.5 bn. The employee strength of company is around 250,000 employees, serving in more than seventy countries and having operations and factories in mostly all nations of the globe (Nestle, 2016).
Company is having around 250000 shareholders, of which no one holders more than three percent of the equity. As per a report, a significant portion of stock holders are Swiss , who holders 42 % shares, US ( 22 %), British ( 10 %), German ( 5 % ) and French ( 8 % ) (Nestle, 2016).
Industry attractiveness:
In the view of Dummett B. and Chaudhuri (2017), Organizations operating in food processing business are involved in transforming raw material into finished products, thereby enhancing the life of the product through following health and hygiene standards. Some of the examples of food processing business are meat processing, cannery, food packaging etc. Such foods are normally sold by retailers or wholesalers directly to consumers. Felsted (2017), this industry has intense competitions, in which Nestle is performing well through its efficient operations in terms of quick food processing and quick distribution. Laghate (2017) argues from economical point of view, the slowdown in the global economy has less impact of food processing business in comparison to other industries as there is always growing demand for ready to eat food. Although, one challenge before the industry in the present environment is growing cost of inputs like corn, dairy, wheat etc. Some more factors impact the business are growing concern for dieting, obesity etc (Besanko, Dranove, Schaefer and Shanley, 2012). According to Rowan (2015), the future opportunities of food processing industry seem to be in organic as well as health products. The report of Organic trade association states that there is significant rise in the sales of organic food in the recent past. The major growth is in organic dairy, vegetables, fruits, meat, grains and bread. With the rise in the competition large organizations of the food processing industry are required to concentrate on this emerging sector for gaining the advantage of first mover.
Resource based view:
Resources:
The source of capability of any organization is its tangible as well as intangible product resources. All resources together form the capabilities of the organization. Tangible resources are those resources which can be seen and touched. While intangible resources are those resources which are invisible but cultivated over time. The 4 tangible resources for Nestle are organizational, financial, technological and physical and the 3 types of intangible resources are innovation, human and reputational.
- Financial resources: High revenue, capital, assets etc.
- Organizational resources: Huge infrastructure, product technology centers, local application clusters etc.
- Physical resources: Baby food, healthcare, nutrition, coffee etc.
- Technological resources: High concentration of R & D activities.
- Human resource: Large employee base across the globe. High skills, experience etc (Nestle, 2016).
- Innovation resource: Combines technology and science in natural products for making them healthier, tastier and available to all.
- Reputational resources: Goodwill, Excellent brand image.
Capabilities:
In the view of Besanko et al. (2012), Capabilities present an organization’s capacity to organize its resources that intentionally merged for achieving a desired outcome. On the other hand, Cameron (2014) argued, capabilities are developing and exchanging knowledge and information through the human capital of the organization and developed in a particular functional area like marketing, management, manufacturing and R&D.
- Distribution: Distribution network of Nestle ensures transport more than 100000 tons products per day from their distribution center and factories to consumers (Nestle, 2016).
Nestle optimizes its distribution network in the way which minimizes emissions of greenhouse gas. It optimizes warehousing and transport in the manner to ensure the most effective use in order to decrease the travelling distance.
- Human Resources: Human resources of the organization have 330000 employees’ works more than 150 nations. Nestle offers training facilities on the code as a part of system of Code’s compliance which organizes training development sessions in one or two times in a year (Nestle, 2016).
- Management Information System: With respect to research and development department, by having research for IT, organization ensures controlling more efficiently.
Core competencies:
Brands portfolio and products of Nestle ranges from local favorites to global icon. This is assisted by capability of research and development, concentrated on priorities, with driving renovation and innovation which are attractive and useful for consumers. Geographical presence of Nestle is supreme not only due to number of nations they are operating in but also due to depth of roots in nations (Laghate, 2017). The organization is concentrating to become a leader in renovation and innovation as well, in processes, system and products. The organization requires to have best supply management in order to ensure best raw material they have. They also require to ensure fresh products on the shelves of the consumers. With respect to operational effectiveness, Nestlé’s approach is Continuous Excellence, with the aim of removing waste, raising effectiveness and efficacy and enhancing quality in operations.
Competitive advantages
Nestle has some differential and competitive advantages certainly in the way to offer trusted as well as healthier brands than others as it is leader organization in the industry. Nestle is providing full range of products in drinks with no color which are artificial with the line, “some things are best left natural”. For this campaign, nestles got positive feedback from its consumers. In order to gain advantage among Muslim consumers according to Nestle corporate reports, they brought a product as “Centre of Excellence for Halal” (Dummett B. and Chaudhuri S, 2017). As they thought it was a profitable product among the Muslim nations like Malaysia. This positioned and got credibility in these countries.
Its’ one of the product Nespresso established a strong idea that positively placed its brand in marketplace. The organization marketed the product to advancement espresso as a lifestyle drink and now it twisted the normal procedure of coffee in an experience. Now it became a lifestyle product for most of the nations it delivers in. it has been established itself as lifestyle not in home just in cafes. Now the vision of the company is to promote and convince the consumers that Nespresso machine and its capsules can make them feel best and they can enjoy coffee with premium taste at home as well (Felsted A., 2017).
In present era, beverage and out of home food market is growing extremely. Nestle has changed unit for food service business into Nestlé Professional for managing business across the globe with respect to independent business which provides caters for operators of out-of-home ranging from stalls to five star hotels. Here, organization concentrates on market consistency. It will add advantages and profitable growth to the organization.
Recommendations:
Though Nestle is one of the biggest organizations across the globe but in order to enhance strategic management there are some suggestions:
- In order to increase their consumer base they must low prices as their prices are little bit higher.
- Of course, 70 percent people consumes product of Nestle, the question arises for rest of 30 % who does not. They should be research activities and survey focused on the facts for their rejection of Nestlé’s products.
- Advertising of Nestle must be improved as it doesn’t effect on the mind of consumers for long time.
- Nestle needs to improve its taste to cover whole market.
- Nestle milk has huge demand in the market. At the same time, Nestle has to improve its distribution channels in order to fulfill demand of Nestle milk sufficiently as sometimes shops do not have milk on demand.
- In order to make innovative products in efficient way, Nestle requires to make sure that products availability is sustainable wherever and however customers need to have them.
- Nestle requires to communicate with the consumer base in the dynamic and best way, not only in order to informed them about existing and new product but also to get their feedback and experiences in order to make innovations in upcoming products of them.
Conclusion:
Strategic management is crucial for any organization for attaining its aim and objectives. Nestle has implemented strategic management practices that are in line with the market attractiveness and its core competition which has provided it a competitive advantage in the food processing industry.
References:
- Besanko D., Dranove D., Schaefer S., and Shanley M. (2012) Economics of Strategy, John Wiley & Sons.
- Cameron, B. T. (2014). Using responsive evaluation in Strategic Management.Strategic Leadership Review 4 (2), 22-27.
- Dummett and Chaudhuri S. (2017) Nestlé to Buy Atrium Innovations for $2.3 Billion. The Wall Street Journal
- Felsted A. (2017) Nestle investors can swallow This Herbal Growth Remedy. BloombergGadfly.
- Laghate G. (2017) Nestle retains Zenith as media agency. The Economist times.
- Nestle (2016) http://www.nestle.com/investors/annual-report
- Rowan, C. (2015). “The world’s top 100 food & beverage companies – 2015: Change is the new normal”. Food Engineering. Retrieved 14 November2016.
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