MOD007662 Principles of Marketing Management Sample
Introduction
NESTLE is a well renowned food and drink company that is based out of Switzerland and with its business operations over the years, along with producing good quality food items, the company has become a household name internationally as well.
The company was first started in the year 1866 and the following years Henri Nestle developed a revolutionary infant food and in 1905 the company was merged with Anglo-Swiss to finally form the NESTLE Group (Nestlé Global. 2021). In the year 1904, the NESTLE company had started to sell chocolate for the first time when the company had taken over the Peter and Kohler’s export sales (Refer to Appendix 1).
PRESTCOM analysis
Two chocolate products have been selected and the external analysis, such as political, regulatory, economic, social, technological, competitive and organizational and market aspects (PRESTCOM) will be discussed critically.
Political
The political environment of the UK is quite stable, however, following Brexit there have been few changes in the rules and regulations of the country and these changes have been experienced by the chocolate industry as well. Moreover, from a political view, it may be stated that the relationship the UK shares with the European Union (EU) is quite turbulent and that may have some impact on the import of chocolate in the UK as well (Bulmer and Quaglia, 2018).
Regulatory
The UK has also imposed some regulatory norms on food and drink products, which may be considered as an obstacle for the NESTLE chocolate bars for being sold out in the UK as well.
In accordance with research, it has come to light that multiple actions have been taken to reduce the consumption of sugar in the UK, especially amongst the young individuals, which involves a 10-20% tax on sugar sweetened beverages as well (Bucktonet al., 2018). Thereafter, it is recommended that Nestle reduces the amount of sugar in the company’s food items and in the given chocolate bars to avoid facing any regulatory charges in the UK.
Economic
The economic condition of the UK is quite stable, since it is considered as one of the largest economies in the world and it may be argued that Brexit has made the economic condition of the country even more significant. Following Brexit, the UK has moved away from cooperation and integration with its closest neighbouring countries.
however, there are opportunities to conduct trading deals with the countries that do not belong to the EU directly (Tetlow and Stojanovic, 2018). The significant economic condition of the UK indicates that the NESTLE corporation will be able to sell its chocolate bars quite efficiently, given that the country has relevant economic stability.
Social
It may be stated that in the UK, sweet and sugary products have a relevant follower’s base, since the majority of the civilians and especially the young children enjoy snacking on sweet foods. Most specifically, children from the age group of 10 to individuals in their late teens, love snacking on sweet foods. The current customer base of the NESTLE company involves children and people from who are in their 20’s as well.
However, along with the changing reality, there are many people whose preferences are also changing and these individuals are turning towards healthier and plant based food as well. In case this pattern in the people’s preferences persists and more people start buying healthy food then companies, such as NESTLE may have significant difficulties doing business. However, the company has also working towards reaching a sustainable business framework and producing healthy food as consumers are gravitating towards plant based diets (Refer to Appendix 4).
Technological
The UK is a technologically advanced country and thus, using the technological marvel, known as the Block chain technology, NESTLE is able to track and tracing its applications and that allows the company to document the product’s chain of custody. Research has suggested that the Block chain technology has proven to ensure traceability, transparency and also security as well, which has eventually shown commitment towards mitigating various challenges within the supply chain management (Saberiet al., 2019).
Competitive
Every business is bound to face competition in the market at some point in time and therefore, it is extremely imperative that companies mitigate the risks beforehand in order to avoid facing stiff competition.
Porter’s five forces is an exceptional framework for analysing the external factors that may be considered as competition for a given business and thus, the five forces of Porter will be discussed below. Porter’s five forces framework is basically dependent upon the perception that the goal and strategies of organizations need to encounter threats and opportunities in the external setting of the organization (Bruijl, 2018).
Figure 1: Porter’s Five Forces
(Source: Bruijl, 2018)
Power of buyers
In any business the power of buyers hold extremely crucial power and influence over the company’s business and the revenue it earns through selling its products (Chan and Saqib, 2018). However, in the case of NESTLE, it may be argued that, since the company has become a household name and earned such recognition and capital, losing a few customers will not have much impact on its business.
Although, if NESTLE does not come up with strategies to reduce sugar and fat content and start making more healthy food items then the company may start to lose a significant number of buyers.
Inter-rivalry of competitors
It needs to be established that there is a significant rivalry within the chocolate industry and in the UK only, there are multiple chocolate companies that sell premium quality chocolate as well. Apart from that, many chocolate companies are also producing healthy versions of a particular sugary snack and in that aspect, NESTLE may face some challenges in selling the company’s chocolate bars in the UK.
It has also come to light that in the midst of growing competition within the chocolate industry, NESTLE has been facing severe challenges in introducing an organic version of one of the company’s most popular chocolates. However, research has stated that to some extent inter-rivalry competition has some benefits for a company’s business as well (Berendt et al., 2018).
Threats of substitute
Since, it has already been mentioned that there is relevant competition within the chocolate industry, NESTLE also may face the threats of being replaced by one of the chocolate companies in the UK and start losing out on capital. Cadbury, one of the major chocolate companies has come out with healthy versions of one of the popular food items that contains less sugar and that may be regarded as the reason for people preferring that product more rather than NESTLE’s products (Cadbury.co.uk. 2021).
Barriers to entry
Following Brexit, the relationship of the UK along with the countries of the EU trade union have become topsy-turvy and that has created significant barriers for NESTLE to import the given chocolate products to those countries (Javorcik et al., 2020). In addition to that, companies, such as Cadbury, Ferrero Rocher and more are giving tough competition to NESTLE and its products in the UK and creating relevant barriers for selling the products within the market as well.
Power of suppliers
The cocoa that is needed for making chocolate is supplied by different countries and many companies exploit the cocoa farmers by buying the cocoa under illegal circumstances and also at a cheaper price than usual, leading the farmers to face significant loss.
However, NESTLE wants to keep a cordial relationship with its suppliers and thus, has been committed to buy the cocoa by adhering to all legal rules and by ensuring that the farmers do not face any loss. In any business model, the power of suppliers may not be overlooked, since companies try to work with the same suppliers without shifting to others, since that may be costly.
Benchmarking
Benchmarking is basically the practice of comparing different businesses and its performance metrics to evaluate the company that has the best business practice within the industry.
However, in this scenario, NESTLE has been able to have a slightly higher profit margin than one of its main competitors Cadbury as a result of increased gross income of NESTLE. Therefore, it may be mentioned that NESTLE products are in a relatively favourable position in the UK market and ahead of one of its main competitors.
Competitive advantage
It needs to be mentioned that the company has significant competitive advantage in the UK market, since NESTLE prides itself in being different and producing different and a variety of food items in the market. The given chocolate bars that the company is trying to promote also come in colourful packaging and are quite different from the other chocolate products that the company has sold previously.
This step taken by NESTLE is bound to provide the company significant competitive advantage, which in return will help NESTLE to earn more revenue as well.
Competitive strategy
NESTLE uses the best quality cocoa for the chocolate products the company makes and the cocoa beans are collected from countries that are exceptional in farming cocoa beans. The company is also trying to use sustainable and unique packaging that will attract the customers to a large extent and also be not harmful towards the environment too.
NESTLE is also trying to maintain a sustainable supply chain for its products and that may also provide competitive advantage, as being friendly towards the environment will create a positive brand image. The company is also trying to make products that have more nutritional value as well which help NESTLE to sustain in the competitive market.
Organizational
| Strength | It may be asserted that NESTLE has been expanding its business throughout the world and the company has a strong reputation as well as brand image due to its wide range of products which is undoubtedly one of the greatest strengths of the company. However, it may be added that creating a strategic framework for achieving success in a highly competitive global market becomes essential where positioning of the products becomes a truly vital factor (Varma and Ravi, 2017). Moreover, it may be implied that NESTLE has more than 2000 brands which clearly hints towards its global market share and at present the company has been operating in 186 countries which is again an indicator of the growing business of the company (Nestlé Global. 2021). Furthermore, it may be stated that the company has an excellent management team and due to their relentless efforts NESTLE has achieved success in an international level |
| Weakness | NESTLE has become an enormous company with the passage of time however, the company has certain areas which need to undergo development as well as improvement including its pricing strategy, range of products, variety of products and a limited number of health products which seriously impacts the growth of the company in the global market. Therefore, it may be mentioned that the limited variety of products as well as higher pricing of the products reduces the affordability of the products to its customers which is definitely a weakness of NESTLE and the company is required to look at it with the utmost care and precision. On a broader note, it may be opined that NESTLE lacks market research strategy which often becomes a weakness of the company where the products fail to create a considerable impact on the customers and the company has to face financial loss. In addition to this, it may be argued that the presence of a strategic management planning and its proper implementation becomes effective in analysing the areas essential for organizational success (Salim, 2018) |
| Opportunity | NESTLE has various opportunities which the company may use to grow and expand its business in the future. Furthermore, it may be opined that NESTLE has gained considerable reputation as a reliable company of Fast Moving Consumer Goods (FMCG) primarily focusing on foods and beverages (Rahman, 2019).On the other hand, it may be implied that the research and development team of NESTLE may take certain steps in order to understand the dynamics of the market which will increase the revenue of the company. Moreover, it may be added that companiesare required to focus on the upcoming market trends in order to increase the sale of the products along with making the customers happy and satisfied (Powers, 2019) |
| Threats | NESTLE has been facing severe competition in the global market as the number of competitors in the industry has been increasing at a steady rate. On a broader note, it may be added that Nestle focuses on creating shared value where the quality of foods enhance the quality of life (Refer to Appendix-2). The shortage of water is an extremely crucial threat to NESTLE as shortage of water is becoming more and more due to various issues relating to climate change and other environmental factors which needs to be dealt with utmost attention. The decision making process of the company is to be further improved which may become the cause of creation of risk areas which may translate into threats which may hamper the progress of the company in the long run (Dam, 2021). However, it may be mentioned that numerous changes in the tax structures as well as changes in the political environment may become a major threat to the existing businesses (Kwilinskiet al., 2019) |
Table 1: SWOT analysis
(Source: Self-Created)
Market
NESTLE is required to adopt a proper strategic approach in order to conduct its marketing of the products in the most suitable way where demographic as well as geographic factors are to be taken into consideration. On the other hand, it may be stated that psychographic and behavioural aspects are also taken into consideration during the marketing of the products.
In other words, geographic segmentation becomes an essential factor to launch a particular product and it will certainly become an essential factor for the success of the products of NESTLE. Demographic segmentation of NESTLE is based on the income, education, social status, gender and age of the customers which makes the overall marketing process accurate. The company is primarily focusing on the customers belonging to the age group of 5 to 25 however, the company also aims to target customers of all age groups to maximize its sales margin.
Conclusion
From the above discussion, it may be clearly concluded that NESTLE is a global company which needs to overcome the existing issues and challenges which the company has been facing in order to provide better products to its customers all over the world.
Recommendation
Strength
It may be recommended that NESTLE is required to focus on launching a new product after conducting extensive market research which will provide a clear view of the perceptions of the customers. However, it may be implied that the company has been working on reducing the levels of carbon emission with the help of new technologies and NESTLE is also aiming towards achieving zero waste (Refer to Appendix-3).
Along with this, the company is also paying attention towards sustainable packaging material where the use of paper is being increased to a great extent. Additionally, the steps taken for attracting more customers will definitely attract global customers for the company in the long run which will become an important factor in establishing a strong relationship with the customers (Doniecet al., 2020).
Weakness
NESTLE should focus on improving its variety of products which will ultimately help the company in achieving its organizational goals and objectives in a profound way.
On the other hand, it may be opined that adopting a proper procurement strategy, investment policy and marketing strategy all becomes essential in the successful accomplishment of a target (Espinoza et al., 2018). In other words, it may be added that in order to develop a new product successfully and in order to make the product a success in the market, all the weaknesses including market research and market analysis should be overcome as soon as possible (Pollák and Markovič, 2021).
Opportunity
Identification of opportunities in launching a new product becomes extremely crucial to make the product an instant success and it may be added that NESTLE needs to pay attention towards improving the performance of the research and development department in order to identify the existing gaps in the market and to utilize the existing opportunities in the best way.
However, opportunities related to achieving sustainability should also be given priority as customers prefer a brand which manufacturer environment friendly products.
Threats
It may be recommended that NESTLE should develop a risk assessment team in order to measure the risks and threats which may hamper the progress of the company and may negatively impact the launch of a new product.
However, it may be added that maintaining a strong communication in a company will definitely help a company in mitigating various factors by sharing all the necessary information with the different departments of a company (Aliet al., 2021). Moreover, it may be implied that focusing on improving innovation becomes an essential aspect of avoiding organizational threats to a great extent (Raybouldet al., 2020).
Screening assessment
A constant assessment is to be carried out in order to monitor the activities which will help significant change in the company and due to this reason assessment screening becomes immensely crucial. It also proves beneficial in analysing the steps taken by other competitors in the industry which may be taken in consideration for making the products of NESTLE better.
On the other hand, the process of screening assessment will also help in generating positive outcomes by measuring the impact which may be brought by the launch of a new product in the global market.
On the other hand, it may be proposed that NESTLE has 376 factories in 81 countries which reflects the fact that the company has a huge customer base and the demand of the new products such chocolate biscuits are always high which is a strength of the company as customers trust the products of the company to a great extent.
In a more specific way, it may be asserted that the company has a great opportunity to expand its business in parts of the world where the company will launch its new chocolate biscuit products by analysing the market in a profound way for generating desirable outcomes in the long run.However, NESTLE is required to conduct an extensive market research in order to know the preferences of the customers which will definitely enable the company to expand its business.
Appendices
Appendix-1
Appendix-2
Appendix-3
Appendix -4
References
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