Tuesday, September 23, 2008

SWOT - Nestle

Objective: “Aim to build a business as the world's leading nutrition, health and wellness company based on sound human values and principles.”

SWOT analysis:

Diversification: Nestle has a wide product portfolio encompassing baby foods and dairy products, chocolates and breakfast cereals and food seasoning.
Joint ventures: Nestle holds joint ventures with leading businesses like Coca Cola, General Mills and L'Oreal which allow it to access their technical knowledge to further develop its own brand.
Influencing consumer decisions: With its innovative and attractive advertising campaigns Nestle is able to influence customer's buying decisions.
Established brand across the globe: With an employee base of over 200,000, annual revenues of more than $120 billion and a presence in more than a 100 countries, Nestle brings with it a strong brand name and knowledge of different markets all over the world.

Negative effects on the brand image: The investigations into the controversial advertising campaign that promoted infant milk products over breastfeeding and the usage of slave labor for its plants in African countries continue even today and Nestlé’s brand name has been negatively affected due to the media campaigns covering this issue.
Storage and transportation problems: Because the Indian food industry is not developed enough to handle complex storage and transport requirements, Nestle has a difficult job of providing product quality at centers far off from the manufacturing base.
Complex supply chain management: Nestle has a complex supply chain management and the main issue for Nestle India is its traceability.

Growing middle class: The growing middle class and the high percentage of youth population provides an excellent opportunity for Nestle to use its existing range of kiosks in malls and educational institutes to build a loyal brand following.
Urbanization and nuclear families: With the Indian society moving towards a more urban and nuclear family society, Nestle has huge market for its products like Maggi and Dahi and other milk products.
· Low labour costs in developing countries: Since manufacturing of some products is cheaper in India than in other South East Asian countries, Nestle India could become an export hub for the parent in certain product categories.
Cost of raw materials: Inflation rising at the pace that it is puts a strain on Nestle for buying its raw materials like food grains and yet maintaining its margins.
Indians perception towards fresh foods: Indians believe in eating fresh foods instead of ready to eat products, which provide a major hurdle in the marketing of Nestle products across the country.
Exports to a single location: The company’s exports stood at Rs 2,571 m at the end of 2003 (11% of revenues) and continue to grow at a decent pace. But a major portion of this comprises of Coffee (around 67% of the exports were that of Nescafe instant to Russia). This constitutes a big chunk of the total exports to a single location. Historically, Russia has been a very volatile market for Nestle, and its overall performance takes a hit often due to this factor.
Liberalization of trade and investment policies: Nestle faces immense competition from the organized as well as the unorganized sectors. Off late, to liberalize its trade and investment policies to enable the country to better function in the globalised economy, the Indian Government has reduced the import duty of food segments thus intensifying the battle.

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