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ANNOTATION

PESTLE ANALYSIS

POLITICAL

Uncertain political and economic conditions in a country have a significant impact on business operations; thus, government consistency is critical in an increasingly competitive industrial world. Democratic instability could disrupt the industry and hurt the manufacturing process. Furthermore, the manufacturing process is influenced by climatic conditions. (Singh et al., 2021)

SOCIAL

The requirement to adapt to various cultural circumstances, such as language, religious beliefs, and family situations.Understanding consumer behaviour is critical for guaranteeing a unique marketing strategy (Varma and Ravi, 2017)

 TECHNOLOGY

Technology is a critical aspect of Nestle's R&D. In 2009, Nestlé spent over 4.4 times more on R&D than Kraft Foods (Traitler, Heribert and I.Sam, 2011). Nestle, for example, has created technologies that allow natural vegetable oils to replace partially hydrogenated fat in Maggi broth and seasonings. With technological advancement, nestle would be at the top of the food chain providing healthy quality life (Singh et al., 2021).

ENVIRONMENT

Future water shortages are projected around the world due to melting glaciers and shifting rainfall patterns (Harvard Business School, 2016). Nestlé must measure and manage its water supply to ensure that it is sustainable, given the decreasing level of groundwater accessible.

LEGAL

Preventing competitors from copying the company's unique chocolate creations has been one of the company's key difficulties throughout the years. Nestle was denied legal protection in Europe for its one-of-a-kind wafer chocolate KitKat, for example. In countries such as Australia, Canada, and France, Nestle has succeeded to get a trademark for the KitKat shape. Cases like this highlight how important it is for Nestle to keep an eye on this market. When a legal requirement is broken, the entire group suffers the consequences (Zigu, 2011)

PORTER’S FIVE FORCES

Competitive Rivalry- High

Coca-Cola, Danone, Mondelez International, PepsiCo, and Unilever are close competitors of Nestlé (McGrath, 2017). Although Nestle is one of the industry's most prominent players, with over 150 years of experience, it is still up against these brands The competition is fierce not only in terms of price but also in terms of product variety, innovation, and special offers. To maintain their market share, all industry players must work hard. As a result, Nestle faces fierce competition.

Threat of New Entrants- Low

The consumer food industry is complex, making it difficult for entrants to succeed. Established companies control a significant portion of the industry. They have much experience and know what customers want. Over time, they have established consumer loyalty (Othman, 2014). Every year, dozens of new entrants enter the market to capture market share, even locally. Only a few people are successful. Nestle faces a low risk of new entrants because of all of this.

Threat of Substitutes- High

Several Nestle products, such as bottled water, have easily accessible substitutes. Most of those items, such as baby food, can be made at home. Some Nestle goods have also been accused of being unhealthy to consume. As a result, the selling of substitutes has increased among health-conscious people. To prevent alternatives, Nestle tries to emphasize the healthier qualities of its goods. As a result, Nestle faces a significant threat of substitutes.

Bargaining Power of Buyers- High

Buyers have a lot of bargaining power because of the high degree of rivalry. Consumers have a low cost of switching. A variety of firms sells similar products. Nestle understands the importance of the buyer's power and works hard to keep its customers happy. Many of Nestle's customers have developed brand loyalty because of these factors (adamkasi, 2017).

Bargaining Power of Suppliers- Low

Nestle has the industry's highest market share. Subsequently, large quantities of supplies are needed. As a result, it is a suitable client for manufacturers. Therefore, any supplier who begins supplying Nestle never interferes with it or tries to negotiate or sway the rates. Nestle values its suppliers and looks after them (Tavsar, 2013). To ensure the quality of raw materials, Nestle prefers long-term relationships with its suppliers.

VALUE CHAIN

Farmers Connect is the largest coffee sustainability programme (Faiz, 2019), and the Nespresso AAA sustainability programme strives to ensure the supply of coffee doesn't destroy the environment in which they are grown, and develop long-term stability in Latin American, African, and Asian communities (Nestlé SA, 2018). Nestle offers suppliers access to research and development, allowing them to strengthen their relations with the community and improve product quality. Nestlé has a good sales strategy in which they establish brands through responsible marketing and extend them all over the world by penetrating new and emerging markets and expanding food and beverage access (Nestlé SA, 2018).

Nestle has a team of experts that aim to design products that are both safe and nutritious. Nestlé has pioneered a number of technologies in which it is a world leader, including foam boosters, and malt extraction (Nestlé SA, 2018). Nestlé invests around 2% of their total revenue in research and development each year, making them the industry's top investor.

VMOST

Nestlé is the world's largest and most diversified food and beverage company, having been founded over 150 years ago. its products are sold in 186 countries around the world, giving it a truly global presence. its aims to deliver sustainable, industry-leading financial performance and earn trust by improving quality of life and contributing to a healthier future. (Nestle, 2018).

STAKEHOLDERS ANALYSIS

Consumers, employees, shareholders, and suppliers are the most important stakeholders for Nestle. Nestle is concerned with creating value for its stakeholders. That is why, it undertakes a formal materiality review every two years, in which it identifies and prioritizes the issues that are most important to its stakeholders (Nestlé Annual Review, 2020).

SWOT ANALYSIS

INTERNAL ANALYSIS

Nestle has an efficient Research and Development system, it has one of the largest foods and nutrition research organization in the world, with 21 R&D centers. Although Nestle has faced some setbacks with products recalls, and this has had an impact on the company’s brand image. Nestle UK Ltd, the parent company, voluntarily recalled Nestle Ski Yogurt Variety Pack with Fruit Pieces with a pack size of 480g (4x120g) in February 2020 due to its presence of small pieces of black rubber, rendering it unfit for consumption. (advantage.marketline.com, n.d.) but with about 5000 people working in the its R&D operations, this should give them the edge to avoid future recalls by planning ahead and taking necessary precautions.

EXTERNAL ANALYSIS

Nestle has a lucrative potential to further expand their market, with the people’s interest in the consumption of tea and coffee increasing steadily. Nevertheless, Nestle battles the case of an increasing competition, many (CPG) companies such as Mondelez and Unilever, sell identical food and beverage products. Nestle is finding it difficult to compete in a market where replacement products are readily available and government regulations and prices also has an impact on Nestle's corporate operations, (Faiz, 2019). Whilst Nestle faces this threat, it can also leverage on the fact that it has a strategic relationship with other food and beverage companies which is also beneficial and it has the potential to enhance its revenue and earnings (Faiz, 2019).

FINANCIAL PERFORMANCE (FIMO)

From the table below, Nestle is generates more profit than Unilever. The table shows a drop in Nestle sales in 2018 as compared to their sales in 2016 and 2017 this is due to the recent COVID-19 pandemic. Although they’ve consistently grown their profit as stated in the table. This shows that Nestle has established itself financially (Birahim, 2020)

	Nestle (€)	Unilever (€)
	2018	2017	2016	2018	2017	2016
Total Sales	79,239	80,494	82,082	50982	53715	52713
Total Profit	10631	7713	5916	9808	6486	5547
Total Expense	4743	3943	4796	3056	2544	2485

STRATEGY

As mentioned earlier, Nestle is keen on creating value for its stakeholders. Most of its strategy are tilted towards creating shared value among its stakeholders. These strategies are.

·  To direct its 150 years of experience towards nutrition, health, and wellbeing to help people, families, and pets live happier, healthier lives (Nestlé Global, 2020)

· Meet the needs of today's consumer with products that are healthy, flavourful, and convenient for mindful, time-constrained lifestyles (Nestlé Global, 2020)

· Ensure that everyone, regardless of their socioeconomic level, has access to inexpensive, safe, and high-quality nutrition (Nestlé Global, 2020)

· Using creative exploration, consumer insights, pioneering nutrition research, and culinary expertise, bring distinctive, premium ideas to market (Nestlé Global, 2020)

· Drive our environmental sustainability to improve the planet's health, generate societal growth, and support a sustainable food system, especially in terms of packaging and delivering our products in safe and protective ways for the environment (Nestlé Global, 2020)

· Increasing the number of plant-based food and beverage options available to enable them to become the consumer's preferred alternative as they vary their diets.

RECOMMENDATION

Another recommendation Nestle could look at would be to use its position as one of the largest food industry in the world to penetrate and influence smaller markets that are still growing with fewer competitors in need of healthy resources and cleaner water, this would help expand their scope/range across the world, seeing that it would be in line with their strategy previously mentioned.

SAF ANALYSIS

Suitability: Nestlé's strategy focuses on important opportunities and conditions in which the industry operates (Johnson, et al., 2017). Health - conscious goods are becoming more popular, and Nestlé has demonstrated its willingness to develop and upgrade through its R&D department.

Acceptability:

· Key stakeholders: Consumers, employees, shareholders, and suppliers.

· Risk: the need for large marketing expenditure, and companies with a focus strategy that may gain more distinctiveness in their sector all pose high a risk of imitation (Campbell, et al., 2011).

· Stakeholder Reaction: Stakeholders are likely to respond positively if the strategy tries to address social and environmental challenges. Nestlé can evaluate multiple points of view and alter the strategy as needed by interacting with stakeholders through roundtables, investor briefings, and forums (Nestlé SA, 2018).

· Feasibility: The approach is possible because Nestlé has the necessary resources and capabilities to carry it out successfully. Nestlé may anticipate implementing its strategy successfully in the industry because of its lengthy history, expertise, and financial strength.