CASE STUDY V: Nestlé: Sustaining Growth in Mature Markets

CASE STUDY V: Nestlé: Sustaining Growth in Mature Markets
I. THE NESTLÉ COMPANY
Nestlé is the largest food and beverage company in the world and is known as the “most
multinational of the multinationals” having approximately 7,500 brands organized into diversified
categories employing approximately 273,000 people around the world
Nestlé incorporated on 1866 as Anglo-Swiss Condensed milk and had been continuously
operating and dominating the food industry. For the last 155 years Nestlé managed to maintain the
title of being the food giant. This company operates in 187 countries and take over the food industry
by adopting to the tastes and preferences of different areas. . The company is committed to become
the very best “Nutrition, Health and Wellness Company” and they have been embodying this goal, as
a matter of fact Nestlé is famous through its dollar brands such as Nescafé and KitKat.
Despite Nestlé’s success, the company has to deal with the maturing market because it already
reached a state of equilibrium and there is no significant growth due to lack of motivation and
innovation. This is where Peter Brabeck-Letmathe, the CEO of Nestlé from 1977 moved the
company’s goal to 4% of real internal growth by focusing on nutrition and wellness offered by their
products, innovation and external growth for the company’s organic growth. And in addition to this
challenges, Nestlé also dealt with increasing rivalry among its local and international competitors
such as Unilever, PepsiCo, Mars Inc. and Mondelez.
II. SWOT ANALYSIS
Strengths
o Ownership of recognizable brands in the world such as Nescafé and KitKat

o Robust research and development implemented to achieve real growth
o Ability to adopt to diversified taste and preferences of different countries creating a strong
local brand reputation
o Unrivaled brand image which creates large market share
o Competitive management that can be a tool for continuing success
o Implementing strong external growth to support the company’s internal growth
o Investing great efforts for environmental sustainability
o Revenue sources are geographically diversified operating at 187 countries
o Transparency in material sourcing
Weaknesses
o Controversy about high water consumption, forced child labor, food contamination and other
unethical practices
o Sudden change of consumer behavior may affect Nestlé because most of its revenues are
concentrated on some well-known brands
o They are still offering old-fashioned products not in demand in modern setup
o High marketing costs as supplement to changing consumer opinions
o High cost of launching new products intended to exchange with the older ones
Opportunities
o Increasing demand of prepackaged foods due to changing consumer behaviors

o Increasing interest for healthy food amidst the pandemic
o Growing online retail outlet for more efficient distribution
o Growing demand for ready-to-drink teas and coffees which the company provides
o Increasing geographical revenues because of diversified location of operation of the company
o Growing middle classes in nations like China creating larger market
Threats
o Maturing market where there is an absence of significant growth

o Increasing rivalry in the beverage and food industry, internationally and locally
o To rival the competitors using cost-leadership, Nestlé is forced to cut prices
o Suspicion of people that prepackaged foods are unhealthy and not natural
o Some countries eat fewer meals at home decreasing the need for Nestlé’s products
o Because of different natural disasters, costs of some raw materials are increasing
o Threat of lawsuit because of different controversies
III. PESTEL ANALYSIS
Political
o Varying policies related to import, export, taxation and environmental regulations among
different countries
o Difference in licensing and regulatory fees
o Varying laws on employment and labor
o Products and services offered are subject to FDA’s regulations
Economic
o Fluctuating costs of raw materials on different countries

o Because of deflationary period across Western Europe, prices dropped by 0.7%
o Improved economic activity of the local areas of operation benefits Nestlé
o Fluctuating exchange rates affects the pricing and sales
o Increasing demand for affordable luxuries and treats
Social
o People are becoming more health conscious

o More consumers demand prepackaged foods
o Health and fitness which is the goal of the management responds with people’s need for
stronger immunity
o Slightest change in trend will greatly affect the company, thus flexibility is essential
o Research and Development to change the perspective of consumers about unhealthy and
unnatural prepackaged food
Technological
o Automation of businesses and increasing demand of online transactions is an opportunity for

the company
o Research and development paved way to the company’s development
o Increasing cyber-attacks disrupting the reliability, security, and privacy of data
Environmental
o Increasing environmental concerns simultaneous to increase in demand for eco-friendly

products
o Nestlé gave more effort in making the plastic that they use as 100% recyclable since many
consumers are now becoming more environmental friendly.
Legal
o Varying consumer, employment and health and safety laws
o There are instances where Nestlé was denied of legal protection in some certain countries
o Legal requirements need to be analyzed and complied accordingly, and to do this there should
be team of experts that will oversee this
IV. ALTERNATIVE SOLUTIONS
Business-Level Strategy
o Nestlé may use cost-leadership for their business level strategy because:
 This strategy will create larger market share for Nestlé by charging lower prices since
most of its competitors are competing through cutting costs and offering products in
cheaper prices
 It will create opportunity to respond to the desire of price-conscious consumer by
cutting prices which can be achieved by outsourcing of company’s operations
o Nestlé may use differentiation for their business level strategy because:
 Most of the competitors are now dominating the market through offering lower-
priced products but sometimes the uniqueness and better product quality was
neglected and Nestlé can gain advantage by differentiating their goods
 It will give edge to the Nestlé despite the strong rivalry because the consumers’
desires varies and this strategy will respond to this
o Nestlé may use integrated low-cost differentiation because:
 As a giant in food and beverage industry, Nestlé is capable of doing both the cost
reduction and creating unique products
 People are now continuously suffering from pandemic and what we need the most are
high quality products that are both healthy and inimitable yet affordable
Corporate-Level Strategy
o Nestlé may use vertical integration because:

 Acquisition of supplier of raw materials such as beans will help Nestlé establish more
control over its value chain where they can be able to control the pricing and
expenses of production
 Acquisition of distributors may minimize the company’s selling expenses and
distribution processes and costs can be controlled by Nestlé
o Nestlé may use horizontal integration because:
 Nestlé’s merger and acquisition of its competitors will minimize the increasing
rivalry among the food industry especially now that many company are now
becoming competitive locally and internationally
 This strategy will help Nestlé maintain its position in the food industry and cope up
with the maturing market, and this can also be the way for the company’s real growth
V. BEST ALTERNATIVE
Business-Level Strategy
The best alternative that I can recommend for the business level strategy of Nestlé is the
use of integrated low-cost differentiation strategy because it can create products and services
that is both cost-effective and unique because this is very essential especially now that we are
still suffering from pandemic where healthy foods with affordable price are much needed. This
will help the company overcome the accusations and go against the negative perspective of the
people towards the product that they offer. In addition, this will also help Nestlé in overcoming
the high cost of advertising and replacing old-fashioned products that they offer by changing it
into differentiated ones.
Corporate-Level Strategy
I suggest that Nestlé continue to use horizontal integration (diversification) because it

will help the company to respond to certain problems such as distribution channels, increasing
rivalry in the market and also environmental problems by acquiring or merging with companies
that are focusing on ecological aspects. And also this will build good relationship among
companies worldwide and Nestlé can use this to respond with challenges related to varying
laws and regulations among the countries. And lastly this will also minimize the number of
competitors and will give the company more power to maintain its established position in the
food and beverage industry.

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CASE STUDY V: Nestlé: Sustaining Growth in Mature Markets

I. THE NESTLÉ COMPANY

II. SWOT ANALYSIS

o Ownership of recognizable brands in the world such as Nescafé and KitKat

o Increasing demand of prepackaged foods due to changing consumer behaviors

o Maturing market where there is an absence of significant growth

III. PESTEL ANALYSIS

o Fluctuating costs of raw materials on different countries

o People are becoming more health conscious

o Automation of businesses and increasing demand of online transactions is an opportunity for

o Increasing environmental concerns simultaneous to increase in demand for eco-friendly

IV. ALTERNATIVE SOLUTIONS

o Nestlé may use vertical integration because:

I suggest that Nestlé continue to use horizontal integration (diversification) because it

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