Nestle: Sustaining Growth in a Mature Market

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Background to the study

Nestle Company has had superior performance since it was established in 1866 within the food production industry. During its 2008 financial year, the firm’s sales revenue averaged $ 103 billion. The firm owns a number of brands that have managed to attain a significant market share. Some of these brands include Stouffers, Kit-Kat, Nestle Water, and Carnation. The firm operates 456 companies located in 84 countries. In addition, the firm has a well-established distribution network which has enabled its products to penetrate the entire global market. This has made Nestle be a key player in the beverage and food industry worldwide (Nestle USA Incorporation: company description,2010, par. 2)

Aim

The aim of the report is to analyze the key elements necessary for Nestle to sustain growth in a mature market.

Scope

The report analyzes the firm’s mission, vision, and fundamental principles. The competitive environment and technological environment are analyzed. The major competitors of Nestle Company are illustrated. The effect of increased globalization on the industry is also considered. The report also considers the increase in health and quality consciousness amongst the consumers. The primary stakeholders are also considered. Finally, the report illustrates the fundamental leadership tasks for Nestlé’s success.

Mission statement

The company is committed to value addition to its food products so as to provide the best foods. This results from the recognition of the fact that good food acts as a major source of good health. In addition, the management team is committed to meeting the consumer’s psychological needs through anticipation and creation of the solutions. This is achieved by supplying food products that are of high quality and safe for consumption. The management of Nestle is committed to meeting diverse consumer tastes and preferences. To ensure the long-term success of the firm, the management of the firm is committed to improving the firm’s brands (Mohammad, Amir, Adnan &Sami, n.d, p. 3).

Vision statement

The management of the firm is committed to increasing the firm’s sales revenue. This will be attained through transforming the company from a food manufacturing company to leading health, nutrition, and wellness firm.

Fundamental principles

In its operation, Nestle is aimed at manufacturing products by integrating the concept of value addition. The value added is aimed at being sustained in the long term to the various stakeholders such as the employees, customers, shareholders, and suppliers.
Recognition of the fact that the consumers have a legitimate interest in the operation of the firm. This includes the firm’s actions, beliefs and behaviors in relation to the firm’s brands since they trust the brands. The company recognizes the fact that the firm cannot be in existence in the absence of the customers.
Recognition of the importance of integrating professionalism and social responsibility by both the management and the firm’s employees in the success of the firm. To attain this, the management of the firm has formulated a comprehensive recruitment procedure and a continuous training program in effort to develop it human capital.
Incorporation of legislation as the best mechanism of safeguarding and inducing responsible conduct. In addition, the management also considers incorporation of voluntary business principles as a strategy of maintaining the highest business standards in the entire organization.
The operation of Nestle is not aimed at attaining a high level of profits in the short term at the expense of its long term survival.
The management of the firm is committed at ensuring that the firm adheres to all the local laws in all the markets in which it operates.

Competitive environment

The food industry is becoming very challenging due to an increase in the number of players in the industry. More investors are venturing into the industry due to its profit potential. The small players are specializing in one line of production such as production of organic food products. In addition, the small firms are being more concentrated on a given geographical area which increases their efficiency of operation. As a result, the competitive degree in the industry is increasing. Apart from the new entrants, Nestle faces stiff competition from already existing firm. Some of the firms which pose intense competition in the domestic and foreign market include Uniliver, Cadbury Schweppes, Conagra Food Incorporation, Kraft Food Incorporation and Mars Incorporated. In addition, Nestle Incorporation is also facing increased competition from giant supermarkets such as Kroger and Albertson. These firms are increasing their competition within the food industry so as attain a relatively high market share. As a result, the food industry has become flooded with a variety of food products. Increase in the number of players has culminated into increment in the degree of rivalry within the industry (Mohammad, Amir, Adnan &Sami, n.d, p. 3).

Considering the competitive nature of the food industry, firms in the food industry have integrated flexibility in their strategic management. This has enabled them to make adjustments according to the changes in the market.

Technology

Over the past decades, the technological environment has undergone rampant changes. Innovation of Information Communication Technology (ICT) has culminated into increased efficiency of operation by the firms. For example, the emergence of electronic commerce has enabled firms in the food industry to tap a wide market. This is due to the fact that the firms can be able conduct their marketing through the internet. As a result, these firms have been able to boost their revenue levels. Considering the mature nature of the food industry, it is important for Nestle to integrate emerging technologies within the industry so as to effectively position itself in the market.

Effect of globalization

Increase in the rate of globalization has enabled firms in this industry to incorporate the concept of internationalization. As a result, these firms have been able to increase their scale of operation through venturing into new markets. This has enabled them to attain economies of scale in their operation. Through this, the firms are able to operate more cost effectively and at the same time increase their competitive strength through fair pricing (Arjen, 2008, p. 5).

Quality

There is an increase in the degree of complexity in the consumption patterns of the consumers which has affected various industries including the food industry (Good food, good life, 2010, par. 3). For instance, consumers are being more quality conscious in purchasing food products (Kevin, 2006, p. 3). This is due to the fact that their objective in making a purchase decision is to maximize on the level of utility they receive upon consuming a product. In addition, the consumers are becoming more health conscious in consuming food products. This results from an increment in knowledge of products by the consumers.

Relationship with primary stakeholders

The management of the firm has recognized the importance of a good relationship with the various stakeholders. For example, the management of the firm is committed at maximizing the investors’ revenue. This has enabled the firm to pay dividends to the shareholders. The firm has also established a good relationship with the customers through provision of high quality products. To the suppliers and creditors, the management ensures that they are paid in time. The management also ensures that the firm complies with the legal requirements.

Conclusion

The food industry has become saturated due to an increase in the number of investors. The industry is also being affected by various external factors such as increased globalization, changes in technology, increase in quality and health conscious amongst the consumers and increased competition. As a result it is important for firms in this industry to formulate ways to sustain their growth.

Recommendation of fundamental leadership tasks for Nestlé’s success

The management of the firm should incorporate the concept of team building. This should be attained through effective recruitment and employee development. This will ensure that the firm has superior human capital. The ultimate effect is that the firm will be able to conduct its quality research and development. Research and development should be aimed at improving the quality of the firms’ products.
The management of the firm should incorporate product development and diversification in its current market and also venture into new markets.

Reference

Arjen, W. (2008). Globalization in the food industry: the impact on market structures and firm strategies. Antwerp: University of Antwerp. Web.

Hoovers Incorporation. (2010).Nestle USA Incorporation: company description. Web.

Kevin, B. (2006). Achieving growth in mature markets. Web.

Mohammad, H, Amir, A, Adnan, R, Sami, K. (N.D). Nestle. Web.

Nestle. (2010). Good food, good life. Web.

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