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Background of the company

Describe about the Business Foundations for Main Product of Nestle.

In this assignment, business operation for a company has been analyzed. For this assignment, company Nestle has been selected which is operating in the country India. The purpose of this assignment is to evaluate the internal and external environment for the organization in which a new product can be developed and launched. With the help of SWOT analysis, the internal environment for the company Nestle can be analyzed.   The target market for the company has to be evaluated for which the new product can be launched.     

Nestle is a Swiss transnational food and drink company founded in the year of 1866 (Nestle 2016). The main products of the company confectionery, ice cream, tea, coffee, baby food, bottled water, medical food, pet foods, frozen foods and snacks. Beckett (2012, pp.67) stated, “It is the largest food company in the world measured by revenues, and ranked 72 on the Fortune Global 500 in 2014.” It has been found that 29 of the Nestle brands have annual sales of more than 1 billion. These brands are like Kit Kat, Maggi, Nesquik, Nespresso, Vittel, Smarties and Stouffer’s. The company has more than 440 factories and it operates in more than 190 countries (Nestle 2016). It has been found that there is more than 335,000 employees work in this company all over the world. In the year of 2015 approximate revenue of the company is 88.8 billion. According to Akhtar (2016, pp.60), “Nestlé is the biggest food company in the world, with a market capitalization of roughly 231 billion Swiss francs, which is more than US$ 247 billion as of May 2015. In 2014, consolidated sales were 91.61 billion and net profit was CHF 14.46 billion. Research and development investment was CHF 1.63 billion.” It has been found that 43% of the products of Nestle are sold in America, 28% in Europe and 29% From Asia, Oceania and Africa (Nestle 2016).

India is the seventh largest country in the world by Ar. It is the second most populous country having more than 1.2 billion. According to Kotni and Prasad (2012, pp.203), “Currently, the Indian economy is the world's seventh-largest by nominal GDP and third-largest by purchasing power parity (PPP).Following market-based economic reforms in 1991, India became one of the fastest-growing major economies; it is considered a newly industrialized country. However, the company continues to face the challenges related with various issue. They are such as poverty, corruption, malnutrition and inadequate public healthcare. A nuclear weapons state and a regional power, it has the third-largest standing army in the world and ranks sixth in military expenditure among nations. India is a federal republic governed under a parliamentary system and consists of 29 states and 7 union territories. India is a pluralistic, multilingual, and a multi-ethnic society. It is also home to a diversity of wildlife in a variety of protected habitats.” It has been found that India has the second largest labor force in the world having 486.6 million workers. The service sector of India helps to gather 55.6% GDP, industrial sector helps to gather 26.3% GDP and agriculture sector helps to gather 18.1% GDP (Sharma &Kiran 2012). 

Background of the country

The relationship of Nestle was started with India during the year of 1912. At that time the company began to trade as “The NESTLÉ Anglo-Swiss Condensed Milk Company (Export) Limited.”  During that time import and sale finished products in the market of India. According to Terpstra et al. (2012, pp.23), “After India's independence in 1947, the economic policies of the Indian Government emphasized the need for local production. NESTLÉ responded to India's aspirations by forming a company in India and set up its first factory in 1961 at Moga, Punjab, where the Government wanted NESTLÉ to develop the milk economy. Progress in Moga required the introduction of NESTLÉ's Agricultural Services to educate, advise and help the farmer in a variety of aspects. From increasing the milk yield of their cows through improved dairy farming methods, to irrigation, scientific crop management practices and helping with the procurement of bank loans.” 

It has been found that the confectionary industry of India is currently ranked 25th globally. Sethi (2012) stated that, it has been emerged as one of the most well-developed and largest food processing sector of the world. Due to the growing economy, various multinational companies like Nestle started to invest in the confectionary industry of India. They are starting to Launch new products at affordable prices and create awareness among the buyers through advertisements and promotional campaign (Bardhan 2012). It has not only increased market competition in the confectionary industry of India but also increased per-capita product consumption.

“The Nestle continuously focuses its efforts to better understand the changing lifestyles of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness through its product offerings” (Nestle 2016). Siddique et al. (2012, pp.1050) added that “The culture of innovation and renovation within the Company and access to the Nestlé Group's proprietary technology/Brands expertise and the extensive centralized Research and Development facilities gives it a distinct advantage in these efforts. It helps the Company to create value that can be sustained over the long term by offering consumers a wide variety of high quality, safe food products at affordable prices.”

It has been found that Nestle India has manufactured international quality products for various famous brand names like Kit Kat, Maggi, Nescafe, Milkybar. In recent years the company has introduced daily consumable products like NESTLÉ Milk, NESTLÉ SLIM Milk, NESTLÉ Dahi and NESTLÉ JeeraRaita. 

From the research report developed by “Indian Confectionery Market Analysis”, it has been found that “the Indian confectionery market is going through rapid changes in terms of trends and consumer behavior pattern. The industry is being benefitted from the country’s economic boom, and growth in consumer spending. This higher consumer spending is also driven by the new found mall culture and changing lifestyle.”

Market condition in which the company operates

It has been found from various research works that presently Indian peoples are becoming more health conscious (especially urban women).   For this reason, Nestle is going to launch a new product named “Diet Chocolate” for those health conscious peoples. Renowned women’s health, nutrition and weight loss expert named Dr Lily Stojanovska first introduced the idea of diet chocolate. Lily explains “Too often a weight loss program makes no provision at all for pleasure, making it just that much harder to follow through. The Chocolate Diet approach is to integrate a specific sweet treat into a healthy low carbohydrate, low fat diet that utilizes balance nutrition, proper meals and realistic snacks rather than a punishing regime of denial.”  The company uses polyphenol rich cocoa to develop Diet Chocolate to control appetite. It also helps to control metabolism by using fat burning genes. Dr Lily Stojanovska mentions “It's also a rich source of antioxidants and other nutrients that help improve heart function, and stimulates neurotransmitters in your brain that improve general mood and wellbeing.” 

SWOT analysis can help the company Nestle to analyze the strengths, weakness, opportunities and threat for the company. They are mentioned below in the table:

Strength

·         High level of product diversity: 

The company develops more than 8000 products under 29 operating brands (Babatunde&Adebisi 2012). High level of product diversity is the greatest strength of the company Nestle.

·         Strong distribution channel:

As Rampier (2012, pp.59) stated, “Nestle is successfully operating in more than 100 countries which gives a real strength to its distribution channel. Including direct and indirect channels, it has operations in 197 countries.”

·         Research and development

The company has the most capable product design and research tea. They are able to develop new products that can provide competitive advantage to the company in the Indian market. 

·         Brand value

In 2013, Nestle became one of the top ten reputable companies in the world in the annual ‘Global RepTrakTM 100’ study.

Weaknesses

·         The company has issues related with food quality. Jha and Banerjee (2013, pp.35) stated, “Nestle is often blamed for many products due to poor supplies. It is hurting the image of Nestle which is a great weakness.”

·         In recent years, The Indian government has sued the company Nestle with $100m due to unfair trading practices with a popular product named Maggi noodles. It has negative impact on the sales performance of the company for long run.

·         The company has been criticized many time for issues like scandal related with horse meat and issues related with child labour. All these issues make the company less trust worthy.   

Opportunities

·         It has been found that demands related with healthier food products. “Great intensity of buying and consuming quality foods is increasing among people. Nestle frequently tries to provide quality foods to its consumers” (Nestle 2016).

·         Due to strong R&D team, the company has great advantage to introduce innovative products in future.

·         The company can develop partnership with some renowned companies like Coca-Cola to enhance sales performance.

Threats

·         Changing trend of food consumption has affected the business operation of Nestle in India. It has been found that chocolate and chocolate related products are the major products for the company Nestle. However, the increase  of health consciousness has declined the sales figure for the company Nestle

·         The increase of price for raw materials can threaten the competitive pricing for the company in future.   

It has been found that the company is facing issues related with product quality in India. In a recent incident, Indian Government has sued the company by $100 million due to unfair trade practices related with Maggie Noodles (Rampier 2012). However, It has been found that Chocolate and chocolate related products are the major products of Nestle. But some recent research showed that peoples becoming more health conscious toward their health which may be the main reason of decline sales of chocolate in future. For this reason the company is thinking to launch a new product named diet chocolate. The company is mainly targeting female consumers and health conscious male consumers. They will get attracted towards this product as it helps to control appetite. It also helps to control metabolism by using fat burning genes. Dr Lily Stojanovska says, “The Diet Chocolate is great news for anyone watching their weight. It will help burn fat and lose weight without feeling hungry.”

Conclusion    

In this assignment, the market condition for the company Nestle has been analyzed for Indian market.  The company is presently facing issues related with the quality and health standards of foods. For this reason they are thinking to launch a healthy food product named as”Diet Chocolate.” Female consumers are the major target market for the company. 

References

Akhtar, S. 2016. Impact of Social Networking Sites in Marketing Communication and Sales: A Study on Nestle Bangladesh Limited. World,6(1). 56-65.

Babatunde, B. O., &Adebisi, A. O. 2012.Strategic environmental scanning and organization performance in a competitive business environment.Economic Insights-Trends & Challenges, 64(1), 24-34.

Bardhan, P., 2012. Awakening giants, feet of clay: Assessing the economic rise of China and India. Princeton University Press.

Beckett, S.T., 2012. Physico-chemical aspects of food processing.Springer Science & Business Media.

Jha, G., & Banerjee, J. 2013. Opportunities and Challenges for FMCG Companies in India. Anusandhanika, 5(1/2), 35.

Kotni, D. P., & Prasad, D. 2012. Prospects and problems of Indian rural markets. ZENITH International Journal of Business Economics & Management Research, 2(3), 200-211.

Nestle, 2016. [online] Nestle.com. Available at: https://www.nestle.com/ [Accessed 4 Sep. 2016].

Rampier, M., 2012. Sales Promotion of Fast Moving Consumer Goods.International Journal of Logistics & Supply Chain Management Perspectives,1(1), p.59.

Sethi, S.P., 2012. Multinational corporations and the impact of public advocacy on corporate strategy: Nestle and the infant formula controversy(Vol. 6). Springer Science & Business Media.

Sharma, A., &Kiran, R. 2012. Corporate social responsibility initiatives of major companies of India with focus on health, education and environment.African Journal of Basic & Applied Sciences, 4(3), 95-105.

Siddique, A., Selvanathan, E. A., &Selvanathan, S. 2012. Remittances and economic growth: empirical evidence from Bangladesh, India and Sri Lanka. Journal of development studies, 48(8), 1045-1062.

Terpstra, V., Foley, J., &Sarathy, R. 2012. International marketing.Naper Press.

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