Essay: Strategic Analysis Of Nestle Australia Limited." (59 Characters)

Write a strategic analysis report . The report should demonstrate that the student has thoroughly researched their topic. Students should use examples of business practice from the scholarly journals papers, conferences, books and professional magazines to support their arguments. The strategic analysis will be on a local company. The report consists of two parts and should cover the following requirements:

1.Business background
2. What industry is it?
3. General environment analysis (economic, physical, sociocultural, global, technological, political/legal and demographic – and work out what the important facts are).
4. The industry environment ((i.e., supplier power, buyer power, potential entrants, substitute products and rivalry among competitors) and explain briefly what is significant for each).
5. Competitive environment (Is there a strategic group that you need to take account of? What is the rivalry like in this group? What capabilities do the relevant firms have? What strategies do they follow? What threats do they represent?)
6. Opportunities and threats

1. The firm’s resources, tangible and intangible
2. Capabilities identification (explain the capabilities carefully to indicate what the firm really does.)
3. Core competency analysis (For each capability, indicate which of the four tests for a core competency it meets).
4. Propose a suitable information system solution that meets the chosen company needs.
5. Evaluate the proposed system and provide your recommendations

Nestle Australia Limited is one of the leading public company present in Australia. Nestle Australia has been ranked 197 out of all the leading companies in Australia. Nestle Australia is headquartered in Rhodes, located in the state of New South Wales, Australia (Nestle.com.au. 2018). The company was founded in the year 1908. Nestle Australia earns majority of the income from its products of food and manufacturing industry. Nestle Australia Limited is a leading manufacturer and marketer of wide range of beverage and food products in Australia. The variety of products manufactured and marketed by Nestle Australia includes culinary products, coffees, drinks, snacks, breakfast cereals, baby products, chocolates, confectionary products and others. The range of products offered by Nestle Australia also includes pet foods and accessories. Nestle Australia Limited not only manufactures the products, it exports its products as well. The report would perform both internal and external analysis of Nestle Australia. The report will give an overview of Nestle Australia. The report will discuss and analyze the external factors related to Nestle Australia, highlighting all the possible factors. The report will give an outlook of the industry environment, highlighting all the aspects. The opportunities and threats of Nestle Australia would be analyzed in this analysis report. The paper would also provide core competency analysis of Nestle Australia and discus about the tangible and intangible resources of Nestle Australia. At the last, the report would provide suitable recommendation regarding needs of the company, Nestle Australia.

The strategic analysis of the company, Nestle Australia can be done by studying both the external situational factors and internal aspects of the company (Grant 2016). This report would discuss about the various internal and external influences on the company, Nestle Australia.

Overview of Nestle Australia

Nestle Australia is one of the leading food and beverage industry in world. Nestle Australia is headquartered in Rhodes which is located in the state of New South Wales, Australia. Nestle Australia Limited offers wide range of products. The list of products offered by them includes processed milks, coffees baby foods, chocolate and confectionary, products of culinary and foods and accessories for pets. Nestle Australia markets its products using brand names that includes Nescafe, Carnation, Nespresso, Optifast, and Bakers’ Choice, Plaistowe, Cerelac and many others. The company Nestle Australia Limited markets their products in Australia, it also has its operations in the country Fiji. Apart from manufacturing, Nestle Australia also exports their certain products. Nestle Australia Limited falls under the Food and beverage industry.

PESTEL Analysis

Figure 1: Sales chart of Nestle Australia in Australian market

(Source:  Nestle.com.au. 2018)

General Environment Analysis 

Political factors - The food and beverages authority of Australia regards non-alcoholic beverages and food products offered by Nestle India within the food category. The government generally regulates the manufacturing procedures of these products and the companies, the products that fail to meet the government standards are subjected to give fine. Nestle Australia Limited also falls under the Food Safety Act of Australia (Magnuson et al. 2013). Some of the major political factors that affect the operations of Nestle Australia Limited are:

• Changing laws and regulation related to food standards and actions of marketing.
• The stability of the government in new economies that are emerging and the risk question that falls in the part of international process.
• Changes in the regulations regarding standard practices adopted globally and adaptation to different political forces are also the factor that has to be taken into consideration.

Economic factors – The economic factor that affects the operation of Nestle Australia are:

• Changing budgets of the consumer and the rise of the consumers who are cost conscious are an economic factor.
• The hike in price of the raw material goods in regards to the need to source from the sustainable suppliers is an economic factor that influences operation of Nestle Australia.
• The other economic factor influencing nestle Australia is knowledge and awareness about the changes about inflation, economic growth rates and income levels.

Figure 2: List of top sugar product sellers

(Source:  Gupta 2013)

Social factors – The list of social factor that influences the sales of products of Nestle Australia are:

• The changing attitudes of the consumers are one of the social factors that influence the sales of Nestle Australia .The consumers are opting for healthier products with the initiatives from the government that supports balanced diets and make people aware of the danger of sugar.
• There is a need to adapt to different settings of culture that includes family setting, language and religious beliefs.
• There is a dire need to understand the behavior of the consumer for ensuring a proper and personal approach to marketing.

Technological factor – Some of the technological factors that cause company’s actual results to vary from expected results include:

• The innovation that has been triggered by technological developments is considered as a technological factor.
• E-commerce that has been the platform for development for Nestle Australia is one of the major technological factors for Nestle Australia (Goel 2016).
• The emergence and rise of social media through which consumers are able to interact with the company through a wide range of platforms contribute to the technological factor (Levina and Vilnai-Yavetz  2013).

Legal factor – The legal factors concerning Nestle Australia are as follows:

• The changes in the nature of regulation regarding the food and beverage industry are to be taken into consideration.
• There is a need to follow the practices of global regulations and changes that are taking place across different markets globally.

Demographic factors – Nestle Australia offers wide range of products targeted to population of all age groups .Nestle Australia  targets children ,youth and adults that comprises of 50-60% of Australia’s population .Thus they cater their services to more than half of country’s population .They offer their products in Australia and have its operation in Fiji. Nestle Australia also export their products.

Figure 3: Industry composition of Australian market

(Source: Peristeris  2014)

Brief about the industry Environment :Porter’s Five Forces

The industry environment of Nestle Australia can be analyzed from the following force models:

• Competitive Rivalry – Nestle Australia Limited has a dominating position in the food processing industry but still there are few rivals or competitors in the market of Australia. The major competitor of Nestle Australia in the market is from Cadbury. The rival companies are continuous in a tug of war to avoid competition (Peristeris 2014). All these companies generally spend a lot on marketing and advertising of their products. There is a violent cutthroat competition in food processing industry and all the rival companies’ tries to outperform each other. As long as this competition persists, the consumers will be able to get improved product qualities.
• Threat of Substitute Products –In products market, there is always room for substitute goods, all kinds of products present in the market has substitute, which results in high competition (Gupta 2013). Nestle Australia Limited manufactures products, which are used commonly, and daily as a result the threat from the substitutes is very high. Therefore, it is understandable that Nestle Australia should adopt innovative approach in its manufacturing of products to persist in the, market successfully and has to work efficiently in order to remove the potential substitutes in the market.
• Threat of new Entrants –When the market is lucrative it will attract many new entrants, which would be a threat to the company but if the resources are limited, and there are hardly any place for improvement it may result in monopoly. Nestle Australia is present in the Australian market for a long time. However, still some companies have emerged as new entrants considering the huge market of food processing industry. Many new companies have emerged in Australian market. However, their market share is far less than Nestle Australia. Every year new companies emerge in the market of food processing in Australia but few are only able to survive. Nestle has been a leader in the markets of Australia for a long time and it is very difficult for new companies to come and mark their presence in term of quality or market share. Therefore, it can be said that the threat from the new entrants is moderate threat for Nestle Australia.
  
  
• Bargaining Power of Suppliers –Nestle Australia shares a very cordial relationship with the suppliers because they understand that in food industry quality of products is very important and Nestle Australia has good amount of buying power (Lacoste and Blois 2015). Nestle Australia also provides guidance to the suppliers to work more efficiently and reduce expenses which are redundant. This cordial relationship with buyers enables them to get quality products from the suppliers.

Figure 4: Supply curve of Nestle Australia

(Source : Nestle.com.au. 2018)

• Bargaining Power of Buyers -The customers possesses a huge amount of bargaining power (Painoli and Singh 2015).There are lot of substitute products in the Australian market offering similar products as Nestle Australia however , Nestle Australia maintain the quality of their products . Nestle Australia understands the bargaining power of the customers so they always care about their customers.

Figure 5: Demand curve of Nestle Australia.

(Source: Nestle.com.au. 2018)

Competitive Environment of Nestle Australia 

The food and beverage industry is a large industry and a threat from the rivals and the competitors always persists. Nestle Australia Limited also has many rivals in the Australian food and processing market .However with its quality of products and its presence in the market, it has dominated the food industry market in Australia.  The major competitor of Nestle Australia is Cadbury.

Figure 6: Sales comparison of Nestle Australia

(Source: Peristeris  2014)

Opportunities and Threats 

The opportunities of Nestle Australia in the food and beverage industry of Australia are as follows:

• The ability of Nestle Australia to access new consumer market and particularly new international market is deemed as an opportunity (Sayema 2014).
• Internationalization of market primarily focusing on the countries of BRICS economies is also an opportunity.
• Development of intangible capabilities that would help competitive benefits is also an opportunity.
• Integrating backwards to attain more control and authority over the supply chain of the company is an opportunity for Nestle Australia Limited.

The threats of Nestle Australia Limited are as follows:

• The higher power of the buyers within the food and processing industry added with lower degree of loyalty is deemed as a threat for Nestle Australia limited.
• The raw material prices vary frequently that influences the company’s ability sustains the prices (Aljunaidi and Ankrak  2014).
• The increase in dynamism in the external environment results in short term making of decisions and increase of competition.
• The changes in technology bring about innovation as well as are associated with challenges.
• The demographics of the workforce is shifting be accuse of ageing population.

Internal Analysis

Nestle Australia‘s resources, tangible and intangible products

Industry Analysis

The sources of a firm’s capabilities are its resources. Resources are collectively structured to build organizational capabilities .Some of the resources of a firm are tangible and intangible  resources includes assets that can be seen whereas intangible resources includes those which have been stored over the time and are connected to history of the firm.

Tangible resources of Nestle Australia

• Financial resource–
• Sales revenue- $2,220,849,000
• Organizational resource–
• The governing body of Nestle Australia Ltd is the Annual General Meeting of shareholders.
• Nestle Australia is headed by Board Chairman and CEO.
• Physical resources – The physical resources includes the variety of products offered by Nestle Australia like coffee, water, ice-cream, baby food, confectionary and others.
• Technological resources – Nestle Australia headed from technology led company that manufactured tasty food to science driven, wellness and healthy company.

Intangible resources of Nestle Australia

• Human resources- Approximately 10,000 people have been employed by nestle Australia (Davis, Chelliah. and Minter  2014).
• Innovative resources –Nestle Australia R&D uses the latest innovation in science and technology to provide products having nutritional and health benefits.
• Reputational resources –Nestle Australia scientists play their role in providing products that are providing health and wellness benefits.

Capabilities of Nestle Australia

The capabilities of Nestle Australia are as follows:

• Proper understanding of the consumer market by which nestle Australia produces healthy products is one of the capabilities of Nestle Australia (Solomon et al. 2014).
• Attracting and appealing the best human resources.
• Gaining Customer loyalty and trust by maintain quality of the products (Martínez and del Bosque 2013).
• Strategic positioning of products by Nestle Australia is also a capability of Nestle Australia.
• A proper understanding of brands that are to be launched in market by Nestle Australia is a capability (Urde, Baumgarth and Merrilees 2013).

Core Competency Analysis of Nestle Australia 

Nestle Australia has developed a future road map which created an identity of its goal and the avenues that should be selected for its achievement. Some of the core competencies of Nestle Australia are:

• Renovation and Innovation– Nestle Australia Limited has chalked out its strategies so that it can hone its capability of Renovation and Innovation. Innovation includes development of new pioneering products whereas by renovation it is meant rejuvenation of products that already present (Ali and Dubey  2014). Nestle Australia ensure that they use fresh raw material to produce the best products in market and tries to reach the customers as fast as possible.
• Efficiency of Operation - Efficiency in operation can be achieved by improving efficiency, wastage elimination and improvement in all the departments of operation (Lütkenhaus and de Freitas 2016). This would lead to an improvement of core competency.
• Increase of customer communication–It is important make the customer s are of the new happenings in Nestle Australia .Nestle Australia strives a to build a two way communication system, it enables the customers to provide feedbacks and give experiences of the products offered .This would help the company to develop new and innovative products in future.
• Conflict resolution –Nestle Australia should ensure that there is no conflict among the stakeholders within the organization .The conflict in any organization is detrimental to the organization and hinders the growth of organization .Conflict resolution is subdivided into two parts which are conflict prevention and conflict resolution.

Proposed Strategy and recommendations

The proposed strategies for Nestle Australia Limited are –

• Premiumisation of products- There are many factors that are taking a toll on products of Nestle Australia. Some of the factors include high-grade raw materials, quality of manufacturing and value added products, overhead costs, discounts to the retailers and others. Nestle should head towards premium product segments. This would increase the, margin per unit per product and it would be easier for the company. Nestle Australia should try to give message to the consumers that their motto is to provide ‘better’ products not ‘more’.
• Consumption out-of-home –Nestle is expected to introduce several out-of-home products in the market, this segment is expected to make even higher growth in the future. The consumers in the market are demanding out-of-home health and nutritional products .This segment also include the catering services in the several institution. Nestle Australia is setting itself to provide foods with value and nutritional products  in this locations.
• Providing health wellness and nutrition-Nestle Australia Limited should aim to provide its customers healthier, tastier as well as more nutritious foods and drinks. More emphasis should be given to providing healthy products to solve health related issues (Friel, Barosh, and Lawrence 2014). This would make the brand more popular across the world.
• Stronger Business Communication – Nestle Australia often fails to communicate their messages to the customers and they are deprived of the nutritious products offered by the company. A stronger communication system would enable them to send their messages to more customers and provide them nutritious products.

Conclusion 

From the above strategic analysis report of Nestle Australia limited that Nestle Australia Limited is leading company in food and beverages  industry in Australia. It enjoys a dominant position in the Australian market because of its long presence in the market and superior quality of products it offers. However, there are some pressure and competitions, from the rivals in the market. Some systems and recommendations have been proposed in the report analyzing all the external and internal factors of Nestle Australia Limited. These systems and recommendations if implemented would increase the sales and production of Nestle Australia in future.

References 

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