Strategic management involves the procedures of formulating and implementing the key goal, objectives as well as the initiatives taken by the business organization top management on behalf of all stakeholders, based on the consideration of key company resources and the assessment of internal and external environment which the company operates. Strategic management is one of the fundamental “hard skill” in business management, strategic management entails management of business organization and projects proactively with the main objectives of initiating long-term strategies. Inside the business environment comprises figuring the association which influences the accomplishment and approach of operation (David, 2013).. The external business environment has the control over the entryway and the threats that affect the business operation. It is important to ensure that, the internal business operations are strategically formulated and implemented, this ensures the strategic goals and objectives of the organization are achieved. Therefore, strategic management involves the procedure of analyzing the cross-functional business decision, which is reached by the management while they anticipate for better performance of the organization. Strategic management exhibits the role of management in an organization, whether they are eligible in delivering the best management services to shareholders of the company, it also necessitates the commitment of strategic planning which represents the organizational ability to set goals and objectives which define the direction for the company.
Nestle is a Swiss transnational food and drink company, with its headquarters is located at Vevey, Switzerland. The company is the largest food company in the world; this is by measure of its revenues and other metrics for 2014, 2015 and 2015 consecutively. It is also ranked number 72 on the Fortune Global 500 in 2014, Number 33 on Forbes Global 2000 list of largest public companies. Nestle products comprise baby food, breakfast cereals, coffee and tea, frozen food, pet foods among other products, the company brands have the annual sales which are estimated to be over $1.1 billion. Nestle company has 447 factories which operate in 190 countries, it employee more than 339, 000 people. The company is the main stakeholder of L'Oreal, which the world largest cosmetic company.
Nestle origin is dated back to 1866 when two companies were founders the two companies latter formed the Nestle company. After the formation of Nestle Company, the management of the two organization combined their efforts and expanded the business activities of Nestle Company across Europe and United States. The company is focusing to be a leaders in food industry especially, health, nutrition, and wellness. Despite its success in food industry market, Nestle Company is still operating under some issues, which needs the company management to strategically implement on relevant parameters, the company needs to overcome these issues in order to achieve its goals and objectives.
Nestle company vision is to Meet the Various needs and demands of consumers in their everyday live, this is by marketing and selling food products which are of high quality. The objectives of this are to ensure that, they deliver the very best quality products in every activity they do, especially from the primary produce, choices of suppliers and transport, to recipes and packaging materials.
The company mission is to strive towards bringing consumers food products that are safe and contributes to health and wellness. Nestle Company aids to provide the selection for all individual in all age’s groups in the market. Therefore, the main purpose of the company is to offer, safe, tasty as well as nutritious foods to improve health and well-being of consumers in the market. They tend to meet current and future demands from the consumers.
The success of Nestle company is primarily based on the commitment of the management all the stakeholders. The primary objectives of the company are to provide to its customers variety of Nutritious products which have different test option, this will allow the consumers to choose the test they like. The long-term strategy and success of Nestle Company is due to the overall investment of scientific research which is done on specific nutrition aspects.
The organizational structure is also called the organizational chart, it typically demonstrates the relationship between various individual in an organization, and it defines the relationship between managers, shareholders and employees. An organizational structure depends on the size of the company. Where when the chart grows to be large, it is splinted into smaller charts that will represent different departments within the business entity. Nestle company used relevant organizational structures which are defined to contributes toward achieving their missions.
Nestles Corporation is decentralized organization that organizes its operations according to the matrix organizational structures. A matrix organizational structure is a structure which the reporting relationship between the employees and management are set up as a matrix form, employees have dual relationship especially to functional managers and the product manager. Nestle as a decentralized organizational structure that allows the subordinate to make decision and present the same decision to the management, other may have dual commitment with their management while they implement on decisional matters in an organization. Although the overall reporting’s are made to the top management, the daily operations of the organizations are left back to the employees, where the operation decisions are pushed down to subordinates.
Nestle Company is categorized to belong to an organic organization type which is characterized as highly adaptive and flexible to both employees and management, and including the stakeholders. The employee within the company are not eligible to be given more rules and regulations or rather direct supervision from the management. In promoting the organic organizational system, the organization has been able to have highly skilled and trained professional which are encouraged to form teams within the company. Due to high level of influence from internal and external business environment, the employees form teams and group in order to solve specific issues affecting the company, for instance the scientific research in food industry. Therefore, teamwork in an important element and asset which us used by the company in striving towards achieving it’s strategic
For accomplishing the organizational mission, Nestlé uses three strategies that allow the company to maintain a competitive advantage over its rivals. It includes “operational pillars”, “growth drivers” and “competitive advantage” (Nestle.com., 2017).
Innovation and renovation: As mentioned in the company website, Nestlé concentrates upon innovation and renovation. The company has largely focused on product development and facility management with the help of innovation and renovation. With the industry leading research and development wing, the company supports constant innovation of the food and beverage portfolio. It helps the company to use effective processes and market attractive products (Nestle.com., 2017).
Operational efficiency: the company opts for using the best raw materials, procedures and serves the highest quality and safest products to the consumers. Nestlé Continuous Excellence is the organizational approach for supporting efficiency, eliminating wastage, and improving the quality of the product (Nestle.com., 2017).
Whenever, wherever, however: for providing the best quality service the company opts for the most effective marketing mix, which includes the diverse product line of the company, the reasonable pricing strategy for the products, appropriate promotional strategies and the accessible distribution channel (Nestle.com., 2017).
Figure 1: Corporate Strategy of Nestlé
(Source: Nestle.com., 2017)
Nutrition, Health, and Wellness: the company has the mission of offering the good quality products and thus, enhancing the quality of lives of the consumers and address the chronic medical condition through nutrition (Nestle.com., 2017).
Emerging markets and popularity positioned products: the company has opted for positioning its popular products in the emerging markets for the low income customer base (Nestle.com., 2017).
Out-of-home consumption: the company has opted for a smart strategy of Out-of-home by introducing products for leisure and others via kiosks, gourmet restaurants, institutional catering, schools and hospitals (Gassmann, Frankenberger & Csik 2016).
Premiumisation: the company understands the need of pleasure moments among the customers. Hence, Nestlé has opted for Premiumisation strategy in which the company offers premium products of the highest quality in a bit extra payment (Laforet, 2015).
Unmatched Product and Brand Portfolio: in the sector of nutrition, health and wellness, the company has the largest number of diversified product line in food and beverages. It serves a huge level of competitive advantage to the company (Gassmann, Frankenberger & Csik, 2016).
Unmatched Research and Development capability: with a mission of being the leader in nutrition, health and wellness, the company is constantly focusing on research and innovation in developing the product quality and organizational process (Nestle.com., 2017).
Unmatched geographic presence: the company is operating in 194 countries with more than 447 factories, which serves as the competitive advantage and a proof of the customer preference for the brand (Nestle.com., 2017).
People, culture, values and attitude: the company values its employee base and indentifies them as the pillar of success over 150 years. Hence, it has opted for a commendable HRM policy to motivate and retain the talents within the organization (Nestle.com., 2017).
It is on record by Forbes 400, there is no entity that works best faces no issues. Every entity works hard to fight its issues and one that does the same is Nestle Company. Nestle is adored by many in the globe and has been termed to be world leader in foodstuffs. Amidst all the popularity, Nestle faces a number of issues that will send one chilling. There are various issues facing Nestle (Hitt, 2017). The issues facing Nestle Company include; Climate change, child labor and raw material issues.
Most of the products of Nestle come from Agricultural produce and climate change forms a strong contender issue to the firm. Climate change has un-presented effect on the company’s supplies. According to Forbes 500, climate has been changing bringing out adverse effects to the company supplies.
There has been a number of alleged use of cheap and child labor by the company. The company has faced many court cases as to child labor. This has affected right to center the company’s turnover as they have had to hire legal minds to represent them in courts. The child labor has been reported in most of Nestle cocoa production. It has been an issue that have attracted international players of food stuff industries. In most regions that nestle company has planted cocoa the families are poor thus resulting school going children to seek employment in a bid to vent for their families. To this tame this issue, Nestle need to design supplier code and monitor most of her participants in the supply chain. In case there are no other workers and should they have to employ children, let the company come up with training programs about child labor and its consequences.
The issue surrounding this is high unexpected demand by her clients. In everyday the client list at Nestle grows without increase of raw materials. As earlier stated, climate change is one strong contributor of low levels of raw materials. Shifts of the climate have insignificant effects to the raw materials of the company. For instance, prolong drought have reduce the cocoa plant from reaching maturity on time. There are some natural disasters that negatively influence raw materials of the product. Floods, thunderstorms and storms have affected the availability of raw materials in a negatively manner.
To curb the menace, Nestle Company management should come up with compound relationship with the rest material suppliers. In case to reduce bulk products at the store Nestle Company should sell most of the products on promotion. Last but not least, Nestle Company should design Dealer Management system that aids in inventory, sales, service and business management.
Since a long age, the company is following the traditional placing strategy. The company has opted for the FMCG strategy of distribution which involves breaking the bulk policy. The typical distribution channel of the company product is as follows:
“Manufacturing >> C & F agent >> Distributors >> Retailers >> Consumer” (Nestle.com., 2017) and “Manufacturing >> Bulk buyers >> Consumer” (Nestle.com., 2017).
In spite of having a strong and effective supply chain model, the over dependency on the physical distribution makes the company experience issues like lack of product availability in the market and increase in the price of the product. It is detrimental for the brand name of Nestlé. Hence, the company can make the products available for the consumers with online channels. In the modern business environment, the usage of the online distribution channel helps the companies to directly interact to the customers, identify their needs and control the pricing. The company can opt for supplying the products like chocolates and refreshment beverages via online stores (Blackshaw, 2014). The company can also make the products available in the online retail apps like Amazon.com or the apps of the food retailers. It will help the company to make itself more available and approachable to the customers (Rezaeegiglo et al. 2014).
As mentioned earlier, the company is facing the issue of low quality raw material and the lack of its availability. The previously discussed issue of environmental degradation can be cited as one of the major reasons for the lack of availability of the raw materials. Hence, it is important for the company to opt for a strategy that will ensure consistent supply of the raw agricultural products.
Here, the company can opt for the strategy of creating alliance with big farming organization. The company can follow the strategy of investing into the company with the condition of using the Nestlé stated regulations for farming. Here, the company needs to lay down own policies for farming which would support the strategy of organic agricultural practices. The partner farming organization needs to conform to the farming policies of Nestlé and sell their product exclusively to them (Wolf, 2014). This strategy will be helpful for Nestlé to promote its current corporate strategy of providing the best quality product to the employees and eliminate the present issues like lack of raw material and environmental challenges.
For the implementation of this strategy, the company can use these organic raw materials for its premium product line in the initial stages. As the new strategy is likely to increase the cost of the company in the first place, the company can collect the profit from its premium product line by using the raw material in its production. Moreover, by promoting the usage of this organic farming strategy, the company can improve its brand image as an environment friendly organization (Payaud, 2014).
Thus, by altering its strategy of supply chain management, Nestlé can achieve a good level of market success in a sustainable way.
Be it internal or external every company have its own issues with Nestle Company included. You are only presented with change and acceptance of it makes the difference. The market is fierce when it comes to chocolate and Nestle should break into block chocolate and run on the platform as her competitor, Cadbury. Research done by the university of Chicago postulates current market share of Nestle chocolate to be 20.0% while that of Cadbury standing at 34.1%. Nestle should come up with plans and develop Block chocolate.
Number two, Nestle motto for confectionary need to be enhanced. ‘Good food good life’ slogan need to be re-modified, Nestle is a global company in food and beverage. In that case I would recommend Nestle have the good food good life for other sections of the company and try design something like ‘Chocolate Champions’ or something Nestle would benefit at the end. In addition, media reports and detailed financial data indicates that Nestle spends huge amounts to advertise on annual basis. It is quite high as compared to her competitor. To respond to it, I do recommend Nestle to change her strategy and embark seriously on uplifting her old sellers and distribution joints across the entire globe. Nestle should shy away from introducing new product in the market and work hard to boost her immediate products by upgrading them.
Nestle is the world leader in food and beverage industry. It sells products of high quality with her revenue increasing on yearly basis. The achievements poised by Nestle is driven by good business management with good leadership that stand tall in realizing the core objective of the company. Operational managers are given mandate to liaise with local marketers and customers on the kind of products they need. The production manager on the same note ensures the customer needs are answered in the product. The product of the company is not a single job but collective efforts that are well-organized and portend realization of Nestle core objective. The report is a complete process adopted by Nestle and upgrade her business through product innovation.
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