Discuss about the Strategic Management Of Nestle in Sri Lanka.
The topic introduces the concepts of strategic management considering a popular and well established business organization named Nestle in Sri Lanka. Nestle is considered as the largest food and beverage company in the whole world that consists of more than 2000 brands and are global icons and even favorites among the local people in Sri Lanka. The company offers good quality food and beverage items including drinks that are quite popular within the market segments and have generated good amounts of revenue in business as well (Robson 2015). The portfolio is presented to discuss about the strategies implemented by the company to analyze the internal and external environment and at the same time, deal with the key issues and challenges to build a good environment for business at Nestle (nestle.lk 2018).
Organizational vision and mission
Nestle’s vision to become a leading, competitive, nutrition, health and wellness company in Sri Lanka has helped in delivering improved value to the shareholders and work as a good corporate citizen, effective employer as well as individuals who supplies raw materials and resources to cater the needs of people. The vision and values also include bringing consumers the food that are safe to consume and are of high quality to provide maximum nutrition value for fulfilling the physiological needs of people (Cohen and Roussel 2013). The company has brought major ingredients to enrich the taste and bring pleasure for them during consumption.
The mission of the organization is to make better food and improve the lives of people by staying healthy and safe. The company’s mission is “Good Food, Good Life” that is apt considering the strategies and operations managed to deliver the customers with the best quality and tasting food items (Jarzabkowski and Kaplan 2015). The food and beverage items provided are nutritious choices that are consumable from the morning till late at night. The wide range of products available makes it more convenient for the customers to make choices and fulfill their nutritional needs by remaining safe and healthy (Hill, Jones and Schilling 2014).
Application of Porter’s value chain
The value chain framework proposed by Porter is applied for understanding the strategic abilities and formulates processes for understanding the market conditions as well as reaches the customers to influence their buying behaviors. The values of Nestle are reflected in the way business is conducted and by following all the legal laws, rules, regulations and policies to support people and the community. The chain of values of Nestlé includes the most important business activities and support activities where the various inbound, outbound logistics, marketing, sales, HRM activities and procurement strategies are managed to deliver products that can provide value to the customers (Hitt and Duane Ireland 2017).
The primary activities of the organization include the various business operations, inbound and outbound logistics, marketing and sales along with services delivery. The inbound and outbound logistics of Nestle have helped in storing the supplies and raw materials properly, which has stabilized the relationships with the suppliers, which created convenience in collecting, storing and distribution of products and services properly in the market (Wheelen et al. 2017). The value chain analysis is based on the value proposition, which allows for creating shared value and manage the supply chain activities properly through creation of value to self assessment and monitoring the processes of manufacturing and production. It has facilitated the marketing activities and the company has gained a sustainable position in the market to deliver the best quality products to the customers (Armstrong et al. 2015). The inbound and outbound logistics operations are managed by Nestle through purchase of raw materials, i.e., the coffee from the farmers and Government agencies for controlling the coffee trade properly. After harvesting, the beans are separated from the parchment and then transported to the factories for further processing (Rothaermel 2015). The raw materials are stored in stores and then with the use of machines, crushed into powder to end the process of coffee production finally.
Nestle, being a major producer of coffee maintains balance between the supply and demand in the market, which has created the right prices for the products too. The “think globally, act locally” approach to marketing as improved the marketing campaign effectiveness and with further advertisements and promotions on televisions, newspapers, magazines, the company’s brand image has been enhanced. By creating shared value, Nestle has gained global exposure and gained competitive advantage within the Sri Lankan marketplace with great value creation, unmatched brand portfolio, great geographic presence and positive global culture (Meyer, Neck and Meeks 2017). The company aims to implement HRM strategies for creating competitive advantage and at the same time, facilitate the processes of recruitment, selection, training, performance management and compensation practices that can influence the competence of human resources.
Analysis of macro environment
The analysis of macro environment is done with the use of PESTEL framework by Nestle, Sri Lanka, which has allowed the company to assess the political, economic, social, technological, environmental and legal factors associated with the influence on business operations and processes (Lasserre 2017).
The changes in laws, rules and regulations implemented by the Government of Sri Lanka regarding the standards of food have enabled Nestle to take actions and ensure that the food items delivered are safe and healthy for consumption (Claessens and Yurtoglu 2013). The stability of Government in emerging economies has assisted the company to manage business locally within the Sri Lankan market segments as well as globally in the foreign market segments with much ease and effectiveness. The changing global rules, laws and regulations have resulted in making the practices standardized and thus Nestle has adapted to the political forces and maintained close relationships with the political parties to ensure successful business functioning (Morschett et al. 2015).
The changes in rate of inflation and growth in economic rates have made Nestle aware of the prices that shall be set for meeting the needs of people and keep them satisfied. The consumer buying behaviors have changed along with the change in their dietary habits and thus the people in Sri Lanka are quite conscious about the prices and whether the products can meet their needs or not. The increased cost of supplies and raw materials provided by the suppliers has also enabled Nestle to keep the costs under control and ensure that the qualities of those are not compromised anyhow (Stead and Stead 2014). By setting the right prices and offering value, the customers’ buying behaviors have been influence, which has lead to higher sales revenue and resulted in growth in economy of the country too.
The demands and preferences of the clients change from time to time and often it is seen that they have become health conscious. The customers have focused on healthier food options that are in line with the quality and safety standards implied by the Government initiatives undertaken. The Government and regulatory bodies made sure to support balanced diet and set policies needed to be implemented by the Government while producing food items consisting of lesser sugar. The company has established itself in various parts of the world and thus has adapted to the local culture though proper management of organizational values and beliefs so that the consumers are kept satisfied (Goetsch and Davis 2014).
With the advancement in technology and communication, the products are marketed through advertisements and promotions on social media and internet, which has increased the exposure of the brand image. Innovation is achieved through research and development and the sustainable management practices are adopted by Nestle to enable innovation. The technological innovation has assisted the company to develop an e-commerce platform for making the products available online for easy accessibility by the clients (Pearce and Robinson 2013).
The company has adhered to the laws, rules and regulations regarding the environmental impact through prevention of pollution and managing sustainable practices too. Guided by the values and purpose to improve the quality of lives of people, Nestle has shaped sustainable consumption and steward resources for improving the lives of people and meeting the needs in the future too. The reduced water usage and renewable energy sources usage have safeguarded the environment and responded to climate changes to maintain an ecological balance in nature (Hahn 2013).
The legal laws including food safety acts are implemented for making Nestle, Sri Lanka aware of the food standards and maintain health and safety of consumers, who are considered as the most important stakeholders in business.
Porter’s five forces
There are various forces influencing the business processes and even created major issues and challenges for the organization including the rivalries in the marketplace, threats caused by the new entries in the market, products available as substitutes, buying power of both the suppliers and customers. Often the changes in tax rates and frequent fluctuations in the share price have resulted in pricing the products in such a manner that the customers felt unsatisfied (Koc and Bozdag 2017). The issues regarding quality and unable to meet the safety needs are also considered as major issues that may be faced by the organization.
Threat of new entrants
The threats caused due to the introduction of new products in the market are low considering the fact that Nestle is a well known and reputed organization that offers a wide variety of good quality products, which have made the customers satisfied. The wide range of products available in great qualities has enhanced the level of trust and they have become consistent clients (Itani and Mason 2014). The increased investments scopes have resulted in long term commitment both locally and globally, which has helped to create factories to increase the supply. This is an effective approach for increasing the market share and target the market segments to generate higher business revenue (Sivula and Kantola 2014).
Threat of substitute products
The threat caused by products considered as substitutes is high because there are many other beverage items available in the market, which creates complexity for the company to reach the market segments. To overcome this threat, Nestle has prioritized on the health and wellbeing through maintenance of quality standards for increasing customer loyalty and consistently innovate for meeting the changing demands of the consumers (Saha 2017).
Bargaining power of suppliers
The bargaining power of supplier is high, because the coffee product quality relies on the coffee beans and other raw materials provided by the suppliers. Nestle has strengthened relationships with the suppliers not only in Sri Lanka but also all over the world, basically for the production of dairy and agricultural products (Roblek et al. 2013). Nestle provided support to the suppliers to reduce the redundant expenses and made sure to get the best quality supplies to improve the quality.
Bargaining power of the customers
Customers, being considered as major business stakeholders, are responsible for creating positive impact on the business performance. Though there are multiple substitute products available in the market, Nestle has maintained the quality keeping the mind the price choices and value delivered, which has created a sustainable position. By focusing on the health and wellbeing, the organization has managed sustainable approaches to bring out innovative and sustainable products for improving their health and cater their needs with much ease (Tsai, Raghu and Shao 2013).
Competitive rivalry in business
Nestlé’s exemplary brand image and loyalty among the customers in Sri Lanka has created very little issues within the competitive business environment. The company holds a strong position in the food and beverage industry, due to which the competitive rivalries are left behind. Thus, the threat of competitive rivalry is very low.
In the first portfolio, the strategic management approaches were assessed with the analysis of external and internal environment with the use of value chain framework and through management of business operations for ensuring that the supply chain components are managed properly too. The PESTEL framework helped in identifying the various factor associated with the business functioning while the five forces depicted by Porter helped in determining the buying behaviors of consumers, suppliers and threats of new entrants, substitutes and competitive rivalry impacting the business. All these necessary components were covered that influenced the strategic management and helped in deriving an appropriate conclusion in the end.
The second portfolio illustrates about the present strategies implemented by the organization for gaining competitive advantage and achieves the sustainability objectives too. This section will also demonstrate the corporate social responsibilities adopted by the company along with the sustainable measures undertaken for achieving higher profit and improve the growth in economy of the country as well. Nestle has made sure to implemented the right strategies keeping in mind the business values and ethics, furthermore implemented technologies for analysis of data and deriving the best possible outcomes to be achieved in the future (McPhee 2014).
Assessment of strategies
Nestle is a major food, nutrition, health and wellness company that has strengthened its focus on the core nutrition business. Due to this, the company has obtained a leadership position and ensure that the corporate strategies are rightly implemented to motivate the customers for purchases made by the product according to the presence of nutritional content. One of the major strategies is the international strategy, which allowed the organization to become an autonomous global business and responsible for the business of performance or body building nutrition, healthcare nutrition and infant nutrition (Dibrell, Craig and Neubaum 2014).
The Corporate Wellness Unit is designed for the integration of nutritional value added to the food and beverage products made available. The research and development practices have further addressed the concerns of the customer and worked according to the future trends to meet the changing demands and preferences of the clients. Nestle, being a global organization has implemented the international strategy as a major competitive strategy inclined with the foreign direct investments in the dairy products (Bornemann and Wiedenhofer 2014). The company has balanced sales between the low risks in the lower growth countries where the markets though experience higher growth. This maintains steady growth as well as provides the shareholders or investors with good rate of return on investments. The international strategy is facilitated by making changes to the quantity and quality of ingredients used along with the processing technologies for making the brand properly adaptable to the customers. Nestle even partnered with Coca Cola worldwide for becoming a expertise in beverages and bottling system, which assisted in entering new market segments and gain growth in business. Nestle even partnered with some Noodles company for expanding the range of items and improve the sales revenue to gain competitive advantage in business (Burns and Dewhurst 2016).
The distribution strategy has enabled Nestle to maintain a diversified and broad brand portfolio and made the products and services available in the market for the end consumers. It enables extensive distribution network that creates better opportunities for reaching different market segments and ensure generating higher business revenue. During the last few years, there have been numerous changes in Nestlé’s business strategy. The business organisation has transformed from a technology dependent organization to a nutrition, health and wellness company fulfilling the needs of people (Robson 2015).
During the end of 20th century, there have been major changes while implementing the business strategies and this has transformed the entire business concept through integration of newer technologies and ensuring that the production level is consistent. Not only does the company aim to enhance the quality of lives of people by delivering tasty, nutritious and healthy food items, but also has managed the processes of manufacturing and production in a responsible manner for preserving the environment during the future years to come. To optimize the environmental performance of the products, Nestle in Sri Lanka made sure to apply a life cycle approach for assessing the product category throughout the value chain. The packaging weight is reduced and promotions of recycling of materials have weighed down the harmful impact on the environment (Cohen and Roussel 2013). The packaging approaches are managed by considering the indicators including carbon footprint, usage of water and non-renewable energy sources, which reduced the generation of wastes and maintained a cleaner and healthier environment.
Nestle followed the environmental sustainability policy to prevent labeling with a single indicator, furthermore ignore the other important factors such as the emissions of carbon dioxide and the resources for non-renewable energy. The communication methods are committed by nestle to use for engaging the customers and deal with the environmental issues. The recycling of wastes helped to keep the environment clean for facilitating the management of business operations and at the same time, made sure that the best quality raw materials and resources are obtained to enhance the production level effectiveness (Hill, Jones and Schilling 2014).
The Board of Directors are engaged to enable the company achieve the long term sustainable goals and create value according to the Governance principles and policies. The main purpose of Nestle is to improve the quality of lives of people and contribute largely to a healthier future through delivery of nutritional value based products. Though the culture changes, still the values and beliefs remain same, this has created convenience for Nestle, Sri Lanka to drive continuous value creation for the shareholders who have invested on the company. By following the organizational policies, procedures, rules and regulations, the company has managed to commit itself towards margin expansion, streamlined the portfolio and allocated the capital appropriately to create strategic opportunities. The actions undertaken by the Board of Directors have created sustainable value and expanded the mission through partnership working with the Nomination and Sustainability Committee. The company assets and liability management re dine properly, which has not only helped in meeting the quality standards, but also has achieved environmental and social sustainability (Hill 2017). Nestlé’s Board of Directors have conducted the internal and external audit along with the development of financial reports to understand the profit or loss achieved by the organization. Thus, the company has provided sustainable value to the investors and brought huge changes and improvements within the society through creation of shared value.
Nestlé’s ethical business
Considering the ethical principles throughout the value chain, Nestle has always focused on strengthening the relationships with the customers for gaining their trust and influencing their buying behaviors. The principles and policies followed by the company enabled preventing fraud activities, corruption and even make sure to keep data private based on the codes of conduct in business. The values and ethics are followed by Nestle considering the four major aspects including the respect for own self, respect for others, respecting a diversified working environment and lastly, respecting the community values and beliefs for enabling innovation in the future. The Data Privacy standard ensured keeping data and information confidential and ensuring that the privacy program implemented can improve the data processing as well as engage with the customers consistently (Hitt and Duane Ireland 2017). The company’s work culture is positive and thus any form of discrimination based on race, religion, color or creed has been prevented to maintain a diversified workplace at Nestle, Sri Lanka.
The portfolio prepared here illustrated the most important aspects of strategic management including the business strategies followed by Nestle, Sri Lanka to gain sustainable competitive advantage. The international and distribution strategy helped in enhancing global exposure and expand business globally while the distribution strategy helped in making the products available easily in the market for the consumers to access. Nestle become socially responsible by managing sustainable approaches to keep the environment safe while the ethical business activities are managed through maintenance of business policies and procedures along with maintenance of a diversified workplace without any form of discrimination within the workplace.
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