Analysis of Nestle’s Operations Using PESTEL Model

Choose any business organisation; and conduct an analysis of the macro environment that the business faces.

In this report the company which is taken is Nestle. Nestle is one of the famous brands in the market. The founder of the company is Henri Nestle and it was founded in 1866 in Switzerland. So, in the first phase of the report, the PESTEL Analysis will be discussed. The second phase of the report will take into consideration Porter Five Forces Model. 

Political factors

It is analyzed that the company is conducting the operations in diversified communities and at the time of conducting the operations the company has to face many changes in rules and regulations.  Various products and services are also offered by Nestle but there are various reasons due to which many products are not allowed in many countries.  The stability is maintained in many economies like India and China.  Nestle has to take into consideration the political changes in the developing countries so that the operations can be conducted smoothly. The activities of Nestle are also affected by the instability of the government and it gives negative impact on the overall operations of the company (Loughlin, 2015).

Economic Factors

The company has also maintained a proper network of research and development so that products can be introduced according to the demand of the customers. Change in economic policies of various countries the company has to deal with the problems related to supply of its products to the customers.  It is analyzed that the customers are aware of the changes in inflation and economic growth.  Change in economic policies gives direct impact on the target segments of the company. The decision related to price is one of the essential factors that give direct impact on the inflation rate and buying power.  In enhancing the economic growth of the farmers the organization is emphasizing on contributing to enhance the satisfaction level of the customers (Nestle, 2013).

Social factors

The operations of the company are influenced by the thoughts and beliefs of the customers.  The culture and lifestyle of the individual influence the company to provide specific product to the proper segment group. Social perspective is the factor that is taken into consideration by the organization. It is seen that the change in the attitude of the customers plays a great role in conducting the activities of the company (Rezaeegiglo et al., 2014).  In the recent scenario, the people focus on their health and also consume those products that are beneficial for their health. The organization has also attained goodwill in the market by evaluating the behavior of the consumers.  Nestle is a global brand but the products are produced locally so that proper quality can be offered to customers (Krafft et al., 2015).

Analysis of Nestle’s Competitive Environment Using Porter Five Forces Model

Technological factors

Technology provides many opportunities to the organization so that new products can be created in a proper manner.  Nestle considers the latest technology in conducting the operations of the company like to maintain the proper database by considering latest softwares.  Social media has minimized the gap between the consumers and the organization.  Nestle takes into consideration the state of art technology for creating new products and to attain proper standards globally (Moura et al., 2015).

Legal Factors

Nestle has to face many labor laws that are related to minimum wages.  It is analyzed that the organization has to follow many promotion laws as it is one of the assets of the organization. Nestle has to consider the foreign trade regulations so that products can be supplied to other countries. These laws assist to provide food and beverages to the consumers at international and domestic level by considering rules and regulations of the transportation products. Nestle has to follow the global regulations so that the changes can be taken into consideration in the international markets. It is evaluated that many countries focus on making changes so that the activities can be conducted smoothly and with proper rules and regulations (Frambach et al., 2016).

Environmental factors

In the present scenario, the emphasis is to have a clean environment. So nestle should consider rules and regulations to produce food for environment-friendly operations.  There are various countries that set various rules so that the products can be accepted in the market.  Nestle is emphasizing towards social contribution so that the problems related to packaging and recycling can be solved properly.

Threat of New entrants – low

In the food industry, the threat of new entrants is low. The players who are prevailing in the market hold a large share of the market.  It is important to analyze the needs and wants of the consumers so that they can survive in the competitive environment.  It is evaluated that each and every year there are various entrants enter the industry so that the large share of the market can be attained. Nestle has achieved a good image in the market but as the food industry is taken into consideration it is evaluated that there are various companies who entered the market. 

Nestle gives a challenge to the new entrants so that the quality can be given to the customers and the large market share can be achieved by the company.  As the outcome is attained it is seen that many companies enter the market in each and every year so that the large portion can be gained to enhance the profitability of the company.  It is evaluated that in China nestle is from decades and it boosts the quality of the products and satisfaction of the customers which has allowed the organization to consider the large share of the market. The policies related to government also make it difficult for the new entrants to enter the market. The discouragement can be given from the approval of the FDA.

Conclusion

Competitive rivalry- High

Nestle conducted the activities in the consumer food industry and faces a tough competition in the market. It is evaluated that the competitors of the organization are Kraft foods and P&G. The Products that are in the breakfast segment have the competitors like Kellogg’s. So nestle is one of the largest players in the industry and still has to face a high level of the competition in this industry. To compete in the high level of competition the organization spends a huge amount on marketing the activities (Hollensen, 2015). The competition is not only of price but also with the variants available in the products and offers related to the promotion. All the competitors who are in the market have to strive so that large market share can be achieved.  So the competitive rivalry of the organization is high.

Bargaining Power of Suppliers – Low

Nestle holds a large share of the market in the industry.  So it needs large suppliers to achieve high quantities.  It is analyzed that if the supplier starts the method of supplying they never bargain the prices.  The company focuses on suppliers so that relations can be kept for a long time.  It is also essential to keep proper relation with the suppliers so that good quality of the raw material can be achieved.  The organization takes care of the suppliers so that the products of the company can be available for the customers (Mirzabeiki et al., 2017).

Bargaining Power of Buyers – High

There is a high level of competition in the market and the bargaining power of the buyers is also high.  It is easy for the consumers to switch to the other brands. It is important to give emphasis on the product prices so that the consumers can be retained for a long time.  The cost of switching is low for the consumers.  The consumers have various choices to select the products range and there are many organizations who sell similar products. The organization focuses on increasing the level of satisfaction of the consumers (Payaud, 2014).

Threat of Substitutes- High

There are various products of Nestle like a packaged water bottle and pasteurized milk that have various substitutes available.  As the organization gives daily products so the threat of substitute is high. Nestle has to consider innovative ideas so that the company can sustain for long in the competitive market.   In the food industry, the share of the market is large so that the substitute is available easily for the customers.  There are allegations made on the products of the organization as it is evaluated that it is not healthy for consumption.  The negative impact is seen in the image of the organization and sale of the products that are substitute can be managed (Iqbal and Khan, 2016). For example: The substitute of Maggi is Knorr noodles.

The industry profitability can be determined by porter five forces model.  So, in the section threat of substitute goods, it is seen that the food industry is growing and there are many good numbers of substitutes that can give tough competition to the company. Organizations like Groupe Danone produces similar products as nestle. The company is being innovative to prevent the customer from turning to the competitors (Sa Vinhas and Heide, 2014).

In threat of new entrants, it is seen that food industry is ready and also attract new clients.  The new entrants have to compete with the established brands like the company has to gain a monopoly in the market. In the section bargaining power of the customers, it is seen that the customer base has to search for the substitution of the products as it has high bargaining power.  The company gives emphasis on satisfying the demands and wants of the customers so the public popularity can be gained (Peck et al., 2013).

In bargaining power of Suppliers, the product of the company is derived from the agricultural raw material. Nestle offers good quality of raw materials that will assist the company to retain high standards of production.  It also helps to retain suppliers and advises them to avoid the wastage (Zeng, 2017).

In Competition within the industry, the company has to maintain the proper edge with the competitors.  The competition with Kraft foods is stiff and it is healthy as it ensures the consumers to attain best deals to enhance quality.  Nestle also produces high-quality products so that the needs of the customers can be satisfied (Saluja and Mahajan, 2017).

Conclusion

By analyzing the report it is concluded that company has to maintain goodwill in the market so that the competitive advantage can be attained effectively.  It is evaluated that if quality offered by the company is good then it can be easy to enhance the overall goals and objectives of the organization. Nestle should produce high-quality products so that the needs of the customers can be satisfied. Also, the company like Groupe Danone produces similar products so the company should focus on being innovative to prevent the customer from turning to the competitors.

References

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