Nestlé Strategic Management
Part 3: Strategic Management
Nestlé is the main Nutrition, Health and Wellness Company in the world with an unmatched combination of more than 2,000 global and local brands headquartered in Vevey, Vaud, Switzerland (Nestle, n.d.). According to Nestle, it provides health solutions and science-based nutrition for all stages of life to help customers concern more about themselves and their families. Besides that, it is the largest revenue generating food company in the world and ranked #72 on the Fortune Global 500 in 2014 (DuBois, 2011; Lausanne & Vevey, 2009; Fortune Global 500, 2014).
Five primary product lines of Nestle are water, milk products and ice cream, powdered and liquid beverages, nutrition and health science, and also prepared dishes and cooking aids. Nestlé waters make consumers’ stay hydrated with its global brand. In Nestlé’s global BCG Matrix in 2015 (Appendix 1), mineral water has high growth rate and high market share which place in a star. This means that the company is able to generate large cash and consume large cash (Arline, 2015). This product line has a clearly visible market and requires large amounts of funding to compete with competitors (Martin, 2015). Ashfaq et al (n.d) point out that the company intends to use market development strategy due to its strong brand image. For instance, the company intends to enter the market where specialised to medical skin treatment (Nestle Annual Review, 2015).This strategy is suitable and aligns with the situation because mineral water is in the best situation which just needs to develop new market so as to maintain and increase market share.
Moreover, Nestlé’s well-known dairy brands symbolize a strong foundation for the company’s continued growth all over the world. Milk products and ice cream place in cash cow where market growth rate is low but market share is high. This means that the investment amount required maintaining their business is lower than the revenues they are able to generate (Martin, 2015). According to Martin (2015), the company will attempt to develop this product with as little investment as possible as this product is in a developed market and the company holding it to continue to make revenues. Ashfaq et al (n.d) point out that the company intends to use market penetration strategy to gain market share. The cash cow gains the best advantage by making maximum revenue due to its high market share as the market is not growing (Nyandat, 2013). Therefore, this strategy is suitable and coordinates with the purpose of minimising investment but gives more financial returns and includes retention of the market share at the same time (Nyandat, 2013). So, more resources can be investing or channelling to other product to maximise profit.
Furthermore, Nestlé exclusively positioned with two trustworthy brands which are Nescafé and Nespresso to provide consumers with a complete range of products, systems and services. Powdered and liquid beverages segment are place in question mark where growth rate is high but market share is low (Arline, 2015). This means that this kind of product consumes more than it generates. According to Lausanne (2001), the company uses market penetration strategy and market development strategy to turn this question mark product into high market share products. In fact, companies are advised to invest in question mark if the product has potential or growth (Arline, 2015), but the position that this powdered and liquid beverages plot in the BCG Matrix seems to be low potential to grow and nearly fall down to dog, therefore it will be better to sell it before the investment completely wasted and result in loss.