Deutsch English Espanol Francais Italiano Nihongo Nederlands Portuguese

Nestlé LC1
Nestle's Competetive Strategy

Nestlé describes itself as a food, nutrition, health, and wellness company. Recently they created Nestlé Nutrition, a global business organization designed to strengthen the focus on their core nutrition business. They believe strengthening their leadership in this market is the key element of their corporate strategy. This market is characterized as one in which the consumer’s primary motivation for a purchase is the claims made by the product based on nutritional content.

In order to reinforce their competitive advantage in this area, Nestlé created Nestlé Nutrition as an autonomous global business unit within the organization, and charged it with the operational and profit and loss responsibility for the claim-based business of Infant Nutrition, HealthCare Nutrition, and Performance Nutrition. This unit aims to deliver superior business performance by offering consumers trusted, science based nutrition products and services.

The Corporate Wellness Unit was designed to integrate nutritional value-added in their food and beverage businesses. This unit will drive the nutrition, health and wellness organization across all their food and beverage businesses. It encompasses a major communication effort, both internally and externally, and strives to closely align Nestlé’s scientific and R&D expertise with consumer benefits. This unit is responsible for coordinating horizontal, cross-business projects that address current customer concerns as well as anticipating future consumer trends.

International Strategy

Nestlé is a global organization. Knowing this, it is not surprising that international strategy is at the heart of their competitive focus. Nestlé’s competitive strategies are associated mainly with foreign direct investment in dairy and other food businesses. Nestlé aims to balance sales between low risk but low growth countries of the developed world and high risk and potentially high growth markets of Africa and Latin America. Nestlé recognizes the profitability possibilities in these high-risk countries, but pledges not to take unnecessary risks for the sake of growth. This process of hedging keeps growth steady and shareholders happy.

When operating in a developed market, Nestlé strives to grow and gain economies of scale through foreign direct investment in big companies. Recently, Nestlé licensed the LC1 brand to Müller (a large German dairy producer) in Germany and Austria. In the developing markets, Nestlé grows by manipulating ingredients or processing technology for local conditions, and employ the appropriate brand. For example, in many European countries most chilled dairy products contain sometimes two to three times the fat content of American Nestlé products and are released under the Sveltesse brand name.

Another strategy that has been successful for Nestlé involves striking strategic partnerships with other large companies. In the early 1990s, Nestlé entered into an alliance with Coca Cola in ready-to-drink teas and coffees in order to benefit from Coca Cola’s worldwide bottling system and expertise in prepared beverages.

European and American food markets are seen by Nestlé to be flat and fiercely competitive. Therefore, Nestlé is setting is sights on new markets and new business for growth.

In Asia, Nestlé’s strategy has been to acquire local companies in order to form a group of autonomous regional managers who know more about the culture of the local markets than Americans or Europeans. Nestlé’s strong cash flow and comfortable debt-equity ratio leave it with ample muscle for takeovers. Recently, Nestlé acquired Indofood, Indonesia’s largest noodle producer. Their focus will be primarily on expanding sales in the Indonesian market, and in time will look to export Indonesian food products to other countries.

Nestlé has employed a wide-area strategy for Asia that involves producing different products in each country to supply the region with a given product from one country. For example, Nestlé produces soy milk in Indonesia, coffee creamers in Thailand, soybean flour in Singapore, candy in Malaysia, and cereal in the Philippines, all for regional distribution.

1 > LC1 Background / Dairy Division
2 > Nestlé’s Competitive Strategies
3 > Competitor Profile – General Mills
4 > SWOT Analysis
5 > Proposed Strategic Plan
6 > Sources


Smart Home Technology
Leapfrog and Powertouch
Internet Radio Creation
Pressure Sensitive Label Waste


Tech Business Computer Engineering Electrical Engineering Selected Topics

© Copyright 2005