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.
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
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
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.
> LC1 Background / Dairy Division
> Nestlé’s Competitive Strategies
> Competitor Profile – General Mills
> SWOT Analysis
> Proposed Strategic Plan
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