Critical Overview of Nestlé

Nestlé is a Swiss multinational beverage and food corporation headquartered in Vaud, Switzerland. Nestle manufactures well-known food brands such as ready-to-eat meals (lean, cuisine), baking goods (Libby’s and Nestlé Toll House), ice cream (Häagan-Dazs, Edy’s), canned milk (Carnation), juices (juicy juicy), beverages (Nesquick, Taster’s Choice, Nestea), candies and chocolate (Goobers, Baby Ruth), and frozen pizza (Goobers, Baby Ruth (DiGiorno, Tombstone). Nestlé Professional Beverages, Nestlé Nutrition, and Nestlé Purina PetCare are among the company’s subsidiaries. The company has continued to innovate and create diversified commodities to keep up with the changing customer, for instance, Nestle introduced the new Sweet arts Ropes candy that contains no artificial flavors or color (Nestle, 2017). In the same year, the organization produced the chocolate and the ice cream candy flavors. The firm has also partnered with other organizations such as the Girl Scout market the commodities to consumers. The company made an investment worth $72 million in Anderson, Indiana plant with the objective of boosting carnation breakfast essential drinks and he boots nutritional drinks. What the company had was established in 1866, and at present, it employs 328000 individuals. The company made sales of $90.82 billion in 2016 (“Bloomberg Markets,” 2017).

The company has diversified its production and spread to multiple organizations. The companies operating in the United States consists of seven significant businesses: Nestlé Health Science, Espresso, Nestlé Professional, Nestlé Nutrition, and Nestlé Waters North America. The firm’s primary purpose is contributing to a healthier future and enhancing the quality of life. The company emphasizes shaping a healthier and better world. The management has stressed on inspiring people to live healthier lives. At present the, the firm has millions of customers that are located all over the globe. Based on the market share Nestle is the biggest foods and nutrition firm in the world (Blenkhorn & Fleisher, 2005, p. 35). To effectively reach all is clients the company has divided the market into various characteristics that include: behavioral, psychographic area, demographic area and geographical area. The company has been effective in increasing the customer’s loyalty and sustaining the stiff competition that is posed by other firms. The company provides quality that drives the global business growth. Over the course of the last decade, the organization has generated scores of innovation and initiative in health education partnership, micro distribution, and micronutrient delivery.

Nestle Inc. has been performing relatively well when compared to its competitors. From the balance sheet, the company was financed by both the debt and equity. The 2016 shareholders’ equity was 85981 million dollar while the total liabilities amounted to 65,920 million dollars. The company intends to use this obligation to grow the business which will, in turn, add value in the long run. The company also contains a significant portion of assets. The major assets include fixed assets such as machinery and plant. In 2016 the company generated total revenue worth 91.16 billion dollars which was a decline from 92.71 billion in the previous year. Despite the drop in sales, Nestle Inc. still managed to generate the profit of 8.66 billion to its shareholders. The dividend per common share was 1.95 in 2016 which was a slight increase from 1.91 in 2015. Nestle has maintained its leadership position in various categories, and it is expected to continue operating efficiently even as the global economy grows. Based on the capital structure the value of the share is expected to keep on rising as the market strengthens.

Thinking About Growth and Diversification

Mergers and Acquisition

Nestle has a large portfolio of commodities and known brand: Gerber baby foods, Hot and Lean Pockets, Stouffer’s, Lean Cuisine, nestle Chocolates and strong pet commodities. Most of Nestle products are primarily international. While the company’s sales are flat on a volume basis, the international growth has shown a 5 percent rate of real growth. The company is also least exposed to the to the volatile commodity market: cheese makers, bread, cereal, corn and dairy and wheat have to contend with the problematic and rising commodity price.

At present nestle is a large conglomerate with numerous business units across the globe. The strategy has enabled the company to grow and penetrate in many countries. The company must engage in mergers and acquisitions to reap the maximum benefits and grow (Cuervo-Cazurra, 2011, p. 21). The company can expand rapidly through a series of acquisitions as well as mergers. First, with such a strategy Nestle can easily expand first to the developing market such as Asia and Africa. For instance, the company can easily tap the market in Africa by acquiring a local business. The company is also able to secure a route that is already established to the new product category. Because of the mergers and acquisition, the firm can derive extra revenue and enhance its product portfolio. Mergers acquisition play a major part in the stability of a firm. Spreading business units across boarders shields the company against economic uncertainties that arise in a single country. The strategy might reduce the profitability or earn volatility in the company.

The organization is likely to achieve significant benefits when the merged business units share resources. For instance, by sharing resources the firm can save the overhead costs, can enhance the bargaining power relative to the suppliers of raw material. Beside Nestle can save on overhead costs where numerous backend departments such as accounting, administration, human resources, as well as finance-related can be minimized (Maslaric & Groznik, 2011, p. 38). Also, the operational costs, logistic costs, and storage costs can be reduced through planning and giving each strategic business unit a chance to grow and share the available resources appropriately. The mergers and acquisition strategies will not only enable Nestle to attain economies of scale but also facilitate the reduction of costs.

Implementation of the Global Business Excellence

The company might also outperform some of the competitors in this industry if they adopt the Global Business Excellence (GLOBE). GLOBE is a detailed information system that integrates multiple business units together and one technology infrastructure. The strategy could see the organization increase the level of accountability and even reduce the costs (Maslaric & Groznik, 2011, p. 39). The process will give the administration a chance to calculate the global distribution of spending and purchases of raw material. GLOBE is also effective in measuring the global revenue of the subsidiaries and also facilitate the proper management of customers. The global business excellence will also facilitate the synchronization of data between retailer and manufacturers. With GLOBE the company can add more products to its store of stock with just a click of a mouse.

Encourage Information Sharing Among the Subsidiaries

It is critical that the company encourage information sharing among the subsidiaries to speed up growth and eliminate some of the drawbacks that limit productivity. For enhance sharing of information the corporation can organize for conferences on the annual basis. With such a strategy Nestle can enhance innovation because of the created network of experts. The company y should study the changing consumer taste and create commodities that suit those needs (Motohashi, 2015, p. 71). The firm should use it’s headquartered as a focal point for shaping thinking and planning while delegating the tasks to the subsidiaries that are located in various parts of the globe. This strategy is crucial because it increases the level of efficiency within the company. The board of management makes significant business decisions at the headquarter, but the subsidiary organizations are left to adapt to the local context and culture in making the day to day business decisions (Yip, 2000, p. 36). The headquarters should also be mandated with ensuring that synergy from all corners of the world are successful and running to the right direction, with the right strategies and tools.

Recommendations

The company should take its role in wellness, health, and nutrition seriously and should work tirelessly to meet the consumers changing preferences and needs and address the public health. At present, most consumers have been particularly sensitive when it comes to health. The company should be committed to helping the consumers fulfill the dietary requirements by consuming less than 10 percent of calories on a single day. Nestle should continue working on innovation to feature more ingredients and nutrients with health effects in its beverages and foods such as whole grains, protein, and calcium. As at the moment, the firm has continued to reduce saturated fat and Trans fat, excess calories, sodium and added sugar. The company should partner with relevant institutions to enable the consumers to get the nutrition required within the calorie limits (MOTOHASHI, 2016, p. 34). The organization must offer portion-controlled options in its portfolio and guide the consumers. The company can update the labels available on the food packs to incorporate advice to consumers on the nutrition content. In line with the commitment to the quality food product, the organization should continue ensuring that consumers have access to information, beverages, and foods they require to make wise choices that are consistent with dietary requirements. The company can partner with the certain global educational institution such to provide educational material to students on matters to do with physical activity and nutrition. The program can be vital in gaining consumer confidence a fact that will lead to an increased purchase of its commutes. Consumers especially the millennials are quite sensitive and tend to associate with those companies that give them value.

Rather than just focusing on the perceived profits the company should start focusing on commodities that add value to the customers. The organization should study the consumer behavior pattern before manufacturing products. Such a strategy will enable the company to win more global customer in a way that competitors cannot emulate (Westney, 2011, p. 67). Nestle should make use of the social media to engage with its customers and monitor the competitors progress. The company broaden its reach and grow the audience. Twitter Pinterest and Facebook provide information on engagement with customers; this includes data such as repining, retweeting, commenting, sharing and liking. If the followers like a particular commodity they are likely to react a fact that will give the company an idea of its production progress. The company can use such platforms as marketing avenues to educate customers on the new products as well as the health impact of consuming some products. The company can also use the social media platform to monitor the competitor’s progress (Stonehouse, Hamill, & Campbell, 2010, p. 38). The management can browse through the older posts to see how the customer is reacting to their products. Social media requires thoughtful planning, and it’s a long game. The company can access information that is crucial to building sales and growing the business. Nestle can use the data it finds to adjust its content. The company should note that to harness the power of social media the management must incorporate the deliberate mixture of: sharing the relevant message and listening to the audience.

Based on the income statement and balanced sheet finding Nestle has an unpredictable trend. The revenue has been fluctuating in the past five years. In 2014 the revenue was 100.53 billion dollars, before dropping to $92.71 billion and $91.16 billion in 2015 and 2016 respectively. In the entire period, the company has consistently paid dividends to its customers. Despite the decline in net revenue in 2016, the company increased the level of earning per share from 1.91 to 1.95 in 2016 (“Bloomberg Markets,” 2017). The scenario might be the taunting to the organization in the long run. Much of the profit should be reinvested back to the business is it seeks to be successful in future. From the income statement, a lot of money has been used to service debt. The trend shows that the business is highly geared. The management should reduce the amount of external debt and acquire funds through share capital.

The company has been successful its implementation of numerous business strategies. The various business units perform well and are key drivers of organizational growth. The company should continue to emphasize on a stronger collaboration between different units to enable the Nestle to achieve a competitive advantage over other firms. In future it is essential, the Nestle continue managing the integrated business units from a more integrated perspective.

References

Blenkhorn, D. L., & Fleisher, C. S. (2005). Competitive intelligence and global business. Westport, CT: Praeger Publishers.

Bloomberg Markets. (2017). Retrieved from https://www.bloomberg.com/quote/NESN:VX

Cuervo-Cazurra, A. (2011). Global strategy and global business environment: the direct and indirect influences of the home country on a firm’s global strategy. Global Strategy Journal, 1(3-4), 382-386. doi:10.1002/gsj.35

Maslaric, M., & Groznik, A. (2011). Towards Improving Supply Chain Coordination through Business Process Reengineering. Supply Chain Management. doi:10.5772/14754

Motohashi, K. (2015). Alliance-Based Global Strategy. Global Business Strategy, 107-119. doi:10.1007/978-4-431-55468-4_7

Motohashi, K. A. (2016). Global Business Strategy. Springer Verlag, JAPAN.

Nestle. (2017). Retrieved from http://www.nestle.com/aboutus/history/nestle-company-history

Stonehouse, G., Hamill, J., & Campbell, D. (2010). Global and transnational business: Strategy and management. Hoboken, NJ: Wiley.

Westney, D. E. (2011). Global strategy and global business environment: changing models of the global business environment. Global Strategy Journal, 1(3-4), 377-381. doi:10.1002/gsj.34

Yip, G. S. (2000). Global Strategy in the Internet Era. Business Strategy Review, 11(4), 1-14. doi:10.1111/1467-8616.00152