11 February 2010
David Chol, Whitney Drost, Raynard Geason, Sarah Laborde, Casey Landers, Darren McNeely, Vanessa Robicheaux, Nicholas Knight, Taylor Mendel, Jonathan Bush, John Priola, William Ratcliff
Table of Contents
Through the years, Nestlé has emerged as a multi-national company that serves as a brand in itself as well as an umbrella company for many well-recognized processed food commodity brands. Nestlé was established in 1867, with the distribution of its first product, dehydrated baby food; this product quickly made the company profitable. Through a series of well-coordinated mergers and the growth of a vast selection of innovative food products, Nestlé became the global giant it is today. Nestlé’s success can be attributed to its deep agricultural supply chain, strong local market teams, hiring from within, and long tenured CEOs. Nestlé has become the epitome of innovation and success in the retail food product industry. In 1996 Nestlé established the Nestlé Environmental Management System (NEMS) in an attempt to produce more environmentally friendly products. NEMS required innovative eco-design in the company’s products and activities, and gave preference to suppliers who worked to improve their levels of efficiency and sustainability regarding their use of resources. Aside from this, NEMS also requires independent environmental auditing regarding the practices of the company. In addition, environmental awareness training for the employees and business partners is required. Nestlé launched Sustainable Agriculture Initiative Nestlé (SAIN) in 2000 in order to optimize the transparency from farm-to-table and to increase efficiency and productivity. Nestlé took a big risk as it was the first to implement this type of program. The program was effective, and other companies such as Unilever and Groupe Danone adopted the idea. In 2006 it further expanded the program to make water a central area of concentration. Five Forces Model
Porter’s Five Forces Model was created to act as a framework for industry analysis and business strategy development. Porter singled out five different forces that impact competitive intensity which portrays an image of the overall attractiveness and profitability of a market. To aid in our evaluation of Nestlé and its status in the industry, we will apply Porter’s Five Forces Model to the company. Threat of New Entrants
The food processing industry is very large and competitive; it is not uncommon for firms within the industry to do quite well. As a result, many companies enter into the market every year in an attempt to gain a portion of the profitable market. Luckily for Nestlé, the company has been around for over a century and boasts a long history of quality products and consumer satisfaction, which has allowed the company to obtain a considerable share of the market. As a result, new entrants into the industry must attempt to seize a portion of Nestlé’s market share in order to survive. Essentially, Nestlé is constantly a target, and so the threat of new entrants is moderate. Threat of Substitute Goods
Due to the nature of the industry, Nestlé is beset with the threat of substitute goods. From bottled water to lean pockets, there are arrays of similar products that compete directly with Nestlé. It is vital for Nestlé to continuously find new ways to improve its products because competition is so fierce. In recent years, Nestlé has focused on the health and wellness aspects of its products to maintain its competitive edge in the market. Bargaining Power of Suppliers
Nestlé prides itself on creating and maintaining positive relationships with its suppliers all over the world. Due to the large purchasing power of Nestlé, and because the suppliers of agricultural commodities offer a product that is far from unique, Nestlé holds more bargaining power than its...