Threat of New Entrants: Low
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 in China for decades and boasts a long history of quality products and consumer satisfaction, which has allowed the company to obtain a considerable share of the market. It is shown in accelerated investment activity in the 2000’s which indicates showing long term commitment to China and construction of 16 factories from 1993-2006 in China to meet consumer demand. 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 relatively low. Threat of Substitute Goods: High
Due to the nature of the industry, Nestlé is best with the threat of substitute goods. From bottled water to milk-based products, there are arrays of similar products that compete directly with Nestlé. Especially in China, there are many local competitors in food and beverages industry that provides similar kind of product like Nestlé’s. 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 and customer loyalty in the market. Bargaining Power of Customers: High
Customers have a large amount of bargaining power regarding their consumption of Nestlé products. As stated previously, there are many close substitutes for Nestlé products which allows for the preferences of the customer to be very influential. Nestlé understands the power of the customer and has taken specific steps to meet the needs of its products consumers. Specifically, Nestlé is...
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