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Agribusiness Food Related Sector of Australia: Nestle

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Executive Summary

This report is based on strategic management inputs of an agribusiness food related sector of Australia. The chosen company for this report is Nestle, Australia. Nestle is the world’s largest food and beverage industry. Choosing this company for the making of the report on strategic management inputs is very helpful because it is one of the top rated agribusiness food sectors of Australia. The report starts with the detailed company analysis including its business units, products and revenue. Later on the external environmental analysis shows how political, economical, social, technological, environmental and legal factors are influencing the business in achieving competitive advantage. The internal environment analysis explains the strengths, weaknesses, opportunities and threats of Nestle, Australia. The competitive analysis of Nestle Australia is also described here. The given recommendations highlight the future strategic direction of Nestle, Australia.

Table of Contents

Executive Summary. 2

Introduction. 4

Company Details. 4

Business Units and Products & service of Nestle, Australia. 4

Business Revenue Units and the Importance of the these Largest of Revenue Units. 5

External Environment Analysis of Nestle. 5

Political Factors. 5

Economical Factors. 5

Social Factors. 6

Technological Factors. 6

Environmental Factors. 6

Legal Factors. 7

Internal Environment Analysis of Nestle. 7

SWOT Analysis. 7

Resources of Nestle. 8

Competitive Advantages and Core Competencies of Nestle Australia. 9

Competitors of Nestle Australia. 9

Recommendation. 10

Conclusion. 10

Reference List 12

Introduction

This report is about strategic management inputs of Nestle, the food-related sector of Australia. The report will provide a detailed company analysis of Nestle. The business units and products of Nestle will also be discussed in this paper. The revenue units of Nestle will be discussed here including the importance of the largest revenue units. The external environmental analysis of Nestle will show how the political, economic, social, technological, environmental and legal factors are influencing the industry. The report will describe the strengths, weaknesses, opportunities, and threats of Nestle, Australia. The resources of Nestle and their competitive advantages will also be presented in this report.

Company Details

Nestle Australia was launched in 1867 in Australia. Nestle is the world’s largest food and beverage company. They have more than 200 brands of products from global icons to familiar local favorites. They are operating from 189 countries (Anon., n.d.). In 1906, Nestle ranked second in the food industry. In 1934, Nestle got the best achievement in the Australian market by launching MILO (Anon., 2009). Currently, this product is sold in more than 30 countries with half billion Australian dollar revenue. The head office of Nestle Australia had become them headquarter for Oceania region which includes Australia, New Zealand and Pacific island in 1999.

Business Units and Products & service of Nestle, Australia

The strategic business units of Nestle, Australia include confectionery & snacks, beverages, foods, New Zealand and Nestle Pacific Islands. Nestle Australia provides varieties of dairy milk products, recipe bases and sauces, Museli bars, baking ingredients, baby and toddler nutrition, medicated lozenges, flavored noodles, frozen meals, flavored milk and yogurts, coffees, cold and hot drinks, light ice-creams, bakery items, snacks, and variety of confectionery items. Nestle Australia has introduced catering services to cafes, restaurants, hotels, and clubs (Anon., n.d.). The brands include Kit Kat, Nescafe, Nestea, Nespresso, Coffee-mate, Ortega, Crunch and many more. Nestle also introduced Purina. It is a pet’s food.

Business Revenue Units and the Importance of the these Largest of Revenue Units

The coffee, chocolates & confectionery, noodles, and baby foods are revenue earning business units of Nestle, Australia. Nestle Australia is known as the market leader in the food and beverage sector in the Australian market. Their revenue-generating units are solely responsible for their huge revenue earning (Anon., 2009). Chocolates, yogurts, ice cream, milk, dairy desserts, coffee, confectionery, and frozen meals are the largest revenue-generating products. These business units are introducing new products which are helping the industry in getting more revenue.

External Environment Analysis of Nestle

The external environmental analysis includes PESTEL (political, economic, social, technological, environmental, and legal) analysis. The following analysis is the PESTEL analysis of Nestle, Australia.

Political Factors

The Australian political environment indirectly influences the performance of any organization. Nestle Australia also gets influences from the political environment of the country. But the organization is not affected by any political issues whenever they launch a new product because currently, Australia is experiencing a stable political situation. There is no war or revolution or election which would affect the Australian market. The country is a constitutional monarchy thus sometimes many organizations face pressure for regulatory reforms. Nestle, Australia faced a major issue when the Department of Agriculture of the Australian government had issued a holding order against Maggie as a precautionary measure on 2015 (Unsupported source type (Misc) for source Naw17.). Nestle Australia had temporarily suspended the import of Maggi noodles from India as that product had violated food safety measures. The new Australian government introduced many new policies for agribusiness food sector by reducing the cost of R & D and taxation policies.

Economical Factors

Australia has experienced a sharp fall in inflation rate in the first quarter of the current financial year so the product selling rate is increased as the product prices are rising slowly. The disposable income of the consumers is also increasing thus the company is experiencing a positive growth rate. Different countries have different economic policies. Nestle uses different economic policies for different countries. Consumers’ budget is changing day by day. Many consumers are cost-conscious. Nestle Australia has many consumers from this segment. It is observed that the raw material prices are increasing about the need to source from sustainable suppliers of Nestle Australia.

Social Factors

Consumers are now becoming health conscious. They support a balanced diet and are well aware of the dangers of sugar. This affects some of the product lines of Nestle Australia like chocolates and snacks. Nestle, Australia is the producer of finished goods thus they are highly dependable on customers’ satisfaction and desire. The organization had introduced some specific steps like the acquisition of specialized start-ups and partnerships with other related companies to meet the needs of health-conscious consumers in Australia. Nestle Australia, is adjusted with the market segments and introduces well-positioned products to meet the needs of customers (Basil et al., 2019). Their thousands of brands make it possible to achieve strategic focus. Social factors are also based on some demographic factors of a country. These are age, gender, income, and social class of the consumers of the selected country. Nestle Australia has products for every consumer from baby to old people.

Technological Factors

Every business industry in present days is using technology as a marketing tool. The Australian market is having a strong technological background. Nestle Australia had made huge investments in research and development to enhance its capability to produce varieties of products. After the innovation of new technologies, the R & D costs are also reduced (Sambell et al., 2019). Technology is also helping the company in product launch, promotion, and customer awareness. Consumers can interact with companies through social media platforms.

Environmental Factors

Environmental factors become the most important factors for every business. Every organization should follow environmental standards while producing, supplying and disposing of wastage. Nestle Australia uses various programs to make the organization more eco-friendly through its CSR initiatives (Unsupported source type (Misc) for source Naw17.). Nestle Australia uses sustainable packaging strategy and product stewardship. Nestle Australia reduces greenhouse gas emissions with improvised resource efficiency and cleaner fuels. They also use renewable energy in the business manufacturing process. In 2013, they revised their safety policy. They sent 3906 tons of waste to landfill as per their commitment of zero waste. They plan to reduce water consumption by 4% per ton of products.

Legal Factors

The legal factors for any organization in Australia include health and safety measurements, employment laws, environmental laws and guides, business laws and legal protection. Nestle Australia is also abided by these legal factors. There are some legal protections in Australia which are also needed to be followed by the organization. These are IPR rights, copyrights, and property patents. Nestle Australia faced some legal charges for infant milk formula scandal, the accusation of child slavery, and food quality of Maggi which was banned in India.

Internal Environment Analysis of Nestle

Internal environmental analysis is based on SWOT (strengths, weaknesses, opportunities, and threats) analysis of an organization’s environment. Strength and weakness are considered as the internal organizational environmental factors whereas opportunity and threats are the external organizational environmental factors (Phadermrod et al., 2019). The SWOT analysis of Nestle is presented below.

SWOT Analysis

Strengths

Weaknesses

·         World renowned brand

·         Huge distribution system

·         Brand equity

·         Broad product portfolio

·     Maggi controversy

·     Infant milk formula scandal

·     Brand structure

·     Legal issues

Opportunities

Threats

·         Healthy breakfast

·         Increasing income level of consumers

·         Expanding market

·         Business partnerships

·     High competition

·     Price hike of raw materials

·     Buyer power

·     Changing mind of customers

 

Resources of Nestle

An organization’s capabilities are defined by its resources. Resources of an organization can be both tangible and intangible. Tangible resources are the assets which can be seen and counted (Porter & Kramer, 2019). Intangible resources cannot be quantified and competitors cannot analyze these. 

The tangible resources of Nestle Australia are the followings.

  • Financial resources
  • Total Sales- CHF 91.4 billion (2018)
  • Operating profit- CHF 13.7 billion (2018)
  • Total assets- CHF 137 billion (2018)
  • Organizational resources
  • The governing body of Nestle Australia includes Annual General Meeting of Shareholders (SALIM, 2018).
  • CEO, Chairman and Board of Directors
  • Clusters, technology centers and research and development centers.
  • Physical resources
  • Coffee
  • Milks
  • Water
  • Ice cream
  • Baby food
  • Chocolates & confectionery
  • Cooking meals
  • Technological resources
  • Nestle adopted technology to upgrade their product range from tasty foods and beverages to scientific and healthy food and beverage provider (Sambell et al., 2019).

The intangible resources of Nestle Australia are the followings.

  • Human resources
  • Nestle Australia employed thousands of employees.
  • Innovation resources
  • The innovation resources of Nestle Australia ensure delivery of nutritional and healthy products.
  • Reputational resources
  • The scientists are playing vital role in the organization as they ensure wellness benefit to the consumers.

Competitive Advantages and Core Competencies of Nestle Australia

Agribusiness related to food sector is highly competitive (Unsupported source type (Case) for source Akp19.). Nestle is the world’s largest food and beverage industry. They are the most renowned brand name for high-quality food and beverages. Nestle Australia’s competitive advantages include great product ranges with great quality. Its product portfolio helps to achieve competitive advantage. Strong and innovative research and development and wide geographic presence are other competitive advantages of Nestle Australia. The culture, values and strong customer support of Nestle Australia help them to connect with people all over the world. Nestle Australia has achieved competitive advantages after launching of Nespresso (Brem et al., 2016).

Nestle Australia find core competencies in combining nutritional and healthy products (Wolfert et al., 2017). The core competencies of Nestle Australia are innovation, unique product development, operational efficiency, customer engagement, and quality product. Operational efficiency is one of the important core competencies. They manufactured products which cannot be imitated by their rivals. They maintain a good relationship with customers, employees, investors, suppliers, and shareholders.

Competitors of Nestle Australia

Nestle is a big brand in food sector but it has strong competitors in the market. The competitors are Kraft Foods UK Ltd., Wrigley Co. Ltd, Unilever, MasterFoods, Mars Australia Pty ltd, and Cadbury Schweppes Australia ltd (Brem et al., 2016).

Recommendation

Nestle Australia should consider and improve following areas for future strategic direction.

  • Centralization of Resources- Nestle Australia has faced decentralization of resources in the global market scenario. Nestle Australia should recruit qualified resources for each geographic location so that these resources can communicate with the employees (Tong, 2019).
  • Brand Recognition- Nestle should use various types of advertising so that they can reach to a maximum number of customers. They should use different types of promotional activities.
  • Introduce Training for the Labors- Nestle Australia should introduce training for new employees, workers and boat captains. They should launch a human rights campaign for employees of their every branch. This will be beneficial for responding in an emergency like employee harassment.
  • Product Ingredients- Nestle Australia should use the best quality of raw materials for making healthy food products. They should use better science and technology in making quality foods.
  • Crisis Management- Nestle Australia faced some major crisis in the past. They should have good management members who can handle such a situation.
  • Building Warehouse- Nestle Australia dealt with lack of warehouse in major locations and as a result, the transportation cost was increasing. Nestle Australia must build new warehouses in the major locations so that the supply management can be done without any problem. They do not have any warehouse near top coffee-growing countries thus they should build warehouses near these places.

Conclusion

This report was about strategic management inputs of Nestle, Australia. Nestle Australia includes a variety of products like dairy milk products, recipe bases and sauces, muesli bars, baking ingredients, baby and toddler nutrition and so on. The external environmental analysis showed how the macro environment influences the business of Nestle, Australia. The internal environmental analysis described the strengths, weaknesses, opportunities, and threats of Nestle, Australia. Besides that, the report also provided resources, competitive advantages and core competencies of Nestle, Australia. The report highlighted the competitors of Nestle Australia. The recommendation part included some important recommendations which can be beneficial for the future strategic direction.

Reference List

  • Unsupported source type (Misc) for source Naw17.
  • Unsupported source type (Case) for source Akp19.
  • Anon., 2009. Nestle. [Online] Available at: https://www.nestle.com.au/.
  • Anon., n.d. Nestle Good Food, Good Life. [Online] Available at: https://www.nestle.com.au/aboutus.
  • Basil, D.Z., Diaz-Meneses, G. & Basil, M.D., 2019. Social Marketing in Action. Springer.
  • Brem, A., Maier, M. & Wimschneider, C., 2016. Competitive advantage through innovation: the case of Nespresso. European Journal of Innovation Management , 19(1), pp.133-48.
  • Phadermrod, B., Crowder, R.M. & Wills, G.B., 2019. Importance-performance analysis based SWOT analysis. International Journal of Information Management , 44, pp.194-203.
  • Porter, M.E. & Kramer, M.R., 2019. Creating shared value. Managing sustainable business, pp.323-46.
  • SALIM, M.S., 2018. AN INVESTIGATION OF STRATEGIC MANAGEMENT ON THE CORPORATION NESLTE.
  • Sambell, R. et al., 2019. Local Challenges and Successes Associated with Transitioning to Sustainable Food System Practices for a West Australian Context: Multi-Sector Stakeholder Perceptions. International journal of environmental research and public health, 16(11), p.2051.
  • Tong, L., 2019. Nestle Employee Recruitment Research. International Journal of Business and Social Science, 6(4).
  • Wolfert, S. et al., 2017. Guidelines for governance of data sharing in agri-food networks. System Dynamics and Innovation in Food Network.

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