Nestle' Case Study

Background

The dairy products at Nestlé are a big driving force for the growth of the company's sales. With the health kick of the many individuals around the world, it pushes the innovator and renovators of Nestlé to reach new height in finding better and healthier products for their consumers. More recent, dairy division became a big potion of the company's earnings, so it would be best for Nestlé to focus a big portion of their core competences and resources on the fast growing dairy division. Which leads us into the most recent yogurt produced by Nestlé's, which is the LC1.

I. OPPORTUNITY AND THREAT ANALYSIS

Comparing Nestlé with the environment concerning which it would determine the opportunity and threats in the future of the company by Likert Ratings Scale

Figure 1 Pest Analysis

I. Economic Factor Rate Weight RxW Comments

1.Economic Growth 3 0.2 0.6 Expected increasing in economic growth. However, it is not direct effect with the food product especially LC1yogurt.

2.Inflation 2 0.2 0.4 Increasing trend due to increasing in economic growth. It didn't apply asNestlé's major problem

3.Interest Rate 2 0.1 0.2

4.Oil Price 3 0.1 0.3 Increasing in oil price would be related on the logistic cost.

5.Disposable Income 3 0.4 1.2 As economic grows, disposable income are expected to increase which is droved the expense on functional food products.

Total 1 2.7

II. Political Factor Rate Weight RxW Comments

1.Government Regulation 3 0.4 1.2 Deregulation to create free market force to open for tense competition.

2.Gevernment / Political Stability 3 0.2 0.6 Political Stability in EU market would be support FDI confidence.

3.Attitude Toward Private Ownership 5 0.4 2 The feeling of acceptable goods is directly affected the distribution channel for product.

Total 1 3.8

III. Social Factor Rate Weight RxW Comments

1.Consumer expectation 3 0.4 1.2 Increasing in Competitors, offerings map closely to customer expectations and interests. Company have to create and deliver value propositions that serve consumer needs

2.Lifestyle Changes 5 0.3 1.5 Trend of health conscious became the one of value in Nestlé LC1 product

3.Population Structure 4 0.3 1.2 Changing in age structure, which is related to sized of potential customer, bring the develop on taste and value added

Total 1 3.9

IV. Technology Factor Rate Weight RxW Comments

1.Technology in infrastructure 4 0.4 1.6 Higher technology infrastructure can help company to produce low cost products and ahead with low operating costs.

2.Technological Advancement 5 0.6 3 Fast technology is another opportunity of company to launch an innovative product

Total 1 4.6

Figure 2 Environment Factor Analysis Summaries (EFAS)

Factor Rate Weight RxW

I. Economic Factor 2.7 0.3 0.81

II. Political Factor 3.8 0.1 0.38

III. Social Factor 3.9 0.3 1.17

IV. Technological Factor 4.6 0.3 1.38

Total 1 3.74

II. INDUSTRY ANALYSIS

Figure 3 Industry Attractiveness Analyses

I. Rivalry among Industry Rate Weight R x W Comment

1. Industry Growth 3 0.1 0.3 Industry growth is expected in increasing because of health conscious.

2. Number of Competitors 4 0.2 0.8 Increasing in variety of functional food products, new ingredient added and innovated, forces Nestlé to launch product faster.

3. Product Differentiation 4 0.3 1.2 Each of companies tries to differentiate its product. Nestlé has to put more effort to sustain its uniqueness.

4. Diversity of Competitor 3 0.3 0.9 There are variety of taste and value added in functional product which is one of company's innovation

5. Switching Cost 3 0.1 0.3 Instead of functional food, customer can eat fruits or other kinds of products.

Total 1 3.5

II. New Entrant Rate Weight R x W Comment

1.Capital Requirement 2 0.6 1.2 Because of functional food depend upon R&D. Therefore, newcomers need a capital in assimilating of nutrients. Nestlé also have to invest in its R&D.

2. Economy of scale 2 0.4 0.8 High technology would help reducing in production for the well established company. However, it is difficult for the new entrant

Total 1 2

III. Supplier Rate Weight R x W Comment

1. Number of supplier 1 0.5 0.5 There are vast amount of supplier in the market. Nestlé can switch from one supplier to another easily.

2. Size of supplier 2 0.5 1 Nestlé demand a huge amount of supply. The more reliable sources may grab more attention by Nestlé.

Total 1 1.5

IV. Buyer Rate Weight R x W Comment

1. Number of Buyer 5 0.7 3.5 Increasing in health conscious lead to higher demand by consumer

3. Price sensitivity 3 0.3 0.9 Functional food is inexpensive product. Customer can buy these daily goods but can eat another food instead of functional food.

Total 1 4.4

V. Substitute Rate Weight R x W Comment

1. Uniqueness of product 4 0.5 2 There are high competitions in vary kind of substitute product which would be effect within the functional product.

2. Price performance relative 5 0.5 2.5 High