EXECUTIVE SUMMARY

This study covers the challenge that is facing Nestle Company.  The study considers that there are various ways of overcoming challenges in the present business world. The current business market is having various challenges which are brought by increased competition and technological change. An organization can overcome them by adopting good structure and management strategy

Nestle company is facing reduced sales challenge. The challenge is caused by both internal factors and external factors. These factors are company’s structure, stiff competitions, negative publicity and increase in the price of raw materials. In overcoming these challenges, Nestle Company will undertake a vigorous marketing campaign. This will help to boost sales and it increase its profitability

Nestle company can have a sustained growth in sales. This can be achieved through sustained marketing. Marketing which will build the name of the company. It will also enlighten the public about the quality of the company’s product. This will make the company to continue to lead the world in the food and beverage industry. It is also recommendable that the company restructures itself.

TABLE OF CONTENTS

INTRODUCTION.. 3

Introduction to the Topic. 3

1.2 Background to the organization. 4

1.3 Objectives. 6

1.4 Scope. 7

2.0 Challenge facing the Nestle Company. 8

2.0.1 Global Financial Crisis. 8

2.0.2 Raw Material Problem.. 9

2.0.3 Negative publicity. 10

2.0.4 Competition. 10

2.0.4 Organizational Structure. 10

2.1 The impact of reduced sales to the stakeholders. 11

3.0 Strategies for dealing with the challenge. 11

4.0 Information for measuring set strategies success. 13

5.0 Ethical issues in dealing with challenges. 13

6.0 CONCLUSION.. 15

Reference. 16

 

 

 

1.0 INTRODUCTION

1.1 Introduction to the Topic

In the contemporary world, organizations are facing new challenges stemming from the market, social culture, economic, political or from within the organization. The ability of the organization to formulate effective strategies for dealing with these challenges, determines whether the organization will be in business for foreseeable future.

Each industry presents its peculiar and inherent challenges to the companies that operate in it. In order to overcome the challenges the management must have a clear and well-spelt plan and strategies of facing the future uncertainties and current challenges. The figure 1.0 below shows ways of dealing with the business challenges in the contemporary business environment (MNP, 2014)

Figure 1.0 (Methods of dealing with contemporary business challenges)       This study shall evaluate challenge facing Nestle Company and recommends ways of overcoming the challenges. In the evaluation of the Nestle Company, the study, shall start with revisiting the background of the company and the assessing the scope and objectives of the study.

The challenge that is facing Nestle Company shall then be analyzed and various ways of dealing with the challenges will be presented. The study shall evaluate the ethical issues that will be encountered in inline of implementing these strategies. The study shall assess the information that shall be necessary in formulating the strategies before giving a conclusion of the whole study.

1.2 Background to the organization

Nestle company was founded in the year 1866. The company operates in food and beverage processing industry. The head quarter of Nestle Company is in Vevey City in Switzerland. According to Gerson and Maffei, (2010), Nestle is the biggest food company in the world in terms of revenue generation.

The company operates a worldwide business and it has offices and factories in more than 86 countries around the world. By the end of year 2012, Nestle Company had 328000 employees around the world. As a marketing strategy, the company is concentration much on the developing economies like in Africa and emerging markets such as UAE food market

Nestle Company objectives are to be trusted by all stakeholders, recognized as world leader in health, Nutrition and wellness and be a leading financial performer in the food processing industry. The figure 2.0 below shows Nestle Company Competitive advantages, operational pillars and growth drivers (Nestle, 2014).

 

Figure 2.0 (Nestle Company competitive advantages, operational pillars and growth drivers)

The competitive advantages of Nestle Company are competent employees, values, culture and attitude, presence in many countries, high investment in research and development and good image and brand name in its products portfolio. The Company growth and expansion is facilitated by setting a strong presence in the emerging markets, offering high quality nutrition, wellness and health products and undertaking competitive marketing strategies such as making sumo of its products to sell in premium market. Key operational pillars of Nestle Company around the world are renovation and innovation, operational efficiency, engaging consuming in coming up with brand names and products and its presence in many countries around the world.

Nestle company uses merger and acquisition as one way of entering new markets and overcoming stiff completion from both local and international companies. According to Nestle (2014_2), Nestle Company has 21% market share of the processed food market share in the world. The company has 8.74% market share in Middle East and a growing market share in the developing economies (Nestle, 2013).

Nestle has a centralized management system even though the regional branches management are mandate to make major decisions that will foster market development and continued excellent financial performance in their regions. The chart below shows the managerial structure of Nestle Company (Nestle, 2013).

Chart 1.0 (organizational structure of nestle Company)

The management of the company stem from its head quarter in Vevey where strategic decisions are made to the regional offices.

1.3 Objectives

The main objectives of this study will be to

1. Establish the major challenge facing Nestle Company in UAE market and international market.
2. Formulate ways of dealing with this challenge
3. Evaluate ethical issues that relate to the implementation of the formulated strategies of dealing with established challenge

1.4 Scope

The study shall evaluate the main challenge that is facing Nestle company operations in UAE and international market. The study shall focus mainly on the increasing competition in proceed food industry. Both local and the international companies bring about the market competition. Completion is health to the consumers because they can get quality goods and products but it is unhealthy to the companies that do not have excellent competitive advantages.

 

 

2.0 Challenge facing the Nestle Company

The main challenge that Nestle Company is facing is reduction in aggregate sales in its processed food products and drinks. The company sales have been reducing over the year. Reduction in the company’s sales is reducing the profitability of the company which has been the main company’s competitive advantage. The graph 2.0 below shows the company’s income from the year 2010 to the year 2013 (Nestle, 2013₂).

Graph 2.0 (The Nestle company income between years 2010 to year 2013)

 

The 2013 sales of Nestle Company were the lowest for the years. The Company performed poorly in UAE and developing economies market. Reduction in sales by Nestle Company can be attributed to the following factors.

            2.0.1 Global Financial Crisis

The year 2009/2008 global financial crisis wreaked havoc the progress of many organizations around the world. The international companies were majorly hit by the crisis which show many companies close down and other strain to survive. The global financial crisis affected the consumer’s ability to buy Nestle Company products. The crisis comes when Nestle had invested a lot in the developing economies.

Between the year 2010 and the year 2013, the company has been struggling to recover from the financial crisis. The crisis led to the rise in the price of the raw materials and reduction the sale price of the company’s products. The global crisis was followed by Europe depression which devastated the Euro market (Dlabay and Burrow 2008)

Nestle Company targets the middle-income market. The middle income was mostly hit by the crisis. During, the crisis majority of the middle-income customers reduced their intake of the processed food. This has affected the aggregate performance of the company.

The developing economies were also hardly hit by the crisis. Nestle company rely much on the developing company to boost its sale. The consumers in the developing economies opted to buy the local products which were   coming at relatively low cost. Nestle company is experiencing reduction in sales in many countries that were hardly hit by the financial crisis such as UAE, Asian countries and Euro countries (Nestle, 2013₁).

            2.0.2 Raw Material Problem

Nestle Company builds raw material deals with many suppliers. This affected the relationship the company and the existing suppliers. The company does not have supply chain management software which can manage its supply deliver well. The hiccup in the supply of the raw materials led to the increase in the price of the Nestle company products.

The raw materials supply was also affected by the bad weather and natural catastrophes that affected many farms. Nestle Company use raw materials such as cocoa which are subject to changes in weather. Reduction in the quantity of the raw materials owing to bad weather and competition from other manufacturing companies caused Nestle Company to raise the price of its products which is affecting majorly on its sale.

            2.0.3 Negative publicity

The image of Nestle Company in the international market has deteriorated over the years due to breach of employment laws by the company in cocoa production. The company has not set clear labor standards to its suppliers. This has affected the good will of the company which affects its sales. The company has also received negative publicity due to its unethical adverts. The company has received many complaints from its baby milk advert that was aired in many countries. The negative publicity of the company has led to the reduced sales.

            2.0.4 Competition

Nestle company is facing stiff competition from both local companies. The main competitors of Nestle Company in UASE market and international market are Kraft and Heinz Company. With the emergency of many small food companies, Nestle market share has been reducing. The company had 24.7% market share in the world food market but by the end of the year 2013, the marker share was 21.2%.

The market share has also been reducing slightly in UAE. In year 2009 Nestle, company had 8.1% food market share it has reduced to 7.3% by the end of the year 2013. The reduction in the market share has contributed to the decline in the sales of the company (Nestle, 2013₁).

            2.0.4 Organizational Structure

The organizational structure of Nestle Company is traditional hierarchical one. The traditional pyramidal organizational structure hinders interaction between the employees and the senior management of the company. The centralized administration of the company makes major decisions to be made at the company’s head quarter. The top administration of the company at the head quarter is not familiar with the circumstances that prevail in all the regions that the company operate this hinders growth in the regional sales which affects the entire organization.

2.1 The impact of reduced sales to the stakeholders

Reduced sales for the Nestle Company will affect the stock performance of the company. In the year 2012 when the company announced that it would not be able to meet the target sales, the stock price of the company fell by 4%. Fall in price of the share affects the company stockholders and if the company will have sustained reduced sales, the investors will be trading at a loss in the company’s stock.

Poor performance of the company negatively affects the morale of the employees. If Nestle company sales continue to drop, it will not be able to attract competent staff from the labor market. Other stakeholders who will be affected by the reducing sales are the creditors because the company might not be able to meet its liabilities. Reduced sales will also affect the amount of tax that the company renders to the tax authorities and might reduce company’s corporate social responsibility.

3.0 Strategies for dealing with the challenge

As a manager of Nestle Company of the Nestle Company, I would first change the marketing strategy of the company. The company relies much on its good image and good customer reputation as a marketing technique. In order to build the name of the company and assure our customers on the quality of goods and services that are produced by Nestle. This will include sustained media advertising.

I would also invest heavily in social corporate responsibility. CSR helps to build the image of the company and to give the company’s products an entrance in the local market. Mostly, Nestle Company relies on the market of the local companies that it acquires. Establishing a good marketing strategy requires a very competent marketing team. As such, I would hire a new marketing team that will organize all the promotions, sales and marketing campaigns.

In implementing this strategy, I will start by convincing the senior leadership of the company on the need for a sustained marketing campaign especially in the Middle East and the developing economies. Then I would formulate a marketing team comprising of internal staff, media personals and external marketing firms. The team would be mandated to come up with competent strategies of marketing all the companies’ products as well as the company. The team should subdivide the target areas according to their income.

Formulating a new marketing team will require the company to change the organizational structure. Currently the marketing team is under the marketing department. The marketing department is overseeing by the marketing and sales manager. The new team will bring in a new structure where the marketing team will be autonomous and answerable only to me.

The team will oversee the activities of other departments and gather opinions from the public in ways in which the company can improve its products. The set team will be advising every department including manufacturing and middle level management. Given that, the team will be liaising the company and the customers. The public relation department will be disbanded. Currently, marketing subordinates will be functioning as the supporting staff to the marketing team.

This strategy will bring resistance from the head of marketing department. The head of this department will feel aggrieved which can result to job friction. In order to overcome this I will integrate the heads of the marketing team in the new marketing team.

I will also solicit for the opinion of the employees. I will also assure the marketing subrogates of their job security. Middle East is mostly a Muslim region. I will ensure that the marketing is done in manner that is ethical and which is in line with the culture and belief of the region. In the execution of the strategy, I will plan, coordinate, organize, direct and budget for the team.

4.0 Information for measuring set strategies success

The information that shall be collected to measure the success of the strategies is the amount of sales in the regions that the marketing shall be undertaken. The aim of this strategy is to increase sales of the company. It is expected that after 8 months of implementing the strategy the sales will have increased at a considerable rate. Another measure that shall be used to measure the success of the strategy will be the amount of feedback we get from the customers and the increase in demand which will lead to increase in production requirement. Measuring sales, customer feedback and reduction demand increment is vital, as it will help in comparing the amount used in marketing to the amount of gain that is accruing to the company..

Measuring sales will be achieved by keeping the record of the amount sold each day and accumulating them for a given period. They will be compared against the past dat. Then a graph of sales of the past period and current will be drawn and the trend noted. The information would be used for assessing whether the team will be using more money than the company is getting from their work. The information will be used to convince senior management of whether to continue with the strategy or to disband it.

5.0 Ethical issues in dealing with challenges

A number of ethical issues that include environmental concern, materialistic concern of adverts and persuading the customers to buy the products will face implementation of this strategy. In Muslim teaching all trade and business should be carried in an ethical manner. Advertising is considered to be spearheading by the company’s urge to get more profit. This is considered unethical. It is also unethical to convince customer to buy the product. Advertising is seen as exaggerating the quality of the products that one is selling. This is culturally unethical. Using poster and banners will also raise environmental concern. In dealing with these challenges, I will undertake the marketing campaign in line with the customer’s beliefs, culture and concern.

 

 

 

 

 

 

6.0 CONCLUSION

The main aim of this report was to analyses the challenge that is facing Nestle Company. The study has analyzed reduced sales as the main challenge. Nestle company has been performing well over the years until recently when its sales started to reduce. The company needs to change its marketing strategy, structure and positioning. This will boost its market performance and expand its future prospects. Undertaking vigorous marketing camping will raise the image of the company in all the regions that it operates in. in brief, Nestle has the potential to sustain its lead in food processing and beverage industry for the future.

 

 

Reference

Dlabay, L.and Burrow, J. 2008. Business finance. Mason, Ohio: South Western.

Gerson, M. L.,and Maffei, R. B. 2010. Technical Characteristics of Distribution Simulators. Management Science, 10(1), 62-69.

MNP 2014. Business Diagnostic. Online < http://www.mnpconsulting.ca/services/performance-improvement/business-diagnostic> [accessed on 4^th Feb, 2014]

Nestle 2013. FY 2012: Good performance across the board, Nestlé model delivered again. Online < http://www.nestle.com/media/pressreleases/allpressreleases/full-year-results-2012> [accessed on 4^th Feb, 2014]

Nestle 2014. Strategy – Nestlé Roadmap to Good Food, Good Life. Online < http://www.nestle.com/aboutus/strategy> [accessed on 4^th Feb, 2014]

Nestle 2014₂. Nestlé opens new USD 136 million factories in Dubai. Online < http://www.nestle.com/Media/NewsAndFeatures/Nestle-opens-new-factory-Dubai > [accessed on 5^th Feb, 2014]

Nestle, 2013₁. The world of Nestlé. Online. . Online < https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&ved=0CEcQFjAB&url=http%3A%2F%2Fwww.nestle-family.com%2Four-company%2Fenglish%2Fassets%2Fdownloads%2FThe-World-of-Nestle.pdf&ei=G8XwUo76KcGQhQeMnICADg&usg=AFQjCNFbkxhpbOsC9Ui5OFHYXmD74mbRWA&sig2=c_IAsmsPchP_3_2jl93wng&bvm=bv.60444564,d.ZG4. > [accessed on 5^th Feb, 2014]