Nestlé Case Study
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This report is going to analyze the company of Nestlé to into the Singapore market. It is going to introduce company and country background, after that it will analyze the company of Nestlé and Singapore market by using SWOT analysis, PEST analysis and Porter’s 5 Forces. Finally, it will have recommendation and conclusion to follow it.
2. Company background
Henri Nestlé founded Nestlé in 1866 in Switzerland. It is the largest food company in the world. Some of products are produced from Nestlé include baby food, coffee, dairy products, ice cream, pet food, etc. Nowadays, Nestlé has more than 400 factories around world and its operation is also in 194 countries. Nestlé has been the world’s most profitable corporation.
3. Country Background
Singapore is the 14th largest merchandise exporter in the world and it has the world’s largest foreign exchange reserves. Nestlé is going to enter the Singapore market because Singapore is a developed country and it has an economic success. Multi-cultural is more important factor for makes Singapore business to be success in that Singapore is easier to enter those countries market. In addition, Singapore has the best business environment in Asia. It is the one of the easiest place to do business in the world.
4. SWOT analysis
Definition: SWOT analysis consists of four parts of strengths, weaknesses, opportunities and threats analysis. It is to identify and analyze the framework can have an impact on a project, product, place or person to survive internal and external factors (Rouse, 2013).
SWOT analysis is an important analysis model in the business, this is because it provides some of internal and external factors that hope people to evaluate market value in the future. It is a simple ways to think about key objectives and specific ideas. Besides, SWOT analysis reveals the business is healthy or sick.
From the below table 1 that shows SWOT analysis of “Nestlé”, after that there is going to explain how each of these factors impact on Nestlé.
Table 1: SWOT analysis of “Nestlé”
Strengths – The biggest brand and valued at $7 billion. Nestlé has become the most famous food company in the world. It has a strong customers trust and financial background. The brand can bring great benefits for Nestlé. It can protect the interests of operators and it can help consumers identify and select merchandise. Nestlé brand ‘s reputation is the best marketing tool. Weakness – Food quality. The major concern for food companies is the food safety and quality issues. Nestle milk powder was broke iodine poisoning cases, the protein content is substandard, traces of melamine and contains toxic heavy metals. Although some toxic components is very low, but it is harmful for the baby and people. The food company of Nestlé can occupy the market situation that basically depends on the quality of the product.
Opportunities – People demand for healthy food. People gradually realized the importance of health, and they also have a growing interest for health. Health care products market has continued to expand in the hot market, but quality of food is uneven. If Nestlé can seize the trendy of health products and to satisfy the people ‘s health requirements for food, this could be a great benefit for them.
Threats – Rising raw material costs. The food company of Nestlé will certainly increase their cost pressures. Meanwhile that impacts the Nestlé Company’s product sales and the price positioning. When the company issue products have expired inventory and cannot be recycled, the cost of the loss of the company products are also increased. In addition, a high spending of company means that the profits will be reduced.
5. PEST analysis
Definition: A PEST analysis is concerned about the impact on the business environment, it may affect the political, economic, socio-cultural and technology issues of strategic development of a business. Identify the impact of PEST is an effective way of summarizing the external environment in which a business operates (Anonymous, 2010).
PEST analysis is an important framework that provides the organization’s overall view of the business environment. Firstly, it can identify the external factors that might change in the future. Secondly, it helps to reduce the impact and effect of potential treats to the organization. Finally, it enables to assess the impact of national and global access to new markets.
From the below table 2 that shows PEST analysis of “Singapore”, after that there is going to explain in detail how each of these factors impact on Nestlé.
Table 2: PEST analysis of “Singapore”
Since independence has not been political violence.
High level of transparency and accountability in the business. Law can have a mandatory sentence, only the judge without a jury. The World’s second of the best protection of intellectual property. Bureaucracy in business at least place in Asia.
GDP ranking the global top 10.
Top 3 in the world for foreign trade and investment.
Unemployment rate at 2.1%.
The currency exchange rates have been increasing.
English, Malay, Mandarin and Tamil.
Chinese, Malay, Indian and Indo-European ethnic origin.
Buddhism, Taoism, Hinduism, Islam, Protestantism, Catholicism, Judaism, Sikhism. An average about 4 people in a family.
Asia’s most network-ready country.
The Highest Rate of Internet Usage in Southeast Asia.
About 23 % of Singaporeans own their own tablet computer.
70% of Singaporeans use a smartphone.
Singapore cardholders owned the most number of credit cards.
Political – The World’s second of the best protection of intellectual property. With the rising role of intellectual property in the international competition and the rapid development of science and technology, the scope of protection of intellectual property is growing. Singapore on intellectual property have good coping strategies that it can be well-protected Nestlé patented products, Nestlé could be a good market share in new products and helping to concentrate focus on the development of new products.
Economic – Unemployment rate at 2.1%. Singapore is one of the countries with the lowest unemployment rate in the world, over the past decade the ratio never exceeded 4%. Low unemployment rate means that a sufficient labor resources and all economic resources of the country. It helps Nestlé avoids the problem of manpower shortage and Lack of resources.
Socio-cultural – Chinese, Malay, Indian and Indo-European ethnic origin. Singapore is a multi- ethnic and culturally rich country, but it also cannot avoid the collision of many cultures. Cross- cultural management crisis is global enterprises likely to encounter a crisis that Nestlé needs to strengthen understanding between the various ethnic cultures and taboos. Avoid employees because of cultural differences and differences affect the normal business operation and development.
Technology – The Highest Rate of Internet Usage in Southeast Asia. Network using a high ratio can be increased to allow Nestlé to sell the product in the network market. They can to wide spread; increasing the customer’s impression and causing positive comments for inspire customer desire for the product. It enhances the quality of service and saves a potential spending of Nestlé. However, it also increases the competitiveness between Nestlé and other companies.
6. Porter’s 5 forces
Definition: Porter’s five forces model is an analytical tool that uses five forces determines industry profitability and creates competitive strategy. It is a framework, the most important forces affecting the industry classification and the intensity of competition and profitability analysis (Jurevicius, 2013).
Porter’s 5 forces it is very useful in the development of the company’s strategy, because it reveals how powerful forces are five keys in a particular sector. This is the work of each analyst to assess the competitive position of the company in the industry, and it can be used to identify strengths and weaknesses to strengthen the position.
Table 3: Porter’s 5 forces analysis of “Food processing” in “Singapore”
From the above table 3 that shows Porter’s 5 forces analysis of “Food processing” in “Singapore”, after that there is going to analysis for chosen industry of Food processing of Nestlé.
TONE (low) – It is difficult for new competitors to enter the industry, the profits began to decline because of more and more companies competing for the same market share.
BPOS (low) – Suppliers are less powerful than Nestlé this is because Nestlé is a food processing company it has a lot of suppliers and it has a large of the supply.
BPOB (low) – Consumers are less powerful than Nestlé because of Nestlé has a lower price than others and it has good quality and reputation.
TOSP (high) – Consumers can use other products instead of Nestlé this is because there is almost the same raw materials in the product, actually there are not special in the Nestlé and can easily be substituted.
CR (high) – It is presence of strong competition. There are many subsidiary of Nestlé, and it impossibly puts so many funds on one product. Nestlé must have less investment fund in a product than those companies, which specializes in a product.
Singapore is attractive a lot of foreign company that Janus’ chief operating officer Jacqueline Low said: ” Singapore to attract foreign companies, because it is ready to provide a low tax rate and a first-class business environment in the global economy of the country, which is a great attraction from developing countries and mature countries.” Last year, the republic was named the world’s easiest place to do business is the seventh consecutive year by the World Bank and the International Finance Corporation (FOO, 2013).
Food industry for countries to create a lot of employment opportunities, as consumption levels improve diet has also become a very important opportunity. Only be able to follow the market demand, and guide the consumer market that the food industry is the fastest payback of and win back the profits. Encourage multinational companies to establish high-tech production facilities in the Republic of Singapore. Singapore ‘s industrial policy has been so successful that the government is now attempting to be the strengthening of local companies, and encourages them to invest abroad (Anonymous, 1993).
In conclusion, growing business in Singapore there is a comprehensive protection powerful policy influence more and more foreign enterprises. Singapore has a higher GDP in the world, which is being developed in a developed market. It has developed technology information dissemination, a stable political system and increasing per capita consumption levels. Singapore is very conducive to the establishment of new foreign companies to join. Food production industry is an easy to set up and quick return on investment industry, it is very easy to get customers for the product and brand loyalty. Food industry in each country’s GDP also account for a large component.
There are some suggestion for Singapore and Nestlé. Firstly, the government should control E-commerce activities and to provide good service to attract foreign investment for promotes local economic development. Secondly, Nestlé should attract some Singapore local large enterprises to some new projects of cooperation, so they can quickly stable local market in Singapore business status, and local enterprises to join in Singapore for Nestlé’s money is a good firm. Finally, Development of each new project there are risks, When any unexpected adverse occurrence and the project, Nestlé and Singapore should be prepared well in advance to deal with the minimum adverse.