Strategic Management: Nestlé SWOT Analysis

As one of the most successful fast-moving consumer goods companies, Nestlé offered a wide range of products with well-known brands throughout the world. The company has solid strengths and seemingly invincible in the industry. This article will inspect the Nestlé SWOT analysis that was proposed by Jurevicius (2021). The article will conclude with strategies and solutions related to the findings and insights from the SWOT analysis.

Nestlé SWOT analysis

SWOT analysis is one of the most common analyses to formulate effective strategies for an organization in pursuing its objectives. The main goal of the SWOT analysis is to determine strategies that align and are suitable for the organization’s resources and capabilities to the demands of the environment in which the organization competes (Ritson, 2015). Hence, it analyzes the strengths and weaknesses of a company, as well as the opportunities and threats it faces, which is what the SWOT stands for. SWOT is often recognized as the bridge between organizational strategy and operations strategy (Stevenson, 2020).

Strengths

Jurevicius (2021) stated five main strengths of Nestlé, such as unrivaled capability in research and development (R&D), strong geographic presence throughout the globe, unmatched product and brand portfolio, environmental sustainability efforts, and the control of some of the most famous brands on earth. Only one of the five can still be argued, and that is the effort in environmental sustainability. The other four are undoubtedly the company’s strengths. The fifth strength can be categorized as brand portfolio, so the company’s main strengths can be summarized as:

1. Unrivaled capability in R&D,
2. Solid geographic presence throughout the world,
3. Unmatched product and brand portfolio.

The company is aware that R&D is one of its main strengths (Nestlé, 2015). This is also shown in the number of budgets the company allocates for R&D, which is higher than its competitors. Moreover, the company has around 300 employees globally dedicated to the R&D of plant-based products (Nestlé, 2021). This is one of the strengths that can be utilized to stay in front of the fast-moving consumer goods industry.

Even more, Nestlé has a strong presence in almost all countries on earth with some of the most well-known brands, such as Nescafé, KitKat, and Pure Life. These market strengths combined with the R&D capabilities can set a solid position for the company to face its opportunities and threats.

Weaknesses

Like many other fast-moving consumer goods companies, criticism often appears in seemingly unethical business practices, such as high water usage, contaminated food, anti-unionism, or forced child labor. These are the main weakness analyzed by Jurevicius (2021). In many countries, Nestlé’s operations are often linked with these criticisms related to the company’s inability to address the communities’ issues and needs.

These criticisms may lead to negative publication which can affect the company’s reputation as a responsible and sustainable company. Its brand reputation will also be affected by the publication which in turn, it can lead to lesser consumer trust in the product. The company must address this issue seriously in order to maintain its reputation in the market.

Opportunities

Jurevicius (2021) analyzed four opportunities for Nestlé, which can be shortened to three:

1. Transparency and accountability in labeling and material sourcing
2. The growing number of small food startups in Silicon Valley,
3. Growing markets of ready-to-drink (RTD) coffee and RTD tea

The third opportunity can be directly taken by some of Nestlé’s powerful brands, such as Nescafé and Nestea. The company is more than ready to welcome the growing market.

However, the company needs to be concerned with the first opportunity. While it is true that consumers are now more aware and inclined to buy more from transparent and accountable brands, Nestlé has a stained history of misleading consumers by covering up harmful substances in labeling and material sourcing (Nelsen, 2018; Lupica, 2020, Dorfman & Heavy, 2010). The company needs to address this issue in a careful manner to slowly build transparent and accountable operations.

For the second opportunity, the company should also be careful as these startups have the potential to disrupt the food and fast-moving consumer goods industry. Learning from previous disruptions in other industries, Nestlé could follow along with these startups and determine what is the future of the industry. The company could invest in startups that will leverage the company to be ready for future challenges.

Threats

Jurevicius (2021) analyzed three threats for Nestlé, which are related to the quality and scarcity of water, increased competition, and the rising price of coffee beans due to uncertain weather. The threats in water usage are logical, since 25% of Nestlé’s sales came from its beverage products, not to mention that other products manufacturing will also include water. Nestlé should find a more efficient way to procure water as the company will take water from the same reservoir that the communities around the factory depend on. In a time of scarcity, it can lead to a fight over water and the company may lose a significant amount of sales.

While the second threat is a continuous threat that the company had faced for years, it should not be underestimated. The company should always strive to be better in competition. Fortunately, the company has more than enough resources, tangible and intangible, to win the competition.

The third threat may sound insignificant, but it really is not. Over 10% of Nestlé’s sales came from coffee products. It is obvious that the increasing price of its major raw materials will affect the price of the end product. The higher price might mean that consumers will try to look for other products which is the real threat.

Conclusion on Nestlé SWOT analysis: Solutions and Strategies

The Nestlé SWOT analysis above shows that having a massive ability in research and development can become a sustainable competitive advantage and also a great leverage for the company to always one step ahead of the competition. However, the R&D should not only focuses on creating new products, but also address the issues related to the company’s weaknesses, opportunities, and threats. The strategy is to focus on generating profit from mature brands and products, as well as maintaining a strong presence in every country, to maintain a high level of profits. It will enable the company to spend more on R&D projects to minimize its weaknesses, handle the opportunities, and face the threats pointed out above. So, instead of only innovating products, Nestlé must also have a breakthrough in responsible operation and be a frontier in it.

References

Dorfman, B., & Heavy, S. (2010, March 4). FDA warns Nestle, others for misleading food claims. Reuters. Retrieved November 17, 2021, from https://www.reuters.com/article/us-fda-foodlabels-idUSTRE6224GW20100303

Jurevicius, O. (2021, October 22). SWOT Analysis of Nestle. Strategic Management Insight. Retrieved November 17, 2021, from https://strategicmanagementinsight.com/swot-analyses/nestle-swot-analysis/

Lupica, D. (2020, October 1). Nestlé Accused Of ‘Misleading Consumers With Nutritional Claims’ On Baby Milk Formulas. Plant Based News. Retrieved November 17, 2021, from https://plantbasednews.org/lifestyle/nestle-misleading-consumers-nutritional-claims-baby-milk-formulas-report-finds/

Neslen, A. (2018, February 1). Nestlé under fire for marketing claims on baby milk formulas. The Guardian. Retrieved November 17, 2021, from https://www.theguardian.com/business/2018/feb/01/nestle-under-fire-for-marketing-claims-on-baby-milk-formulas

Nestle. (2015). Annual Review 2015. https://www.nestle.com/sites/default/files/asset-library/documents/library/documents/annual_reports/2015-annual-review-en.pdf

Nestle. (2021). Annual Review 2020. https://www.nestle.com/sites/default/files/2021-03/2020-annual-review-en.pdf

Ritson, N. (2013). Strategic Management. Bookboon.com.

Stevenson, W. J. (2020). Operations Management (14th ed.). McGraw-Hill Education.

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