Nestle: Transnational Nutrition & Health Giant in Australia - Essay Sample

Introduction

Nestle is a transnational nutrition and health company headquartered in Switzerland that engages in food and drinks processing and supply (Nestle Australia Limited. 2015). Nestle Australia being among its principal subsidiaries, is one of Australia's most magnificent food and drinks suppliers that has about 4400 employees in 40 of its sites (Nestle Australia Limited. 2015). The company's products portfolio includes confectionery, snacks, powdery, and liquid beverages, among others. This report will assess the overall strategic elements for Nestle Australia by evaluating the internal and external business operating environment and how they affect the organization strategic competence and long-term strategy.

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Business Units and Products and Services Lines

Nestle Australia manufactures a wide variety of interconnected products and services lines, according to Nestle's 2018 annual report, the company collectively produces about 10,000 unlike products and generally makes daily sales of about a billion products (Nestle Australia Ltd. 2018). Nestle Australia's business units include beverages such as Nescafe, MILO and International roast, Foods such as SUNSHINE and MAGGI and confectionaries such as KitKat and CLUB (Nestle Australia Ltd. 2018). Besides, Nestle is among the leading manufacturers of mineral drinking water in Australia that has substantially grown overtime.

Nestle Revenue Units

Nestle generates most of its revenue from the company's trading activities, dividends, and selling its shares. According to Nestle's 2018 annual report, the company had $23.26 billion cash flow, generated about $138.05 billion from product sales with their shares earning at a rate of $5.08 per share and a $3.40 proposed dividends. Nestle Australia's primary revenue is drawn from the manufacture and selling of its products in the Australian market. The company's primary products include brands such as Nespresso, Nesquik, Milo, Carnation, NAN, and Nestle Health Science (Nestle Australia Ltd. 2018). These products are marketed in Australia and the products surplus exported to the outside oceanic market. Powdered and liquid beverages are the highest revenue unit for Nestle, which has been instrumental in the overall growth and financial viability of the brand (Nestle 2018 Annual Review. 2018). The liquid and powdered beverages are exported to many countries and also the demand is steady all through the year which makes it an integral revenue unit for the company operations in Australia and the world at large (Nestle Australia Ltd. 2018). The culture of drinking beverages in Australia and the world, in general, makes the powdered and liquid beverages products for Nestle one of the constant sources of revenue for the organization.

External Business Analysis of Nestle

Being a transnational organization which makes products not only for the domestic market but also for the individual international markets, the company's external environment is dominated by social, economic, technological, and political factors.

PEST Analysis

A PEST analysis is an instrumental tool that can be used in the analysis of Nestle Australia external analysis, which is critical in informing the overall organization strategic direction.

The political landscape: Nestle operates in many countries, Australia being one of the agricultural output and production bases. As such, the changing global political landscape affects the sales and viability of Nestle's products and services. The political influences vary from one jurisdiction to another depending on the applicable laws and regulations that govern Nestle Australia business (Allison-Reumann, Matera, & Murray, 2018). Health and safety standards of products in different countries significantly affects the overall business strategy and continuation. Different countries pass different laws and standard regulations, which affects the Nestle Australia production management and decisions to help meet the safety and quality standards set by different countries (Lester & dela Rama, 2018). Brexit has been an instrumental negative political aspect due to the change in trade policies and tariffs (Lester & dela Rama, 2018). Brexit threatens to affect the European market which is one of the major markets and will temporarily lead to the decrease of final goods and raw materials in Europe until calm is restored (Allen & Spialek, 2018). Any adverse effect on the market will negatively affect the current workforce for Nestle in the United Kingdom, and such cases have the potential of adversely affecting the potential to retain the workforce in Britain as well as operations in the country (Allison-Reumann et al., 2018).

Economic environment: Recently, there has been significant economic changes and a potential recession due to the continued trade disagreements between China and the United States. Ideally, the trade conflict between China and the United States has dragged on for long, which poses a threat to the continued business operations (Lester & dela Rama, 2018). Economic calm plays an instrumental role in promoting trade, which will increase the market for Nestle Australia. The foreign currency fluctuations due to China and the United States business conflicts possess a threat to Nestle Australia products sales and market targeting.

Social factors: The growth of social media influence across the globe poses a significant threat to organization sales. The negative business environment due to social intolerance and spreading of negative business environment which can negatively affect the business operations and sales (Allen & Spialek, 2018). Therefore, social media has increased the volatility of Nestle Australia business environment.

Technology: Technology changes and potential in the areas of farming and processing of the final products is a significant opportunity and threat for business. Processing efficiency to create final products ultimately affects Nestle production line and the ability to maximize its production (Allen & Spialek, 2018). Nestle Australia needs to take note over new technological developments which will be instrumental in the continued success of the brand. There are increasing calls for more eco-friendly production approaches, which will help meet the CSR requirements for more excellent environmental protection and conservation (Allison-Reumann et al., 2018).

Internal Organization Analysis

According to a 2018 Nestle Australia Ltd report, the public company is ranked at position 196 out of Australia's 2000 most significant companies. The company's major competitors include other food and drinks companies such as PepsiCo Inc, Snyder's-Lance and National Beverages Corp, among others. The internal analysis of Nestle Australia will be based on the company's strengths and weaknesses, which play a significant role in assessing the strategic business direction.

Strengths

The company's success and prevalence are owed to its effective structural and operational organization that has granted it unmatched products and brands in food and drinks production. Some of the company's major strengths include its massive, comprehensive research ability due to its dedication of resources to the same that leads to the company's progressive growth. Nestle Australia owes its market effectiveness on its possession of some of the most recognizable brands across Australia and its efforts on environmental sustainability (Nestle Australia Limited. 2015). The company's smooth production and supply chain are promoted by its reliable and authentic raw material suppliers. Moreover, the company has an adequately skilled workforce due to its intensive workers' training programs that advance their skills and motivate them to work. Nestle Australia has proper vast geographical presence diversified across the continent, favoring its competitive market viability. These strengths not only enable Nestle to maintain its market share but also penetrate new markets.

Weaknesses

Nestle for decades has been bridging their impuissance gap for effective production, and it has substantially decimated the company's significant weaknesses such as unethical marketing, misguiding products labeling, and using child labor. Some of its common inadequacies, however, include, high water usage in the production process that gradually lowers underground water sources. Nestle has a high attrition rate compared to its competitors as the company spends more cash in its employees' training worsening its production costs (Nestle Australia Limited. 2015). The company, besides, has poor technological advancements attributed to the company's lag in investing in new technologies which are necessitated by its market target due to its broad geographical coverage. There is thus need for the company to strategize weakness-elimination means for cheaper and effective production and supply chain.

Nestle Australia Resources, Capabilities, Core-competencies and Competitive Advantages

Resources and Capabilities

Nestle Australia has most of its resources sourcing from food products manufacturing in the Australian industry (Nestle Australia Limited. 2015). The company aims at creating shared value with its consumers necessitating humane-based operations enhanced by the company's enormous human resources. In 2018, for instance, the company's workforce consisted of 4415 workers inclusive of those from the company's subsidiaries (2018 IBIS). In the same year, Nestle Australia Ltd, inclusive of revenue and annual sales generated a total of $2,270,062,000, a figure attributed to the company's wide brands and numerous products that sell across Australia. Besides, the company has financial shares in its ally companies that it keeps profitability tracks and lays emphasis on research and development activities.

Core-Competencies

Nestle's competency is based on the differentiation of its products to shadow competitors' and be efficient in terms of product quality, hygiene, and consumer gratification (Nestle Australia Limited. 2015). For maximum benefaction from the products, Nestle products include products assurance in their delivery, expiry, and post-sale services offered. Nestle's competencies include producing hygienic and health-beneficial products and creating a shared value state where both parties are benefiting. However, more focus is laid in achieving customer loyalty by offering their satisfaction; it has reached different people groups with international quality standard health-verified products.

Competitive Advantages

Nestle faces stiff competition from its rivals such as Unilever and Danone. The company's success despite tight competition is made possible by Nestle's competitive advantages such as large economies of scale and business experience, enabling manufacturing cost efficiency (Nestle Australia Limited. 2015). The company's effective employees training and intensive research promote its progressive development and operational effectiveness over its competitors.

Strategic Recommendations for Nestle Australia

Investing In High Quality Standards

Quality is a primary selling tool that can play a significant role in increasing Nestle products competitive advantage. The organization should establish strict regulations and practices aimed at improving the overall standards of quality that can be instrumental in meeting the set quality standards in the European market (Lester & dela Rama, 2018). Therefore, Nestle can gain competitive advantage by setting production standards, which will be instrumental in gaining more significant market share. Quality will play a significant role towards the realization of increased market share and consumer loyalty.

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