Case Study Description of Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A)
In early 2005, Nestle is in the midst of a decision: whether or not the Fairtrade mark should be applied on Partners' Blend, a new instant coffee product to be marketed in the growing UK 'ethical' coffee segment. Application of the Fairtrade mark on the Partners Blend product means that Nestle must go against its historical position of not offering minimum guaranteed prices to coffee farmers. As part of their deliberations, Nestle executives must consider their coffee sourcing program at large, their corporate social responsibility framework, Nescafe and corporate Nestle branding, the UK market, and the potential consumer benefit or backlash that could result from releasing such a product.
Swot Analysis of "Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A)" written by Niraj Dawar, Jordan Mitchell includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Nestle Fairtrade facing as an external strategic factors. Some of the topics covered in Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) case study are - Strategic Management Strategies, Social responsibility, Strategy and Organizational Development.
Some of the macro environment factors that can be used to understand the Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%,
challanges to central banks by blockchain based private currencies, there is backlash against globalization, etc
Introduction to SWOT Analysis of Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nestle Fairtrade, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nestle Fairtrade operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) can be done for the following purposes –
1. Strategic planning using facts provided in Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) case study
2. Improving business portfolio management of Nestle Fairtrade
3. Assessing feasibility of the new initiative in Organizational Development field.
4. Making a Organizational Development topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nestle Fairtrade
Strengths Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nestle Fairtrade in Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) Harvard Business Review case study are -
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Nestle Fairtrade digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nestle Fairtrade has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Operational resilience
– The operational resilience strategy in the Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Organizational Development industry
– Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) firm has clearly differentiated products in the market place. This has enabled Nestle Fairtrade to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Nestle Fairtrade to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Nestle Fairtrade are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to recruit top talent
– Nestle Fairtrade is one of the leading recruiters in the industry. Managers in the Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Nestle Fairtrade is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Niraj Dawar, Jordan Mitchell can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Diverse revenue streams
– Nestle Fairtrade is present in almost all the verticals within the industry. This has provided firm in Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Learning organization
- Nestle Fairtrade is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Nestle Fairtrade is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Nestle Fairtrade has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
High brand equity
– Nestle Fairtrade has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nestle Fairtrade to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Nestle Fairtrade has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nestle Fairtrade has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Organizational Resilience of Nestle Fairtrade
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Nestle Fairtrade does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) are -
High bargaining power of channel partners
– Because of the regulatory requirements, Niraj Dawar, Jordan Mitchell suggests that, Nestle Fairtrade is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Interest costs
– Compare to the competition, Nestle Fairtrade has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Nestle Fairtrade supply chain. Even after few cautionary changes mentioned in the HBR case study - Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nestle Fairtrade vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Nestle Fairtrade has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Nestle Fairtrade has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Skills based hiring
– The stress on hiring functional specialists at Nestle Fairtrade has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Lack of clear differentiation of Nestle Fairtrade products
– To increase the profitability and margins on the products, Nestle Fairtrade needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) HBR case study mentions - Nestle Fairtrade takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Need for greater diversity
– Nestle Fairtrade has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Workers concerns about automation
– As automation is fast increasing in the segment, Nestle Fairtrade needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nestle Fairtrade is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) are -
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nestle Fairtrade in the consumer business. Now Nestle Fairtrade can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Nestle Fairtrade to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Organizational Development industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nestle Fairtrade can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Nestle Fairtrade can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nestle Fairtrade to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Nestle Fairtrade to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nestle Fairtrade in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Organizational Development segment, and it will provide faster access to the consumers.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Nestle Fairtrade can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Nestle Fairtrade can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Organizational Development segment.
Better consumer reach
– The expansion of the 5G network will help Nestle Fairtrade to increase its market reach. Nestle Fairtrade will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nestle Fairtrade is facing challenges because of the dominance of functional experts in the organization. Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Nestle Fairtrade to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Loyalty marketing
– Nestle Fairtrade has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nestle Fairtrade can use these opportunities to build new business models that can help the communities that Nestle Fairtrade operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Organizational Development industry, but it has also influenced the consumer preferences. Nestle Fairtrade can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Nestle Fairtrade will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Nestle Fairtrade needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Nestle Fairtrade with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Nestle Fairtrade needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Nestle Fairtrade can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Nestle Fairtrade business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Nestle Fairtrade is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nestle Fairtrade in the Organizational Development industry. The Organizational Development industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing wage structure of Nestle Fairtrade
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Nestle Fairtrade.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A), Nestle Fairtrade may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Organizational Development .
Stagnating economy with rate increase
– Nestle Fairtrade can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nestle Fairtrade can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) .
Regulatory challenges
– Nestle Fairtrade needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Organizational Development industry regulations.
Weighted SWOT Analysis of Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Nestle's Nescafe Partners' Blend: The Fairtrade Decision (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Nestle Fairtrade needs to make to build a sustainable competitive advantage.
