The second of a three-part series on the 2.5 billion British pounds takeover of Rowntree by Nestle in 1988. Nestle has launched a hostile bid for Rowntree; this case ends at a breaking point in the process and places us in the middle of a critical negotiation session of the most senior executives of the two companies. Written from Nestle's point of view, it raises questions regarding the takeover price and the potential post-acquisition integration and organization structure.
Authors :: James C. Ellert, Dana G. Hyde, J. Peter Killing
Swot Analysis of "Nestle-Rowntree (B)" written by James C. Ellert, Dana G. Hyde, J. Peter Killing includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Rowntree Nestle facing as an external strategic factors. Some of the topics covered in Nestle-Rowntree (B) case study are - Strategic Management Strategies, Negotiations, Organizational structure and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Nestle-Rowntree (B) casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google,
increasing commodity prices, geopolitical disruptions, etc
Introduction to SWOT Analysis of Nestle-Rowntree (B)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nestle-Rowntree (B) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rowntree Nestle, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rowntree Nestle 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-Rowntree (B) can be done for the following purposes –
1. Strategic planning using facts provided in Nestle-Rowntree (B) case study
2. Improving business portfolio management of Rowntree Nestle
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Rowntree Nestle
Strengths Nestle-Rowntree (B) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rowntree Nestle in Nestle-Rowntree (B) Harvard Business Review case study are -
Training and development
– Rowntree Nestle has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Nestle-Rowntree (B) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Highly skilled collaborators
– Rowntree Nestle has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Nestle-Rowntree (B) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Rowntree Nestle in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Rowntree Nestle is one of the leading recruiters in the industry. Managers in the Nestle-Rowntree (B) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Rowntree Nestle is present in almost all the verticals within the industry. This has provided firm in Nestle-Rowntree (B) 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.
High brand equity
– Rowntree Nestle has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Rowntree Nestle to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Rowntree Nestle is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Strategy & Execution field
– Rowntree Nestle is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Rowntree Nestle in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the Nestle-Rowntree (B) 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.
Innovation driven organization
– Rowntree Nestle is one of the most innovative firm in sector. Manager in Nestle-Rowntree (B) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Strategy & Execution industry
– Nestle-Rowntree (B) firm has clearly differentiated products in the market place. This has enabled Rowntree Nestle to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Rowntree Nestle to invest into research and development (R&D) and innovation.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Rowntree Nestle digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rowntree Nestle 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.
Weaknesses Nestle-Rowntree (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nestle-Rowntree (B) are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Nestle-Rowntree (B), in the dynamic environment Rowntree Nestle has struggled to respond to the nimble upstart competition. Rowntree Nestle has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study Nestle-Rowntree (B) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Rowntree Nestle 's lucrative customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Nestle-Rowntree (B), it seems that the employees of Rowntree Nestle don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Aligning sales with marketing
– It come across in the case study Nestle-Rowntree (B) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Nestle-Rowntree (B) can leverage the sales team experience to cultivate customer relationships as Rowntree Nestle is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Nestle-Rowntree (B) HBR case study mentions - Rowntree Nestle 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
– Rowntree Nestle 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.
Skills based hiring
– The stress on hiring functional specialists at Rowntree Nestle 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.
No frontier risks strategy
– After analyzing the HBR case study Nestle-Rowntree (B), it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow decision making process
– As mentioned earlier in the report, Rowntree Nestle has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Rowntree Nestle even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Rowntree Nestle 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.
Capital Spending Reduction
– Even during the low interest decade, Rowntree Nestle 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.
Opportunities Nestle-Rowntree (B) | 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-Rowntree (B) are -
Leveraging digital technologies
– Rowntree Nestle can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Rowntree Nestle 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. Rowntree Nestle 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Rowntree Nestle can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Nestle-Rowntree (B), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Rowntree Nestle in the consumer business. Now Rowntree Nestle can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Rowntree Nestle can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Nestle-Rowntree (B) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Rowntree Nestle is facing challenges because of the dominance of functional experts in the organization. Nestle-Rowntree (B) 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 Rowntree Nestle 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.
Using analytics as competitive advantage
– Rowntree Nestle has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Nestle-Rowntree (B) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Rowntree Nestle to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Rowntree Nestle can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Rowntree Nestle can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Rowntree Nestle has opened avenues for new revenue streams for the organization in the industry. This can help Rowntree Nestle to build a more holistic ecosystem as suggested in the Nestle-Rowntree (B) case study. Rowntree Nestle can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Rowntree Nestle can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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. Rowntree Nestle can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Nestle-Rowntree (B) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Nestle-Rowntree (B) are -
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Rowntree Nestle in the Strategy & Execution sector and impact the bottomline of the organization.
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. Rowntree Nestle needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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. Rowntree Nestle 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 dependence on third party suppliers
– Rowntree Nestle high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Environmental challenges
– Rowntree Nestle 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. Rowntree Nestle can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Rowntree Nestle in the Strategy & Execution industry. The Strategy & Execution 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.
Stagnating economy with rate increase
– Rowntree Nestle 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.
Shortening product life cycle
– it is one of the major threat that Rowntree Nestle is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Rowntree Nestle
– 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 Rowntree Nestle.
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 Rowntree Nestle business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Rowntree Nestle 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 Strategy & Execution industry regulations.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Rowntree Nestle 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-Rowntree (B) .
Weighted SWOT Analysis of Nestle-Rowntree (B) 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-Rowntree (B) 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-Rowntree (B) 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-Rowntree (B) 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-Rowntree (B) 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 Rowntree Nestle needs to make to build a sustainable competitive advantage.
