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 - – increasing commodity prices, increasing energy prices, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, there is backlash against globalization,
geopolitical disruptions, there is increasing trade war between United States & China, 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 -
High switching costs
– The high switching costs that Rowntree Nestle 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.
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.
Effective Research and Development (R&D)
– Rowntree Nestle has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Nestle-Rowntree (B) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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 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.
Organizational Resilience of Rowntree Nestle
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Rowntree Nestle does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Rowntree Nestle 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 Rowntree Nestle is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Nestle-Rowntree (B) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Rowntree Nestle in the sector have low bargaining power. Nestle-Rowntree (B) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Rowntree Nestle to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
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 -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Rowntree Nestle is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Nestle-Rowntree (B) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
Lack of clear differentiation of Rowntree Nestle products
– To increase the profitability and margins on the products, Rowntree Nestle needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, James C. Ellert, Dana G. Hyde, J. Peter Killing suggests that, Rowntree Nestle 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.
Low market penetration in new markets
– Outside its home market of Rowntree Nestle, firm in the HBR case study Nestle-Rowntree (B) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Rowntree Nestle 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.
High cash cycle compare to competitors
Rowntree Nestle has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Nestle-Rowntree (B), is just above the industry average. Rowntree Nestle needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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 -
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.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Rowntree Nestle can use these opportunities to build new business models that can help the communities that Rowntree Nestle operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Learning at scale
– Online learning technologies has now opened space for Rowntree Nestle 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.
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.
Loyalty marketing
– Rowntree Nestle 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.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Rowntree Nestle to increase its market reach. Rowntree Nestle 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.
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.
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.
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 -
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Rowntree Nestle with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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-Rowntree (B), Rowntree Nestle may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Rowntree Nestle.
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.
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.
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.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Rowntree Nestle can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.