Nestle SA is the world's largest food company; its acquisition of RowntreePlc in 1988 was, at 2.5 billion British pounds, the largest ever foreign takeover of a British company. This case is the first in a three-part case series positioned before, during, and after the acquisition of Rowntree by Nestle and gives an inside look at a major international acquisition. Includes a note on the world chocolate industry and ends at the point when Nestle must decide whether to launch a hostile bid for Rowntree. Written from Nestle's point of view, it provides the opportunity to consider the benefit of various acquisition possibilities in the industry. Also raises questions as to why Rowntree became a takeover target as well as Nestle's policy of not making hostile takeovers.
Authors :: James C. Ellert, Dana G. Hyde, J. Peter Killing
Swot Analysis of "Nestle-Rowntree (A)" 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 (A) 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 (A) casestudy better are - – there is backlash against globalization, increasing commodity prices, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, technology disruption,
increasing transportation and logistics costs, geopolitical disruptions, etc
Introduction to SWOT Analysis of Nestle-Rowntree (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nestle-Rowntree (A) 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 (A) can be done for the following purposes –
1. Strategic planning using facts provided in Nestle-Rowntree (A) 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 (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rowntree Nestle in Nestle-Rowntree (A) Harvard Business Review case study are -
Analytics focus
– Rowntree Nestle 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 James C. Ellert, Dana G. Hyde, J. Peter Killing 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.
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.
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 (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Rowntree Nestle is one of the leading recruiters in the industry. Managers in the Nestle-Rowntree (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.
Low bargaining power of suppliers
– Suppliers of Rowntree Nestle in the sector have low bargaining power. Nestle-Rowntree (A) 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.
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.
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.
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.
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 (A) 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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Rowntree Nestle 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.
Sustainable margins compare to other players in Strategy & Execution industry
– Nestle-Rowntree (A) 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.
Weaknesses Nestle-Rowntree (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nestle-Rowntree (A) are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Nestle-Rowntree (A), 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.
Aligning sales with marketing
– It come across in the case study Nestle-Rowntree (A) 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 (A) can leverage the sales team experience to cultivate customer relationships as Rowntree Nestle is planning to shift buying processes online.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Nestle-Rowntree (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Rowntree Nestle has relatively successful track record of launching new products.
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 (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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Nestle-Rowntree (A), 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.
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.
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.
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.
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.
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.
Opportunities Nestle-Rowntree (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-Rowntree (A) are -
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.
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 (A) case study. Rowntree Nestle can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Rowntree Nestle in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
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.
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 (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.
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 (A), 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.
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.
Developing new processes and practices
– Rowntree Nestle can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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.
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.
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.
Building a culture of innovation
– managers at Rowntree Nestle 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 Strategy & Execution segment.
Threats Nestle-Rowntree (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-Rowntree (A) are -
Technology acceleration in Forth Industrial Revolution
– Rowntree Nestle has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Rowntree Nestle needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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 (A) .
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.
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.
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.
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 (A), 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 .
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.
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.
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.
Consumer confidence and its impact on Rowntree Nestle demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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.
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.
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.
Weighted SWOT Analysis of Nestle-Rowntree (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-Rowntree (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-Rowntree (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-Rowntree (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-Rowntree (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 Rowntree Nestle needs to make to build a sustainable competitive advantage.
