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 - – central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies,
customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , 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 -
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.
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.
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.
Diverse revenue streams
– Rowntree Nestle is present in almost all the verticals within the industry. This has provided firm in Nestle-Rowntree (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.
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.
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 (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Rowntree Nestle has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Rowntree Nestle 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.
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.
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.
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.
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.
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 -
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.
Increasing silos among functional specialists
– The organizational structure of Rowntree Nestle is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Rowntree Nestle needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Rowntree Nestle to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Nestle-Rowntree (A) 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.
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.
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.
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 to strategic competitive environment developments
– As Nestle-Rowntree (A) 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.
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.
Low market penetration in new markets
– Outside its home market of Rowntree Nestle, firm in the HBR case study Nestle-Rowntree (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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 -
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Rowntree Nestle 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 Rowntree Nestle to hire the very best people irrespective of their geographical location.
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.
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.
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.
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.
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.
Manufacturing automation
– Rowntree Nestle can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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.
Buying journey improvements
– Rowntree Nestle can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Nestle-Rowntree (A) 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.
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.
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 -
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 .
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 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.
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.
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.
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.
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.
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.
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.
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.
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 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 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.
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.