The third of a three-part case series on the 2.5 billion British pounds takeover of Rowntree by Nestle in 1988. Nestle has acquired Rowntree; this final case raises issues about the post-acquisition integration of Rowntree and Nestle. This case setting is six months after the acquisition and is written from the point of view of the former senior Rowntree manager charged with integrating the Rowntree and Nestle chocolate businesses in Europe.
Authors :: James C. Ellert, Dana G. Hyde, J. Peter Killing
Swot Analysis of "Nestle-Rowntree (C)" 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 (C) 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 (C) casestudy better are - – increasing transportation and logistics costs, there is increasing trade war between United States & China, wage bills are increasing, increasing government debt because of Covid-19 spendings, technology disruption, increasing household debt because of falling income levels, there is backlash against globalization,
talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Nestle-Rowntree (C)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nestle-Rowntree (C) 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 (C) can be done for the following purposes –
1. Strategic planning using facts provided in Nestle-Rowntree (C) 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 (C) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rowntree Nestle in Nestle-Rowntree (C) Harvard Business Review case study are -
Ability to recruit top talent
– Rowntree Nestle is one of the leading recruiters in the industry. Managers in the Nestle-Rowntree (C) 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 (C) 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.
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 (C) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 (C) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
Operational resilience
– The operational resilience strategy in the Nestle-Rowntree (C) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Strategy & Execution industry
– Nestle-Rowntree (C) 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.
Innovation driven organization
– Rowntree Nestle is one of the most innovative firm in sector. Manager in Nestle-Rowntree (C) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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.
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 (C) 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.
Weaknesses Nestle-Rowntree (C) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nestle-Rowntree (C) are -
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.
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.
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 (C) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Nestle-Rowntree (C), 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 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.
Products dominated business model
– Even though Rowntree Nestle has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Nestle-Rowntree (C) should strive to include more intangible value offerings along with its core products and services.
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.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Nestle-Rowntree (C), 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.
Opportunities Nestle-Rowntree (C) | 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 (C) 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.
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 (C) - 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.
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.
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.
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 (C) 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.
Buying journey improvements
– Rowntree Nestle can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Nestle-Rowntree (C) 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.
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.
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 (C) case study. Rowntree Nestle can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
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.
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.
Threats Nestle-Rowntree (C) 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 (C) are -
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.
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 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.
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.
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.
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 (C) .
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 (C), 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 .
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.
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.
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.
Weighted SWOT Analysis of Nestle-Rowntree (C) 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 (C) 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 (C) 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 (C) 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 (C) 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.