Case Study Description of Nestle's Creating Shared Value Strategy
This case considers NestlA?'s creating shared value (CSV) strategy, which focused on the three categories of nutrition, water, and rural development. In the packaged food and beverage industry, pressure had mounted since the 1990s to improve supply chain sustainability and provide healthier, more natural foods, leading to consolidation and causing sales to decline in the 2010s. With 150 years' experience in the industry, NestlA? had transformed into a nutrition, health, and wellness company and made its CSV strategy explicit in the early 21st century. By 2014, NestlA? CEO Paul Bulcke considered how best to fully embed the company's CSV strategy and to communicate it to shareholders and external stakeholders.
Authors :: Michael E. Porter, Mark R. Kramer, Kerry Herman, Sarah McAra
Swot Analysis of "Nestle's Creating Shared Value Strategy" written by Michael E. Porter, Mark R. Kramer, Kerry Herman, Sarah McAra includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Csv Nestla facing as an external strategic factors. Some of the topics covered in Nestle's Creating Shared Value Strategy case study are - Strategic Management Strategies, Operations management, Strategy and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Nestle's Creating Shared Value Strategy casestudy better are - – wage bills are increasing, increasing transportation and logistics costs, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic ,
increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Nestle's Creating Shared Value Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nestle's Creating Shared Value Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Csv Nestla, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Csv Nestla 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's Creating Shared Value Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Nestle's Creating Shared Value Strategy case study
2. Improving business portfolio management of Csv Nestla
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 Csv Nestla
Strengths Nestle's Creating Shared Value Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Csv Nestla in Nestle's Creating Shared Value Strategy Harvard Business Review case study are -
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Csv Nestla digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Csv Nestla 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.
Ability to recruit top talent
– Csv Nestla is one of the leading recruiters in the industry. Managers in the Nestle's Creating Shared Value Strategy 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 Csv Nestla in the sector have low bargaining power. Nestle's Creating Shared Value Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Csv Nestla to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Strategy & Execution industry
– Nestle's Creating Shared Value Strategy firm has clearly differentiated products in the market place. This has enabled Csv Nestla to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Csv Nestla to invest into research and development (R&D) and innovation.
High brand equity
– Csv Nestla has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Csv Nestla to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Csv Nestla is present in almost all the verticals within the industry. This has provided firm in Nestle's Creating Shared Value Strategy 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.
Highly skilled collaborators
– Csv Nestla 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's Creating Shared Value Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Csv Nestla 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 Csv Nestla is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Nestle's Creating Shared Value Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Csv Nestla 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.
Operational resilience
– The operational resilience strategy in the Nestle's Creating Shared Value Strategy 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.
High switching costs
– The high switching costs that Csv Nestla 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.
Innovation driven organization
– Csv Nestla is one of the most innovative firm in sector. Manager in Nestle's Creating Shared Value Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Nestle's Creating Shared Value Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nestle's Creating Shared Value Strategy are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Csv Nestla is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Nestle's Creating Shared Value Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring
– The stress on hiring functional specialists at Csv Nestla 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.
Increasing silos among functional specialists
– The organizational structure of Csv Nestla is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Csv Nestla needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Csv Nestla to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Csv Nestla, firm in the HBR case study Nestle's Creating Shared Value Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Nestle's Creating Shared Value Strategy 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 Csv Nestla 's lucrative customers.
Interest costs
– Compare to the competition, Csv Nestla 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, Csv Nestla 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 bargaining power of channel partners
– Because of the regulatory requirements, Michael E. Porter, Mark R. Kramer, Kerry Herman, Sarah McAra suggests that, Csv Nestla 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.
Lack of clear differentiation of Csv Nestla products
– To increase the profitability and margins on the products, Csv Nestla needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Nestle's Creating Shared Value Strategy, is just above the industry average. Csv Nestla 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.
Capital Spending Reduction
– Even during the low interest decade, Csv Nestla has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Opportunities Nestle's Creating Shared Value Strategy | 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's Creating Shared Value Strategy are -
Developing new processes and practices
– Csv Nestla 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.
Building a culture of innovation
– managers at Csv Nestla 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.
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 Csv Nestla 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.
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. Csv Nestla can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Csv Nestla 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. Csv Nestla 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.
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. Csv Nestla can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Csv Nestla 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Csv Nestla 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.
Using analytics as competitive advantage
– Csv Nestla 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's Creating Shared Value Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Csv Nestla to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Csv Nestla is facing challenges because of the dominance of functional experts in the organization. Nestle's Creating Shared Value Strategy 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Csv Nestla can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Csv Nestla can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Nestle's Creating Shared Value Strategy 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Csv Nestla 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's Creating Shared Value Strategy, 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's Creating Shared Value Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Nestle's Creating Shared Value Strategy are -
Regulatory challenges
– Csv Nestla 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.
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. Csv Nestla 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.
Shortening product life cycle
– it is one of the major threat that Csv Nestla is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Csv Nestla 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.
Stagnating economy with rate increase
– Csv Nestla 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.
Increasing wage structure of Csv Nestla
– 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 Csv Nestla.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Csv Nestla 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.
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.
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 Csv Nestla in the Strategy & Execution sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Csv Nestla with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Consumer confidence and its impact on Csv Nestla 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.
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 Csv Nestla.
Weighted SWOT Analysis of Nestle's Creating Shared Value Strategy 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's Creating Shared Value Strategy 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's Creating Shared Value Strategy 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's Creating Shared Value Strategy 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's Creating Shared Value Strategy 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 Csv Nestla needs to make to build a sustainable competitive advantage.