NestlA? and Totole: A Foreign-invested Enterprise in China SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of NestlA? and Totole: A Foreign-invested Enterprise in China
After acquiring a majority stake in the Shanghai Totole Food Company, a leader in the Chinese chicken powder industry, NestlA? faced dilemmas regarding maintaining control over this foreign-invested enterprise (FIE). Despite its 80 per cent stake, and in a departure from past practice, the Swiss company let its minority Chinese partner remain firmly in control. The circumstances surrounding the integration of Totole posed questions about the strategic decisions surrounding investment in a Chinese enterprise by a multinational firm and the challenges of integrating local and global operations. In 2012, NestlA? began talks with the general manager of Totole about acquiring the remaining 20 per cent of the company. Should Totole sell the remaining 20 per cent of shares and, if so, how and when should it do it? Libo Fan is affiliated with University International Business and Economics.
Swot Analysis of "NestlA? and Totole: A Foreign-invested Enterprise in China" written by Libo Fan, Yingchao Zhou, Oded Shenkar includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Totole Nestla facing as an external strategic factors. Some of the topics covered in NestlA? and Totole: A Foreign-invested Enterprise in China case study are - Strategic Management Strategies, Mergers & acquisitions and Strategy & Execution.
Some of the macro environment factors that can be used to understand the NestlA? and Totole: A Foreign-invested Enterprise in China casestudy better are - – wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, technology disruption,
there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of NestlA? and Totole: A Foreign-invested Enterprise in China
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in NestlA? and Totole: A Foreign-invested Enterprise in China case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Totole Nestla, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Totole 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 NestlA? and Totole: A Foreign-invested Enterprise in China can be done for the following purposes –
1. Strategic planning using facts provided in NestlA? and Totole: A Foreign-invested Enterprise in China case study
2. Improving business portfolio management of Totole 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 Totole Nestla
Strengths NestlA? and Totole: A Foreign-invested Enterprise in China | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Totole Nestla in NestlA? and Totole: A Foreign-invested Enterprise in China Harvard Business Review case study are -
High brand equity
– Totole Nestla has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Totole Nestla to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Totole Nestla in the sector have low bargaining power. NestlA? and Totole: A Foreign-invested Enterprise in China has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Totole Nestla to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Totole 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.
Effective Research and Development (R&D)
– Totole Nestla 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 NestlA? and Totole: A Foreign-invested Enterprise in China - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Totole Nestla digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Totole 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.
Strong track record of project management
– Totole Nestla is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Totole Nestla
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Totole Nestla does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Totole Nestla is present in almost all the verticals within the industry. This has provided firm in NestlA? and Totole: A Foreign-invested Enterprise in China 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.
Innovation driven organization
– Totole Nestla is one of the most innovative firm in sector. Manager in NestlA? and Totole: A Foreign-invested Enterprise in China Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Totole Nestla has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Totole Nestla 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.
Sustainable margins compare to other players in Strategy & Execution industry
– NestlA? and Totole: A Foreign-invested Enterprise in China firm has clearly differentiated products in the market place. This has enabled Totole Nestla to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Totole Nestla to invest into research and development (R&D) and innovation.
Ability to lead change in Strategy & Execution field
– Totole Nestla 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 Totole Nestla in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses NestlA? and Totole: A Foreign-invested Enterprise in China | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of NestlA? and Totole: A Foreign-invested Enterprise in China are -
Slow to strategic competitive environment developments
– As NestlA? and Totole: A Foreign-invested Enterprise in China HBR case study mentions - Totole Nestla 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.
High cash cycle compare to competitors
Totole Nestla 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.
Low market penetration in new markets
– Outside its home market of Totole Nestla, firm in the HBR case study NestlA? and Totole: A Foreign-invested Enterprise in China needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Totole Nestla 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.
Skills based hiring
– The stress on hiring functional specialists at Totole 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.
Products dominated business model
– Even though Totole Nestla 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 - NestlA? and Totole: A Foreign-invested Enterprise in China should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Totole Nestla 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. Totole Nestla 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.
Aligning sales with marketing
– It come across in the case study NestlA? and Totole: A Foreign-invested Enterprise in China 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 NestlA? and Totole: A Foreign-invested Enterprise in China can leverage the sales team experience to cultivate customer relationships as Totole Nestla is planning to shift buying processes online.
Interest costs
– Compare to the competition, Totole 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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Totole Nestla supply chain. Even after few cautionary changes mentioned in the HBR case study - NestlA? and Totole: A Foreign-invested Enterprise in China, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Totole Nestla vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study NestlA? and Totole: A Foreign-invested Enterprise in China, is just above the industry average. Totole 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.
Opportunities NestlA? and Totole: A Foreign-invested Enterprise in China | 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 NestlA? and Totole: A Foreign-invested Enterprise in China are -
Using analytics as competitive advantage
– Totole 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 NestlA? and Totole: A Foreign-invested Enterprise in China - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Totole Nestla to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Totole 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.
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 Totole 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.
Building a culture of innovation
– managers at Totole 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Totole 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, NestlA? and Totole: A Foreign-invested Enterprise in China, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Totole 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. Totole 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.
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. Totole Nestla can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Totole Nestla 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, Totole Nestla is facing challenges because of the dominance of functional experts in the organization. NestlA? and Totole: A Foreign-invested Enterprise in China 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 Totole Nestla can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Totole Nestla has opened avenues for new revenue streams for the organization in the industry. This can help Totole Nestla to build a more holistic ecosystem as suggested in the NestlA? and Totole: A Foreign-invested Enterprise in China case study. Totole Nestla can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Totole 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.
Better consumer reach
– The expansion of the 5G network will help Totole Nestla to increase its market reach. Totole Nestla 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 NestlA? and Totole: A Foreign-invested Enterprise in China External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study NestlA? and Totole: A Foreign-invested Enterprise in China are -
High dependence on third party suppliers
– Totole 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Totole 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Totole Nestla with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Totole 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. Totole 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.
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 Totole 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.
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 Totole Nestla 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 Totole Nestla.
Technology acceleration in Forth Industrial Revolution
– Totole Nestla has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Totole Nestla 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study NestlA? and Totole: A Foreign-invested Enterprise in China, Totole Nestla may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Totole Nestla business can come under increasing regulations regarding data privacy, data security, etc.
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. Totole Nestla can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of NestlA? and Totole: A Foreign-invested Enterprise in China 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 NestlA? and Totole: A Foreign-invested Enterprise in China 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 NestlA? and Totole: A Foreign-invested Enterprise in China 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 NestlA? and Totole: A Foreign-invested Enterprise in China 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 NestlA? and Totole: A Foreign-invested Enterprise in China 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 Totole Nestla needs to make to build a sustainable competitive advantage.
