In early 1996, Mr. Mascenon, vice president of the instant drinks department of Nestle (Philippines), had to decide how to respond to a major change in Nestle's environment. Until January 1996, imports of coffee in any form--green beans, roasted, or ground and processed--were prohibited. As of January 1996, however, coffee within a specified quota could be imported over a 30% tariff. Nestle was the only foreign-owned producer of coffee in the Philippines and had over 60% of the market, up from 52% seven years before. Over the same period, total coffee consumption in the Philippines doubled. Nestle produced its coffee from Philippine-grown robusta beans, since Philippine arabica beans were of inferior quality. Outside the Philippines, however, a mixture of robusta and arabica beans was usually used. There were rumors that both Procter & Gamble (Folgers) and Kraft General Foods (Maxwell House) were planning to enter the Philippine market, initially via imports, but possibly in the future with production facilities.
Swot Analysis of "Nestle (Philippines)" written by Donald J. Lecraw includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Philippines Beans facing as an external strategic factors. Some of the topics covered in Nestle (Philippines) case study are - Strategic Management Strategies, Competition and Global Business.
Some of the macro environment factors that can be used to understand the Nestle (Philippines) casestudy better are - – geopolitical disruptions, there is backlash against globalization, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion,
increasing transportation and logistics costs, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Nestle (Philippines)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nestle (Philippines) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Philippines Beans, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Philippines Beans 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 (Philippines) can be done for the following purposes –
1. Strategic planning using facts provided in Nestle (Philippines) case study
2. Improving business portfolio management of Philippines Beans
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Philippines Beans
Strengths Nestle (Philippines) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Philippines Beans in Nestle (Philippines) Harvard Business Review case study are -
Learning organization
- Philippines Beans 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 Philippines Beans is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Nestle (Philippines) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Global Business field
– Philippines Beans 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 Philippines Beans in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Philippines Beans 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 Donald J. Lecraw 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.
Ability to recruit top talent
– Philippines Beans is one of the leading recruiters in the industry. Managers in the Nestle (Philippines) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Philippines Beans 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.
High switching costs
– The high switching costs that Philippines Beans 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.
Operational resilience
– The operational resilience strategy in the Nestle (Philippines) 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 Global Business industry
– Nestle (Philippines) firm has clearly differentiated products in the market place. This has enabled Philippines Beans to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Philippines Beans to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Philippines Beans is present in almost all the verticals within the industry. This has provided firm in Nestle (Philippines) 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.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Philippines Beans digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Philippines Beans 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
– Philippines Beans is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Philippines Beans 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 (Philippines) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Nestle (Philippines) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nestle (Philippines) are -
High operating costs
– Compare to the competitors, firm in the HBR case study Nestle (Philippines) 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 Philippines Beans 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Philippines Beans, firm in the HBR case study Nestle (Philippines) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Philippines Beans products
– To increase the profitability and margins on the products, Philippines Beans needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Philippines Beans supply chain. Even after few cautionary changes mentioned in the HBR case study - Nestle (Philippines), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Philippines Beans vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Nestle (Philippines) 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 (Philippines) can leverage the sales team experience to cultivate customer relationships as Philippines Beans is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Philippines Beans is dominated by functional specialists. It is not different from other players in the Global Business segment. Philippines Beans needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Philippines Beans to focus more on services rather than just following the product oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Nestle (Philippines) 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 Philippines Beans has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Philippines Beans 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Nestle (Philippines), is just above the industry average. Philippines Beans 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.
Need for greater diversity
– Philippines Beans 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.
Slow decision making process
– As mentioned earlier in the report, Philippines Beans 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. Philippines Beans 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.
Opportunities Nestle (Philippines) | 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 (Philippines) are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Philippines Beans can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Philippines Beans 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. Philippines Beans 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, Philippines Beans is facing challenges because of the dominance of functional experts in the organization. Nestle (Philippines) 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.
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 Philippines Beans 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Philippines Beans can use these opportunities to build new business models that can help the communities that Philippines Beans operates in. Secondly it can use opportunities from government spending in Global Business sector.
Learning at scale
– Online learning technologies has now opened space for Philippines Beans 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, Philippines Beans 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Philippines Beans 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 (Philippines), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Philippines Beans can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Philippines Beans 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 Philippines Beans to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Philippines Beans can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Nestle (Philippines) 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Philippines Beans in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Manufacturing automation
– Philippines Beans can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
Threats Nestle (Philippines) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Nestle (Philippines) are -
High dependence on third party suppliers
– Philippines Beans 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 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.
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. Philippines Beans needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Philippines Beans can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Philippines Beans with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Philippines Beans
– 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 Philippines Beans.
Technology acceleration in Forth Industrial Revolution
– Philippines Beans has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Philippines Beans needs to keep up with the evolution of technology in the Global Business 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.
Consumer confidence and its impact on Philippines Beans 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.
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 (Philippines), Philippines Beans may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Shortening product life cycle
– it is one of the major threat that Philippines Beans is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Philippines Beans 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 (Philippines) .
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 Philippines Beans in the Global Business sector and impact the bottomline of the organization.
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. Philippines Beans 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.
Weighted SWOT Analysis of Nestle (Philippines) 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 (Philippines) 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 (Philippines) 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 (Philippines) 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 (Philippines) 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 Philippines Beans needs to make to build a sustainable competitive advantage.