Nestle India (NEST) SWOT Analysis / TOWS Matrix / MBA Resources
Food Processing
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nestle India (India)
Based on various researches at Oak Spring University , Nestle India is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, geopolitical disruptions, increasing government debt because of Covid-19 spendings, technology disruption,
customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nestle India can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nestle India, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nestle India 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 India can be done for the following purposes –
1. Strategic planning of Nestle India
2. Improving business portfolio management of Nestle India
3. Assessing feasibility of the new initiative in India
4. Making a Food Processing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nestle India
Strengths of Nestle India | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nestle India are -
Diverse revenue streams
– Nestle India is present in almost all the verticals within the Food Processing industry. This has provided Nestle India 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
– Nestle India has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Food Processing industry. Secondly the value chain collaborators of Nestle India have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Nestle India in Food Processing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Nestle India is one of the most innovative firm in Food Processing sector.
Successful track record of launching new products
– Nestle India has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nestle India 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.
Low bargaining power of suppliers
– Suppliers of Nestle India in the Consumer/Non-Cyclical sector have low bargaining power. Nestle India has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nestle India to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Food Processing industry
– Nestle India is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Nestle India 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 of Nestle India comprises – understanding the underlying the factors in the Food Processing 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 Food Processing industry
– Nestle India has clearly differentiated products in the market place. This has enabled Nestle India to fetch slight price premium compare to the competitors in the Food Processing industry. The sustainable margins have also helped Nestle India to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Nestle India has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nestle India staying ahead in the Food Processing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Nestle India 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 Food Processing industry. The technology infrastructure of India is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses of Nestle India | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nestle India are -
Employees’ less understanding of Nestle India strategy
– From the outside it seems that the employees of Nestle India 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.
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 Nestle India supply chain. Even after few cautionary changes, Nestle India is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nestle India vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nestle India is slow explore the new channels of communication. These new channels of communication can help Nestle India to provide better information regarding Food Processing products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee of Nestle India is just above the Food Processing industry average. It 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.
High operating costs
– Compare to the competitors, Nestle India has high operating costs in the Food Processing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nestle India lucrative customers.
No frontier risks strategy
– From the 10K / annual statement of Nestle India, it seems that company is thinking out the frontier risks that can impact Food Processing industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High cash cycle compare to competitors
Nestle India has a high cash cycle compare to other players in the Food Processing 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 Nestle India has some of the most successful models in the Food Processing industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Nestle India should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Nestle India 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.
Need for greater diversity
– Nestle India 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.
Ability to respond to the competition
– As the decision making is very deliberative at Nestle India, in the dynamic environment of Food Processing industry it has struggled to respond to the nimble upstart competition. Nestle India has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Nestle India Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nestle India are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Nestle India 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nestle India is facing challenges because of the dominance of functional experts in the organization. Nestle India can utilize new technology in the field of Food Processing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Nestle India 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nestle India in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Food Processing industry, and it will provide faster access to the consumers.
Manufacturing automation
– Nestle India can use the latest technology developments to improve its manufacturing and designing process in Food Processing sector. 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nestle India can use these opportunities to build new business models that can help the communities that Nestle India operates in. Secondly it can use opportunities from government spending in Food Processing sector.
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 Nestle India to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Buying journey improvements
– Nestle India can improve the customer journey of consumers in the Food Processing industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Better consumer reach
– The expansion of the 5G network will help Nestle India to increase its market reach. Nestle India 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nestle India 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 Nestle India to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Nestle India can develop new processes and procedures in Food Processing 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Food Processing industry, but it has also influenced the consumer preferences. Nestle India can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Nestle India can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Nestle India External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nestle India are -
Regulatory challenges
– Nestle India 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 Food Processing industry regulations.
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 Nestle India in the Food Processing sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Nestle India 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 Food Processing industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nestle India in Food Processing industry. The Food Processing 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.
Easy access to finance
– Easy access to finance in Food Processing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nestle India can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Nestle India.
Environmental challenges
– Nestle India needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Nestle India can take advantage of this fund but it will also bring new competitors in the Food Processing industry.
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. Nestle India needs to understand the core reasons impacting the Food Processing industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Nestle India is facing in Food Processing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Food Processing industry are lowering. It can presents Nestle India with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Food Processing sector.
High dependence on third party suppliers
– Nestle India 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.
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.
Increasing wage structure of Nestle India
– 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 Nestle India.
Weighted SWOT Analysis of Nestle India Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nestle India 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 Nestle India 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 Nestle India 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 India 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 Nestle India needs to make to build a sustainable competitive advantage.
