Nestle (NESN) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nestle (Germany)

Based on various researches at Oak Spring University , Nestle is operating in a macro-environment that has been destablized by – there is backlash against globalization, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, etc

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Introduction to SWOT Analysis of Nestle

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nestle can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nestle, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nestle operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Nestle can be done for the following purposes –
1. Strategic planning of Nestle
2. Improving business portfolio management of Nestle
3. Assessing feasibility of the new initiative in Germany
4. Making a Beverages (Nonalcoholic) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nestle

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Strengths of Nestle | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Nestle are -

Ability to recruit top talent

– Nestle is one of the leading players in the Beverages (Nonalcoholic) industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.

Organizational Resilience of Nestle

– The covid-19 pandemic has put organizational resilience at the centre of everthing Nestle does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Training and development

– Nestle has one of the best training and development program in Consumer/Non-Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Effective Research and Development (R&D)

– Nestle has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nestle staying ahead in the Beverages (Nonalcoholic) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Operational resilience

– The operational resilience strategy of Nestle comprises – understanding the underlying the factors in the Beverages (Nonalcoholic) 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.

Successful track record of launching new products

– Nestle has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nestle 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.

Ability to lead change in Beverages (Nonalcoholic)

– Nestle is one of the leading players in the Beverages (Nonalcoholic) industry in Germany. Over the years it has not only transformed the business landscape in the Beverages (Nonalcoholic) industry in Germany but also across the existing markets. The ability to lead change has enabled Nestle in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Superior customer experience

– The customer experience strategy of Nestle in Beverages (Nonalcoholic) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Diverse revenue streams

– Nestle is present in almost all the verticals within the Beverages (Nonalcoholic) industry. This has provided Nestle 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 Beverages (Nonalcoholic) industry

- digital transformation varies from industry to industry. For Nestle digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nestle has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

Sustainable margins compare to other players in Beverages (Nonalcoholic) industry

– Nestle has clearly differentiated products in the market place. This has enabled Nestle to fetch slight price premium compare to the competitors in the Beverages (Nonalcoholic) industry. The sustainable margins have also helped Nestle to invest into research and development (R&D) and innovation.

Cross disciplinary teams

– Horizontal connected teams at the Nestle 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.

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Weaknesses of Nestle | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Nestle are -

Low market penetration in new markets

– Outside its home market of Germany, Nestle needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Products dominated business model

– Even though Nestle has some of the most successful models in the Beverages (Nonalcoholic) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Nestle should strive to include more intangible value offerings along with its core products and services.

Slow to strategic competitive environment developments

– As Nestle is one of the leading players in the Beverages (Nonalcoholic) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Beverages (Nonalcoholic) industry in last five years.

Lack of clear differentiation of Nestle products

– To increase the profitability and margins on the products, Nestle needs to provide more differentiated products than what it is currently offering in the marketplace.

Increasing silos among functional specialists

– The organizational structure of Nestle is dominated by functional specialists. It is not different from other players in the Beverages (Nonalcoholic) industry, but Nestle needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nestle to focus more on services in the Beverages (Nonalcoholic) industry rather than just following the product oriented approach.

Skills based hiring in Beverages (Nonalcoholic) industry

– The stress on hiring functional specialists at Nestle has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

High dependence on Nestle ‘s star products

– The top 2 products and services of Nestle still accounts for major business revenue. This dependence on star products in Beverages (Nonalcoholic) industry has resulted into insufficient focus on developing new products, even though Nestle has relatively successful track record of launching new products.

Workers concerns about automation

– As automation is fast increasing in the Beverages (Nonalcoholic) industry, Nestle needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

Interest costs

– Compare to the competition, Nestle 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.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nestle is slow explore the new channels of communication. These new channels of communication can help Nestle to provide better information regarding Beverages (Nonalcoholic) products and services. It can also build an online community to further reach out to potential customers.

Slow decision making process

– As mentioned earlier in the report, Nestle has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Beverages (Nonalcoholic) industry over the last five years. Nestle 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.

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Nestle Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Nestle are -

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Beverages (Nonalcoholic) industry, but it has also influenced the consumer preferences. Nestle can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Better consumer reach

– The expansion of the 5G network will help Nestle to increase its market reach. Nestle 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.

Using analytics as competitive advantage

– Nestle has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Beverages (Nonalcoholic) sector. This continuous investment in analytics has enabled Nestle to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nestle to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Nestle can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Nestle 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 Nestle to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Learning at scale

– Online learning technologies has now opened space for Nestle 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Beverages (Nonalcoholic) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nestle can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Nestle can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.

Buying journey improvements

– Nestle can improve the customer journey of consumers in the Beverages (Nonalcoholic) 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.

Leveraging digital technologies

– Nestle 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.

Manufacturing automation

– Nestle can use the latest technology developments to improve its manufacturing and designing process in Beverages (Nonalcoholic) 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.

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 can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Building a culture of innovation

– managers at Nestle can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Beverages (Nonalcoholic) industry.

Developing new processes and practices

– Nestle can develop new processes and procedures in Beverages (Nonalcoholic) 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.

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Threats Nestle External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Nestle are -

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Nestle in Beverages (Nonalcoholic) industry. The Beverages (Nonalcoholic) industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Nestle needs to understand the core reasons impacting the Beverages (Nonalcoholic) industry. This will help it in building a better workplace.

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 Nestle business can come under increasing regulations regarding data privacy, data security, etc.

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 dependence on third party suppliers

– Nestle high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.

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.

Consumer confidence and its impact on Nestle demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Beverages (Nonalcoholic) industry and other sectors.

Shortening product life cycle

– it is one of the major threat that Nestle is facing in Beverages (Nonalcoholic) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Nestle may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Beverages (Nonalcoholic) sector.

Easy access to finance

– Easy access to finance in Beverages (Nonalcoholic) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nestle 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 to Beverages (Nonalcoholic) industry are lowering. It can presents Nestle with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Beverages (Nonalcoholic) sector.

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.

Technology acceleration in Forth Industrial Revolution

– Nestle has witnessed rapid integration of technology during Covid-19 in the Beverages (Nonalcoholic) industry. As one of the leading players in the industry, Nestle needs to keep up with the evolution of technology in the Beverages (Nonalcoholic) 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.

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Weighted SWOT Analysis of Nestle Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nestle 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 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 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 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 needs to make to build a sustainable competitive advantage.

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