Nestle SA: A SWOT Analysis Writing Assignment Paper (Coursework Sample)

Nestle SA: A SWOT Analysis
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Executive summary
Nestle SA operates in a competitive and dynamic foods and drinks industry. This is a huge industry considering that that the demand for foods and drinks is perpetual. As a multinational company operating in a country that produces and sells its own food, nestle has had to strategize and ride along the success of the global brands offered by the company. This report establishes that the company’s internal and external environment has strong global features. Even though a new product may be hard and costly to introduce, the confectionery industry in South Africa is dynamic and has new brands are emerging daily.
Introduction
South Africa has been deemed as a food self-sufficient country whereby the bulk of the food needs of the country are provided locally from the country’s abundant resources and raw materials. The country’s agriprocesing consists of a number of downstream sectors with major agriprocessing companies including Nestle. This report will provide insight regarding this company’s operation in South Africa with focus being on the analysis of strengths, weaknesses, opportunities and threats. The country competitive insight will also be provided, and this well includes analysing the market for the foods and drinks in the country. These details will be guide the recommendation of a new product for the company in that country.
Background to the company
Nestle in a multinational company whose core business is the manufacture of packaged foods and beverages. The company is considered to be the largest food manufacturer in the world, and this owes to the fact that it operates in 197 countries and produces over 2000 product brands. Among the company’s product lines include chocolate, confectionery, bottled water, coffee, creamer, milk, pet foods and food seasoning among others. Nestle was incorporated in Switzerland and other operations in countries like South Africa are full subsidiaries of the Nestle Switzerland CITATION Nes161 \l 2057 (Nestle, 2016).
The company can be said to be a successful company considering that it has been making good progress in the various countries that it operates. In 2015, the company reported revenues amounting to $ 99.09 billion with estimated sales being $92 billion. 29 of its brands constitute an annual sale of approximately $ 1.1 billion. The largest market for Nestle is America despite the company’s headquarters being in Switzerland. The sales percentages in its key markets as of the year 2015 are as follows:
* Americas 43%
* Europe 28%
* Asia, Africa and Oceania 29%.
Nestle has been in operation in South Africa for over a hundred years, and the company boasts of having delivered to the customers expectation. The company has steadily created an increasing demand for its products in this market and attributes its success to its good relationships with both the customers and employees. Throughout its life, the company has engaged in acquisitions and other expansionary strategies like partnerships that have seen the company grow in size. For example, it formed a 50% partnership with Imperial Cold Storage in 1993, and acquired Valvita and Schoonspruit, water mineral brands, in the year 2000. As has been mentioned earlier on, South Africa produces its own food products locally, and Nestle SA has adopted this trend whereby 95% of its products are indeed South African. Among the favourite brands in South Africa include Cremora, Maggi Noodles, and Ricoffy among others CITATION Nes16 \l 2057 (Nestle, 2016).
Market description
South Africa is arguably the largest and most well-established confectionery markets in Africa with an estimated per capital consumption of 1.3kg as of 2010 CITATION Foo11 \l 2057 (FoodStuff South Africa, 2011). The country’s confectionery sales have been on the rise as has been observable from both industry reports and other research undertaking, for example, Leatherhead Food Research. There is a huge variety of confectionery products that are traded in the country by the various companies among which include Nestle. Among these products include breath fresheners (clorets, dentyne, endearmints, and halls), chewing gum, chocolate, and nougat among others. For a company like Nestle, the confectionery products amount to approximately 13.3% of the company’s sales in South Africa CITATION Nes01 \l 2057 (Nestle, 2001).
The confectionery market in South Africa tends to be dominated by the sugar confectionery sector (in terms of volume) which has sold over 104 000 tonnes in 2010. This constitutes about 56 % of the total market, and marks a 9.5 increase from the levels recorded in 2006.chocolate is the leading confectionary sector that accounts 50.5 % of the overall market, even though this is a slight decline from 52 % as recorded in 2006. Leatherhead Food Research keeps the track of these dynamics in the confectionery market in South Africa. The chocolate sector is dominated by the chocolate bars accounting for 40% of the total market volume.
The country is registering an increasing number of patents for the confectionery products, the highest number of patents occurring between 2012 and 2016 CITATION All17 \l 2057 (Allied Market Research, 2017). The figure below illustrates the patent analysis by company for the various companies offering confectionery products in South Africa:
This figure should be an indication that the market is ever growing with new products emerging frequently. It is an indication that the market is attractive as indicated by the new products emerging every day.
A further analysis shows that among the dominant companies in this market include Cadbury/Kraft, Ferrero and nestle. Cadbury dominates the gum market with a 55% share. Nestle has about 15% of the chocolate sector selling brands such as Bar One, Rolos, Smarties and KitKat. Ferrero sells brands such as Tic Tac and Kinder chocolate mints. The leading supplier in this market is Tiger Brands accounting for a fifth of the chocolate sector and about half of the sugar confectionery sector.
SWOT analysis
The company’s SWOT analysis reveals the internal strengths and weaknesses, and the external opportunities and threats. These are summarized in the SWOT table presented below:

Positive

Negative

Internal

Strengths
* Highly diversified operating in different sectors of the foods and drinks market, for example, the confectionery market.
* A variety of brands helps it withstand economic shocks in different segments of the market.
* Well-established relationships with powerful brands, for example, Coca-Cola.
* Owns some of the world’s most recognized and trusted brands.
* Strong research and development capabilities.
* Strong relationships with retailers
* Considerable market shares in South Africa.

Weaknesses
* Most of its sales virtually depend on a few well-recognized brands. This often makes the company vulnerable to sudden changes in consumer behaviour.
* Grocery sales in major markets increasingly concentrated to a few giant retailers.
* Some brands are old-fashioned to some customers, as they have not been tailored for modern consumer.
* Heavily depends on advertising t shape customer opinion and drive traditional sales.
* Launching new brands to supplement the older ones is costly.

External

Opportunities
* Online retail could open up new distribution channel – that is, online retail.
* Growing middle classes in South Africa could increase demand for luxury brands sold by the company.
* Increasing disposable income in modern South African households could increase demand for confectionery and other products.
* Dynamics in lifestyle, for example, more women in workforce driving demand for various products.
* Increasing interests in health and nutrition

Threats
Pressure from large retailers to cut prices.
Growth of new retail channels, for example, online retail, is a challenge for the traditional channels.
Global trends are also being felt in South Africa, for example, disruption of traditional grocery industry.
Ineffectiveness of traditional advertising as new technologies set in, for example video streaming.
Growing suspicion of packaged food globally also impacting the sales in South Africa.
Possibility of increasing government oversight and regulations in various markets.

The SWOT table presented above illustrates the situation of the company as it operates in the South African market. It is important to notice that some of the strengths accrue to the entire multinational with very few items specialized for the South African market. This can be explained by the fact that with the current trends in globalization, a movement in one variable in one market can cause movements in the same variable or other variables in other markets. For example, the interest in health and nutrition is a global trend and the impact it makes in Americas are similar to what it will make in South Africa. Relatively, the company is in a good position to compete effectively with other giant firms in the food and drinks industry, specifically the confectionery market.
Recommendations
* New product description: Milk Biscuits
The proposed new product for Nestle is Milk Biscuits. Milk biscuits are a different brand from the chocolate biscuits and bars that the company has been selling. The milk biscuits are very nutritious and are suitable for any person. The company can create a very successful brand from these products especially for a market that is increasingly becoming aware of the need for health and proper nutrition CITATION Cla161 \l 2057 (Claasen, et al., 2016).
The company can market this product alongside its other brands, o...