Nestlé corporate portfolio, core competences, and competitive advantages analysis

¶ … Nestle 2008

Corporate Portfolio

Nestle began as a food -- especially milk-based company that later moved into nutrition, confectionary and recently even to bottled waters. Health care, confectionary and nutrition are the current portfolio of the company. Apart from the above majors, the products now includes pet food, powdered beverages, milk food (modern) and many more consumables. In fact the portfolio has grown very wide comprising of many individual industries.

Core Competences

Nestle has developed a standard business culture that is unique to it and has stood the changes in market and expansion strategies. The competencies also lie in the products it can create, from milk and other confectionary -- expertise that is valuable to core competencies like improvement in technology, adapting to changes and lastly but not the least, management perceptions -- as shown by the thinking that even water could be marketed with sound sense. These competencies have evolved over time and must be nurtured and passed on to the succeeding employees by training.

3. How do you leverage Nestle's core competences?

The core competencies need not have leveraging except in a situation of expansion. What can be done is to improve the delivery mechanism of the existing products - which is already being attempted by the CEO -- who is trying to enter the rural markets. One area where the competencies can be leveraged are the areas where the company is an acknowledged leader - in milk and baby wellness products and health foods of which it has the greater customer share. The research and development ought to be concentrated in defining and redefining these markets with intensive research and marketing for which the core competency could be enhanced.

4. Competitive advantages? What synergies do they need to integrate AND leverage?

The major competitive advantage is that Nestle has the market for both the common consumer and the high end consumer within the same product array. However to integrate and create a synergy, the products and the general outlook must be concentrated to create a basket of goods that can be brought together in the market. This requires that the beverages basket be handled in an independent manner but at the same time must be able to innovate with other product baskets. For example a nutrition-based tea would include the nutrition and milk-based unit with the tea and beverage to create a new product that can be sold under nestle brand with the least cost and which surprises the competition.

5. How do they manage from the center? Do they create synergies or do they destroy it?

The management from the centre as is seen is not rigid and bureaucratic. There is freedom within the existing framework and the company has not got a rigid work model. This has helped create synergies in the various departments that complement the need of the company. However, as the company is moving into more and more sophistications there will be a need in future for greater control from the centre. At that point it is necessary to create a model for the company that can control the overall business function and technology but have the synergy intact by giving autonomy to most functions that are not critical.

6. Value chain

The addition and creation of value and the passing on of value to the succeeding unit has been accomplished largely by coordinating the service and redefining existing brands with newer features -- coffee for example and addition with the specific food for dogs and lastly by changing the rural delivery model which is a stroke in sound business strategy. The ability to create the best product in each of the sections and maintaining quality is the best method they have demonstrated in passing value to the customers.

7. Paradox of responsiveness and synergy

The creation of synergy is based on integrating strategic management like strategic renewal, use of disruptive technologies, and core industry development and using the feature of multi-business synergy. There is also the use of acquisition and inside integration, forming strategic alliances, and creating new business ecosystems which form the basis of strategy implementation. (Witt; Myer, 2004)

8. How should Bulcke balance local autonomy with global coordination as more science-based products with multi-market roll-out potential were developed?

The best thing to do under these circumstances would be to create a model that has two of the synergies overlapping. For example the company must create the model for the technology that makes nestle unique -- its products, standards and the way the marketing is done common to all the units regardless of their background and the internal administration and control must be made autonomous. In other words there will be two identical frames wherein products receive the absolute, coordinated and controlled attention and that is the same every where while unit functioning and internal administration, training staffing and coordination can be based on the unit based autonomy. It goes without saying that the personnel selected for each of these operations have to be highly qualified, trained and motivated based on the overall company policy. Creating such a two tier model will be helpful in coordination and management.