Nestle Analysis and Recommendations Nestle

Nestle Analysis and Recommendations

Nestle is one of the world's leaders in the packaged food industry, with products ranging from candy to bottled water to -- due to a relatively recent acquisition from Kraft -- frozen pizzas.

The company's stability and profitability can be seen as somewhat questionable, however, due to a combination of different factors and events including a reduction in profits for the bottled water industry -- one of Nestle's major endeavors and several ethical problems the company has faced in recent years.

An analysis of the company reveals certain strategic changes that should be implemented.

ECONOMIC ENVIRONMENTS

The economic crisis and global recession that the business world has been experiencing for the past year-and-a-half or so has had an impact on every major international company, and Nestle is no exception. Some indicators suggest that the company has actually benefited slightly from the economic downturn in terms if its industry share, yet other measures of the company's value show the company's reduced profitability and growth potential in the current economic environment, as well as its reduced potential to raise capital through investment (Appendix 1). The sales per share of Nestle stock were cut almost in half from 2008 to 2009, yet at the same time sales did not actually take as huge a tumble as might have been expected, as many of Nestle's products and subsidiaries are not engaged in the production of luxury items but rather produce food items viewed as necessities or budget-conscious alternatives.

(Appendix 2).

PROBLEMS IN THE ORGANIZATION

Nestle is facing several major problems as an organization. First and foremost are the series of ethical issues that the company has been engaged in, beginning several decades ago with its marketing of baby formula as a substitute for breast milk in developing countries despite World Health organization opposition and many other issues (Appendix 3). Another major problem that Nestle is facing is the drop-off in sales of bottled water generally; the company has several subsidiaries and a large amount of capital engaged in the production, distribution, and marketing of bottled water, and sales declined in 2009 for the first time in at least five years, with growth in the industry slowing noticeably during the first half of the decade.

(Appendix 4). Finally, emerging markets are seeing the highest level of growth for Nestle, but there is not sufficient evidence that the organization is exploiting these markets to their full potential (Appendix 5).

Recommendations

Nestle's leadership must make the organization's ethical stance clear and unequivocal, committing the company to better stewardship and cooperation with consumer and world health agencies. Moving away from bottled water will actually solve many of the current ethical quandaries as well as freeing up capital for more profitable and sustainable pursuits; divestment of the bottled water subsidiaries or their slow dismantlement is recommended. Finally, Nestle must focus efforts more intensively on emerging markets.

CONCLUSION

Nestle is definitely poised to regain what stature and profitability it has lost in the current economic crisis, through intensive marketing campaigns in emerging markets, a reorganization of its operations and subsidiaries to maximize profitability while shedding less profitable enterprises, and through a commitment to ethical practices and policies that has never been a strong suit of the company. Accomplishing these specific tasks will allow Nestle to build a stronger image and a stronger position for itself in the global food industry, poising Nestle to capitalize on the rebounding economy as the overall global economic situation improves. A failure to address the problems the company is currently facing, on the other hand, will leave Nestle more vulnerable to outside economic and consumer forces, which would serve to further damage the company's reputation and profitability.

Appendix 1

Appendix 2

Appemdix 3

-Pre 1980s: Long-standing boycott of Nestle products for the company's continued advertising and distribution of baby formula despite World Health Orgnization codes calling for a return to breast feeding in order to promote health