Nestle Company Nestle\'s Long History

Nestle Company

Nestle's long history began with founder Henri Nestle's infant saving formula. More than 140 years later, the company has grown into an international powerhouse centering on nutrition, health and wellness. However, the organization's recent financial success leads to a significant challenge. New CEO, Paul Bulcke, will need to ensure the company doesn't become complacent and continues to operate with a sense of urgency. This can be accomplished by taking advantage of developing and emerging markets, through the customization of recently acquired frozen pizza brands from Kraft Foods. If Nestle is ill-prepared for this, it could negatively affect their market position and profitability.

Table of Contents

Abstract

Executive Summary:

Brief Problem Diagnosis:

Analysis of the Problem:

Recommendations:

Strategic Posture:

Strategic Managers:

SWOT Analysis:

Strengths:

Weaknesses:

Opportunities:

Threats:

TOWS:

EFAS:

IFAS:

SFAS:

Financial Analysis:

General Environmental Analysis:

Five Forces Analysis:

Resource Analysis:

Value Chain Analysis:

Strategic Analysis:

Conclusion:

Appendix:

Table 1: TOWS Matrix

Table 2: EFAS Matrix

Table 3: IFAS Matrix

Table 4: SFAS Matrix

Table 5: General Environmental Analysis

Figure 1: Nestle Total Revenues (1999 -- 2009)

Table 2: Nestle Net Profit (1999-2009)

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Case Study: Nestle Company

Executive Summary:

Brief Problem Diagnosis:

Nestle's long history began with founder Henri Nestle's infant saving formula. Developed in 1867, Nestle's formula included a revolutionary drying process that allowed the formula to retain most of the nutrients found originally in the cow's milk, wheat flour and sugar of which it was comprised. More than 140 years later, the company has grown into an international powerhouse centering on nutrition, health and wellness. However, the organization's recent financial success leads to a significant challenge. New CEO, Paul Bulcke, will need to ensure the company doesn't become complacent and continues to operate with a sense of urgency. This problem affects all areas of the organization, from research and development to sales to manufacturing to customer service. Although the company is secure in the marketplace as of this moment, in an increasingly globalized and hyper-competitive business environment, this could change at any time. If Nestle is ill-prepared for this, it could negatively affect their market position and profitability.

Analysis of the Problem:

This challenge of remaining proactive and operating with a sense of urgency is a direct result of Nestle's success, coupled with their multi-national size. Nestle's success has been facilitated, in a large part, by their mergers and acquisitions over the years, beginning with their merger with rival Anglo-Swiss Condensed Milk Company, in 1905. Geographical expansion into the United States, Germany, Great Britain, and Spain, in the early 20th century, and entry into emerging markets like China, also were stepping stones to the company's current success.

With this global expansion, part of Nestle's success with the autonomy they have given to their country managers, when it comes to dealing with consumers. As the organization has often built local supply chains, often organizing the country's basic agricultural capabilities back to the farm level, this has resulted in value additions to these supply chains. Nestle's 'milk district model' began in the company's founding years, in Switzerland, and has since facilitated the organization's growth, through replication in Asia, Latin America, Africa, the Caribbean, and Inner Mongolia.

Remaining innovative in an industry that not only spans nations, but also cultural tastes is a particular challenge. Although Nestle offers 29 'billionaire' brands, brands that had revenues greater than CHF1 billion these globalized brands are not necessarily standardized from country to country. Nestle believes there are no standard tastes around the world, therefore a product's formulation may vary for each country in which it's offered. With more than 8,000 products, continued innovation is a monumental task.

Although Nestle has more than 275,000 employees, the organization's relatively flat and decentralized nature allows it to be more responsive to changing market needs. The company is organized geographically, with forty-three regions organized under three primary geographic zones. However, this decentralized nature adds to the challenge of remaining proactive and innovative. The organization becomes a multi-headed being that may each want to travel in different directions.

This problem of remaining proactive and innovative, while being a leader in the industry that has experienced great success, affects all areas of the Nestle's business. Although innovation may be seen as a primary research and development function, innovation across all business units is needed to remain competitive in today's increasingly competitive world. If complacency sets in, in any of Nestle's busines units, this will lessen the organization's competitiveness as a whole. It is only through proactive strategies that take advantage of emerging opportunities, such as those strategies that have helped garner the market share the organization already controls, that Nestle can hope to continue to be a world leader in their industries.

Recommendations:

Nestle is well positioned to remain a leader in the food and beverage industry. Their focus on nutrition and health and well-being is perfectly timed with the emerging consumer trend of focusing on healthier eating and drinking options, as well as healthier options in every area of the consumer's life. However, Nestle's 140 years of success could lead the company to become complacent. Their position in the marketplace is not bulletproof. Although there are not current competitors that pose a serious threat to the organization, if the company doesn't implement strategies that are proactive they may slowly allow competitors to erode at their market share. For this reason, the recommended course of action centers on proactive innovation.

Emerging and developing markets offer such a significant amount of potential for Nestle. These markets offer almost twice the growth potential as the mature markets, including the United States, Japan, and Western Europe. However, Nestle has a significantly less market presence in these high-growth areas. Not only does this mean Nestle isn't taking full advantage of the growth in these areas, but they are also more impacted by the economic downturns that are faced by the mature markets, such as the recent economic recession. For these reasons, further expansion into emerging and developing markets is an important strategic recommendation for Nestle.

The organization has also had historic success with customizing products for specific geographic regions. Their country managers are charged with understanding the unique culture, tastes, and needs of their areas and developing products to address these traits. This needs to be an integral part of the company's strategy as they continue their expansion into developing and emerging markets. Even within a country, there are often regions with different tastes and cultures that require different formulations, in order to effectively enter that market.

The company's process of transformation into an organization that focuses on nutrition and health and well-being can be applied to this recommended strategy. Entering developing and emerging products with healthier food and beverage options takes advantage of these high-growth markets, while also capitalizing on the healthier eating consumer trend. Although the company has already made significant strides in transforming many of its products into healthier options, but removing trans fatty acids, salt and sugar, while adding whole grains, vitamins, minerals, Omega-3s, and antioxidants, they still have thousands of products to still reformulate. In addition, recently acquired Kraft Foods' frozen pizza business unit includes well-known American brands that could be reformulated into healthier options while also be reformulated for expansion into emerging and developing markets. For instance, the California Pizza Kitchen restaurants have already expanded into a variety developing countries. This expansion has already begun to build the brand name that Nestle can use for the expansion of their California Pizza Kitchen brand pizzas. By reformulating these pizzas to meet the cultural tastes of these markets, and also reformulating them to provide healthier eating options, Nestle can maximize the effectiveness of their expansion.

By expanding into developing and emerging markets, with healthier reformulated versions of the brands of frozen pizza Nestle recently purchased from Kraft Foods, this addresses the major threats facing the organization, while also countering a primary weakness. In addition, it takes advantage of a significant opportunity, in the developing and emerging markets, while utilizing the company's strengths. It eliminates the problem of Nestle's relatively lesser market positioning in these markets. It also helps eliminates the potential threat of the possible unviability of the company's recent acquisition, from Kraft Foods.

This plan will involve first determining which developing and emerging markets into which Nestle would like to expand. Likely, this would lead to expansion of the California Pizza Kitchen pizzas into the countries where the restaurant has already entered the market, pre-building the brand name for Nestle. Research and development will then need to develop reformulations of the existing products, for those unique markets, while country managers build local supply chains and develop marketing campaigns appropriate for the local culture. The cost of the plan will depend on the market the company enters; however, the remaining cash on the books from the sale of the interests in Alcon can be used to finance this expansion.

The risks of this plan primarily involve the failure of consumers in accepting the product lines. Competitors may imitate Nestle's expansion, creating direct competition for the new markets. Governments in these developing countries also may have issues with foreign companies expanding within their borders. Lastly, establishing local suppliers, and the infrastructure required for these suppliers, may be a challenge, especially for those they develop from the ground up.

Strategic Posture:

Nestle's mission statement is simple. "Good Food,

Good Life'. That mission is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night, and thereby to help them to live enjoyable, healthy lives" ("Annual report," 2010, p. 2). The corporation's current objective is to transform the company into a leader in the nutrition and health and well-being industry, moving away from simply a food and beverage provider. Strategies the company is currently utilizing include reformulating many of the organization's recipes to reflect this healthier corporate image. This include lowering salt, sugar and removing trans fatty acids. In addition, healthy additions are being made as added whole grains, antioxidants, Omega-3s, vitamins, and minerals.

Strategic Managers:

Paul Bulcke is Nestle's current Chief Executive Officer. He has been in office since 2008. Prior to this position, from 2004 to 2008, he served as Nestle's Executive Vice President and Zone Director fo Americas. He held several other positions in the company, including sales and marketing, as well as division functions at Nestle Ecuador, Nestle Peru, and Nestle Chile. He was Managing Director at Nestle Portugal, Nestle Czech and Slovak, and Nestle Germany, giving him excellent insight into how important autonomy can be for each geographic region ("Nestle SA," 2010).

Werner Bauer is the current Executive Vice President, Chieft Technology Officer, and Head of Innovation, Technology, Research, and Development. Before he accepted this position in 2007, Bauer was the Head of Nestle Research Center. He also served as Technical Manager for Nestle Southern and Eastern Africa, and then became Region Head of this area. Bauer also was appointed Executive Vice President, Head of Corporate Technical, Production and Research and Development ("Nestle SA," 2010).

Frits Van Dijk is Executive Vice President and Zone Director for Asia, Oceania, Africa and Middle East. Luis Cantarell is Executive Vice President and Zone Director for United States, Canada, Latin America, Caribbean. Jose Lopez is Executive Vice President, Operations, GLOBE. Each of these, and the several other, members of Nestle's executive board all have one thing in common. They all have extensive experience within the Nestle corporation. These are not executives that have been recently brought onboard from other competitors or other industries. Instead, most of these executive board members have tenures at least two decades in length. This gives Nestle's executive team practical insight into the workings of the corporation. Their knowledge isn't simply theoretical or implied, but instead, the Nestle executives have worked in the organizational levels that will now be charged with implementing their vision. For this reason, they have a greater affinity with those they are now directing.

Nestle's Corporate Culture:

Nestle's corporate culture has always centered on quality. This quality focus has helped the company emphasize the value of the brand. The company relies more on this culture than on management systems. Most of the organization's top managers have been with Nestle for more than two decades. For this reason, these business leaders are in sync with Nestle's principles and objectives. This is the reason they rarely recruit executives from other companies. Their culture often doesn't mesh with Nestle's culture, with a different set of priorities.

SWOT Analysis:

Strengths:

Nestle owns numerous brands that are known around the world, including more than 29 brands that are worth than more than CHF1 billion annually. The company's top 30 brands, according to Datamonitor, earn approximately CHF81 billion in annual sales. This accounts for 75% of Nestle's sales. One of the best known Nestle brands is Nescafe. Nescafe was ranked the 25th most recognizable brand in the world, by Interbrand, a brand management company ("Nestle," 2010). Clearly, Nestle is skilled in leveraging their brand names to generate sales.

Another strength Nestle can utilize to their benefit is their ability to customize their global products for the specific cultural and consumer demands of a local market. Although Nestle has several brands that are sold globally, the organization has always understood that culturally there are no standard worldwide tastes. Nestle performs this customization through empowering its subsidiaries, such as its country managers, who they rely upon to understand the local market and consumer preferences, in order for products to be customized to meet these unique needs. Nestle's Nescafe brand comes in several variations that are specifically adapted to the preferences and local tastes of the local market, while still providing the same international quality and recognizable brand name ("Nestle," 2010).

Nestle has historically had a strong commitment to research and development. Between 1998 and 2007, Nestle's spending on research and development more than doubled, reaching CHF1.88 billion. Sixty percent of this investment supported the company's food, nutrition and health and wellness division, with 40% supporting Nestle's pharmaceutical businesses. Nestle had a permanent staff, in their Research Center in Switzerland, of 700 employees, including 300 scientists, in 2007. In addition to these staff members, Nestle has 23 Product Technology Centers (PTCs) globally, that develop category-specific innovations, that are aligned with one or more of the organization's SBUs and global businesses. According to Datamonitor, Nestle has more than 5,200 employees working in the food and beverage development and PTCs. The PTCs are one of three core functions of Nestle's R&D activities, which also include their Research and Development Centres and Nestle's Application Groups. The PTCs are aligned with specific Nestle businesses. They provide specific product category expertise and form a hub for global product and process development. The Research and Development Centres work closely with the PTCs, to fulfill the regional research and development requirements, as well as to provide input for customization of products to meet the preferences of local consumers. Located in Nestle's factories, the Application Groups ensure products fulfill the local tastes preferences of the consumers. The Application Groups work closely with the Research and Development Centres, as well as the PTCs. They test scientific applications as close to Nestle's end consumer as possible ("Nestle," 2010).

Werner Bauer, executive vice president of innovation, technology, and R&D, stated,

Given our internal growth targets, CHF3 billion of new sales has to come from renovation or innovation each year. Therefore we must understand the global business strategy to see where R&D should be working. The goal is to identify the sweet spot of three elements: What is needed by the consumer, what is technically and scientifically feasible, and what is commercially viable (cited Bell & Shelman, 2009, p. 9).

CFO James Singh noted,

Nestle was founded on invention and, 140 years later, this spirit is still here. We have a spirit of discovery, especially today since what we become in the future will be driven by our ability to innovate today. Nespresso is a great example of a true invention that created a new industry. Nestle built the unique business model, technology, machine, capsules the entire experience. It took 15 years to get to the first billion (dollars) of revenues, but only three years to get to the second. Nespresso is now growing 40% a year -- the fastest of all Nestle brands (cited Bell & Shelman, 2009, p. 9).

Research and development initiatives have been key to the company's increased profitability. Powdered and liquid beverages saw an organic growth of 9.5% in 2009, thanks to the continued roll-out of renovated Nescafe brands, including Nescafe Green Blend ("Nestle," 2010). These research and development capabilities help Nestle renew their product line, while renewing revenue growth.

Weaknesses:

Nestle's history of product recalls has negatively affected brand equity. In 2009, the company was notified by the United States Food and Drug Administration (FDA) and the Centers for Disease Control (CDC) that their Nestle Toll House refrigerated and frozen cookie dough possibly was connected to sickness caused by E.coli bacteria and the consumption of Nestle's uncooked cookie dough. In 2008, Nestle USA performed a recall of their Nesquik Strawberry Powder, for fear that it contained small bits of aluminum. Nestle's Lean Cuisine brand had to recall approximately 900,000 pounds of frozen chicken meals, because bits of blue plastic had been reported in the meals. In the beginning of 2008, Nestle's UHT pure milk product was recalled in Hong Kong, when a tiny amount of melamine was discovered in the product ("Nestle," 2010). Not only do these product recalls indicate an issue with product quality control, but also they damage the brand image Nestle has worked so hard to build and can negatively affect customer loyalty and brand equity.

The volume trend for Nestle dropped in 2009, due to the economic downturn. Datamonitor notes,

Although the industry has been in course of recovery since 2009, it has not been led by the company's diversified profile, relative higher pricing and smaller relative contribution from emerging markets. This signifies that Nestle, which is a market leader in a few of its products category, has found it difficult to manage the growth of its product volume since coming out of the 2009 recession ("Nestle," 2010, p. 7).

Nestle's diversified products profile has resulted in a more limited volatility in Nestle's growth metrics. This has led to slower growth in sales volume and profitability.

Emerging markets is an important factor in Nestle's success. Nestle owns 220 factories in emerging markets. Their sales reached CHF35 billion in 2009. However, emerging markets only makes up approximately one-third of the company's sales. This is significantly less than their primary competitors Groupe Danone and Unilever, who have a geographic mix of 40% and 50% respectively of emerging markets. Due to the economic downturn of 2008 and 2009, it is anticipated that emerging markets will experience faster paced economic growth in comparison to mature markets like Japan, the United States and several European nations. The International Monetary Fund (IMF) estimated that the American economy would grow only 2.7% in 2010. In contrast, the Indian economy is expected to grow 7.7%, while the Chinese economy is expected to grow 10% ("Nestle," 2010). With these figures in mind, Nestle will benefit less from these more rapidly growing economies, compared to their competitors who have a greater presence.

Opportunities:

Transitioning from just a food and beverage to also a nutrition and health and wellness company is a significant opportunity for Nestle. The company has evolved from its original baby formula to a provider of products that combine taste and nutrition, as a means of accelerating profitable growth. Nestle is improving their products, across their portfolio, to further promote their brands as those associated with health and wellness. To this end, they have reduced their trans fatty acids, sugar and salt in many products, or increased their product's micronutrients such as minerals and vitamins. Nestle is also enhancing the nutritional density of their products as well, by adding calcium, whole grains, antioxidants, and Omega-3s. "As a result in 2009, Nestle renovated 7,252 products for nutrition or health considerations. Furthermore, during the same year the company's brands, Milo enhanced its position with consumers in Zone AOA (Asia, Oceania, Africa), whilst Nesquik enjoyed a resurgence in Europe following a renovated recipe with an improved nutritional profile" ("Nestle," 2010, p. 7-8).

Nestle is also using its research and development capabilities to better position itself in the health and wellness market. As an example, the company is pioneering the use of probiotics, for their preventive nutrition products, to reduce gastrointestinal diseases. Nestle is also developing products to address diabetes and obesity. Other nutritional initiatives for Nestle include addressing the special nutritional needs of Alzheimer's patients and other illnesses related to aging. The organization is investigating the ground-breaking areas of genes and proteins, through the specialized areas of proteomics, genomics, and metabolomics, as a means of adapting foods to adapt food to meet individual needs.

This strategy to convert Nestle into a company focused on nutrition and health and well-being comes at an opportune time, when consumers are becoming increasingly health conscious. As Datamonitor notes, the global organic food market is experiencing phenomenal growth, growing 9.7% in 2009, reaching a value of $60 billion. This market is forecasted to reach almost $97 billion by 2014, increasing 60.7% over those five years. In addition, the global functional drinks market, in 2009, grew by 6.4%, and reached a value of more than $40 billion. This market is estimated to reach more than $53 billion by 2014, an increased of almost 33%, over the five-year period. The consumers' increasing health awareness is leading to a higher demand also for low calorie and low carbohydrate foods, around the world. The risks of obesity and bad dietary habits are becoming more widely understood by consumers. This has enhanced the company's focus on developing food products that are healthy, as well as positioning the company in the health and well-being market, so they can take advantage of this trend ("Nestle," 2010).

Nestle has built much of its success on taking advantage of developing and emerging economies. There are opportunities that still exist in these markets, especially in China and India. The populations of these emerging economies are estimated to increase by 3.3 billion by the year 2050. This dramatic population increase is expected to also drive a significant demand for food and beverage products. Nestle has taken advantage of developing and emerging economies in Africa, Asia-Pacific, Turkey, Latin America, and the Middle East. These sales accounted for nearly one-third of their total revenue in 2009. By 2020, Nestle anticipates doubling its sales in these markets ("Nestle," 2010).

Mature economies are expected to grow at a significantly slower rate. The IMF estimates that these economies will grow by 2.1 and 2.4% respectively, in 2010 and 2011. In contrast, developing and emerging economies are expected to grow by 6 and 6.3% respectively, in 2010 and 2011 ("Nestle," 2010). In the future, as market growth remains flat in mature economies, and these markets become ever more saturated, Nestle could recognize high growth in developing and emerging economies.

The increase in consumers eating out is another opportunity of which Nestle can take advantage. There has been a significant boom in this trend. Although the restaurant sector shrank by 2.9%, in 2009, to $1,443.4 billion, it is anticipated to reach $1,792.2 billion by 2014, increasing 24.2%. The National Restaurant Association forecasted that consumers will spend approximately $580 billion, at restaurants in North America, in 2010. In North America, nearly 40% of consumer spending on food and beverage is spent out-of-home ("Nestle," 2010). A similar trend is being showing in Brazil, India, Russia, China, and many Western European countries. Nestle Professional is the world's leading manufacturing in this out-of-home market. With sales of CHF5.8 billion, in 97 countries, the company has an opportunity to take advantage of economies of scale, boost their sales and their profitability.

Threats:

Compliance issues Nestle has faced in the past has resorted in millions of dollars recently. In the beginning of 2009, Nestle, along with the Coca Cola Company, were fined $650,000 as a part of a pact with 27 states, as a resolution over a marketing dispute regarding their Enviga-brand green tea beverage, a product developed to burn extra calories and result in weight loss. At the same time, Nestle was fined $38.5 million by the Hellenic Competition Commission, "for 'abusing' its dominant position in the instant coffee market" ("Nestle," 2010, p. 9). Nestle was accused of trying to shoulder out other coffee providers, in their dealings with restaurants, supermarkets and distributors. The company's reputation is built on consumer trust. Continued compliance issues could negatively impact Nestle's reputation.

This valuable reputation can also be tarnished by allegations of unethical business dealings. A variety of social organizations have accused Nestle of these unethical activities, over the years. During the sourcing of cocoa from the Ivory Coast, Nestle was accused of torture, trafficking, and forcing children to cultivate and harvest the beans they were importing from Africa. Artificial infant milk substitute has also been a source of criticism for the company. Much of this criticism lies in a breach of the World Health Organization International Code of Marketing of Breast Milk Substitutes. In addition, Nestle has been criticized for marketing their infant formula in ways that undermine breastfeeding, through giving away free samples and the promotion of their infant milk substitutes. Negative publicity, such as this, can significantly impact customer loyalty and consumer attitude toward the organization.

Following Nestle's disposal of its remaining ownership in Alcon, the company has a more than $40 billion on their balance sheet. This is not an optimal situation, as the cash yields a lower return, for the company, than they receive from their food and beverage operations. In January 2010, Nestle acquired Kraft Foods' frozen pizza business, which includes top brands like: Tombstone, DiGiorno, Jack's, California Pizza Kitchen, and Delissio. In 2009, Kraft Foods was the leading frozen pizza maker, with $2.1 billion I sales. The company also enjoyed double-digit growth, in the United States and Canada, over the last four years. However, this may not have been the best strategy as consumers veer away from high calorie products, like pizza, and are looking for healthier alternatives. In addition, "the target consumers for such products are only limited to mature markets which bore the maximum brunt of the economic slowdown of 2008-09. Hence to be dependent on few markets with reduced consumer spending for revenues returns at the cost of expensive acquisitions raise questions on the company's reinvestment policies" ("Nestle," 2010, p. 10).

TOWS:

There area variety of strategies may employ to take advantage of the organization's strengths and emerging opportunities, while countering their weaknesses and taking action against possible threats (See Table 1). These strategies will help Nestle ensure they don't become complacent with their success, while also remaining innovative and warding off possible emerging threats. The strategies that utilize Nestle's strengths and take advantage of the external opportunities include using the company's strong existing brand names for the development of healthier products. This strategy takes advantage of the organization's strong global brand recognition, while capitalizing on the current trend of consumer's desiring healthier eating options. New, healthy product options, manufactured under existing brand names, have the advantage of instant brand recognition, and the consumer loyalty that comes with this recognition, while attracting new consumers who are looking for nutritional foods and beverages.

The expansion of existing brands into developing and emerging economies also takes advantage of Nestle's portfolio of globally recognized brand names, while taking advantage of the opportunities that can be found in the rapidly expanding developing and emerging economies. Approximately 70% of Nestle's revenues come from 29 'billionaire' brands, brands that earn CHF1 billion or more annually. These are globally recognized brands, such as Nescafe, Nesquick, and Nestea. By taking the brands that are already well-established in other countries, and introducing them in developing and emerging countries, Nestle can benefit from the tried and true brands that already have a global following with consumers, while also taking advantage of the strong economic growth in these developing countries. The significant anticipated population rise in these economies equals significant demand in these geographic regions for food and beverages. Brands that already have a strong following in other countries are likely to have at least some recognition in these markets, thanks to today's increasingly globalized world.

When this strategy is coupled with Nestle's ability to develop customized products to meet the unique consumer tastes around the world, as they have with the customization of many of their global brands like Nescafe, this strategy becomes even more viable. The organization's research and development functions not only can develop completely new products, but also variations of existing products, to fulfill the needs and cultural tastes of these developing and emerging economies. The country managers at Nestle are empowered to help ensure these versions of these globally known brands are well-accepted in their specific markets. In this way, Nestle utilizes two of their most valuable -- their ability to customize their products for local markets and their strong focus on research and development -- and applies these strengths to take advantage of the opportunities that lie in the developing and emerging markets.

Developing custom products for the out-of-home eating market also takes advantage of Nestle's long-standing history of being able to develop custom products for the unique needs of their consumers. Consumers around the world are expressing a growing desire for convenience and are eating out in restaurants and other non-home locations. "In mature economies, between 30% and 50% of consumer spending on food and beverages was for food prepared outside the home. Nestle estimated the size of the out-of-home market at $400 billion" (Bell & Shelman, 2009, p. 12). Although Nestle is currently the largest manufacturer in the industry, this is not due to any concentrated efforts on their part. Instead, without specific strategies to take advantage of this growing market, Nestle opens the opportunity up to other competitors and may find themselves losing significant market share. To prevent this complacency from setting in, and allowing competitors to get a strong foothold in the market, the strategy to utilize Nestle's skills in customization of products, for the out-of-home food market, will help purposely secure their position in this important market segment. Nestle Professional needs to expand their product offerings to fulfill the unique consumer tastes in this market.

Nestle should also address the product quality assurance issues, which have resulted in the numerous product recalls in recent years, to improve specifically their nutrition and health and well-being product lines. Product recalls have a significant negative effect on not only Nestle's brand images, but also on the corporate image as a whole. Customer loyalty and customer trust in the Nestle products also is negatively affected when there is a product recall. When a company works so hard to build a brand image, the last thing the organization wants is for a quality assurance mistake to completely destroy that hard work. This negative effect is exacerbated in nutrition and health and wellness products. These products are supposed to represent healthier product offerings. To have a product recall for a product that has been deemed to be 'healthy' exponentially destroys the consumer's faith in the product, because of the healthy aspect. By improving the quality assurance processes, specifically in the nutrition and health and well-being products, Nestle will help minimize the chances that this past weakness will negatively affect their sales, specifically in this market segment. In addition, improved quality in any product line helps enhance the Nestle brand name in general, reaping benefits for other product lines, by association.

A decade ago, globalization was a huge concern for organizations. Today, globalization is a reality. Economic growth in mature markets, such as the United States, Japan and Western Europe, has flattened due to a saturated marketplace and recent economic turmoil. In contrast, more and more developing countries are not only opening their borders to companies from other parts of the world, but their rapid population growth equates to market growth that simply can't be found in the more developed countries of the world. In addition, these markets have a significant impact on the rest of the world. As Bell and Shelman (2009) note, when a country like China becomes the third largest buyer of a product, the rest of the world reacts to their purchase decisions. "If everyone in China decides to have one more cup of coffee every day, then the cost of coffee beans will increase, and (companies like Nestle) must build many more factories" (p. 10).

Currently, Nestle only recognizes one-third of their sales from developing and emerging markets, while their competitors, like Groupe Danone and Unilever, receive up to 50% of their sales in these high-growth markets. By increasing Nestle's market mix to have a stronger presence in these countries, not only will the organization better take advantage of this significant opportunity, but they will also take actions to correct a significant weakness, their relatively weak position in these important geographic areas.

Nestle can use their strong brand name to counter much of th Nestle e accusations of unethical business activities they experience. For more than 140 years, has built their brand names as quality food and beverage products. These are brands that are known in households around the globe. When accusations of unethical business activities arise, Nestle can use their long-standing brand names as part of the efforts to counter these accusations. As an example, when they were accused of marketing their infant milk substitute in such a way that undermined breastfeeding, the organization should have used their brand reputation to negate this attack. Nestle's history began with the development of infant milk substitute. Henri Nestle's original formula and innovative drying process was a life saving invention. Nestle's formula helped prevent infant mortality due to malnutrition, in babies that couldn't breastfeed. Reminding consumers of this historical foundation of the company, as well as the lives Nestle formulas have saved over more than a century, could help counter naysayers. Giving away free samples and marketing a nutritionally acceptable breast milk substitute does not discourage women from breastfeeding their infants. Instead, it provides them with a nutritionally sound option, for times when they can't, or don't want to breastfeed. The customer loyalty, and the recognition of the brand as a leading provider in this alternative, can help reinforce this message and negate the negative effects of some of these accusations.

In recent times, Nestle has made some potentially unviable acquisitions, particular the frozen pizza segment of Kraft Foods business. Although this acquisition includes top brand sellers like DiGiorno, Tombstone, California Pizza Kitchen, and Jack's, the changing consumer tastes to include healthier food options, including low calorie and low carbohydrate foods, could possible result in a decrease in sales in this product category, making the acquisition unviable. As such, Nestle should utilize their strong research and development teams to develop pizzas, under these brand names, that meet these healthier criteria for consumers. This type of product development would help ensure the company doesn't become complacent with the historic success of these brands, but instead ensure they are continuing to innovate. With more than 5,200 research and development employees working on food and beverage development and 23 Product Technology Centers dedicated to developing category-specific innovations, Nestle has the resources to develop these healthier innovations for these brands.

In addition, this healthy customization of these well-known brands meshes with Nestle's mission to transform themselves into a company whose focus nutrition and health and wellness. As they have done with thousands of their other products, the organization can look into reducing trans fatty acids, salt and sugar, in the pizza brands they have recently purchased from Kraft Foods. Increasing the pizzas' micronutrients, such as their vitamins and minerals, as well as adding calcium, antioxidants,, whole grains, and Omega-3s, can also help make them healthier, attracting more health conscious consumers. Healthier reformulations have shown to be successful in the past, with Nesquick enjoying a product resurgence, after it was nutritionally improved, in Europe.

As the frozen pizza brands was a significantly large acquisition, it's important for these brands to continue to perform for Nestle. For this reason, Nestle can use one of their key strengths, their ability to customize products for local markets, to introduce these brands into new countries. As an example, California Pizza Kitchens, the restaurant, has successfully entered several international markets, including: China, Guam, India, Indonesia, Japan, Malaysia, Mexico, Philippines, Singapore, South Korea, and United Arab Emirate ("Restaurant location," 2010). This success of the restaurant in these countries has helped build the California Pizza Kitchen brand name. Customizing the frozen pizza recipes, under this brand name, can help Nestle expand their newly acquired product into these countries. Nestle's strength in developing customized recipes for foreign markets, that meet the unique cultural tastes of their consumers, is a powerful tool the company can use to further ensure the success of the market entry for these products. In addition, this innovation helps ensure the company continues to innovate, despite little significant threat from other competitors.

One weakness Nestle needs to address is their slow product volume recovery, following the recent economic downturn in their more mature economies. The company has experienced higher costs for many of their suppliers, resulting in higher end prices for their consumers. In today's still challenging economic times, this may lead consumers to other, lower cost product alternatives. By lowering prices on their recently acquired Kraft Foods frozen pizza brands, it can help grow sales in this product segment. Increased sales should allow Nestle to take further advantage of economies of scale, increasing their profitability, despite the lower unit prices.

The company's relatively less exposure in developing and emerging markets, when compared to some of their competitors, can also be countered by using these newly purchased brands to enter developing and emerging markets. Not only will this increase the company's presence in these more rapidly growing markets, but also it will help ensure the success of this potentially unviable acquisition. When coupled with Nestle's powerful research and development division, and their historic success in customizing products to meet local consumer tastes, this strategy could help ensure the organization remains a leader in the food and beverage industry.

EFAS:

When one looks at the External Factor Analysis Summary for Nestle, it becomes clear that the organization is only doing slightly better than average when it comes to addressing opportunities and threats that may affect the organization (See Table 2). The company's transition to a nutrition and health and well-being company is the only area in which they are solidly performing above average. As CEO, Brabeck's vision was to transform "Nestle from a technology- and processing-driven food and beverage company toward a braoder vision of nutrition, health, and wellness" (Bell & Shelman, 2009, p. 4). This strategic decision meant the company would try to create a new industry that would like food and beverage products with health and personal well-being.

A new Division of Nutrition was created, that reported directly to Brabeck. To jump start this transformation, the company purchased three major businesses related to the nutrition industry. These included the acquisition of Jenny Craig, in 2006, an American chain of weight-loss centers that garnered a foothold for Nestle in the weight management arena. Novartis Medical Nutrition was acquired in 2007, which helped solidify Nestle's position in the healthcare nutrition industry. Nestle also purchased Novartis's Gerber Baby Foods division in 2007, giving the company leadership across critical areas of infant nutrition (Bell & Shelman, 2009).

This new focus on nutrition and health and well-being goes beyond weight-loss management and infant foods. Nestle has extended the transformation to all categories, even including candy and pet food. The promotion of well-being, through product development and improving the nutritional foundation of their existing products, is an important part of this transformation. Adjustment of their recipes have already resulted in a removal of 5,000 metric tons of salt, 34,000 metric tons of trans fatty acids, and 204,000 metric tons of sugar. Even indulgence food categories have been improved. Their Dreyer's Slow Churned ice cream uses low-temperature freezing technology to produce an ice cream with 50% less fat and 30% fewer calories. Many confectionery products are now made with fiber or yogurt fillings. Nestle's pet foods now include formulas with natural ingredients and those specially formulated for different sizes, ages and breeds of pets. However, there are still products in the Nestle arsenal that could be made healthier for consumers. In addition, the health benefits that are made could be used in the company's marketing, in order to build the correlation between the Nestle brand names and nutrition and health and well-being.

Nestle's position in developing and emerging economies is ranked as average. In the early twentieth century, Nestle was already pursuing globalization strategies, before the term had even been coined. The company sought entry into the then developing economies of countries like Hong Kong, Singapore, and a still very young United States. As Nestle enters each of these new markets, it has worked to establish local supply chains. In some of the emerging countries, this has meant organizing basic agricultural capabilities. Nestle's 'milk district model' has been used to ensure adequate milk supply, and has been replicated in emerging and developing economies such as the Caribbean, Latin America, Africa, Asia, and Inner Mongolia. However, despite this long history of expansion into developing economies, Nestle's percentage of sales that come from these valuable markets is significantly lower than that of their primary competitors. With mature economies growing at a very slow of just over two percent annually, developing and emerging economies offer much more potential, with rapidly expanding populations and economies anticipated to grow over six percent each year. Nestle's relatively low involvement in these markets means they are not taking full advantage of this potential.

The growing out-of-home eating market is the opportunity Nestle is not exploiting as well as they should be. Consumers are trending towards a growing need for convenience. As such, up to 50% of consumer spending on food and beverages was spent on food prepared outside the home, in mature economies. This is an estimated $400 billion market. With $7 billion in revenues in this market, Nestle is the largest player, in this sector. However, this is less than two percent of the market share. Clearly, there are significant opportunities for expansion in this sector, for Nestle,

In general, Nestle has done averagely in warding off external threats that could negatively affect the organization. The company has been required, in recent years, to pay thousands of dollars in fines due to compliance issues. From misleading marketing claims to monopolization of market segments, Nestle has handled these issues as best they can, as they arise. However, future events could negatively impact the organization's reputation. A general distrust of large corporations, thanks to the activities of companies such as BP and the Gulf oil spill, especially in America, makes even the slightest compliance issue a potential source of severe negative publicity for the company. Although the past events have been dealt with, the company needs to be proactive to ensure future compliance issues don't arise. This is the type of complacency, assuming that their strong brand reputation can't be tarnished, that could eventually lead to lost revenues and profitability for Nestle.

A similar threat centers on allegations of unethical business practices. Again, Nestle has been able to successfully address the allegations in the past. Their marketing campaigns promoting breastfeeding helped quiet the concerns of many who felt their marketing of the company's infant milk substitute was preventing women from breastfeeding. However, each instance where Nestle is accused of unethical behavior, even if the accusation is unfounded, is damaging to the company's reputation, and will negatively affect consumer loyalty. Again, unethical businesses is a hot topic for many consumers, especially in developed countries where scandals, such as experienced with Enron, have soured consumers on big businesses. Nestle must be proactive in ensuring their actions remain above question.

Lastly, Nestle recently acquired Kraft Foods' frozen pizza business unit and they are not effectively handling the threat this acquisition brings as effectively as they could. This large purchase included the brands: DiGiorno, Tombstone, California Pizza Kitchen, and Jack's. Although these are well-known, successful brands, changing consumer dietary concerns could negatively affect these brands. Consumers are becoming increasingly health conscious. They are often looking for low calorie and low carbohydrate eating options. Pizza, in general, does not typically fall into these requirements. For this reason, needs to take steps to ensure this purchase was a good investment. To date, there has been little development done to ward against this threat, instead Nestle is relying on the past success of these brands to continue in the future. This is exactly the complacency that could lead to the downfall of the company.

IFAS:

When one looks at the Internal Factor Analysis Summary, it becomes clear that Nestle is doing an above average job utilizing their strengths; however, they are note effectively countering their weaknesses (See Table 3). This results in a total internal factor score of just above average. One of Nestle's most critical strengths is their strong focus on research and development. Beginning in 1997, with CEO Brabeck, research and development was restructured to ensure that the company was responsive to their consumers, to facilitate organic growth. The small, decentralized research and development units, that were scattered all around the globe, were transformed into a few, large, resource-intensive research and development centers that were organized by product groups. The next major shift for research and development came with an evolved role. Instead of focusing on improvements in processing technologies or raw materials, the new nutrition and health and well-being focus has research and development focusing on new product ideas completely, to fulfill this new corporate role. The Nestle Research Center, in Switzerland, is the world's largest private fundamental research facility, centering on food and nutrition and their research to health. In contrast, Unilever spent €868 million, in 2008, on research and development. General Mills, in 2008, only spent $204.7 million on research and development. This commitment to research and development is Nestle's greatest advantage in fighting complacency and ensuring the company remains innovative in an industry where they are clearly the leader.

Nestle is doing an above average job in utilizing their strong brand names. The company owns some of the best-known brands around the globe. These brands span a variety of product categories. Nestle owns some of the best-known brands in the world across diverse product categories. Nestle's Nescafe is one of the most recognizable brands in the world, ranking 25th in the top 100 best global brands of 2009. The company's top 30 brands earn Nestle approximately 75% of their annual sales. Clearly, Nestle has been able to leverage their brand popularity to generate sales. Although there are several food and beverage companies with globally recognized brands, such as Coca-Cola, these are typically in a very limited number of product categories. Nestle has been able to build top brand names in not only beverage products, but also pet care, confectionery items, infant milk substitutes, and more.

Nestle also is doing an above average job utilizing their strength in customizing products for local markets and the unique consumer tastes of these markets. This strength is facilitated by the organization's subsidiaries' ability to understand consumer preferences and the developing of products to match these preferences. Even the company's top global brands are formulated to meet the needs of diverse consumers. Nestle understands that there is no taste that is standard worldwide. Tastes can very drastically from country to country, and even within different regions in a country. Where Nestle excels in this customization, when compared to many of their competitors, is the level of autonomy their country managers, also known as 'market heads' have. Local management is charged with understanding the cultural tastes, traits and needs of their market, which leads to long-term consumer-product relationships. In fact, Nestle is considered a local company in several countries. These customized products have the same underlying, international quality standards that ensure continued consumer loyalty toward Nestle and their brands. However, more can be done to take advantage of this strength. Nestle still has a lesser relative presence in developing and emerging markets, when compared to their competitors. Therefore more customization could be done to take more of the popular Nestle products into these important and rapidly growing products.

Increasing product recalls is a significant weakness the organization has, and one they have handled in the past adequately. The company has recently suffered a bout of product recalls that could negatively affect brand equity. Their Nestle Toll House frozen cookie dough was recalled in 2009, when there was a reported link between their cookie dough and E.coli. In 2008, Nestle Nesquik Strawberry Powder was recalled due to pieces of aluminum found in the product. In the same year, 900,000 pounds of Nestle's Lean Cuisine frozen chicken dinners were recalled when chunks of plastic were found. 2008 also saw a recall of Nestle's UHT pure milk product in Hong Kong, after the chemical melamine was discovered. Although the company has addressed these issue, more steps need to be taken to ensure product recalls don't continue to happen.

More efforts need to be taken to address the slow recovery of product volume Nestle is experiencing, since the economic downturn of some of their most important mature markets in 2009. Although many organizations experienced a dip in their volume trends, due to the economic challenges being experienced in countries like the United States, many of Nestle's competitors have been on course for recovery. Instead, Nestle continues to suffer due to their relative higher pricing and their relatively smaller position within developing and emerging markets. Nestle's prices have grown especially in their confectionery, beverages and petcare operations, when coupled with cautioned consumer spending, due to continuing economic challenges, this has led to slow growth sales volumes. Nestle is not doing enough to counter this weakness, perhaps due to their overconfidence in their market positions in these industries. Although it may be possible that they can wait out the economic turmoil, the economic ramifications from the most recent recession could be long lasting, as such it would be more beneficial for the company to take a more proactive strategy and not simply rely on past success to pull them out of current state of slow growth.

The company is also not doing as well as it could in correcting their weakness about their relatively small position in developing and emerging countries. Many of Nestle's larger European competitors have a stronger market presence in these key markets. Although owns 220 factories in emerging markets, they only realized approximately one-third of their sales from these markets. With competitors, like Unilever, obtaining approximately half of their sales from developing and emerging markets, this could significantly impact Nestle's market position, especially given the faster paced growth of these countries, when compared to mature markets like United States, Japan and some European countries. As currently positioned, Nestle will benefit less than their competitors from this growth. Nestle needs to take more aggressive steps in entering these markets; otherwise, their complacency could significantly, negatively impact their sales, profitability and market share. Nestle When considering these internal factors, it becomes clear that although Nestle is performing above that of their average competitor, there is still much they can do. The company has been very successful utilizing their skills. They have effectively taken these well-honed tools and leveraged them to their best advantage, in most cases. This has been a significant part of the company's success. However, when it comes to their weaknesses, the organization seems to be a bit more lax in addressing these deficiencies. This could be due to the company's strong leadership position and their overconfidence in this position. However, this is exactly the complacency which CEO Buckle is afraid will negatively impact the company in the future.

SFAS:

The Strategic Factor Analysis Summary shows that currently Nestle is performing slightly above average strategically. (See Table 4) In the short-term, there are strategies that need to be implemented in order to address specific opportunities, threats and to counter one of the organization's primary weaknesses. The need to fully take advantage of the opportunity that lies in developing and emerging economies, as well as correcting the company's weakness in their relatively small position in these critical countries needs to be addressed as quickly as possible. These emerging economies are anticipated to grow at nearly double the rate of the more mature economies in which Nestle is already well-positioned. The longer it takes Nestle to expand their foothold in these markets, the longer they go without realizing the profits. Each month that ticks by that Nestle doesn't make an aggressive move, is a month that their competitors can further their hold on these profitable markets.

Another strategy that needs to be implemented in the short-term is one that deals with the potentially unviable recent acquisition of Kraft Foods' frozen pizza operations. Although the brands Nestle purchased have been successful in the past, Nestle needs to ensure they will continue to be successful. Given the changing focus on healthy eating options, with consumers, high calorie, high carbohydrate pizzas may soon be a declining market. For this reason, these brands need to quickly be evaluated for either expansion into emerging and developing economies where there is high-growth potential, in general, or they need to be reformulated to not only meet the healthier needs of consumers, but also so that these brands can meet the company's new vision to become the leader in nutrition and health and well-being. As they stand, these brands are contrary to this vision.

This transition to a nutrition and health and well-being company is a strategy Nestle needs to continue to pursue for the intermediate-term. Given the diverse products in Nestle's portfolio of brands, and the diverse categories these products fall under, this is going to be a strategy that will take some time to fully accomplish. As of 2009, the company had reformulated 7,252 products, in an effort to build the company as a leader in the nutrition and health and well-being industry. Reducing trans fatty acids, sugar, and salt, and adding whole grains, Omega-3s, calcium, vitamins, minerals, and antioxidants in the remaining products will take significant research and development, to ensure the products still meet the needs the consumers have come to expect.

Long-term strategies need to utilize Nestle's strengths, while warding off potential threats and overcoming weaknesses the organization currently has. The organization's well-developed research and development program has been a source of the company's success from the beginning of Nestle's history. The company must continue to utilize their research and development team to continually innovate. If they become overconfident in their industry leadership, they will slowly see their market share erode as their competitors innovate them out of the industry. This research and development strength must also be used to continue to customize products for specific geographic regions.

This customization is what allows Nestle to have globalized brands that meet the unique customer tastes of a diverse array of cultures. Despite the effects of globalization, consumers will never be a homogeneous group. In fact, offering uniquely formulated versions of products in geographic regions that are different than their originating areas, but have large populations of people who have immigrated there, could open new opportunities for the company. This is a strategy the company has utilized throughout it's history of geographic expansion, and should continue to be employed.

Although unethical business activities are a hot topic in current events, it's an issue Nestle needs to keep in consideration for the long run. Accusations of unethical business activities, even if they are unfounded, can have a significant negative impact on the corporation. This is something that most companies appear to be reactive to, but instead Nestle needs to be proactive. Clearly, some of their products, such as infant milk substitutes, are areas where some organizations may find points of contention. These products need to have their marketing campaigns carefully crafted in order to ensure the minimal amount of controversy is raised. In instances of illegal activities, such as child labor concerns raised in the past, the company needs to carefully monitor their suppliers, as well as their overseas manufacturing facilities, to ensure these types of practices are not being conducted or even implied. Only in this proactive way can the company hope to prevent the damage done when an allegation of unethical business practices occur.

Product recalls is another long-term concern Nestle needs to keep in mind when developing strategies for the future. Like accusations of unethical business behaviors, product recalls can permanently damage Nestle's reputation, resulting in lost sales, lost profitability, and reduced consumer confidence. In addition, the recent bout of product recalls Nestle has experienced is the antithesis of the nutrition and health and well-being image the company wants to promote. Improved quality assurance has to be a number one priority at Nestle. Not only do product recalls damage the company's reputation, leading to reduced market share and competitiveness, but also the physical costs of recalls is significant, further reducing the corporation's profitability. Product recalls leave a lasting negative impression on consumers. Long after a recall has been completed, consumers remember that the product was recalled and often no longer trust that brand. Nestle cannot become complacent in believing that their decades of hard work building their brand names are bullet proof. For this reason, for as long as the company exists, quality assurance and the prevention of product recalls must be a part of the strategic decision making.

In general, Nestle is performing just slightly above average, in these key strategic factors. In some instances, such as the transformation to a nutrition and health and well-being company, strong focus on research and development, and customized products for local markets, the company truly excels, which is one of the reasons why they have been so successful in the past. However, there are some key strategic areas where the organization really needs to focus, in order to ensure they continue to be leaders in the industry. These areas specifically include addressing the potentially unviable acquisition they recently made with Kraft Foods' frozen pizza business unit and the company's less relative exposure in the developing and emerging markets that have such a high-growth potential. These areas need to be addressed to ensure the corporation doesn't become complacent simply because they are industry leaders currently. The organization must remain innovative, especially given today's increasingly competitive marketplace.

Financial Analysis:

Nestle has seen record revenue growth over the last ten years; however, this growth not been consistent over recent years. The company's total revenue in 1999 was CHF74.66 billion. Revenues increased nine percent, in 2000, to CHF81.422 billion. By 2002, Nestle reported revenues of CHF89.16 billion. 2003 saw a slight downturn in revenues, with total revenues reduced by one and a half percent, down to CHF87.979 billion. In 2008, revenues had broken the CHF100 billion mark, reaching CHF109.82 billion. However, once again, in 2009, the company realized a decrease of 2.1% in revenues to CHF107.618 billion ("Annual report," 2009) (See Figure 1). Zone Americas is Nestle's largest geographic market, comprising 29.9% of their total revenues in 2009. Clearly the economic challenges faced in mature markets, like the United States, has negatively affected the revenues of the company. In addition, these years that recorded revenues dropped are likely due to the company not taking full advantage of opportunities, like more aggressive entry into developing and emerging markets.

Net profit has also been a roller coaster for Nestle. In 1999, net profit was just over six percent of sales. In 2000, Nestle reported an increased in net profit, up to 7.1% of revenues. 2001 and 2002 also reported increased profitability, at 7.9% and 8.5% of sales respectively. However, in 2003, along with a drop in revenue, the company realized a reduction in profitability, with net profit equaling only 7.1% of sales. In 2008, the company had a banner year, with profit equaling 16.4% of sales that year. Once again, in 2009, net profits plummeted, to 9.7% of sales ("Annual report," 2009) (See Figure 2).

The inconsistent net profits are likely affected by the economic turmoil in some of Nestle's largest markets, plus the fact that the company is missing out on some of the most profitable opportunities currently available.

This complacency is likely the result of overconfidence in the company's industry leadership position. The economic results of these less than fully effective strategies has resulted in a failure to grow the company's business consistently. In 2004, in an effort to cut costs, there were closures and sales of several facilities. This included a chocolate manufacturing plant that is located to the north of Syracuse, New York. This facility sat empty for more than a year, before it's final sale, simply acting as a financial drain on the company ("Outlook sours," 2005).

General Environmental Analysis:

There are a multitude of factors in the general environment that may affect Nestle's business (See Table 5). Increasing populations in emerging and developing countries will likely result increased market demand for food and beverage products, resulting in higher growth in these markets than found in mature markets. With increased globalization, the ethnic composition of populations is changing, even in mature markets, giving Nestle the opportunity to utilize their reformulated recipes from other geographic areas in more mature markets. An increasing aging population, as Baby Boomers continue to get older, must be taken into consideration in Nestle's product mix.

Sociocultural issues such as an increased awareness of health and fitness fits well with the company's mission to become a leader in the nutrition and health and well-being industry. An increased societal concern for the environment needs to be a concern for Nestle, as it may be a source of alleged unethical business activities, or it can be used to help build brand equity by highlighting environmentally and socially responsible activities the company undertakes, such as is used by competitor Cadbury's Green & Black's brand and their 100% Fair Trade compliance. An increased societal concern for business ethics, in general, means Nestle needs to ensure their business activities are above question.

The political and legal environment also can affect Nestle's operations and profitability. Tax policy changes can impact net profits. Privatization of state monopolies in some developing countries can offer new opportunities in supply chain savings, for the company. Laws concerning environmental protection, could impact the company's operations, as well as the operations of their suppliers.

Technological advancements have been a part of Nestle's history since the beginning. The reduced costs of technology will help Nestle increase profitability. Traditional marketing on the Internet, such as commercials during streamed television programs online, offer new marketing opportunities for the company, with a global audience. Social network advertising, including sites like Facebook and Twitter, also offers increased marketing opportunities for Nestle,

Economic factors are some of the strongest factors affecting Nestle. The recent economic recession has negatively affected the company, as seen by their reduced revenues and profitability. Interest rates on loans can affect the company's willingness and ability to expand productions. Given the multinational nature of the corporation, exchange rates can also significantly impact Nestle, especially when importing ingredients from other countries, such as cocoa beans that must be imported for the confectionery side of Nestle USA.