Nestlé and Its Nescafé Kingdom in China

Published: 2021-09-10 21:20:10
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Corporate Strategy and Renewable Advantage
Course 45-971 / Final Paper




Nestlé and Its Nescafé Kingdom in China



Executive Summary
Nestlé is a leading company in food industry. We choose to analysis this company's corporate strategy to reflect what we learned through the course. This report is composed with two part of analysis. In the first part, we analyze this multinational company as a whole, by looking at its scale orchestration across product lines and across market place around the world. We also analyze Nestlé's corporate strategy and its standard cycle business. In the second part, we focus on one of its brand - Nescafé in specific market place (China) as a case study, to exam if it also falls under standard business cycle and chances to turn into other types of business cycle.
PART ONE: NESTLE AND ITS STANDARD CYCLE BUSINESS
Nestlé Quick Fact
Nestlé S.A. is the largest food and nutrition company in the world. Founded and headquartered in Vevey, Switzerland. Founded by Henri Nestlé in 1866, the company operates in 86 countries around the world, and employs over 280,000 people today.
Nestlé's Scale Orchestra
Standard cycle business falls into scale orchestration, which has four sections - Product, Process, Leaning and Scale. As the leader in food industry, Nestlé's strategies meet a standard cycle business.
Product
Nestlé has some 6,000 brands, with a wide range of products across a number of markets, including coffee, bottled water, milkshakes and other beverages, ice cream , breakfast cereals, infant foods , performance and healthcare nutrition , seasonings, soups and sauces , frozen and refrigerated foods, confectionery, and pet food. Nestlé ranks as the top 2 players in most of those markets in the world.
"Good Food, Good Life" is the slogan Nestlé used around the world. The company also provides consistently high quality product in each country. Nestlé has its own corporate quality standard which is higher than GMP and ISO9000. It has standard plant design in all the countries. To ensure product quality, Nestlé sets non-negotiable quality standards for suppliers around the world. Qualified suppliers need to follow Nestlé Supplier Code, which is an integral part of all purchase orders, supply contract and is being integrated into all other commercial agreements. Nestlé also has a product quality tracking system. If one product is being found with quality problem, the tracking system can quickly search all related information including production shift, distribution shift and material supplier information. Then the company is able to identify the root cause of quality problem, tracks all products that were produced at the same shift to minimize the negative impact to consumer. The entire quality control system ensures no surprise product quality across product lines worldwide.
But at the same time, Nestlé targets at scalable market segment. "60/40 rule" is a very important standard in Nestlé's product management. "60/40" but not "80/20" because the company doesn't want to provide products to the top 20% or less top tier consumers, nor does it want to match the needs of 80% majority. Nestlé's target is to gain 60% of consumer except the top 20% and the bottom 20%, to capture the majority while maintain a relative high product margin.

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