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Nestle case study

1.Current Situation…….
2. Issue……..
3. Mission……………………… 4.Objectives…………….
PEST Analysis: Political………………… 5.Economic…………………… 6.Social…………………… 7.Technology…………………
External Analysis– Porter’s Five Forces:
8.Barriers to entry…………………………
9. The Bargaining Power of Suppliers…………… 10.The Bargaining Power of Buyers……………… 11.Competitive Rivalry………………
12.The Threat of Substitution……………… 13.Opportunities……………… 14.Threats…………………
15.Overall evaluation of the external 16.environment……
Internal Analysis:
17. Organizational strategy………………
18. Value chain analysis………………… 19.Strengths…………………… 20.Weaknesses………………
21.Market share……………………………… 22.Overall evaluation of the internal environment…………….
23. Key Success Factors……………… 24.Alternatives (Strategic Choice of Business Strategies and Corporate Strategies)
25. Criteria Matrix to Evaluate Alternatives …………………………….. 26.Recommendation………
27.Action Plan………
28.Contingency Plan ………………………
2/18/2015 Euromonitor International Related
Analysis
http://www.portal.euromonitor.com/portal/analysis/relatedtab 1/3
Nestlé (China) Ltd in Hot Drinks (China)
Local Company Profile | 09 May 2014
STRATEGIC DIRECTION
Nestlé is the world’s leading nutrition, health and wellness company. Considering the Greater China
region is Nestlé’s second largest market, annual capital investment in the Chinese market is expected
to reach billions of renminbis in the forecast period, of which RMB500 million will be used for expanding
the ice cream business in Guangdong. Nestlé (China) Ltd will build two new research and development
centres in Xiamen and Dongguan.
Nestlé is the world leader in hot drinks through its key brands Nescafé, Nespresso, Nesquik and Milo.
Meanwhile in China, Nestlé also leads in hot drinks where its key brands have recorded an outstanding
performance. The company’s mission of “Good Food, Good Life” aims to provide consumers with the
besttasting,
most nutritious choice in a wide range of food and beverage products. In the forecast
period, the company will continue to make efforts in new product development and lead in product
innovation for the entire hot drinks competitive landscape.
KEY FACTS
Summary 1 Nestlé (China) Ltd: Key Facts
Full name
of
company: Nestlé (China) Ltd
Address: 9th Floor, Building B, LSH Plaza, No 8 Wangjing Street, Chao Yang District, Beijing,
China 100102
Tel: +86 (10) 8434 7888
Fax: +86 (10) 6433 1868
www: www.nestle.com.cn
Activities: Manufacturer and distributor of dairy, nutritional foods, bottled water, sauces and
dressings, cereal products, coffee, concentrates, RTD tea, confectionery, ice cream, pet
food
Source: Euromonitor International from company research
COMPANY BACKGROUND
Nestlé (China) Ltd is a foreignowned
enterprise, a subsidiary of Nestlé SA. In 1908, Nestlé initiated
its first trading office in Shanghai. In 1990, Nestlé established its first joint venture in China with a local
company. In order to serve the entire country, Nestlé opened its corporate head office in Beijing in
1996, to operate manufacturing and sales in China. At the end of the review period, Nestlé in Greater
China operated 33 factories.
Nestlé (China) Ltd’s business portfolio covers most of the food and beverage categories, including
soft drinks and hot drinks, chocolate and confectionery, ice cream, baby foods, consumer health,
culinary food, pet care and foodservice. Within soft drinks and hot drinks the company’s offerings
include bottled water, coffee, cereal/pulsebased
drinks and concentrates. In addition, Nestlé has
invested in coffee growing in Yunnan Province and fresh milk collection in Inner Mongolia, Shandong
and Heilongjiang Provinces.
Nestlé (China) Ltd has a sales network consisting of 59 sales offices in 53 cities with national
coverage. There are three Nespresso direct selling stores in Beijing, Shanghai and Chengdu. Nestlé
has a wide range of distribution networks throughout China via all leading grocery retailers. Nestlé’s
food and beverages are usually allocated the best shelf positions in most grocery outlets, such as
supermarkets, hypermarkets and convenience stores. Besides the traditional sales channels, its online
Nestlé Tmall Flagship Store achieved a good sales record during the review period. The online shop
2/18/2015 Euromonitor International Related
Analysis
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continuously engaged in promotional activities to attract consumers. In addition, joint ventures like Hsu
Fu Chi and Yinlu have large distribution networks in China, which helps Nestlé cover every corner of
China.
In October 2013, Nestlé introduced its Nescafé Dolce Gusto coffee machines to China for the first
time, with six kinds of coffee flavour capsules including latte macchiato, cappuccino, black coffee,
espresso, chocolate milk and Hong Kongstyle
milk tea. Nescafé Dolce Gusto has a 15bar
pressure
pump similar to those used in café coffee machines, which helps to produce a layer of frothy milk to
create the perfect macchiato or cappuccino. The release of Nescafé Dolce Gusto in China helps Nestlé
generate a young and fashionable image which makes the company more attractive to young
consumers.
PRODUCTION
Nestlé (China) Ltd has been expanding the production capacity actively. Through July 2013, Nestlé
(China) Ltd had established partnerships with Yinlu, Hsu Fu Chi, Totole, Wyeth Nutritionals, Haoji and
Da Shan Water, and it operated 33 factories. It built three new factories in 2013, namely a water plant
with 280,000 tonnes capacity in Jixian in Tianjin Province, a coffee plant with 120,000 tonnes capacity
in Laixi in Qingdao Province and the Yinlu food processing plant with 900,000 tonnes capacity in
Chuzhou in Anhui Province.
About 99% of Nestlé products sold in China are locally manufactured, except for some coffee, baby
food and pharmaceutical products. For example, Nespresso coffee pods and machines are imported
from Switzerland, and some baby food products are imported from Switzerland, Germany and France.
Most of the company’s local production services the Chinese market, and the exported products mainly
focus on some culinary foods of the Maggi brand. They are exported to 16 countries and regions, such
as North America, Europe, Japan and Australia.
The majority of Nestlé (China) Ltd’s products are manufactured by its own factories. Since Beverage
Partners Worldwide withdrew from the Chinese market in 2012, Nestlé (China) Ltd has sought out other
OEMs for Nestlé Icy Tea Drinks.
COMPETITIVE POSITIONING
The offtrade
value share of Nestlé in hot drinks was 7%, ranking it in first place in 2013. As one of
the largest hot drinks manufacturers in China, Nestlé showed very strong competitive power in coffee
and other hot drinks. Its strong research and development and innovation capability, high brand
awareness and wide sales network helped Nestlé (China) Ltd show good market presence.
The market share of Nestlé (China) Ltd increased during the review period. Since 2012, Nescafé has
changed its previous “warmth” theme and instead started the new marketing communication strategy
with the idea to “live out your boldness”, to encourage young people to communicate with others
through sharing coffee with them. In its marketing platform, in addition to traditional media, Nescafé
innovatively started social media channels, to interact with the young consumer groups and listen to
their concerns.
Nestlé (China) Ltd set up very comprehensive distribution coverage, including the fastestgrowing
and
emerging channels, which guarantees the products’ availability. In almost all channels, Nescafé
occupies more than 50% of the coffee shelf space. Therefore, Nescafé is always the first coffee brand
to attract consumers’ eyes.
Nestlé (China) Ltd has a wide product portfolio and customer base. Firstly, it provides the right
products and solutions inhome
and outofhome
for customers. For example, consumers can drink
fresh ground coffee or Nescafé Gold at home. Meanwhile in the office, consumers can enjoy its instant
coffee. Secondly, it has been adapting product tastes and formats to local preferences – for example,
Nesvita cerealbased
drinks and the peanut and milk drinks from the acquired brand Yinlu are
traditional drinks for Chinese consumers.
Overall, Nestlé (China) Ltd provides comprehensive ranges of products to match all income levels
and positions different brand variants to different markets. Specifically, Nespresso coffee pods and
coffee pod machines, Gerber puffs, Perrier bottled water and Fitness cerealbased
drinks are targeted
for the highend
market. Nescafé Gold coffee and Nestlé Milo concentrate drinks are targeted for the
2/18/2015 Euromonitor International Related
Analysis
http://www.portal.euromonitor.com/portal/analysis/relatedtab 3/3
middleand
highend
market. Nescafé 1+2 coffee, Nestlé Pure Life bottled water, Nestlé Icy Tea drinks,
Nestlé C+ concentrate drinks, Nesvita, Hsu Fu Chi and Yinlu are aimed at the middleand
lowend
market. These actions help Nestlé build a stronger customer base and increase the crosssales
between different consumer groups, which will promote sustained sales growth.
Nestlé (China) Ltd is typically a leader in terms of market innovation. It has two research and
development centres in Shanghai and Beijing, and will build two more centres in Xiamen and
Dongguan. The research and development centres provide solutions for Chinese consumers’ special
needs in nutrition and taste, and keep updating the food technology, processing and packaging.
Summary 2 Nestlé (China) Ltd: Competitive Position 2013
Product type Value share Rank
Coffee 73.5% 1
Other hot drinks 0.8% 5
Hot drinks 6.7% 1
Source: Euromonitor International from company research, trade sources, trade interviews
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