1. Based on your readings and understanding of Nestle Co.

, discuss how did the company

had made use of the following strategies. Support your answer with at least 4 to 5
sentences.

Generic competitive strategies

1. Overall Cost Leadership (5pts)

Overall cost leadership is when a business sets out to become the low-cost
producer in its industry, which Nestle has successfully done. Nestle has developed
the capability to produce goods for a lower operating cost than its competitors
while maintaining the industry standard. Their selling price has remained low, but
since they have achieved economies of scale, Nestle makes a larger profit due to
their very low operating costs in the industry. Their products target a broad
market, being purchased by many different people from varying demographics.
Nestle has taken the time and made investments to construct state-of-the-art
facilities, pursuing cost reductions, and more. Because of Nestle’s use of overall
cost leadership, they have become a world-renown brand with a considerately
large market share. Even sari-sari owners sell Nestle products at a cheap price but
still make a profit.
2. Differentiation Strategy (5pts)
The differentiation strategy involves being unique from every other firm within
the industry. It puts emphasis on branding, advertising, design, service, quality,
and new product development. Nestle has made excellent use of the
differentiation strategy. Nestle has developed an incredibly strong brand image
and adept marketing abilities. Nestle aggressively advertises their products
through videos, social media, and print. While Nestle produces inexpensive goods
such as instant coffee, milk, and cereal, Nestle has also provided more expensive
choices within their products. For example, the inexpensive instant coffee they
sell is Nescafe Original. Additionally, they also offer the more expensive ground
arabica coffee known as Nescafe Gold. Because Nestle has developed such a
strong brand image, consumers are willing to pay a larger selling price than other
brands due to customer loyalty.
Growth strategies
a. Market penetration (5pts)
In reference to my previous statement about Nescafe Gold, Nestle effectively used
market penetration to increase their market share. Nestle provides a large variety
of products at different price points to target consumers of different income
brackets, which increases their market share. Through Nestle’s pricing strategy,
they can target consumers looking for cheap goods (i.e., Nescafe Original), but
can also tailor to consumers looking for products on the more expensive side (i.e.,
Nescafe Gold). Nestle also utilizes promotional activities such as discounts, buy 1
get 1 free, etc.
 b. Market development (5pts)
As an internationally recognized brand, Nestle has successfully implemented the
market development strategy. Nestle made its origins as a Swiss brand in 18666,
and has since expanded to 186 countries out of the total 195 countries in the
world. Not only has Nestle expanded its operations to new geographical areas, but
they have also targeted new market segments and devised new uses for its
products. Starting as a condensed milk company, Nestle has since tailored their
products to many different consumers with infant formula, gluten-free products,
organic products, coffee machines, and much more. Printed on their product
packaging includes unique recipes that essentially give new uses to their products.
For example, using ground coffee to bake a coffee cake instead of making brewed
coffee.
c. Product development (5pts)
Nestle manufactures a large variety of products. In 1866, Nestle began as a
condensed milk company, and expanded into infant formula. Following the Nestle
timeline, they began selling chocolate in 1904 and sterilized milk in 1905. In
1916, Nestle began selling milk powder. The list goes on—Nestle has since sold:
Milo, white chocolate, Nescafe instant coffee, Nestea, soup, seasoning, Nesquik,
pasta, ice cream, frozen foods, yogurt (for health and weight-conscious
customers), mineral water, canned food, and more.
d. Diversification
d.1 vertical integration (5pts)
Nestle has gained control of various parts of its production process. Nestle
has purchased roasting companies and distributes its own products. Nestle owns its own coffee
bean farms, own facilities to grind, mill, sort, and hull coffee beans. Since Nestle controls
suppliers, and distributors, they have benefited by allowing them to control processes, reduce
costs and improve efficiencies.
d.1.1 vertical integration backward (5pts)
As given in the previous example, Nestle has made excellent use of
backward integration. Nestle has gained control over its own farms and mills which
produce and partially process the raw materials. This has given Nestle an advantage
because it ensures it own supply and effectively lowers operating costs since they
have complete control over the process instead of depending on a third party supplier.
d.1.1 vertical integration forward (5pts)
Nestle’s use of forwards integration can be seen in their origins in the mid
1860s. Nestle began as a production facility for condensed milk in Europe. They
began supplying towns with an alternative to fresh milk. Over the years, Nestle has
since then evolved from operating only at the factory level. Nestle has expanded past
manufacturing into distributing its own products to various retail locations across the
globe.
d.2 horizontal integration (5pts)
Nestle has merged, purchased, and acquired many different companies
over the ears. Nestle’s main competitor in the 1800s was Anglo-Swiss, which
 eventually merged with Nestle in 1905 (Nestle & Anglo-Swiss Milk Company). In
1916, Nestle acquires Ergon, a Norwegian diary company known for their milk
powder. In 1929, Nestle bought Switzerland’s largest chocolate company Pater-
Cailler-Kohler. In 1947, Nestle merged with Alimentana, a swiss company that
produced Maggi soups and seasonings. In 1960, Nestle purchased ice cream producer
Jope and manufacturer Heudebert-Gervais, as well as canned foods company Crosse
& Blackwell. In 1962, Nestle purchased a frozen food brand from Swedish
manufacturer Marabou. In 1968, Nestlé bought French yogurt producer Chambourcy.
e. Unrelated or Conglomerate Diversification (5pts)
Customers consume many products owned by Nestle even though the Nestle
name and logo may not be featured. Nestle has diversified outside the dairy and
food industry into mineral water, pharmaceuticals, and cosmetics. In 1974, Nestle
became a minority shareholder in global cosmetics company L’Oréal. In 1977,
Nestle bought US pharmaceutical and ophthalmic products manufacturer Alcon
Laboratories. In 1981, Nestlé and L’Oreal established Galderma as a joint venture
active in dermatology. In 2001, Nestle bought US pet food business Ralston
Purina, and merges it with Nestlé Friskies Petcare to establish the new market
leader in pet care, Nestlé Purina Petcare.

Resource Based Strategies

a. making use of strategic resources (5pts)
Resource based strategies emphasize internal capabilities of a company in
formulating strategies to achieve a sustainable competitive advantage in its market
and industries. It focuses on the internal business environment and internal
capabilities to determine strategic choices it makes in competing with the external
environment. Businesses that own strategic resources have a competitive
advantage over businesses that don’t have them. Resources such as cash,
buildings, and vehicles aren’t considered strategic resources because any
company can have thejm. A resource is considered strategic if it is:
- Valuable: aids in improving firm’s effectiveness and efficiency while
neutralizing opportunities and threats of competitors.
- Rare: the resource is held by few or no other competitors.
- Difficult to imitate: Often involves legally protected intellectual
properties such as trademarks, patents, and copyright.
- Non-substitutable: the resource combination of other firms can’t
duplicate the strategy provided by the resource bundle of a particular
firm.
Intangible resources include knowledge and skills of employees, firm reputation,
and human resources. These intangible resources should be placed at a premium,
being nurtured and developed.
b. making use of capabilities (5pts)
Capabilities are what a firm can do based on the resources it possesses. A good
way to distinguish resources and capabilities is this: resources refer to what a firm
 owns, while capabilities refer to what a firm can do with its resources.
Capabilities are needed to bundle, manage, and exploit resourced in a manner that
provides value added to customers and created an advantage over competitors.
3. What do you think are the strengths of Nestle Co. that made them achieve tremendous
growth? (5pts)
Nestle Co. has developed an incredibly strong brand image with a loyal customer
base. Even though many companies produce dairy, coffee, and various other
foods, customers tend to buy Nestle because they believe that Nestle is able to
provide premium quality products at a reasonable price. Nestle has successfully
diversified into related industries, which maximize and compliment the industries
that Nestle had previously expanded into. For example, Nestle started with milk
and eventually expanded into ice cream. Nestle makes aggressive use of
advertising and marketing which keeps them relevant in the consumer market.
4. What are the opportunities for Nestle Co. that they exploited to be where they are right
now? (5pts)
handwritten