Nestle political risk

Nestlé has operations in more than 190 countries, so any change in the regulatory landscape can cause a
significant effect. Governmental rules and changes have increased the possibility of production
bottlenecks for multinational companies like Nestlé. Basically, the likelihood of regulatory changes that
could disrupt operations increases the more nations a corporation operates in.

For instance, Nestlé’s plans were derailed by the Brexit issue (the United Kingdom’s decision to leave the
European Union). Workers in agriculture and food production were at risk from the change. Europe is a
significant market for Nestlé’s goods and earnings. Additionally, the entire UK food supply chain has
been hampered by the unpredictability of Brexit. Because of how disastrous the Brexit upheaval has
been, Nestlé has considered moving production from Newcastle and York to Poland. The corporation
lacks confidence in the nation’s future because Brexit is still up in the air. Therefore, it makes more
sense to relocate operations outside of this unstable environment.

Although political changes often affect the company, moving operations out of the country affects the
unstable environment for Britain. Losing Nestlé means a loss of over 300 jobs, impacting the already
controversial political British climate. Keep in mind, not many companies can impact political stability,
but Nestlé can.

Nestlé is also required to follow evolving food standards and laws. Every nation has its own unique set of
laws. Nestlé will be cut off if they don’t follow them; the items won’t be considered consumable or
buyable in the eyes of the government.

Strategies of Nestle

Nestle uses two type of differentiation strategies one is business level strategy and other is corporate
level strategy.

Business level strategies of Nestle

Nestle’s Differentiation Strategy: Nestle uses two separate types of differentiation strategies, one at the
corporate level and the other at the company level. Nestle’s corporate strategies: Nestle primarily
employs three business-level strategies: cost leadership, differentiation, and focus strategy. The
following are discussed:

1. Low Cost Leadership Strategies: Leading producer of premium meals and drinks is Nestle. It
buys raw materials of the finest quality from a variety of market sources. Nestle was unable to
maintain its low cost leadership strategy in the industry because its cost of production is
comparably higher than that of small-scale businesses, but their business-level strategies are
largely focused on achieving this goal through cost-effective operations, quality assurance, and
effective inventory management.
2. Differentiation Strategy: Nestle utilises differentiation strategy as its second business level
strategy. The major goal of this approach is to distinguish their products from those of their
rivals and build a brand image in the minds of their clients and consumers. More than 10,000
different products are produced by Nestle under 8,500 different brand names, and the majority
of these goods may be distinguished from those of the competition based on their features,
 quality, ingredients, packaging, pricing, labelling, and other characteristics. These goods uphold
the high quality and health standards to which they are produced. Additionally, the organisation
promises to provide genuine value for the consumers' money when these products are offered
and promoted.
3. Focus Strategy: Focus strategy is the third corporate strategy. Nestle concentrates on
differentiation and low-cost leadership tactics in particular goods, brands, or operational areas,
as we've already mentioned. It is rumoured that it employs a targeted low-cost strategy to
manage the high manufacturing and marketing expenses associated with its best-selling
products. This tactic is employed to alleviate the financial strain that these premium brands
place on the company's overall profitability. Additionally, rather than differentiating all of the
items in the existing available brands, the focused differentiation strategy focuses on making
enhancements and changes to the quality, ingredients, flavour, and other aspects for a specific
product line.

Corporate Level Strategies of Nestle

1. Growth Strategy: Nestle is one of the leading manufacturers in foods and beverages. It has
expanded its operations in 130 countries with more than 500 production units and strategic
relationships with thousands of different suppliers around the globe, multiple of associates,
partners and investors. All of these achievements are the outcomes of its growth strategies.
Nestle has made a tremendous growth over the years in in all of its business units and segments.
The current growth strategies of the company can be divided into two types vertical and
horizontal growth strategies.
2. Stability Strategies: Nestle not only needed growth strategies but also need stability strategies
when it comes to expanding the business in unstable economic environments or unfavourable
environments , poor industrial situations or high market saturation. Nestle waits for the
conditions to turn favourable for its business operations under stability strategies. Nestle
undertake any type of business expansion, brand extension or operational growth projects.

3. Retrenchment Strategies: Nestle uses retrenchment strategies to get rid of the products that
are not putting any significant impact to its success, but are taking a huge and significant portion
from its marketing budget, research and development efforts and quality management. These
strategies are the least frequent option for companies.

International logistics of Nestle

On a daily basis, Nestle transports over 140,000 tons of products to the consumer markets from over
1600 warehouses globally (Nestle Company, 2016). The transport and distribution of the company’s
products are majorly done through a partnership with the third-party logistic service providers who
travel approximately 270 times around the world on a daily basis (Nestle Company, 2016). The products
are mainly transported from the factories to the distribution centres and lastly to end users.
The selection of the carrier used in the transportation of Nestle products is based on three main factors
namely:

 Reduction of greenhouse emissions

 Cost reduction
 Increasing efficiency

The company is focused on establishing the most sustainable modes of transport that reduce gas
emissions. Nestle is shifting from long distance transportation via roads into using sea and rails where
possible. This helps in cause cutting avoiding traffic reducing green house gas and increasing efficiency.

Reducing GHG emissions through rails:

 Through the project known as Marco Polo project, Nestle is shifting over 360,000 tons of water,
cereal products from roads to rail transportation. The model shift withdraw approximately 5000
trucks per annum by taking advantage of the rail systems between France, Italy, US and
Germany.
 Project Green Alpes was made for the distribution of Nestle raw materials and products
between France and Italy via train. The project reduced GHG emissions by 2.3 million per year.
 In Japan, Nestle has partnered with the logistics and shipper services providers to facilitate the
shifting into rail transport. This model was implemented on a full scale in 2011.

Distribution Networks

Nestle product line

Nestlé had distinctive product lines catering to the needs of infant, young children, adults who are
concerned with their health and athletics who wants a performance boost. Nestlé R&D has always been
focusing on creating products with micronutrient fortification to address deficiencies, therefore, with
Nestlé’s expertise in the field and food and nutritional sciences, they can aim to develop an additional
product line with a range of milk products cater for the management of elderly health.

1. Powdered and liquid beverages

The powdered and liquid beverages segment includes coffee, cocoa, malt beverages, and tea
categories. This business features major brands such as Nescafé, Nespresso, and Milo. It is the
most selling segment worldwide.
2. Pet Care
Pet care segment includes major brands such as Go Cat, Lucky Dog, Pro Plan, Purina ONE,
Gourmet, and Merrick, among others. They are the second in most selling products in product
line of Nestle.

3. Health and Nutrition

 The nutrition business segment includes infant formula and baby food. In addition, Nestlé
Health Science (NHSc) is engaged in medical nutrition, consumer care, and vitamins, minerals,
and supplements.

4. Cooking

The prepared dishes and cooking aids segment offers a wide range of daily staples – from
bouillons, soups, ambient, and chilled culinary products – to frozen food and pizzas. Through
brands including Stouffer’s, Maggi, and Buitoni, the company is focusing on renovating its
product portfolio with more natural, tasty, and healthy ingredients.

5. Dairy Products
The milk products segment offers dairy products under the Nido brand. In addition, the
company’s coffee creamer business is based on constant innovation with a market-leading
brand, “Coffee Mate”. With regards to ice cream, the company offers a wide range of indulgent
products, from affordable prices to premium offerings.

6. Confectionery
The confectionery segment includes the global brand – KitKat – and a large portfolio of
much-loved local brands. The company is continuously focusing on innovation to provide
consumers with healthier options.

7. Water
Nestlé waters business segment includes Nestlé Pure Life – the world’s biggest bottled water
brand, which provides affordable healthy hydration in many markets worldwide. International
sparkling water brands such as Pellegrino and Perrier added new natural, fruit-flavoured
offerings and aluminum can format to cater to surging consumer demand for flavoured water.