From kids to adults, Nestle holds a sweet spot in the lives of people. Henry Nestle founded this Swiss multinational corporation that has been serving its products since 1867. Formerly, there was a merger with the Anglo-Swiss Condensed Milk Company which led to the birth of Nestle. Let’s know about Nestle Competitive Advantages.
It is a food and beverage processing conglomerate, with headquarters in Vevey, Vaud, Switzerland. It produces several products such as dairy products, snacks, beverages, baby food, cereals, medical food, ice cream, and much more. Nestle is best known for some of its globally loved brands such as Maggi, Kit Kat, and Nescafe.
Nestle position in the industry and its competitive advantages:
Nestle has touched several peaks of success during its existence in the market and has been satisfying its customer’s demands and tastes throughout its journey of existence. The secret behind such splendid performance of Nestle in the market can be more vividly understood by
Porter’s Five Forces analysis of Competitive Advantages.
1. Threat of new entrants:
The level of threat because of new entrants depends mainly on the conditions of the market. Whether there is monopoly or monopsony in the market, determines the level of threat a newcomer company in the market can create. Newcomers cannot make any impact if a monopoly exists in the market.
But since the Fast Moving Consumer Goods industry is diverse and feasible, there is a place for a lot of other companies in the market. The food processing industry is not confined to only limited products. It has several other requirements that Nestle alone cannot fulfil. Hence, several other companies thrive in the market.
Though they are still trying to create a niche for themselves in the market, they have not been able to match the market share of Nestle yet. It remains to be the leading player in the industry for over a century. These newcomers have to be cautious in terms of quality and productivity to survive in the market.
Hence, it can be concluded that the threat of new entrants for Nestle is currently low.
2. Bargaining power of Suppliers:
Nestle owns the market share on a large scale and deals with multiple suppliers all over the world. Hence, it needs to keep in check the requirements of its suppliers and have them on good terms.
Nestle is known to have firm business relations with its suppliers. Also, Nestle possesses great purchasing power which never disappoints any of its supply chain demands, and is capable of meeting its prerequisites. Most of its suppliers have been in long-term relations with it.
Thus, it would not be wrong to say that for Nestle, the Bargaining power of Suppliers is low.
3. Bargaining power of Buyers:
Due to the lack of monopoly in the food processing industry, the consumers do have a lot of options open to them. They can easily switch from one brand to another for products having equal attributes with different prices.
Nestle is well-aware that in this case, consumers hold greater power which results in the high bargaining power of consumers. Nestle has impeccably dealt with this by employing great marketing strategies which ultimately resulted in the worldwide endearment of some of its brands like Maggi and Nescafe.
Nestle looks out for the preferences and demands of its customers and works on them.
4. Threat of substitute products:
As discussed earlier, the FMCG industry has a lot of players and there are abundant substitutes available in the market. Since Nestle deals with processed food products, many of its substitutes are even homemade such as home-grown coffee, dairy, and baby food.
Other than this, there are cheaper substitutes always available in the market. However, this does not reduce the consumption of its products. It is still marketed and consumed by a large scale of customers. The threat of substitute products is quite high for Nestle.
5. Competitive Rivalry:
Speaking of rivals, PepsiCo, Danone, Mondelez, and Kraft Foods are some of the loftiest rival companies of Nestle. The company does not experience tough rivalry on an overall level but only for its specific brands.
Since several brands are owned by Nestle, it is difficult for just a single name in the industry to compete with it. Its various products such as cereals, chocolates, dairy products, coffee, and beverages do suffer intense competition from brands such as Kellogg’s, Cadbury, HUL (Bru), and PepsiCo. The market is enormous and so are the demands.
Regardless of high competitive rivalry, Nestle has set its roots so deep in the hearts of its consumers that it has become irreplaceable in the market.
Nestle has been ruling the food production industry for a long time and has proved itself to be a top-notch player. The net sales worth of Nestle is estimated to be over 93 billion US dollars. It has its branches spread globally all over Europe, the Middle East, Africa, and America. In the above discussion we finely known about Nestle competitive advantages.
Today, the company holds high competitive advantages over older firms and emerging companies and has maintained its stability through well-planned tactics and strategies that are crucial to the success of any business.