The Unrepentant Chocolatier - Essay Example

? New Project_The unrepentant chocolatier_SB_#710335 Table of Contents SWOT Analysis 3 Strengths 3 Weakness 3 Opportunities 5 Threats 6 PESTEL Analysis 7 Political 7 Economic 7 Social 8 Technological 9 Environmental 9 Legal 10 Works Cited 11 SWOT Analysis Strengths The Swiss based global brand is increasingly making significant level of investments towards the research and development of functional foods for almost a decade, which provides health benefits to the consumers. The company is increasingly dedicated to the research and development of products, which will introduce radical innovation rather than incremental innovation in its product. This will directly lead to the generation of revenue from the intended target consumers over a longer period of time as compared to that of new products introduced by various other competitors in the market. The company has increasingly committed itself to the development and fulfillment of long term goals and is dedicated to a slow process of brand building for its products. The long term dedication shown by the company towards the brand building as well as its promotion efforts of Nespresso led to increase in the number of consumer conversion from high profile coffee selling brands like Starbucks to a more affordable cheaper alternative provided by the Nestle brand. This shows that the long term effort of the brand has helped to establish consumer connect for the global Swiss company. Weakness The global brand Nestle has been facing a severe shortage in sales for the bottled water products. The bottled water division which constitutes 10% of its entire business interest around the world has been declining sales figures from the established markets due to the impact of recession. Though there are chances of revival of the bottled water market with the bouncing up of the economy, there are also chances of facing increasing resistance from the environmental groups. The lineup of bottled water products is also a source of tremendous weakness for the company as the quality of the bottled water products is declining significantly. In the second quarter of 2009, the products of Nestle’ lost high percentage of market share to various competitors in the high value market that is existent in the United States. The impact of recession has also hit the consumers spending on the company’s product lines in the advanced economies. As a direct step towards the reducing of lifestyle costs, consumers are increasingly shifting to unbranded food items, which have taken a direct impact on the revenue generation cycle of the company. The investors in the share market are also highly concerned with the fact that Nestle might reinvest majority or the entire portion of the cash that it will be receiving from the divesting off the shares of its eye care business in building up and developing the company’s non profitable businesses. This has brought down investor confidence in the company’s processes of handling its own businesses and has reversely affected the company’s share prices in the equity market. The brand Nestle has also stirred significant investor skepticism as the investors feel chiefly that the company has become large as well as unproductive. Opportunities The brand of Nestle is increasingly focusing its attention on the research and development of functional foods, which have high health benefits. Reports by Pricewaterhouse Coopers significantly predict that the global market for functional foods is estimated to stand at $128 billion by 2013. Also, with the increase in market demand for the functional foods in the European market, it can be increasingly assumed that it will be the new product lines surrounding the functional foods that will be acting as a significant source of revenue for the future and will promote strong growth for the company in the European markets. The brand Nestle has made investments towards the development of functional foods almost a decade ago. This particular early investment plan provides the company with an advantageous position as compared to that of its competitors in an attempt to proceed with the research and development of the new line of the products. This may present the company with a better chance to generate future growth for the company. Various reports forecast that the market for nutrition based products is expected to be around $100 billion. The brand of Nestle is looking forward to exploiting this opportunity by the process of investing towards the development of new product lines on the principles of personalized nutrition. High levels of regulations existent in the industry catering to functional foods is acting as a boon for the brand of Nestle as it is benefitting the brand by eliminating the number of competitors. High levels of regulation demand significant amount of cash investment towards the development and research of functional food items which has in return resulted in the elimination of competition with low budgets reserved for the research and development. Threats The global Swiss brand Nestle can look forward to strong threats emerging from the competition arising out of various international and global firms that have significant interests in the functional foods markets of Europe. The companies like French diary based firm Danone is increasingly trying to enhance their share of the revenue generation pie that is emerging from the functional foods markets, while developing new functional foods based product lines. Apart from Danone, various drug manufacturing companies around the world are also increasingly attempting to tap into the market of health foods and nutrition products for the purpose of attaining high growth in the future. High focus on the development of products in regard to functional foods will lead to the dilution of its brand image of Nestle. As a direct consequence, it may hamper the sales of its currently existing high-revenue branded products which can lead to downfall in profits from the well established brands. A significant amount of risk is emerging from the company in terms of its budget allocation for the research and development of the functional food brands. Though the company is increasingly focused on the process of deriving benefits from radical product based innovation in the long run, the organization’s budget allocation for the research and development has increased significantly over the years. Also, the company’s budget allocation is at a maximum when reviewed in terms of budget allocation for the purpose of product development by rival companies. This increases the amount of financial risk as well as setback that the company may suffer from in case of failure of the new products when launched in the market. PESTEL Analysis Political The global brand Nestle has to look forward to complying with the rules and regulations that are existent in various parts of the globe in relation to the food industry. The reason for complying with the standards is the fact that the business of the Swiss brand is spread over multiple countries around the globe, and it is a significant factor for the sustenance of the business in the global markets. Economic The brand of Nestle, which is based in Switzerland, has over the years since its inception achieved the position and strength on a global scale, thereby earning itself the title of an international brand. With its business interests currently spanning many countries around the globe, it is very much certain that the economic crisis that is happening in various parts of the world is also affecting the sales of several of Nestle’s product line ups. The bottled water division of the Nestle brand, which encompasses 10% of the brand’s entire business engagements, has been registering significant decline in sales as an impact of recession. Consumers in various well established economies are looking to cut down spending in an attempt to survive the prolonged economic crisis period that is currently affecting the west. The sale of Nestle’s food products has also registered significant sales decline in the wake of the economic crisis and consumers are increasingly focusing on switching to cheaper, non branded, food products. The economic crisis has also provided a growth benefit to the functional foods, as more and more functional foods are demanded by consumer as compared to packaged foods. Social The social variable in the PESTEL analysis is an extremely important criterion as it provides a glimpse of the consumer sentiment existent in the market and the related effects it may have on consumer products. The company is increasingly focusing on bringing and implementing radical innovation in its food products in an attempt to retain consumers of the brand in the long run. This has led to increased amount of spending on the development and research of the functional food products as compared to that of its competitors, thereby making the company excessively vulnerable in case of a new product failure. Apart from that, another important fact is that the Nestle brand is increasingly trying to highlight the health benefits present in the functional foods. Failure of getting clearance from the food regulatory authorities in terms of maintaining the highlighted and expected standards and protocols could result in severe backlash from the consumers, affecting the high-revenue brands of Nestle, thereby affecting the sales of the other Nestle products altogether. The company has developed immense amount of consumer connect and loyalty by highlighting on the indulgence factor of its products. Changing the theme of the food products into a health conscious one may lead to increase in consumer disconnect with the brand and its social image. Technological The brand is highly advanced in technological terms. The company’s $6.23million investment in the technology establishment itself talks about the company’s technology. It can be increasingly said that the brand of Nestle was the first to identify the rising demand for the functional products almost a decade back and has ever since tried to tap in this particular niche of the market by designing food products with health benefits. Also, in an attempt to bring health beneficial food products it has been investing significant amount of financial resources as compared to its closest competitors for the purpose of developing radical innovation, which the company expects will be instrumental in generating a revenue stream for its products in the future. Environmental The environmental variable is increasingly getting a significant level of importance in judging a company’s potential strategic challenges. The brand of Nestle has already seen a significant slowdown in sales of its bottled water products due to the global economic crisis. The chances of revival of that particular line up of bottled water products are dampened due to a significant threat from environmentalists, who are increasingly focusing their attention on packaged drinking water and their relative effects on the environment. Apart from that, the company’s efforts to deal with genetically modified foods by the process of developing food products for children which will act as a probiotics and vitamins carrier may increase the chances of backlashes from the well established economies around the globe, which have already reacted strongly to the global food industry’s efforts to introduce genetically modified foods. Legal The brand Nestle has gained significant advantage in its business process due to the adoption of stringent rules and standards in terms of quality for the functional foods division by the European Commission. As a matter of fact, companies producing functional foods have to clear the rules and standards which involves significant amount of research. As a direct relation, it can be said that companies with significant amount of finances can sustain such high levels of research and development that is needed to successfully design and produce new functional food products. While this acts as a significant boon for the Nestle brand, significant amount of caution has to be taken by the brand for the development of functional products. In case a newly developed and designed functional food product fails to meet the standards set by the various health agencies, the company may face severe backlash from the consumers which may also result in a decline of the sales of other food products in its portfolio. Works Cited Lausanne and Vevey. “The Unrepentant Chocolatier.” The Economist. 29 Oct 2009. Print. 27 July 2012 Read More