Gap Analysis: For Nestle Company - Research Paper Example

Gap Analysis: For Nestle Company Contents Contents 2 Nestle in UK 3 Concept of GAP Analysis 3 Identifying Three GAP in Goals 4 Prioritizing Gapand Recommended Action 8 Works Cited 10 Name of the Student Name of the Professor Name of the Course Date Gap Analysis: For Nestle Company Nestle in UK Nestle S.A. is a Switzerland based company that had begun as a producer of condensed milk. The company was founded in 1886 by Henri Nestlé who was a pharmacist by profession. Nestle has become one of the largest FMCG companies in the entire world. The operations of the company in U.K. date back to 1873 (“History”). Presently, the company manages all of its twenty nine brands in the U.K. The mission of the company is to establish itself as one of the “leading nutrition, health and wellness company” of the world. The company wishes to enjoy the trust of its shareholders and embark on a sustainable financial performance (“History). The business of the company in the U.K. is one of the oldest ones. The purpose of this paper is to conduct a GAP analysis of Nestle in context of the U.K. market. The first section of the paper provides a basic understanding of the GAP concept. This is followed by identifying three major GAPs in the current business of Nestle and the final section prioritizes the strategy that must be followed by the Nestle to overcome the GAP. Concept of GAP Analysis GAP analysis is one of the most effective marketing tools that are used to find the existing gaps in the business and find ways in which these gaps can be removed to gain competitive advantage over rivals. The management literature identifies that there are four major types of gaps namely usage gap, product line gap, competitive gap and distribution gap. The schematic diagram below shows the types of gap for a company in any country. Figure 1: Schematic Diagram of GAP (Source: Sulivan 552) The usage gap refers to the extent of demand that can be generated in the country for the subsequent periods which provides the basic framework for planning. The distribution gap refers to the loss of sales arising from places where the company does not distribute products but its competitor does. Product gap refers to the loss of sales due to variations of competitor’s products in the market and finally competitive gap refers to the loss of sales arising from factors like better image of competitors. Identifying Three GAP in Goals Market Gap: The current opportunity for Nestle arises from the diversification of the products in markets. It has often been observed that the financial recession of 2008 had impacted the rate of growth of the company in recent year. Most of the growth of the company in the past years was driven from the growth of efficiency and geographic expansion. It is now being understood that diversification strategy is one of the key strategies for future growth in home markets. The present marketing trends in the U.K. reveals that the potential for growth of organic market is profound in the U.K. The following graphs show the existing trend of organic foods. Figure 2: Market trend for organic food (Source: “Organic market report 2013”) It can be seen from the above graph that the market for organic food is constantly growing in the U.K. A little decline had occurred since 2010 due to recession, but the market is reviving. This is because majority of the population is shifting towards healthy eating habits. This implies that a wide usage gap exists in the organic market. Though, Nestle have acquired San Pellegrino water, Power Bar energy bars, and Skinny Cow ice cream to capture the organic market, there is further room for improvement. Nestle can consider expansion of its own products in the organic food market. This will be in line with the mission statement of the company “Good food, good life”. It can be expected that tapping the organic market can help in capturing greater market share for Nestle. The following graph shows the share of rising profits of retailers who have produced products rich in organic contents. Figure 3: Profits of retailers selling organic food (Source: “Organic market report 2013”) It can be seen that share of multiple retailers selling organic food is the highest. It implies that there is a sufficient market potential in organic food market which Nestle must capitalize in order to obtain competitive edge over its rivals. The efforts that had been adopted by the company is already showing results as the company had already shown 4.6% rise in organic sales for the fiscal year 2013. This target is slightly short of its 5% mark which the company had set in the fiscal year (“Nestlé first-quarter sales: 7.2% organic growth, full-year outlook confirmed”). This result is quite impressive given the adverse impacts of recession that had reduced the level of sales in the entire retail market. Nestle is closer to the projected image of “strongest value driver” by injecting innovation in its health and wellness brands (Askew, “In the spotlight: Nestle looks to combine nutrition, premiumisation”). Product Line Gap: Nestle has recently lost market share to its competitors namely Cadbury due to the collaboration between Kraft and Cadbury. Nestle has already established itself as one of the biggest companies in the FMCG market. Yet, the company is struggling to retain its market share. In a recent report that has been published the leading FMCG companies are altering their basic products in order to capture the changing consumer tastes and preferences (Roberts, “What people want from innovation in FMCG”). For instance, Cadbury has introduced number of new products in its breakfast cereal category that has kept shoppers engrossed. The combination snack product introduced by the company has been extremely successful in the breakfast cereal market. In order to remain competitive Nestle must introduce diversified products. It has also been observed that the market for convenience snack has also improved by leaps and bounds and major brands are targeting convenience foods fro their future growth. Nestle has been losing market share in the U.K. after it had launched the flavored Kit-Kats. It has been one of the worst policies that have been adopted by the company in a long time. This strategy had ultimately led to the decline of the sales of Kit Kat (Roberts, “What people want from innovation in FMCG”). Nestle has been facing tough competition in the U.K. from brands like Cadbury and Kraft. In the breakfast cereal market, Kellogg’s has been a major competitor. Organizational Management Gaps: Nestle has long been considered as one of the most sustainable companies in the FMCG business. The company strives to create value for its external shareholders and benefit the broader community as a whole. The company has committed itself to the reduction of depletion of natural capital and protecting the environment in general. Nestle strives to follow the “Triple-bottom-line” objective of corporate governance by striving to improve the social, environmental and financial aspects of operation (“The Nestlé Policy on Environmental Sustainability”). Despite projecting a sustainable image of the company, recent experience at Ivory Coast shows that the company can improve its public image. It has been argued that the company must alter its present codes of conduct to include agendas beyond child labor and health requirements. Nestle can bring significant development in the lives of the farmers by increasing the awareness and understanding about their lives. Improvements in monitoring techniques are expected to bring better results. Despite the health and safety measures implemented by the company there were instances in the past which were in direct conflict with the goal of the company. For instance, contamination of pet food and the scandal that followed had maligned the image of Nestle in the past. Pet food produced by the company was found to be contaminated with Salmonella, a virus resulting in death of pets. This action was immediately followed by a strategy to withdraw the products from the market. Consumers were advised to discard the food if they had already purchased it (Schumann, “Purina ONE Recall 2013: Nestlé Purina Dog Food Recalled by FDA Due To Potential Salmonella Risk”). More recent scandals of Nestle include illegal animal testing. Nestle has been accused of not using animal testing for measuring the safety of the foods but for making health claims for customers. Nestle has also been accused of creating products that leads to problems like obesity and diabetes among babies which can tarnish their image. All of these examples have a common factor in them (“Nestlé baby milk scandal has grown up but not gone away”). They show that the management has not taken serious measures to protect the image of health and safety measures that Nestle boasts. These show the signs of weakness in the ethical practices followed by the management to ensure safety standards. Eliminating child labor is going to be a tough task for the company as child labor is still a major problem for the cocoa plantations. Nestle has the power to improve the lives of the farmers and their children by implementing strict monitoring in its entire supply chain to eliminate child labor from its entire supply chain. Improvements can also be made in the rehabilitation programs of children to remove child labor. It implies that Nestle needs to act in association with its other partners in the supply chain to ensure that forced labor, long-working hours and unfair wages are eliminated from the system (“Sustainable Management of Nestlé’s Cocoa Supply Chain in the Ivory Coast—Focus on Labor Standards”). Concerted efforts are required by all partners in the supply chain. Failing to do so may malign the image of the company as Nestle has been trying to promote a sustainable image. Prioritizing Gap and Recommended Action The above three gaps that has been shown are few of the biggest one that is being faced by Nestle. However, in terms of priority, Nestle must consider the gaps in the organizational management. These matters are within the voluntary control of the company and it is likely to take care of the ethical practices in the business to continue sustained success in the long run. Most of the existing literature in the management literature bears testimony to the fact that unethical business practices and corporate greed have resulted in failure of multinational corporations (Robin and Reidenbach 44-58). It is extremely important for Nestle to adhere to its code of sustainability conduct by integrating ethical and sustainable business practices in its long-term corporate strategies (Carroll and Buchholtz 172). Harming animals for personal profits and use of unhealthy ingredients in the production of baby food can harm the image of the company. Consumers are highly aware about the products that they purchase in the contemporary era of sustainable business practices. It has been observed that eco-friendly products are becoming extremely popular among consumers in the food and beverages market (Aaker 89). Though, Nestle has already committed itself to the development of corporate social responsibilities in the future yet it has not been fully successful in eliminating major issues like child labor from its supply chain. Therefore, the aspect of ethical practices have diverted from their desired state for which this area requires special analysis. Works Cited Aaker, David A. Strategic market management. New Jersey: John Wiley & Sons, 2008. Askew, Katy. “In the spotlight: Nestle looks to combine nutrition, premiumisation.” Just Food. Aroq, 2014. Web. 25 September. 2014. Carroll, Archie and Ann Buchholtz. Business and society: Ethics, sustainability, and stakeholder management. Connecticut: Cengage Learning, 2014. Print. “History.” Nestle. Nestle, 2013. Web. 25 September. 2014. “Nestlé baby milk scandal has grown up but not gone away.” The Guardian. The Guardian, 2013. Web. 25 September. 2014. “Nestlé first-quarter sales: 7.2% organic growth, full-year outlook confirmed.” Nestle. Nestle, 2014. Web. 25 September. 2014. “Organic market report 2013.” Soil Association. Soil Association, 2013. Web. 25 September. 2014. Roberts, Jo. “What people want from innovation in FMCG.” Marketing Week. Centaur Communications, Web. 25 September. 2014. Robin, Donald P. and R. Eric Reidenbach. “Social responsibility, ethics, and marketing strategy: closing the gap between concept and application.” The Journal of Marketing (1987): 44-58. Print. Schumann, Rebecka. “Purina ONE Recall 2013: Nestlé Purina Dog Food Recalled By FDA Due To Potential Salmonella Risk.” International Business Times. IBT Media, 2014. Web. 25 September. 2014. “Sustainable Management of Nestlé’s Cocoa Supply Chain in the Ivory Coast—Focus on Labor Standards.” Fair Labour Association. Fair Labour, Web. 25 September. 2014. Sulivan, Daniels Radebaugh. International economics. New York: Pearson Prentice Hall, 2007. Print. “The Nestlé Policy on Environmental Sustainability.” Nestle. Nestle, 2013. 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