Nestle is a multinational company that was established in 1867 to produce food for dehydrated children. The company was welcome to the public since at that time it had no competition. It was the first of its kind. Later, Nestle merged with other companies to become bigger and better. Below is a full Porter 5 Forces Analysis for Nestle.
These are the five forces that affect the competitiveness of Nestle in the market:
Threat of substitute goods
Since the food industry has an ever growing and ready market, there can be also a good number of ready substitutes that can compete with Nestle. Companies such as Kraft Foods and Groupe Danone produce similar products as Nestle. Nestle should therefore keep on being innovative to prevent clients from turning to competitors.
Threat of new entrants
The food market is always ready and very big and can be hugely attractive to new entrants. The new entrants however have to fight with already existing and established brands such as Nestle to gain market monopoly. Government policies also make it difficult for new entrants to enter the market. Getting approval of the FDA may also discourage new entrants.
Bargaining power of customers
Because the customer base has access to substitute products, they possess a higher bargaining power. Nestle has constantly battled to counter this bargaining power by producing food products that satisfy the demands and needs of the customer base. This is how Nestle has been able to gain public popularity.
Bargaining power of suppliers
Most of Nestlé’s products are derived from agricultural and dairy raw materials. The company therefore seeks suppliers that can provide high quality raw material that will enable the company to retain its high standards of production. It also makes efforts to retain the best suppliers and advises them on ways in which to avoid wastage.
Competition within the industry
Nestle has been able to maintain an edge among its main competitors, Kraft Foods and Groupe Danone. This kind of stiff competition is healthy because it ensures that customers get the best deals in terms of quality. Through competition, Nestle has been able to consistently produce top quality products to fit customer needs.