Nestle is a multinational company with sales around the world. It sales its products globally in more than 190 countries. The company has brought several iconic brands to the market including maggi, Nescafe and Kitkat. It achieved impressive sales in 2018. The company has factories in 85 countries as well as a global sales and distribution network. Through more than 1600 warehouses the company serves its customers globally. Its product range has continued to grow larger with the addition of more healthier products. Last year, it released several products targeted at expecting and new mothers. The largest market of Nestle is the United States. However, the food and beverages industry has grown highly competitive and Nestle is facing increasing pressure related to marketing and R&D.
Read more about how the various forces in the international environment affect Nestle’s business in this pestle analysis.
The role of political factors in the realms of international business has continued to grow stronger. The effect of political and geopolitical factors on international trade has grown higher than ever. Trade relationships between countries as well as level of government control and oversight is also affecting how businesses perform in various parts of the world. Nestle is a multinational food and beverages company. It sells its products in 190 countries. However, being an international player, its business is also exposed to political forces in various regions of the world. The company is subject to government control and oversight in the various regions that it operates in.
Americas are the largest market of Nestle and particularly the United States. However, Asia-Pacific is developing fast and Nestle has a large market for its products in Asian nations like China and India. However, the business of American multinationals in China has been affected by the growing tension in trade relationships between the two countries. This has led to higher taxes and reduced profits for American multinationals operating in China. Other geopolitical factors like government instability, terrorism etc also affect how businesses perform in specific regions of the world. Government stability is important for profitable business. Political instability can be disruptive for business and can have adverse effects on profitability as well as supply chain performance. Being an international player, Nestle is also affected by the changing political scenario in various parts of the world.
Economic factors have always played a central role in the context of business. Global economic scenario has always had a definite and direct impact upon the business performance of global brands. Multinational companies like Nestle can perform well only when the economic scenario globally is stable. In recessionary periods, employment, level of income and spending go down. The result is that economic fluctuations and decline in economic activity can lead to reduced sales and profits for international businesses. In 2018, Nestle’s financial performance remained strong. Globally, the economic scenario was good in most of the leading markets of Nestle including United States. The Americas are a leading source of revenue for Nestle and therefore improved economic activity in this region as well as Asia Pacific generally lead to better performance as well as higher sales and profits. The financial performance of multinational brands depends to a very large extent on the performance of the global economy and stability in key regional markets.
In the 21st century the role of sociocultural factors in the context of business has also continued to grow stronger. This is because society and social factors are integral to business. Globally society and cultures vary from one region to another. These factors also have a definite impact on demand and how and what people purchase. Due to the growing impact of socio-cultural factors, businesses and marketers are integrating them into their business, marketing and sales strategies. Considering these socio-cultural factors and integrating them into the marketing strategy helps establish a better connection with the customers in various societies and cultures.
People’s taste and styles also vary from society to society and culture to culture. Due to these things, it is important for businesses to consider these variations to get their product and marketing strategies right. Nestle has brought a large range of products and many of these are tailored to the tastes and needs of customers in specific markets. This helps drive sales and profits in the regional markets. Nestle also considers sociocultural factors while marketing its products in specific markets and designs ad campaigns accordingly.
The role of technological factors is now more important than ever in the context of international business. From manufacturing to supply chain as well as sales and marketing, everywhere technology has grown central to performance and profitability. Whether it is about manufacturing and supply chain efficiency, product quality or marketing, sales and customer service, technology is central to productivity and performance in all these areas.
Moreover, digital technology and AI have brought new opportunities and possibilities for international brands. In the area of marketing too, social media has made it easier for businesses to connect with their customers all over the globe and promote their products without major expenses. Apart from it due to growing internet usage all over the globe, a larger number of people are now shopping online. This has benefitted brands like Nestle whose ecommerce revenue went up in 2018. In this way, the role of technology in the context of business performance and productivity has continued to grow larger.
Environmental factors are now also a central concern in the context of business. The environmental impact of international businesses also affects their public image. Apart from that governments all over the world and government agencies are increasingly concerned about how businesses are affecting the environment. Nestle has been involved in a number of issues related to water and environment. The company has faced severe criticism over its overuse of water and exploitation of natural resources in the past. Governments have tightened the noose around international brands that are having a high environmental impact. Exploitation of natural resources can lead to large fines and losses.
The legal net around businesses has continued to grow tighter and governments and legal agencies all over the world have increased the level of oversight over global and multinational businesses. Compliance related pressures and costs have increased and violations can lead to large fines. Nestle has remained involved in a number of legal disputes in the past. In the Indian market, it is still facing legal issues over its use of lead and flavour enhancers above the permitted levels in Maggi. Apart from product quality, there are laws in several more areas including labor and environment where law has tightened the noose around businesses. Nestle might already have to pay a large sum if proved guilty in the maggi case. It is why large food and beverages brand like Nestle are spending a lot on legal compliance.
Nestle is a multinational company with operations in around 190 countries. Being an international company, it is affected by economic, political, legal and other factors. The importance of legal and political factors in the context of international business has grown and so has that of technological and economic factors. Apart from it the level of competition in the food and beverages industry has also grown. However, Nestle has increased its focus on product quality as well as consumer preferences which might mean improved performance in the coming years.
- Nestle Annual Report