2.

0 INTERNAL ANALYSIS
2.1 STRENGTHS
1. Unmatched research and development capability (S1)
Nestle’s biggest advantages is it capability in research and development. Nestle has spend an
amount of 1,697 billion equivalent to 1.89 revenue and to compare to its main competitor
PepsiCo only able to invest about $ US 754 million with the revenue of 1.20% of its revenue
in 2015. Nestle’s large amount of investment on R&D enable them to produce a high-end
quality product to customers.

Figure 1: R&D spending by the top food and beverage companies (in billions of dollars)

R&D expenditure Revenue % of the revenue

Nestle SA 1,697 89.772 billion 1.89%
PepsiCo 0.754 63.056 billion 1.20%
Mondelez 0.409 29.636 billion 1.38%
Coca- Cola 0 44.294 billion 0%

Source: PepsiCo SWOT analysis

Nestlé's R&D capabilities are based on its extensive R&D network. With 34 R&D facilities
and over 5000 people working in them, the firm has the largest R&D centre network of any
food or beverage company in the world. Nestle is always improving and innovating to offer
new products and services, whether it's delicious plant-based meals that support better, more
sustainable diets, packaging waste solutions, affordable nutrition for all, or personalised
nutrition. Nestlé’s superiority in R&D against its rivals provides a sustainable competitive
advantage and long-term success [ CITATION Str17 \l 17417 ]

2. Unrivaled product and brand portfolio (S2)

Nestle has offer a wide range of products than any of its competitors in food and beverage
industry. With more than 2000 products brand in more than 10 different categories from
global icon to local favorites ranging from infant foods, bottled water, chocolate and
confectionaries, dairy, drinks, chilled and frozen food, coffee, ice cream, pet care, services
and among others. The great thing is that Nestle’s broader range of portfolio enables them to
serve its customer’s wide range of needs and wants. This helps Nestle to gain competitive
advantage over its competitors in the industry thanks to its unrivalled product and brand
portfolio. Besides that, a change in customer preferences have less impact on the brand itself.

Popular brands under Nestle

3. Environmental sustainability practices (S3)

Nestle has intended to reduce the use of plastics and has announced free plastic materials. By
2025, the company wants to make packaging recyclable or reusable and by 2030 Nestle
wants to be free from any adverse effects on the environment. Nestlé intends to embark on an
assertive and compelling worldwide corporate strategy to positively impact the environment
by stating and reporting on its performance against these ambitious targets. Others may
wonder about Nestle's active commitment to global sustainability issues. Nestle requires a
healthy environment in which natural resources are conserved and preserved to provide
healthy food. Customers also want them to make a meaningful and constructive contribution
to society and the environment, they believe. In short, Nestle's long-term success depends on
environmental sustainability[ CITATION the211 \l 17417 ] . Nestle (Malaysia) Berhad has
aggressively worked with local partners to promote better and more widespread recycling
habits, as well as more effective ways to collect and classify various forms of waste, to solve
the issue of packaging waste in the environment. Nestle, for example, recently signed a
Memorandum of Understanding (MoU) with the Petaling Jaya City Council (MBPJ) to
launch a roadside recycling collection initiative in two Selangor municipalities, with the goal
of increasing recycling awareness, reducing household waste, and increasing waste
segregation and collection as part of the company's recycling initiatives. [ CITATION the211 \l
17417 ]
 Nestle and MBPJ have inked an agreement to work together "towards a waste-free, shared future."

The firm and MBPJ formed a collaboration to work toward a waste-free future, beginning in
Petaling Jaya by improving new and existing roadside recycling collections in Bandar Sri
Damansara and Ara Damansara, which serve roughly 10,000 residents. To facilitate
recycling, the company has also produced new product packaging guidelines to educate
consumers on how to properly separate the various components of product packaging. By
2021, this information will be written on 80% of all Nestle recycled packaging, with the goal
of reaching 100% by 2022. Paper, cardboard, most plastics, used beverage cartons, metal and
glass are examples of recycling. At Nestlé, this material accounts for 90% of the packaging.
These rules will encourage and facilitate segregation at resources, as well as foster recycling
behaviors and habits [ CITATION the211 \l 17417 ]

4. People trust on products due to proper health and safety measures (S4)

Nestle's food safety approach begins with farmers and suppliers and extends throughout the
supply chain. Nestle maintains strong procurement and auditing procedures to assure safe and
high-quality raw ingredients. Setting material standards and conducting reviews are all part of
this process to guarantee that it always meets the most exacting requirements and
incorporates the most recent scientific information. If they do not comply, nestle will reject
them. Every production facility in the world is built to ensure that products satisfy the highest
quality and safety standards. These include preventing foreign bodies from entering the
product, allowing allergen management, and pest control. The facility is built to tight criteria,
including for clean and safe water supply, air filtering, and any materials that will come into
touch with food, to ensure that the materials, equipment, and production environment are all
designed to produce safe products

Water testing

Nestle keeps a close eye on the flow of ingredients and completed items into and out of its
facility to guarantee that raw materials and cooked foods are kept separate. The factories have
designated zones, equipment, and utensils for separate materials to avoid cross-
contamination. Nestle employs accredited cleaning and sanitation processes at every level of
the manufacturing process, and their employees are instructed to follow food safety
guidelines. Before leaving the factory, a 'positive output' test indicates that a collection of
items is safe to ingest. Nestlé undertakes more than 100 million tests every year to guarantee
that its products fulfil internal and external standards, including testing for harmful
compounds or microorganisms in the materials they use, the environment in which they
operate, and the products themselves. Nestle ensures that products are delivered in pristine
condition when they leave the factory. Assuring that chilled or frozen products are stored and
transported at the proper temperature is also part of this. Packaging is critical in ensuring that
their products arrive in good condition to the consumer. It also contains extensive directions
for preparing, storing, and using the product, as well as information on ingredients and
allergen risks. Nestle makes sure that the best prior date and usage date are both accurate so
that customers know when a product has outlived its usefulness and is no longer safe to use.
This also contributes to the reduction of waste.
5. Globally recognized brand (S5)

Nestlé owns and markets Nestlé, Nescafé, Maggi, Purina, KitKat, and Nan, among other
well-known brands. The Nescafé brand is valued US $ 16.3 billion and US $ 12.5 billion,
respectively, according to Forbes and Interbrand, making it the 32nd and 36th most valuable
brands in the world. Nestlé is the 49th and 56th most valuable brands in the world, according
to Forbes and Interbrand. Brand value and brand recognition are inextricably linked. Nestlé's
brand recognition is bolstered by its presence in 189 countries. Companies can offer new
items and sell old ones more easily when their brands are well-known [ CITATION Ovi21 \l 2057
]. As a result of its efficient advertising and branding strategies, it has raised global
recognition and generated a successful brand image [ CITATION Bri21 \l 2057 ]

Nestlé Malaysia, which has over 30 brands, offers a diverse selection of products in 10
categories, from worldwide icons to local favourites such as MILO, Maggi, KitKat,
Nespresso, and Colgate Palmolive.

6. Has strong relationship with retailers (S6)

The strength of trust ties between manufacturers and retailers benefits organisations such as
distributors. Because of their quick ability to captivate consumer allegiance, retailers appear
to be winning an eternal struggle to obtain better control. The retail industry's power
dynamics are continually shifting. As a result of the growth of specialised superstores, many
factors such as buying alliances and expanding mergers are driving the dynamics of the
retailer-manufacturer relationship. As a result, power is concentrated in the hands of a few
large retailers with access to a large user base.

Nestlé Malaysia is the first food and beverage business in Malaysia to open a multi-brand
online health store. With a month-long E-Commerce health promotion entitled "Wellness
Together-Gather," the world's top nutrition, health, and wellness company commemorated the
milestone. Nestle Malaysia has announced the launch of its main E-Commerce store in
collaboration with Lazada and 11street, two of Malaysia's top online retailers. "Nestlé's debut
into E-Commerce demonstrates our commitment to innovate in order to continue to win the
hearts and minds of Malaysians," stated Mr Alois Hofbauer, Managing Director of Nestlé
Malaysia. People's lives have grown more convenient, accessible, and valuable as a result of
digital platforms.". " Our ambition to grow with our consumers by extending into the digital
realm is in keeping with our goal to develop and grow steadily over time. "Our commitment
to continual innovation and long-term success includes expanding into the digital domain to
grow with our clients." We're looking forward to working with Lazada and 11street in the
future. "E-commerce offers the Group numerous prospects, and we are certain that we will be
able to take use of them in the long run," he added. Nestlé’s flagship E-Commerce store
offers healthcare solutions, including nutrition-themed packages and product discounts, based
on real-world searches and social data from Malaysian mothers [ CITATION the16 \l 2057 ].

Nestle, as an industry leader in eCommerce, has noticed a shift in customer online buying
behaviour, from deal hunters to brand-savvy shoppers, according to Hans-Peter Ressel, CEO
of Lazada Malaysia. Nestlé's Lazada Malaysia eCommerce store will undoubtedly satisfy the
evolving needs of Malaysian consumers, proving Nestlé's commitment to offering a flawless
online shopping experience for all. We are delighted to welcome Nestlé to Lazada Malaysia's
premium brand portfolio, and we look forward to collaborating with Nestlé [ CITATION the16 \l
2057 ].

7. Strong geographic presence (S7)

Nestlé is a global company with operations in 189 countries and products on practically every
continent. The company's three operating segments are the Americas (AMS), Europe, the
Middle East, and North Africa (EMENA), and Asia, Oceania, and Sub-Saharan Africa (AOS)
(AOA). No single region generates more than half of the total revenue. Nestlé, unlike most of
its competitors, does not rely on a single or few countries to generate most of its revenue. The
United States, the single largest firm market, earned only CHF25.293 billion, or 28.5 percent
of total sales. The second-largest market, China, brought in CHF7.06 billion, or 8% of total
revenue. PepsiCo and The Coca-Cola Company, on the other hand, generate 56 percent and
46 percent of their revenue, respectively, from the United States. This suggests that Nestlé
has a competitive edge over its competitors because to its extensive and diverse geographic
footprint, particularly when the US market is impacted [ CITATION Ovi21 \l 17417 ]

Figure 2: Nestle main markets

Country Percentage Revenue

United States 28.5%
China 8%
France 5.5%
Brazil 4.4%
United Kingdom 3.4%
Other 50.3%

8. Large distribution system (S8)

Nestle is a Swiss business that operates in 189 countries as the world's largest food and
beverage company. The brand of people and commodities is the most significant aspect. The
FMCG model, which encompasses manufacturers, C&F agents, distributors, retailers, and
consumers, is the foundation of Nestle's distribution strategy. Nestle is noted for having a
strong sales network for marketing as well as efficient distribution systems. Nestle offers
trade discounts and other incentives on a regular basis to encourage channel engagement.
Nestlé has created a distribution channel that ensures Kit Kat is available for purchase
wherever and whenever customers want it [ CITATION Nes17 \l 2057 ]. Sales of confectionery
depend heavily on its availability, with market research showing that well over 60 of all
purchases are made on impulse. Consequently, Nestlé tries to supply as many outlets as
possible – both wholesaler and retailer channels. Nestle's operations are spread out over the
country, with its headquarters in Selangor and six manufacturing facilities. Nestle's broad
network of 44 sales offices strategically situated across Malaysia and Borneo allows them to
mobilize their dedicated team to reach distributors and customers across the country.
Customers can also get a personalized experience at the Nespresso boutique and the
groundbreaking CHOCOLATE KIT KAT store. (Annual Report, 2019).
9. Has loyalty from customers (S9)

Customer satisfaction after utilizing a product varies depending on the individual, according
to Oliver and Swan (1989). Once their products are released, marketers are continually
seeking for trends in customer satisfaction. The Maggi brand is well-known in India as a
family brand with strong brand equity. The brand has always been known as the first to
market in portfolios such as noodles, tomato sauce, soups, and sauces. The parent company,
Nestle, has long been connected with family, home, and warmth, which Maggi has cleverly
exploited.

In the Malaysian context, MAGGI has established itself as a household brand, providing
Malaysians with a world of taste and convenience through a wide range of gourmet goods
that enable consumers to enjoy delectable home-cooked meals. MAGGI noodles have been a
household favorite in Malaysia since 1972, when they were originally launched. The MAGGI
"Simply Good" campaign was established by Nestle this year to raise awareness of the high-
quality ingredients and cutting-edge technology used to make MAGGI noodles. From a
balance of 12 meticulously sourced ground spices to the best-grade Australian wheat, the
phrase #YangBaikBaikJe, marketed on television and internet platforms, reflects the delicacy
of the product (Annual report, 2019). Through key events held across Malaysia, as well as
sampling sessions, this campaign allows us to convey the depth of care and high standards
used in manufacturing high-quality MAGGI noodles, a tale that resonates with Malaysians.
According to [ CITATION Fra02 \l 2057 ] consumers have feelings for a brand before they utilize
it. As a result, Malaysians are becoming more familiar with the MAGGI brand, which has
become a household name in the country.

10. Ability to compete in a dynamic environment (S10)

Nestlé has reaped the benefits of rapid economic growth and a more favorable investment
climate, particularly in developing countries. Nestlé also analyses the income level and
purchasing power of consumers when entering a new market or launching a new product in a
certain location. With company across the world, Nestlé has adjusted for changes in
consumer demand and price sensitivity. According to a new survey of the global food
business, Nestlé is steadily changing its commercial focus from America and Europe to Asia-
Pacific and the Middle East. Nestlé can collect consumer behavior to develop good and
effective business strategies in global marketplaces. Nestlé's achievement in honoring African
socio-culture can be shown in this case. In wealthier countries, the Nestlé chicken bouillon
cube is extensively used to enhance dish flavor; but, in low-income African countries, people
simply mix the cube with rice to consume. As a result, Nestlé has created a small container of
bouillon cubes so people may simply consume one piece for an individual in a meal, in
conformity with local consumption habits and storage conditions.

2.2 WEAKNESSES

1. Contaminated food recalls (W1)

Nestlé is a multinational food company that sells tens of thousands of different products each
day. Despite its extensive quality control measures, the firm is frequently obliged to recall
items due to contamination in various provinces. In 2014, Nestlé recalled and destroyed
37,000 tonnes of tainted Maggi noodles in India. Hundreds of millions of dollars have been
lost in sales, and the brand's image has been ruined. Because of the danger of glass fragments,
the company had to recall several dishes cooked in the United States recently. The company
has to recall some of its products almost every month. The unprofitable press had a
significant impact on Nestlé's operations [ CITATION Ovi21 \l 2057 ]. Furthermore, a batch of
Nestle Gold Honey Flakes has been recalled due to the presence of small fragments of plastic.
Cereals Partners Worldwide Singapore has begun a voluntary recall to accommodate one
group. Nestle Gold Honey Flakes Group was recalled after a joint venture between Nestle
and General Mills received reports that a 370 gramme grain box included small fragments of
plastic. According to their press release, the voluntary recall only applies to a single batch
code listed on the product packaging. The cluster code in question is 12236031DD, which has
an expiration date of August 11, 2022.

2. Sourcing materials from suppliers practicing child and forced labor (W2)

Children under the age of 15 continue to work on Nestlé-affiliated cocoa fields more than a
decade after the firm pledged to eliminate child labour from its supply chain. Between
September and December 2014, researchers visited 260 Nestlé farms in Ivory Coast for a new
analysis commissioned by the Fair Labor Association (FLA) [ CITATION Cla15 \l 2057 ]. The
researchers discovered 56 employees under the age of eighteen, with 27 of them being under
the age of eighteen. On a farm in the country's Divo district, the FLA discovered evidence of
forced labour, including a young worker who was not paid for a year's work. In response to
international pressure, Nestlé commissioned the FLA to investigate the rights of employees
on its west African farms in 2013, and researchers discovered underage labour in 7% of the
farms visited. The company's code of conduct prohibits the use of child labour in its supply
chain. Despite Nestlé's efforts to teach farmers about its code of conduct, the researchers
discovered that farmers had little awareness of the code and were frequently unable to attend
training sessions owing to "lack of interest or time." The FLA also discovered that the farm
lacked any system of age verification for workers, implying that child labour was still in
operation. A total of 24 children were discovered working on the farm as "family labourers,"
unable to attend school because they worked alongside their parents and siblings. Children
working on farms are forced to work in hazardous conditions and undertake hazardous tasks,
such as machete work and lifting heavy loads. [ CITATION Joe15 \l 17417 ]

Nestle's KitKat chocolate bar. Roger Tooth's photograph

3. Operating inefficiency due to operating too many brands in many food segments (W3)

After years of seeking growth through acquisitions, Nestlé now owns 2,000 product brands.
With such a large portfolio, the parent company's resources must be spread over several,
resulting in some of its primary competitors' low-performing sectors due to a lack of
investment. In the previous two years, Nestlé has acknowledged this weakness and has
divested itself of low-performing non-core businesses, such as Nestlé skin health. In 2019,
Nestlé announced that it would sell a $ 4 billion stake in its ice cream business in North
America to Froneri International Ltd. Due to a drop in sales and a weak competitive position
in the US compared to Hershey and Mars. In 2018, Nestlé sold its recognition business in the
United States to Ferrero for USD 2.8 billion [ CITATION Swo21 \l 2057 ].
4. Nestle has been accused of violating codes of ethical marketing (W4)

Nestlé, a Swiss multinational company, has been accused of breaking ethical marketing rules
by making deceptive nutritional claims regarding its infant formula to deceive customers.
Despite a restriction by the UN World Health Organization, Nestlé markets its infant formula
as "closest to," "inspired by," and "following the example" of human breast milk in various
nations, according to a new analysis by the Changing Markets Foundation (WHO).
According to the study, which looked at more than 70 Nestlé baby milk products in 40
countries, Nestlé frequently disregards its own nutritional requirements in its advertising.
"We are aware that businesses exploit consumers' emotional responses to sell a wide variety
of product."," The Changing Markets Foundation's campaign director, Nusa Urbancic, told
the Guardian [ CITATION Art18 \l 2057 ]. "However, when it comes to the health of vulnerable
babies, this behavior is unethical." If science confirms that a certain item is safe and useful to
a baby, it should be included in all packages. Sugar, for example, should not be utilized in
any product if it is unhealthy. Nestlé's contradictions on this subject create serious issues
about the company's claim to be committed to science [ CITATION Art18 \l 2057 ].
 A boycott campaign poster against Nestlé baby milk products at the Hay festiva,
2002. Photograph: Kathy deWitt/Alamy Stock Photo

5. None fixed price (W5)

Retail behemoths like Walmart, Tesco, and Kroger account for most Nestlé's retail sales. This
retailer's price reductions or increases may have an impact on Nestlé sales.

6. Need more investment in new technologies (W6)

Given the extent of its expansion and the diversity of geographies it expects to penetrate,
nestle needs to invest more in technology to fully integrate operations. Investing in
technology does not now align with the company's vision.

7. Limited success outside core business (W7)

While nestle is one of the industry's leading companies, its present culture has made it
difficult for them to expand into new product segments.

8. Anti-unionism (W8)
UFCW Canada is calling on all activists to join the International Food Workers Union (IUF)
in a new campaign to defend labour rights against the world's largest food corporation. Union
members were sacked after protesting an impasse in collective bargaining at the Nescafé
facility in Panjang, Indonesia. The company did not show up for mediation and refused to
allow delegations from the local legislature to see the occupied workplace, preferring mass
dismissal over good faith negotiations. Nestlé has attempted to undermine labour unions in
Pakistan by meddling in elections and harassing labour leaders, which is a similar scenario
[ CITATION UFC10 \l 2057 ] Nestlé retaliated with threats, firings, and the suspension of the
union president, as the union fought for the rights of hundreds of contract workers at the
company's new Kabirwala plant. " "Strong international worker solidarity is the only way to
prevent multinationals from trampling on workers' rights in different parts of the world,"
stated UFCW Canada National President Wayne Hanley. As employees, consumers, and
members of the community, we must demonstrate to Nestlé that we are aware of and will
oppose all violations of human rights, particularly workers' rights. Activists are being urged
to stand up for workers' rights by calling for Nestlé to cease employing Nespressure and
respect trade union rights [ CITATION UFC10 \l 2057 ].

9. Days inventory is high compare to the competitors (W9)

The company must raise additional capital to invest in the channel because the day's
inventory is high. Nestle's long-term growth may be hindered because of this.

10. Social criticisms (W10)

Nestlé critics took to Facebook to express their displeasure over the company's purported use
of palm oil from deforested areas in Indonesia. On Nestlé's Facebook "fan page," customers
can celebrate and discuss their favorite brands. However, many comments began to appear on
the website accusing the multinational corporation of unethical behavior. "Start taking control
of your material riches... and maybe you'll be forgiven," one suggests. Greenpeace launched a
campaign this week accusing the corporation of sourcing palm oil from Indonesia's
unsustainable rainforests, putting endangered orangutan habitat in jeopardy, eliciting a
barrage of responses. "... we welcome your ideas, but please do not post using altered
versions of any of our trademarks as your profile images - they will be erased," Nestlé page
admins wrote as new nasty words flooded in every minute. "Release it from your chest - we'll
deliver it," the administrator said in response to one of the orangutan's death's hundreds of
notes. Greenpeace's anti-Nestlé campaign spokesman Ian Duff said that the incident was not
staged: "We are unable to hire a social media business due to a lack of financial resources."
This uproar has been sparked by Nestlé. [ CITATION Ell10 \l 17417 ]

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