Strategic Management Final Project

Under Supervision: DR. Hanady Ragaii

Nestle Strategic Plan

Group G1
 Prepared By :
Reem Kamal El din Mohamed
Dalia Saher El Sonbaty
Noura Sayed Tawfik
Sally Adel Hashish
Ahmed Ibrahim EL Misiny
Hussein El Sayed Fawaz

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 Table of contents
About the . 3
……………………………………………………………………………………Company
…………………
Company •
………………………………………………………………………………………overview
..……………
Vision, Mission and Core Values…………………………………………………………………………………… . 4
•Vision……………………………………………….…………………………………………………………………………. 4
•Mission……………………………………………………………………………………………………..………………… 5
………………………………………………………………………………………•Values
.…..………………………….…
The Input . 6
…………………………………………………………………………………………Stage 7
………………… 7
External Environment • 13
..……………………………………………………………………………Assessment 15
PESTEL ➢ 16
………………………………………………………………………………………Analysis 17
17
...………………
21
Porter Five Forces ➢ 27
.………………………………………………………………………………………Analysis
.
External Factor Analysis Summery Matrix (EFAS) ➢
.………………………………………………………
Competitive Profile Matrix (CPM) ➢
...……………………………………………………………………………
Internal Environment •
..................................................………………………………Assessment
VRIO ➢

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 ………………………………………………………………………………………Analysis
. ……………………
Porter Value Chain ➢
.………………………………………………………………………………………Analysis
Internal Factor Analysis Summery Matrix (IFAS) ➢
…………………………………………………………
The Matching . 28
…………………………………………………………………………………………Stage 29
..………… 29
Quadratic Analysis • 31
.......................................................……………………………………………… 35
SWOT ➢ 37
………………………………………………………………………………………Analysis
.…………………
TOWS Analysis ➢
..............................................................……………………………………………
SPACE •
..................................................……………………………………………………Matrix
..........
BCG •
…………………………………………………………………………………………Matrix
..………………………
The Decision . 39
....................................................……………………………………………………Stage 40
.
Quantitative Strategic Planning Matrix (QSPM) •
.……………………………………………………………
Strategy Formulation .
………………………………………………………………………………………………
.…
Strategic Objectives •
………………………………………………………………………………………………
..…
Corporate Strategy •
………………………………………………………………………………………………
.………
Ansoff Matrix •
...........................................................…………………………………………………
Marketing 4 Ps •
………………………………………………………………………………………………
..……………
Strategy
………………………………………………………………………………Implementation
…………………

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 Implementation Matrix •
......................................................…………………………………………
Strategy Evaluation and .
...…………………………………………………………………………………Control
Balanced Score Card •
.........................................................……………………………………………
Business Plan
………………………………………………………………………………………………
.…………………
References
………………………………………………………………………………………………
………………………

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Introduction

Nestlé is the largest food and beverage company in the world. It is also well on its way to
becoming world leader in nutrition, health and wellness.

Nestlé is more than just the largest food and Beverage Company in the world. Increasingly,
Nestlé is becoming the world’s leader in nutrition, health and wellness. From the start, nutrition
has been at the core of our business. However, today we place far greater emphasis on it – and on
health and wellness. Our Corporate Wellness Unit and the individual business units are driving
forces in bringing Good Food, Good Life to all our consumers.

Nestlé. Good Food, Good Life

We use four simple words to describe what we believe in and what we offer consumers around
the world: “Good Food, Good Life“. Food and beverages play an increasingly important role in
people’s lives – not only because of the enjoyment and because of social pleasure of eating
together, but more and more in terms of personal health and nutrition.

Although it is important, nutrition is only one aspect of “Good Food, Good Life“. Consistent
quality and safety, as well as value-for-money and convenience, all play a part. Above all, great
taste is fundamental to our products and our consumers' appreciation of good food.

Nutrition: the core of the Nestlé business

Nutrition has always been at the core of our

business. Indeed, the Company was founded, back
in 1866, on the launch of an innovative, nutritious
baby food.

Now, almost 150 years later, we live in a very

different world. The global population has grown to
over six billion. People are living longer. Living
standards have improved. Life styles have changed.

These, and other demographic factors, have had a

considerable influence on Nestlé – both in terms of
the products we make and the way we run our
business. Nestlé today is at the forefront of
providing consumers with food and beverage solutions that generate a long, healthy life.

Our purpose is to unlock the power of food to enhance quality of life for everyone, today and for
generations to come.

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Driven by this purpose, we focus our energy and resources where unlocking the power of food
can make the greatest difference to the lives of people and pets, protect and enhance the
environment, and generate significant value for our shareholders and other stakeholders alike.

Main Brands Sold in the Region Nescafé, Bonjorno, Nido, Coffee-mate, Nesquik, Maggi, Kit
Kat, Fitness Toasties, Quality Street, Nan, Cerelac, Nestlé Cereals, Nestlé Pure Life, Baraka.

What is the vision statement of Nestle?

To be a leading, competitive, Nutrition, Health and Wellness Company delivering improved

shareholder value by being a preferred corporate citizen preferred employer preferred supplier
selling preferred products.

Our Mission Statement

Nestlé is...
...the world is leading nutrition, health and Wellness Company. Our mission of "Good Food,
Good Life" is to provide consumers with the best tasting, most nutritious choices in a wide range
of food and beverage categories and eating occasions, from morning to night.

Our values
At Nestlé, respect has a special and powerful meaning. It has a huge impact on the way we work
and run our business.

Our values are rooted in respect. A respect for ourselves. For others. For diversity. and for the
generations who will follow in our footsteps.

Setting out our values is crucial - but living by them makes the difference. We serve with
passion, build for the long term, and are inspired to innovate. We always strive to do better, so
we can grow and succeed together while acting with integrity, fairness and authenticity.

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Input stage

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 External Analysis
PESTEL
A PESTEL analysis is a strategic framework commonly used to evaluate the business
environment in which a firm operates. Traditionally, the framework was referred to as a PEST
analysis, which was an acronym for Political, Economic, Social, and Technological; in more
recent history, the framework was extended to include Environmental and Legal factors as well.
1. Political

a. Changing Economic Regulations

As we know that Nestle is a multinational brand and operating its business in more than 190
countries worldwide. Government regulations and the political environment of any country can
strongly impact the multinational global brand. That’s why the company must comply with the
local rules and regulations of any country. If the brand doesn’t keep in the mind the local
environment of the country, then it would create serious problems. (Threat)
B. Non-skilled workforce
Brexit (Exit of British from EU) is a very good example of a recent political factor impacting the
growth of the company. Many foods and beverage businesses lose their skilled EU workers in
the UK because of the Brexit deal. It created a gap of a non-skilled workforce, and it has become
very difficult to hire skilled professionals. (Threat)

2. Economic

a. Foreign Exchange Rate

Nestle as a global multinational brand must deal with many exchange rates of different countries.
Even a small change in the price of the exchange rate, it would have a huge impact on the
revenue of the company. It depends on the region and location of the country because the
exchange rate impacts different markets differently. (Threat)

b. Growth in the comfort food sector

According to a study conducted by Mintel Global Food and Drink Trends in 2020, the trend of
fast and comfort food is growing, and it continues to grow in the next 10 years. It presents a great
opportunity for the company to increase its sales in this category. (Opportunity)

3. Social

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a. Public Attitude Towards Diet

In recent years, the general interest and lifestyle of the people have shifted towards healthier
food. It has made people cautious about their diet and looks. Now, people prefer food and drink
with a low concentration of sugar and fats in them.

It presents a great challenge to the company. But Nestle is aware of the challenges of growing
trends and lifestyles of people. That’s why the brand is working on the reformulation of cooking
preparation processes by decreasing the quantity of salt, sugar, and fats. It would launch a newer
and healthier product of Nestle that people want. It’s because of these steps, people still love and
buy nestle products. (Opportunity)

4. Technological

a. Digital Industrial Revolution

We’re living in the age of the digital revolution of every day, where things are happening every
second of every day. Economists call it the fourth-generation industrial revolution, and this
revolution presents both opportunities and threats to nestle. Most importantly, this digital
revolution is also impacting the behavior and attitude of society. At the end of the day, it poses a
great challenge to companies like nestle.

For instance, the internet of things (IoT) would help the customers to check and verify the
quality of food and drinks. Social media marketing and digital marketing are redefining the
whole concept of marketing and forcing companies to adopt new methods of communication.
(Opportunity

b. Research & Development

Nestle spends a plethora of resources on research and development of finding more efficient
ways of preparing quality and healthier products to the customers. Thanks to technology and
digital and social media marketing that made it much easier for nestle to conduct research and
development. (Opportunity)

5. Environmental

a. Less Carbon Waste A wave of the eco-friendly environment has impacted every industry
across the globe. It means that companies like nestling have to find newer ways to dump less
carbon into the environment. (Threat)

6. Legal

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a. The laws related to health and safety of the employees, quality and hygiene of its products and
labor laws established in different countries need to be followed. (Threat)

Porter’s 5 Forces

Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape
every industry and helps determine an industry's weaknesses and strengths. Five Forces analysis
is frequently used to identify an industry's structure to determine corporate strategy.

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Threat of New Entrants

If the market is attractive the new entrants would always be a threat for the company but if the
market has been restricted to a limited resource and it has very few areas of improvement, so it
becomes difficult for new entrants to get into the market and hence monopolies exist. Although
Nestle has accomplished a strong name in the market but as the food processing industry is very
huge and viable; so there are a lot of companies who already entered in this market and somehow
achieved a place in the market even though they could not cross Nestle in terms of market share.
Every year number of companies attempt to enter the market and strive for their share of profit
and productivity in the market but very few survive. Nestle has been the leader of market for a
century almost so now it has become a very big challenge for the new entrants to not only work
over their quality, but they also have to cut the share of Nestle to survive which is quite equal to
impossible. Fundamentally, Nestlé is persistently on the board, and therefore the threat of new
entrants is temperate.

Threat of Substitute Goods

Substitutes have always been in line whenever we talk about products market, every kind of
product has a substitute present which leads it to the heights of competition when taken
seriously. As the product is very common and daily use product so the threat of substitutes is
very high here. Like if we take the example of bottled water so the substitute of this is lean
pockets that serve as a competition. So Nestle has to innovate its products tremendously to stay
in the market and to work efficiently for removing the threat of substitutes. We can take the
example of recent innovation which is health consciousness and wellness factor that has been
introduced in all products of Nestle. Such initiatives would make it easier for Nestle to go
beyond the substitutes.

Bargaining Power of Suppliers

Bargaining power of suppliers is very important factor to be considered in any industry as they
are the main strength of the company. Nestle is known for strong relations with the suppliers
around the globe due to its immense buying power and also because of the fact that in such dairy
and agricultural products quality is always important. Nestle as always focused over strong and

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sturdy business relations to make the ongoing quality stronger. Additionally, Nestlé also presents
helpful guidance to its suppliers on how to work more proficiently to decrease redundant
expenses. And thus, it cares of its suppliers which I return pays them off in the form of quality
products.

Bargaining Power of Customers

The bargaining power of customers has always been an important factor in terms of company’s
performance so this should be given reasonable value while accessing the company’s position.
Customers carry huge quantity of bargaining power concerning their utilization of different
Nestlé products. Although a lot of substitute products and competitors Nestle customers have
very influential choices but still the quality that has been maintained by Nestle has made it very
successful among the users. It is very important to understand the power of the customers and
also their needs so that they can be better satisfied. This is what Nestle always cares about and
that is reflected in Nestle health and wellness programs that are being used wile creation of new
products as society has in progress of becoming more health conscious.

Competitive Rivalry within the Industry

Competition if healthy would bring huge success but if negative would destroy the whole
industry so it should be critically analyzed for better future of the company. Nestle has a very
strong position in the food processing industry but few major rivals do exist in the industry like
Kraft Foods and Groupe Danone. Above mentioned companies are fighting continuously to get
on to each other and avoid any sort of competition but I am still there. If we talk about marketing
and advertising these companies have spent hell of their expenditures for the purpose of effective
marketing and advertising and in competition, they have always performed each other.
Competition is violent in the food processing industry, and this is a plus point for consumers.
Provided that these companies carry on in competing, consumers will persistently enjoy
improving product qualities.

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 c. EFAS
.In this paper, IFAS and EFAS follow Whatson framework for rating from 1-5
External Strategic Factor Weight Rating Weighted Score
Opportunities
O1- Online shopping 0.25 5 1.25
O2- Expanding ready-to-drink tea and coffee market 0.1 3 0.3
O3- Sustainability 0.15 4 0.6
O4- Largest distribution system 0.15 3 0.45
Subtotal 0.65
Threats
T1- Raising Competition in the food industry 0.1 3 0.3
T2- Water scarcity 0.1 1 0.1
T3- Economic Uncertainty 0.1 2 0.2
T4- Climate Impact 0.05 1 0.05
Subtotal 0.35
Total 1 3.75

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 Internal Analysis

SWOT Analysis
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and so a SWOT analysis
is a technique for assessing these four aspects of your business. SWOT Analysis is a tool
that can help you to analyze what your company does best now, and to devise a successful
strategy for the future

Strengths Weakness
S1 Global presence W1 Social criticisms
S2 Brand Valuation & Well-known products W2 Organizational Structure
S3 High diversified portfolio W3 Increase in prices
S4 World large cooperation
S5 Health life products for breakfast & snacks
S6 Efficient R & D System
S7 Labeling of the nutritional health of the product

Opportunities Threats
O1 Online shopping T1 Raising Competition in the food industry
O2 Expanding ready-to-drink tea and coffee market T2 Water scarcity
O3 Sustainability T3 Economic Uncertainty
O4 Largest distribution system T4 Climate Impact

Strengths
• Global presence
Nestle has a strong global presence, and its products are available almost everywhere.
Nestle's products are available in 186 countries. Rather than relying on a few markets, it
has captured a
sizable market in a number of developed and developing countries to generate the
majority of its revenue.
• Americas is Nestle's largest market, accounting for approximately 44.9% of total sales.
The United States and Canada account for 70% of sales in this region, with the
remaining 30% coming from Latin America and the Caribbean.
• Europe, the Middle East, and North Africa (EMENA) is the second-largest market,
accounting for approximately 29.6% of total revenue. Western Europe accounts for 64%
of regional revenues, while Eastern and Central
Europe account for 18%.

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 Brand Valuation & Well-known products
Nestle is well positioned for expansion. Nestle was ranked #62 by Interbrand in 2021, with a
brand value of $10.6 billion, moving up one position from 2020. [1]
• #28 - Pepsi (Brand value: $19.4 billion) comes before Nestle.
• Starbucks (Brand value: $13.0 billion) is ranked 51st.
• Danoe (Brand value: $9.8 billion) (#65)
• #72 - Kellogg's ($8.6 billion in brand value)
Nestle, with a market capitalization of $330 billion or more, is one of the world's largest food
companies, selling products such as Hot Pockets, Stouffer's, DiGiorno, and Nespresso.

A High diversified portfolio

Nestle owns over 2000 brands worldwide and has renovated over 8000 products. It is one of the
world's largest corporations, with the most extensive and diverse product portfolio.
Nestle categories its products into seven groups:
Powdered and Liquid Beverages ,Petcare , Nutrition and Health Science , Prepared
dishes and cooking aids , Milk products and ice cream , Confectionery , Water products

Segments Revenue (CHF billion) % Share

Powdered and Liquid Beverages 24 28%
PetCare 16 18%
Nutrition and Health Science 13 15%
Prepared dishes and cooking aids 12 14%
Milk products and Ice cream 11 12%
Confectionery 8 9%
Water 4 5%
Total 87 100%

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• World large cooperation
Nestle is one of the world's largest corporations, according to Forbes Global 2000, and is
ranked 46th in the list for 2022.
Nestle has signed a perpetual licence agreement with Starbucks to market its products
worldwide. The transaction strengthens Nestle's coffee portfolio and allows Starbucks to
leverage Nestle's network for global expansion. Furthermore, Nestle has long-standing
relationships with well-known and powerful brands such as Colgate Palmolive, Coca-Cola,
General Mills, and L'Oréal.

• Healthy Life products for breakfast and snacks

• Nestle, the world's largest food corporation, has reduced the amount of sugars used in the
production of its beloved Carnation Breakfast Essentials (by 25%). Furthermore, in order to
improve sustainability, the company is incorporating completely new and environmentally
friendly paper packaging for the product line. When it comes to the things that matter most to
customers, the company undoubtedly checks all the right boxes. Furthermore, many of these
customers grew up enjoying the Carnation Breakfast Essentials line of products and want their
children to do the same.

• Efficient R & D System

• Nestle invests heavily in environmental sustainability practises and takes innovative steps to
improve product quality. It optimises advanced solutions to reduce waste, water consumption,
nonrenewable energy consumption, and packaging material consumption.

Labeling of the nutritional health of the product

Nestle has previously been chastised for providing misleading nutritional information on its
packaging. As a result, there is an opportunity to improve its practises by providing reliable
information and accurately labelling its products.

Weakness
Social Criticism
Nestle has frequently been the focus of media attention. Some of the examples that have
harmed its market reputation include the claim to privatize water, misleading labelling, and a
lawsuit for chocolate production using child and slave labor.

Organizational Structure
Nestlé is structured in the form of a matrix. That means a large number of brands are under the
same umbrella group, which makes managing a large number of individual brands somewhat
difficult, which can often result in discord and conflict of interest.

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Increase in prices
Nestle Products’ prices increase due to an increase in raw material and transportation costs,
supply chain constraints, and an overall inflationary environment.

Opportunities

• Online Shopping

Nestle has a fantastic opportunity to expand its e-commerce and online shopping platforms.
Only a few CPGs provide online services to make shopping more comfortable and enjoyable.
Despite the fact that Nestle has online stores in a few countries, expanding its online services to
more areas will be a profitable decision for the company.

• Expanding ready-to-drink tea and coffee market

The demand for tea and coffee is constantly increasing, creating a profitable opportunity for
Nestle to further develop this market.

• Sustainability

• Nestle invests heavily in environmental sustainability practices and takes innovative steps to
improve product quality. It optimizes advanced solutions to reduce waste, water consumption,
nonrenewable energy consumption, and packaging material consumption. The company has
committed to achieving net zero greenhouse gas emissions by 2050. Furthermore, the supply
chain is deforestation-free, and the goal is to reduce virgin plastics by one-third (by 2025).

 Largest distribution system

Nestle owns a large and diverse distribution network that reaches not only urban but also rural
areas. To run the business efficiently in respective countries, it has adapted local distribution
methods and a decentralized approach. Nestle maintains close relationships with its suppliers,
retailers, vendors, and distributors.

Threats
Raising Competition in the food industry
Many CPG companies, such as Mondelez and Unilever, provide comparable food and beverage
products. Nestle finds it difficult to compete in a situation where substitute products are readily
available.

Water Scarcity
Nestlé's production is heavily reliant on water use. Accessing clean water from less expensive
sources has become difficult for the company for a variety of reasons. These include rising

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 population, climate change, increased demand for food and water, increased pollution, water
waste, and resource overexploitation.

Economic Uncertainty
Despite this, Nestlé's sales were not adversely affected by the pandemic due to panic buying
triggered by recent events. Global economic uncertainty and recession continue to threaten the
company's revenue.

• Climate Change:
Climate change and its consequences can be seen in the raw materials of many Nestle
products. Raw materials like coffee, wheat and dairy are affected by climate change. They are
very likely to have a long-term impact on Nestle's growth.

TOWS Analysis
Strengths Weakness

Opportunities S1- O1,O4 One of the most important opportunities W3-O4 although the increasing
for the strength of Nestlé over its competitors is its prices by 6.5% on a certain
global presence in large way, whether through category of their consumer goods
agents or through distance shopping, which makes it but nestle still has it’s strong
a strong entity that makes its products highly distribution system which can help
competitive in most markets of the world. to make great sales numbers all
over the world
S6, O3 Research and development programs at
Nestlé are considered one of the strongest systems
around the world, That seeks to spread and achieve
profit rates while preserving the recommendations of
sustainable development

Threats S3-T1 Increasing the diversity of Nestle products W3- T3 One of the weak points
increases the size of its competitors in the market which might be threat points for
significantly, which poses a threat to its sales in the Nestle products is the increase in
event of an increase in its prices it’s products prices, especially in the
unstable economic conditions,
S2-T3 Despite the unstable economic conditions, W1-T1 Nestle might be exposed to
Nestlé is able to keep stand firm due to its brand some criticism far from its products,
Valuation & Well known products . such as social criticism, due to the
increase in competition in products
in markets around the world.

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 Value Chain Analysis

Porter's value chain model is highly popular in the business world. However, Nestle must not
take it as a rigid, standalone framework by assigning the equal importance to all activities. The
effective Value Chain Analysis requires Nestle to realize that not all activities or functions
require same scrutiny level. Hence, the first step of adapting the Porter Value Chain framework
is to identify the importance of activities according to their role in product/service delivery
process.

Here is the list of primary value chain activities as proposed by Porter:

2.1 Primary Activities:

The primary value chain activities of Nestle are directly involved in producing and selling the
product to targeted customers. Analysis of primary value chain activities can improve the
performance of Nestle as explained below.

2.1.1 Inbound Logistics

It is important to develop strong relationships with suppliers, as their support is necessary to
receive, store and distribute the product. Without analyzing the in-bound logistics, Nestle can
face various challenges in product development phases. Analysis of in-bound logistics requires
a company to focus on every aspect of transformation from raw material to finished product.
Some examples of inbound logistics are retrieving raw material, storing the inputs and internally
distributing the raw material and components to start production.

2.1.2 Operations
The importance of analyzing operational activities raises when raw material arrives, and Nestle
is ready to process the raw material into the product and launch it in the market. Some
examples of operational activities are machining, packing, assembling and testing. Equipment
repair and maintenance also falls into this category.

It includes both- manufacturing and service operations. Analysis of operational activities is

important for improving productivity, maximizing the efficiency and ensuring the competitive
success of Nestle. The increased productivity can help Nestle to achieve consistent economic
growth, increase profitability and set a powerful basis for competitive advantage.

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2.1.3 Outbound Logistics
Outbound logistics include the activities that deliver the product to the customer by passing
through different intermediaries. Some outbound logistics activities are material handling,
warehousing, scheduling, and order processing, transporting and delivering to the destination.
Nestle can analyze and optimize the outbound logistics to explore competitive advantage
sources and achieve its business growth objectives.

Because, when outbound activities are timely managed with optimal costs and product delivery
processes put a minimum negative effect on the quality, it maximizes the customer satisfaction
and increases growth opportunities for the firm. Nestle should pay specific importance to its
outbound value chain activities when its offered products are perishable and require quick
delivery to the end customer.

2.1.4 Marketing and Sales

At this stage, Nestle will highlight the benefits and differentiation points of offered products to
persuade the customers that its offering is better than the competitors. Only producing a high
quality product at affordable costs and distinctive features cannot create value until Nestle
invests on the marketing and sales activities. The sales agents and marketers play an important
role here.

Some examples of Nestlé's marketing and sales activities are- sales force, advertising,
promotional activities, pricing, channel selection, quoting and building relations with channel
members. The company can use the marketing funnel approach to structure its marketing and
sales activities. The marketing strategies can either be push or pull in nature, depending on the
Nestle’s business objectives, brand image, competitive dynamics and current standing in the
market.

Effective and wisely integrated marketing activities can develop the brand equity of Nestle and
help it stand out from the competition. However, Nestle must avoid making false commitments
about product features that cannot be fulfilled by the production department. It indicates the
need to ensure coordination between different value chain activities.

2.1.5 Services
The pre-sale and post-sale services offered by the Nestle will play an important role in
developing customer loyalty. The modern customers consider post-sale services as important

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as marketing and promotional activities. The power of negative e-WOM due to poor support
service cannot be undermined in the current technologically advanced era. The company must
analyze its support activities to avoid damaging brand reputation, and instead use it as a tool to
spread positive word of mouth due to quick, timely and efficient support services.

2.2 Secondary Activities:

The support activities play an important role in coordinating and facilitating the primary value
chain activities. Nestle can also benefit from analysis of its support activities as explained below.

2.2.1 Firm infrastructure

The firm infrastructure denotes a range of activities, such as- quality management, legal matters
handling, accounting, financing, planning and strategic management. Effective infrastructure
management can allow Nestle to optimize the value of the whole value chain. Nestle can control
the infrastructure activities (or commonly called overhead costs) to strengthen the competitive
positioning in the market.

2.2.2 Human resource management

Nestle can analyze human resource management by evaluating different HR aspects, including-
recruiting, selecting, training, rewarding, performance management and other personnel
management activities. The effective HR management can allow Nestle to reduce competitive
pressure based on motivation, commitment and skills of its workforce. The company can also
achieve its cost minimization objectives by analyzing hiring and training costs with their relative
return. The heavy dependence of Nestle on employees' talent will increase the importance of
this value chain support activity.

2.2.3 Technology development

In a modern, technological advanced era, almost all value chain activities depend on
technological support. The technological integration in production, distribution, marketing and
human resource activities requires Nestle to realize the importance of technology development.
It can be divided into product and process technological development activities. Some examples
are- automation software, technology-supported customer service, and product design research
and data analytics. The research and development department of Nestle is classified in this
category.

2.2.4 Procurement

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The procurement in value chain denotes the processes involved in purchasing the inputs that
may range from equipment, machinery, raw material, supplies, raw material and other items
necessary for producing the finished product. Due to its linkage with multiple value chain
activities, Nestle should carefully consider its procurement activities to optimize the inbound,
operational and outbound value chain.

As mentioned above, the application of Porter Value Chain model depends on understanding
the importance of all activities. After understanding the relative importance of identified value
chain activities, Nestle should highlight areas where value can be added, cost efficiency can be
achieved, differentiation basis can be set, or processes can be optimized.

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