Nestle is one of the oldest food and beverage processing companies in the world. It was found in 1866 in Switzerland by Henri Nestle. Today, it is the largest food processing company in the world with headquarters in Vevey, Vaud, Switzerland. The company produces baby food, dairy products, coffee, ice cream, bottled water, breakfast cereal, and much more. The company has more than thirty brands under its portfolio. During the twentieth century, the company grew rapidly and spread to 189 countries. The company operates 447 factories across the globe where its products are manufactured (Nestle, 2015). In 2018, the company earned revenue of CHF 91.43 billion and had more than 320,000 employees (Nestle, 2019). Nestle is known for its diversity in terms of markets and products to ensure success whenever it enters a new product or launches new products.
Following are the four dimensions of the Ansoff Matrix for Nestle:
Market Penetration
During market penetration, Nestle attempts to sell its existing products into its existing markets. The first strategy Nestle adopts is aggressive marketing. It uses various channels for marketing its products, flavors, and packaging sizes. Different products are launched in different sizes to increase access for those who cannot purchase large-size packaging. The company is also known to acquire smaller competitors in various areas to reduce competition in its existing markets. Nestle also motivates its users to consume more of its products. E.g. in the case of baby food, it encourages that more the baby eats, the quicker he or she will grow and remain healthy. The company also offers various promotions. These include discounts on large purchases, joint promotion of various products, price reductions to attract greater purchasing, and so on. Nestle also regularly introduces new flavors of its products, such as cereals to gain more sales. All of these market penetration tactics help Nestle maintain its sales in existing markets.
Market Development
When existing products are launched by Nestle into new markets, it is termed as market development. The company regularly expands geographically into markets it has not entered into as a plan to develop its markets. Whenever entering a new market, the company ensures that its prices are affordable and its products are readily available through the efficient use of distribution channels. Nestle also aggressively markets its presence and the various products it sells through various advertisements sources. It also modifies is products to suit the local market. These modifications can be in terms of product packaging or product variants. For example, there are variants of Nestle Maggi instant noodles in Pakistan and India that are not available in the United States or Europe (Nestle, 2015). There are many more variants of breakfast cereal in the United States than in South Asia. The company also offers discounts during launch in a new market. Market development is a risky strategy for Nestle as it faces intense competition and extensive marketing costs.
Product Development
Product development is executed by Nestle when it launches new products in its existing markets. Nestle has done this numerous times. Snickers and Mars are chocolates sold by Nestle. However, as a part of its product development strategy, it launched ice cream in Snickers and Mars flavors that went hit. The company also creates new products such as new baby food lines, breakfast cereal lines, different beverages, and much more. The company launches these products in the market through promotions and marketing at reduced prices to gain access and determine market feedback on the product. It then modifies the product, introduces new variants, and adjusts the price to improve its profit margins. There is detailed research behind each product before Nestle launches it.
Diversification
The riskiest of the strategies is to launch a new product in a new market. Horizontal diversification is often the approach used by Nestle. It diversifies the current products it sells and launches new products related to them. For example, in addition to Gillette shaving foam, the company launched various other grooming products related to shaving. There is even more room as the company can expand into electric razors. The company sells baby food and formula milk for infants. It can also expand into diapers and other baby grooming products. There is a great room and Nestle keeps on testing this with new products regularly. However, this strategy requires a greater understanding of the market and the products to succeed.
References
Nestle, 2015. Annual Report 2014. [Online] Available at: https://www.nestle.com/sites/default/files/asset-library/documents/library/documents/annual_reports/2014-annual-report-en.pdf [Accessed 25 Dec. 2019].
Nestle, 2019. Financial Statements 2018. [Online] Available at: https://www.nestle.com/sites/default/files/asset-library/documents/library/documents/financial_statements/2018-financial-statements-en.pdf [Accessed 25 Dec. 2019].