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Nestle Company
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Economic Environment and Industry Dynamics
Nestle company is Swiss multinational food and drink processing conglomerate company
established in Switzerland. In this case, it is considered one of the largest producers of foods and
beverage companies globally, especially considering that it has developed and established its
brands and branches in more than eighty countries. In addition, to confirm its effectiveness and
reliability in the global market, Nestle company has existed and thrived in the competitive global
market since it was established in 1866 (Nestle, 2001). In this case, it is estimated that the
company has gained significant customer boundaries and connections across all borders,
especially considering that it has developed more than 2000 brands and operates in several
countries globally (Nestle, 2001). The company headquarters is in Vevey, Switzerland. In
addition, Nestle company has remained competitive in the global market and its business
operations by progressively standardizing its products and exploring its business operations
across borders. However, despite the success encountered by the company, other competitors
producing similar products are a threat to the development and growth of the company,
especially considering the stiff competition encountered in the global market.
Some of the closest competitors to Nestle company include general mills, Mondelez,
kraft foods, Danone, and Heinz (Singh and Alazmi, 2019). Suggestively, these competitors are
characterized and popular for producing similar food and beverage products just like Nestle
company. In this case, they pose a significant threat to Nestle company, given that they both
struggle for similar customers globally. Because of this point, Nestle has thrived and modified its
production to meet the demand and needs of customers globally. However, the empirical finding
of Salim (2018) shows that Nestle company competitors are considered below average. Hence, it
is estimated that Nestle company is more effective and competitive than its competitors globally.
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Economic Indicators of Nestle Company
Considering the economic indicators of a business organization is beneficial, given that
investors wishing and willing to invest in a company can determine the status of a company or
business organization. Therefore, it is estimated that the economic indicators of Nestle company
can be used to determine its effectiveness and competitive nature in its business operations in the
global market. In this case, Nestle company economic indicators can be perceived from a broader
perspective, ranging from the Consumer Food Price Index, producer price index, and Gross
Domestic Product (GDP).
The GDP of Nestle Company
Nestle company is estimated to have a significantly higher GDP attributed to the high
revenue and income. The organic growth of Nestle company is also estimated to increase
annually (Nestle, 2001). The GDP of Nestle company is considered based on organic growth and
real internal growth to determine the growth and competitive nature of the company in its
business operations. In this case, in the year 2019, the organic growth was 3.5% with real
internal growth of 2.9% and pricing of 0.6%. In the year 2020, Nestle company encountered an
increased rate of growth with organic growth at 3.6% and real internal growth of 3.2%.
Consequently, in the consequent year, 2021, Nestle company recorded organic growth of 7.5%
with real internal growth of 5.5% of pricing 2.0%. Therefore, based on the increasing values of
the GDP of Nestle company, it is estimated that the company experienced a successful business
operation and competitiveness compared to its competitors.
Consumer Food Price Index
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https://images.app.goo.gl/888m42iCLQdZBzSq9
A consumer food price index is a determinant and measure of change in retail prices of
food and beverages consumed by consumers (Chung et al., 2020). Because Nestle company is a
company associated with the production of foods and beverages, the above figure shows the
consumer food price index of the consumers over the past decade. However, it is evident that the
consumer price index of Nestle company varies and alternates annually. In this case, from the
figure above, it is evident that Nestle company encountered the lowest consumer food price
index in 2018. However, towards the end of the year 2021, the consumer food price value has
been increasing exponentially. The alteration or changes in prices of Nestle products is
dependent on the demand, availability, and quality of the products.
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Producer price index
https://images.app.goo.gl/e22k56t3nX58K54L8
The producer price index is significant in determining the change in the price of food and
beverages sold by Nestle company. Notably, the prices set by Nestle company are influenced and
impacted by inflation in the economic setting. However, as evident from the above figure, the
producer price index has been increasing annually over the past decade. In the year 2004, Nestle
company recorded the least producer price index compared to the year 2022, which records the
highest producer price index. Therefore, Nestle company is estimated to experience an inclining
producer price index annually based on its business operations.
The Competitive Position of Nestle company
Nestle company is successful in its business operations but encounters significant
competition from its closest competitors. Suggestively, its competitors produce similar foods and
beverages, making it challenging for Nestle to acquire extensive and wider customer boundaries.
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https://images.app.goo.gl/49N7y8jqiQoMrix2A
From the above pie chart, it is evident that Nestle company is encountering significant
threats from its competitors, especially Mondelez company. It is also evident that Nestle
company is outweighed by Mondelez based on the sales perspectives. Mondelez is the top and
best in terms of sales of its products globally, with 50.20% of the total value. This is a
significantly higher value, given that it is more than twice the value sales of Nestle company
(21.80%). Therefore, Nestle company comes second best based on sales made on products in the
global market. In this case, based on Porter’s Framework, competitive rivalry is the main
challenge associated with product distribution and sales in the global market. Nestle is
experiencing significant competition from Mondelez company, which is estimated to have more
extensive customer boundaries, enabling it to make huge sales compared to Nestle company. In
addition, nestle company is closely followed by Mars foods, which is also estimated to have a
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significant customer boundary, making sales of approximately 20.80% based on the figure
above.
Financial Analysis
https://images.app.goo.gl/3tmNU4M8LEht8JZy7
Nestle company is estimated to make significant sales and profits from its business
operation and performance from a global market perspective. However, from the above figure, it
is evident that the income levels and rates alternate annually. The figure shows that the income
rates increased exponentially between the years 2009 and 2010. However, drastic depreciation in
the income levels was encountered between the years 2010 and 2011. In this case, it is estimated
that Nestle company incurred relatively unstable business performance on the sales of the
products. However, Nestle company has been recording growth and increase in income rates
from 2017 to 2019. Consequently, the revenue collected changes annually. Between the years
2010 and 2011, Nestle company recorded a significant decrease in revenue.
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https://images.app.goo.gl/RmEUFeCY3CHUR7uV7
On the other hand, the financial analysis of Nestle company can be determined by
considering essential factors, such as proprietary ratio, debt-equity ratio, and fixed asset to equity
ratio. The figure above shows the solvency ratios of Nestle company in India from the years
2011 to 2015. From the above figure, it is evident that the solvency ratios alternate annually. In
the year 2012, the company recorded the highest fixed assets to equity ratios, which has been
decreasing in the subsequent years from 2013 to 2015. However, the proprietary ratios are
increasing from the years 2012 to 2015.
Furthermore, the return of equity (ROE) of Nestle company is estimated to vary based on
its brands and branches in various countries. In addition, the value of ROE is estimated to be
higher in Nestle company compared to its competitors. This is attributed to the fact that it has
several brands across the globe. In this case, Nestle Malaysia is one of the brands of the Nestle
company established in Malaysia. From the figure below, it is evident that the ROE of Nestle
Malaysia company increased exponentially from the years 2014 to 2017. Consequently, the ROA
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value of Nestle company is high because it has several assets from the many brands and branches
established in different countries globally.
https://images.app.goo.gl/UL6xcEnedUCk6WBw7
The general ROE of Nestle company is changing annually over the past decade. Between the
years 2007 and 2008, the company encountered significant depreciation in the value of ROE. In
addition, the ROE value is increasing between the years 2017 and 2020 as indicated in the below
figure.
https://images.app.goo.gl/zFbHE44BcSJ8PssJ8
P/E and Growth Rate Analysis
The P/E of Nestle company has been changing every financial year. Over the past year,
the P/E ratio of Nestle company is 19.8x. However, for the fiscal year ending December 2017 to
2021, the P/E ratio of Nestle company was 25.7x. Consequently, for the fiscal year ending
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December 2017 to 2021, the P/E ratio of Nestle company was 26.8x (Chung et al., 2020). On the
other hand, the growth rate of Nestle company is estimated to be increasing annually based on
the organic and real internal growth. In the year 2019, the organic growth was 3.5% with real
internal growth of 2.9% and pricing of 0.6%. In the year 2020, Nestle company encountered an
increased rate of growth with organic growth at 3.6% and real internal growth of 3.2%.
Consequently, in the consequent year, 2021, Nestle company recorded organic growth of 7.5%
with real internal growth of 5.5% of pricing 2.0%. These values indicate a positive growth of the
company based on its business operations.
Financial Forecast
https://images.app.goo.gl/83JpzWHQBHwyAkj36
The share price is a significant financial focus used to determine if a company or business
organization is perceived to be performing and operating well in the global business. According
to Syafii et al. (2020), a share price also called stock price refers to the amount required to
purchase one share in a business organization or company. The share price of Nestle company is
fluctuating from the years 2009 to 2021. The fluctuation is attributed to the changing market
condition. Based on the figure above, it is estimated that the stock price of Nestle company is
increasing because the company is performing well in its business operations and in the global
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market. The increase in share price from the years 2019 to 2021 shows that Nestle company is
doing great in its business, hence increasing the amount to be paid for one share of the company.
Conclusion
Nestle company is one of the largest producers of food and beverage products globally.
In this case, the company is estimated to have a well-structured business operational system to
enable it to thrive in the competitive global market from its closest competitors, such as Mars
food and Mandelez. In this case, based on the financial considerations discussed prior, Nestle
company is very competitive and effective in its business operations, especially considering that
its share price is currently higher compared to the previous years.
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References
Nestle, M. (2001). Food company sponsorship of nutrition research and professional activities: a
conflict of interest?. Public Health Nutrition, 4(5), 1015-1022.
Salim, M. S. (2018). An investigation of strategic management of the corporation NESLTE.
Chung, E. Y., Kee, D. M. H., Chan, J. W., Tiong, S. Y., Choke, Y. W., Low, J. S., ... & Motwani,
H. (2020). Improving Food Safety and Food Quality: The Case of Nestle. International
Journal of Tourism and hospitality in Asia Pasific (IJTHAP), 3(1), 57-67.
Syafii, M., Ulum, B., Suparman, P., Rahayu, D. I., & Syasindy, N. B. (2020). The Effect Of
Financial Performance On The Company's Share Price: A Case Study
Indonesian. European Journal of Molecular & Clinical Medicine, 7(8), 1055-1071.
Singh, A., & Alazmi, F. K. (2019, October). A Case Study on Nestle. In Journal of International
Conference Proceedings (JICP) (Vol. 2, No. 2, pp. 80-85).