Porter's 5 Forces - Nestle

Extract

[...] Porter's 5 forces of Nestle Competitive Rivalry Competition is very important and healthy for an industry such as the one Nestle operates in. Whenever it becomes too much, it can negatively impact the business. The companies in the food consumer industry spend a lot of money in order to keep up with the market rhythm. This aspect of the analysis allows us to determine the number of competitors that fight against Nestle. When the company' customer base is not faithful, clients will tend to switch to the competitors. [...]

[...] The brand was named after its creator Henri Nestlé. When we talk about Nescafe, we can imagine how big and famous the brand's products are. The company's motto is "good food, good life". Nestle is a brand that cares about the well-being of its consumers. The brand is diversified. In fact, Nestlé manufactures milk based products, water, drinks, etc. Concerning its wealth, Nestlé's net profit was around 12.2 billion CHF in 2020. In 2018, the brand had workers around the world. [...]

[...] This means that for a new company to commercialize its products, it must go through a long procedure of checking by the competent authorities. The latest will decide whether a company fills the requirements or not. So, the threat is weak for this aspect. Anyways, concerning the distribution aspect, we can say that the threat is weak. In fact, it is very easy, especially nowadays, to put in place distribution channels. With few retail outlets, the company can easily sell its products. [...]

[...] In fact, consumers have the ability to switch to other companies if Nestle is not providing what they expect. That is also the case with substitution products, which impact the bargaining power of buyers. The more the industry has a strong competitiveness and substitution products, the more buyers will have a strong position during negotiations. Threat of substitution It is very important for every company, including Nestle, to know that substitution products increase the competitiveness of the industry. Whenever the threat becomes high, it means that Nestle consumers for example, will start buying substitution products to satisfy their needs. [...]

[...] So, the rivalry is very intense in the Nestlé's environment. The years of experience of a company does not matter and even new comers can still make profit and compete. Supplier power In each and every business, there is at least one supplier that provides the raw materials or the necessary products, so that companies will make whatever product they want. Whenever the suppliers have a considerable bargaining power when negotiating, companies like Nestle will suffer, and vice versa. This is very important for existing firms because a strong bargaining power of suppliers will lead to a strong competition within the industry. [...]