List of Contents
1.2 Research objectives/ purpose
1.3 Interest of the study
1.4 key problem to be resolved/problematic
1.5 Research questions
1.6 Research method
1.9 Keys words definition
CHAPTER2: LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK
2.2 Strategy introduction
2.2.1 missions, objectives and strategies within an organization
2.2.2 Strategic orientation of firms
2.3 Marketing strategy
2.4 PESTEL Analysis
2.5 PORTER'S five forces model analysis
2.6 SWOT Analysis
2.7 Marketing mix analysis
2.8 Segmentation, Targeting, and Positioning
CHAPTER3: RESEARCH METHOD AND DATA ANALYSIS
3.1 Research method
3.2 Data analysis: macro factors environment analysis
3.3 Market analysis
3.2.1 Dimensions of market analysis
3.2.2 Analysis of market dimensions in Nigerian manufacturing industry
3.2.3 competitors analysis in Nigerian agro-food industry
3.3 Porters' five forces analysis in Nigerian manufacturing industry
3.4 SWOT analysis of Nestle Nigeria PLC
3.4.1 Brief introduction of Nestle S.A( organization's mission, vision, and products)
3.4.2 Nestle Nigeria PLC
3.4.3 Nestle Nigeria Plc organizational chart
3.4.4 Micro analysis of Nestle Nigeria PLC
3.4.5 SWOT analysis of Nestle Nigeria Plc
CHAPTER:4 STRATEGY DEVELOPMENT AND OUTCOME
4.2 Nestle Nigeria Plc marketing mix analysis
4.2.1 Brands and Products
4.2.3 Place( distribution)
4.2.4 The Promotion
4.3 Nestle Nigeria Plc market segmentation/targeting and positioning
4.3.1 Bases for Segmentation
4.3.2 Target Marketing
4.3.3 Positioning strategy
4.4 Outcome analysis
CHAPTER5: CONCLUSION AND RECOMMENDATIONS
5.1.1 Nestle general strategy development in Africa
5.1.2 Nestle Nigeria Plc
Due to the harsh situation that exists in Africa(, such as diseases, social uprising ,ethnic war, serious unemployment…) and with its 54 countries with different growth rates, infrastructure, trade agreement, tax regulations, different consumers patterns, culture and level of technological. It appears very difficult to conduct a profitable business there. companies which want to survive and success in such challenging environment need to build their core competitive, developed their own unique development strategy. Then, the company’s strategy is vital for all companies, deciding the sustainable development of the enterprise.
Based on a case study of Nestle Company in Nigeria, called Nestle Nigeria Plc This paper focused on the development strategy of the African market development strategy for the African research. First of all, on the basis of the research background and significance, the external development environment of the Company in Nigeria have been studied, through the applied management theory of strategic management, marketing, management economics and PESTEL analysis method and the Porter’s five forces model. Secondly, from the internal resources and ability of Nestle Nigeria Plc, this paper expounds the internal conditions of the company. Thirdly, this paper explores the opportunities, threats, advantages and disadvantages of the company by SWOT analysis, and puts forward the development strategy of the company. At the end, we study the factors of Nestlé’s success in Africa in depth, explained its key success in Nigeria and enumerate some strategies for the development of other companies in Africa in order, to provide some guidance and valuable suggestions for those companies.
[Keywords]: Nestle Nigeria Plc, African Market, Developing Strategy
LIST OF FIGURES
Figure1: Porter’s 5 forces model analysis
Figure2: Nigeria’s PESTEL analysis
Figure 3:Manufacturing industry sector Porter’s five forces model.
Figure4: Nestle Nigeria Plc portfolio products
Figure5: Price of some products
Figure6: distributions outlets
LIST OF ABBREVIATIONS
illustration not visible in this excerpt
Worldwide recognized as an unstable place, because of many factors such as diseases(recently Ebola), social uprising( the Arab spring in 2011 that affected in Africa Tunisia ; Egypt; morocco; Libya; Algeria), ethnic war, political instability, recently in 22 December 2016 in Republic Democratic of Congo serious social unrest …Africa is not one but 54 countries with different growth rates, infrastructure, trade agreement, tax regulations, culture and level of technological development. Furthermore, some parts of Africa continue to face extremely challenging conditions, including wars, famines, diseases, and repressive regimes, although other parts are increasingly overcoming those conditions.
Africa same time represents a massive potential consumer, the continent is among the fastest-expanding economic regions today. Rising consumer demand, aligned with the annual growth of around eight percent, is likely to add around $1.1 trillion to African GDP by 2019,... According to Deloitte consumer review, Africa reviews 21 century. Besides, the continent with its 54 diverse countries, more than 2000 dialects, each with its own unique set of challenges(differences in consumer behavior, low data availability and quality, a fragmented retail market: Africans buy groceries primarily from neighborhood kiosks or independently owned convenience stores; in many countries). It has been repeatedly said by investors interviewed by How we made it in Africa that companies can not copy and paste their business model from elsewhere in the world into Africa. The environments are just too diverse, and operating in Africa requires different strategies of doing business in Europe or the USA, for example. Said Sarah Boumphrey, head of countries and consumers research at Euromonitor International.
Despite all those ambiguities, on the one hand, a lot of opportunities and others side a challenging place for doing business, there are pioneering companies that have been able to make Africa a part of their success story. More than 400 companies generate at least $1 billion in Africa-based revenues. Coca-Cola, Nestlé, and Unilever, among others, have been on the continent for decades and enjoy significant market share in their categories. In our study, we will focus on Nestle.
What were their keys to success? one possible answer could be because they have had a good marketing strategy. Then for every company, the search for profit is such a great importance that it is the reason why firstly they are created and further it determines their future existence. Looking all those ambiguities and try to understand why we find many international companies there thus, we choose as a topic : Research on market development strategy in Africa: Case study Nestle Nigeria Plc. How the company succeeds to reach the local African consumer, why did it succeed in this challenging place where a lot of companies failed? What is nestle Nigeria Plc key success in the Nigerian market? The main question here what market strategies did the company implement to win in this challenging environment? Our study is limited to understand Nestle development strategy five years ago to get an understanding of the strategy, then if we use recent data in our work, that means we try to propose a strategy to the company, which is not the case here. The importance of our study can be related to providing an explanation for Nestle keys success in Africa generally and in Nigeria particularly, to provide some relevant information to its competitors( local competitors, actual and future competitors local or international); in addition, could also help local enterprises try to understand the global strategy of this big company, furthermore try to get an understanding of African's consumer habits.
To conduct our research, we chose the exploratory method, so we will use the external and internal documents relative to elaborate our work. Thus, our study is divided into five-part: the first part consist of introducing our work, chapter two is the literature review, all the literature related to our study( review, article,…); chapter three Environmental analysis of Nigeria and of Nestle Nigeria Plc. Chapter four will be a focus on the Environmental analysis of Nigeria and of Nestle Nigeria Plc. To finish, chapter five consists of conclusion and suggestions.
1.2)Research objectives/ purpose
The purpose of this study is generally to present Nestle development strategy in African context known as an unrest place generally and particularly in Nigeria. Try to understand How Nestle has succeeded to convert potential to profit. The others objectives are:
Economic objective helps firms wishing to do business in African relevant tools, to improve/ to get more market share by understanding way people act(customer consumption habits/customer consumption pattern).
Social objective: try to understand African society would help firm avoid a lot of misunderstanding cultural objective: Because of many cultures, tribe, languages, and customs the way how people act( in recruiting process, sales…) lead a company to understand that if they want to win in Africa, they need to immerse in local reality, customize markets according to the reality found. We think that our research topic can be a benefit to future firms, which would wish to set up a firm in Africa.
1.3)Interest of the study
Our research can benefit to western companies, which find difficult to set up a business in Africa.
1.4)key problem to be resolved/problematic
Problematic: Why Nestle is doing better than others in Africa generally and particularly in Nigeria.? What have been or what are the success factors of Nestlé in Africa?
A set of question found in our study and they need to be answered
-What is nestle strategy/strategies overall in Africa/ Nigeria?
-How did the company succeed to reach the local African consumer?
-What is Nestle growth's strategy in Africa?
-What strategies did it implement in Nigerian market(here emphasis will be on PPP nestle model, marketing, and distribution channel)
The material used for our subject namely(Research on market development strategy in Africa: case study Nestlé Nigeria Plc.) consists of data collected from books, review, article and other information on the company internet website.
By this way, we assume that our work is based on exploratory method, then it takes into consideration analysis of document related to Nestlé's growth strategy five years, found in company website, books read during classes and books taken in the library . The research is in Africa that means 54 countries with different markets and different consumers habit due to the diverse cultural habits and diverse tribe, politic, land, and sometimes social instability. However, our study is focused on one country Nigeria with a population about 188,457,261 in 2016. We have thought that the qualitative method precisely exploratory method is more adapted to our study due to the difficulties to collect numerical data.
The limitations of the study, during our study we faced some difficulties: Not enough relevant material, Use internet website resources, which sometimes provides unverified data. Financial issues: some book needs to be paid if you want to get them.
Certain themes need to be developed/analyzed/studied in a group team like PESTEL analysis or be done in group, to get pertinent factors, but we could not form those team to have a deep and varied brainstorming.
Through this study, we hope to give some reasons to push more and more international companies to go to Africa and build companies there, as we have noticed it is a controversial place but still offers a lot of opportunities, to name few Africa represents massive potential consumers. As Africa's economy progress, opportunities are opening in sectors such as retailing, telecommunications, banking, infrastructure related industries, resource related business and all along the agricultural value chain. Africa offers a higher return on investment than, any others emerging market. For several reason: competition is less intensive and few foreign companies have a presence there and pent up consumer demands is strong.
For all those reasons we do believe that Africa is a good place for international companies, they just need to stay in touch with the local realities thus, need to tailored their business strategies to the specifies of each market or sub regions if they are to succeed.
1.9)Keys words definition
Some keys word are defined below:
Research: means to look through or go over thoroughly to look something or examine to find anything concealed.
Market: in marketing a set of current and potential customers of a product or service. Development: the process, fact to deploy or to grow something
Strategy: is a plan that is intended to achieve a particular purpose. Africa: place lieu with typical characteristic…
Marketing: an organizational function and a set of processes for creating, communicating and delivery value to customers and for managing customer relationships in way that benefit the organization and its stakeholders.
Marketing strategy: can be defined as the fundamental goal of increasing sales and achieving a sustainable competitive advantage
CHAPTER2: LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK
2.1.1)Evolution of marketing
As we can not talk about market development without introducing marketing and marketing strategy. We will begin by giving an understanding of marketing strategy then the purpose of the study is to try to understand how a company can have a strategic position in its market and as consequence get a competitive advantage over its competitors. Marketing as the term involves, at first sight, the focus on the marketplace, where people can exchange goods or service against money in marketing market can be defined as the set of actual and potential buyers of a product.
Marketing has evolved over the last century and has acquired significant and varied importance. Marketing extends to all activities, those of companies, large or small but also those of associations, political parties, territorial and even individual. In our work, we will focus on marketing evolution concerning the internal organization of the company, which has established itself as a vital function of the company. There are 3 distinct periods of marketing evolution:
Production culture or production era: The production culture was born between 1870 and 1930, The market took up all that could be manufactured it was to increase the capacity of production, to improve the production processes and the quantities produced in order to minimize the production costs, The economic depression of 1929, would have forced organizations to revise their relationship with the market. After then, the selling culture was born (1929-1950) during which the company learned to use market research and advertising to support the action of the sales force. The last one marketing culture(1950) Companies are on the side of consumers, understand him/her, solicits their opinion, anticipates their needs and wants. This era of marketing culture is characterized by inconstant, critical and up to date, and demanding consumers; introduction of a marketing department; density in industry… This chronology has been progressively put into question. Ronald A. Fullerton (1988) particularly criticized the reductionist character of the term over time, which ignores the implementation by companies of modern marketing practices since the end of the nineteenth century, notably to stimulate demand during economic recession periods. To recall, before marketing was production oriented, the companies produced and sold the different product, over time it seems, it has become vital for a company to address its offer to a particular group of consumers due to constant changes (increased competition, changes in consumer tastes ...) Now the companies are oriented to consumers in order to detect and anticipate their needs and desires. Over the time the term marketing has known important changes, marketing is sometimes related to the reflection about the business in terms of customer needs and their satisfaction. Marketing differs from selling because (in the words of Harvard Business School's retired professor of marketing Theodore C. Levitt) "Selling concerns itself with the tricks and techniques of getting people to exchange their cash for your product. Selling and advertising are though as marketing, there are marketing activities that help companies in gaining revenues.
Today, the concept marketing must be understood not in the old sense of making a sale( telling and selling), but in term of creating value for the customer and profitable value for the organization. "The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return." Kotler and Armstrong (2010). The idea here is to show how it is vital for a company to create, build and maintain and a long-term relationship between him and its customers.
2.2) Strategy introduction
The achievement of business objectives (generating profit) is only possible if the company has established a good strategy. "Without a strategy, an organization is like a ship without a rudder, going around in circles. It's like a tramp; it has no place to go."Joel Ross and Michael Kami (David R. Fred strategic management p3) The process of fixing strategies and objective in a company is related also to its mission. So first what are missions, objective and strategies for a company.
2.2.1) mission, objectives and strategies within an organization
The mission, the very first element of a business plan after the project summary, is the foundation stone of a business, the aspiration which it continually tries to attain. It is its reason to be, and it shapes all decisions made by the company. Thus, the quote of Peter Drucker, the American management theorist(Peter DRUCKER, Management: Tasks, Responsibilities and Practices, Harper & Row, New York, 1973, p 120), is always up to date: "The most important reason for frustration and failure in companies comes from insufficient reflection of the company's reason to be, its mission".
Generally, mission within a company is related to objectives. Objectives are essential and vital in running a business, objectives are the expression of business purpose. The determination of the objective is the beginning of the managerial process. A goal is a specific outcome to be achieved within a specified time. It is defined quantitatively and/or qualitatively. It results from a calculation, the objectives are the quantified goals that the firm seeks to fulfill in order to achieve its goals. The objectives of the company are diverse. They can be fixed in the long or medium term ( more than one year) or in the short term (to be achieved in the year). They can be classified in terms of profitability, market share, diversification, productivity, innovation, quality, prestige, training of personnel, etc.
The realization of objectives is possible only if a good strategy has been planned. The strategy serves to materialize the policy directions taken by the company. A business strategy is the set of choices of the most relevant objectives and means that direct its activities in the medium and long term to ensure the survival of the company and enable it to gain a competitive advantage in its market. The strategy is translated into a set of operational and coherent action plans to be implemented over time and in different areas of activity. It may also include alternative plans in case we have major events affecting the company's environment.
A good strategy is not taken in isolation. It takes into account the managers' vision and is closely linked to the reason to be or mission of the company. It encompasses some steps as - define the goals or finalities. For example, our goal is leadership and growth; - lead to a diagnosis of the business situation, it is about the company within its competitive environment to find out opportunities and know threats that the company can face in the environment.
To be successful, organizations constantly try to match its own capabilities to the needs of its customers(current and potential), the best way to achieve, it is to implement a good strategy.
The aim is to carry out a strategic diagnosis of the company's situation, concretely, we have here to determine "strategic" objectives that company wishes to achieve. So what is a strategy? Strategy means different things for different people. The term has had several meanings, different in scale and complexity, it can mean policies, objectives, tactics, goals, programs, among others, in an attempt to express the concepts necessary for its definition.
" There is no single, universally accepted definition". Mintzberg & Quinn (1991). The strategy is a mediating force between the organization and its environment: consistent patterns in streams of organizational decisions to deal with the environment. Mintzberg (1979).
According to Igor Ansoff (1965): "The strategy is the firm's conception of its activities, specifying its rate of growth, the fields of its expansion and its directions, the major forces to exploit and the profit to be realized".
For Michel Machesney (1993): "The strategy consists of reflections, decisions, actions to determine the general goals, then the objectives, to determine the means to achieve these goals, Implement the actions and activities accordingly, to monitor the performance of the execution and the achievement of the goals "
"(strategy) is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of the courses of action and the allocation of resources necessary for carrying out those goals." Chandler, A.D (1962).
"Strategy is a series of actions undertaken by a company according to a particular situation". von Neumann & Morgenstern (1947).
The analysis tool here is the SWOT. It is very important to keep in mind the goal of the company during this diagnosis; - determine your strategic objectives, here we have to choose your goals, the objectives are to be linked to the goals defined in the first stage. Over all those objective must be encrypted and defined according to a time horizon.; - define strategic choices and orientations. To achieve your goals, it is now necessary to make structuring choices that will strongly impact the existence of your company.
2.2.2) Strategic orientation of firms
The diversity of orientations taken by companies (establishment abroad, the opening of a subsidiary, concentrations, mergers). We can distinguish:
1)Offensive and defensive strategies(Behavioral strategies). The defensive strategy is to adapt to the circumstances or to imitate the behavior of a dominant firm in a market. The aim of the defensive strategy is, therefore, to enable the company to remain competitive.
Offensive strategies, on the contrary, aim at the growth of the company and the development of its market shares with the aim of reaching, if possible, a situation close to that of a monopoly.
- The strategy may be offensive in terms of products (launch of new products, the creation of new range, etc.).
- The strategy can also be offensive in terms of markets (for example, commercial strategy of penetration of foreign markets).
- The strategy can finally be offensive in terms of price (reduction in margins for example) or protection of know-how (filing of patents).
Classification by strategic area:
1) Product strategies(Specialization and diversification strategies). The strategy of specialization is generally linked to the knowledge of a technology while the strategy of diversification, for its part, consists of extending these activities in totally different fields.
2) Strategies focusing on markets: The penetration strategy consists for the company to strive to get a dominant position in a market. The company will analyze the elements of its marketing plan (price, product, communication, distribution) and adapt them according to the objectives it has determined. Penetration pricing is a pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market. The strategy works on the expectation that customers will switch to the new brand because of the lower prices.
On the other hand, we have the skimming strategy consists of targeting a specific clientele or a specific group of customers. It is usually accompanied by a strategy of hyper-specialization on a given product or service, price skimming is a pricing strategy in which a marketer sets a relatively high initial price for a product or service at first, then reduces the price over time.
3) Strategies for internationalization
4) Different product-market strategies:
Concentration on a couple product/market: This is referred to as a niche strategy when the target segment is particularly narrow (but profitable!) And the supply is therefore very specific. The company specializes in a product for a given market segment.
Specialization by product: The same product is proposed to several targets. The goal is to capitalize on a know-how and to become a specialist of a product. But this poses the problem of the brand 's credibility in the various market segments and constitutes a risk of dilution of the brand image.
Specialization by market: Products of a different nature are offered to meet the expectations of the same market target. This is a strategy of successive brand extensions. The company will capitalize on the image known and recognized by the target already identified to market new products.
Selective specialization: Different products are offered in different market segments. But this raises the question of the brand image and the company could with time loose market share.
5)Global coverage: The company chooses to cover all market segments with all existing productions. This strategy of total occupation of the territory requires large means to ensure the credibility of the brand with different targets and the same level of quality on all products.
Strategies are the means by which long-term objectives will be achieved, there are possible actions that require top management decisions and a lot of amounts of the firm's resources. Besides, as the strategies can affect an organization's long-term prosperity, henceforth there are future-oriented. Strategies have multifunctional or multidivisional consequences and require consideration of both the external and internal factors facing the firm. It is the reason why it is very important to implement a good strategy. The strategy notion is found almost everywhere( politics, economics, businesses, war, companies, organization…).
As a matter of fact, each company's function has is own strategy closely related to the general strategy of the company. In our work we will focus on how the strategy helps a firm to have a strategic position or a competitive advantage over its competitors, thus we will base our work on marketing strategy. A marketing strategy aims to establish your company in its market, to define its positioning in the mind of your target and create a value corresponding to its needs, desires, and expectations. Strategy according to us can be seen as some action that a company has to implement in order to achieve its long and short term objectives and same time attain its mission.
Marketing strategy has the fundamental goal of increasing sales and achieving a sustainable competitive advantage. It encompasses all basic, short-term, and long-term activities in the field of marketing that deal with the analysis of the strategic situation of a company and the formulation, evaluation, and selection of market-oriented strategies and therefore participate in the goals of the company and its marketing objectives, it can also be seen as a marketing plan. An organization's strategy that links all of its marketing goals into one integral plan. A good marketing strategy should be drawn from market research and are centered on the right product mix in the bid to achieve the maximum potential profit and sustain the business.
The process begins with a scan of the business environment( internal and external factors), look up technological, economic, cultural, political… aspects. Through this analysis, we can identify and evaluate opportunities and threats.
The second phase consists of analyzing market segment( we take into consideration aspect such as geographical aspect ( country, region, city, town...); psychographic aspect ( personality traits or character traits that influence consumer behavior), demographic aspect (age, gender, socio-economic class...), Behavioral (brand loyalty, usage rate…) and choosing target markets. The company has to be sure the target market chosen will be beneficial for them. A well-defined target market is the first element of marketing strategy.
The third phase, planning a market position and elaborate a marketing mix strategy. The marketing mix is the four elements of a marketing strategy that determine the success of a product or service in the marketplace. Generally, we distinguish 2 type of marketing mix 4Ps and 7P's. 4P's: product(design, branding, packaging, lifecycle of the product…); price(price setting, price strategy… ); place(location decision, warehouses, market coverage, assortment…) and promotion( message, promotional mix…) and later it had been added process(Process design, Analysis of resource requirements and allocation Introduction of key performance indicators (KPIs)…); people(recruitment and training, Managing social interactions…); and physical evidence ( artifacts, souvenirs, symbols…). But we find also 6 Ps, 7 Ps, 8 Ps, 9 Ps and occasionally more. Here, the company has to think how to position the product in the mind of a consumer, so the company has to choose which best marketing mix will be tailored to consumer expectations and serves the company's profitability objectives.
The fourth phase it is about to prepare a formal marketing plan: A marketing plan also contains a description of the current marketing position of a business, a discussion of the target market and a description of the marketing mix that the business will use to achieve their marketing goals. Marketing plans start with the identification of customer needs through a market research(market situation analysis, action programs, strategies, budget sales forecasts and projected financial statements. The marketing plan should also help to identify the organization's competition, and how the business can satisfy these needs while generating an acceptable level of return. Competitors analysis consists of making an assessment of the strength and weaknesses of present and potential competitors, the steps include: define your industry( scope and nature of the industry), determine who your competitors in the industry are, determine who your customers are and what benefit they expect.
The last phase, executing the plan, controlling effort and evaluating the result. The execution can also be considered as the implementation section that shapes the exact steps the business will take to achieve the strategy. Evaluating the marketing plan means looking at the numerical data to see if an organization has achieved or not its strategy objectives from the execution phase. Controls are necessary for the evaluation phase. Controls provide benchmarks which will assess how well the plan has accomplished its goals.
A relevant marketing strategy requires a process of studying the opportunities and threats of its environment and then confronting them with the strengths and weaknesses of the company, followed by the phases of segmentation, targeting and finally positioning. Our literature review will consist of some marketing tools which will help us go deeply in our research, it will consist of:
- PESTEL Analysis
- PORTERS FIVE FORCES MODEL SWOT Analysis
- THE MARKETING MIX
- SEGMENTING CONSUMER MARKET
2.4) PESTEL Analysis
We are going to review now the Pestle analysis, then pestle analysis is often linked with Swot analysis, the tools complete one another and are often used together. The first one explores the factors of a business, product line or product level, the second one looks at the "big picture" factors that might influence a decision, a market, or a potential new business.
The term PESTLE (Political, Economic, Social Technological, and Legal) has been used regularly in the last 10+ years and its true history is difficult to establish. from what we learnt, the earliest known reference to tools and techniques for ‘Scanning the Business Environment' appears to be by Francis J. Aguilar (1967) who discusses ‘ETPS' - a mnemonic for the four sectors of his taxonomy of the environment: Economic, Technical, Political, and Social.
Later others approach will add in extra factors, such as International, or remove some to reduce it to PEST. Thus we find:
PEST analysis (political, economic, social and technological)
PESTEL or PESTLE, which adds legal and environmental factors. Popular in the United Kingdom.
SLEPT adding legal factors.
STEEPLE and STEEPLED, adding ethics and demographic factors. DESTEP, adding demographic and ecological factors.
SPELIT, adding legal and intercultural factors. Popular in the United States since the mid-2000s
However, these are all merely variations on a theme, The important principle is identifying the key factors from the wider, uncontrollable external environment that might affect the organization.
PESTEL/ PEST analysis aims to understand the cause and effect associations between the things shaping our business and its markets.
As a new/ business manager, the first thing you must be in tune is the state of micro economics and macro economics. A macro environment analysis is the major external and uncontrollable factors that influence an organization's decision making and affects its performance and strategies.
Main reason is given to have an assessment of the market for a business or organizational unit strategic plan:
Highly recommended when entering a new market, it gives a company a detailed overview of the different factors it needs to reflect when entering a new market (different macro environment factors the company has to take into consideration: political stability, inflation rate, labor law, international trade…to name few.) Be aware of the powerful forces of change that affect or can affect our working environment, in the bid to take advantages of those changes to be likely more successful.
A good use of pestle analysis help you avoid taking action that could lead to failure for reasons beyond your control, then it provides significant and warning information that will help you improve your business or organization.
Six categories of macro-environmental factors that can influence an industry are:
Policies: government stability, fiscal policy, social protection, foreign trade, as governments intervene in the economy, businesses are bound to be affected, how foreign markets operate...
Economic: economic cycle, the evolution of GNP, interest rate, monetary policy, inflation, unemployment, disposable income, macro and micro-economical economic factors such as interest rates, exchanges rates, inflation, and disposable incomes influence how you will manage your business at present and in the long run., ... Sociological: This has to do with the beliefs and culture of the society you are operating in, demography, income distribution, social mobility, consumerism, the level of education, the attitude of leisure and work…
Technological: businesses also have to deal with production, distribution, and communication changes imposed by new technology in order to stay afloat in a competitive economic landscape, public spending on R & D, private investment in technology, new patents or discoveries, the speed of technology transfer, the rate of
Ecological: laws on the protection of the environment, waste reprocessing, energy consumption...
Legal: monopoly laws, labor law, health legislation, safety standards, etc.
Scanning the business environment is the first step in effective business planning or developing a business strategy. It helps the business to provide the decision with the context within to make an informed decision. In reality, success or failure is likely to be understood when we know. Pestle analysis is a strategic tool which permits a given company to have an overview of the different factors it needs to understand when entering a new market in. Even of nowadays, it is not only important but useful for the company, then it provides a big picture of the environment in which they will evolve or are evolving.
Knowing now our market, we need now to have an idea of who will be our concurrent, we will then assess the industry competitivity through one another marketing tool namely PORTERS FIVE FORCES.
2.5) PORTER'S five forces model analysis.
Generally, we can define competitive forces as factors that influence the competitive position of a company in an industry or market. " Awareness of these forces can help a company stake out a position in its industry that is less vulnerable to attack." Michael
The model of the "Five Porter Forces" was developed in 1979 by strategy professor Michael Porter. It considers that the concept of competition must be broadened. Within an industry, a "competitor" refers to any economic operator likely to reduce the ability of the firms involved to generate profit. The state of competition depends on five forces:
Case study 14 - Nokia & Coke
What do you need to know?
What are the local, national and regional impacts of these decisions?
Map showing the location of Nokia's operations
Reasons for the location of its operations
MNCs such as Nokia have branches in many countries because they want to reduce costs. With lower costs, their profits are higher. MNCs such as Nokia keep costs low by opening factories and offices in regions of the world that have:
Low labour costs
Cheap land or building costs
Low business rates(the tax paid by a company)
Locating business to be close to the customer:
Another reasons why Nokia is constantly expanding its range of factories and offices is to be close to its customers, who are spread right across the globe. Nokia's products have massive appeal. Nokia estimated that the mobile phone market had around 2.2 billion people in 2005 and this was expected to rise 4 billion in 2009. Growth in mobile phone ownership and subscription has been particularly strong in Newly Industrialising Countries (NICs). As consumers in LEDCs have become wealthier, Nokia has expanded its business into Asia, Africa and South America. It has, therefore, opened new sales offices in many NICs, located closer to these new customers.
Different jobs in different locations:
Nokia employ a wide range of staff. Some are highly qualified or skilled, such as business managers or R&D staff. Other staff, such as some assembly workers or sales stuff, do not require high-level qualifications or as much training. So, like many other MNCs, Nokia has chosen to locate the assembly of basic products in their range in NICs where wages are lower.
However, the more highly trained R&D staff tend to work in Europe. Here, Nokia develops new products, such as hand-held devices capable of filming video, playing games and surfing the web. These devices use the latest technology and therefore need more highly trained staff to develop and produce them. These high-tech products are also aimed at wealthier consumers, so it makes sense to make them in Europe.
Coca-Cola - not just bad for your teeth?
Pollution caused by the factories - lower standard of regulation
Jobs for local people
Local people can learn new skills
Development of local infrastructure
Development of mineral wealth
New energy projects such as dams built
Large-scale pollution in lakes and rivers
By manufacturing in Europe Nokia can avoid having to pay tariffs in the EU
Improve the quality of life of people living in the region