The food processing industry is very large and competitive; it is not uncommon for firms within the industry to do quite well. As a result, many companies enter into the market every year in an attempt to gain a portion of the profitable market. Luckily for Nestle, the company has been around in China for decades and boasts a long history of quality products and consumer satisfaction, which has allowed the company to obtain a considerable share of the market.
It is shown in accelerated investment activity in the 2000’s which indicates showing long term commitment to China and construction of 16 factories from 1993-2006 in China to meet consumer demand. As a result, new entrants into the industry must attempt to seize a portion of Nestle’s market share in order to survive. Essentially, Nestle is constantly a target, and so the threat of new entrants is relatively low. Threat of Substitute Goods: High
Due to the nature of the industry, Nestle is best with the threat of substitute goods. From bottled water to milk-based products, there are arrays of similar products that compete directly with Nestle. Especially in China, there are many local competitors in food and beverages industry that provides similar kind of product like Nestle’s. It is vital for Nestle to continuously find new ways to improve its products because competition is so fierce.
In recent years, Nestle has focused on the health and wellness aspects of its products to maintain its competitive edge and customer loyalty in the market. Bargaining Power of Customers: High Customers have a large amount of bargaining power regarding their consumption of Nestle products. As stated previously, there are many close substitutes for Nestle products which allows for the preferences of the customer to be very influential. Nestle understands the power of the customer and has taken specific steps to meet the needs of its products consumers.
Specifically, Nestle is incorporating health and wellness into the creation of its products as society has started becoming more health conscious. What does Nestle do for its supplier in China? Long-term cooperation benefiting thousands of farmers such as fresh milk collection and pioneer in coffee culture ? : Received the World Business and Development Award for “Innovative & productive business practices that benefited Chinese society ? gain customer satisfaction and loyalty