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Nestle Porter's 5 Forces

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Nestle Porter's 5 Forces
* What does the model tell you about the nature of competition in the industry?

External Analysis (Porter's Five Forces Analysis)

Threat of Substitute products (low)
Food and beverage market has a long industry chain and big industry span so threat in substitute products is low. Giants such as Wrigley (Mars, Milkway, Snickers and etc), Unilever (Knorr, Cornetto ,Lipton Ice tea and etc) ,Coca Cola, Nestle have similar products to offer to customers. But in Nestle case threat of substitute products is high because of wide range of similar products that can compete directly with Nestlé. For example, Danone led Nestle to decreasing sales in 2009 in European Markets. In order to make a differentiation in the worldwide market Nestle should innovate its products to stay in the market and to go beyond its substitutes. Recent innovation made by Nestle health consciousness and wellness factor that has been introduced in all products of company.

Threat of new Entrants (low)
The company has been lunched since 1866 which gave Nestle a wide experience in the food and beverage industry. With substantial brand equity and a base of loyal customers Nestlé is at an insignificant risk from entrants. Nestlé has an advantage of holding majority of the share in the market where competition is becoming increasingly fierce in the world today. Although the food and beverage industry is very competitive and is constantly evolving with entrants, small business don’t have much advantages due to high cost of business, little profit which lead their survival into serious threat. Consumer demand mostly focuses on brand which makes difficult to access new business.
Nestle Distribution Channel is indirect. Indirect channel is used by companies who do not sell their goods directly to consumers. (REF

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