Nestle Audit - Ansoff Product Matrix

ANSOFF PRODUCT MATRIX

The Ansoff product/market grid offer a logical way of determining the scope and direction of a firm’s strategic development in the marketplace. The firm’s strategic development consists of two related types of strategy: portfolio strategy and competitive strategy.

The portfolio strategy specifies the objectives for each of the firm’s product/market combinations. It points the dots on the horizon.

The competitive strategy specifies the route to reach those objectives.

Nestlé operates in a multitude of different markets with different products. Based on the original product/market grid, four generic competitive strategies are identified:

1. The Market penetration consist in selling more of the same products and services in existing markets. This strategy can be developed by lowing the prices so that the products can enter into the market more quickly.
2. The Market development, sell more of the same products and services in new markets.
3. The Product development consist in selling new products and services into existing markets.
4. Diversification consist in selling new products and services into new markets.
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We are going to identify this strategies following the history of the company and analysing each product.

The first products of Nestlé were dressed to children alimentation in 1867, so the brand start like a baby food company.

In 1938 they introduce the coffee as a product of the company with the brand of Nescafé. This was a strategy of product development because they offered a new product remaining in the same market (alimentation market). The same strategy was implemented in the early 1940s, when they introduce Nestea.

The close of World War II marked the beginning of a particularly dynamic phase of the history of the company. Dozens of new products were added as its growth accelerated and it acquired outside companies. In 1947 the Maggi products, from seasoning to soups, become part of the Nestlé family and Nesquik, the instant chocolate drink, was developed in 1948. We can say that this both are product development strategies too.

For the first time they diversified outside the food industry when they became a major shareholder in L'Oréal, one of the world's leading makers of cosmetics in 1974. A few years later, rising oil prices and slow growth in industrialised countries meant that the company needed to respond to a radically changed marketplace. In 1977, it made its second venture outside the food industry by acquiring Alcon Laboratories Inc., a U.S. manufacturer of pharmaceutical and ophthalmic products. Both strategies are conglomerate diversification because the company start selling a completely new, technologically unrelated products in new markets.

Nestlé continue implementing a product development in the subsequent years with this actions:

• In 1984 an improved bottom line allowed Nestlé Company to make new acquisitions, including a public offer of USD 3 billion for the American food giant, Carnation. At the time, this was one of the largest acquisitions in the history of the food industry.
• They started to commercialize Nespresso products in 1986 with a simple idea: enable anyone to create the perfect cup of espresso coffee, just like a skilled barista.
• The Italian brand Buitoni, in Sansepolcro, became part of its portfolio in 1988.

The first half of the 1990s were favourable for Nestlé, it changes the strategy and start doing a market development with the opening up of Central and Eastern Europe, as well as China.

Nestlé merged with the Ralston Purina Company, which had been founded in 1983, in 2001 to form a new pet food company, Nestlé Purina PetCare Company. This is clearly a conglomerated diversification strategy because the company starts to sell new products and services into new markets.

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