3. 1/ Market structure
• Monopolistic competition: each producer sells same
products, but slightly differentiated products. They can
set its price and quantity.
• Characteristics:
Many Customers and Producers on market
The same prices among producers
There are few barriers to entry and exit
No a Producer can control over price.
The good is slightly differentiated ways (advertising,
branding or local production)
There is some degree of consumer loyalty
4. Advantages
• No significant barriers to entry->markets are
relatively contestable.
• Differentiation creates diversity, choice and
utility.
• They may be dynamically efficient, innovative
in terms of new production processes or new
products.
5. Disadvantages
• Some differentiation does not create utility but
generates unnecessary waste, such as excess
packaging.
• Advertising and Marketing may also be
considered wasteful.
• Profitability -> small abnormal profits due to
the high expenses
6. Pricing strategy
• Long-term pricing framework, which establishes
the initial price for a product and the intended
direction for price movements over the product
life cycle.
• 3 type of pricing strategy: Price skimming,
Penetration pricing and Status quo pricing.
• Penetration pricing to market product which is a
way where Nestle charges a relatively low price
for a product initially as a way to reach the mass
market.
7. Choose the price strategy
• When Nestle has decided the product price,
they will choose a good pricing strategy that
will give them direction of price movements
over the Product Life Cycle.
• Nestle are aware about higher price. Theyhave
to produce a good quality of product. Besides
that, the competitors also will influence the
pricing strategy.
8. Output decisions
• For the price, Product should make a good pricing
strategy. If they want to put a high price, they have to
make sure that the quality and the quantity are suitable
enough with the price.
• They also can do the packages which contain the
chosen product in one pack and they will set the price
for the pack in a moderate value. This is also known as
eco pack. This pack is affordable whereas not only the
high income persons but also low income are able to
buy.
• -> They that Nestle are not bias and are suitable for all
level of person.
9. 2/Market forces
• Demand and Supply
• Establishing pricing goals: Marketers have 2 choices
whether to use profit oriented profit maximization or
satisfactory pricing. The marketers need to have an
understanding of trends and changes in the market
place to set a goal. If Nestle have decide to go for profit
maximization objective, they must be able to afford
large sum of investment. It is easy to follow
competitors pricing but they may not have the best
considering cost, demand and changes in Product Life
Cycle. So they have to require a careful analysis before
setting the price.
10. Estimate demand, costs and profit.
• After the pricing goals have been established,
Nestle have to estimate demand, costs and
profit. It is important for Nestle to know the
corresponding cost for each product price. So
they need to estimate the profit that they will
earn, determine level of price and how much
market share they will get.
11. PESTEL
• Analysis-is a simple and effective tool used in situation
analysis to identify the key external (macro environment
level) forces that might affect an organization.
Therefore, the aim of doing PEST is to:
• find out the current external factors affecting an
organization;
• identify the external factors that may change in the future;
• to exploit the changes (opportunities) or defend against
them (threats) better than competitors would do.
• The outcome of PEST is an understanding of the overall
picture surrounding the company.
12. Political
• The United States is a representative federal democracy driven by
elections in which citizens' and lobbyists' diverse interests compete.
-> Strict quality control played a role in political factor. It means that
Nestlé’s products quality will not be different with other countries.
Consumers are guarantees with full satisfaction of the products all
over the world.
• Nestlé’s products are always come with the seal of guarantee. By
having the seal of guarantees, consumers are now more confident
and trust of Nestlé’s products. Strict quality control played a role in
political factor too. It means that Nestlé’s products quality will not
be different with other countries. Consumers are guarantees with full
satisfaction of the products all over the world.
13. Economy
• The United States, with an economic freedom score of
75.5, is the 12th freest economy in the 2014 Index. Its
score is half a point lower than last year, primarily due
to deteriorations in property rights, fiscal freedom, and
business freedom. The U.S. is ranked 2nd out of three
countries in the North America region, and although its
score remains well above the world and regional
averages, it is no longer one of the top 10 freest
economies.
• GDP (by sector) : agriculture: 1.2% industry: 22.1%
services: 76.7% (2011 est.)
• Corporate tax rate of 35%
14. ->Purchasing power: Nestlé also collaborates with local
government to provide technical assistance to farmers in
planting and harvesting crops. The farmer will get income and
Nestlé will get to purchase good and fresh raw materials to
produce their food. By having own local productions, Nestlé
should no longer needs to import any raw materials from other
country where they will save much more money. It will also
benefit the consumers whereby consumers could enjoy the
local productions with low price. More consumers will use this
product and therefore Nestlé will gain more profit from that.
15. Socio Culture
• Multicultural American has a variety of
expressions due to its geographical scale and
demographic diversity.
• -> A good diet and adequate food supply, the
central for promoting health and well-being is
the focus of every person even these days;
whether people tend to value products that
incorporate with them healthy benefits.
16. Teachnology
• Almost all of the people nowadays will get contact with
Internet and Mobile Technology . Nestlé could use this
advantage to benefit them by using technology to
promote their products over those advanced technology.
• -> Customer could get any information from their site.
Nestlé’s employees could use this internet service to
connect to its industry in other country . They did
research and development by using the technology to
find more information to satisfy the local tastes and
cultural flavours in each country market. By
understanding what each country asks for, Nestlé could
market difference product according to the customer
demand in difference country.
17. Environment
• The industry environment has a more direct
effect on the firm’s strategic competitiveness
and to earn above-average returns. The
intensity of industry competition and an
industry’s profit potential are functions of five
forces of competition such as the threat of new
entrants, bargaining power of supplier,
bargaining of power buyers, threats of
substitute products, and intensity of rivalry
among competitors.
18. ->
• Porter singled out five different forces that
impact competitive intensity which portrays an
image of the overall attractiveness and
profitability of a market. To aid in my
evaluation of Nestle and its status in the
industry, I will apply Porter’s Five Forces
Model to the company.
19. Legal
• Protection of crucial business processes by
copyrights and patents
• -> They have to make sure that they follow not
only the laws in US but also the laws in the
countries they operate
20.
21. 3/Culture
• Spelling of name
Name of Americans own name written in the first
name, then the middle name and finally is surname.
Surname taken from their father and do not taken
from their mother.
• Way of communicating
Except for some special cases, Americans often call
each other by their first name. However, there are
some common principles that foreign traders should
follow.
For once direct contact or by mail first, should call
each other by Mr., Mrs., Miss, Ms. or Dr. and then is
surname.
22. • Greeting
As in other places in the United States, shaking
hands is a common greeting .Sometimes , man with
woman or woman with woman greet each other by
hugging, and even has the cheek to cheek or kiss
cheek each other. Forms are usually offered only to
those who are long time friends, or at least have
known each other well.
• Equal treatment for women
• Equal treatment with the other races
23. Market segmentation
• Market segmentation: dividing a market into
distinct groups of buyers who share the same
or similar attitudes and patterns of behavior.
• Market can be segmented by:
₊ Demography
₊ Geography
₊ Age
24. • Demography:
₊ Nestle ‘s demographic segmentation than they will find
that our product is for everyone. People from any area ,
any culture , any age , any sex , any belief and an income
will use it . It is not any luxury item which is used by a
specific people.
• Geography:
₊ The company segments its market geographically on
divisional basis. They divide each division in different
zones and every distributor is restricted to sale its
products.
• Age:
₊ The products for everyone , for all age , for all
social. Anyone can use the products as per need.
