Nestle Essay Example | Topics and Well Written Essays - 3500 words

Nestle - Essay Example most appropriate growth strategy to pursue will be determined by arriving at decisions about whether to sell old or new products in old or new markets. (Ansoff, 1957). Nestle’s growth strategy falls under the category of concentric diversification, wherein a Company produces new products that are closely related to its current products, but introduces them into a new market (Ansoff, 1957). This has been Nestle’s strategy in countries such as infant formula, tofu and noodles which are basic food stuffs but are tailored to meet the needs of the new market, for example in India, the Company also sells pickles to appeal to the housewife market. Nestle’s financial strength and ability to weather the recession may be closely linked to its diversification strategy. Since it has such a broad based approach, any potential issues that it is likely to face are marginal. The efficacy of this strategy is also borne out through the application of the Shareholder Value Analysis, developed by Rapoport (1986). Rapoport identified three specific value drivers, namely Finance, Investment and Business, all three of which if improved, could lead to a direct increase in shareholder value. In general, shareholders in a Company are rewarded in two different ways: (a) dividends paid and (b) capital appreciation, which depends upon the kinds of investments that the Company undertakes. The total shareholder return for a specific year can be calculated using the formula: TSR = Dividends + Capital Appreciation (Pike and Neals, 2006). From an examination of Nestle’s balance sheets for financial records in the European region, it may be noted that the net dividend yield percentages have increased as follows: 2006 – 2.4%, 2007- 2.8% and 2008 – 3.1% (NestleSA, 2008). The last share price in 2006 was 42.85, in 2007 it was 48.05 and in 2008, it was 45.56.(www.nestle.com). The total shareholder value for each year may therefore be calculated as follows: This result from the