Nestle Case
Nestle is a big company that is the objective is to enhance the quality of consumers lives through health, nutrient and wellness. A company as huge as nestle, the worlds largest food and drinks maker, said that it expects 2014 to be challenging just like last year amid falling growth in emerging markets and weaker prices in Europe. The maker of Perrier, Nescafe, Haagen Dazs, and Jenny Craig is a major buyer of food commodities such as wheat, sugar, and milk and its results is a good indicator of the strength of consumer demand around the world. Nestles shares fell 1.49 percent to close at 66.10 Swiss francs. Nestle, based in Vevey, Switzerland, said that although 2013 has a weak progress, it expects an improvement only in the second half of the year 2014. Organic sales, which do not reflect accomplishment and currency variation, are to anticipate growth of 5 percent by next year. Its net profit in 2013 fell to 10 billion francs ($11.1 billion), from 10.6 billion francs in 2012. 9.5 billion Swiss francs of profit was made in 2011. “Last year, which is year 2013, was challenging and this year, year 2014, are to be expected to be similar.” CEO Paul Bulcke said. He said that this year would most likely to be able to see improvement but the improvement will be only be able to seen at the second half of the year 2014. Nestle is facing slowing demand in emerging markets and in Europe, where many customers are adjusting to government austerity measures. It said organic sales growth was 4.6 percent. Nestles aim every year for 5-6 percent organic growth and improvements in its trading operating profit margin, underlying net income per share and capital efficiency. (Heilprin, 2014)
If this case is analysed thoroughly, nestle faces challenge is because of the demand side of the market. What does demand actually means? Demand is an economic principle that describes a consumers willingness and desire to pay a price for a particular good or service. By holding other factors constant, the price of a good or service increases as its demand increases and vice versa. One of the reasons why nestle is facing lost but not profit is caused by the substitution of nestle products that can be used for the same purpose. Well known nestle’s products such as cereals and coffee can be substitute by other products in the market. Customers has the power and the