When Consumers Think of Nestlé,they Probably Think of Chocolate

question 51

Multiple Choice

When consumers think of Nestlé,they probably think of chocolate.Historically,though,Nestlé's confectionary business is its weakest area.Based in Switzerland,it is the world's Nestlé
largest food company,with a brand arsenal of Nescafe,Jenny Craig,Perrier,Purina,and PowerBar,just to name a few of its 30 product lines.Nestlé is hoping to become the "world's leading health,nutrition,and wellness firm" by spending billions of dollars on research and development of functional foods--foods that have pharmaceutical-like capabilities to enhance energy and heart,bone,gut,and other health.Nestlé wants consumers to see chocolate as a pharmaceutical product rather than just a treat.Part of this new focus includes streamlining their product mix by selling underperforming items or lines that do not fit its new direction.Critics claim this new focus could hurt the company's existing brands if the new products fail.Additionally,it may be an uphill battle convincing consumers that a company known for indulgence is now a wellness company.
-Refer to Nestlé.What adjustment to its product mix is Nestlé doing when it removes underperforming items from the market?

• A) product line extension
• B) product line contraction
• C) product pruning
• D) product line retraction
• E) functional modification

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Definitions:

Profits Equal Zero

A situation in which a firm's total revenue is exactly equal to its total costs, resulting in no net profit.

Economies of Scale

Cost efficiencies achieved by organizations through their operational scale, with per unit cost diminishing as the scale of production grows.

Monopolistically Competitive

Describes a market structure where many companies sell products that are similar but not identical, allowing for some degree of market power.

Product Differentiation

A strategy used by companies to distinguish their products from those of competitors based on features, quality, or design.