When I look at this blog, we know that as one of the well-known business operations in the world, Nestle is deciding to diminish its unprofitable sectors. This is because despite bad brands can make profit in some cases; their marginal benefit is lower than the average benefit and cannot run Nestle as a profitable company. I totally agree with Dimu’s opinion because cost is an important element to consider in business operation. If Nestle continue operates these bad brands, it will increase its’ total cost, also unprofitable brands will create bad influence on Nestles’ reputation since the company need to show their financial statement to public.
From my standpoint, reducing underperformed sectors in Nestle is a proper market method to save cost. Therefore, Nestle can invest majority of their cost toward profitable brands to increase benefit. When Nestle increase its profit level, it will create business confidence for the investors and strengthen the firm position. However, it is so narrow to use “profit level” to judge whether the brands are good or bad. This is because the business operators in Nestle are limit to predict whether these brands can make profit in long term. Maybe these sectors make loss in short term, but in long term, they may earn profit.