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A Case Study of The Food Company Nestle Marketing

Nestle is one of the oldest multinational companies, founded in Switzerland in 1867. It is now the largest food and beverage company in the world, operating in nearly every country. Nestle pursues growth in emerging markets by employing local managers, offering affordable basic products, and investing in local infrastructure to establish strong distribution channels. This multi-pronged strategy allows Nestle to gain brand loyalty as markets develop while securing an early foothold.

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KSHITIZ GUPTA
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210 views4 pages

A Case Study of The Food Company Nestle Marketing

Nestle is one of the oldest multinational companies, founded in Switzerland in 1867. It is now the largest food and beverage company in the world, operating in nearly every country. Nestle pursues growth in emerging markets by employing local managers, offering affordable basic products, and investing in local infrastructure to establish strong distribution channels. This multi-pronged strategy allows Nestle to gain brand loyalty as markets develop while securing an early foothold.

Uploaded by

KSHITIZ GUPTA
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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A Case Study of the Food Company Nestle Marketing

Nestle is one of the oldest of all multinational business, began in Switzerland in


1867 when Henri Nestlé, a pharmacist launched his product ‘FarineLactee’
Nestlé, a nutritious gruel for children. Nestlé, which means ‘little nest’s used in
both the company name and the logotype. It symbolizes security, family and
nourishment. Today Nestlé is the world's biggest food and Beverage Company. It
employs roughly 280,000 people in over 86 countries and has factories or
operations in nearly every country in the world. The Nestlé family has grown to
produce products that include chocolates, soups, coffee, cereals, frozen products,
yoghurts, mineral water and other food productsNowadays, Nestle is one of the
biggest food and nutrition companies in 86 countries in the world. (Hill, 2009 pp).
Nestle was involved with a range of acquisitions in the last years in order to extend
its line of products and try to expand on a geographical scale. Since its sales are
reducing in developed markets, Nestle has the opportunity to expand business in up
and coming countries, which is going to generate more profit for the company. Up
and coming countries is one sector that Nestle is going to invest money in because
it has the potential to be a strong and attractive market. Nestle feels confident in
doing so because in such countries population economy and technology has
experienced a rapid growth. Nestles long-term strategy is to identify the quickly
expanding countries first and get into the market as soon as possible in order to
take advantage of other competitors. However, it first has to hold the leading
position in the developed markets where it is currently placed. Also Nestle has to
hire local managers and staff in the developing markets that understand the local
market dynamic and culture. It is a huge advantage that Nestle works with local
managers in fast rising emerging countries. As a result, Nestle will have quick
results which lead to quick profits

Nestle is closely related to the Strategic management module because companies


will have a range of research (reports) on fast growing countries. Therefore, they
will have the ability to balance the services they are able to provide (food, cereals,
coffee, chocolate, drinks, ice cream, etc) (Nestle 2011), with the price that
customers are willing to pay. For example, if people cannot afford the Nestle
products then they will not expand in such countries but focus their attention and
invest in countries where people are able to buy their products.

Also, Nestle is connected with methods of enquiry with Emerging markets.


Companies will have less space to roam around and make decision considering that
much of their movements are controlled by the market reaction. This means that
emerging markets are countries with social or business activities in the process of
rapid growth and industrialization.

From an organizational perspective for an a strategy to work effectively it is


necessary to ensure that the strategy is developed in such a manner that it would fit
the market needs and help the company to gain a comparative advantage
(Oladunjoye & Onyeaso, 2007, pp. 592 – 598). Based on everything that has been
stated above and the manner in which Nestlé’s is currently operating in China,
India, Africa, the Middle East and Eastern Europe, it is clear that the company has
adopted many different successful strategies that are helping it to gain a
competitive edge in these markets while continuing to benefit from the ‘first
mover’ advantage that it has created for itself.

The overall structure and the strategy of the company as stated previously and have
been made clear to the reader throughout the case study, is that the company
pursues a multi domestic strategy, due to the need to have a high responsiveness to
the local market needs (Drejer, 2002). While this is impressive, the company goes
further to also ensure that it is staffed by local nationals in the host countries and
that power and authority is decentralized as much as possible, again indicating that
the management structure is indeed very much aligned to its philosophy of local
autonomy and its multi domestic strategy (Silverman, 2002). However instead of
relying on the local managers alone, the company also has a pool of at least 700
expatriate managers who travel from one country to another ensuring that the local
and regional strategies of the company are upheld and global integration is a
possibility (Mintzberg & Rose, 2003, pp. 270 – 277), while this may sound like a
sound and often a wise move on the part of the company, the fact that none of the
regional international managers get involved in local level strategy design and the
fact that none of the local level managers are involved in the global strategy design
and development leaves a disconnect that can cost the company dearly in the long
run and therefore it is necessary to take a close look at the integration of both and
make changes wherever necessary

Does it make sense for Nestle to focus its growth efforts on emerging markets?

The recent financial crisis that reverberated throughout the globe was a clear
indicator of the interdependence and the codependence that globalization has
created while simultaneously making it clear to everyone that the emerging
economies, especially those that make up BRIC (Brazil, Russia, India and China)
are more resilient than western economies, thus making them engines of growth
that have helped the recovery effort in the last few years. Therefore from that point
of view alone it can be stated that yes, Nestlé’s strategy to focus its growth efforts
in developing or emerging markets is indeed a sound one. However this does not
mean that the ability of these markets to recover faster than the western economies
should be sole reason for such a decision. Rather there are many more and varying
reasons that need to be taken into consideration. The onset of globalization for one
thing has helped uplift the living standards of many in China and India and
millions of families have climbed out of poverty and are able to aspire to better life
styles and a better standard of living, thus creating new markets companies.

What is the company’s strategy with regard to business development in


emerging markets- Does this strategy make sense- From an organizational
perspective, what is required for this strategy to work effectively?

As is clear from the information that has been provided in the case study, Nestle
uses a variety of different strategies to develop its business activities and markets
in the emerging markets. While many maybe of the opinion that only one or two
strategies should be used in order to ensure that synergies of scale are gained and
that there is consistency across the operations, such a customization of strategy to
meet the specific needs of an economy is highly commendabl. For instance in
countries like India and China, Nestle has entered the market by providing low cost
brand name basic food stuff like condensed milk and infant formula, in doing so
the company has also located its manufacturing plants within the countries and the
regions, employed host country nationals and helped uplift their living standards.
Thus not only has the company provided them with a livelihood by employing
them and purchasing local produce from local farmers and businessman, but in
doing so has also created loyalty to its brand, which is something priceless
(Karake-Shalhoub, 1999). As the living standards and the income levels of these
individuals and entrepreneurs increase, they will no doubt continue to be loyal to
the Nestle brand and purchase the more upscale and products that are sold by the
company, when they are ready to move from basic food stuffs to more branded and
upscale foods stuffs like cookies and chocolate.

Likewise another strategy that is being used by the company is to enter markets
like Nigeria and China and invest in basic infrastructure to ensure smooth
distribution channels, while many may see this as a waste, in the long run, the
company has gained a strong foothold in the marketplace, created job opportunities
and further increased the visibility of its brand and thus increased entry barriers for
the competition (Sims, 2003), thus it can be stated that this is indeed a very good
business development strategy that is being followed by the company at the present
time.

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