International Marketing Strategy of Nestle
Introduction
In the recent years, the rapid growth in the market had influenced the business practices. The improvement which had occurred in the technology, communication and transportation is proven to be the co-dependent factor among the whole world. The multinational corporations which are working around the world by carrying out the business activities not in one but several of the countries which includes the production and distribution of goods and services. The movement of Multinational Corporation had increased the market growth and the consumers through the world. The factor which influences the most is the globalization which started by opening up the borders in the late 19th century where umber of business took historical decisions towards the expansion of businesses. After the globalization started it process, the money, human resources and technology also started moving across nations even more easily. The organization which took the initiative in making itself multinational was the Nestle, despite of cultural, economic and social constraints Nestle has always been succeeded when it comes to the growth steps. Around 130 nations knows the name of Nestle and the consumers living in those nations consume the beverage products of Nestle. Furthermore, this essay analyzed the historical expansion of the Nestle along with its current strategy towards international market.
Discussion
Nestle is considered to be the world most renowned organization working in the beverages industry and it’s headquarter is located at Switzerland. Nestle expended globally with having 500 factories around the globe with distribution among Europe, America along with Asian and African countries. Nestle was founded by the Henry Nestle who named the organization with his own name. The owner was basically from the Switzerland and in the beginning of 1866 he started manufacturing the milk for babies in powdered form. The main aim at the start of the company was to serve the infants by providing quality foods to save their lives and the milk powdered to those mothers who were not able to breastfeed their babies. Since, the organization have always succeeded in achieving its goals and targets and during that time the organization succeeded in providing the quality food and milk. That was the same reason why the company logo is being designed as the nest to show the care and nourishment through the approach of nature and affection. The idea is still being carried out and that is the reason they had the best corporate social responsibility programs to support culture and value of their host countries (Grew, 2018).
Historical International strategy of Nestle:
The historical international strategy of the Nestle involves the merger with its main competitors during that time Anglo-Swiss condensed milk which led to the rapid sale growth through the Europe in 1905. The business analyst recognize that merger as the horizontal in nature which gave the leverage to Nestle to conduct the business and sale its products of processed milk and infant food throughout Europe by only using its own name. The early 1900 was the period where the Nestle goes international and a step away to turn into a multinational. This move of acquiring and merging it with the competitors was the historical international strategy of the Nestle. The product line which was milk, sugar, cocoa and coffee stayed their core business nature but the company expended throughout Europe and allowing the acquired companies to use Nestlé’s name to sale the goods. After a while, increasing its product line to coffee, soft drinks and ice cream to further gain the strength in every market its operation and captured the food markets. Furthermore, Nestle at that time designed and created the 4 different approaches in order to grow in the current and future markets (Salam, 2016).
Those four approach which are referred as above includes the penetration in the market, development of product, after that developing the market and in the last diversification approach to further increase the line of products. The next addition to its international strategy during 1920’s, Nestle included the Milo along with the proceed milk. This strategy had made them include the customers who were not infants and the product targeted teenagers. After that in 1938, Nestle further using the approach of diversification and included coffee products with the name of Nescafe which had helped the company to further expansion of customers. Through several other strategies, Nestle was not stayed limited to food industry but also included the cosmetic and pharmaceutical products with L’Oreal. The acquisition and mergers were not only limited to food making companies but they acquired Alcon Laboratories in order to gain strength in cosmetics and pharmaceutical products. This approach was known as the economies of scale which had made them cutting the cost of distribution by owning several other companies through mergers and acquisition (Grew, 2018).
This move of diversification in portfolio development, Nestle further expended the brands by using the market penetration approach. Nestle further increased the product lines with similar in nature but targeting different types of consumers which includes the products like Nesquik and Nespresso. In achieving the aim of leading the food industry Nestle didn’t left the food for pets by adding the Friskies and Vittel. China and Saudi Arabia are the clear examples in the start along with other European countries where the historical strategy of Nestle involves the acquisition and mergers. Nestle had always been the one who while penetrating any new market with the approach of Multinational Corporation used its name which had gain fame and also acquiring all the organization which are working on the same product types which Nestle manufactured. The strategies by using its 4 approaches have always helped the Nestle to become the strong multinational corporation. Leading the food and beverages industry was their mission and goal at the start of expanding to new international markets. Nestle created its structure decentralized which had also helped it gaining the success by overcoming the cultural barriers. The local staff of any host countries created its marketing strategies was sufficient for the Nestle. Still, Nestle is known for the decentralized system by giving the decision making authority to its staff to all level (Salam, 2016).
While going through its history it can be easily assess that market trend during that time had helped them gaining the strength in the international markets. Now, as it can be easily assess the change in the market is rapid and continuous. The market internationally becoming competitive and also flat. Nestle as they are known for the leader in global strategy would surely be looking into more markets for growth of business. The changes which had occurred recently and also in continuous form it is occurring, Nestle needs to be more flexible than as compared to before. The foreign direct investment approach has always been the strategy of Nestle to enter in any new market. Nestle approach of acquiring and merger proven to be less expensive approach in entering the new market. During the early days of Nestle it has used the needs of the consumers to gain the strength but the current international strategy has evolved and made changes in the Nestle growth goals. Now they are preferring the upscale products such as chocolate and beverages to penetrate in the new market along with current market. This strategy looks small but it’s a strong strategy which will be proven to be effective one by looking at it current pace of growth. But still, its strategy of acquiring the small companies are being applied in the Asian countries (Fielding, Sieber & Vellas, 2015).
Nestle Global strategy are dependent on the decentralized approach and the example is Nigeria where that they had sued the central warehouse system to distribute while viewing the condition of the country’s road system. In China, the approach of Nestle is different as compared to other countries. Its dairy products are not being solely manufactured by them but they had created the contracts with farms who bring Nestle Milk from their farms which further processed into refine milk products. The other example of Nestle global strategy can be taken is from the Syria. The consumer from Syria prefer tomatoes more so Nestle production of the food materials are being processed by the local ingredients which is widely being appreciated and helped Nestle securing the position (Baran, 2016).
Current International Strategy:
The current strategies of the Nestle aims to achieve the sustainable competitiveness by applying the four pillar globally. The first one focuses on the low cost, second is efficient operations, third is renovation and the last one is innovation. According to Nestle all of these could only be achieved through better mean of commination with consumer by building effective marketing strategies. The focus of the Nestle which in the past was towards the technology but now they had shifted it to health, nutrition and wellness. The current strategies of Nestle did helped them and the initiative they took was not to own the agricultural roots but building relationships with the local farmers. The other initiative Nestle took is to modify its value chain system by cutting off the few activities. Nestle no longer using the cocoa roasting for the production of chocolate. The traditional methods and activities which the multinational corporation used in the value chain has been eliminated which turned out to become more innovative and it is helping in developing the new products efficiently. Moreover, the other significant initiative Nestle took in their global strategy to create stronger relationship with suppliers by cutting of the third party interfere. In fact, Nestle is focusing on guiding and providing the assistance to suppliers for productivity and growth (Black, 2016).
The next move for achieving the renovation and innovation is to build strong and focused Research and Development departments through the world. This benefited the Nestle for meeting the demands of all the customers around the world by understanding their needs and demands. The specification of the products are now focused according to the specification provided by the customer. Nestle gather data from survey and different marketing campaigns and using that information bring innovation and renovating the products. This initiative of the Nestle had helped it securing the sustainable ways to gain the strength in new markets and sustaining the old customers. Along with research and development, Nestle is also focusing on the knowledge sharing approach which is helping it to gain the competitive advantage by adopting the all the changes which is occurring in the market. All the 4 pillar which are mentioned earlier the first one focuses on the low cost, second is efficient operations, third is renovation and the last one is innovation. According to Nestle all of these could only be achieved through better mean of commination with consumer by building effective marketing strategies. The focus of the Nestle which in the past was towards the technology but now they had shifted it to health, nutrition and wellness. These pillars are the current global strategies of Nestle and the working is being done on all of these pillars (Robinson, 2016).
Challenges in the Global Markets:
It is important to take the concern regarding the multinational corporations which influences their growth and market penetration. The bad reputation came from the anti-globalization movement which accuse the MNCs for manipulating the natural resources of the host and developed countries. The factor which Nestle is currently acing is climate change. The production which is being done in factories really influencing the climate and proven to be bad influence or the environment. Currently, the Nestle is working on it which will be environmental friendly ways of production. The other concern is damage to local market. The small businesses from the local markets are also facing problems because big corporation captured the market by their strategies and marketing approaches. The socio-economic condition of the country matters when pursuing the business to any country. The jobs which Nestle is providing to local people but at the meantime shifting of production and not paying as compared to the standards of developed counties is another factor. The consumers are now being aware of the issues which are connected with the working of multinationals in the local markets. This influences the power of multinational and Nestle had suffered in the past with similar problems (Tempels, Verweij & Blok, 2017).
The impacts are both positive and negative when it comes to globalization, the positive side of the globalization is that it contributes in the growth of the economy and also brings the improvement in the living standards of people living in the developing countries. But the negative side of the globalization is the significant which is a threat to local small businesses. The other concern which recently has been raised by environmentalist is the climate change. The small businesses from the local markets are also facing problems because big corporation captured the market by their strategies and marketing approaches. The socio-economic condition of the country matters when pursuing the business to any country. The jobs which Nestle is providing to local people but at the meantime shifting of production and not paying as compared to the standards of developed counties is another factor. The consumers are now being aware of the issues which are connected with the working of multinationals in the local markets. This influences the power of multinational and Nestle had suffered in the past with similar problems.
The challenges which Nestle is confronting is a potential threat to its business. The first one is the political condition of the country which influences the business. The political instability is threat because of the change in the government brings new policies regarding international businesses. The tariffs and limitation of the production can harm the Nestle. The other challenge is the economic condition of the country where the Nestle intended to do business. The low economic condition of the country eliminates the customers because of buying power is limited. The cost which occurs in moving the business to that country and production will not be covered if people don’t buy the products. The infrastructure of the host country also matters because infrastructure plays huge role in conducting the business. The technological limitation will cause the Nestle to use extra cost in bringing the supportive machinery for conducting the business. The other significant challenge is the cultural which can also influence the Nestle. The products such as mineral water and processed milk which Nestle offered considered to be not good to buy because in developing countries people prefer not to use the mineral water and it’s a bad norm not breastfeed the infant by the mother (Miah et al., 2015).
Conclusions
In conclusion, Nestle historical achievements in term of tuning into multinational is indeed remarkable. The firm started with a very small amount of resources in the village but the strategies which it implemented took it to other heights of growth. The current global strategies which are innovative and environmental friendly benefiting the Nestle. The continuous adoption of change in the market is securing the position of Nestle. The pro-active approach of Nestle to always adopt the change even before it occurs made them market trend setters. The movement of Multinational Corporation had increased the market growth and the consumers through the world. The factor which influences the most is the globalization which started by opening up the borders in the late 19th century where umber of business took historical decisions towards the expansion of businesses. After the globalization started it process, the money, human resources and technology also started moving across nations even more easily. The organization which took the initiative in making itself multinational was the Nestle, despite of cultural, economic and social constraints Nestle has always been succeeded when it comes to the growth steps. The organization have always succeeded in achieving its goals and targets and during that time the organization succeeded in providing the quality food and milk. That was the same reason why the company logo is being designed as the nest to show the care and nourishment through the approach of nature and affection. China and Saudi Arabia are the clear examples in the start along with other European countries where the historical strategy of Nestle involves the acquisition and mergers. Nestle had always been the one who while penetrating any new market with the approach of Multinational Corporation used its name which had gain fame and also acquiring all the organization which are working on the same product types which Nestle manufactured. The foreign direct investment approach has always been the strategy of Nestle to enter in any new market. Nestle approach of acquiring and merger proven to be less expensive approach in entering the new market. During the early days of Nestle it has used the needs of the consumers to gain the strength but the current international strategy has evolved and made changes in the Nestle growth goals. The other significant initiative Nestle took in their global strategy to create stronger relationship with suppliers by cutting of the third party interfere. In fact, Nestle is focusing on guiding and providing the assistance to suppliers for productivity and growth. Political, cultural, infrastructure and social challenges are important to consider by the Nestle. The instability in several of Asian and African Countries are being faced by the Nestle. The importance given to them is crucial because Nestle have the major market share in those areas. The challenges which are being in the way to further success is influencing the growth of Nestle. The organization need to take approach which environmental friendly along with these the relationship building through the use of cultural factor will definitely help the Nestle even more.
References
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