Issues In Global Business And Consultancy Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Nowadays the globalisational theories are present in all branches of sciences - not only enonomics but also in art, politics or media studies. During the last fifty years globalisation took over the whole world: from the all-known products such as Coca-Cola drink, Marlboro cigarettes or Asian technologies, through the foreign investments strategies, ending on communication and financial markets. Fast globalisation and also universalisation of the modern world has its darker side which is disintegration, particularisation. In mid 90's John Naisbitt, the author of "Megatrends" predicted that very soon there will be about 1,000 countries in the world, because the nations constantly divide (Naisbitt, 1995: 40 [1] ). Naisbitt stated that nations are similar to huge corporations with their effectiveness. Also there is a massive gap between wealthy North (thirty OECD countries) and poor South ("Third World" countries) of the globe (Bradshaw, Wallace, 1996: 20) [2] .

Globalisation with its fast technology development forces economic organisations to adapt to the changing business environment. Also flexibility in reacting to the external and internal signals is vital. Complex analysis of business environment allows the company to sight not only threats, but also to define potential areas of success to its business activity.

The main issue of this report is to critically evaluate an organisation through a given or chosen case study, in this case it will be Nestlé Group as a multinational enterprise (MNE), that is a business having productive activities in at least two countries. Nestlé is a perfect example of transnational corporation, allowing for vast analysis of its history and strategy. The company is of Swiss origin but during the last hundred years or so it evolved from the small family business into one of the biggest and most valuable global corporations.


Globalization can be perceived as the shift towards a more integrated and interdependent world economy. Nowadays an independent, integrated global economic system supercedes self-contained national economies which are becoming more and more historical.

The globalisation of the world economy is considered to be one of the most ambiguous issues of present economic sciences. It is regarded as a huge threat for national social and economic systems' balance. On the other hand, globalization creates new opportunities for business, unlike anything known in the past. Analysts state that the process itself is evolving and growing to the predicted point of all economic structures being destroyed in aid of creating more or less uniform private and capitalistic global market economy.

Also the convergence of consumer tastes and preferences is noticeable. People all over the world expect the same commodities to be available on their national markets, needs are becoming more and more uniform. There are products and brands known almost in every distant part of the world such as Coca-Cola drink, Marlboro cigarettes, iPods or Levi Strauss jeans. People expect to have many alternatives to choose between popular and more global or less popular, more national products, but they need to have their choice. On the other hand, national markets are still relevant, challenging companies to develop different marketing strategies and operating procedures. Some of the strategies and procedures will be analyzed through Nestle case study.

Main Body

A wide range of issues concerning the modern world, appointing directions for the economic evolution, created new theories of building and functioning of modern business organisations. This report's subject of analysis is Nestlé - a transnational corporation of food and beverages industry.

At its beginning, Nestlé was a small, family Swiss company, founded by Henri Nestle who was a pharmacist and wanted to help those mothers, who were unable to breast feed their children. He wanted to create an alternative source of infant nutrition and succeeded. Since the mid-1860's Nestlé has become of the most recognized brand in the food industry, expanding its product offer. Nowadays Nestlé products are valued all over the world and the corporation itself is a strategic partner and active participant of the M&A market.

The fall of communism and opening East European markets to the world trade created new opportunities for Nestlé. Since then global strategy is inherent to its business activity. In July 2000 Nestlé started the GLOBE (Global Business Excellence), which purpose is to simplify the external procedures of trade and production in global scale. In 2002 Nestlé performed two major acquisitions: of Dreyer and of Chef America. In the same year Nestlé together with Dairy Partners Americas founded Fonterra company and together with L'Oreal - Laboratoires Inneov. In 2003 Nestlé acquired Movenpick Ice Cream, in 2006 - Jenny Craig, Uncle Toby's and Delta Ice Cream, and in 2007 - Novartis Medical Nutrition, Gerber and Sources Minerales Henniez. By the end of 2007 the Swiss giant concluded a partnership agreement with Pierre Marcolini - manufacturer of exclusive chocolate products.

Nestlé started with infant nutrition products but now the range of its products includes coffee, chocolates, ice-cream, mineral water, pet food, cookies, convenience food and more. The corporations own est. 8,000 brands of which all are yearly changed and improved.

Nestlé company can be considered one the most successful global Corporation, lasting two World Wars and the global economic crisis of 2007-2008. Its income is estimated for over $100 billion [3] . In 2006 r. Nestlé Group owned 8,500 brands, 481 factories and hired 265, 000 employees [4] , in 2007 r. - 276,000 employees [5] . At present it's active in over 80 countries and hires about 283,000 employees worldwide [6] .

In 2004 r. Nestlé was 25th in Business Week's „Global 1000" (31st in 2003), with a value of $104,87 billion [7] . In 2008 Nestlé was 23rd in World Investment Report and respectively 9 and 7 on the list of the highest transnationalisation and internationalization companies, being a third company in the world (before Siemens, Procter & Gamble, GlaxoSmithKline, Bayer, Philips or IBM) of the highest number of foreign branch offices and affiliations. Nestlé is also very successful on those foreign markets which are hostile for global corporations and their interests. A good example is Nigerian market, on which Nestlé is present for over 40 years, adapting to the local business environment and implementing a local strategy [8] . In 2005 Nestlé owned 62% shares in its Nigerian branch office, selling infant nutrition, beverages and sweets manufactured in local factories mostly from origin ingredients. In 2004 Nigerian coffee market alone generated for Nestlé sales of $ 215,7 million. The biggest gains on Nigerian market are availability of products for further processing and high market potential combined with oil deposits. These two factors induce the country's high economic growth.

Nestlé's global strategy is not only about gaining and maintaining its leader position in food industry. The company also diversifies its activity as a multibranch transnational corporation. Nestlé has over 26 percent of shares in L'Oréal - the world's biggest global beauty corporation and 20 percent market share of ice-cream industry [9] . In 2006 the company's share rose up to record value [10] and the Gerber acquisition was stated 51st World Investment Report' of the most expensive acquisitions of 2007 worth $5,5 billion.

One of the most interesting features of Nestlé's global business activity is their principle code - Corporate Business Principles issued at first in 1998, reviewed in June 2010 [11] . The code lies at the basis of the company's culture. Nestlé not only feels strongly obliged to comply with all applicable international and local legal requirements and ensure that all their activities are fully sustainable, but additionally the company felt a need to create significant value for society, called Creating Shared Value. Strong compliance culture is very important for the company's leadership as well as fully embedding it in the company's business. The purpose of Corporate Business Principles and all supporting documents was to reflect the company's commitment and to protect and maintain the trust of Nestlé's consumers and other stakeholders. Stated internal rules not only require strict compliance with the law, but also they guide company's actions in cases the law is more lenient or there is no applicable law at all.

The code includes ten key issues, which are: (1) nutrition, health and wellness, (2) quality assurance and product safety, (3) consumer communication, (4) human rights, (5) leadership and personal responsibility, (6) safety and health at work, (7) supplier and customer relations, (8) agricultural and rural development, (9) environmental sustainability, and (10) water. To each and every principle there are various documents and procedures assigned. As the principles are important and interesting, they will be described below.

"Nutrition, Health and Wellness" means that the company's aim is to enhance the quality of consumers' everyday lives, and that aim is achieved by offering more tasty and more healthy food and beverage products as well as encouraging a healthy lifestyle. This aim is expressed via Nestlé's corporate proposition: "Good Food, Good Life".

"Quality assurance and product safety" means the guarantee of safety and high standard of products sold all over the world. This guarantee is expressed through the Nestlé brand name.

"Consumer communication" means that Nestlé as a global company feels committed to maintain responsible and reliable consumer communication and privacy. Nestlé believes consumers all over the world have right to informed choice of healthier diets.

Human rights are very important in Nestlé's business code. The company fully supports the United Nations Global Compact's (UNGC) guiding principles on human rights and labor by providing an example of good practices throughout its business activities.

"Leadership and personal responsibility" means that Nestlé's success is based on its employees and thus they are worthy of respect, and they need to be treated with dignity. The company respects their employees and expects to be treated the same way having a sense of personal responsibility. Nestlé's recruitment policy aims to recruit only competent and motivated people, who respect company's values. The company also provides equal opportunities for all employees' development and advancement, protects their privacy and doesn't tolerate any form of harassment or discrimination.

This kind of value in corporate principal code is actually very popular in many other regulations of multinational enterprises. Many anti-globalists and globalisation critics worry that globalization will actually cause job losses, but it is not true. Globalisation is more jobs but more specialised jobs, which doesn't mean that physical labor is becoming less demanded. By creating new workplaces abroad, global corporations can help trigger local economies growth.

Safety and health at work are very important for Nestlé's business operation. The company is highly committed to prevent any accidents, injuries or illnesses related to work environment.

"Supplier and customer relations" means that Nestlé requires its suppliers, subcontractors, agents as well as their employees to adhere to its non-negotiable values (e.g. honesty, commitment, fairness) and standards. In the same way, Nestlé is committed to its own customers.

Agriculture and rural development policy includes contribution to improvements in agricultural production, as well as in social and economic status of farmers and rural communities. Nestlé aims to help making agricultural production systems more environmentally sustainable.

"Environmental sustainability" means that Nestlé commits to environmentally sustainable business practices. At all stages of the product life cycle natural resources are being efficiently used, using sustainably-managed renewable resources is being favoured, and the company targets zero waste.

It is important to point out that globalisation critics fear that free trade encourages firms from advanced nations, where there are costly environmental standards, to move manufacturing facilities offshore to less developed countries with lax environmental regulations. However, advocates of globalization claim that environmental regulations are developed simultaneously with economic progress, so foreign direct investment (FDI) actually encourages countries to raise their standards. Implementation of tougher environmental laws, economic growth and free trade agreements can together trigger economic growth with a decrease in environmental pollution.

On the other hand there are many environmentally-friendly campaigns organized in global media or social websites which point out wrong behavior such as destroying rain forests or endangering rare fauna. A good example is Greenpeace's campaign to get Nestle to stop sourcing rain forest destroying palm oil from Sinar Mas. After a two month Greenpeace campaign (e.g. on Youtube) that exposed Nestlé's use of palm oil in products like KitKat, the corporation finally announced banning the products that come from rainforest destruction. Thanks to Greenpeace consumers all over the world realized that expansion of palm oil and pulp plantations is driving the destruction of Indonesia's rainforests and pushing endangered Orang-Utan species to the brink of extinction. With organisations such as Greenpeace and global media such as Youtube or Facebook, people are becoming more aware of environmental issues and that forces transnational corporations to improve their policies and codes.

Nestlé is also committed to the sustainable use of water and continuously improving in water management. Nestlé recognizes world's growing water challenge issue and keeps in mind that responsible management of the world's resources by all water users is an absolute necessity.


In the times of progressive economy transnationalisation, global market becomes a market of specific products rather than a set of national markets. In consequence countries and economic authorities lose their importance. Transnational corporations gain it on the other hand, becoming less and less subject for external control, including government control. Initiatives of economic policies such as policy of competiveness protections on the national markets become insufficient.

Changes caused by economic globalisation and modern electronic technology development were revolutionary enough to prompt researchers to create a new term - "new economy" or "e-economy" to divide the present state of global economy from its historical state. The new economy is characterized by supremacy of intellectual labor over the physical and of innovations over mass production. Also low trade and investment barriers mean that companies can locate production facilities in the optimal (and less expensive) location all over the world. Production and sales now take place in multiple markets creating interdependency between countries for goods and services. Other features are global competitiveness, constant technological and organizational changes with computers applied.

Based on the example of Nestle it can be stated that even if globalisation may be the answer to many question, it is not a perfect solution. Nowadays the need to protect competitiveness and consumers from the growing expand of global corporations is vital for world business. Also income and living standard inequalities (so called "economic injustices") are important, being a consequence of globalisation for social systems around the world. Another issue is a growing destruction of the natural environment connected with global commodities production.

As long as the world will stay in relative balance, free from significant global economic and political shocks, world economy integration will escalate and its main beneficiaries will be transnational corporations.

Anti-globalization protesters who fear that globalization is forever changing the world in a negative way now turn up at almost every major meeting of global institutions like the WTO and IMF. In some cases, for example in Seattle in 1999, and France in 1999, the protests have been violent.