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Introduction To Contextual Study Of Nestle Marketing Essay

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Published: Mon, 5 Dec 2016

Nestlé Company had started off from a single mans idea, and developed into a giant corporation. In 1866 Henri Nestlé, a pharmacist, developed a milk food formula for infants who were unable to tolerate their mother milk (Nestle.com). His product became a success, and it created a demand throughout Europe. As Nestlé’s popularity grew more businesses wanted to merge and become partners with Henri Nestlé’s business.

From 1866 to 1947 the Nestlé Company had gone through several name changes.

In 1905, Anglo-Swiss Condensed Milk Co. and Farine Lactee Henri Nestlé merged, and the company’s name became Nestlé & Anglo-Swiss Condensed Milk Co.

Then in 1929, Peter-Cailler-Kohler Chocolats Suisses S.A. merged with the company. The name was then changed to Nestlé & Anglo-Swiss Holding Co. Ltd, on November 27, 1936.

In December 1947, Co. acquired all the shares capital of the Alimentana S.A. company in exchange for fifteen Nestlé shares and fifteen Unilac shares for each of Alimentana S.A. share, so this point the name was at Nestlé Alimentana S.A. And then finally, the last name change that the company would endure was in 1977, where it adopted the name Nestlé SA (Mergent Online).

The dairy products at Nestlé are a big driving force for the growth of the company’s sales. With the health kick of the many individuals around the world, it pushes the innovator and renovators of Nestlé to reach new height in finding better and healthier products for their consumers. In 1998, the dairy business had accounted for 5% of the company’s sales revenue (Rodgers, 2000). More recent, in the first half of 2004, Nestlé milk-based products, nutrition, and ice cream accounted for 60% of Nestlé revenue

growth (Nutraingredients.com). The amount of 60% is a big portion of the company’s earnings, so it would be best for Nestlé to focus a big portion of their core competencies and resources on the fast growing dairy division. Which leads us into the most recent yogurt produced by Nestlé’s, which is the LC1.

Nestlé strives on being innovator and renovators. So their research team in Switzerland discovered a culture called Lactobacillus acidophilus, or La-1. This particular product was chosen because it contains a probiotic agent, which is living microbial feeding supplements that allow the lower intestine to function better (Rodgers, 2000). La-1 helps the small intestine function by improving the body’s immune system, and in turn helping the body in preventing diseases. Nestlé has now found a solution for their health conscious consumers, but now they need to find away to implement it into one of their products. That when the researchers at Nestlé discovered that if they replace one of the mixes in their yogurt with the La-1 the same texture would be maintained. Now with the combination of Nestlé yogurt mix and the La-1; Nestlé has given their yogurt the name of LC1.

Decentralization

Switzerland is home to Nestle’s Swiss subsidiary, its international headquarters and the registered office of Nestle’s holding company, but Nestle does not regard its Swiss headquarters as the center of the universe. Decentralization is a basic principle of Nestle. Their policy is to adapt as much as possible to regional circumstances, mentalities and situations. By decentralizing operational responsibility, they create strength and flexibility and are able to make decisions that are better attuned to specific situations in a given country. Policies and decisions concerning personnel, marketing and products are largely determined locally. This policy creates stronger motivation for Nestle’s executives and employees and a greater sense of identification with Nestle’s business. It is not Nestle’s policy to generate most of its sales in Switzerland, supplemented by a few satellite subsidiaries abroad. Nestle strives to be an “insider” in every country in which it operates, not an “outsider.”

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Research and development

Nestle is probably unique in the food industry in having an integrated research and development program that engages in applied and basic research in the fields of human physiology, health, nutrition and raw materials. Their research and development program gives them the capacity to create new types of products that they cannot even imagine today, especially in the critical area where preventive medicine and food products overlap. In addition, as concern for the environment grows, research will play an important role in overcoming environmental problems. For Nestle this is particularly important in packaging.

While Nestlé Corporate Business Principles will continue to evolve and adapt to a changing world, their basic foundation is unchanged from the time of the origins of Company, and reflects the basic ideas of fairness, honesty, and a general concern for people.

Nestlé is committed to the following Business Principles in all countries, taking into account local legislation, cultural and religious practices:

Nestlé’s business objective is to manufacture and market the Company’s products in such a way as to create value that can be sustained over the long term for shareholders, employees, consumers, and business partners.

Nestlé does not favor short-term profit at the expense of successful long-term business development.

Nestlé recognizes that its consumers have a sincere and legitimate interest in the behavior, beliefs and actions of the Company behind brands in which they place their trust, and that without its consumers the Company would not exist.

Nestlé believes that, as a general rule, legislation is the most effective safeguard of responsible conduct, although in certain areas, additional guidance to staff in the form of voluntary business principles is beneficial in order to ensure that the highest standards are met throughout the organization.

Nestlé is conscious of the fact that the success of a corporation is a reflection of the professionalism, conduct and the responsible attitude of its management and employees. Therefore recruitment of the right people and ongoing training and development are crucial.

Nestlé continues to maintain its commitment to follow and respect all applicable local laws in each of its markets.

In Nestlé’s view, it must be fully integrated in the social, cultural and economic fabric of the countries in which it operates. Thus no matter which country it operates in, it is committed to strengthening local communities.

VISION AND STRATEGY

The Nestlé global vision is to be the leading health, wellness, and nutrition company in the world. Nestlé Pakistan subscribes fully to this vision. In particular, we envision to:

Lead a dynamic motivated and professional workforce – proud of its heritage and bullish about the future.

Meet the nutritional needs of consumers of all age groups – from infancy to old age, from nutrition to pleasure, through an innovative portfolio of branded food and beverage products of the highest quality.

Deliver shareholder value through profitable long-term growth, while continuing to play a significant and responsible role in the social, economic and environmental sectors of the country.

Our brands are the preferred choice in their categories. Consumer insight drives all aspects of our marketing and communication efforts.

Our communications to the consumer are relevant, cutting-edge, and adhere to the highest standards of responsible communication.

Our company is seen as the No. 1 career destination for talented, motivated and ambitious professionals.

Our result-oriented organizational structure ensures effective communication and empowered self-management.

Our milk collection and agri services will continue to play the primary role in development of the dairy sector in rural Pakistan.

Our proactive innovation and renovation culture is the key to our success in the marketplace.

Fully integrated systems (Nestlé Pakistan, suppliers, customers) ensure efficient business processes.

Non-strategic activities and products are outsourced or discontinued.

Headquarters:

Greenwich, CT, USA

Brands:

14

Related to:

Nestlé Waters, Paris, France, a subsidiary of Nestlé, S.A., Vevey, Switzerland

Products

Nestlé has a wide range of products across a number of markets including coffee (Nescafé), bottled water, other beverages, chocolate, ice cream, infant foods, performance and healthcare nutrition, seasonings, frozen and refrigerated foods, confectionery and pet food.

Business segments

Beverages

Milk Products, Nutritional, and Ice Cream

Prepared Dishes and Cooking Aides

Confectionery

Other Food & Beverages

Pet Care

Pharmaceutical Products

Nestle Pakistan Milestone

In 1912 Nestle begins its long relationship with South Asia when the nestle Anglo-Swiss condensed Milk company starts importing and selling finished products in the Indian market.

Nestle makes clear a distinction between strategy and tactics. It gives priority to the long-range view. Long-term thinking defuses many of the conflicts and contentions among groups — this applies to employment conditions and relations with employees as well as to the conflicts and opposing interests of the trade and the industry. Of course, ability to focus on long-term considerations is only possible if the company is successful in the struggle for short-term survival. This is why Nestle strives to maintain a satisfactory level of profits every year.

Nestlé describes itself as a food, nutrition, health, and wellness company. Recently they created Nestlé Nutrition, a global business organization designed to strengthen the focus on their core nutrition business. They believe strengthening their leadership in this market is the key element of their corporate strategy. This market is characterized as one in which the consumer’s primary motivation for a purchase is the claims made by the product based on nutritional content.

In order to reinforce their competitive advantage in this area, Nestlé created Nestlé Nutrition as an autonomous global business unit within the organization, and charged it with the operational and profit and loss responsibility for the claim-based business of Infant Nutrition, HealthCare Nutrition, and Performance Nutrition. This unit aims to deliver superior business performance by offering consumers trusted, science based nutrition products and services.

The Corporate Wellness Unit was designed to integrate nutritional value-added in their food and beverage businesses. This unit will drive the nutrition, health and wellness organization across all their food and beverage businesses. It encompasses a major communication effort, both internally and externally, and strives to closely align Nestlé’s scientific and R&D expertise with consumer benefits. This unit is responsible for coordinating horizontal, cross-business projects that address current customer concerns as well as anticipating future consumer trends.

Nestlé is a global organization. Knowing this, it is not surprising that international strategy is at the heart of their competitive focus. Nestlé’s competitive strategies are associated mainly with foreign direct investment in dairy and other food businesses. Nestlé aims to balance sales between low risk but low growth countries of the developed world and high risk and potentially high growth markets of Africa and Latin America. Nestlé recognizes the profitability possibilities in these high-risk countries, but pledges not to take unnecessary risks for the sake of growth. This process of hedging keeps growth steady and shareholders happy.

When operating in a developed market, Nestlé strives to grow and gain economies of scale through foreign direct investment in big companies. Recently, Nestlé licensed the LC1 brand to Müller (a large German dairy producer) in Germany and Austria. In the developing markets, Nestlé grows by manipulating ingredients or processing technology for local conditions, and employ the appropriate brand. For example, in many European countries most chilled dairy products contain sometimes two to three times the fat content of American Nestlé products and are released under the Sveltesse brand name.

Another strategy that has been successful for Nestlé involves striking strategic partnerships with other large companies. In the early 1990s, Nestlé entered into an alliance with Coca Cola in ready-to-drink teas and coffees in order to benefit from Coca Cola’s worldwide bottling system and expertise in prepared beverages.

European and American food markets are seen by Nestlé to be flat and fiercely competitive. Therefore, Nestlé is setting is sights on new markets and new business for growth.

In Asia, Nestlé’s strategy has been to acquire local companies in order to form a group of autonomous regional managers who know more about the culture of the local markets than Americans or Europeans. Nestlé’s strong cash flow and comfortable debt-equity ratio leave it with ample muscle for takeovers. Recently, Nestlé acquired Indofood, Indonesia’s largest noodle producer. Their focus will be primarily on expanding sales in the Indonesian market, and in time will look to export Indonesian food products to other countries.

Nestlé has employed a wide-area strategy for Asia that involves producing different products in each country to supply the region with a given product from one country. For example, Nestlé produces soy milk in Indonesia, coffee creamers in Thailand, soybean flour in Singapore, candy in Malaysia, and cereal in the Philippines, all for regional distribution.

As a matter of fact a good strategy is not the only necessary prerequisite for operating successfully in foreign markets. In markets of transitory nations or even less developed

nations there could be a risk in terms of political instability harming the political economy such as the security of property rights, macroeconomic and cultural uncertainties are as well an issue. To a certain extent environmental changes occur with the notion of endangering the basic strategy. In order to avoid these influences and to counter react on these a company needs the ability of gaining steady learning process which needs ultimately to be implemented with a cross-functional attitude among all functional levels.

Flexibility is another distinctive competencies a company must be able to achieve to react as quickly as possible to changing environments. As a consequence, the company must implement mechanisms allowing it to respond to changes in local demand, cultural barriers and political fluctuation. Ethnocentric behaviour must be avoided in any circumstances in order to approach the market in the appropriated way. A company must as well learn to consider decisions under the long-run perspective, because markets can be conquered within short period, but the successful implementation of a strategy needs more time than that. Entering a new market requires some pre-math. The company must estimate the perspectives it has in that new market with regards to threats and opportunities formulating the profile of that country.

Basing on this profile the company is able to figure out the strategical approach. One important part of the strategy must be the cultural awareness, which means a company should employ locals in order lower cultural barriers and resentments established by the foreigner. Hence, this results in a better insight and handling of local demand conditions and knowledge about the customer. In order to guarantee flexibility the functional level units must have their own responsibility and must have freedom in decision making, which allows a quick response towards market fluctuations. To relate these statements to this case Nestle’s business process in Nigeria gives a good example. An entirely new marketing approach, distribution channel and network had to be set up due to changing

demands, lacking infrastructure and a lack of security. Nestle managed these threats successfully by understanding the culture and the being aware of the lack of essentials.

Joint ventures

Nestlé holds 26.4% of the shares of L’Oréal, the world’s largest company in cosmetics and beauty. The Laboratoires Inneov is a joint venture in nutritional cosmetics between Nestlé and L’Oréal, and Galderma a joint venture in dermatology with L’Oréal. Others include Cereal Partners Worldwide with General Mills, Beverage Partners Worldwide with Coca-Cola, and Dairy Partners Americas with Fonterra.

SWOT analysis

Strengths:

Nestle’s LC1 division has many strengths. Their first is that they have a great CEO, Peter Brabeck. Brabeck emphasizes internal growth, meaning he wants to achieve higher volumes by renovating existing products, and innovating new products.

Another strength that Nestle has is that they are low cost operators. This allows them to not only beat the competition by producing low cost products, but by also edging ahead with low operating costs.

Weaknesses:

The main weakness of the LC-1 division of Nestle is that they were not as successful as they thought they would be in France. The launch in France was in 1994, but since the late 1980s, Danone had already entered the market with a health-based yogurt.

The second weakness is that LC-1 was positioned as too scientific, and consumers didn’t quite understand that LC-1 was a food and not a drug

Nestle also has multiple critical resources. They have a great research and development team.

Opportunities:

An opportunity that Nestle has is that health-based products are becoming more popular in the world, including in the United States.

Nestle also has an opportunity of being even a larger market leader in Germany with LC-1. Within two years of launching the product in Germany, they had captured 60% of the

market. This was due to the fact that they differentiated the product, and Germans simply preferred the taste.

Another opportunity of LC1 is that, because they are a market leader, they can introduce more health-based products in Germany.

Threats:

A threat to Nestle is the fact that some markets they are entering are already mature. Danone had an established leadership position in the yogurt market in France. Since Danone was the first to arrive in the market, they have always been the market leader there. Also consumers in France liked the taste of LC-1, but researchers believe they did not repurchase the yogurt because they preferred the taste of Danone products better.

Another threat to Nestle is that there is intense competition in the United States yogurt market. General Mills’ Yoplait division is the leader in the yogurt market in the United States. Yoplait has been the leader for years and is constantly innovating new health products.

Competitors

General Mills has been a strong competitor of Nestle

Unilever NV (UN) – A Dutch company that produces packaged foods and products for the home and personal care markets. Unilever is one of Nestle’s largest international competitors.

Kraft Foods (KFT) – A U.S. company that produces packaged foods products. Kraft is one of Nestle’s largest U.S. based competitors. On January 19, 2010, Kraft bought Cadbury Schweppes (CSG) for $19.5 billion, creating the largest candy company in the world and strengthening Kraft’s international presence.

Cadbury Schweppes (CSG) is a U.K. company that produces products for the confectionery and non-alcoholic beverages markets; they compete with Nestle’s beverage and confectionery products internationally and in the U.S.

GROUPE DANONE (DA) – A French company that produces packaged foods and beverages. Groupe Danone competes with Nestle internationally and in the U.S.

Hershey Foods (HSY) – A U.S. company that produces chocolate and sugar confectionery products. Hershey Foods competes with Nestle’s confectionery brands mostly in North America.


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