Crisis Facts. 1978 Senate Hearing

Edward Kennedy and Nestlé 1978 Senate Hearing

http://www.youtube.com/watch?v=1-_yitXcHU0

index      3

Clip of Senator Edward Kennedy cross questioning Nestlé about its marketing of breastmilk substitutes in the developing world.

1978 US Senate Hearing on the marketing of formula in developing countries. This instigated the International Code of Marketing of Breastmilk Substitutes, which was adopted by the World Health Assembly in 1981. This Code is a benchmark for good practice and is used by governments all over the world to protect infant and young child health from unethical marketing.
Clip taken from the 1984 BBC/Baby Milk Action Film “When Breast are Bad for Business”.

www.babymilkaction.org

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3.3 Immediate Response and Backlash from NGOs

The boycott against Nestle emanated from concerns about Nestlé’s aggressive marketing of breast milk substitutes. The boycott spurred a flurry of supporters from various NGOs in the US and then swiftly spread to several NGOs in Australia, Canada, New Zealand, and Europe. However, the initial backlash from Nestlé’s so-called “irresponsible marketing” started with launch of the boycott in Minneapolis by the Infant Formula Action Group (INFACT).  INFACT announced a consumer boycott against all Nestle products in the U.S. on July 4, 1977, to protest the marketing of infant formula in third world countries(Baby Milk Action). Joined by other organizations such as Interfaith Center of Corporate Responsibility (ICCR) and the International Baby Food Network (IBFAN), the Nestle boycott set in motion a series of events that dramatically changed the face of the company forever.

The NGOs involvement with the boycott were so successful in their intensive campaigning that it resulted in achieving two strategic victories: they were able to convince US Senator Edward Kennedy to hold a hearing on the issue and persuaded the World Health Organization to institutionalize an international code on of marketing on infant formula. The code explained how baby formula should be promoted worldwide and prohibited companies from unethical practices such as promoting products in hospitals, giving free samples to mothers, and disseminating misleading information (Krasney).

Sources

Baby Milk Action. “History of the Campaign.” Baby Milk Action. International Baby Food Action Network, 30 Nov. 2008. Web. 14 Apr. 2012.

Krasny, Jill. “Every Parent Should Know The Scandalous History Of Infant    Formula.”Businessinsider.com. Business Insider, 25 June 2012. Web. 14 Apr. 2013

http://www.nestle.com/aboutus/history

http://www.babymilkaction.org/pages/history.html

http://www.businessinsider.com/nestles-infant-formula-scandal-2012-6?op=1

http://www.palgrave-journals.com/jibs/journal/v25/n3/pdf/jibs199441a.pdf

 

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UPDATE: Nestle – Environmental Analysis

Nestlé S.A. is a Swiss multinational corporation leading in nutrition, health, and wellness industries. (Nestlé) Like many multinational corporation, Nestlé is responsible and required to abide by many environmental factors pertaining to their stakeholders. These factors include political or legal, economic, social or cultural, and technological. All corporations try to appease these factors to remain afloat and competitive. As large of a corporation Nestlé S.A. is, Nestlé is affected by all of these environmental factors.

Not only do corporations in the food and beverage industry have to follow the political and legal aspects of their home country, they are required to follow the political laws and regulations of other countries the corporation is doing business in. Nestlé operates and sells their products in over a hundred countries. (Nestlé) In each and every country they are operating in, they are being regulated for the specific country’s laws and taxes, whether it is through their products or employment. By being equip to the countries’ laws and regulations, Nestlé and other corporations create a good standing relationship with the countries’ government for the future of their corporation. For example, Nestlé operates in Saudi Arabia and United Arab Emirates among others. In these two countries, Nestlé faces the Islamic Law and has created the Nestlé Halal Committee to foresee the Halal products produced by Nestlé Malaysia. (Ahmadnawi & Nestlé)

Being socially responsible is one of Nestlé’s greatest responsibilities, likewise of multinational corporations trying to stay profitable and by not overlooking the country’s society and culture they operate in. Especially in light of the Nestlé boycott in 1977 by the Infant Formula Action Coalition. (Nestlé) With the many products Nestlé produces for every region worldwide, they produce the products specifically suited towards the regions and according to the countries regulations. As well, Nestlé produces countless brands marketed to certain demographics. Nestlé failed to be socially responsible in the 1970s, pushing out their infant formula products and to discourage breastfeeding. (Teachspace) This action led to a worldwide boycott towards Nestlé for encouraging formula over breastfeeding and failing to factor in the living conditions of third world countries. (Baer) For example, most third world countries do not have clean water while the infant formula requires it. Nestlé has taken every effort to refine their brand name in Africa. In a report published by Nestlé in 2005, it spoke of the many responsibilities and actions Nestlé had taken since the infant food marketing crisis. (Nestlé) This is to ensure that Nestlé would still regain as much of the trust of their consumers that they have lost since the infant formula crisis.

The competitors of Nestlé are Unilever, PepsiCo Inc., Kraft Foods Group Inc., and Groupe Danone S.A. (CNNMoney) Compared to Nestlé, these competitors only have a handful of brands in the food and beverage industries under their control. Whereas Nestlé has numerous brands in the industry that are unmatched by its competitors, Nestlé had rapidly grew their corporation, expanded, and acquired smaller companies quicker than their competitors. This established Nestlé’s corporate brand and control of the food and beverage industry. By and large of Nestlé’s control, their opportunities and treats are influential in their sales in the future. Due to Nestlé’s infant formula crisis in the 1970s, consumers and activists will always hold it against Nestlé to make sure it does not occur again and no other product will create such an incident. With the likeness of multinational corporations and other corporations doing business overseas, once a company has their reputation tarnished, some may not recover. Another threat is the scarcity of water. In a speech given by the CEO of Nestlé, Paul Bulcke predicts that in the next 15 to 20 years there would be a massive food shortage. (Nestlé)

Opportunities for Nestlé and the food and beverage industry are emerging markets in developing countries. Quickly grasping a reputation for the corporate name in a new region and offering numerous products from the company builds brand loyalty with the population. With the size and capital of Nestlé, another opportunity Nestlé is exploring is new industries. Through the new organization formed, Nestlé Health Science, it is used to develop personalized health science nutrition to prevent and treat health conditions according to NutraIngredients.

Citations

  1. “About Us.” Http://www.Nestlé.com. Nestlé S.A., n.d. Web. 31 Mar. 2013. <http://www.Nestlé.com/aboutus>.
  2. “Death, Diarrhea, and Disease: Nestlé and the Ethics of Infant Formula.” Death, Diarrhea, and Disease: Nestlé and the Ethics of Infant Formula. Teachspace, n.d. Web. 01 Apr. 2013. <http://www.teachspace.org/personal/research/Nestlé/history.html>.
  3. “Fortune Global 500 2009: The World’s Biggest Companies.” CNNMoney. Cable News Network, 2009. Web. 08 Apr. 2013. <http://money.cnn.com/magazines/fortune/global500/2009/snapshots/6126.html>.
  4. “Nestlé CEO Warns Water Scarcity Is Major Threat to Food Industry.”Http://www.nestle.com. Nestlé, n.d. Web. 08 Apr. 2013. <http://www.nestle.com/media/newsandfeatures/city-food-lecture>.
  5. “Nestlé Home.” Halal Policy. Nestlé, n.d. Web. 08 Apr. 2013. <http://www.Nestlé.com.my/AboutUs/Nestlé_in_Malaysia/Pages/halal_policy.aspx>.
  6. “The Nestlé Commitment to Africa – 2004 (Summary).” Http://www.nestle.com. Nestlé, Oct. 2005. Web. 08 Apr. 2013. <http://www.nestle.com/csv/downloads>.
  7. Ahmadnawi, Farah. “Nestlé Malaysia Committed to Providing Halal Products.” Nestlé Malaysia Committed to Providing Halal Products – Brusearch News. Borneo Bulletin, 31 July 2009. Web. 08 Apr. 2013. <http://www.brusearch.com/news/47782>.
  8. Baer, Edward. “Babies Means Business.” New Internationalist. New Internationalist, n.d. Web. 01 Apr. 2013. <http://newint.org/features/1982/04/01/babies/>.
  9. Daniells, Stephen. “Nestlé Targets Personalised Nutrition Opportunities with New Organisations.” NutraIngredients.com. NutraIngredients, 27 Sept. 2010. Web. 09 Apr. 2013. <http://www.nutraingredients.com/Research/Nestle-targets-personalised-nutrition-opportunities-with-new-organisations>.
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Nestle – International Strategy

 

In 1990s Nestlé faced significant challenges in its market growth. Despite of the stagnant population in western countries the balance of power was increasing from large scale manufacturers like Nestlé, toward supermarkets and discounted chain stores. In result, Nestlé decided to lessen its focus on developed markets like North America and its home based market in Switzerland to emerging market like India and China. all overThe driving force behind the decision of expanding its market share in emerging market is simple, as the population grows and government decisions favoring market economies brings attractive business opportunities for public living at intermediate income.

Although many of the counties are still living under poverty line, even living on $1 per day shows optimistic signs for the future markets.  For example: as the current economic forecasts continues, there will be 9 billion people living on this planet as compare to today’s population of $7 billion today, and coincidently the increase in population is all in developing countries.

Nestlé uses the strategy which correlates the ratio of increase in income to use of branded food products, which means as a person earns more and has less time for making food in his/her home, they will automatically substitute for branded products.

In general the company’s strategy has been to enter emerging markets early before its competitors and build a substantial customer base by selling products which suit the local population such as infant formula, milk, and noodles. Nestlé narrows down its market share to many small niche markets, as opposed to general or one for all strategies. Nestlé keeps the goal of commanding the niche markets by gaining at least 85% of market share in every food product it launches.  For example, by pursuing such a strategy, mouth & hairNestlé has taken as much as 85 percent of the market for instant coffee in Mexico, 66 percent of the market for powdered milk in the Philippines, and 70 percent of the market for soups in Chile. As the income level rises in each niche market, Nestlé introduces an upscale version of the same brand to increase its profit level. Although Nestlé has become a global brand, it uses local identity to gain exposure in local markets. The company owns 8500 brands but only 750 of them are known internationally.

Customization is the key to Nestlé’s global brand identity rather than universalism, which means Nestlé, uses global brand identity but, from the internal point of view, it uses local ingredients and other technologies that resonate with the local environment and brand name that is known globally. The customization of Nestlé’s products causes many hindrances in carrying out its distribution of products from local farmers to factories. For example, in Nigeria the infrastructure placed is crumbling, trucks are old and political conditions are not suitable to carry out the processes successfully, so Nestlé adopted a new strategy to deliver its products to local warehouses which are Lococonvenient to local farmers for milk production. Although this might seem as an expensive solution, the local farmers have tripled their milk production and the supply of milk, which Nestlé has calculated as beneficent for the long term growth.

The execution of the strategy matches the planning of the strategy which is to plan globally and implement locally. Nestlé gives autonomy to its local branches based in different countries to make pricing decisions, and distribution decisions. Nestlé has expanded its growth by diversifying its product base to tomato ketchup and wheat base products such as noodle and tofu. Nestlé has expanded into 5 countries and expects to supply all food products throughout the regions namely, Turkey, Egypt, Syria, Dubai and Saudi Arabia.

Nestlé is also buying local companies in China and adapting its own portfolio for the Chinese market. Since many Chinese find coffee too bitter for their liking, Nestlé is working on a new “formula” to offer Smoovlatte, a coffee drink that tastes like melted ice cream. The company wants to be seen as a company that makes healthy food. As Janet Voûte, Nestlé’s global head of public affairs, said “it is a core business strategy” (The Economist).

competetive

Nestlé has used its brand name as strength to generate sales and to expand its market share, which includes it customization of products to fit its target market’s profile. Although Nestlé has not always started from scratch, the company has used acquisition as a penetration strategy to expand and penetrate new international markets, which eliminates any local barriers to its competition. A few weaknesses which are related to the company’s quality measure resulting in product recalls. The company has decentralized its strategy units into 7 subunits in charge for different product lines, for instance, one – for coffee and beverages; another one focuses on ice cream and milk products. Nestlé brings its management level employees all around the world for 2-3 week training in its headquarters in Switzerland to familiarize them with their global culture, strategy and given them access to the company’s top management.

 

Works Cited

 

  1. “About Us.” Http://www.nestle.com. Nestlé S.A., n.d. Web. 31 Mar. 2013. <http://www.nestle.com/aboutus>.
  2. “Death, Diarrhea, and Disease: Nestlé and the Ethics of Infant Formula.” Death, Diarrhea, and Disease: Nestlé and the Ethics of Infant Formula. Teachspace, n.d. Web. 01 Apr. 2013. <http://www.teachspace.org/personal/research/nestle/history.html>.
  3. Baer, Edward. “Babies Means Business.” New Internationalist. New Internationalist, n.d. Web. 01 Apr. 2013. <http://newint.org/features/1982/04/01/babies/>.
  4. “About Us.” Nestle Health Science. Nestle, n.d. Web. 1 Apr. 2013. <http://www.nestlehealthscience.com/about>.
  5. Annual Report 2010. Rep. Nestle.com, 2011. Web. 1 Apr. 2013. <http://www.nestle.com/asset-library/Documents/Library/Documents/Annual_Reports/2010-Annual-Report-EN.pdf>.
  6. DuBois, Shelly. “Nestlé’s Brabeck: We Have a “huge Advantage” over Big Pharma in Creating Medical Foods.” CNN Money. Cable News Network, 1 Apr. 2011. Web. 1 Apr. 2013. <http://money.cnn.com/2011/04/01/news/companies/nestle_brabeck_medical_foods.fortune/index.htm>.
  7. Food Processing Industry: Market Research Reports, Statistics and Analysis. Rep. Report Linker, n.d. Web. 1 Apr. 2013. <http://www.reportlinker.com/ci02050/Food-Processing.html>.
  8. Sperber, Bob. “Nestle USA: Manufacturing That Sustains.” FoodProcessing.com. Food Processing, 30 Nov. 2009. Web. 1 Apr. 2013. <http://www.foodprocessing.com/articles/2009/processor2009_nestle_plant.html>.
  9. “Strategy – Nestlé Roadmap to Good Food, Good Life.” Nestle.com. Nestle, n.d. Web. 1 Apr. 2013. <http://www.nestle.com/AboutUs/Strategy>.
  10. United States. International Trade Association. Department of Commerce. Food Manufacturing NAICS 311. Trade.gov, Feb. 2010. Web. 1 Apr. 2013. <http://www.ita.doc.gov/td/ocg/outlook10_food.pdf>.
  11. United States. Safety & Health Assessment & Research for Prevention (SHARP). Washington State Department of Labor & Industries. Food Processing Industry. Washington State Department, n.d. Web. 1 Apr. 2013.
  12. “Food for Thought.” The Economist. Web.15 Dec. 2012
  13. <http://www.economist.com/news/special-report/21568064-food-companies-play-ambivalent-part-fight-against-flab-food-thought/comments#comments>
  14. “Nestlé Centralizes Expertise in System Technology.” Rep. Nestlé.com. 25 Mar. 2013. Web. <http://www.nestle.com/media/newsandfeatures/stc-orbe>
  15. “Nestlé Financial Overview in Group Figures.” Nestle.com. Nestle, n.d. Web. 31 Dec. 2012 <http://www.nestle.com/investors/results/financialoverview/groupfigures>
  16. “Nestlé Looks to Strong Brands as Sales Growth Slows.” The Wall Street Journal. Web. 14 Feb.2012 <http://online.wsj.com/article/SB10001424127887324162304578303261113027892.html>
  17. “FT Global 500 2012.” Financial Times. Web. December 2012. <http://www.ft.com/intl/cms/a81f853e-ca80-11e1-89f8-00144feabdc0.pdf>
  18. Nestlé S.A. Company Profile.” Yahoo Finance. Web. 21 March 2013 <http://finance.yahoo.com/q/pr?s=nsrgy>
  19. “Nestlé Research Vision.” Nestle.com. Nestle, n.d. Web. <http://www.nestle.com/RandD/OurVision>
  20. “Nestlé’s Corporate Business Principles.” Nestle.com. Web. <http://www.nestle.com/aboutus/businessprinciples>
  21. “Nestlé to build Nescafé Coffee Centre in China.”  Nestle.com. Web. <http://www.nestle.com/media/newsandfeatures/puer-coffee-institute>
  22. “Nestle to Spend $16 Million on China Coffee Center.” BloombergBusinessWeek. Web. 2 April 2012. <http://www.businessweek.com/news/2013-04-02/nestle-to-spend-16-million-on-china-coffee-center>
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Nestlé: MNE Profile

 

Nestlé: MNE Profile

 

   

 

Nestle: Corporate Strategy

  “Good Food, Good Life”

 

  • Nestlé Profile. What is the company’s mission?

 

       The mission of Nestlé nowadays – “Good Food, Good Life” – is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions and to put a strong emphasize that leadership is not just about size; it is also about behavior and trust earned over a long period of time by consistently delivering on promises (Nestlé).

        Nestlé S.A., formerly known as Nestlé Alimentana S.A, is a Swiss multinational nutritional, snack food, and health-related consumer goods company founded in 1866 and headquartered in Vevey, Switzerland. It is the largest food company in the world measured by revenues which, as of December 31 2012, were equal to US $98.92 billion (Nestlé).

       Nestlé’s products include baby food, bottled water, breakfast cereals, coffee, confectionery, dairy products, ice cream, pet foods and a variety of snacks. In addition, it offers sports nutrition, weight management and pharmaceutical products. Nestlé has around 468 factories, operates in 86 countries around the world, and employs around 330,000 people. It is one of the main shareholders of L’Oréal, the world’s largest cosmetics company (Nestlé).

    Nestlé is the world’s leading nutrition, health and wellness highly successful, cash-rich corporation company with an unmatched portfolio of more than 2,000 global and local brands, a strong culture, and a history of producing innovative products and customizing products and services (Nestlé).

 
 
 
 
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Nestle: Industry Analysis

Industry Analysis

Companies in the food processing industry deal with the transformation of finished food products from raw agricultural ingredients, lengthening the shelf life of products in compliance with hygiene and health standards (SHARP). Food processing industries include the following: cannery, meat processing, food packaging etc. These foods are often sold to wholesalers or retailers for distribution to consumers. The industry is characterized by intense competition, with the most reliable firms, such as Nestle, performing well by focusing on efficiency in terms of fast processing and distribution (ReportLinker). More often than not, the most successful companies within the food and beverage industry (such as Nestle, Kraft and Mars, Inc) implement a diversification competitive strategy where they spread out and add related or similar products to its existing core business.

Economically speaking, the effect of the global economic meltdown has had a less impact in food processing industry than in other industries due to its rising demand for convenience food and ready to serve products. However, one of the challenges that all food processing companies face today is the rising price of raw ingredients such as corn, wheat and dairy. Other factors that affect demand for processed food are issues concerning dieting and obesity, allergens, and increased interest in the use of quality ingredients. One major key segment in the food processing industry is the increasing growing market for organic food and health products. The Organic Trade Association reports that sales of organic food grew to over $28.6 billion, making up  4% of total food sales. Sales growth was strongest for organic meat, dairy, fruits and vegetables, and bread and grains (US Organic Trade Association). Companies that wish to find success in the food processing industry must adhere to these factors, as they have an undoubtedly major effect on the industry.

As the largest food company in the world in virtually any way that can be measured, Nestle is the food processing industry’s undisputed leader. In fact, Nestle currently has over 29 brands that independently earn revenue upwards to a billion Swiss francs every year (DuBois). Additionally, with only 42% of its food and beverage sales coming from the United States, Nestle solidifies itself as the most geographically diverse of all major food and beverage companies. For the company, it’s all about creating long-term value and catering to customer’s wants and needs by employing a decentralized approach to its market (DuBois). Although Nestle derives much of its success from superior marketing and strategy, former vice president, Allan McIntosh, asserts that its true competitor advantage is due to its manufacturing operations. All manufacturing of Nestle products take place in its own plants “to better control all aspects of value creation, from marketing and supply chain factors to technology and plant processes (Sperber)”.

In response to the current trend in the food processing industry, Nestle has focused its core competencies toward advancing health and nutrition. Illustrated by its tagline, Good Food Good Life, Nestlé’s stated goal is to be recognized globally as the leader in nutrition, health, and wellness. This is accomplished by Nestlé’s attempt to promote its nutritional value in its products and to expand into new areas of nutritional food- and food-based products. Nestlé’s creation of the Nestle Health Science Company further demonstrates its commitment to nutrition, health, and pharmaceutical foods (Nestle Health Science). This wholly-owned subsidiary operates under the objective to bridge the gap between pharmaceuticals and food and untangling the accessibility of food, drugs, and disease. The main driver in the food processing industry is technological innovation. In addition, in order to maintain its leading global position, Nestle has a notably huge R&D budget of $2 billion which is invested in new food technologies for chilling, dehydrating, and freeze-drying (DuBois). In sum, Nestle has a clear competitive advantage over its competitors, allowing the company to be an impressive leader in the industry and to dominate markets.

 Works Cited

“About Us.” Nestle Health Science. Nestle, n.d. Web. 1 Apr. 2013. <http://www.nestlehealthscience.com/about>.

Annual Report 2010. Rep. Nestle.com, 2011. Web. 1 Apr. 2013. <http://www.nestle.com/asset-library/Documents/Library/Documents/Annual_Reports/2010-Annual-Report-EN.pdf>.

DuBois, Shelly. “Nestlé’s Brabeck: We Have a “huge Advantage” over Big Pharma in Creating Medical Foods.” CNN Money. Cable News Network, 1 Apr. 2011. Web. 1 Apr. 2013. <http://money.cnn.com/2011/04/01/news/companies/nestle_brabeck_medical_foods.fortune/index.htm>.

Food Processing Industry: Market Research Reports, Statistics and Analysis. Rep. Report Linker, n.d. Web. 1 Apr. 2013. <http://www.reportlinker.com/ci02050/Food-Processing.html>.

International Trade Association. Department of Commerce. Food Manufacturing NAICS 311. Trade.gov, Feb. 2010. Web. 1 Apr. 2013. <http://www.ita.doc.gov/td/ocg/outlook10_food.pdf>.

Safety & Health Assessment & Research for Prevention (SHARP). Washington State Department of Labor & Industries. Food Processing Industry. Washington State Department, n.d. Web. 1 Apr. 2013.

Sperber, Bob. “Nestle USA: Manufacturing That Sustains.” FoodProcessing.com. Food Processing, 30 Nov. 2009. Web. 1 Apr. 2013. <http://www.foodprocessing.com/articles/2009/processor2009_nestle_plant.html>.

“Strategy – Nestlé Roadmap to Good Food, Good Life.” Nestle.com. Nestle, n.d. Web. 1 Apr. 2013. <http://www.nestle.com/AboutUs/Strategy>.

U.S. Organic Industry Overview.” Www.ota.com. Organic Trade Association, 2011. Web. 2 Apr. 2013.

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Nestlé: Environmental Analysis

Since Nestlé operates in food industry and is required to abide by many environmental factors pertaining to their stakeholders. These factors include regulatory, social, political, economic, technological, and market. All corporations try to appease these factors to remain afloat and competitive. As large of a corporation Nestlé S.A. is, Nestlé is affected by all of these environmental factors.

Not only do corporations have to follow the laws and regulations of their home country, they are required to follow the laws and regulations of other countries the corporation is doing business in. Nestlé operates and sells their products in over a hundred countries. (Nestlé) In each and every country they are operating in, they are being regulated for the specific country’s laws and taxes, whether it is through their products or employment. By being equip to the countries’ laws and regulations, Nestlé and other corporations create a good standing relationship with the countries’ government for the future of their corporation.

Being socially responsible is one of Nestlé’s greatest responsibilities. Especially in light of the Nestlé boycott in 1977 by the Infant Formula Action Coalition. (Nestlé) With the many products Nestlé produces for every region worldwide, they produce the products specifically suited towards the regions and according to the countries regulations. As well, Nestlé produces countless brands marketed to certain demographics. Nestlé failed to be socially responsible in the 1970s, pushing out their infant formula products and to discourage breastfeeding. (Teachspace) This action led to a worldwide boycott towards Nestlé for encouraging formula over breastfeeding and failing to factor in the living conditions of third world countries. (Baer) For example, most third world countries do not have clean water while the infant formula requires it.

When a multinational corporation expands to a new country, not only do they determine if the market will produce any profit for the company, they look to the political factor to see if the company will be able to function effectively under the countries’ government. Respectively the factors, regulatory and political, coincide with one another. Expanding to a new country, a corporation or Nestlé becomes knowledgeable of the laws, regulations, social and political aspects, and of the benefits that the country’s government and its population can provide before deciding to expand.

Likewise in appeasing local and government law and regulations in other countries, economical factors, such as rates of inflation and exchange, play a great part in foreign relationships with the country. By understanding the specific country’s rates in employment, inflation, and exchange, Nestlé can determine whether they can maximize their profits after the likes of employment costs, currency exchanges, and taxes. With the advancement of technology, Nestlé will benefit greatly in investing into these new technology. Technology can bring down the cost and efficiency of the production of products and other aspects internally for the organization.

In the market or industry factor, Nestlé distributes some of their products to other companies, some being their competitors in certain countries, for these to later distribute to countries they primary have their markets in. Giving competitors the ability to help distribute Nestlé’s products to other countries can lower production and operation costs, such as wages, packaging, and marketing. As well as, producing affiliations with the competitors, being able to learn from their competitors and use their local country advantage in marketing their products in a market they are trying to reach.

Source:

  1. “About Us.” Http://www.nestle.com. Nestlé S.A., n.d. Web. 31 Mar. 2013. <http://www.nestle.com/aboutus>.
  2. “Death, Diarrhea, and Disease: Nestlé and the Ethics of Infant Formula.” Death, Diarrhea, and Disease: Nestlé and the Ethics of Infant Formula. Teachspace, n.d. Web. 01 Apr. 2013. <http://www.teachspace.org/personal/research/nestle/history.html>.
  3. Baer, Edward. “Babies Means Business.” New Internationalist. New Internationalist, n.d. Web. 01 Apr. 2013. <http://newint.org/features/1982/04/01/babies/>.
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Nestle: Corporate Strategy

Alona Chystyakova

Professor Gardberg

MGT 4880 CTRA

April 1st 2013

 

Nestlé: MNE Profile

Corporate Strategy

Nestlé has around 468 factories, operates in 86 countries around the world, and employs around 330,000 people. It is one of the main shareholders of L’Oréal, the world’s largest cosmetics company (Nestlé). The mission of Nestlé nowadays – “Good Food, Good Life” – is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions and to put a strong emphasize that leadership is not just about size; it is also about behavior and trust earned over a long period of time by consistently delivering on promises (Nestlé).

The company grew significantly during the First World War and again following the Second World War, expanding its offerings beyond its early condensed milk and infant formula products. The company has made a number of corporate acquisitions, including Crosse & Blackwell in 1950, Findus in 1963, Libby’s in 1971, Rowntree Mackintosh in 1988, Gerber in 2007, Kraft Frozen Pizza in 2010 and Wyeth Nutrition in 2012 (Wall Street Journal).

Nestlé has a primary listing on the SIX Swiss Exchange and is a constituent of the Swiss Market Index. In 2011, Nestlé was listed No. 1 in the Fortune Global 500 as the world’s most profitable corporation. With a market capitalization of  $ US 200 billion, Nestlé ranked No. 13 in the FT Global 2011 and No. 12 in the FT Global 2012 (Financial Times).

It is quite important to present Nestlé’s internal resources when analyzing company’s strategic position – the key strengths and weaknesses. Nestlé’s Chairman and CEO Paul Bulcke had set Nestlé on the path of achieving worldwide sustainable competitiveness through the following strategic “pillars” such as low-cost, highly efficient operations; renovation and innovation of the Nestlé product line; universal availability and ability to customize products to the local market conditions; improved communication with consumers through better branding; research and development capabilities with a focus on meeting today’s needs without compromising the ability of future generations to meet their needs, and to do so in a way which will ensure profitable growth year after year and a high level of returns for shareholders and society at large over the long-term. The company has the largest R&D network of any food company in the world; with 32 R&D centers and over 5,000 people directly involved in R&D (Nestlé).

However, there are still few weaknesses the company has to take into consideration, such as the history of product recalls, questionable reputation and shady deal-making, allegations of unethical conduct, product concentration in many areas have been viewed as unhealthy and also lower margins. Nestlé’s LC-1 division was not as successful as it has been thought it would. The growth in the organic food sales division was flat since 2008, even though the industry grew 8.9%. Since 2004 the breakfast cereal industry has been under fire from the FDA and the American Medical Association, both of which said that false claims of “heart healthy” and “lower cholesterol” had to be removed from packaging and advertising. Nestlé has also been forced to reduce the amount of sugar in their products, as parent’s advocates groups claimed they were contributing to the diabetes epidemic among American children. General Mills is an experienced, established brand and are the market leader in the USA; however, they have been lacking in innovation and have been behind in creating new niche products.

Nestlé is the biggest food company in the world, with a market capitalization of roughly 191 billion Swiss francs (CHF), which is more than 200 billion U.S. dollars. In recent years the company has performed quite well reporting US $98.92 billion in sales for 2012. However, financial analysts are lately concerned about Nestlé’s decline in emerging markets where key regions were hit by a string of natural disasters and political unrest. As of December 31 2012, Nestlé’s sales (in million CHF) were equal to 92,186, whereas reported sales in 2011 – 83,642 and in 2010 – 93,015 (in million CHF) respectively. Despite the slowdown in sales, Nestlé Chief Executive Paul Bulcke reassured there were still growth opportunities. According to the recently published financial data, Nestlé still managed to report a 12% rise in full-year net profit as high-profile brands such as Kit Kat and Nescafe continued to perform very well (Nestlé).

During 2011-2012 Nestlé was boosted by strong performances by its so-called “billionaire brands” – products that generate more than 1 billion Swiss francs ($1.09 billion) a year.  As an example, Kit Kat, became the best-selling chocolate bar in Japan, following the successful launch of new flavors including wasabi and limited edition bars, while instant coffee capsule brand Dolce Gusto was a major success around the world. The coffee brand performed very well in Germany, the U.K., Russia and austerity-hit Spain, where it benefited from a consumer trend toward small, affordable treats despite economic cutbacks (Wall Street Journal).

Nestlé’s long-term corporate objectives are to be recognized as the world’s largest and best branded food manufacturer and leader in Nutrition, Health and Wellness, trusted by all its stakeholders, whilst ensuring that the Nestlé name is synonymous with products of the highest quality as well as achieving the status of “Nestlé Model”, a term which referred to Nestlé’s objectives of “organic growth between 4% and 6% each year; continued year-after-hear improvements in earnings before interest and tax. In recent years, the company has pursued a policy of expansion and diversification (brands diversified into specific product groups like baby foods, bottled water, coffee, drinks, food service, sport nutrition and weight management etc.) through acquisition and divestment to achieve a more balanced structure to the business (as an example, Nestlé‘s 2012 acquisition of Pfizer Nutrition, enhancing its position in global infant nutrition) (Nestlé).

To stay ahead of the competition, Nestlé centralizes expertise in the system technology. Nestlé has marked recently the official opening of a new System Technology Centre (STC) in Switzerland that brings together on one site the expertise used to combine products, capsules and machines such as those used in its Nespresso and Nescafé Dolce Gusto beverage systems what will significantly affect the company’s profits in the future (Wall Street Journal).

The company has also set up a new institute to combine nutritional and biomedical research, in the hope of creating foods that provide a medicinal benefit. Nestlé is examining its entire portfolio to make sure its products are healthier and tastier than those of its direct competitors (The Economist).

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