Report on Group Case Study: Nestlé Expands InternationallyPaper PDF

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Summary

The report answers to four questions. (i) Would you classify Nestlé as a multinational corporation? Why or why not? (ii) Does Nestlé have to adapt its products for foreign markets? (iii) Why is it so expensive for Nestlé to sell a product like Lean Cuisine in other countries? (iv) Will competitors b...

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Report on Group Case Study: Nestlé Expands Internationally

Table of Contents 1.0

Case Summary ..................................................................................................................... 2

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Solution to the Case Questions ............................................................................................ 2

Question 1: Would you classify Nestlé as a multinational corporation? Why or why not? ...... 2 Question 2: Does Nestlé have to adapt its products for foreign markets? ................................. 3 Question 3: Why is it so expensive for Nestlé to sell a product like Lean Cuisine in other countries? .................................................................................................................................... 4 Question 4: Will competitors be able to follow Nestlé into foreign market with the same degree of success? ....................................................................................................................... 4 3.0

Case Conclusion................................................................................................................... 7

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Bibliography ........................................................................................................................ 8

Table Table 1: Comparative Analysis of the Top 3 Competitors with Nestlé………………………….5

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Report on Group Case Study: Nestlé Expands Internationally

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Case Summary

Nestlé Corporation, founded in 1866 and headquartered in Vevey, Switzerland, is the world’s largest food company with production facilities in over 60 countries. Being the largest producer of coffee, powdered milk and frozen dinners, the company has experienced business success with boosted sales worldwide. Nestlé strives to adapt its products to local tastes and preferences with global appeal. Though having faced high importing costs associated with high shipping charges, Nestlé did not withdraw from its international expansion strategy which resulted in vast popularity of its Lean Cuisine meals not only in Canada, but also in Britain and France. With ongoing global expansion, Nestlé is now considering to enter into the Third World countries. However, whereas Nestlé has been expanding internationally for decades, its competitors are now striving to be involved in profitable international trade.

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Solution to the Case Questions

Question 1: Would you classify Nestlé as a multinational corporation? Why or why not? Answer: Yes, in our point of view, Nestlé can be classified as a multinational corporation due to the similarity of its characteristics with the features and definition of a multinational corporation. By definition, a multinational corporation (MNC) is an enterprise with a centralized office in the home country and facilities and other assets in at least one country outside the home country (Mayrhofer & Prange, 2013). Nestlé can be classified as an MNC, since it is headquartered in Vevey, Switzerland with production facilities in over 60 countries, according to the case study. However, according to Nestlé’s updated report, the company currently has 413 factories in 85 countries with sales operation in 190 countries worldwide (Nestlé, 2018, p. 55). Currently, there are over 82,000 MNCs around the world and Nestlé is certainly one of these MNCs (Edwards, Marginson & Ferner, 2012). Nestlé was ranked 69 on the Fortune Global 500 in 2017 that annually reviews and releases the top 500 companies worldwide in terms of revenue (Fortune.com, 2017).

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Report on Group Case Study: Nestlé Expands Internationally

Question 2: Does Nestlé have to adapt its products for foreign markets? Answer: Yes, indeed Nestlé has to adapt its products for foreign market, since taste preference, beliefs, norms, values and habits vary from one country or region to another country or region. Keeping this in mind, Nestlé believes that “Food is a local matter.” Thus, customization takes place in Nestlé instead of universalism. The company, therefore, plans its strategies globally and implement those locally. Nestlé provides autonomy to its local branches in each foreign market to make decisions in relation to pricing and distribution (Jaffery, 2013). In fact, Nestlé encourages adapting products to local markets to respect the respective tastes, habits, cultural norms and religious backgrounds of consumers from each nation and region (Nestlé, 2019a). The company’s global presence and high expenditure on research and development have allowed it to offer local products with global appeal. Three examples can be presented to show how Nestlé strives to adapt its products to different foreign markets. Firstly, it has introduced noodles under the brand name, Maggi, in similar flavours in different countries, but with different taste and packaging, and ingredients sourced locally in each country (Kannan, 2015). For instance, in Bangladesh, Maggi is present in only two flavours namely, Curry and Chicken (Nestle's Bangladesh, 2019). However, in its neighbouring country India, the brand is present in 12 different flavours due to Indians’ preference for spice and vegetables (Jaiswar, 2017; Saxena, 2016). On the other hand, since cows are abundant in Australia and New Zealand, Maggi offers Beef and Oriental flavour in the region. Again, considering the preference for salt, Maggi presents Tomyam and Curry flavoured noodles in Malaysia and Thailand (Jaffery, 2013). Secondly, Nestlé usually practices distribution of its products operating from a central warehouse. However, since Nigeria’s road construction is poorly developed which would cause substantial loss of the company, Nestlé instead built several small warehouses throughout the country to efficiently reach its products to people with locally employed Nigerian citizens. Thirdly, Chinese find the original tastes of coffee too bitter for their liking. Nestlé, therefore, implemented a new formula by integrating melted ice-cream flavour that made coffee more acceptable to many Chinese (The Economist, 2012).

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Report on Group Case Study: Nestlé Expands Internationally

Question 3: Why is it so expensive for Nestlé to sell a product like Lean Cuisine in other countries? Answer: Lean Cuisine is a brand of frozen meals that was introduced by Nestlé’s frozen dinner company, Stouffer in the United States in 1981 to promote balanced diet and reach those consumers who desired for healthy weight management (Nestlé, 2019b). Lean Cuisine is, in fact, a low calorie – low fat tasty and balanced diet solution with over 100 breakfast, lunch and dinner meal alternatives, such as sausage, pasta, pizza, spaghetti, cheese as well as meatballs (Raga, 2016). Selling products like Lean Cuisine in other countries imported from Canada would make Nestlé incur very high costs and result in expensive operations due to the following reasons: i)

High fare of freight due to long distance from Canada to other overseas countries;

ii)

High cost of shipping frozen dinners associated with high refrigeration facility charges

iii)

High cost of import tariffs and taxes at customs of other countries.

Question 4: Will competitors be able to follow Nestlé into foreign market with the same degree of success? Answer: A comparative analysis among the competitors and Nestlé would provide the relative strengths and weaknesses of the companies and help to analyse whether the competitors would be able to follow Nestlé in foreign markets with the same degrees of success. Among many competitors enlisted by Bhasin (2018), we have selected the top 3 competitors in terms of global presence for comparative analysis. The comparative analysis is framed in the Table 1 below.

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Report on Group Case Study: Nestlé Expands Internationally

Table 1: Comparative Analysis of the Top 3 Competitors with Nestlé SL

Factors

Nestlé

Mondelez Mars Inc. International

Kraft Heinz Company

1

Founding year

1866

2

190

40+

SL

Global Presence / Operations (Total no. of countries) Factors

October, 2012 160+

Nestlé

Mondelez Mars Inc. International

Kraft Heinz Company

3

Net revenues (2018)

4

Net Profit (2017) Total no. of employees worldwide Competitive Strengths

USD 25.93 billion USD 2.9 billion 83,000

USD 35 billion -

5

USD 91.44 billion USD 15.52 billion 308,000

USD 26.2 billion USD 10.998 billion 39,000

No. 1 in chocolate, baby food, frozen food and gum; World’s largest food company Over 2,000 brands worldwide

No. 1 in biscuits and candy globally

World’s 5th largest food and beverage company

Over 121 brands worldwide

Specialized in pet care products, being present in over 50 countries Over 100 brands worldwide

(i.e. Milo, Nescafé, Kitkat, Crunch, Polo, Boost and Neslac)

(i.e. Oreo, Cadbury, Dairy Milk, Halls and Toblerone)

(i.e. M&Ms, Snickers, and Milky Way chocolate bars)

(i.e. Cadbury, Cheesybite, Kraft Mayo, Toblerone and Tang)

Transnational

Transnational Global strategy

6

7

8

Leading global brands

International expansion strategy

June 23, 1911 2012 78+

100,000

Over 25 brands worldwide

Multidomestic

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Report on Group Case Study: Nestlé Expands Internationally By referring to the Table 1 on the previous page, we can analyse in terms various features. First, in terms of global operations, whereas Nestlé is present in 190 countries, the closest competitor Mondelez International has operations in 160 countries and the remaining two top competitors remain quite far with below 90 locations worldwide (Mondelez International, 2018; Kraft Heinz, 2019). Second, in terms of total number of net revenues in FY2018, Nestlé reported USD 91.44 billion, whereas the closest competitor Mars Inc. reported only USD 35 billion which is nowhere closer to the net revenues of Nestlé (Nestle. 2019c; Statista.com, 2018). Third, in terms of net profit as well, Nestlé remains with a competitive advantage, since the closest competitor, Kraft Heinz, recorded a net profit of USD 10.998 billion in FY 2017. Fourth, considering the total number of employees worldwide, the competitors are far behind Nestlé, as Nestlé reported having over 3 times employees worldwide compared to its closest competitor Mars Inc. in this regard (The Financial Express, 2018; Staley, 2017). Fifth, in terms of competitive advantage, though Mondelez International is no. 1 in biscuits and candy and Mars Inc. is more specialized in Pet Care products compared to Nestlé, the latter company still remains as the world’s largest food and beverage MNC (Mars, 2018). Sixth, in terms of brands as well, the competitors are nowhere near Nestlé. Whereas, Nestlé offers over 2,000 brands worldwide, other competitors offer below 200 brands globally only (Bhasin, 2018). Seventh, in terms of international expansion strategy, only Mondelez International can compete with Nestlé, as both of these MNCs have adopted transnational strategy (a strategy characterized by both high global integration and high local responsiveness). However, Mars Inc. adopted a global strategy with high global integration and low local responsiveness. Kraft Heinz Company, on the contrary, adopted a multi-domestic strategy characterized by low global integration and high local responsiveness (Haynes, 2014). Nevertheless, MNCs adopting a transnational strategy are at competitive stake over other competitors. From the analyses addressed above, it can be understood that the top 3 competitors lag behind in many factors while comparing to Nestlé. Therefore, according to our stand, the competitors of Nestlé will not be able to follow Nestlé into foreign market with the same degree of success due to the aforementioned shortcomings. 6|Page

Report on Group Case Study: Nestlé Expands Internationally

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Case Conclusion

Nestlé is a multinational corporation (MNC) since it operates in more than 60 countries besides its Head Quarter in Switzerland. The company, therefore, has to adapt its products for foreign markets, since it practices a core value that respects differences in peoples’ tastes, habits and preferences in various culture. However, when shipping its products in long distance i.e. from Canada to Britain, Nestlé experiences incurring high importing taxes with high freight charges and freezing costs. Even after all, Nestlé is gradually expanding globally with significant competitive advantages than its competitors in terms of worldwide area of operations, net annual revenues and profits, total number of employees, total number of brands and international expansion strategy.

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Bibliography

Bhasin, H. (2018). Top Nestle competitors across the world. Marketing91. [online] Available from: https://www.marketing91.com/top-nestle-competitors-across-the-world/ [Accessed 27th March, 2019] Edwards, T., Marginson, P. & Ferner, A. (2012). Multinational companies in cross-national context: integration, differentiation and the interactions between MNCs and nation states. [online] Available from: https://pdfs.semanticscholar.org/3842/091251760343d02a969df03dc1db50cde5a2.pdf [Accessed 27th March, 2019] Fortune.com. (2017). Fortune Global 500: Nestlé. [online] Available from: http://fortune.com/global500/nestle/ [Accessed 27th March, 2019] Haynes, C. (2014). The Global Environment and Operations Strategy. [online] Available from: https://slideplayer.com/slide/6674638/ [Accessed 27th March, 2019] Jaiswar, P. (2017). Maggi noodles growth rate slows even as Nestle introduces new flavours. Zeebiz. [online] 24th May, 2017. Available from: https://www.zeebiz.com/companies/newsmaggi-noodles-growth-rate-slows-even-as-nestle-introduces-new-flavours-16631 [Accessed 27th March, 2019] Jeffery. (2013). Nestle – international strategy. [online] Available from: https://blogs.baruch.cuny.edu/mgt4880nestle/2013/04/08/nestle-international-strategy/ [Accessed 27th March, 2019] Kannan, I. (2015). Made in India Maggi noodles safe in Canada, claims Nestle. India Today. [online] 7th June, 2015. Available from: https://www.indiatoday.in/india/story/maggi-noodlesindia-canada-safe-vice-president-nestle-256017-2015-06-07 [Accessed 27th March, 2019] Kraft Heinz. (2019). Employees located in 40+ countries around the world. [online] Available from: https://www.kraftheinzcompany.eu/company/our-locations/ [Accessed 27th March, 2019] Mars. (2018). #498 Mars. Forbes. [online] Available from: https://www.forbes.com/companies/mars/# [Accessed 27th March, 2019] 8|Page

Report on Group Case Study: Nestlé Expands Internationally Mayrhofer, U. & Prange, C. (2013). Multinational Corporations (MNCs) and Enterprises (MNEs). Encyclopaedia of Management. [online] 2013 Edition, Wiley. Available from: https://www.researchgate.net/publication/319533213_Multinational_Corporations_MNCs_and_ Enterprises_MNEs [Accessed 27th March, 2019] Mondelez International. (2018). 2018 fact sheet: leading the future of snacking. [online] Available from: https://www.mondelezinternational.com/~/media/mondelezcorporate/uploads/downloads/mondel ez_intl_fact_sheet.pdf [Accessed 27th March, 2019] Nestlé. (2018). Annual Review 2018: Enhancing quality of life and contributing to a healthier future. [online] p. 55. Available from: https://www.nestle.com/assetlibrary/documents/library/documents/annual_reports/2018-annual-review-en.pdf [Accessed 27th March, 2019] Nestlé. (2019a). Are Nestlé products the same throughout the world? [online] Available from: https://www.nestle.com/ask-nestle/products-brands/answers/are-nestle-products-the-samethroughout-the-world [Accessed 27th March, 2019] Nestlé. (2019b). Lean Cuisine. [online] Available from: https://www.nestle.com/brands/allbrands/lean-cuisine [Accessed 27th March, 2019] Nestle. (2019c). Nestlé reports full-year results for 2018. [online] Available from: https://www.nestle.com/media/pressreleases/allpressreleases/full-year-results-2018 [Accessed 27th March, 2019] Raga, S. (2016). 10 facts you might not know about Lean Cuisine. Mental Floss. [online] Available from: http://mentalfloss.com/article/76047/10-facts-you-might-not-know-about-leancuisine [Accessed 27th March, 2019] Saxena, S. (2016). Nestle India launches new flavours of instant noodles: Maggi 'Hot Heads' available on Snapdeal. NDTV Food. [online] 12th September, 2016. Available from: https://food.ndtv.com/food-drinks/nestle-india-launches-new-flavours-of-instant-noodles-maggihot-heads-available-on-snapdeal-1422082 [Accessed 27th March, 2019]

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Report on Group Case Study: Nestlé Expands Internationally Staley, O. (2017). To fill 70,000 jobs, chocolate giant Mars will have to overcome its deeply secretive past. [online] Available from: https://qz.com/1047136/mars-recruiting/ [Accessed 27th March, 2019] Statista.com. (2018). Net Revenue of Mondelez. [online] Available from: https://www.statista.com/statistics/260298/net-revenue-of-mondelez-international-worldwide/ [Accessed 27th March, 2019] The Economist. (2012). Food for Thought. [online] Available from: http://www.economist.com/news/special-report/21568064-food-companies-play-ambivalentpart-fight-against-flab-food-thought/ [Accessed 27th March, 2019] The Financial Express. (2018). Mondelez International sets up operations in Bangladesh. [online] Available from: https://www.thefinancialexpress.com.bd/trade/mondelez-internationalsets-up-operations-in-bangladesh-1534051799 [Accessed 27th March, 2019]

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