TABLE OF CONTENT
Introduction page 2
Overseas expansion page 3
Recommendation page 6
Conclusion page 8
Reference page 9
Introduction
Nehri Nestle is the founder of Nestle of new-born child nourishment in 1866 in Switzerland (Nestle, n.d). The Nestle slogan of “Little Nest” represent the safety and nourishment. Nowadays, Nestle provides their products for 152 years and has 8500 brands such as medical and child food. Purpose of Nestlé’s is to grow to the world’s leader of wellbeing nourishment and health organization. The “Good Food, Good Life” is an attractive slogan to give customers the best degustation and better choice of nutrition in a variety of food and drinks for day and night. The essential wellspring of better health all through life is good quality food, Nestle put an exertion in giving ideal nourishment, excellence quality, and safe meal for customers’ physiological needs.
Nestle encountered important challenges in its marketplace growth throughout the Nineties. During the overseas expansion, the company faced with World War I and II which motivated to expand globally and open the first factory abroad. Further, the use of child labour in cocoa production due lack of education brings the company new challenges and show their business activities more in a friendly manner to society. At the same time, a powerful competitor in the market decreases the Nestle market share, and how business can adopt at the market by being competitive. Lastly, how the company can expand their activities in China and due to which factors Nestle decided to operate and invest in the Chinese market. All these aspects would be explained in details.
Overseas expansion
Nestlé had factors to expand overseas and built the first American factory in the Nineties. One of the factors was World War I and II. So, the motivation for Nestle to expand globally for market benefits in increasing demand and trends for the products. The World War I caused the disruption to economy and business operation in Europe, and Nestle faced an economic crisis due to lower consumption because of the shortage of milk. In other hand, Nestle acquired to government contracts due to increased demand for milk and chocolate productions and had 40 factories in 1918 (Owles E.,2017). Before the World War II, purchase of productions was low. World War II has significantly promoted Nescafe and the product become popular for American servicemen in Europe and Asia. During World War II, the Nestle supplied for both parties of the conflict in the war and acquired contract with German Army and sold the Nescafe American factories to the USA (Owles E.,2017).
Following the next motivation, the seeks for natural resources and human capital which are not accessible in the home market or can be gained at lower cost abroad. So, a sum of 24 children was discovered on farms as “family laborers” that not able to attend school (Sandler C. J., 2015). That led to the infringement of the child labour law that focuses on the enslaved and trafficking. The solution to the problem is the introduction of the Nestle supplier code to monitor the supply chain and set up the labour standards. So, Nestle should monitor the process of recruitment and training on how to address the child labour problem. Nestle set up a Child Labour Monitoring and Remediation System (CLMRS) in Côte d’Ivoire by recruiting the child labour agent and community liaison that focus on awareness and identification risk of child labour awareness and report the discoveries to suppliers in 2012. Nestle was the first cocoa producer to set up the system that identified 7000 child labour and helped about 5000 moves away from child labour. In 2016, the CLMRS system introduced in Ghana to help children in “Cocoa-Growing Community” to attend schools. Therefore, Nestle renovated 42 schools and introduced a partnership with Jacobs Foundation for training in literacy for children education (Nestle, n.d).
One of the reasons for Nestle expand overseas is being competitive which would bring benefits to the business. During expansion to Europe and USA, Nestle did not have competitors that might bring risk to the Nestle operation. Nestle joint the joint ventures with Anglo-Swiss Condensed Milk Company after for long-term competition for firm expansion in 1905 (Nestle, n.d.. However, expansion does not guarantee a place of a market leader as Nestle faces competition with Mars Company that lead for lower market share. Mars and Nestle focus on similar product categories such as beverages, pet care, and health products (Stevens, A., Fosness, D., Katz, J. and S. J. Harrison,(2012). The popularity of chocolate and sweets industry is declining due to the change in consumer taste and high demand for healthy products. This factor motivated Mars to stop selling products children under the age of 12 for decreasing childhood obesity in 2007 (Stevens, A., Fosness, D., Katz, J. and S. J. Harrison,(2012). Due to that, Nestle introduced the natural method to cut the 40% of sugar in chocolates. Neste filed the patent for fruit juice for decreasing the sugar level in foods and sweets products. Therefore, Nesle provides snacks based on health platform which bring the 3% retail sales comparing to the competitors. At the same time, Nestle introduced the “Nutritional Profiling System” that set targets for sugar contains in their products (Nieburg, O.,2016).
The fundamental of Nestle is “Investments have to be good for the country as well as good for the company.” Traditional motivation for a Nestle’s expansion to China due to lower economic level in 1980 which leads to bringing to the new market investment and improving the economy in the country. However, during expansion Nestle joined the joint-venture with Shuangcheng Ltd due to the lack of power and acceptance of the product in the market in 1987 and first local production started in 1990 (Nestle, n.d). Nestle provided economic assistance due to the lack of economic and money power in China which called the “factory and farmers” program for milk production. This program helped the local farmers to increase the effectiveness of the production due to technical support by Nestle. At the same time, the company provides an opportunity for local farmers to attend the training sessions which is free and about 300 training per year (Nestle, n.d.). Due to the partnership, Nestle helped to reduce the unemployment rate in China by opening 31 factories and hired about 50,000 Chinese employees (Nestle, n.d.). At the same time, Nestle expanded the distribution, profit, and its production.
Recommendation
There are a couple of things that could enhance the task, structure, and administration of the business. The strategy is the most critical part of the organizations. During overseas expansion Nestle will be able to get cost effectiveness and regional responsiveness. To do that, Nestle needs to transfer operations in favor of locations where is political stability, costs, and labor. For example, Nestle should stop child labor and go the Chinese market due to the lower cost of human capital and resources. Also, Nestle should use their technological advance for scientist research for improving the food quality and decrease more the sugar level in their products to become a more healthy supplier to the society. In the case with competitors, Nestle needs to differentiate their products and use local adaptation by producing the products at the local market. The local adaptation of the products will bring customer loyalty and a well-known brand. Lastly, Nestle is always seeking natural resources and it is better to expand abroad where the cost of resources is lower than at the home market. The low cost for resources will help the company to save money and increase their production and distribute to available markets. The economic situation in western nations faced decline in production output that have an impact for product responsiveness and usage. Target audience might requires for product modification or differentiation but spend less money (Gaumer C. J. and William C. Leif, 2005). Recommendation for Nestle is expanding into various markets such as China due to the buyers behavior and economic environment are diverse in examination with western nations (Khanna, T., Palepu, K. G., and Sinha, J. 2005). Those markets still in developing process which bring the grow potential for the business.
Conclusion
Starting business from 1866, Nestle introduced new-born child nourishment and progressed to become a well-known brand name and put effort to expand products offering with 8500 brands around the world. The decision of expanding caused by many factors such as seeks for human capital, being competitive and economic situation in the foreign market. To conclude, Nestle has a powerful adaptation in different markets and faced a some challenges during the expansion period mostly in World War I and II which lead for further business opportunities. Nestle expands internationally that lead to development of countries economy by increasing awareness and set up joint ventures with different organizations which bring outcome in beneficial for everyone. Nestle mostly adapt their operation for the foreign markets which increases profit, market share and manage potential risk by competitors.
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Reference
Gaumer C. J. and William C. Leif, “Social Facilitation: Affect and Application in Consumer Buying Situations,” Journal of Food Products Marketing 11, no. 1 (2005): 75–82.
Khanna, T., Palepu, K.G. and Sinha, J. (2005) Strategies That Fit Emerging Markets. Harvard Business Review, 83, 63-76
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Sandler Clarke, J. (2015). Child labour on Nestlé farms: chocolate giant’s problems continue. online the Guardian. Available at: https://www.theguardian.com/global-development-professionals-network/2015/sep/02/child-labour-on-nestle-farms-chocolate-giants-problems-continue Accessed 15 Oct. 2018.
Stevens, A., Fosness, D., Katz, J. and S. J. Harrison, (2012). Industry Competitors. online Robins.richmond.edu. Available at: https://robins.richmond.edu/documents/cases/Nestle.pdf Accessed 15 Oct. 2018.
Stevens, A., Fosness, D., Katz, J. and S. J. Harrison, (2012). Strategic Issues. online Robins.richmond.edu. Available at: https://robins.richmond.edu/documents/cases/Nestle.pdf Accessed 15 Oct. 2018.
