NESTLÉ SLA CASE SOLUTION

1. How is culture influencing Nestlé’s product development and marketing strategies around
the globe?

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Nestlé’s product development is largely influenced by culture. Food has always been a local
product. A Bavarian soup will not appeal to noodle lovers in Taiwan. Thus, Nestlé has been
practicing a balancing act by trying to simultaneously achieve economies of scale and yet cater
to a variety of cultural preferences.

Nestlé’s marketing strategy also influenced by culture. Different culture demands different
marketing strategy. Nestlé generally understands how to adapt their global and local brands to
the given markets and find a suitable niche to place its products. Through an intense process of
research and development in local affiliates, Nestlé is able to find certain product variations
that are suitable for a given market. For example, their global brands KitKat and Maggi are very
well adjusted to different markets. In Japan, for example, KitKat is sold in numerous flavours
that cannot be found elsewhere. Even within the country itself, Nestlé implemented some
variations for only a small part of it. These variations range from yubari melon and baked corn
from Hokkaido Island to cherry and bean flavoured chocolate bars in the Tokyo region. A similar
tactic is also used for the Maggi brand, where different types of soup are designed to fit
individual market preferences.

2. Does it make sense for Nestlé to focus its growth efforts on emerging markets? Why

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In general, the company’s strategy has been to enter emerging markets early—before
competitors—and build a substantial position by selling basic food items that appeal to the
local population base, such as infant formula, condensed milk, noodles, and tofu. By narrowing
its initial market focus to just a handful of strategic brands, Nestlé claims it can simplify life,
reduce risk, and concentrate its marketing resources and managerial effort on a limited number
of key niches. The goal is to build a commanding market position in each of these niches. As
income levels rise, the company progressively moves out from these niches, introducing more
upscale items, such as mineral water, chocolate, cookies and prepared foodstuffs. Emerging
markets offer an opportunity that is relatively untapped by other companies. Emerging markets
are by their very own nature difficult to penetrate and to ensure that there are some synergies
between the parent and child company. In essence Nestlé’s strategy of going into emerging
market and establish a “dominant” position or to take over some local production and investing
in the infrastructure of the local people is a bold but also good move.

So yes, it does make sense for Nestlé to focus its growth efforts on emerging markets.

3. Critically analyse Nestle’s entry mode across the globe?

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As the markets are getting more competitive as well as more flat, it is very much apparent that
Nestle would be looking towards other new markets from the growth perspective. Nestle, being
the first mover, tries to enter the emerging markets in an early stage. Nestle is not generally
inclined to go through the expensive process of setting up its brand name in the prospective
markets; rather the company prefers to acquire local companies which are known in the
indigenous market. This actually helps Nestle to overcome the cultural hurdles and consumer
resentment to the foreign brands. Nestle first used this policy to start its business with the basic
consumer needs like infant food; and after that they expanded their business in the upscale
market segments of chocolate , soft drinks, instant food and beverage items as per customer
needs. The strategy is quite simple but strong. Sometimes they connect their expansion plan
with other brands as per the rising income of the population present there. Nestle uses this
approach as it is easier to reach the consumers with local brand names because of their
attachment to these local names. Consequently the marketing becomes easier in such a
situation as the local company has its own distribution channel, reputation and its own
customer base. With due course of time, Nestle starts the marketing of its own products. In
such a situation Nestle can very well concentrate on enhancement of the product line as well as
process innovation.

4. How would you describe Nestlé’s strategic posture at the top level (corporate level; is it
pursuing a global strategy, a Multi domestic strategy, an international strategy, or a
transnational strategy) and is the company’s strategy about business development in
emerging markets?

=> Nestlé’s Strategic posture seems to us like a multi domestic strategy.

A multi domestic strategy focuses on competition within each country in which the firm
operates. Firms employing a multi domestic strategy decentralize strategic and operating
decisions to the strategic business units operating in each country so each can tailor its goods
and services to the local market. Business units in each country are independent of each other,
Assumes markets differ by country or regions; Focus on competition in each market.

The ability to react and act to environmental changes is seen as a crucial part of Nestlé’s
strategy. As a result, all of the subsidiaries have the freedom in terms of decision making
regarding strategy issues. This allows its subsidiaries to be able to act independently from the
controls of headquarter in Switzerland. Hence, they can respond quicker to the local
environment, conditions and demands with the result of a more efficient approach to local
distribution, employees, advertising, products and marketing. Nestle as a company is organized
into seven worldwide strategic business units which are called “SBUs”. These units formulate
the high level strategic decisions on a worldwide basis, while each of these SBUs focuses on a
specific segment: chocolate, infant food, cereals, coffee etc.

5. What ethical dilemmas are faced by the Nestlé’s management and why and how should
they deal with it?

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A boycott was launched in the United States on July 7, 1977, against the Swiss-based Nestlé
Corporation. It was prompted by concern about Nestlé's "aggressive marketing" of breast milk
substitutes, particularly in less economically developed countries (LEDCs), largely among the
poor. A significant number of children work in the cocoa production sector in Nestle. This act
violates the child labour law. Human rights organizations are continually protesting the use of
child labour by Nestle. Nestlé is also fighting a PR battle with Greenpeace over claims that it is
continuing to source palm oil from Sinar Mas, the Indonesian company accused of illegal
deforestation and peatland clearance. Nestlé, maker of Kit Kat, uses palm oil from companies
that are trashing Indonesian rainforests, threatening the livelihoods of local people and pushing
orang-utans towards extinction.

As per these ethical challenges, Nestlé’s management is responding to set rules of labour
standard in workplace.