International business today is defined by the globalization of markets and corporations, the effects of a potential recession, the creation of some economic blocs, and the pressure on corporations to become more ecologically friendly. No business is safe from these environmental influences. International managers must be able to create and put into action effective strategies if they are to function effectively in this complicated global context. Among the notable multinational firms, Nestlé has emerged as one of the top organizations for nutrition, health, and wellness in the globe, exploring possible stimulants for international engagements. With a desire to gain profound insights into the international business strategy of Nestlé, our group has decided to choose the research topic: “International Business Strategy of Nestlé from 2014 to Present”. In the research paper, key aspects in the development of Nestlé’s international business strategy during its evolution from 2014 to the present are considered, particularly focusing on its company features and market analysis. In terms of research methods, we have implemented VRIO Framework, Porter’s Five Forces, and also expert assessment.
FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS & INTERNATIONAL BUSINESS INTERNATIONAL BUSINESS REPORT INTERNATIONAL BUSINESS STRATEGY OF NESTLÉ FROM 2014 TO PRESENT Instructor Class Group : PhD Nguyen Hong Hanh : KDOE307 Hanoi, June 2023 TABLE OF CONTENT INTRODUCTION .1 CHAPTER 1: OVERVIEW OF NESTLÉ 1.1 History of Foundation and Development 1.2 Mission, Vision, and Core Values .3 1.3 Nestlé’s Products and Markets CHAPTER 2: INTERNATIONAL BUSINESS STRATEGY ANALYSIS OF NESTLÉ .6 2.1 Value Chain Analysis 2.1.1 Primary Activities 2.1.2 Supporting Activities 2.2 Reasons for Nestlé Adopting Transnational Strategy .12 2.2.1 Company Characteristics (VRIO Framework Analysis) 12 2.2.2 Market Characteristics (Porter’s Five Forces Analysis) 17 2.3 Challenges of Nestlé in Some Typical Markets and Recommendations 21 CHAPTER 3: CONCLUSION .26 REFERENCE 27 INTRODUCTION International business today is defined by the globalization of markets and corporations, the effects of a potential recession, the creation of some economic blocs, and the pressure on corporations to become more ecologically friendly No business is safe from these environmental influences International managers must be able to create and put into action effective strategies if they are to function effectively in this complicated global context Among the notable multinational firms, Nestlé has emerged as one of the top organizations for nutrition, health, and wellness in the globe, exploring possible stimulants for international engagements With a desire to gain profound insights into the international business strategy of Nestlé, our group has decided to choose the research topic: “International Business Strategy of Nestlé from 2014 to Present” In the research paper, key aspects in the development of Nestlé’s international business strategy during its evolution from 2014 to the present are considered, particularly focusing on its company features and market analysis In terms of research methods, we have implemented VRIO Framework, Porter’s Five Forces, and also expert assessment By analyzing Nestlé's trajectory, we also aim to examine the conformity assessment and effectiveness of its international business strategy in the global market This research paper has additionally addressed Nestlé’s specific challenges in the international environment and to make recommendations for its effectual operation The report is structured as follows: Chapter 1: Overview of Nestlé Chapter 2: International Business Strategy Analysis of Nestlé Chapter 3: Conclusion CHAPTER 1: OVERVIEW OF NESTLÉ 1.1 History of Foundation and Development Nestlé SA is a nutrition, health and wellness company, which manufactures, supplies and produces prepared dishes and cooking aids, milk-based products, pharmaceuticals and ophthalmic goods, baby foods and cereals It has operations in more than 80 nations and has its headquarters in Vevey, Switzerland For the past 150 years, it has dominated the food business, growing to become the biggest food and beverage firm in the world The company dates to 1866, when two separate Swiss enterprises were founded that would later form the core of Nestlé Charles A Page and George Page, two American brothers, founded the Anglo-Swiss Condensed Milk Company in Cham, Switzerland, in August of that year In 1877 Anglo-Swiss added milk-based baby foods to its products, and in the following year the Nestlé company added condensed milk, so that the firms became direct and fierce rivals As a result of the takeover of the Fabrique de Produits Maggi SA (founded 1884) and its holding company, Alimentana SA of Kemptthal, Switzerland, the companies merged in 1905 to form the Nestlé and Anglo-Swiss Condensed Milk Company, which they kept using until 1947 Maggi was a well-known producer of soup bases and associated products From the beginning of the 20th century, Nestlé started expanding its products It acquired the chocolate rights in 1904, paving the way for items to bear the Peter, Kohler, Nestlé, and Cailler names By 1905, Nestlé & Anglo Swiss had more than 20 factories and its selling in Africa, Asia, Latin America and Australia The company enjoys the period of prosperity named “The Beautiful Age” The outbreak of war in 1914 created new challenges and opportunities to Nestlé The demand for condensed milk increased while a shortage of raw materials and cross-border trade slowed down the production To solve this problem, the company acquired processing facilities in the US and Australia By the end of the war, Nestlé & Anglo Swiss had more than 40 factories After the war, military demand for milk declined, causing major crisis for Nestlé & Anglo Swiss in 1921 The company then recovered, but was rocked by Wall Street Crash, which reduced the consumer purchasing power However, the company’s management corps was more professionalized and pioneering products like Nescafé were launched The outbreak of World War II in 1939 affected virtually every market of Nestlé In 1947, company added Maggi soups and seasonings to its product range The post-war period was marked by growing prosperity People in the US and Europe spent more money on convenience foods, with Nestlé launching Maggi ready meals From 1960, acquisitions enabled Nestlé to enter new areas such as frozen foods In 1970s, the company diversified into pharmaceuticals and cosmetics Nestlé later became one of the first companies to apply the WHO code on breast-milk substitutes After years of growth, in 1981, Nestlé let go of unprofitable brands It started promoting brands that meet the demands of more health-conscious consumers, in line with its new strategy “Nutrition, Healthcare, and Wellness” and targeted for global leadership in water, ice-cream and animal foods During the period from 2013 to present, Nestlé has articulated its “Creating Shared Value” approach to business Followed by the launch of Nestlé Cocoa Plan to further develop sustainable supply chains It also started focusing on medical nutrition and continued to find new growth opportunities in health care In addition, the company has stepped up its sustainability aims, committing to recycle packaging and net zero emissions 1.2 Mission, Vision, and Core Values The mission and vision statements of Nestlé Corporation, the leading food and processing brand in the world, are among the most forward-thinking The company's wide range of products has raised the bar in this industry In fact, it is one of the rare businesses that has celebrated its 150th anniversary and takes satisfaction in the position they have attained thus far Mission statement Nestlé's aim is to be "the world's premier nutrition, health, and wellbeing corporation" or "Good Food, Good Life." Based on their mission statement, it is clear that a significant portion of Nestlé's success is attributable to their wide range of products connected to health The company's "Good Food, Good Life." philosophy is to provide clients the highest-quality, most nutrient-dense alternatives across a variety of food and beverage categories and dining situations from dawn to sunset This statement implies that Nestlé places a high focus on customer pleasure The principal locations are as follows: – Nestlé, established in Switzerland, is the 's top nutrition, health, and wellness firm In terms of sales, it is the world's largest food corporation Baby food, breakfast cereals, coffee, confectionery, dairy goods, frozen food, pet meals, yogurt, and snacks are all sold by Nestlé Stouffers, Nescafe, Kit-Kat, Nestlé Water, and a slew of other important customer brands are among its holdings – The third element of the mission statement refers to the industry's role as a supplier of all things linked to food It's a sort of extension of the first section of the mission statement, but this time they go into further detail about delivering a "broad selection of food and beverage categories." Vision statement Nestlé's mission statement is, "To be a global, competing Nutrition, Healthcare, and Wellness Company producing greater value for shareholders by being a preferred employer, preferred partner, and preferred seller of products/services." The vision statement is noteworthy for two reasons The first is that the organization's objective is dedicated to its shareholders, also known as investors The second is a well- liked company There are several connections between the first and second portions of the vision statement The business may dominate the market by becoming the preferred provider and employer Nestlé promises that by dominating the market, investors will make money It is plausible to suppose that the company's profitability may be its main objective as a result Core values Nestlé core values are “full legal compliance, honesty, fair dealings, integrity, and respect.” It is not a wonder that Nestlé has managed to cultivate positive practices among all its staffers in all corners of the globe These guiding principles encourage doing things right while adhering to the approved processes It also emphasizes on the presence of proper interrelationships between different parties as well 1.3 Nestlé’s Products and Markets In a wide range of product categories, Nestlé enjoys an unparalleled worldwide position because of the power of its brands About 70% of the group's total sales are accounted for by six global corporate brands: Nestlé, Nescafé, Nestea, Maggi, Buitoni, and Friskies, with the Nestlé brand accounting for 40% of those sales Whether used alone or in cooperation with other product brands, these brands are the top picks of customers all around the world Nestlé now also holds an interest of at least 20% in these companies but does not exercise management control The most important associated company is L’Oréal, the world leader in the cosmetics market Nestlé’s involvement with L’Oréal started in 1974 L’Oréal markets over 500 brands and more than 2000 products in all sectors of the beauty business: hair color, permanents, styling aids, body and skincare, cleansers and fragrances Its products are found in all distribution channels Nestlé also owns local and national brands that are well-known to customers and have frequently been so for a very long time These trademarks are essential components of the Nestlé portfolio because they allow consumers to express their personality and respect their traditions while still enjoying the quality of a Nestlé product The brands and products of Nestlé are the subject of ongoing innovation and renovation in order to make them appealing to customers of today and future Making sure that our brands are accessible whenever, wherever, and whatever our customers want them is equally as crucial as making sure that they meet and exceed their expectations Figure: Various Brands under Nestlé Source: The Brand Hopper CHAPTER 2: INTERNATIONAL BUSINESS STRATEGY ANALYSIS OF NESTLÉ 2.1 Value Chain Analysis 2.1.1 Primary Activities Inbound Logistics Nestlé initiates its inventory network by following a chain that begins with National Demand Planning for its products Subsequently, based on the agreed-upon Demand Supply Planning, the necessary arrangements are made The Procurement Department is responsible for acquiring the direct materials, which include raw materials and packaging materials The procurement activities encompass both national and international exporters and suppliers Inbound logistics plays a crucial role in ensuring the proper clearance of all foreign materials at the port, adhering to customs protocols and maintaining accurate records Once this step is completed, the raw materials and other components are utilized for production, followed by the fulfillment of customer orders through customer service and distribution processes Operation Nestlé, being a multinational corporation, operates manufacturing plants across numerous countries worldwide The company's manufacturing facilities are located in Europe, Asia, Oceania, and Africa, with a significant concentration in the USA Some of the largest manufacturing plants producing Nestlé's food and beverage products can be found in Switzerland, Germany, and India With a diverse range of product lines, including baby nutrition, cosmetics, pharmaceuticals, and more, Nestlé has the flexibility to meet customer demands by manufacturing specific product types that are in demand in particular countries Nestlé's presence in both domestic and international markets allows the company to maintain and enhance its competitive edge against other global players The company tailors its strategies based on the preferences and requirements of local markets, enabling worldwide distribution that caters to specific customer needs An important part of the sophisticated operation is Nestlé’s effort to localize products, as much as they could The most notable result of the strategy is that mostly every country has an “iconic product” belonged to Nestlé, such as Japan with an immense amount of flavors, some are only available for domestic uses; or India with their Maggi instant noodles, which received positive feedbacks from customers, no matter where they are from The global reach of Nestlé is evident by the presence of its products in markets across many countries, as indicated by the United Nations list and intelligence reports Moreover, some of these countries serve as significant producers of Nestlé products Nestlé strives to supply specific products to countries based on their needs, minimizing distribution of products that have low demand in certain regions Outbound Logistics On a daily basis, Nestlé successfully transports a considerable volume of products from various warehouses to its valued customers This distribution process heavily relies on the collaboration with third-party logistics providers, who play a vital role in monitoring the company's environmental performance and optimizing its extensive network Together, they work towards reducing mileage, fuel consumption, greenhouse gas emissions, noise, and congestion, benefiting both the company and the environment To achieve these objectives, proactive measures are taken This includes continuous efforts to optimize distribution networks and meticulously plan routes across all operations, ensuring the selection of the most efficient paths that maximize productivity while minimizing resource usage Additionally, Nestlé explores alternative transportation modes and trials alternative fuels to continuously improve their transportation processes Furthermore, Nestlé prioritizes driver training programs, addressing both safety and environmental efficiency These comprehensive training sessions equip drivers with the necessary skills and knowledge, covering critical aspects of their operations Marketing and Sales According to Aude Gandon, Nestlé's Global Chief Marketing Officer, “We never dissociate marketing from sales”, the organization's ability to meet the accelerated demand is a result of the close relationship between marketing and sales Nestlé's global sales operation and global marketing operation fall under one team and organization This collaboration allows for a holistic approach where marketers and sales professionals work together to align plans and ambitions from a marketing perspective Nestlé recognizes the importance of providing marketers with the right processes and tools to adapt to changes in the marketplace The company invests heavily in capability building and training, acknowledging the need for continuous learning and evolution in the marketing field Gandon emphasizes the importance of getting the basics of marketing right, even in the digital era Understanding the brand, having a clear strategy, knowing the target consumers, understanding the market category and competition—all these fundamentals play a crucial role in driving marketing success Global Brand Consistency Nestlé has developed a strong portfolio of global brands that are recognized and trusted by consumers around the world Prominent brands like KitKat, Nescafé, Maggi, and Nestea have become synonymous with quality and reliability, creating a sense of familiarity regardless of the market in which they are encountered The company employs standardized marketing campaigns and advertising messages that resonate with consumers globally Whether through television commercials, digital advertising, or social media campaigns, Nestlé's marketing efforts are characterized by a unified brand voice that transcends national boundaries Nestlé also strives for global product consistency While allowing for some local adaptations to cater to specific tastes and preferences, they maintain a core product offering that remains consistent across different markets This consistency enables consumers to trust that the Nestlé products they encounter, regardless of their location, meet the same high standards of quality and taste Nestlé's commitment to global brand consistency is underpinned by its recognition of the benefits it brings Moreover, global brand consistency allows Nestlé to achieve economies of scale, streamline operations, and optimize its marketing investments by leveraging successful campaigns and strategies across multiple markets Emerging Markets Strategy Nestlé understands that price sensitivity is often higher in emerging markets due to lower average incomes and a larger population segment with limited disposable income Nestlé's affordable products strategy involves finding ways to reduce costs without compromising on quality The company invests in research and development, supply chain optimization, and efficient manufacturing processes to ensure competitive pricing while maintaining high product standards Localization is another important aspect of Nestlé's emerging markets strategy The company recognizes that consumer preferences and tastes can vary significantly across