Nestlé concentrates on: - Social class: lower, working, and middle classes - Interests: attract to innovation and health conscious - Attitudes • Behavioural: - Usage rate: Nestlé hol
BANKING ACADEMY FACULTY OF INTERNATIONAL BUSINESS GROUP ASSIGNMENT SUBJECT: INTERNATIONAL BUSINESS STRATEGY (MGT28A) GROUP Research Nestlé’s International Business Strategy Lecturer: Tran Ngoc Mai Hà Nội, December 25th, 2022 Contents Overview Establishment history Mission and Vision Statement Organization culture Target customers and customers segments Phases of global strategy Drivers of global strategy External Factors 10 Opportunities and Threats 10 EFE Matrix 13 Diamond model 14 Competitive profile matrix (CPM) 16 Internal Factors 18 Strengths and Weaknesses 18 IFE Matrix 21 VRIO 22 Value chain 23 Entry Mode Analysis 27 Entry mode analysis 27 Nestlé’s entry strategy 27 Subsidiary – Corporate Level Strategy 29 Subsidiary level strategy 29 Corporate level strategy 30 SPACE & QSPM Matrix 32 SPACE Matrix 32 QSPM Matrix 33 Challenges 35 Recommendations 41 Conclusion 42 REFERENCES 43 Members of group Number Full name Student ID Nguyễn Quỳnh Anh 23A4050023 Phạm Mai Anh 23A4050039 Trần Thi Mai Anh 23A4050205 Nguyễn Thị Hà 23A4050111 Lê Thị Thu Hiền 23A4050133 Trần Thị Khánh Huyền 23A4050176 Đặng Thị Thùy Linh 23A4050209 Đinh Tú Uyên 22A4050180 Overview Establishment history The Nestlé Group is a global leader in food and beverage, with an extensive global sales and production network Nestlé has nearly 500 factories in 86 countries and sells 30,000 products Nestlé's current products include soft drinks, baby food, coffee, and dairy products, Nestlé was founded in 1986 by its founder, Henri Nestlé The head office is located in Vevey (Switzerland) • In the 1860s, Henri Nestlé invented a food for infants who could not be breastfed and successfully saved the life of a premature baby As a result, Nestlé Farine Lactée Henrie milk powder quickly gained popularity and was distributed in large quantities throughout Europe and numerous other nations, including Viet Nam • 1992-1993: La Vie Company was created through a joint venture between Perrier Vittel (a member of the Nestlé Group) and Long An Trading Company • 1995-1988: Nestlé Vietnam was born and started construction of a factory in Dong Nai • 2002: Put into operation La Vie's 2nd factory in Hung Yen • 2009: Expansion of MAGGI production line at Nestlé Dong Nai factory • 2011-2013: Started construction of Nestlé Tri An Factory specializing in the production of NESCAFÉ and acquired Nestlé Binh An Factory from Gannon • 2014: Expanding the production line Nestlé MILO • 2015: Inauguration of the decaffeinated green coffee factory • 2016-2017: Commencement of construction of Nestlé Bong Sen factory in Hung Yen Up to now, Nestlé is operating factories and nearly 2300 employees nationwide With a total investment capital of more than 600 million USD, Nestlé not only demonstrates the company's long-term commitment to development in Vietnam but also the desire to improve the quality of life and contribute to a healthier future for its customers Vietnamese family generation Mission and Vision Statement • Misson: Nestlé is the world's leading nutrition, health and wellness company mission of "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, from morning to night • Visson: Nestle's vision statement is “To be a leading, competitive, Nutrition, Health and Wellness Company delivering improved shareholder value by being a preferred corporate citizen, preferred employer, preferred supplier selling preferred products.” Organization culture - The culture of human leadership principles in the enterprise: Nestlé is a very humane company that meets all the essential needs of people in terms of nutrition as well as health This is shown and encouraged through the company's management and direction style - Culture at work, working environment: Nestlé's office is designed based on the main idea of the "bird's nest" image, an inspiration based on the company's logo Besides, the company also equips a lot of meeting rooms and convenient facilities that have contributed to serving the service efficiency for work and rest time for employees - Salary culture, welfare regime: Nestlé has built a dynamic salary and benefits system that competes with the market in all means, including salary and shortor long-term bonuses, additional benefits for salary, and social benefits for employees - Corporate culture through leadership Nestlé: Nestlé's members are facilitated, enjoy good remuneration policies, have many opportunities for career development, and are trained continuously At the same time, you must also work according to the following principles: dynamic, honest, hard-working, and trustworthy Constantly changing, cultivating and learning is also a prominent element in Nestlé's corporate culture Target customers and customers segments • Geographic: - Regions: The tastes of consumers in different regions of the country are very different => Nestle launched many product lines and gave different sugar content together - Climate: Summer is often hot, and rainy; winter is dry and cold => Nestle launches many product lines suitable for each season - Population: Large and rapidly growing population => there are many product lines suitable for all ages from adults to children • Demographic: - Segment into different ages: Children and the elderly are the most important customer segments In fact, Nestlé has created many products specifically for these two audiences - Occupation: Nescafe is specifically for people working in offices Nescafe has been a hit among working professionals as Nestle has promised Nescafe to be the coffee that would keep them fresh throughout the day - Income: Nestlé segmented their market based on customers’ earnings in an effective way => creating items that save money, and even the average person can buy them • Psychographic: In the marketing world, lifestyle-oriented interests, activities, and opinions, are categorized under psychographic variables Nestle can use Recommended for you Document continues below Taxation exercise group Cơ sở liệu I 100% (1) NHTM Tổng hợp 36 commercial banking Corporate Banking 100% (2) • Today, Tv channels provide more men's… Cơ sở liệu I 100% (5) Brainstorm and full essay (ls1) Cơ sở liệu I 100% (1) psychographic segmentation to divide the potential buyers into different segments Nestlé concentrates on: - Social class: lower, working, and middle classes - Interests: attract to innovation and health conscious - Attitudes • Behavioural: - Usage rate: Nestlé holds a large market share, launching many different types - Price sensitivity: Vietnamese consumers have high price sensitivity, so they of products to meet different tastes of consumers require Nestlé to have appropriate price policies Therefore, Nestlé always adjusts the selling price if they feel it is not suitable - Brand loyalty: The average value of consumer preference for Nestlé is 4.36, the highest compared to other brands Phases of global strategy Single country strategy: In 1867, Henri Nestlé, a German pharmacist and founder of Nestlé, developed a powdered infant formula in Vevey, Switzerland During this time, Nestlé adopted a cost-leading business strategy (also known as a low-cost strategy), but product quality and value were still focused and prioritized to gain a competitive edge in the food and beverage industry Export strategy: In this strategy, Nestle mainly produces products from its domestic factory in Switzerland and then exports to countries where the company currently does not have the production capacity International strategy: In this stage of strategy implementation, Nestlé mainly produces products products from the domestic factory in Switzerland and then exported to other countries where the company currently does not have production capacity Now Nestlé has more than 300 branches over the world Global strategy: The company established seven global strategic business units (SBUs) responsible for business development and high-level strategic decision making Drivers of global strategy a Macro level Globalization: Nestlé was founded in 1866 in Switzerland, with their first office in London in 1868 In 1905, the company merged with Anglo-Swiss Condensed Milk, thereby expanding its product line to include condensed milk and infant formula The company ranks second in ice cream products, breakfast cereals, and pet foods Food sales in Europe accounted for 38%, in the US accounted for 32%, and in Africa and Asia accounted for 20% ICT: build, deploy and maintain leading solutions, and internal and external communication programs; Plan and strategize to ensure consistent and reliable information is delivered to company stakeholders b Industry level Market drivers: There is a sudden increase in the potential of the different regional markets to house Nestle products This was done through its aggressive campaign featuring the culture and values of its clientele through packaging Cost drivers: With the acceleration of technological advancement and innovation, the cost of the products can now be manipulated benefiting both the company and the consumers as well Through globalization, different developing countries are known to be able to manufacture different food products with high quality and low labor costs Government drivers: Vietnam is an important country for Nestlé because it is not only a potential market but also the second largest coffee producer in the world and the largest in terms of robusta coffee Nestlé is the largest coffee buyer in Vietnam with an annual purchase volume of 20-25% of total coffee production Since its inception in 2011, the NESCAFÉ Plan has been assessed by the Ministry of Agriculture and Rural Development as one of the successful public-private partnership projects Competitive drivers: Nestle is a multinational enterprise, dealing in food and beverage products all over the world, for example, some products appear globally such as Milo milk products, instant coffee, baby powder Although Nestle’s product differentiation is relatively large, its competitors also have many substitutes for it Nestlé narrows its market share down to many small niches, keeps aiming capture niche markets by capturing at least 85% market share in every food product it launches c Firm level Global orientation: Business at Nestlé is conducted on the basis of Common Value Creation (CSV) Nestle's activities and products always make a positive difference to society and contribute to the continued success of the business Global experience: From the very beginning, the company looked for growth opportunities in other countries After merging with Anglo-Swiss Condensed Milk, Nestle continuously expanded its scale In the late 1990s, Nestlé owned 500 factories in 76 countries, and products were sold in 193 countries, almost everywhere in the world strategy along with cost leadership to set the basis for sustainable competitive advantage in the intensely competitive global consumer market Differentiation strategy: Nestle's strategic objective using this strategy is to differentiate by embedding innovation and addressing the consumers' growing health concerns The combination of differentiation and cost leadership has helped Nestle build a strong and loyal customer base Through a differentiation generic strategy, Nestle positions its product offerings in a way to stand out and is different from the available alternatives Focus strategy: Nestle adopts the focus strategy in differentiation and lowcost leadership in specific products, brands, or operational areas For example, it uses a focused low-cost strategy to control the heavy manufacturing and marketing costs of its top-selling brands This strategy is used in order to lessen the financial burden which is put by these top brands on the overall profitability of the company Corporate level strategy Diversification strategy: Diversification is the fourth intensive growth strategy of the Ansoff matrix This strategy involves entering new markets with new products The diversification strategy is further divided into related diversification and unrelated diversification As the name depicts, unrelated diversification is riskier than related diversification as the firm decides to launch completely new products in new markets with no prior experience While in the case of related diversification, the company's existing knowledge, resources, and infrastructure supports the decision to diversify the product portfolio Nestle places secondary importance to this strategy as it only supports the growth achieved through market penetration and product development Nestle’s diversification strategy: • The Nestle's portfolio diversification is supported by its cost leadership generic growth strategy as cost minimization ability, and existing infrastructure makes 30 it possible for the organization to explore new product opportunities in new markets • The strategic objective linked with diversification intensive growth strategy is to expand the portfolio through effective acquisition strategies Due to risk factors, the company focuses on the related diversification and avoids risky experiences into unknown regions Rather, the company utilizes the brand awareness and strength to launch related products in the global drink industry However, some examples of Nestle's unrelated diversification are offering merchandise from fridges, shirts, glasses to pens • The related diversification strategy is applied by acquiring profitable businesses after analyzing market trends and changing customer expectations For example, in response to the growing criticism by environment protection groups, the company attempted to offset the loss from declining sales by investing in green business practices and making business partners with the positive brand image • Strategically wise application of the related diversification growth strategy enhances business sustainability and helps the organization achieve long-term growth objectives despite high market turbulence A well-managed product portfolio with related diversification also offers risk hedging ability as declining trends in some product areas can be balanced by emerging trends in related product areas 31 SPACE & QSPM Matrix SPACE Matrix CP average = -15:4 = -3,75 FP average = 13: = 3,25 SP average = -15:4 = -3,75 IP average = 16: = x- axis = CP+IP = -3,75+4 = 0,25 y- axis = FP+SP = 3,25-3,75 = -0,25 Nestle should pursue: 32 Competitive Strategies: - Backward, forward, horizontal, integration - Market penetration - Market development - Product development QSPM Matrix 33 => Note by sum Total Attractiveness Scores (TAS) of 1.99 and 3.63 that the analysis indicates Nestle should focus on market development strategy than other strategic alternatives A market development strategy is called a business growth strategy, which focuses on introducing existing products to new markets It supports businesses in a growing period It recognizes and enhances new sales opportunities for the current range of products in otherwise untapped markets => This strategy means Nestle needs: Research: Market research is the backbone of development strategy It’s vital to undergo continuous research to sustain in the competitive market Establish growth goals: Nestle must ensure that their development strategy achieves market expansion growth goals Allocation of resources: Nestle must carefully distribute resources as per development strategy 34 Marketing plan development: Nestle must create a strategy according to market needs Product launch: Nestle must continually launch market development strategies and products Result analysis: Nestle must analyze how effective the market development strategy has proven and accordingly modify plans Challenges a Regulatory restrictions • Since the Company was founded, Nestlé's business activities have been governed by integrity, honesty, fair dealing and full compliance with all applicable laws Since then, Nestlé employees worldwide have upheld and carried out this commitment in their day-to-day responsibilities, and Nestlé's reputation remains one of the Company's most important assets today • The boss of the world's largest food company has warned that "too much regulation" in the industry is eroding personal responsibility Nestlé, like other food and beverage manufacturers, is resisting defensive action as governments and municipalities seek to tackle obesity – a growing and costly problem across the country developed world as well as emerging markets – through regulation The industry has fought back through a mixture of self-regulation, limiting advertising to children, reducing sugar and salt content, and lobbying But Paul Bulcke, chief executive of Nestlé, the makers of KitKat and Nescafe coffee, attacked the moves, conjuring up images of a nanny state in which the government makes citizens think for them Nestlé, like its peers, has reduced the amount of sugar, salt and fat in its products Mr Bulcke argues that there is no such thing as a bad food, only a bad diet - and that it is up to the individual to limit their consumption of chocolate and other treats 35 • In the past, Nestle has been involved in several employer violations Plaintiffs in the Republic of Mali said that Nestlé and its companies supported and abetted human rights abuses through the procurement of cocoa from Ivory Coast Even Nestlé is accused of knowing about this situation, but still hiring child labor to take advantage of cheap labor Nestlé is also sued in the United States for allegedly knowing but ignoring the Fancy Feast cat food product made from fish ingredients, provided by a Thai business that used to use slave labor In fact, this is not the first time Nestlé has faced lawsuits, before that the group had a lot of suspicions related to tax evasion and loss of reputation In fact, the suspicion of tax fraud and transfer pricing of Nestlé has appeared since 2013, and is present in Vietnam At that time, Nestlé reported huge losses when doing business here Even more unreasonable is the fact that despite losses, Nestlé has not stopped pouring more money into the Vietnamese market Not only being accused of tax fraud, Nestlé was also "faced" for cheating in the dairy market in Vietnam In 2013, they were fined 45 million VND for administrative violations because they had declared 3/24 dairy products missing b Competition in Global Market Nestlé is one of the largest food and beverage companies in the world With the development of the food industry with more modern technology, more variety with stricter requirements, it means that their competitors in the global market are increasing We can list some fixed names like: - Kellogg Company: Kellogg Company, operating as Kellogg's, is an American multinational food manufacturing company with headquarters in Battle Creek, Michigan, United States Kellogg's makes cereals and convenience foods, including crackers and baked goods, and markets their products under several well-known brands including Corn Flakes, Rice Krispies, Frosted Flakes, 36 Pringles, Eggo and Cheez -It Kellogg’s mission statement is “Nourishing families so they can flourish and thrive.” Kellogg's products are manufactured and marketed in over 180 countries - The Hershey Company: The Hershey Company, commonly known as Hershey's, is an American multinational company and one of the largest chocolate manufacturers in the world It also manufactures baked goods, such as cookies and cakes, and sells beverages such as milkshakes, and many other products made globally - Ajinomoto Co., Inc: is a Japanese food and AminoScience corporation specializing in the production of spices, cooking oils, frozen foods, beverages, sweeteners, amino acids and pharmaceuticals AJI-NO-MOTO is the trade name of the company's original monosodium glutamate (MSG) product The company's headquarters is located in Chūō, Tokyo Ajinomoto operates in 35 countries, employing approximately 32,734 people in 2017 Its annual revenue in fiscal year 2017 was approximately $10.5 billion - Orion corporation: opened a representative office in Ho Chi Minh City in 1997, in Hanoi in 2002 and started advertising in 1997 In 2005, officially established Orion Vina Food Co., Ltd with headquarters in Ho Chi Minh City In December 2006, Orion inaugurated the first factory in My Phuoc Industrial Park, Binh Duong Province and the second factory in Yen Phong Industrial Park, Bac Ninh Province years later Vietnamese consumers are probably familiar with the slogan “Orion is ChocoPie ChocoPie is Orion” For more than 20 years, Orion has tried to localize its products associated with the identity of the Vietnamese people - Masan Consumer: is the company that occupies the 7th position in the list of Top 50 most valuable brands in Vietnam in 2016 and ranks 2nd in the consumer goods industry Masan Consumer manufactures and distributes a wide range of food and beverage products Its products include soy sauce, fish sauce, chili sauce, instant noodles, instant coffee, instant cereals, and bottled 37 beverages The company exports its products to the United States, Canada, France, the Russian Federation, the Czech Republic, Poland, Germany, Japan, the Middle East, Asia, Laos, and Cambodia It operates in the packaging technology, food processing, information and communication technology, construction, investment, and mining industries - Bibica Joint Stock Company: is one of the leading confectionery manufacturing and trading companies in Vietnam and has a very familiar brand name with consumers Each year, the company can supply to the market more than 20,000 tons of confectionery of all kinds such as: Tet cake, Hura cake, biscuit, chocolate, moon cake, hard candy, soft candy, of which Hura, Goody, Orienko, Migita, Four Quarters, Four Seasons, etc are quite strong brands in the market In 1993, the Company started to produce confectionery with three production lines: a candy line imported from Europe, a Biscuits line using British APV technology, a malt line with synchronous equipment used Enzyme hydrolysis and ion exchange technology for the first time in Vietnam was imported from Taiwan The company's confectionery products are quickly distributed to all provinces and cities in the country and have been highly appreciated by consumers for their quality - Mondelez Kinh Do Joint Stock Company: is a member of the global Mondelēz International group, headquartered in Chicago, Illinois (USA) Is a joint stock company specializing in manufacturing and trading snacks with main products including cookies, fresh bread, sponge cake, moon cake, Chocolate, Gum and other confectionery - Vietnam Dairy Products Joint Stock Company (Vinamilk): is a company manufacturing and trading milk and dairy products as well as related machinery and equipment in Vietnam According to statistics of the United Nations Development Program, this is the 15th largest company in Vietnam in 2007 Vinamilk is currently the leading enterprise of the dairy processing industry, accounting for more than 54.5% of the dairy market share water, 38 40.6% market share of powdered milk, 33.9% market share of drinking yogurt, 84.5% market share of edible yogurt and 79.7% market share of condensed milk nationwide - TH True MILK: TH Milk Food Joint Stock Company, international trading name (in English) is TH Joint Stock Company, abbreviated name is TH True Milk, is a company of TH group established in Vietnam was established in 2009 in Nghe An This is a 100% Vietnamese dairy brand specializing in the production and supply of milk and dairy products - Trung Nguyen Group: is an enterprise operating in the fields of coffee production, processing and trading; franchise; distribution services, modern retail and tourism Trung Nguyen Coffee is one of the leading famous brands in Vietnam and is present in more than 60 countries around the world c Financial Cost In Q3 ’21, Nestle’s finance costs jumped from N687.58 million in Q3 ’20 to a whopping N2.34 billion in the review period – an increase of 246.6 percent This mirrors the trend at nine-month level to September 30, which shows a huge spike of 253.7 percent, from N1.62 billion to N5.73 billion in 2020 and 2021 respectively A robust finance income of N3.8 billion in the first quarter came like a windfall compared to an insignificant figure of N123 million in the same period in 2021 This caused a big shift in the company’s cost-income balance from a net finance cost of N1.3 billion to a net finance income of N1.4 billion over the review period Notwithstanding the robust finance income, the challenge of rapidly growing finance expenses has remained Cost of finance rose by 65 percent to N2.4 billion in the first quarter.Mounting balance sheet debts explain the company’s rising finance expenses Nestle’s borrowings rose from N40 billion at the end of 2020 to N77 billion at the end of 2021, climbing further to about N84 billion at the end of the first quarter 39 Further supporting the gain in profit margin and profit enhancement in the first quarter are cost savings from expense lines that hindered profit improvement in 2021 The change of position from net finance cost to income is the biggest positive move in costsaving In the preceding year, net finance expenses had jumped by 173 percent to over N12 billion to consume a significantly increased share of operating profit Also, administrative expenses provided one of the biggest cost savings for Nestle in the first quarter The administrative cost dropped by 21 percent to N2.6 billion in the first quarter Equally, input cost, which posed a major constraining factor last year, moderated in the first quarter At N67 billion for the first quarter, the cost of sales grew by 27.6 percent year-on-year only slightly ahead of the 26 percent increase in turnover over the same period 40 Recommendations Nestle should enhance and find ways to enrich their product with substances and vitamins that will provide children with their daily needs of calcium and even mothers Because they should start with mothers’ health in order to provide for infants’ health Carry on with their partnership activities that will increase their competitive advantage more However, they shouldn’t venture their business with companies that can’t sustain the pressure of the market and which waver under the scrutiny of competitors Nestle should consider the current increasing trend of the public like readyto-drink coffee is showing heavy growth in the market and although nestle is the largest coffee-selling brand in the world in RTD it does not have any recognized brand Nestle can emerge as any small company that produced RTD or they can start a new setup on their own to enter this market The growing use of the products is also causing waste that is harmful to the environment To reduce this waste recyclable material must be used for packaging Another technique that can be implemented is the use of the collect and reuse method With this not only the waste will reduce but also the cost will be decreased Nestle should consider starting joint ventures with the new emerging companies this will provide the opportunity for competitive advantage One thing that should be kept in mind is that company should venture with companies that have the capability to increase the business and the company which can face market pressure They can select the companies with good and promising performance 41 Conclusion It is safe to say that Nestle has a lot of positive attributes backing its larger than life product portfolio and therefore the company has managed to sustain its position in the list of the fortune five hundred companies The company through the use of efficient management procedures, innovation, capital infusion and research and development continues to expand its portfolio and also serves as an example of not just a an exceptional food and nutrition providing company but also a real multinational corporation There are many lawsuits against the company and it is also generally considered to be one of the world's most boycotted companies and despite all off that the revenues of the company have hardly slumped since its inception That is a testament to their value chain creation and streamlined processes that ensure that Nestle becomes a part of the livelihood of the people of the 130 countries it serves 42 REFERENCES • https://www.nestle.com.vn/vi/aboutus/nestlevietnam • https://www.nestle-esar.com/aboutus/missionvision • https://timviec365.vn/blog/van-hoa-doanh-nghiep-cua-nestle-new15239.html • https://oriagency.vn/cac-san-pham-cua-nestle • https://www.essay48.com/13633-Nestle-Porters-Diamond-Model • https://strategicmanagementinsight.com/swot-analyses/nestle-swot-analysis/ • https://www.edrawmax.com/article/nestle-swot-analysis.html • https://www.nestle.com/sustainability/waste-reduction/packaging-strategy • https://www.academia.edu/5598621/Nestle_international_business_strategy • https://bstrategyhub.com/nestle-swot-analysis-2019-swot-analysisofnestle/#Nestles_Strengths 43 Recommended for you Taxation exercise 36 group Cơ sở liệu I 100% (1) NHTM Tổng hợp commercial banking Corporate Banking 100% (2) • Today, Tv channels provide more men'… Cơ sở liệu I 100% (5) Brainstorm and full essay (ls1) Cơ sở liệu I 100% (1)