Strategy: Merger and Acquisitions

Mergers & Acquisitions form strategic components for a firm which deal with buying or combining different companies to create synergy effect so as to have speedy growth and improve upon its financial performance in the long term. Nestl's strategy is built on different basic principles such as, innovation and renovation to ensure that the existing products grow and maintain a balance in geographic activities. Longterm potential is never compromised for short-term profit. The Company's priority has been to bring the best and most relevant products to people. Nestle has expanded its operations through series of acquisitions in last decade. Major thoughts behind these acquisitions could be defined as gaining first mover advantage i.e. enter the market before competitors, acquisition of local firms whenever there is good opportunity available. Prior to this Nestls acquisition of Maggi in 1940s has helped Nestle expand its range of products and extend its operations in different geographic areas. Nestls acquisition of Goplana tells us the first mover advantage the company gained in the polish market. The company aimed at developments to be made in the emerging market before any other competitor would enter into the market. Further, it followed the localization strategy wherein it carefully customized the Goplana products to fit the local needs. This explains its strategy to explore less developed market with an acquisitions of local firms. As a part of HR management, the firm retained the local staff to better cater to local habits and to create shared value. In 1990s the firm was challenged by declining growth rate in Western Europe and North America. Hence, company focused on emerging markets for further growth. Realizing that increasing income levels in Russian market it acquired Rossia, in 1995, who was one of the leaders in chocolate manufacturers in Russia. In certain emerging markets such as China it has started from scratch. Key driver for the success of Nestle for this strategy is its ability to develop the brands in the developing market quickly than its competitors. Nestl follows adaptation strategy to local conditions by using its PPP (Popularity Position Products) method to ensure that it offers affordable products of high quality meeting the needs of emerging consumers. Following figure shows Porters generic strategies for competitive advantage. Nestle has always adopted focus on differentiation to create niche brands. This particular strategy helped the firm to create a substantial position in the market.

International operations strategy: Nestle has followed transnational strategy wherein it localized its products to cater local needs and has taken advantage of lower costs through location economies in the emerging markets. This key characteristic of transnational strategy offered Nestl to gain almost $40 billion of sales in emerging markets with a growth rate of 11.5% in 2010.