Nestle Case Study

Group 8: Sohum Mehta, Johannes Matthias, Rahil Poojara, Austin

Cunningham, Xiaoya Li

 Largest nutrition and foods company in the world

Founded and headquarterd in Vevey, Switzerland
Nestle originated in a 1905 merger of the Anglo-Swiss Milk
Company which was founded by Henri Nestle in 1866
Company grew significantly during the WWI and WWII
Operates in 86 countries

Employees 283,000 individuals.

Key Figures
Revenue 107.6 billion
Operating Income 15.7 billion
Profit 10.43 billion
Total Assets 110.9 billion
Total Equity 53.63 billion (2009)

 Nestle has 8500 brands with a wide range of products across a number
of markets including:
coffee
bottled water
other beverages

chocolate
ice cream
infant foods
confectionary
pet food

Growth Strategies

Forced by Switzerlands small size

Established its first foreign offices in U.S.A and

Great Britain in the late 19th century

Australia, South America, Africa and Asia in the first

three decades of the 20th century.

By the late 1990s, Nestle had 500 factories in 76

countries, sold products in 193 nations

3% of its employees are located in Switzerland

Emerging Markets
Does it make sense for Nestle to focus on emerging markets?
Infrastructure / Political difficulties ?!
Nestl Emerging Markets Division imports products from
more than 20 countries, and exporting products to more than
40 countries.

Profits of Adversity
Nestl's sales in emerging markets up 8.5% last year
Double the rate of the companys total revenue
Sales from those regions totaled $33.15 Billion, more than any
rival.

Growth of Emerging Markets Propensity

1 billion consumers in emerging markets will increase their
incomes enough to be able to afford Nestle products within
the next decade.
1/3 of its revenue from emerging economies and aims to lift
that to 45% within a decade.
- CEO Paul Bulcke

Population Growth Distribution

Investing In Emerging Markets

Nestle will receive $28.1 billion from Novartis for its majority
stake in Alcon, the maker of Opti-Free contact lens cleaners,
giving it a cash pile exceeding the $26.5 billion that Google
had on its books at the end of March. The Swiss company is
starting a new 10 billion-franc buyback programme, though
Nestle would rather invest in its business or make
acquisitions
CFO Jim Singh said on June 22

Investing in Emerging Markets

Nestle may purchase bottled water businesses in markets
such as China
Frits van Dijk, head of Nestles Asian business, on June
22.
Acquisitions would also be considered to expand its business
selling nutrition products for athletes, such as PowerBar
Nestle Nutrition CEO Richard Laube

Start cheap and introduce luxury later

Strategy to work effectively

Flexibility is another distinctive competencies which Nestle

company was able to achieve to react as quickly as possible to
changing environments.

As a consequence, company was able to respond to changes in

local demand, cultural barriers and political fluctuation.
Ethnocentric behavior must be avoided in any circumstances in
order to approach the market in the appropriated .

 The Nestle company uses that approach in order to the

convenient fact that the consumer is easier to reached
because he is accustomed to this brand name and they
think they know what they are buying.
The Nestle strategy was to be cultural awareness, which
means a company should employ locals in order lower
cultural barriers and resentments established by the
foreigner.
Nestle believes that, the key to their success is
customization rather than exaggerated globalization.

Nestl's strategy in emerging markets

The Key strategy:

Customization rather than globalization.

Executing the strategy

Flexibility
Local adaptation
A long-term focus

Executing the strategy

In Nigeria: the company

hired local singers to go to
towns and villages offering a
mix of entertainment and
product demonstrations.

In China: Nestl established

its own distribution network,
known as milk roads.

Nestle Organizational Structure

Moving from Localization strategy to Transnational strategy
Includes first mover advantage, local economies, global web,
economies of scale
Strong local responsiveness, but production, training, and
R&D becoming centralized
Management practices spread knowledge, create learning
effects, and transfer core competencies
Glocal philosophy and creating value

Nestle Organizational Structure

Seven global strategic business units classified by food type
(worldwide production divisional structure)
Five regional units by geography (worldwide area structure)
Has created a global matrix structure
Example of a global matrix structure:

Findings and Future

Strategy succeeding and applicable to markets and countries
Need for tighter integration at matrix points
Focus on healthier, more nutritious products
Raise revenue from developing countries from 33% to 45% of
total revenue within 10 years
Will receive $28.1 billion for its stake in Alcon