Nestle is one of the world’s largest global food companies. It has over 500 factories in 76 countries, and sells its products in 193 nations. Only 1% of sales and 3% of employees are located in its home country, Switzerland. Having reached the limits of growth and profitable penetration in most Western markets, Nestle turned its attention to emerging markets in Eastern Europe, Asia, and Latin America for growth. Many of these countries are relatively poor, but the economies are growing quickly. Thus a consumer base capable of buying many Nestle products will develop over the next couple of decades.
Nestle tries to enter emerging markets ahead of competitors, and build a substantial position in basic foodstuffs. As income levels rise, the company progressively moves from these niches into more upscale items. It very much focuses on developing local goods for local markets, however, and places relatively less emphasis on its global brands in emerging markets. It also localizes its distribution and marketing strategy to the requirements of the local market. When good opportunities are available, Nestle acquires local firms.
Nestle is a very decentralized organization, with operating decisions pushed down to local units. On top of this are both a SBU organization focused around food groups, and a regional organization that tries to help rationalize production and marketing among nearby countries. Helping hold the organization together is a group of managers who rotate around the world on various assignments.
The main teaching objectives of the case are:
1.Provide an example of the strategy of one firm operating with an international approach 2.Show how this strategy is supported by structure and management systems 3.Illustrate the way a firm can enter and develop in emerging markets
This case could be best used after chapter 13, linking the strategy with the organization of a...