Nestle is one of the world's largest global food companies. It has over 500 factories in over 70 countries, and sells its products in approximately 200 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. NESTLE CASE
Nestle is one of the oldest of all multinational businesses. The company was founded in Switzerland in 1866 by Heinrich Nestle, who established Nestle to distribute "milk food," a type of infant food he had invented that was made from powdered milk, baked food, and sugar. From its very early days, the company looked to other countries for growth opportunities, establishing its first foreign offices in London in 1868. In 1905, the company merged with the Anglo-Swiss Condensed Milk, thereby broadening the company's product line to include both condensed milk and infant formulas. Forced by Switzer¬land's small size to look outside' its borders for growth opportunities, Nestle established condensed milk and infant food processing plants in the United States and Britain in the late 19th century and in Australia, South America, Africa, and Asia in the first three decades of the 20th century. In 1929, Nestle moved into the chocolate business when it acquired a Swiss chocolate maker. This was fol¬lowed in 1938 by the development of Nestle's most rev¬olutionary product, Nescafe, the world's first soluble coffee drink. After World War 11, Nestle continued to expand into other areas of the food business, primarily through a series of acquisitions that included Maggi (1947), Cross & Blackwell (1960), Findus (1962), Libby's (1970), Stouffer's (1973), Carnation (1985), Rowntree (1988), and Perrier (1992). By the late 1990s, Nestle had 500 factories in 76 countries and sold its products in a staggering 193 nations-almost every country in the world. In 1998, the company generated sales of close to SWF 72 billion ($51 billion), only 1 percent of which occurred in its home country. Similarly, only 3 percent of its- 210,000 employees were located in Switzerland. Nestle was the world's biggest maker of infant formula, powdered milk, chocolates, instant coffee, soups, and mineral waters. It was number two in ice cream, breakfast cereals, and pet food. Roughly 38 percent of its food sales were made in Europe, 32 percent in the Americas, and 20 percent in Africa and Asia.
A Growth Strategy for the 21st Century
Despite its undisputed success, Nestle realized by the early 1990s that it faced significant challenges in main¬taining its growth rate. The large Western European and North American markets were mature. In several coun¬tries, population growth had stagnated and in some there had been a...
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