CASE STUDY: NESTLE
PELS Analysis of Indonesia, Thailand and Vietnam| | | | | | | Nestle Corporation Expansion Strategy - Geographical Location of next manufacturing Facility| | | | Country| Political| Economical| Legal| Social| TOTAL| | Factors| 0.15| Factors| 0.40| Factors| 0.15| Factors| 0.30| 1.00| Indonesia| P o v e r t y| 2.4| | Armed Conflicts| Economic Reforms| Education| |
| Corruption| Financial Reforms| Judicial Reforms| Human Rights| | | Score| 1| Score| 3| Score| 3| Score| 2| |
Thailand| 0.20| 0.30| 0.20| 0.30 | 3.0|
| BriberyGovernment Restrictions South China Sea Piracy| Economic FreedomStrong in industryGrowing GDPVery Strong Currency| Civil LawNon Party State| Large Young population| | | | | | | |
| Score| 1 | Score| 3 | Score| 3| Score| 3 | | Vietnam| Corruption| Strong Industrial Sec.| No Free Speech| 2.55| | South China Sea Piracy| Growing GDP| Civil Law| Large Urban Pop.| | | Communism| Strong Currency| Communism| |
| Score| 2| Score| 3| Score| 3| Score| 2| |
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After studying all three countries that Nestle was planning to invest in for their new facilities we came to amazing conclusions. All three countries can be a beneficial option for Nestle in different term. However Nestle should choose the country with the most affordable labor cost and lowest barriers of entry. Moreover the freedom of economy of the market they are planning to enter is an important segment to look for. According to the table we can see that Thailand and Vietnam can be the first two possibilities for Nestle in order to start new facility. After lots of considerations in terms of four Political, Economical, Legal and Social factors we can come to the conclusion that Thailand will be a potential market in terms of low labor costs, less barriers of entry, strong industry, large youth population, economical and political freedom and most importantly due to strong exchange rate. Thailand is a partially economically free country comparing to two other countries. Moreover the buyers are more powerful in this country according to the percentage of exchange rates. Affordable cost of labor made Thailand the better possibility for Nestle to invest in for their new plant. All of these three countries has the issue of corruption, however, among them Vietnam has the highest rank of all 133. This can be another reason to start the new Nestle facility in Thailand. Corruption is not an easy process to handle especially when there might be cultural barriers as well. Therefore according to all of these studies and based on the scores we have given to each country over all, Thailand is going to be the best option for Nestle to invest in for their new facility.
Our suggestion for Nestle is to take advantage of the young generation in Thailand in order to decrease the unemployment rate in their benefit and create more jobs. If Nestle focuses on the growing GDP in this country and the powerful currency and exchange rate they can improve their new facility in Thailand immediately. Moreover as far as corruption, according to the table above we can see that all three countries has the same issue to face. If Nestle Corporation studies more cultural related behavior of Thailand before entering this market; they will handle this barrier as well as other governmental or political barriers. Economic freedom of Thailand is notable comparing to Indonesia and Vietnam. Thailand is a partly free country in terms of economic freedom in order to start a business or entering an existing market. Therefore Nestle will have a higher chance of being successful in Thailand in terms entering the market and starting a new facility.
Indonesia is a country...