1.) Does it make sense for Nestle to focus its growth on emerging markets? As it can be derived from the text, Nestle generates operates worldwide with a focus on European markets, which make up 70 percent of its sales. These markets are in the mature state of life cycle of that industry and additionally demographic changes such as the stagnation of population growth rates make it very hard companies like Nestle to generate higher profits through higher sales. As a matter of fact the western economies are actually facing a downturn in output and growth, thus influencing the consumption patterns of customers, especially in the retail business. Consumer are becoming more price aware and tend to spend less while demanding at the same time for customisation, product differentiation and specialization. Another trend is the shift away from branded food and beverages towards cheap non-branded foods and beverages. Nevertheless, the introduction of non-brand own labelled products such as Food Lion offers only makes sense in a large scale in order to achieve economies of scale. As a result of increasing non-brand cheap products offered by rivals, Nestle find itself in an even more embattled market and needs to develop a new strategy either away from branding or towards a higher degree of international market penetration.
Since Nestle stands for high quality and has distinctive competencies in producing higher quality food, it would not make sense to change the strategic group, because it would most likely get stuck in the middle. The right strategy is to expand into new markets such as Asia, Eastern Europe and South America. Logically, in these markets the consumer behaviour, macroeconomic environment and cultural habits are different in contrast to western economies. Most of these markets are yet in a growth cycle and this clearly generates an opportunity because they are emerging markets and untouched. As mentioned in the text book China for instances will inhabit 700 million people by 2010 who will have nearly the same income levels as Spain has today. While income levels in these emerging markets will increase, people will gain a higher purchasing power with unsatisfied demands. Serving this demands is the right opportunity for Nestle to penetrate new markets, build up market share while at the same time using its profits to defend its old markets in the western economies through low prices.
The Essay on What makes asian growth so phenomenal
Asian cities have been tended to grow more quickly than Western cities, so what makes their growth so phenomenal? The accelerated rate may be attributed to population dynamics, economic markets and or/socio-political conditions, poor planning and disregarding environmental hazards like flood plains have held them back. Many primate cities in Asia have grown to become megacities, and some more are ...
Concluding, I am strongly convinced that expanding into new markets is necessary for Nestle if it wants to stay a global player in the 21st century. 2.) What is the companys strategy with regard to business development in emerging markets? Does it make sense? Nestle follows the first mover advantage strategy which means that the company enters in an early stage the emerging markets, in order to establish a network there before competitors such as Unilever do so. The first step they make is to establish a substantial position by selling basic products such as infant formula and condensed milk to the customer with the goal to build up commending positions in each niche. In order to save the costly process of establishing a brand name, Nestle simply purchases local brand names which the consumer is accustomed to. This helps the company to overcome cultural barriers and customer resentments to foreign brands. After these niches of basic food supply are filled Nestle moves on into the more upscale segments such as chocolate, soft drinks and the like.
Their strategy is to establish a basis and then expand into more niches as demand rises. Connected to the rising demand is the rising income level as the population can afford to spend more money on food products. As mentioned in the book, Nestle provides about 8500 brand names, but only 750 of them are registered in more than one country and only 80 are registered in more than ten countries. This is due to the fact that Nestles strategy is based on a broad range of local brand names which are not entitled as Nestle. The 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. Consequently, marketing is easier and les costly because a reputation, a distribution channel and customer loyalty already exits for that product with that brand name. As a result Nestle can focus its distinctive competencies on product improvement and technological aspects such as process innovation. Concluding, the key to their success is customisation rather than exaggerated globalisation.
The Business plan on SWOT Analysis Of Nestle, The Popular Food Brand
... products has opened up an immense market for companies. Nestle in response to the health trend ... posing a real risk to its marketing strategy (Mcspotlight, 2011). McDonald’s have problems with fluctuations ... criticisms that have become synonymous with the brand itself. 1.0 Introduction 1.1 Introduction The term ... problems, the future could be robots taking orders; preparing and serving food in the most ...
This strategy makes sense as the business success of the company proofs. An example is Nestles success in the Chinese milk powder market. There was hardly any infrastructure nor transportations systems in 1987 when the company entered the market. Nevertheless, Nestle increased the output of powdered milk from 300 tons in 1990 to 10,000 tons in 1994. This refers to an increase in output of 790% per year. These figures show the success of their strategy, as well as their flexibility, the steady learning processes and the monitoring of the environment.
In combination all these factors make up a successful and sense full strategy. 3.) From an organizational perspective, what is required for this strategy to work effectively? As a matter of fact a good strategy is not the only necessary prerequisite for operating successfully in foreign markets. In markets of transitory nations or even less developed nations there could be a risk in terms of political instability harming the political economy such as the security of property rights, macroeconomic and cultural uncertainties are as well an issue. To a certain extent environmental changes occur with the notion of endangering the basic strategy. In order to avoid these influences and to counter react on these a company needs the ability of gaining steady learning process which needs ultimately to be implemented with a cross-functional attitude among all functional levels. Flexibility is another distinctive competencies a company must be able to achieve to react as quickly as possible to changing environments.
The Essay on Harley Davidson Company Market Share
Harley-Davidson is a company that began in a shed almost 100 years ago. In the beginning, Harley-Davidson supplied motorcycles for the military, and now they are the most prestigious heavyweight motorcycle corporation in the United States. In addition to designing, manufacturing and selling heavyweight touring, custom, and performance motorcycles, Harley-Davidson also has a product line of ...
As a consequence, the company must implement mechanisms allowing it to respond to changes in local demand, cultural barriers and political fluctuation. Ethnocentric behaviour must be avoided in any circumstances in order to approach th ….
