1.) Bauer suggests that Nestle’s R&D efforts are moving towards a “pharmaceutical model.” What are the implications of this for their organization?
-Clashes with Nestle’s history of successful acquisitions to add profitable brands and product groups
-Pharmaceutical model can be characterized as time consuming, costly, and risky
-Different markets have differing needs and preferences
-Patents may be ineffective across geographies based on culture, customs, and regulations
-How long will food patents last? Will it be enough to cover high R&D costs or will Nestle need to pass on costs to consumers thereby breaking its goal to keep products affordable?
-Is it possible to find a universal blockbuster product given the differences between food/nutrition and drugs/diseases?
-Competitors may be able to develop products faster and or outspend on R&D (arms race?)
-No info on Danone’s R&D budget given similarities in product groups
However, Nestle has proven that growth can be driven by new innovation (Neospresso)
-Appropriate and or strategic acquisitions are not a sustainable long term strategy unless Nestle can cherry pick product groups from Danone
-Per capita is increasing rapidly in the developing world
-As a result, nutrition becomes more important according to the Growth Platform diagram (Exhibit 13)
-Consumers may become less price sensitive as GDP increases
-Could pass on R&D costs to consumers
-Market benefits to developing countries in an effort to create a blockbuster universal product
2.) What should Bulcke do with the $50 billion he may have at his disposal?
-Focus on nutritional products in the developed world (Americas/Europe) by increasing R&D spending on BABs (Branded Active Benefits) added to existing products and blockbuster products added to the Nestle Nutrition Global unit. How big of an impact can this create though when the existing R&D spending was only CHF1.88B in