Nestle - Global Strategy Case
1.What is the company’s strategy with regard to business development in emerging markets? Does this strategy make sense?
From the NESTLE : GLOBAL STRATEGY case, it can be seen that Nestle generally operates worldwide with the strategy of customization rather than globalization. It moves into consumer markets by using Niche market strategy to become the market leader in each of the niches. It mainly focuses on European markets, which make up 70 percent of its sales. As mentioned, these markets are in the mature state of the life cycle of that industry and also demographic changes such as the stagnation of population growth rate and slight decline in the food consumption have made it very challenging for companies like Nestle to generate higher profits through higher sales. Factually, the western economies are slumping in output and growth, thereby influencing the consumption patterns of customers, especially in the retail business. Consumers are becoming more aware of price and tend to spend less while they demand for customization, product differentiation and specialization at the same time. Another trend is the shifting away from branded food and beverages towards cheap non-branded foods and beverages. Nevertheless, the introduction of non-brand own labeled products such as Food Lion or encouraging private labeled products 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 has found itself in an even more problematic position in the market and needs to develop a new strategy either away from branding or towards a higher degree of international market penetration. Since Nestle prioritizes high quality and has distinctive competencies in producing higher quality food, it would be unwise to change the strategic group, because it would most likely lose its smooth operation. The right strategy is to expand into new markets such as Asia, Eastern Europe and South America.
From the NESTLE : GLOBAL STRATEGY case, it can be seen that Nestle generally operates worldwide with the strategy of customization rather than globalization. It moves into consumer markets by using Niche market strategy to become the market leader in each of the niches. It mainly focuses on European markets, which make up 70 percent of its sales. As mentioned, these markets are in the mature state of the life cycle of that industry and also demographic changes such as the stagnation of population growth rate and slight decline in the food consumption have made it very challenging for companies like Nestle to generate higher profits through higher sales. Factually, the western economies are slumping in output and growth, thereby influencing the consumption patterns of customers, especially in the retail business. Consumers are becoming more aware of price and tend to spend less while they demand for customization, product differentiation and specialization at the same time. Another trend is the shifting away from branded food and beverages towards cheap non-branded foods and beverages. Nevertheless, the introduction of non-brand own labeled products such as Food Lion or encouraging private labeled products 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 has found itself in an even more problematic position in the market and needs to develop a new strategy either away from branding or towards a higher degree of international market penetration. Since Nestle prioritizes high quality and has distinctive competencies in producing higher quality food, it would be unwise to change the strategic group, because it would most likely lose its smooth operation. The right strategy is to expand into new markets such as Asia, Eastern Europe and South America.