Busm 1227 International Business For Assessment Answers
Answer:
About Nestle
The Nestle was created in the year 1950 with the merger of two companies named, Anglo-Swiss Condensed Milk Company and Farine Lactee Henri Nestle. The company is considered the largest food producer and provider in terms of revenues. The company is providing its services worldwide with the aim of the globalized international multi-corporation. The company is providing baby food, coffee, confectionery, pet foods, dairy products, breakfast cereals, ice cream etc. the company has the large employee base of more than 400000 employees which are serving the client and stakeholders in an adequate manner (Nestle, 2012).
The company runs their operations with the aim to provide the Good Food, Good Life. Nestle has more factories, which are equipped and operated in almost every country in the world. The company has been ranked on number one position in the Fortune Global list of companies in the world as the most profitable company. Nestle is the biggest company in food with a market capitalization of around 210 billion Swiss Francs (Food & beverage, 2012).
Globalisation of business
The globalization of Nestle has affected the environment both positively and negatively. The effect of globalization is which has seen on Nestle is that it can able to coordinate and expand its business operation in other regions. The other region also includes the area of Australia, New Zealand, China, Japan and many others are there. Australia is opted by Nestle is due to the policy of open trade in Australia. This is the reason for increasing exports in the country by three and a halftime. This has increased not only Australia’s GDP but also able to increase the overall performance of other’s country. Globalisation is considered a dominant force due to which the world has become interconnected to each other. Globalization is responsible for increased trade and helps in reducing the cultural differences in the countries (Nestle, 2018).
Nestle has made its existence in more than 100 countries which make the presence of Nestle all over the world. Not only, Nestle has expanded its business and entity in many countries but are also able to manage the logistics and distribution in the areas where setting up the manufacturing concern is not possible. With the help of globalization, many changes in the trade and services have been done in the environment. To provide Nestle, its product and services in another market also, the company has made the subsidiaries in many countries. They are no longer the national firms with their operations, which are limited to one boundary only (Bergeaud-Blackler, 2015).
Political, Economic and Socio-cultural factors
- Due to the effect of globalization, the political system of the countries is also are relived and made the policies liberal in case of taking entry in the new country. It is the effect of globalization only that the countries are welcoming the other countries company to invest in their country and introduce the open trade policy in the country. Some country has opted for the open trade policy in the countries so that capital investment made in their countries.
- Not only the country will gain the profitability but also able to grab the high economic growth in the country. This growth can be increased by double fold when the new firms and companies enter and invest in the country. When Nestle enters the new market, the economy is always in favor of the company, which makes the success of Nestle. This favorable condition in the country makes the survival simple for Nestle to enter the new market and grab a large portion of the market (Export.Gov, 2018).
- The socio-cultural factors affect the business performance in some countries. They are interconnected to the profitability of the business. Nestle has been famous for many things in the world. These famous things include the instant noodles, making delicious coffee powder and many other products. Nestle has been accused of harming the health of the infants, after getting many offended statements against them in some parts of the globe. However, Nestle is able to coordinate with that and make the image good in the market (Nestle, 2014).
Factors affecting the Nestle in choosing Australia
Nestle has made more than acquisition in the countries to have the large expansion in the market. Initially, the Nestle used growth strategy and diversify the company’s product offerings. There are many factors in Australia, which are affecting the Nestle choice to operate their business. There are many reasons, which are responsible for Nestle to expand their business operations in Australia. One of the factors, which affect the choice of Nestle to operate in Australia, is the socio and cultural factors of Australia. The people of Australia are finding with the attitude to accept the new product available on the market. They are also called the early adopter in the market. Due to this reason, the market has a wide scope to operate the new business in the market. Peoples in Australia are sharing the same values, attitudes, and beliefs, which is followed in their culture and society. So nestle has to operate its business according to the values, beliefs and attitudes followed in the organization (Robin, Théoduloz and Srichuwong, 2015).
Another factor due to which Nestle has expanded its business in Australia is the legal framework used in the country. In Australia, the rules and regulations are the same for every company, which makes the equality under the law, and attract the new firms to enter and invest in the market. The society in Australia is found to be an egalitarian one in which all individuals will not have the same wealth or property in the economy (Shen et al., 2011).
Porter’s diamond theory
This theory has been used as the supportive argument that the Nestle will able to grab the large portion of the market. To do the internationalization Nestle has used the Porter diamond theory. This theory is used by the Nestle to get the competitive advantage in the international market. This theory was used to possess some advantage from the factors available in the country and help in improving the overall position of the country (Chirindel et al., 2015).
Factors condition
This is the situation where the country is getting the knowledge related to the production and infrastructure in a particular country in reference to understanding the country situations and conditions. These factors are considering the relevant factors in industries to remain competitive in the environment. These factors are classified as the human resource, knowledge, and infrastructure of the particular country.
Related and supporting industries
The success of the market depends on the presence of a number of suppliers and customers present in the market as both these factors affect the demand and supply in the country. Similarly happens with the Nestle company as it is ready to go into the company where there is a large market to explore their business. Nestle is always remained competitive in nature to their related industries as it works on the theme that there should be competitiveness and innovation in the market (Lowe et al., 2011).
Demand Conditions
The demands of the products depend on conditions prevailing in the market. The demand always depends on the consumer preferences and choices of the customers, the price of the product and its related products etc. if the price of the product charged by the Nestle is less, then the demand will be considered high in nature and vice versa. Another reason to increase in the demand conditions is that the innovation level and development of the product by the research and development department of Nestle (Coombs and Holladay, 2015).
Strategy, structure, and Rivalry
In this situation, the factors are dependent on the strategy opted by the Nestle. These factors are dependent on the competition in the domestic market. In this nestle has to analyze the competitive rivalry present in the market by using the strategies. Before entering the international market, nestle has to check the existence barriers if any in Australia. If there, are barriers to entry and exist then try to resolve them by using any of the strategies. Another thing that Nestle has to be taken care is of the Nestle present management and culture style followed by them. This will become the basis to survive for a long time in the market (Sacks et al., 2015).
Foreign entry strategies
The market in the present scenario has to get competent in nature. It can be analyzed that Nestle is looking for the country to enter the market for expanding its business. Nestle is considered the first mover advantage in the market in relation to entering into the new market of New Zealand, Australia, India, and other countries. In order to expand the business, Nestle has various options for diversifying their activities and business. In the initial years, Nestle has opted for the exporting mode of foreign trade in which the only the distribution is done in another country. However, the whole production has been done in the parent country that is Switzerland only. Using this entry mode, Nestle has to face some advantages as well as disadvantages. Benefit enjoyed by the Nestle when opting the exporting is that the less involvement of cost (Stuckler and Nestle, 2012).
Nestle is opting for the multi-domestic strategy. In this type of strategy, the firm views itself as a collection of relatively independent operating in the subsidiaries. Each of them is focused on the specific domestic market of the country. in this type of strategy, there is high pressure for local responsiveness and low pressure for global integration in the market. These strategies are used by Nestle and have its own advantages. Nestle is oriented towards achieving the maximum local response in the market (Gillespie and Riddle, 2015).
The company has not to establish its own manufacturing firm and can save many costs. The disadvantage faced by Nestle in Australia is the cost of logistics and distribution. This cost is too high that emphasis the company to have their own manufacturing concern in Australia. After this, Nestle has opted for the strategic alliances in Australia in order to establish its own manufacturing unit. This entry mode is also known as the strategic alliance or joint ventures. This mode allows Nestle to share the risk and resources required to enter the international market (Nestle, 2012).
This gives Nestle, a flexibility which individual cannot able to get through the direct investment. Nestle has made its existence in Australia by using the concept of acquisition and merger. This will give an exposure to Nestle to establish their units in Australia too. Developing their own manufacturing units in Australia helps in making the large profits to the company. This not only makes the profits but also helps in reducing the cost of distribution and logistics. Acquiring the company in Australia makes the availability of more brand and products of Nestle. This will give the direct ownership to Nestle in the target country. Another advantage, which Nestle gets from the acquisition, is the transfer of resources including the capital, technology, and personnel (Nestle, 2017).
MNC and its impacts
At present, Nestle waters use eco-friendly plastic bottles that are made with at least thirty less plastic then average half-litre bottle. The company gets the success in reducing the package weight and try to make the collaboration between nestle waters research and development center and the packaging agencies. Nestle is trying to reduce the greenhouse emissions and use of the non-renewable source of energy. This source affects the packaging process of the company and able to reduce it by 19 per cent in Nestle Waters. Another development that the Nestle is focussed on providing the good health believes for the kids and youth, which are consuming the Nestle products. The company is trying to improve their performance while focusing on saving and utilizing the water (CRC, 2017).
Still, the company is aiming to achieve other sustainable development goals in order to get the improved image of the business. Other goals, which Nestle are planning, to achieve is supporting the sustainable development goals. Nestle has committed that by the end of the year 2020, the company can able to make their three long-term ambitions trues which are in accordance to the United Nations Sustainable Development Goals. This long-term ambition is nothing but helping more than 50 million people in which the majority is of the children. This is done in order to give those peoples and children a healthier life and helps to improve the livelihood of more than 30 million communities living across the globe. Nestle is involving such activities which are directly contributing to their business activities and are striving for zero environmental impact on the operations (Nestle, 2015).
Another current development done by Nestle is committing that the sugar contents in the products will be decreased while getting almost the same taste. Nestle has made the global commitment that they are focusing on reducing the sugar portion in products by 2020. These goals had been developed only for Europe, which will also cover a large area of the market across the globe (Nestle, 2017).
Conclusion
From the above discussion, it can be concluded that the MNC like Nestle has got its presence in more than 100 countries. Nestle has the strategy to use the proper marketing plan in order to enter in any of the markets. The implementation and formulation of the strategic plan are made by the Research and development department in order to get the assured success in the new market in which the company is going to enter. The management of the company has been analyzed and understand all the aspect by considering the political, economic and socio-cultural factors and aspects. Nestle has the strategy to segment the market based on demographic, psychographic, geographic and behavioral aspects operates in each country’s market. The mode of entering the market is wholly based on ownership basis. The company is targeting the customer on the parameters of age group and income groups. After getting the globalization, the Nestle has the more market ton explore its business. As the result of globalization, the standard of living of individual has been increased. The products introduced by the Nestle have been positioned in the minds of the Australia customers by advertisements, sales promotion, and using the social marketing concepts. Nestle products have been part of Australian consumers and their family with the good health.
References
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Coombs, T. and Holladay, S. (2015) CSR as crisis risk: expanding how we conceptualize the relationship. Corporate Communications: An International Journal, 20(2), pp.144-162.
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Export.Gov (2018) Australia - Market Entry Strategy [Online] Available from: https://www.export.gov/article?id=Australia-market-strategy [Accessed on: 10-09-2018]
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Gillespie, K. and Riddle, L. (2015) Global marketing. Oxon: Routledge.
Lowe, A.J., Hosking, C.S., Bennett, C.M., Allen, K.J., Axelrad, C., Carlin, J.B., Abramson, M.J., Dharmage, S.C. and Hill, D.J. (2011) Effect of a partially hydrolyzed whey infant formula at weaning on risk of allergic disease in high-risk children: a randomized controlled trial. Journal of Allergy and Clinical Immunology, 128(2), pp.360-365.
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Sacks, G., Mialon, M., Vandevijvere, S., Trevena, H., Snowdon, W., Crino, M. and Swinburn, B. (2015) Comparison of food industry policies and commitments on marketing to children and product (re) formulation in Australia, New Zealand and Fiji. Critical Public Health, 25(3), pp.299-319.
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