Nestle Case Study

Group 8: Sohum Mehta, Johannes Matthias, Rahil Poojara, Austin

Cunningham, Xiaoya Li

 Largest nutrition and foods company in the world

Founded and headquarterd in Vevey, Switzerland
Nestle originated in a 1905 merger of the Anglo-Swiss Milk
Company which was founded by Henri Nestle in 1866
Company grew significantly during the WWI and WWII
Operates in 86 countries
Employees 283,000 individuals.

Key Figures
Revenue 107.6 billion
Operating Income 15.7 billion
Profit 10.43 billion
Total Assets 110.9 billion
Total Equity 53.63 billion (2009)

 Nestle has 8500 brands with a wide range of products across a number
of markets including:
coffee
bottled water
other beverages
chocolate
ice cream
infant foods
confectionary
pet food

Growth Strategies

Forced by Switzerlands small size

Established its first foreign offices in U.S.A and

Great Britain in the late 19th century

Australia, South America, Africa and Asia in the first

three decades of the 20th century.

By the late 1990s, Nestle had 500 factories in 76

countries, sold products in 193 nations

3% of its employees are located in Switzerland

Emerging Markets
Does it make sense for Nestle to focus on
emerging markets?
Infrastructure / Political difficulties ?!
Nestl Emerging Markets Division imports
products from more than 20 countries, and
exporting products to more than 40 countries.

Profits of Adversity
Nestl's sales in emerging markets up 8.5% last year
Double the rate of the companys total revenue
Sales from those regions totaled $33.15 Billion, more
than any rival.

Growth of Emerging Markets

Propensity
1 billion consumers in emerging markets will
increase their incomes enough to be able to
afford Nestle products within the next decade.
1/3 of its revenue from emerging economies and
aims to lift that to 45% within a decade.
- CEO Paul Bulcke

Population Growth Distribution

Investing In Emerging Markets

Nestle will receive $28.1 billion from Novartis for its
majority stake in Alcon, the maker of Opti-Free contact
lens cleaners, giving it a cash pile exceeding the $26.5
billion that Google had on its books at the end of
March. The Swiss company is starting a new 10 billionfranc buyback programme, though Nestle would rather
invest in its business or make acquisitions
CFO Jim Singh said on June 22

Investing in Emerging Markets

Nestle may purchase bottled water businesses in
markets such as China
Frits van Dijk, head of Nestles Asian business,
on June 22.
Acquisitions would also be considered to expand its
business selling nutrition products for athletes, such
as PowerBar
Nestle Nutrition CEO Richard Laube
Start cheap and introduce luxury later

Strategy to work effectively

Flexibility is another distinctive competencies which
Nestle company was able to achieve to react as
quickly as possible to changing environments.
As a consequence, company was able to respond to
changes in local demand, cultural barriers and
political fluctuation.
Ethnocentric behavior must be avoided in any
circumstances in order to approach the market in
the appropriated .

 The Nestle 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.
The Nestle strategy was to be cultural
awareness, which means a company should
employ locals in order lower cultural barriers
and resentments established by the foreigner.
Nestle believes that, the key to their success is
customization
rather
than
exaggerated

Nestl'sstrategyinemergingmarkets

TheKeystrategy:
Customizationratherthanglobalization.

Executingthestrategy

Flexibility
Localadaptation
Alongtermfocus

Executingthestrategy

InNigeria:thecompany
hiredlocalsingerstogoto
townsandvillagesofferinga
mixofentertainmentand
productdemonstrations.

InChina:Nestlestablished
itsowndistributionnetwork,
knownasmilkroads.

Nestle Organizational Structure

Moving from Localization strategy to
Transnational strategy
Includes first mover advantage, local economies,
global web, economies of scale
Strong local responsiveness, but production,
training, and R&D becoming centralized
Management practices spread knowledge,
create learning effects, and transfer core
competencies
Glocal philosophy and creating value

Nestle Organizational Structure

Seven global strategic business units classified by
food type (worldwide production divisional
structure)
Five regional units by geography (worldwide area
structure)
Has created a global matrix structure
Example of a global matrix structure:

Findings and Future

Strategy succeeding and applicable to markets
and countries
Need for tighter integration at matrix points
Focus on healthier, more nutritious products
Raise revenue from developing countries from
33% to 45% of total revenue within 10 years
Will receive $28.1 billion for its stake in Alcon