Nestle S.A: International Marketing

Section S3 – Group 4

Nestle was founded in 1867, by Henri Nestle and merged with Anglo-Swiss Condensed milk Company in 1905

Nestle grew rapidly through mergers, geographical expansion and entry into new product categories

By 1982, Nestle was the 25th largest international company

In 2011, consolidated sales were CHF 107.6 billion and net profit was CHF 10.43 billion.

Nestle

Nestle expanded through creation of Local Operation Companies with their own local management.

Nestle had a hybrid structure of centralization and decentralization, with the Centre allowing its units a significant degree of autonomy.

75 Operating companies were run by country managers:◦ Responsibility for Profits and losses◦ Marketing. Manufacturing, Financial and Administrative

Functions. Personnel Transfers across Boundaries had become

increasingly difficult

Situational Analysis

Jean Robin, marketing – suggest change in marketing strategy emerging markets –Centrally Coordinated◦ Greater coordination◦ Economies of Scale◦ Effective Implementation of Ideas

Level of Coordination between Country Head & HQ will support cross fertilization of ideas & experiences

Net After Tax Profit was declining and fell below 4% of sales between 1978-1981

From Table A we see that Sales of Dairy Products Infant Food and Culinary fell between 1982 and 1983.

Situational Analysis

What factors influence our decision to centralize? How will the current organization facilitate or

adapt to a change in structure? Should Centralization be based on:

◦ Marketing Mix◦ Product Categories◦ Geographical location

Problem Statement

Internal and External Factors effecting StructureInternal / External Centralization Decentralization

Internal Factors  Economies of Scale Customization – Local Markets

Interrelation / Cross over of successful ideas

New Ideas – local managers(Mouseline in France), brand names (Bollino in France)

Simplification of Organization Structure

Better relationship with local stake holders

External Factors  Demographic convergence between countries

Product Differentiation

Cultural convergence Customization – advertizing , branding

Spill Over Effect Customization – as per consumer taste & cultural sensitivities

Regional and Country managers had significant control over all elements of marketing mix, except Branding

Branding was centrally controlled and standardized

A license fee was charged to countries operating companies for the use of brands and brand names

Product Positioning, Distribution, Trade Promotion, Consumer Protection and Media advertising decentralized

Structure at Nestle

Elements No HQ Initiative

HQ Promotes Cross Fertilization

HQ Persuasion for Standardization

HQ Decision Making

HQ Enforced Standardization

Marketing StrategyProduct PositioningProduct CharecteristicsBrandingPackagingDistributionTrade PromotionConsumer PromotionMedia Advertising

Planning Chart for Nestle

Primary FunctionSecondary Function

Recommendations : 4 P’s

Product:Low degree of Centralization is desirable in this area so as to cater to local preferences

Price:Price points are sensitive to local market competition, consumer’s purchasing power and brand value. Decision on Centralization is contextual and dependent on the extent of achievable economies of Scale

Place:Because of the scale of operations and the diversity of consumer groups across the globe, decentralization is recommended

Promotion:It is easier to manage resources locally and to understand what works for the target segment

Push products if more centrally coordinated will increase profits by more sales and reduced operations cost

Taste based products should be less centrally regulated

Products already having high sales are assumed to be performing well because of higher degree of centralization

Degree Of Centralization : Products

Country• Cross Cultural Understanding

between different Countries• Demographic and cultural Trends• Consumer Tastes and Preferences• Family size, Population growth ,

away from food consumption and standard of living.

• Spill Over National Boundaries• Contribute to conflicts in product

positioning.• 65% of the programming watched in

French Speaking pat of Switzerland emanated from France.

Degree OF Centralization : Geographic

Satellite TV• centralized coordination

planned to break down cultural barriers

• Offer same type of Advertising Cost effectiveness in Europe as in US.

• Harmonized Product Positioning, Packaging, Promotion and Pricing.

• Can be adopted for (Breakeven Volume)Cost/unit > Fixed Costs of$200million/Satellite and other government hindrance issues.

Prepared by

Abhishek Sharma FT13300Arjun Choudhry FT13312

Garv Sharma FT13325Irene Eltham FT13337

Mrityunjay Arya FT13350Ramachandran FT13362

Sonali Das FT13374Vijaykumar Bale FT13386

Thank You