Category: Nestle

“Nestlé” is the largest food and beverage manufacturer in the world, it is founded at 1866 by Henry Nestlé. They promised to offer ‘GOOD FOOD, GOOD LIFE’ to all customers. The firm’s headquarter placed at Vevey, Switzerland (Nestle, n.d). Nestlé also a firm of nutriment and health which undertake in produce, supply, and production of prepared dishes and cooking aids, baby foods and cereals, medicines and ophthalmic supplies, and dairy products. Moreover, their output are in certain types which included confectionery, beverage in liquid or powdered, pet cares, water, dairy products and ice cream, prepared dishes and cooking aids, nutrition and health science (CNN Business, n.d). Nestlé have been nourishing Malaysian by their goods and quality brand such as MILO, MAGGI, KITKAT, and NESCAFÉ, simultaneously maintain Halal excellence and integrity since 1912.

The main purpose of Nestlé Company is improve quality of life and create better and healthy world. They encourage people to live in healthier live, this is how Nestlé Company dedicate to the society and ensure their long-term successful. Besides, they set 3 primarily goals for 2030 which instruct their job and support the achievement of the UN Sustainable Development Goals (Nestle, n.d). Diagram below shows the 3 goals:

Furthermore, Nestlé Company also strictly follow on the principle of policies and commitment (Nestlé, n.d):

1. Nutrition, health, and wellness Nestlé’s kernel target is provide delicious, healthier food and beverage to improve the quality of customer.
2. Quality assurance and product safety Nestlé guarantee to produce safety and high standard of outputs through the world.
3. Consumer communication Nestlé’s respect on customers’ privacy.
4. Human rights in Nestlé’s activities Nestlé’s support the UNCG (United Nations Global Compact) guiding the principle on human rights and labour.
5. Leadership and personal responsibility Nestlé’s respect on their employee and recruit people is capable and motivated.
6. Safety and health at work Nestlé has the responsibility to protect employee from the accident and injuries.
7. Supplier and customer relations Nestlé hope their employee expression in honesty, integrity and fairness to their non-negotiable standard.
8. Agriculture and rural development To ensure the environmental sustainability, Nestlé determine to engage the farming product.
9. Environmental sustainability To ensure the environment sustainability, Nestlé try hard to use natural resources.
10. Water Nestlé manage the usage of water since the world are faces growing water challenge.

Nestlé Performance:

Progress against commitments-Nestlé disclose their performance every year since their commitment. Their commitments related to their ambitions on 2030 and most of commitments support the UN’s sustainable development goals.

External assessment-Nestlé feel proud while their result recognized by the world’s leading rating and ranking agencies.

Breast-milk substitute marketing: Compliance record-Nestlé guarantee their breast-milk substitutes (BMS) complies with the Nestlé Policy and Instructions for Implementation of the WHO International Code of Marketing of Breast-milk Substitutes

Assurance-Nestlé hire third party to provide independent assurance for the data.

Environmental performance indicators-Help Nestlé to gauged their progress and illustrate compliance.

Corporate Responsibility Reporting Awards 2018-Nestlé’s shared value report 2016 gain 2 CR Reporting Award 2018 which include ‘Credibility through Assurance’ and ‘Innovation in Reporting’ (Nestlé, n.d).

Moreover, there also challenge faced by Nestlé. The executors state that Nestlé are facing the resk of having supply chain that cause by the climate change. Pascal Gréverath said that, climate change can make the food sector in European faced a serious risk on supply on agricultural raw materials (Frédéric Simon, 2015).

SWOT

Strengths, Weakness, Opportunities, and Weaknesses (SWOT) analysis is a tool where organizations use it to further understand their strengths and the weaknesses, and the opportunities the organization has, and the threats faced by the organization. Therefore, organization that uses SWOT analysis to understand and be more aware of the organization’s environment. When an organization understands their weaknesses, they can minimize or eliminate the threats that can damage the organization in the long run. SWOT analysis allows Nestle Malaysia to look at the new business directions, where they can take advantage of the internal strength and opportunities, at the same time reducing their internal weakness and threats.

Strengths

Firstly, in terms of internal analysis is Strengths and Weaknesses. For strengths, it assesses what does the strengths that Nestle possess, what are the unique features of Nestle, and what does Nestle has that provides them a competitive advantage. Nestle has to consider their strengths through both internal and external perspective. For internal, Nestle Malaysia has to look into the strategies and their operations. For external, customer’s point of view also must be considered. Nestle Malaysia has to look into their competitors in order to do comparison on what their competitors’ absence that provides Nestle a competitive position. One of the strengths that Nestle Malaysia possess is superior technology which is from one of the remote environment factors. The technology that Nestle Malaysia possess allows them to meet their customer needs in ways that the competitors does not fully fulfil. Nestle’s technologies enable the development of safe, nutritious foods and beverages. For example, Nestle uses healthier fats in processing foods and the use of portion dispensing system in the beverage system. (Food science and Technology , n.d.).

Next, Nestle Malaysia are environmentally aware and strive to reduce environmental impact of their packaging. Based on Nestle’s 2007 report, Nestle uses resources from renewable resources in terms of packaging and manufacturing of product performance. Nestle also supports the initiatives towards recover and reuse energy from used packaging, and to provide environmental benefit by using recycled materials. (Nestle, 2013) The Nestle policy on the worldwide environment, since the year 1991 has been communicated and implemented in Nestle Malaysia. Nestle Malaysia can contribute to the global environment by minimizing waste and preserving natural resources. (Nestle, 2007) This encourages loyal customers to feel better, buying from Nestle as they are environmentally aware because they strive on lessening negative impacts on the environment.

Furthermore, one of the major strengths of Nestle Malaysia is the strong brand name as it is the largest food and beverage industry in the world that is headquartered in Switzerland. (Nestle , n.d.) Nestle is also fortune 500 company ranked 69th in the year 2018 with the revenue of $91,222 million. (Fortune Global 500, n.d.) Therefore, this gives Nestle Malaysia the upper hand above their competitors in setting higher prices for their products. This is because consumers place additional value in the Nestle brand. Nestle Malaysia was able to penetrate into the Malaysian market easily with additional 500 halal products.

Weaknesses

One of the weaknesses of Nestle (Malaysia) Berhad is overstocking. Based on a study by Nur Zakeerah Binti Mat Khanin from Universiti Utara Malaysia, there is overstocking problem in Nestle (Malaysia) Berhad. It shows that the company has issues and difficulty paying its current liabilities when the need arises, and therefore the company will not be able to pay off the current liabilities of the company without winding up its existing inventories. This can lead into a major issue into the future if there is any surplus of existing inventories where it will lead to insolvency. (Khanin, 2017) This shows that Nestle (Malaysia) Berhad is not very good with demand forecasting which will lead to high inventory and eventually overstocking the inventory.

Next weakness of Nestle Berhad is the brand structure. There are over 2,000 brands over 150 countries where in Malaysia there are brands which is the favourites among the customers. (Nestle, n.d.) Brands such as Nescafe, Milo and Maggi are the favourites in Malaysia, however too many brands under one management can lead to conflict of interest. For example, Nestle Berhad cannot create a strategy to fulfil the needs of all customers whenever they are focusing on other category. (SWOT analysis of Nestle – Nestle SWOT analysis and 4 P’s, 2018)

Opportunities

Malaysia was considered one of the most obese country in Asia over the recent years therefore the Ministry of Health (MOH) has come out with a solution by implementing new national health policies to reduce the issue of obesity. (Meiyi, 2018) Therefore, Nestle Malaysia needs to do more market advertising and penetration on the healthy cereals. Nestle Malaysia can also come up with a healthier choice of beverages and snacks as well, to further improve on their healthy selection of food and beverages. Consumers who are health conscious will focus on Nestle’s healthier choices of product.

The next opportunity for Nestle (Malaysia) Berhad is creating strategic alliance with other big brands in Malaysia, to further captivate and fulfil customer’s needs and wants. Nestle has already engaged with many big companies such as Coca-Cola and L’Oreal, but they can partner with more food giants and other product line brands to further increase their growth of their company. Increasing alliance of other brands can further increase Nestle’s product line and enable people to listen, learn and contribute effectively. (Nestle, n.d.)

Moreover, Nestle (Malaysia) Berhad should also focus more on research and development to handle ethical issue. There were many products that Nestle has to recall due to various issues such as the Maggi noodles in India where the noodles has lead, also the Alfamino infant formula in Germany and Maggi beef and chicken noodles recalled in Philippines due to found salmonella in 2 batches of noodles. (Reuters, 2015), (Reuters, 2018), (ABS-CBN News, 2011). To avoid any of the following issues to be repeated in Malaysia or internationally that can affect the Nestle’s brand image, Nestle has to be more cautious in their operations and invest more in Research and Development to further bring up more hygienic food products and ingredients.

Threats

For Nestle (Malaysia) Berhad, one of the threats in Malaysia is the competition in the market. It is an external threat that the company cannot control but to adapt or to change for improvement. It can be local or international brands. Cheaper cereal brands such as Tesco brands goods sells at a cheaper price with bigger serving size which is more reasonably price, compared to Nestle which is set at a higher price with smaller serving size. With increasing numbers of competitors, it gives Nestle difficulties to differentiate from others with emerging products which is similar functions and might be better in terms of advertising and cost.

In addition, buyers’ power or the customer’s buying power also plays a very big role in determining the growth of Nestle. In Malaysia market, it is highly diversified in goods which offers different benefits and characteristics. It is difficult for a consumer to stick to one brand and be loyal towards a single company. Therefore, this will result to brand switching where customers has the power to choose other brands beside Nestle, based on different factors. Factors such as availability, price, portion size and group recommendation. It is difficult for Nestle to ensure customer are loyal to their products due to different types of products which offer different flavours which Nestle has not created one.

Industrial analysis

Nestle (Malaysia) Berhad is a Malaysian investment holding company owned by Nestle. Nestle (Malaysia) Berhad manufactures and sells food and beverage products in Malaysia and internationally. It provides junior foods, powdered milk and drinks, liquid milk and juices, breakfast cereals, instant coffee and other beverages, instant noodles, chilled dairy products, ice creams, culinary products, chocolate confectionery products, health science products, yogurt and related products, and ready-to-drink beverage products, as well as infant and maternal nutrition products. The main geography is the domestic market, representing approximately 80% of total sales.

It offers its products primarily under the well-known Brands are MILO, NESCAFÉ, MAGGI, NESTLÉ OMEGA PLUS, DRUMSTICK, NESTLÉ BLISS, LACTOKID, COMFORTIS, and KIT KAT.

Nestle (Malaysia) Berhad is using Porter Five Forces analysis to enhance and secure its business and competitiveness in the industry.

Threat of New Entrance

The threat of entry is affected by many factors which are economies of scale, capital requirements, access to supply or distribution channel, customer of supplier loyalty, experience, expected retaliation, legislation or government action and differentiation (Johnson et al, 2005).

It is very important for Nestle to set up numbers of entrance barriers. Nestle is well experience and understand the customers’ need. They have developed customer loyalty over time (Othman, 2014).

Nestle has developed strong distribution networks and economies of scale that allow that to produce or manufacture as well as deliver at a very low cost. Nestle has the most important thing to retain its customers which is the brand name itself. In 2008, Nestle is one of the companies in the list of 100 Best Global Brand (Best Global Brands, 2008). Capital also play a very important roll, most of the time when they is a new product launched, advertisement and promotion are needed. This will cost a lot of money, thus this tough for new entrance trying to grab some market share in this industry. Hence, it has low threat of new entrants.

Threat of Substitute

Threat of substitute is high in the food and beverages industry. Threat can be assessed using price/performance ratio and extra industry effects. Nestle may use product selling price to tackle the product substitute from the competitors.

Nestle is strives to highlight the healthy aspect of the products so as to tackle the substitute. It strives to bring consumers foods that are safe, of high quality and provide optimal nutrition to meet physiological needs. In addition it also brings the vital ingredients of taste Nestle is to deliver nutritional value for the customers.

Nestle may use the strategy of manufacture or produce broad range of similar products. These products may compete with one another to gain market share. It means that they become substitute for each other. For example Nestle Koko Krunch Cereal can be the substitute for Nestle Nesvita cereal drink since both of them are intended for breakfast consumption. The product are substitute but from the same company with different brand name. Nestle has strong capital to produce same range of product to gain market share in this industry. This industry is said to be having high threat of substitute.

Bargaining power of buyer

The bargaining power of buyers at growth stage is not high but it will increase as the industry goes further in the life cycle. The main reason for this is because of increasing number of competitors to offer more products to the customers. Nestle needs to emphasis on its products to meet customers’ need and demand. Whether on products ingredients, freshness, nutritious, health and wellness. For example Nestle MILO has strong market share and remains a perennial favorite amongst Malaysia consumers. In order to further strengthening the brands image, the company added MILO GOLD to its product range. This was done to keep the consumers loyalty towards the product (Business Review, 2008).

Nestle needs to carry out more often on market survey, interview and event that to provide more feedback from different group of age customers consuming products so that it can cover different range of products. Thus, it has a high bargaining power of buyers because Nestle can meets the needs of their buyers.

Bargaining power of supplier

The power of supplier in food and beverages industry tends to be medium. The basis of Nestle products are agricultural raw materials such as milk, cocoa, and coffee. They not only rely on the suppliers to provide the raw materials. Nestle itself purchases agricultural materials in either raw or semi-processed form directly from farmers or via trade channels (Raw Materials, 2009).

Nestle holds the largest market share in the industry. As a result it requires supplies in massive quantities. Therefore any supplier get started supply raw material to Nestle will never interferes with its or attempts to bargain or influence the price. Nestle, in return hold its supplier in esteem and take of them (Tavsar, 2013) Nestle prefer long term relationship with supplier in order to ensure the quality of raw material and stable pricing.

Switching cost of Nestle or change supplier is moderate as it need to ensure that quality from the supplier. The bargaining power of supplier depends heavily on the strength of the company’s brand. In this case, big companies such as Nestle can take advantage in bargaining. Small scale companies or local companies may feel that the power of supplier is higher as compared to the well-established companies. In short, bargaining power of supplier is low.

Competitive Rivalry

Nestle are facing competitors too in the market. The main competitors are Kellog, Danone, Kraft Foods, Hershey’s and many others. The competition is not only price, but product varieties, creativities, promotions and so on.

Nestle has made the company reached the first place in the industry. Quality which is the most important factor for food and beverages industry. Nestle knows that innovation and quality are the key determinants. It means that for the company to success in this industry, the product quality should be taken care the most while innovation process is also carried out. Nestle brand has been the symbol of quality. Innovation is said to be the critical factor because in this kind of industry the company should be able to come out with new ideas to keep pace with the changing customer preferences.

Nestle has which is becomes the first in the industry to offer a full range of chilled dairy products with “No Artificial Colouring” in 2008 (Business Review, 2008). Some examples of the products are BLISS Yogurt Drink, NESTLE Yogurt and YOCO Cultured Milk Drink. Nestle can take advantage of location economies to lower the cost of value creation thus it can achieve low cost position which will give the company even better market shares (Nestle: Global Strategy, 2009).. For Nestle to sustain its competitive advantage shouldn’t be a problem. This is due to the value and inimitable of the core competencies of Nestle especially for its corporate brand image and commitment. The most important thing is that Nestle is aware of the intense competition and keeps improving itself. Nestle also has competencies in leading and developing people (Roongrerngsuke, 2006). As the market in each country is different from the others, the company needs to adapt itself to the macro-environment accordingly. Therefore, the competitive rivalry is high.

Last but not least, the industry has high competitiveness because it has low threat of new entrants, high threat of substitute, low bargaining power of supplier, high bargaining power of buyers and high competitive rivalry.

Abstract

Whenever we think about Nestle, we think about a story about organizational success. Since its inception in 1866, the company has seen rapid growth, profit, and earned reputations all around the world. Even its company in India is doing exceptionally well. Since 1959 Nestle has been operating in India. It is selling noodles to a rice/wheat-eating country. Sells chocolates to people who are famous for their sweets. Sells powder milk to a country obsessed with fresh milk. Unfortunately, the company lost its reputation in India in 2015 and faced a never before seen crisis. The 104-year-old reputation was inked when a lab found high amount of lead in its most famous brand of noodles, Maggi. This finding lead to a subsequent nationwide ban of India’s most beloved product. Nestle India faced its worst nightmare. However, the company managed to jump back from the situation and regained its once-held reputation. What’s more impressive about Nestle is how they reacted in the face of its worst crisis. The way they solved their problem, remained in business, and now growing faster than ever before is a case for study and research. This paper delves deep into how the crisis began and how the company efficiently and effectively came out of it.

Nestle Maggi Crisis

A Brief History

It all started in 1867 in Vevey, Switzerland. The founder of Nestle is Henri Nestle. It’s first product was created as an alternative for mothers who could not breastfeed their babies. It was called Farine Lactée Henri Nestlé. Within a few years it gained popularity in the Europe.

At that time their main competitor was Anglo-Swiss Condensed Milk Company. The companies merged in 1905, on that year Nestle also added Chocolates on their product of foods. Initially they had factories in the United States, Britain, Spain and Germany. And soon they started manufacturing in Australia, Singapore, Hong Kong and Bombay. They faced some complications during the World War 1 but their production boosted back after the World War.

By the 1920s Nestle was Creating chocolate and powdered beverage products. The developed their one of the successful Product in 1930s Nescafe along with Nestea and it became an instant hit. Nescafe became a main Beverage for the American Soldiers in Europe and Asia. Their total sales increase by $125 million from 1938-1945 during the World War 2. After the World war they expanded their product line. And within a matter of time Nescafe became one of the largest stock holders in the market.

The First logo of Nestle in 1868.

Current operations around the world

• Nestle and Starbucks will work closely together on the existing Starbucks range of roast and ground coffee, whole beans as well as instant and portioned coffee. The companies are working on a new innovation with the goal of enhancing its product offerings for Coffee lovers globally. The agreement significantly strengthens Nestle’s portfolio in The North American premium roast and ground and portioned coffee business.

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• Nestle launches free online chef’s academy with WORLDCHEFS. It will be a great help for the aspiring chefs to take the first step. This academy is a partnership between the World Association of Chefs Societies (WORLDCHEFS) and Nestle Professional Academy is free of cost and accessible for anyone, no matter what their background is or what skills they have.

Introduction in India

Nestle’s relationship with India dates back to 1912.After India’s independence in 1947, the economic policies of the Indian Government emphasized the need for local production.

Nestle responded to India’s aspirations by forming a company in India and set up its first factory in 1961 at Mega, Punjab, where the Government wanted NESTLÉ to develop the milk economy. Nestle has been a partner in India’s growth for over a century now and has built a very special relationship of trust and commitment with the people of India. The Company’s activities in India have facilitated direct and indirect employment and provides livelihood to about one million people including farmers, suppliers of packaging materials, services and other goods.

Operations in India

The main operation of Nestle is to serve Good quality food. Nestle India manufactures products of truly international quality under internationally famous brand names such as Nescafe, Maggi, Milky bar, Kit Kat, Bar-One, Milkmaid and Nestea and in recent years the Company has also introduced products of daily consumption and use such as Nestle Milk, Nestle Slim Milk, Nestle Dahi and Nestle Jeera Raita.

Nestlé India Head Office, Gurgaon, Haryana

Nestle Contribution to India’s Economy

Nestle’s contribution to India’s economy till now is quite good. Their first factory was created in 1961 in Moga. Their total sales are Rs. 7,546 crores as of September 2017 and their net profit after tax is Rs. 913 crores as of September 2017. Nestle has given a major push to the dairy sector of the country and has developed the Milk economy. Nestle is the market leader in various categories such as Infant Cereals (96.5%), Instant Pasta (65.2%), Instant Noodles (59.5%), White Chocolates and wafers (62.6%).

The Beginning of the crisis

Before Maggi was launched in India in 1983, nobody imagined that a snack can be prepared in just 2 minutes. Within a short period of time it gained popularity all over the sub-continent. It was mainly targeted for the middle-class families of the country.

Everything was going smoothly for three decades but then a storm struck in 2014. On a laboratory in Gorakhpur proved that the samples of Maggi contained lead and monosodium glutamate 1 (MSG) much beyond the permissible limit. Then several state governments tested the samples and banned the product. Within a matter of time Maggie was off the Market.

The Crisis

Maggi instant noodles came under the scanner for three main reasons. The first was the aforementioned violation of the regulations for adding lead and MSG into the product. As against the maximum limit of 2.50 parts per million (ppm), the amount of lead detected in the Maggi samples was perilously high at 17.2 ppm. The second offence was mentioning ‘No added MSG’ on the packaging, which is an act of mislabeling. Also, it launched ‘Maggi Oats Masala Noodles’ without meeting the appropriate norms of standardization. Maggi owned 80% of The market share in the instant noodles segment. After the ban it dropped to 0%. The crisis was very serious and it was state of emergency for Nestle India. Maggi’s all hard work of 30 years was at stake. So, Nestle India had to take some necessary steps.

The Financial Downturn

As a result, Nestlé India slipped into a loss for its second quarter after being battered by a national ban on its popular Maggi noodles due to safety concerns.

The Maggi meltdown would prove costly. Nestlé lost at least $277 million in missed sales. Another $70 million was spent to execute one of the largest food recalls in history. Add the damage to its brand value—which one consultancy pegged at $200 million—and the total price tag for the debacle could easily be more than half a billion dollars. And the fallout continues. [image: https://fortunedotcom.files.wordpress.com/2016/04/nestle-maggi-stock.png]

In a statement to the Bombay Stock Exchange, Nestlé India reported a net loss of Rs 644m ($10m) in the three months ending in June 2015, compared with a Rs 2.8bn profit during the same period in 2014.

The loss of Reputation

With Indian Food Inspectors ordering Nestle India to recall a batch of Maggi instant noodles identifying dangerous levels of lead and MSG (click for entire report), Maggi (Nestle India) was caught into a vicious circle of bad reputation.

Maggi till date has been enjoying a brand that could connect people to not only a product but to the whole concept. Maggi has become the other name for “Instant Noodles”. Even if someone purchases Top Ramen Noodles or Sunfeast Yippe Noodles, it would still be assumed as another type of noodles but not instant noodles. At times Maggi is been sought for as a quick alternative to the staple food. However, what problems the present crisis would create to Maggi is to be watched.

Due to the scandal, the internet had started talking more and more about the ill effects of Maggi which is considered as itself a brand. This gave an opportunity to rumor-mongers and gossipers to start talking more and more about the ill effects of Maggi. Social media sites such as Facebook, twitter , and google+ were abundantly supplied with information of what is good and what is bad and how Maggi (Nestle India) is cheating its customers. Hashtags like #Maggi, #Maggi ban is being voiced over in the internet. Famous mobile messaging apps like WhatsApp, WeChat, etc., will now spit the venom against Maggi.

The loss of Market Share

1. Nestlé India said its sales plunged by 20% in the second quarter, as a food-safety scandal and a large-scale product recall weighed on its earnings.
2. [image: https://fortunedotcom.files.wordpress.com/2016/04/nes-05-01-16-print-charts.png]
3. Nestlé Noodle’s market share in India also took a nosedive from 63% in 2014 to 23% in 2015 due to the Maggi noodle scandal.
4. The Indian arm of Nestlé SA said its revenue declined to 19.34 billion rupees ($302 million) in the three months ended June 30th 2015, compared with 24.19 billion in the same period a year earlier.

The loss of Public Trust

Due to the reports of the lead contamination in Maggi noodles, consumers lost their trust on Nestle. Trust metric for Maggi noodles dropped to as low as 3% in 2015. On top of all that, enraged consumers wasted no time venting their anger. In some cities protesters in the street smashed and set fire to packs of noodles and photos of Bollywood stars who were paid Maggi endorsers. One prominent newscaster compared the situation to Bhopal, the worst industrial accident of all time, in which a toxic gas leak at a Union Carbide pesticide plant in central India killed thousands of people. From commanding 80% share of India’s noodles market, (as estimated by Nomura Securities in May 2015) Maggi went down to zero in just a month.

Legal Ramifications

The Maggi sample which was tested contained more than seven times the permissible level of lead—over 1,000 times more than the company claimed was in the product. Due to this debacle, Nestle had to face several legal ramifications such as the ban imposed on Maggi noodles for an indefinite period and it had to take all Maggi packs — or 35,000 tones — off the shelves of about four million retailers.

Other nations such as Nepal indefinitely banned Maggi over concerns about the lead levels in the product. Maggi noodles were subsequently withdrawn from the market of five African nations: Kenya, Uganda, Tanzania, Zimbabwe and South Sudan.

Dealing with the crisis

The Uttar Pradesh food safety commissioner sent a formal notice to Nestle seeking clarification on presence of MSG and lead in Maggi samples. The company did mail its response along with its internal monitoring documents on 5 May 2015, but did not take any proactive step to counter any possible aftershock. On 7 May, there was a small news item on the episode in one of the Hindi newspapers in Uttar Pradesh.

Still, Nestle did not react. It never thought the news could lead to an estimated half a billion-dollar loss for the company (including erosion of brand value) that would shake the Swiss multinational and that the subject would be debated at length in television studios.

Nestle failed to gauge the depth of the crisis even after national newspapers started writing about it. It did not issue any statement till 21 May. And in its first official statement, it said there was “no order to recall Maggi noodles being sold” and the popular instant noodle was “safe to eat”.

On 5 June 2015, the day FSSAI asked Nestle to recall Maggi noodles, the company’s global chief executive Paul Buckle met the regulators, and addressed the media in New Delhi. Buckle said: “This is a matter of clarification and we need to sit down together and clear the air… We will look into the safety concerns. We do not add MSG in Maggi noodles… We apply the same quality standards everywhere. Everything we do is keeping consumers in mind. We will do everything it takes, and are fully engaged with the authorities.”

But by then, things had spun out of control. Buckle was left with little choice but to recall the popular noodles from the market. The company got Luca Fichera, then executive vice-president (supply chain) at Nestle India, to lead the recall process.

Between 5 June and 1 September 2015, Fichera’s team collected 38,000 tons of Maggi noodles from retail stores, and destroyed them by first crushing the noodles and then mixing them with fuel and burning in incinerators at 11 cement plants across the country.

How Nestle managed to jump back

“Clinically dead”, is how the company’s India boss loves to describe the Nestle of those days.

Swiss parent controlled Nestle India, makers of Maggi noodles, has made a strong comeback to regain its lost ground in 2017 – nearly two years after it was forced to withdraw its largest selling noodle brand from shops across the country following its failure to meet certain food safety standards.

After two years, Maggi noodles commands a market share of 60 percent, having regained most of its lost share during the ban days.

The brand equity and customer trust has been built over generations and this has helped the brand bounce back after a near ‘death’ experience, Suresh Narayanan had said in an interview to First post last year. After the five-month ban, in November 2016, Nestle India relaunched Maggi noodles in the Indian market.

The company is not just relying on Maggi brand, although it still accounts for a major portion to its overall revenue. In the last few quarters, Nestle has launched several products like Greek yoghurt, kids breakfast cereal Nestle Ceregrow, health food drink Nestle A+ Pro-Grow, Nescafe RTD chilled Latte, everyday masala, Maggi Hot Heads, and variants of Maggi noodles.

Going forwards, the company plans to launch Nespresso (a coffee machine), Dolce Gusto (a coffee capsule system), besides products in pet care, healthcare and skincare. Despite the planned launches, Nestle parent sells just 20 brands in India as against its global bouquet of around 20,000 odd brands, a Mint report said.

The company wants to tap India’s top 600 cities that will account for half of the consumption growth over the next 10 years or so.

Nestle’s current performance

Nestle is a story of organizational success. Even after its 2015 Maggie debacle, Nestle managed to turn back from the disaster, and established itself as one of the most durable companies in the world. Nestle India released the annual report for the year 2017 (the food and beverages major maintain a January-December format). It revealed, among other things, that the firm had managed to grow volumes in all four product categories for the first time since 2010 — milk products & nutrition, prepared dishes & cooking aids, beverages and chocolates & confectioneries — grew.

In the late afternoon of May 17, Nestle India’s stock was trading at Rs 9,865 a piece at the Bombay Stock Exchange. In other words, the company had bounced back from the biggest existential threat in its 104-year history in India.

In the quarter ended March 2018, domestic sales remained strong (up 10.9 per cent year on year), primarily led by higher volumes across categories. Nestle’s domestic growth was comparatively better than the growth reported by other large FMCG players this far for the quarter,” analysts from Edelweiss said in May.

So, we can see that even after such a huge crisis, Nestle has managed to recover its market share, profit and it is growing faster than ever before.

Innovating with existing products

Suresh Narayanan, chairman and managing director of Nestle India, who was brought in to handle the crisis in August of 2015 said that they were innovating with their existing products. Nestle has introduced six new variants of Maggi called HotHeads. They have high levels of spice and they come in exotic flavors. There is also Munch Nuts, a chocolate wafer with peanuts, and Nescafe Cappuccino ready-to-drink premixes.

As Suresh Narayanan said, “We have launched 25 new products or variants since the Maggi crisis. All of these are in the incubator. Some will gallop in the future; others will canter, some may die. People ask me, what has changed? How did Nestlé suddenly acquire this pace? We’ve never had so many product launches in such a short time in the history of the company”.

Change in Attitude

Often times, success or failure of an organization depends on its attitude. The same is true for Nestle.

Suresh Narayanan believes that the reason for Nestle’s recent success is its changed attitude.

In one interview Narayanan said, “Today I see an attitude and mindset of growth. There is an instinct growth opportunity among people working across verticals. Part of this is reflected in our new motto of growth through innovation and renovation,” he said. Earlier it used to take some two years to come up with a new product; now the time has been cut to less than six months”.

“In the past we have had periods of rapid launches but could never sustain the momentum,’ he added.

With its changed attitude Nestle proved what the former American professional baseball player, Wade Boggs said, “A positive attitude causes a chain reaction of positive thoughts, events, and outcomes. It is a catalyst and it sparks extraordinary results”.

How the crisis affected the organization

In one interview the Chairman and Managing Director of Nestle India, Suresh Narayanan said, “Nestle probably required such shock treatment as the June 2015 ban on Maggi noodles to jerk it out of its ennui”.

Narayanan had spoken about how the Maggi Noodles crisis was the most challenging and dramatic situation in his entire professional career. Maggi is the worst crisis that they have faced in the 104 years of their existence in India, also the worst crisis the company has faced globally in a long time.

Narayanan also talks about the mood of the workers and employees of Nestle India. He said, “The team was shattered. Our factory workers were extremely upset…. I had an empty feeling. At that time, I realized as a leader, the weight of responsibility on my shoulders is so big during a crisis”.

Change in Organizational Structure

Due to the Maggie crisis Nestle realized that the way things had been going on needed to change. Nestle was quick to change with the changing situations. They brought about changes to the decision-making process.

To increase focus on the market, Nestle has decentralized the decision-making process by creating 15 verticals that now target specific geographies with their respective hyper-local strategies.

Crisis and Organizational Culture

An organizations culture can give an estimation as to how an organization would react if they faced any crisis. It is evident that during the face of crisis the strong and weak cultures have an important role to play. Moreover, the rigidity or flexibility of an organization’s culture will give an idea as to how soon an organization can overcome its crisis or give into it.

Various studies have revealed that a multinational corporation with over a century of presence in the country struggled to align itself to the complexities of the cultures of the host country. In the case of Nestle India, whereas environmental variables such as political economy and Westernization of urban India boosted the growth of its instant noodles, the multinational company struggled to cope with the rise of media corporatization, activist pressure.

It is evident that Nestle’s crisis response was governed more by its traditional corporate culture than by an ability to keep pace with the changing demands of its environment, leading to the amplification of an issue into a crisis.

So, we can see that multinationals that ignore culture will be forced to pay a heavy price both in terms of reputation and finance.

Lessons for Management

The omnipotent view of management shows that managers are completely responsible for the success or failure of an organization. Although that is not completely true, Management in an organization bears the most important roles for an organization to succeed. As the top-level management reap most of the profits gained by the organization it is also their responsibility to see if anything goes wrong. Besides the real competency of the managers are tested during a crisis.

Since its inception in India in 1959, Nestle India is a story of organizational success. But, the 2015 Maggie crisis put them to their test in 2015. There are multiple lessons for management here.

• No matter how successful an organization is they can always face crisis
• Consumers won’t remember the years or hard work and service, rather they will remember that one mistake the organization made
• Public trust is easier to lose than to gain
• In the cutthroat world of business no one is truly your friend
• You should always be prepared for change

Nestle realized this during their 2015 Maggie crisis. Fortunately, they bounced back from their state and is now performing better than before.

Lessons for students

As business students, we are learning various theories about how business is operated. Without practical knowledge these theories are not much of help. The story of Nestle has a lot to teach to us students also.

Analyzing its 104-year history and ways of operation, we cannot but marvel at the success of an organization. In a rice country they make noodles; in a tea country they sell coffee; in a sweets country they sell chocolates; in a fresh milk country they sell powder. They must be doing something right.

However, the 2015 scandal was a shock for all. What makes this company different from others is how they solved their problems and overcame the crisis. Nestle’s crisis management should be a case study and a matter of research. We as students learned a lot as to how the role of Management, Culture, Commitment and attitude can take a company to the top.

References

1. Dhanesh, G. S. (2017, December 21). Culture and Crisis Communication: Nestle India’s Maggi Noodles Case. Retrieved from Journal of International Management: www.sciencedirect.com
2. Dubey, A. S. (2017, December 4). ‘Maggi is the worst crisis that we have faced in the 104 years of our existence in this country’. Business Today, p. 6.
3. Fry, E. (2016, April 26). Nestlé’s Half-Billion-Dollar Noodle Debacle in India. Retrieved from Fortune: fortune.com
4. Money Control. (2017, August 29). Post-Maggi Crisis: How Nestle India is stepping up its game. Retrieved from Money control: www.moneycontrol.com
5. Nestle. (2016, April 11). MAGGI Noodles timeline of events. Retrieved from Nestle: www.nestle.in
6. Rediff Business. (2018, June 8). How Nestle bounced back from the Maggie Crisis. Retrieved from Rediff Business: www.rediff.com
7. Robbins, S. P. (2017-18). Organizational Culture. In S. P. Robbins, Management (pp. 465-467). New York: Pearson.
8. Sharat Pradhan. (2015, June 9). Maggi noodle crisis: How it all began. Business Today, p. 7.
9. The Quint. (2017, September 9). Excerpts: How Nestle Overcame the Maggie crisis. Retrieved from The Quint website: www.thequint.com

In this review, I am going to analyze the ingredients of breakfast cereals made by the company Nestlé and titled Nesquik Cereal. Breakfast cereals are one of the most common types of processed food.

The serving size is 30g per portion (the company also advises to serve these 30g with 125ml of semi-skimmed milk). The ingredients include cereal grains (whole grain wheat 44.5%) (per 120g: 87.1g carbohydrates, 2.2g fats, 16.4g protein). According to FNS, if the word “whole” is placed before the first ingredient, it is more likely that the product is whole-grain. Maize Semolina (100g: 4g fats, 77g carbs, 8g protein) is made from purified wheat middlings and is considered a healthy product. Rice flour (127g carbs, 2g fats, 9g protein) is made from ground rice; it is a natural product. All these components are used to make the cereals (Nesquik Cereal, n.d.).

Sugar (100 g: 0g fats, 100g carbs, 0g protein) is added to make the product sweeter. Glucose syrup (100g: 0g fats, 78g cabs, 1g protein) apparently has the same aim. Coca powder (6.1%) (7.5 oz: 20g fats, 120 g carbs, 40g protein) adds the taste/scent of chocolate. Palm oil (1 tbsp: no fats, carbs, protein) is used as a substitute for other types of oil because it is cheaper than those; its use is highly widespread, especially in supermarket products.

Fat-reduced cocoa powder (0.5%) (6g: 4g fats, 40g carbs, 7g protein) is used to defeat chocolate products and adds a strong chocolate taste/scent (Nesquik Cereal, n.d.). Salt (1 tsp: no fats, carbs, protein) is mostly used in all breakfast cereals. Trisodium phosphate is used to adjust acidity and approved by FDA; it is not dangerous. Flavoring’s type (3 oz: 7g fats, 1g carbs, 6g protein) is not specified but is used to add a specific flavor typical for Nestlé’s cereals (chocolate/vanilla).

There is also a variety of vitamins and minerals used. Niacin (B3) (14mg per 100g) is crucial for normal body functioning; adults should take 14mg or 16mg of this vitamin each day. Pantothenic acid (B5) (5.2mg per 100g) helps the body utilize carbohydrates and proteins; adults should take 5gm per day. Vitamin B6 (1.3mg per 100g) is needed to ensure the normal development of the human brain, skin, nerves, etc.; adults should take approx. 1.3g per day. Riboflavin (B2) (1.3mg per 100g) is required for a normal function of blood cells, the skin, immune system, etc.; adults normally take approx. 1g or 1.3g of the vitamin per day (Nesquik Cereal, n.d.). Thiamin (B1) (0.97mg per 100g) regulates the body’s ability to utilize carbohydrates; adults should take approx. 12.mg or 1.1mg of it per day.

Folic acid (180mcg per 100g) plays a major role in the body’s ability to create genetic material; adults take 400mcg per day. Vitamin D (3.0mcg per 100g) regulates calcium and phosphorus and is essential for maintaining the normal bone fracture; 15mcg per day is recommended for adults (Nesquik Cereal, n.d.). Calcium carbonate (478mg per 100g) can be used as a calcium supplement and is crucial for the normal bone fracture and function; the adult dose is approx. 500mg per day (should not be used for a long period of time).

Iron (11mg per 100g) regulates the delivery of oxygen by red blood cells; 8mg per day is recommended for adults. The label also notifies the customer that peanuts, nuts, and milk can be included. This information can be perceived differently: Nestle does not use these products in significant amounts, or the company warns people with allergies that the product can be dangerous to them.

As can be seen, the cereals do not use any hazardous ingredients and provide a variety of vitamins. I believe that they still should not be eaten every day for breakfast since most of their ingredients contain fats and sugar, which can be harmful to the body. Nevertheless, the overall review has shown that the cereals are suitable for adult consumption.

Reference

Nesquik Cereal. (n.d.). Nestle Nesquik cereal 375g. Web.

Having an impressively long history and being accessible to the point where they have become household names, Nestle and Johnson and Johnson are the two companies that do not seem to become any less relevant now that they were several decades before (Collier & Evans, 2013). The organizations under analysis owe a significant part of their success to the specific method of inventory management, which they have adjusted for the rapidly changing economic environment of the global market in the 21st century.

Both organizations have a similar set of inventories, which include raw materials, work in progress, or goods in process, and finished goods (Iwu et al., 2014). The specified set of inventories can be viewed as a standard one and does not incorporate any components that are uncharacteristic of other organizations and can be attributed to Nestle or Johnson & Johnson solely (Demeter & Matyusz, 2011). It should be noted, though, that each company keeps its inventory characteristics unique.

Nestle, being the company that works in the food industry, can define its raw material inventory as perishable in arrange of cases; the same can be said about the items that are characterized as work-in-progress (WIP) ones, as well as finished goods. Therefore, time is of the essence of the company.

Johnson & Johnson, in its turn, may identify its raw materials as those acquired from natural resources (such as palm oil) and, therefore, requiring a sustainable approach in their use. Also, the company produces medical devices and diagnostic segment, which allows for defining the organization’s inventory as technologically advanced and diverse (Jha, 2015). The technological devices mentioned above can be classified as finished goods, whereas the parts, which they are assembled from, are the WIP inventory.

As it has been stressed above, Johnson & Johnson has its services and goods integrated and connected closely. However, instead of catering to the needs of their target population, i.e., individuals, who use Johnson & Johnson’s brand products, the organization caters to the needs of other firms and entrepreneurs, who may find interest in “access to a broad array of products, including personal lines, commercial lines, and premium financing” and the related facilities (Johnson & Johnson Agency to Acquire Sunbelt General Agency From American Modern Insurance Group, 2010).

To be more specific, the organization provides services that help the company expand and become more influential in the global economic environment. While the approach in question may be viewed as efficient from the perspective of an expansion strategy, the organization may need to consider the design of the services that will be related directly to its products (e.g., opening a chain of beauty parlors).

Nestle, in its turn, also seems to be deviating from the standard pattern of linking services closely to products. Specifically, the organization aims at providing the services that have seemingly few links with the products that the organization sells to its target audience. Specifically, the company aims at offering its services to not only customers but primarily retailers and partners, according to the official statement issued by the organization: “Putting our customers, our retailers and our wholesalers first really is our top priority” (Customer services, 2015, par. 1). Therefore, though both companies must have put a lot of effort into the means of integrating the design of their services and products, the apparent differences between the two components shine through.

Based on the fact that both companies integrate their inventories as the tools for improving their production process and at the same time enhance the promotion of new services, it can be assumed that the catalog plays a significant role in the design of both organizations’ supply chains. Nestle, for instance, uses its inventory to create shared value in the supply chain so that the concept of the shared value could be incorporated into the organization’s design and set of values.

The specified approach aligns with the goals that the firm has set recently as a means to shape its relationships with its target population and, therefore, enhance the communication process between the company and the communities that it provides its services to: “Our people are learning more about the contribution Nestlé foods and beverages can make at every stage of life” (Creating shared value, 2015).

Johnson & Johnson, in its turn, also utilizes its inventories as the means of reconsidering the current relationships with its customers and, thus, incorporate the concept of customer satisfaction into its framework. Moreover, the organization seems to have started accepting the importance of creating shared value since recently. It is quite peculiar that, though providing strikingly different services, the two organizations (i.e., Nestle and Johnson & Johnson) used to share a similarly “hard-nose” (Porter & Kramer, 2011, par. 6) approach towards the concept of shared value; it was not so long ago that Nestle refused from accepting the idea of creating a shared value.

However, in the light of the factors, which the environment of the global market has exposed the two organizations to, the importance of adopting the approach of shared value increased significantly, which made the companies succumb to the new pattern of building relationships with customers, suppliers, and other stakeholders.

Evaluating the critical production processes within Nestle, one must admit that the company’s operational framework can be defined as product layout. Indeed, the company produces a range of similar products in vast quantities (e.g., chocolate bars), which means that the process of production must involve a conveyor-belt approach. As a result, every single piece of equipment is located in assembly order, and the production process consists in carrying out a sequence of specific tasks. The product layout in Nestle is quite similar to that one in Johnson & Johnson, as the latter also produces large amounts of related goods (e.g., shampoos).

Also, both companies adopt a cellular layout as a tool for grouping the critical mechanisms by their functions in the production process (Dixit & Gupta, 2013). As far as the fixed-position layout is concerned, Nestle traditionally does not resort to the approach in question, as most products that are provided by the company are small enough to carry without the help of other tools or machinery. The specified path, in fact, sets Nestle and Johnson & Johnson apart from a range of organizations, which use the exact method regularly. According to a recent study, the fixed position layout enjoys wide popularity among a variety of organizations: “Fixed position layout or project layout was also found to be dominant type layout in 7 companies, and only one company was using both fixed position and cellular layout” (Dixit & Gupta, 2013, p. 351).

Johnson & Johnson uses the fixed-position layout only when the goods produced have to be arranged into groups and stacked. Finally, the two organizations incorporate the mixed design into the framework of their operations, as both nestle and Johnson & Johnson need to utilize several approaches at the same time on a range of occasions in the course of the production process.

The evaluation of the supply chain performance for both organizations will require a detailed analysis of several performance indicators. Individually, the characteristics of the organizations’ performance, such as the customer satisfaction rates, the quality, and speed of customer feedback analysis, the overall profitability of the company, the use of the resources available, the financial statement of the company and its budget (Gopal & Thakkar, 2012) must be assessed carefully.

The specified approach is suitable for both nestle and Johnson & Johnson since the factors mentioned above allow for a generic evaluation, which will lead to obtaining essential data. In addition, the communication process must be assessed so that the cohesion between the departments of each company could be tested. The issue in question can be defined as knowledge management. Though not related to the concept of supply chain management directly, it represents the accuracy of the data transferred from one department to another rand, thus, predetermines the quality of the final product, which, in turn, affects customer satisfaction rates.

It should be noted that the metrics in question may also involve the analysis of the behavior of buyers, as well as buyers’ attitude towards the companies and the products that they have to offer in general: “Performance measures and metrics are not just measuring the performance objectively; they are also embedded with politics, emotions and several other behavioral issues” (Gopal & Thakkar, 2012, p. 519). As the recommendations provided above show, Nestle and Johnson & Johnson must incorporate the tools that evaluate not only the effects of the external factors on the organization’s success (or the lack thereof) but also integrate the analysis of internal factors, which may impact the organization’s efficacy.

When it comes to defining the tools that will possibly allow Nestle and Johnson & Johnson succeed in the environment of global economy and promote their products and services to a broader range of customers by enhancing their inventory management, one may suggest that the companies should focus on the fixed position layout as one of the critical inventory layouts. Thus, Nestle and Johnson & Johnson will be capable of enhancing the use of their equipment and raw materials without altering the production process.

In addition, both organizations should incorporate the shared value approach into their frameworks as soon as possible. Although nestle seems to have already announced its transfer to the shared value strategy, it still needs enhancing the speed of the assignment, most global organizations have already accepted the shared value principle, and Nestle is under a threat of being left behind. The same concerns Johnson & Johnson; not having considered the possibility of adopting the shared values approach yet, the company may face significant impediments in the process of developing and managing its supply chain. As soon as Johnson & Johnson’s leaders set the company’s priorities straight, though, the firm will be open to a plethora of opportunities for enhancing its supply chain management by reconsidering the use of inventory.

Reference List

Collier, D. A., & Evans, J. R. (2013). OM: 2013 custom edition (4th ed.). Mason, OH: South-Western Cengage Learning. Web.

Creating shared value. (2015). Nestle. Web.

Customer services. (2015). Nestle. Web.

Demeter, K. & Matyusz, Z. (2011). The impact of lean practices on inventory turnover. International Journal of Production Economics, 133(1), 154–163. Web.

Dixit, A. R. & Gupta, M. (2013). Current status, enablers & barriers of implementing cellular manufacturing system in Indian industries. Advanced Manufacturing 1, 346–356. Web.

Gopal, R. P. C. & Thakkar, J. (2012). A review on supply chain performance measures and metrics: 2000-2011. International Journal of Productivity and Performance Management, 61(5), 518–547. Web.

Iwu, H. C., Ogbonna, C. J., Jude, O. & Onuma, K. G. (2014). Application of inventory model in determining stock control in an organization. AJAMS, 2(5), 307–317. Web.

Jha, S. K. (2015). Inventory audit: Ascertainment of the liquidity position. Global Academic Research Journal, 3(1), 21–25. Web.

Johnson & Johnson agency to acquire Sunbelt General Agency from American Modern Insurance Group. (2010). Business Wire. Web.

Porter, M. E. & Kramer, M. A. (2011). The big idea: Creating shared value. Huffington Post. Web.

Executive Summary

Henri Nestle started the Nestle Company over a century ago to provide healthy food to mothers who could not breastfeed their children. The company developed and expanded by way of mergers with other businesses that shared its vision. The founder, Henri Nestle used his name because it represented the ideals he worked for as a pharmacist. The logo also indicated the founder’s dream to feed people with healthy meals.

Apart from offering condensed milk to the infants, it also diversified its products to include adults. It started providing milk powder, biscuits, sweets, pampers, chocolate and coffee. It is these products that enhanced its presence all over Switzerland, America, Europe, and Africa.

Its presence in the Middle East brought about a product called Nescafe Arabiana, Arabic coffee. It was a result of three years of intensive research. The company wanted to launch a product that would be acceptable in the United Arab Emirates region. The brand grew to become the best product that has enabled Nestle to stamp its dominance in the area.

It has used its name recognition to provide varieties of the same product. It has also introduced another range of products that are not a beverage category. The market for coffee started centuries even before Nestle ventured into the Middle East. The people used it as a gesture of warm welcome to their visitors. The small vendors of the product did not provide innovative standards in the field. Nestle saw the opportunity and used it to advance its brand in the region.

Nestle Arabiana has improved its marketing strategies and uses them to develop in the volatile market. The company uses its immense resources to market its product and make significant sales. Nescafe Arabiana has over 80% market dominance. Therefore, it only needs to utilize its strategic positioning well to maintain its market.

Introduction

Nestle is today the world’s leading company in the provision of food and drinks. It has grown by leaps and bounds from its inception over a century ago. The company has hundreds of products. It is in over 130 countries. One of its core competencies is the desire to become innovative. Some products come in more than five varieties. Nestle Arabiana is the Arabian coffee is introduced to the Middle East. The UAE region has adapted to it, and it has become the best coffee product in the market. Its marketing strength deals with the principle of research and development. It has a market of over 80% and keeps on increasing. The market is growing and the demand to produce more is appreciable. The company has strong brand recognition and produces quality products.

Nestle Company Overview

Nestle is today the world’s leading company in its provision of food and drink products (Mirabile 2007). The products promote health, nutrition, and wellness. Nestlé’s is on a mission to provide foods and drinks that suit the desires and taste of the market. From its inception to date, Nestle has grown to have more than 100 different products in different classifications.

Purpose and Work

Nestlé started operations first in Switzerland. It was in 1866 when Anglo-Swiss Condensed Milk Company opened the first European condensed milk factory. It was in Cham, Switzerland. In 1867, a pharmacist known as Henri Nestle came up with the world’s first prepared cereals for infants. About 38 years later, the two businesses joined hands to form one company which became known as Nestle. It had its headquarters in Vevey town in Switzerland (Weiss 2011).

The first customer was a premature infant who could not take the mother’s milk or any other foodstuff from any other source. The main purpose of the pharmacist was to make a meal that was suitable for parents that could not breastfeed their children. Most of his tests majored on varieties of cow milk, sugar and cereals.

Nestlé employs about half a million workers all over the world (Kose 2007). It has opened stores in almost all countries of the world. It closes its books worldwide with millions of sales. It makes billions of dollars. It is a public listed company. Nestlé SA has subsidiaries all over the world. It has a good and strong relationship with its suppliers, especially the farmers. It builds this great relationship through strong local management teams. Nestlé also has a well established Research and Development team and manufacturing department. Its primary competitive advantage is the unmatched geographical presence all over the world (Mirabile 2007).

Health Standards

Health and nutrition provide Nestlé’s strategic direction. Customers can make healthy choices about their food and beverages. In as many other products are concerned, Nestle prides itself on the Nestle Arabiana in the Middle East. It is a healthy product with a variety of flavors. Nestle believes that good beverages must be a healthy one. It sometimes means treating the body. It provides pleasurable, tasty and nutritious products.

Corporate Value

Creating Shared Value is the best way that Nestle encompasses its vision. It uses this model to connect with society worldwide. The main thinking behind the shared value is that business does not only exist to serve the interest of the company. The company is in an environment where people are concerned. Therefore, as the company grows, so should the communities and individuals in those settlements.

Nestle has created a value chain. It would continue to foster development in its chain (Kose 2007). It has also established a competitive edge above its competitors. The company engages in actions that address social and environmental issues. The firm has established its internal strength by applying best business practices and being able to sustain its market. As a result, this helps to preserve the environment for future generations. The shared value is in three categories; nutrition, water, and rural development.

Its most important pillar is nutrition. Since inception, food and nutrition have been its business because they constitute to good health. Nestlé’s mission is to enhance the quality of life of its consumers. It does this by providing tastier and healthier food and beverage choices. It also provides services that help people improve their nutrition, health, and wellness.

It focuses on water and rural development as part of its Corporate Social Responsibility. In so doing it serves its market and considers its importance to the business. Other beneficiaries are the employees, farmers, suppliers, distributors, and communities where it operates.

The company has set the best standards to create shared value in the firm and outside. And that is what Nestle has done. It complies with international codes and norms as well as the company’s Code of Business Conduct. It also maintains the Corporate Business Principles, and Management and Leadership Principles.

Review of the Financial and Marketing Perspectives

The financial information of the company since 2008 shows the potential for growth. For instance, the market capitalization in 2008 was CHF150, 409 million. But in 2012, it came to CHF190, 038 million, of course with some fluctuations over the years. The sales dipped in 2011 but started rising again from 2012 towards 2014. The projection is that the sales and proceeds would keep growing (Kose 2007).

The company does not need to invest more money in marketing because people believe in the products of Nestle. Nescafe Arabiana has become a local product in the UAE. Marketing should only continue as a means of reminding customers and maintaining the market. It may also provide informative marketing for the new citizens entering the region. The company should invest more in Research and Development to enhance its product viability and longevity (Koch 2011).

Nescafe Arabiana from Nestle

Nestlé’s mission is “Good Food, Good Life”. It provides customers with the chance to choose among its broad range of products. The meals are for all seasons and all time. Nestle entered the Middle East over 70 years ago. It formulated its brands to suit the market. Nescafe Arabiana is the coffee that gets inspiration from centuries-old coffee culture. The preparation of the Arabic coffee requires very light roasted beans and infused with massive doses of cardamom (Al-Samadani 2013).

Nescafe Arabiana came into being as a result of three years of intense research. Nestle wanted to launch the particular Middle East product to complement the discerning local palette. Arab culture has a profound history of coffee consumption.

Arabica green coffee has Chlorogenic acid. It is one of the most powerful and effective anti-oxidants. It cleans the body and protects it from free radicals that destroy the body’s cells. Green coffee’s other benefits include weight loss, digestion, and health enhancement. It also helps the consumer improve his or her focus, memory and attention (Koch 2011). All over the world, Nescafe has become the number one coffee brand. Nescafe Arabiana is an Arabic coffee that has cardamom. It is the first of its kind and is the leading coffee product available in the UAE and its environs.

Nescafe Arabiana has set the standard as the only coffee provider in the region. It is the niche and does not have a problem with competition in this category. It has approximately 80% of the market and is the market leader. Being the best requires the company to do continuous extensive research and carry out several market surveys. It would help to build on its strengths and capabilities while improving on its weaknesses especially with the CSR. The decline of previous coffee producers was due to a lack of innovation in the industry (Koch 2011).

Marketing Strategy Tools

SWOT Analysis

Nestle Arabica has more strengths and hence possesses greater capabilities for further expansion. Its SWOT analysis indicates its strength in product development. Research and Development, distribution channels and specialty in merger acquisitions are also its strengths. It is also good in brand recognition, reputation, and consistency in quality production. Opportunities exist in the increasing market demand and ability to acquire small companies. Its CSR portrays a weakness that it can work on with time to improve its image. The primary threat is the rising cost of production.

The critical success factors are the quality product with excellent flavor, diversification, and ethical view. The only major problem that Nestle Arabica can work on is its moral values and response to customer queries. Nescafe has earned its recognition the world over because of its well-established brand, quality products and having a human face. It has employed hundreds of people from the United Arab Emirates. Some of the strategic tools for continued success would involve PESTEL (Weiss 2011).

PESTEL Analysis

PESTEL is an acronym for Political, Economic, Social, Technological, Environmental, and Legal (Rao, Rao & Sivaramakrishna 2008). It is a framework for macro-environmental factors that Nestle can use for environmental scanning. It is useful in conducting an external analysis for businesses. PESTEL analysis encourages proactive thinking in the company. The company does not just rely on habitual or instinctive reactions.

As a Multinational Corporation, Nestle has to have enough information about the country’s inflation rate, economic growth rate, and national per person capital income. It is the economic perspective of the PESTEL analysis. The information is helpful to Nestle because it gives the company an upper hand on how it conducts its business.

Nescafe Arabiana is a giant that has specialized in the food and health industry. There could have been many manufacturing companies doing the same business. But Nestle spotted the gap in the market and took charge of the entire Middle East coffee provision (Tandon 2010). The company is well-equipped financially. It is one of its greatest assets. The market in the UAE is appreciable. Companies are expanding, and the economy of these nations is growing.

Over the past decades, people have been moving to the UAE for work and business. It has become a hub of business with over 300 nationalities settling in the states. The UAE has become an expatriate destination for many people because of its excellent infrastructure. It has been one of the safest places on earth because of the peaceful coexistence of different people. It has also established a system whereby people earn a tax-free income. It is a trade and business hub. Most of the world-class companies have set their businesses in UAE (Johnson, Scholes & Whittington 2011). UAE comprises seven emirates of Abu Dhabi, Dubai, Sharjah, Ajman, Um Al Quaiwan, Ras Al Khaimah, and Fujairah. As a result of the interconnections by road and air; the cultures have become molded up in the general culture.

It creates a ready market for Nescafe Arabiana. The right market extends to other Middle Eastern countries such as Bahrain, Qatar, and Kuwait. Nescafe has dealt with its customers so well that there is hardly any complaint. Nescafe has realized that it is not prudent to lose customers because of things that the company can correct beforehand. The company has to monitor the market to prevent any counterfeit products since it can affect its customers (Hill 2013). The score on the economy is 0.8.

Similarly, the political aspect is equally important. The company has a perfect working relationship with the host nations. Although the market is volatile and, nations keep changing rules Nescafe Arabica has adapted to the market demands. The UAE has one currency that it uses across the seven Emirates. All seven Emirates have managed to stabilize the region for the prosperity of business. They have not had severe cases of penalizing foreign countries.

They help to promote business by setting up laws that prevent illegal dealings. The company has developed a marketing campaign in all the emirates that promote its products. Nestle depends on political considerations (Tandon 2010). Government laws and regulations in accounting standards, taxation requirements, including tax rate changes have affected the business environment. New tax laws and revised tax law interpretations frequently affect Nestle’s business. The score on the political perspective is 0.69.

Socially, Nestle has helped to create jobs for the citizens of the UAE. It has caused a social adjustment in society (Cadogan 2009a, p. 275). It has hired marketers, researchers, and has enhanced the livelihood of many other employees. It also has internal promotions where the workers can advance their career mobility within the company. Nescafe Arabiana has empowered coffee farmers with training on how to produce quality coffee beans. It also gives them subsidies. It has also created a working relationship with its suppliers. The leadership should start promotional activities for customer awareness. It should also continue with the staff motivational programs (Head 2013).

Arabic coffee has always been an Arab symbol of generosity and hospitality. It became a daily drink in the region. Coffee connects the people with their heritage and generosity. Nescafe Arabiana came in to maintain the history and authenticity of Arabic coffee. It made it easy and quick to prepare. The flavor and aroma remained the same. Nescafe Arabiana organizes for social gatherings with customers to share ideas and inform them about their products and varieties (Mukherjee 2010). The company caters to the expenses of all the events it organizes.

Nestle has developed effective strategies to meet different lifestyle consumer behavior. The company remains entirely dependent on consumer lifestyle and attitude. The company needs to study consumer behavior so that it can provide the best products and services. Nestle considers the culture of the UAE region. On the social perspective, Nestle Arabica scores 0.9.

Nestle boasts of technological advancement in its field of production. It has invested a lot of money in Research and Development to promote its products. It has been evolving ever since its foundation in the 19th century. The company has the latest machinery and equipment for manufacturing and processing its products. It has a well established online setup that allows customers to interact with the staff. Customers can also place their orders online (Hill 2013). The well established online trade would be sufficient for the business if the company continues to innovate along the way (Cadogan 2009b, p. 360).

Technology is so volatile that each day there is a new way of doing things. Nestle has and would always remain ahead in product innovation and development. The new marketing techniques through the internet and e-commerce are now bringing great rewards to the company. It uses technology to record sales, orders, customers, and employees. The product scores 0.9 because of its creative innovation.

The legal perspective goes hand in hand with the legislative requirements. The company is a Multinational Corporation. It adheres to the international standards of corporations. Being a publicly listed company, its books of account are open to the public for analysis. It has fully complied with the UAE’s legal, legislative requirements. It has all the rights to trade in the region. It is a strength that enables it to market its products and business in the area. It has good relations with the area’s legal authorities and regulatory bodies. It adheres to formulated policies and reviews of the same.

The UAE is one of the regions in the world where adherence to policy is supreme. It also has advertising standards and consumer protection standards. Nestle remains one of the biggest companies that is truthful, honest and decent in its scope of work. It adheres to the health and safety law and has provided its members with free legal help scheme. Nestle Arabiana scores 0.5 from the legal perspective.

Nestle has ensured that it adheres to environmental concerns. Its product content is superb. Nescafe Arabiana’s packaging adheres to the safety of the environment. The ingredients of the coffee are natural and help to promote a healthy society (Evans 2013). Nestle knows that to succeed it has to respect the environment. It would, therefore, continue with its commitment to carry out environmentally sound business practices throughout the world. It would also seek to preserve natural resources and save energy as it has always done. Nestle scores 0.8 because it is concerned about a healthy lifestyle.

The Pyramid of Corporate Social Responsibility

Basing on the previously examined PESTEL Analysis, Nestle Arabica has done its best to shape the future of the company. The Pyramid of Corporate Social Responsibility requires the organization to honor the philanthropic, ethical, legal, and economic responsibilities. The company has had a good social relationship with the host nations and citizens. It organizes meetings with the staff to ensure that they all feel safe and happy to work for the company (Mukherjee 2010).

On many occasions, it has sponsored several social events like sports and other amenities. It has also contributed to ethically marketing its products. The packaging and sales channels are well advanced. However, it has also suffered some setbacks. For instance, there was reported food contamination in some areas, and the company managed to solve the problem quickly. The good news is that Nestle Arabiana has maintained its performance as the best coffee ever in the region. It is because of the ability to do research and development that it continually develops competitive flavors (Mirabile 2007).

Conclusion

Nestle Arabica and Nestle Company have lived up to their commitments to environmental, social and economic sustainability. They have established business practices that are at the core of operations. When Nestle launched the product in UAE, the aim was not just to add another product to the already existing ones. The company sought to become the best provider of a quality product and brand that is incomparable to any other. As a result, it became the only product that citizens could choose first if given the chance to choose. Nescafe Arabiana is in every corner of the UAE.

The company’s resources are at the disposal for marketing and promotion purposes. It has also adapted quickly to the Middle Eastern culture. Research and Development have been the company’s essential capabilities. It has also worked tirelessly to deliver better financial results for the shareholders. The company has improved working conditions for suppliers and workers. It is also working on the environmental practices that would benefit the planet. Product enhancement has been at the core of its strategy to meet the specific needs of customers.

It engages in leadership training and promotion of leadership attributes. It continuously trains and educates its workers and people outside the company. One of the main reasons is to enhance technology with lower environmental degradation. The company boasts itself as one of the founding members of the UN Global Compact Lead. It is for corporate sustainability leadership.

References

Cadogan, J 2009a, Marketing strategy, SAGE publications, London.

Cadogan, J 2009b, Marketing strategy processes and tools, Sage, Los Angeles, California.

Evans, V 2013, Key strategy tools, Pearson, Harlow, England.

Al-Samadani, K 2013, ‘Color stability of restorative materials in response to Arabic coffee, Turkish coffee and Nescafe’,. JCDP, vol. 15, no. 3, pp.681-690.

Head, H 2013, Healthy eating, Sea-to-Sea, Mankato, Minnesota.

Hill, M 2013, Marketing strategy, SAGE Publications, Thousand Oaks, California.

Johnson, G., Scholes, K & Whittington, R 2011, Exploring Strategy, Financial Times Prentice Hall, Harlow, UK.

Koch, R 2011, The financial times guide to strategy, Financial Times Prentice Hall/Pearson, Harlow, England.

Kose, Y 2007, ‘Nestle: a brief history of the marketing strategies of the first multinational company in the ottoman empire’, Journal of Macromarketing, vol. 27, no. 1, pp.74-85.

Mirabile, L 2007, International directory of company histories, St. James Press, Chicago.

Mukherjee, R 2010, Business policy and strategic management, Adhyayan Publishers & Distributors, New Delhi.

Rao, C, Rao, B & Sivaramakrishna, K 2008, Strategic management and business policy, Excel, New Delhi, India.

Tandon, A 2010, Business policy and strategic management, Anmol Publications, New Delhi.

Weiss, A 2011, Key business solutions, Financial Times/Prentice Hall, Harlow, England.

Appendices

Value Creation

Background to the study

Nestle Company has had superior performance since it was established in 1866 within the food production industry. During its 2008 financial year, the firm’s sales revenue averaged $ 103 billion. The firm owns a number of brands that have managed to attain a significant market share. Some of these brands include Stouffers, Kit-Kat, Nestle Water, and Carnation. The firm operates 456 companies located in 84 countries. In addition, the firm has a well-established distribution network which has enabled its products to penetrate the entire global market. This has made Nestle be a key player in the beverage and food industry worldwide (Nestle USA Incorporation: company description,2010, par. 2)

Aim

The aim of the report is to analyze the key elements necessary for Nestle to sustain growth in a mature market.

Scope

The report analyzes the firm’s mission, vision, and fundamental principles. The competitive environment and technological environment are analyzed. The major competitors of Nestle Company are illustrated. The effect of increased globalization on the industry is also considered. The report also considers the increase in health and quality consciousness amongst the consumers. The primary stakeholders are also considered. Finally, the report illustrates the fundamental leadership tasks for Nestlé’s success.

Mission statement

The company is committed to value addition to its food products so as to provide the best foods. This results from the recognition of the fact that good food acts as a major source of good health. In addition, the management team is committed to meeting the consumer’s psychological needs through anticipation and creation of the solutions. This is achieved by supplying food products that are of high quality and safe for consumption. The management of Nestle is committed to meeting diverse consumer tastes and preferences. To ensure the long-term success of the firm, the management of the firm is committed to improving the firm’s brands (Mohammad, Amir, Adnan &Sami, n.d, p. 3).

Vision statement

The management of the firm is committed to increasing the firm’s sales revenue. This will be attained through transforming the company from a food manufacturing company to leading health, nutrition, and wellness firm.

Fundamental principles

• In its operation, Nestle is aimed at manufacturing products by integrating the concept of value addition. The value added is aimed at being sustained in the long term to the various stakeholders such as the employees, customers, shareholders, and suppliers.
• Recognition of the fact that the consumers have a legitimate interest in the operation of the firm. This includes the firm’s actions, beliefs and behaviors in relation to the firm’s brands since they trust the brands. The company recognizes the fact that the firm cannot be in existence in the absence of the customers.
• Recognition of the importance of integrating professionalism and social responsibility by both the management and the firm’s employees in the success of the firm. To attain this, the management of the firm has formulated a comprehensive recruitment procedure and a continuous training program in effort to develop it human capital.
• Incorporation of legislation as the best mechanism of safeguarding and inducing responsible conduct. In addition, the management also considers incorporation of voluntary business principles as a strategy of maintaining the highest business standards in the entire organization.
• The operation of Nestle is not aimed at attaining a high level of profits in the short term at the expense of its long term survival.
• The management of the firm is committed at ensuring that the firm adheres to all the local laws in all the markets in which it operates.

Competitive environment

The food industry is becoming very challenging due to an increase in the number of players in the industry. More investors are venturing into the industry due to its profit potential. The small players are specializing in one line of production such as production of organic food products. In addition, the small firms are being more concentrated on a given geographical area which increases their efficiency of operation. As a result, the competitive degree in the industry is increasing. Apart from the new entrants, Nestle faces stiff competition from already existing firm. Some of the firms which pose intense competition in the domestic and foreign market include Uniliver, Cadbury Schweppes, Conagra Food Incorporation, Kraft Food Incorporation and Mars Incorporated. In addition, Nestle Incorporation is also facing increased competition from giant supermarkets such as Kroger and Albertson. These firms are increasing their competition within the food industry so as attain a relatively high market share. As a result, the food industry has become flooded with a variety of food products. Increase in the number of players has culminated into increment in the degree of rivalry within the industry (Mohammad, Amir, Adnan &Sami, n.d, p. 3).

Considering the competitive nature of the food industry, firms in the food industry have integrated flexibility in their strategic management. This has enabled them to make adjustments according to the changes in the market.

Technology

Over the past decades, the technological environment has undergone rampant changes. Innovation of Information Communication Technology (ICT) has culminated into increased efficiency of operation by the firms. For example, the emergence of electronic commerce has enabled firms in the food industry to tap a wide market. This is due to the fact that the firms can be able conduct their marketing through the internet. As a result, these firms have been able to boost their revenue levels. Considering the mature nature of the food industry, it is important for Nestle to integrate emerging technologies within the industry so as to effectively position itself in the market.

Effect of globalization

Increase in the rate of globalization has enabled firms in this industry to incorporate the concept of internationalization. As a result, these firms have been able to increase their scale of operation through venturing into new markets. This has enabled them to attain economies of scale in their operation. Through this, the firms are able to operate more cost effectively and at the same time increase their competitive strength through fair pricing (Arjen, 2008, p. 5).

Quality

There is an increase in the degree of complexity in the consumption patterns of the consumers which has affected various industries including the food industry (Good food, good life, 2010, par. 3). For instance, consumers are being more quality conscious in purchasing food products (Kevin, 2006, p. 3). This is due to the fact that their objective in making a purchase decision is to maximize on the level of utility they receive upon consuming a product. In addition, the consumers are becoming more health conscious in consuming food products. This results from an increment in knowledge of products by the consumers.

Relationship with primary stakeholders

The management of the firm has recognized the importance of a good relationship with the various stakeholders. For example, the management of the firm is committed at maximizing the investors’ revenue. This has enabled the firm to pay dividends to the shareholders. The firm has also established a good relationship with the customers through provision of high quality products. To the suppliers and creditors, the management ensures that they are paid in time. The management also ensures that the firm complies with the legal requirements.

Conclusion

The food industry has become saturated due to an increase in the number of investors. The industry is also being affected by various external factors such as increased globalization, changes in technology, increase in quality and health conscious amongst the consumers and increased competition. As a result it is important for firms in this industry to formulate ways to sustain their growth.

Recommendation of fundamental leadership tasks for Nestlé’s success

• The management of the firm should incorporate the concept of team building. This should be attained through effective recruitment and employee development. This will ensure that the firm has superior human capital. The ultimate effect is that the firm will be able to conduct its quality research and development. Research and development should be aimed at improving the quality of the firms’ products.
• The management of the firm should incorporate product development and diversification in its current market and also venture into new markets.

Reference

Arjen, W. (2008). Globalization in the food industry: the impact on market structures and firm strategies. Antwerp: University of Antwerp. Web.

Hoovers Incorporation. (2010).Nestle USA Incorporation: company description. Web.

Kevin, B. (2006). Achieving growth in mature markets. Web.

Mohammad, H, Amir, A, Adnan, R, Sami, K. (N.D). Nestle. Web.

Nestle. (2010). Good food, good life. Web.

If a company has already achieved some success in international business, guided by the strategic logic of decision-making, and the internationalization of its activities has been successful, it should further develop the strategic management process of its operations. The multilocal or multinational approach implies the presence of a set of relatively independent subsidiaries, each of which serves national markets. In this case, the company has excellent opportunities to adapt its products and marketing campaigns (Lasserre, 2017). Moreover, a company’s production methods of goods or services can completely meet the consumers’ needs with different tastes.

A standard example of such a firm is the Swiss Nestle, which has a decentralized structure and a widely diversified product line adapted to the specific needs of consumers around the world. For example, in Switzerland and Western Europe, the central emphasis in production is milk chocolate, which is in demand among consumers (Deligonul, 2020). Although in the Eastern European market, the company also successfully promotes dark chocolate.

Thus, the multinational strategy enables firms in each region to produce the most popular product, which leads to the growth of the company’s popularity. In turn, this guarantees that customer demand will be fulfilled. Therefore, I would choose the multilocal strategy for my business. In my opinion, it helps a firm predict possible profits and assess whether it is worth entering the market of a particular country. However, in order to produce research on client tastes and establish production, it is required to have start-up capital (Deligonul, 2020). Despite this, with an assessment of the competitive market and the ability of clients to buy new goods, the company does not lose start-up funds and also receives a significant profit.

References

Deligonul, S. Z. (2020). Multinational country risk: Exposure to asset holding risk and operating risk in international business. Journal of World Business, 55(2), 10.

Lasserre, P. (2017). Global strategic management. Macmillan International Higher Education.

The case study is related to the marketing affairs of the transnational corporation – Nestle – and its strategy conducted in the Democratic Republic of the Congo. It can be said that the company’s country director Herve Barrere developed and guided this strategy appealing to the core cultural and business peculiarities of the region (Hooley et al., 2019). By communicating with “mummies on the table tops,” who are the crucial element of the local chain of markets, Mr. Barrere distinguished the required approach to be successful. Maggi squares’ sales – Nestle’s product promoted in the country – subsequently demonstrated growth at 30 percent a year.

It would be rational to claim that Mr. Barrere utilized a number of marketing strategies that led the campaign to such achievements. In particular, he was likely to provide the target consumers with superior services (Hooley et al., 2019). The essence of this approach is to make a business customer-orientated, taking into account as many specific features as possible. For example, Barrere went into people’s homes to figure out how women cooked and what families preferred to eat. This understanding was used to adjust Maggi’s tastes to the local preferences.

Then, Barrere was also able to adhere price positioning strategy – low-pricing, specifically. He assumed that selling the squares at just 50 francs (three pence) would be a proper choice, considering the buying capabilities of the potential consumers (Kenton, 2021). The crucial point here is to lure as many buyers as possible to increase sales. Moreover, Barrere used promotional differentiation to reach the broadest range of customers (Datta, Ailawadi and van Heerde, 2017). Particularly, the squares were advertised differently in Kenya, Nigeria, and DR Congo, respecting local cultural and historical backgrounds. Finally, Berrere was likely to utilize segmentation and comparison in terms of the marketing strategy (Tarver, 2021; Félix, Moura and Clifton, 2017). For instance, he did not follow the same selling patterns in different cities – like Lubumbashi and Kinshasa – of the country after the comparison of the identified groups of buyers.

Reference List

Datta, H., Ailawadi, K. L. and van Heerde, H. (2017) ‘How well does consumer-based brand equity align with sales-based brand equity and marketing-mix response?’, Journal of Marketing, 81(3), pp. 1–20.

Félix, R., Moura, F. and Clifton, K. J. (2017) ‘Typologies of urban cyclists: Review of market segmentation methods for planning practice’, Transportation Research Record, 2662(1), pp. 125–133.

Hooley, G., Pierce, N, Nicoulaud, B., Rudd, J. and Lee, N. (2019) Marketing strategy and competitive positioning (7^th ed.). London: Pearson.

Kenton, W. (2021) Low-cost producer. Web.

Tarver, E. (2021) What is market segmentation?Web.

Introduction

Nestle is the largest food company in the world, with its presence stretching to more than 80 countries and manufacturing facilities numbering about 450. The company has registered great success that is showcased in its elaborate structure and physical establishments across six continents of the globe. Nestle has dealt with one controversy after another in its course of operation. The most pronounced controversy involved the marketing of infant formula, mainly in third world nations.

The company’s bottled water brand also faced controversies over its alleged purity in some developing countries. This paper analyzes the company’s controversies and the corrective measures undertaken to rectify the situation, making a comparison of international management theories. The paper also includes a personal opinion on how the organization managed the issues through. The paper finally reflects on how managers can prevent similar issues in the future.

The Management Issues

Infant formula marketing controversy

Nestle Corporation was embroiled in controversy in 1977 when the company’s management sought to increase the sale of infant formula brand within the developing nations. Groups in opposition to Nestlé’s plan raised concerns over the firm’s idea to offer breastfeeding mothers the infant formula to act as a substitute to the breast milk.

A global call for a boycott of the company and its products, mainly the infant formula, was organized by groups that argued that substituting breast milk with the infant formula led to suffering and even deaths of babies, particularly in the developing countries (Boyd, 2012).

The anti-Nestle groups, including Save the Children and International Baby Food Action Network, insisted on the unrivaled benefits of breast milk to babies. They accused Nestle of cheating mothers to make huge profits. Several other prominent organizations and bodies in the world, including the World Health Organization (WHO) (Heath, 1997), joined the activist groups in rallying for the global boycott of Nestlé’s infant formula. These bodies termed the milk a baby killer.

Ethical management issue

Nestlé’s management failed to consider the ethical question when it sanctioned the questionable marketing of its infant formula. The least developed countries, compared to the developed world, still suffer from many infrastructural and developmental challenges.

These countries lack sufficient refrigeration services, suffer from lack of sanitary conditions, and experience impure water supplies. The management ignored ethical practice and consideration by insisting on bottle-feeding as the best alternative for mothers and babies living in such countries (Carroll & Buchholtz, 2012).

Lack of adequate sanitary standards meant that the mothers were more likely going to use dirty water to prepare the infant formula mix. Mothers were also more likely to dilute the infant formula in their bid to have it last for long because of the high poverty levels (Carroll & Buchholtz, 2012). This would, in turn, put the babies at risk because it was more likely to increase cases of diarrhea, while also leading to malnutrition because of the over diluting of the infant formula.

Nestlé’s marketing of the alternative baby feeding also brought about the danger of diminishing mothers’ capacity to breast-feed because of the continued use of bottles (Carroll & Buchholtz, 2012). It also increased the danger of mothers feeding their babies with less nutritional food substitutes because of the biting poverty levels. These mothers would have found it easy to stock the bottles with any kind of food without considering the nutritional value because of the availability of the bottles (Carroll & Buchholtz, 2012).

Nestlé’s management showed total lack of care for the dangers that its feeding bottles posed to the babies born in the developing countries. While this would not have been a big issue in the developed world because of the high standards of living and improved infrastructure, it was dangerous for the less developed world.

What the aggressive marketing of the infant formula by Nestle highlighted was its high concern for higher revenues and profits (Carroll & Buchholtz, 2012). The management did not care about the health of its consumers; instead, it cared a lot about the company making more profits throughout its global market.

The management further sanctioned one of the most unethical marketing practices; ‘milk nurses’ visited mothers while still in the maternity wards and urged them to feed their babies on the formula (Carroll & Buchholtz, 2012). The ‘milk nurses’ were actually not true nurses, but they were sales representatives working for Nestle who disguised their identity by wearing nurses’ uniforms.

Such a practice underscores the unethical management decisions that were being put into practice by Nestle. The company knew that it was lying to its customers. That is why it had to conceal the practice of its sales representatives by disguising them as nurses (Carroll & Buchholtz, 2012).

The controversy involving ‘Nestle Pure Life’ water

The Nestlé’s portfolio has expanded to the water industry where the company acquires top brands like Perrier. In the 1990s, the company embarked on selling relatively cheaper water under the brand ‘Nestle Pure Life’, targeting mainly the less developed countries (Crane et al., 2008). A controversy ensued, whereby concerns about the purity of the water were brought up. These concerns were documented by ActionAid and the ‘Swiss Coalition of Development Organizations’ in 2005.

There was also another controversy in 2003 involving extraction of water from McCloud, California. Nestle intended to build a large bottling company in McCloud, but controversies ruined the plans. However, the project was strongly opposed by groups of activists and individuals in the country.

The strong opposition that the company faced over its plans mainly focused on many other historical controversies that had by then plagued its bottled water business (Crane et al., 2008). Nestle eventually bowed out to pressure and abandoned the water plant project in McCloud altogether.

Handling of the Issues: International Theory of Management

Ethical management and practice

Ethical management and practice is an important consideration for application by international companies. It is important for international companies consider ethics before making management decisions because of variation in cultures, beliefs, development levels and standards, and social practices across the different countries of the world. While a particular practice may be considered to be morally sound in one society, the same practice may be viewed as immoral or unethical in a different society.

Putting ethics in marketing practice into consideration would have helped Nestle to avoid the controversy that faced its marketing campaign on infant formula. The company did not consider any ethical repercussions before it sanctioned the move, but it only looked at it as an easy and sure way of making quick money.

In the case of its bottled water controversy, Nestle once again failed to take into consideration the importance of ethical marketing practices. Its marketing practices portray the company as one that is determined to make profits at whatever cost, including lying to its potential customers.

Opinion regarding the Organization’s Management of Issues

Although Nestlé’s management has worked toward effectively managing the issues that afflict its business operations and activities, these efforts are not enough. In the case of its controversy over the infant formula, Nestle instituted adequate corrective measures that included formulation of new policies geared towards improving its corporate performance and not combating critics. The company focused on empowering the top management to solve the problem fully (Heath, 1997).

Nestle also realized the importance of changing its corporate policy prior to rushing into communicating to the world that it had rectified the problem. All the management levels in the company were instructed to offer support to the campaign, while the issues manager was to work in cooperation with the operations manager to help with advice. Nestle even went ahead to produce a business ethics code in conjunction with the World Health Organization to ensure that similar mistakes and controversies were avoided (Heath, 1997).

However, Nestle has not been effective in its efforts to address and rectify issues related to its business and marketing, despite the comprehensive resolution framework. Many years after it suffered the business-damaging controversy with its infant formula, the company is once again courting controversy with its bottled water brand.

Like in the previous case, Nestle has gone to the extent of using unsubstantiated claims on its bottled water to enhance revenue and profit. The company overlooked the important aspect of ethical marketing by claiming that its bottled water marketed in Pakistan was pure. Instead, it promoted an unethical practice that does not necessarily take into consideration the safety of its customers, but one that focuses on business and profit.

A Reflection on How Management can conclude the Issue

With the globalization phenomenon taking center stage, international management is increasingly growing in importance. The world is transformed into a small village where events taking place in one location or continent would easily get known in another continent.

In the 1970s when the infant formula controversy was born, the globalization phenomenon was by far less developed compared to the situation at present. Had the same controversy existed today, the repercussions would be so immense to Nestle such that the company could probably fold its operations. Information today travels faster and more people access information compared to the situation in the past.

Nestlé’s management can effectively deal with this situation by constantly informing the public about its reformed business practice and policy. Although the boycott was ended in the early 1980s, the negative reputation of the company continues to affect its operations and image in the public eye. Thus, the company will be working toward building the confidence of the market and public by constantly informing the public about its new policies and marketing activities that focus on ethics.

Nestlé’s management can also help in eliminating the company’s negative image by engaging in many corporate social responsibilities (CSR) (Davidson, 2009). Specifically, Nestle should focus most of its CSR activities in countries where it was widely accused of promoting unethical practices.

These include all the developing countries where the infant formula was marketed back in the 1970s, as well as in Pakistan where its bottled water brand was found to be impure. These activities will help a great deal in rebuilding the confidence of the general public towards the company (Davidson, 2009).

Although the company has already established new policies and code of ethics that seek to address such controversies in the future, their implementation seems to be poor. Nestle would not be facing similar ethical problems, like in 2003 where its bottled water was found to be impure, had the implementation of the new policies and code of ethics been effective.

The fact that the company still finds itself in the same ethical quagmire as it did in the 1970s means the corrective measures are not being implemented fully. Thus, the management must ensure that the new policies are reviewed to ascertain their effectiveness and those found to be valuable should be fully implemented.

Conclusion

Nestle has been embroiled in several controversies affecting its activities and products. Despite its great success in the business front as the largest food company in the world, these controversies have had serious implications for its general public image. In the 1970’s, the company embarked on a serious marketing exercise that sought to increase the sale of its infant formula. This raised several unethical questions regarding the authenticity of the company and its claim that an alternative to breastfeeding was good for babies.

Its bottled water product has also been embroiled in controversy following revelations that it was not pure as opposed to contrary claims by the company. The company must seriously consider the aspect of ethics in its operations to avert similar controversies in the future. New policies and code of ethics must be formulated and strictly followed in their implementation to avert any similar occurrences in future.

References

Boyd, C. (2012). The Nestlé Infant Formula controversy and a strange web of subsequent business scandals. Journal of Business Ethics, 106(3), 283-293

Carroll, A. B., & Buchholtz, A. K. (2012). Business and society: Ethics. Mason, OH: South-Western Cengage.

Crane, A., McWilliams, A., Matten, D, Moon, J., & Siegel, D. (2008). The Oxford handbook of corporate social responsibility. New York, NY: Oxford University Press.

Davidson, K. (2009). Ethical concerns at the bottom of the pyramid: where CSR meets BOP. Journal of International Business Ethics, 2(1), 22-32.

Heath, R. L. (1997). Strategic issues management: organizations and public policy challenges. Thousand Oaks, CA: SAGE

Product price at different retailers

The process of marketing Aero Nestle chocolate bars in Canada demanded allocation of various prices in different retail outlets. Product differentiation and packaging appearance strategies have also been adopted to market the product.

Various outlets are retailing the product with slight price differences in order to convince customers into buying them. Moreover, the customer friendly adverts provided in the Appendix had positive impacts to the firm’s revenue. The adverts have cleared the suspicion that customers believed that most marketing campaigns are just mere scams intended to blackmail them^[1].

The Candy land stores retails Nestle Aero milk chocolate at $2, Amazon marketplace retails Nestle aero mint chocolate at $2, Cost Plus World retails Nestle aero peppermint at $2, and the Christmas Central Retail Store sells at $3. All these stores have adopted close price ranges for the product given that customers go for lower price.

The highest price of $3 adopted by some stores is a marketing tactic because they offer after sale services which other stores do not offer as a result of higher marginal cost of doing it. This has actually positioned the marketing of Aero Nestle product for customers to access them.

Pricing strategy

Pricing strategy is defined as a distinctive strategy where marketing team adjusts the price of its products basing on the cost of production, distribution and the price offered by the competitors. The Nestle Chocolate Bars have adopted this strategy by pricing their product based on the competitor-based pricing policy and setting prices on the same margin with its competitors^[2].

This is evidenced by the graph in the appendix section showing how Nestle intensive pricing strategies generated high revenues within a short period of time. The Nestle intends to intensify the marketing of the Aero Nestle products because of the stiff competition offered by rival firm in the same industry

Fine-tuning price tactics

Fine-tuning tactics are strategies meant to convince customers to buy more of a product. These tactics adopted for the Aero Nestle are the quantity and functional discounts. Quantity discounts are offered when customers buy more and get their prices reduced by a specified margin which vary in different retail outlets. The functional discounts are offered to the retailers and distributors so that the final price offered for the product is customer friendly^[3].

A company will benefit from the increased turnover and high customer base. Moreover, fine-tuning tactics should be exercised after undertaking a thorough competitive intelligence so as to gather all the necessary data. Without such an exercise, a firm can find itself offering huge discounts hence lowering their long term revenues. On the other hand, without discounts may make the product expensive thus swaying away potential customers to rival firms.

Comparative summary of prices

The main long time competitor of Nestle is the Cadbury. Their competition intensifies as time goes where prices are often affected. The prices of the product from both firms fluctuate by one or two dollars in most retail outlets. This shows a high level of competitiveness thus allowing customers to benefit from the reduced prices.

In some outlets, Aero Nestle products are quoted as high as $8 and $12. This is because of product differentiation and packaging strategies. In these stores, Aero Nestle has some other ingredients such a mint, orange and milk flavors which gives the customers a wider range to choose from.

Place strategy

Due to geographical positioning of customers, Nestle retails Aero on various online shops through which customers can have the products delivered to their doorsteps. These retailers are Amazon marketplace.com, British delights, BellaMia Store stores, Canadian favorites, Candy land stores, and the British Delights.

This strategy places the company in a unique position to market its products to customers from all over the world^[4]. Moreover, the retail outlets caution the firm against the cost of distribution to final customers. This is also an added advantage because it enables the firm to concentrate on its core business while at the same time maximizing the shareholders value.

Non-store retailing strategy gives the company an opportunity to market Aero Nestle products in a customized environment. These avenues are the mail order shops, online shopping and vending machines installed at strategic points such as parties and busy streets. It should be noted that non-stores retailing have a wider coverage than the retail confectionaries and supermarkets. For example, more customers can access the vending machines placed in the streets or at the work place.

Nestle products are usually located in a confectionary section in a retail store given that it contain sugars. This is also a strategic positioning by the marketing team so that customers buying other food products can by chance or intention spot and buys them. This is a better approach of positioning the products in a retail store so that the customers will have an opportunity to compare with other brands and prices. Therefore, they will make an informed purchase decision^[5].

Distribution intensity

Distribution intensity of the Nestle products is usually high in every geographical area. This is because of its efficient pricing, distribution, after sale services and the production capacity. When these factors are taken into consideration, the supply of Aero would meet the demand thus avoiding shortage.

In addition, distribution intensity ensures maximum customer awareness about the product on sale. Since Aero Nestle product is available in different brands, potential customers may not be aware of them. Therefore, it is only through distribution intensity that these products are availed to customers at the right time^[6].

Comparison of the distribution

It should be noted that the distribution tactics of Nestle and Cadbury in the chocolate industry is similar owing to the fact that they are competing for the same market. Both firms have intermediaries who are the retailers and therefore, most of their products are found in same retail outlets worldwide.

However, Nestlé’s approach is more comprehensive and covers a wider geographical area than Cadbury. This has given them a vast recognition in many countries for supporting various health charities while at the same time enhancing the product distribution

Bibliography

Cadogan, John. Marketing Strategy. Los Angeles: Sage, 2009.

Haberer, Jenny. Disneyland International Marketing Mix International Marketing Mix of Disneyland Hong Kong. München: GRIN Verlag, 2010.

Richter, Tobias. International marketing mix management: theoretical framework, contingency factors and empirical findings from world-markets. Berlin: Logos, 2012.

Rogers, Stuart C. Marketing strategies, tactics, and techniques: a handbook for practitioners. Westport, Conn: Quorum Books, 2001.

Appendix

Sample advertisement statement

“We are fully and truly committed to responsible consumer advertisements that enable customers to make informed decision”

Graph

Graph showing the increased revenue collection from the sale of the Aero product with intensive fine-tuned prices strategy

Footnotes

1. Tobias Richter. International marketing mix management: theoretical framework, contingency factors and empirical findings from world-markets. Berlin: Logos, 2012.
2. John Cadogan. Marketing Strategy. Los Angeles: Sage, 2009
3. Stuart C Rogers. Marketing strategies, tactics, and techniques: a handbook for practitioners. Westport, Conn: Quorum Books, 2001
4. Tobias Richter. International marketing mix management: theoretical framework, contingency factors and empirical findings from world-markets. Berlin: Logos, 2012.
5. John Cadogan. Marketing Strategy. Los Angeles: Sage, 2009
6. Jenny Haberer. Disneyland International Marketing Mix International Marketing Mix of Disneyland Hong Kong. München: GRIN Verlag, 2010