Nestle: Global Strategy
1. Does it make sense for Nestle to focus its growth on emerging markets? Why?Due to saturation and increased competition in the European and North American markets, it makes sense for Nestle to focus its growth on emerging markets.These markets have a huge potential, as they were closed to foreign companies because of their political system (China, Russia,...). Thus, there are only a few consumer industries in these markets and Nestle can benefit from first-mover advantages.Nestle can earn greater return from its distinctive competencies, i.e. unique strengths that allow a company to achieve superior efficiency, quality, innovation and customer responsiveness. By applying those competencies, and the products they produce, to foreign markets where indigenous competitors lack similar competencies and products, Nestle can realize enormous returns. Furthermore, Nestle can take advantage of location economies. Location economies arise from performing a value creation activity in the optimal location for that activity, anywhere in the world. The optimal location for a value creating activity lowers the costs of value creation therefore helping the company achieve a low-cost position. Mor
Nestle is a decentralized organization where responsibility for operating decisions is delegated to local units, which have a high degree of autonomy concerning pricing, distribution, marketing, etc. This resulted in heavy price competition in several key segments of the food and beverage market (e. Nestle's goal is to build a superior market position in each of these niches. Nestle uses local brands in a wide range of local markets and focuses on trying to optimize ingredients and processing technology to local conditions. That is why, the company needs to be flexible and able to adapt rapidly to local demand and cultural differences. Doing business in different countries means different ethical standards, different business expectations, and different cultural norms. Nestle claims that it can reduce risks and concentrate its marketing resources by narrowing its initial market focus to just a few strategic brands. Its global strategy must be backed up with the necessary financial and human resources and knowledge management should be introduced to spread information throughout the company. Clearly, the entrance of a company into the global marketplace creates numerous challenges. Knowing that innovation and quality were key determinants, Nestle transferred these distinctive competencies to foreign markets. In Nigeria, for example, Nestle had to rethink its traditional distribution methods (operating a central warehouse), because the road system was poorly developed and there was much violence. This example shows, that the company was able to respond quickly to different local conditions.
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