Report on Group Case Study: Nestlé Expands Internationally

Table of Contents
1.0 Case Summary ..................................................................................................................... 2

2.0 Solution to the Case Questions ............................................................................................ 2

Question 1: Would you classify Nestlé as a multinational corporation? Why or why not? ...... 2

Question 2: Does Nestlé have to adapt its products for foreign markets? ................................. 3

Question 3: Why is it so expensive for Nestlé to sell a product like Lean Cuisine in other
countries? .................................................................................................................................... 4

Question 4: Will competitors be able to follow Nestlé into foreign market with the same
degree of success? ....................................................................................................................... 4

3.0 Case Conclusion................................................................................................................... 7

4.0 Bibliography ........................................................................................................................ 8

Table
Table 1: Comparative Analysis of the Top 3 Competitors with Nestlé………………………….5

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 Report on Group Case Study: Nestlé Expands Internationally

1.0 Case Summary

Nestlé Corporation, founded in 1866 and headquartered in Vevey, Switzerland, is the world’s
largest food company with production facilities in over 60 countries. Being the largest producer
of coffee, powdered milk and frozen dinners, the company has experienced business success
with boosted sales worldwide. Nestlé strives to adapt its products to local tastes and preferences
with global appeal. Though having faced high importing costs associated with high shipping
charges, Nestlé did not withdraw from its international expansion strategy which resulted in vast
popularity of its Lean Cuisine meals not only in Canada, but also in Britain and France. With
ongoing global expansion, Nestlé is now considering to enter into the Third World countries.
However, whereas Nestlé has been expanding internationally for decades, its competitors are
now striving to be involved in profitable international trade.

2.0 Solution to the Case Questions

Question 1: Would you classify Nestlé as a multinational corporation? Why or
why not?

Answer: Yes, in our point of view, Nestlé can be classified as a multinational corporation due to
the similarity of its characteristics with the features and definition of a multinational corporation.

By definition, a multinational corporation (MNC) is an enterprise with a centralized office in the

home country and facilities and other assets in at least one country outside the home country
(Mayrhofer & Prange, 2013). Nestlé can be classified as an MNC, since it is headquartered in
Vevey, Switzerland with production facilities in over 60 countries, according to the case study.
However, according to Nestlé’s updated report, the company currently has 413 factories in 85
countries with sales operation in 190 countries worldwide (Nestlé, 2018, p. 55).

Currently, there are over 82,000 MNCs around the world and Nestlé is certainly one of these
MNCs (Edwards, Marginson & Ferner, 2012). Nestlé was ranked 69 on the Fortune Global 500
in 2017 that annually reviews and releases the top 500 companies worldwide in terms of revenue
(Fortune.com, 2017).

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Question 2: Does Nestlé have to adapt its products for foreign markets?

Answer: Yes, indeed Nestlé has to adapt its products for foreign market, since taste preference,
beliefs, norms, values and habits vary from one country or region to another country or region.

Keeping this in mind, Nestlé believes that “Food is a local matter.” Thus, customization takes
place in Nestlé instead of universalism. The company, therefore, plans its strategies globally and
implement those locally. Nestlé provides autonomy to its local branches in each foreign market
to make decisions in relation to pricing and distribution (Jaffery, 2013). In fact, Nestlé
encourages adapting products to local markets to respect the respective tastes, habits, cultural
norms and religious backgrounds of consumers from each nation and region (Nestlé, 2019a). The
company’s global presence and high expenditure on research and development have allowed it to
offer local products with global appeal.

Three examples can be presented to show how Nestlé strives to adapt its products to different
foreign markets. Firstly, it has introduced noodles under the brand name, Maggi, in similar
flavours in different countries, but with different taste and packaging, and ingredients sourced
locally in each country (Kannan, 2015). For instance, in Bangladesh, Maggi is present in only
two flavours namely, Curry and Chicken (Nestle's Bangladesh, 2019). However, in its
neighbouring country India, the brand is present in 12 different flavours due to Indians’
preference for spice and vegetables (Jaiswar, 2017; Saxena, 2016). On the other hand, since cows
are abundant in Australia and New Zealand, Maggi offers Beef and Oriental flavour in the
region. Again, considering the preference for salt, Maggi presents Tomyam and Curry flavoured
noodles in Malaysia and Thailand (Jaffery, 2013).

Secondly, Nestlé usually practices distribution of its products operating from a central
warehouse. However, since Nigeria’s road construction is poorly developed which would cause
substantial loss of the company, Nestlé instead built several small warehouses throughout the
country to efficiently reach its products to people with locally employed Nigerian citizens.

Thirdly, Chinese find the original tastes of coffee too bitter for their liking. Nestlé, therefore,
implemented a new formula by integrating melted ice-cream flavour that made coffee more
acceptable to many Chinese (The Economist, 2012).

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 Report on Group Case Study: Nestlé Expands Internationally

Question 3: Why is it so expensive for Nestlé to sell a product like Lean

Cuisine in other countries?

Answer: Lean Cuisine is a brand of frozen meals that was introduced by Nestlé’s frozen dinner
company, Stouffer in the United States in 1981 to promote balanced diet and reach those
consumers who desired for healthy weight management (Nestlé, 2019b). Lean Cuisine is, in fact,
a low calorie – low fat tasty and balanced diet solution with over 100 breakfast, lunch and dinner
meal alternatives, such as sausage, pasta, pizza, spaghetti, cheese as well as meatballs (Raga,
2016).

Selling products like Lean Cuisine in other countries imported from Canada would make Nestlé
incur very high costs and result in expensive operations due to the following reasons:

i) High fare of freight due to long distance from Canada to other overseas countries;
ii) High cost of shipping frozen dinners associated with high refrigeration facility
charges
iii) High cost of import tariffs and taxes at customs of other countries.

Question 4: Will competitors be able to follow Nestlé into foreign market with
the same degree of success?

Answer: A comparative analysis among the competitors and Nestlé would provide the relative
strengths and weaknesses of the companies and help to analyse whether the competitors would
be able to follow Nestlé in foreign markets with the same degrees of success. Among many
competitors enlisted by Bhasin (2018), we have selected the top 3 competitors in terms of global
presence for comparative analysis. The comparative analysis is framed in the Table 1 below.

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Table 1: Comparative Analysis of the Top 3 Competitors with Nestlé

SL Factors Nestlé Mondelez Mars Inc. Kraft Heinz

International Company
1 Founding year 1866 October, June 23, 1911 2012
2012
2 Global Presence / 190 160+ 78+ 40+
Operations (Total
no. of countries)
SL Factors Nestlé Mondelez Mars Inc. Kraft Heinz
International Company
3 Net revenues (2018) USD 91.44 USD 25.93 USD 35 USD 26.2
billion billion billion billion
4 Net Profit (2017) USD 15.52 USD 2.9 - USD 10.998
billion billion billion
5 Total no. of 308,000 83,000 100,000 39,000
employees
worldwide
6 Competitive No. 1 in No. 1 in Specialized in World’s 5th
Strengths chocolate, baby biscuits and pet care largest food
food, frozen candy products, and beverage
food and gum; globally being present company
World’s largest in over 50
food company countries
7 Leading global Over 2,000 Over 121 Over 100 Over 25
brands brands brands brands brands
worldwide worldwide worldwide worldwide

(i.e. Milo, (i.e. Oreo, (i.e. M&Ms, (i.e. Cadbury,

Nescafé, Kitkat, Cadbury, Snickers, and Cheesybite,
Crunch, Polo, Dairy Milk, Milky Way Kraft Mayo,
Boost and Halls and chocolate Toblerone and
Neslac) Toblerone) bars) Tang)

8 International Transnational Transnational Global Multi-

expansion strategy strategy domestic

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By referring to the Table 1 on the previous page, we can analyse in terms various features. First,
in terms of global operations, whereas Nestlé is present in 190 countries, the closest competitor
Mondelez International has operations in 160 countries and the remaining two top competitors
remain quite far with below 90 locations worldwide (Mondelez International, 2018; Kraft Heinz,
2019).

Second, in terms of total number of net revenues in FY2018, Nestlé reported USD 91.44 billion,
whereas the closest competitor Mars Inc. reported only USD 35 billion which is nowhere closer
to the net revenues of Nestlé (Nestle. 2019c; Statista.com, 2018). Third, in terms of net profit as
well, Nestlé remains with a competitive advantage, since the closest competitor, Kraft Heinz,
recorded a net profit of USD 10.998 billion in FY 2017.

Fourth, considering the total number of employees worldwide, the competitors are far behind
Nestlé, as Nestlé reported having over 3 times employees worldwide compared to its closest
competitor Mars Inc. in this regard (The Financial Express, 2018; Staley, 2017).

Fifth, in terms of competitive advantage, though Mondelez International is no. 1 in biscuits and
candy and Mars Inc. is more specialized in Pet Care products compared to Nestlé, the latter
company still remains as the world’s largest food and beverage MNC (Mars, 2018). Sixth, in
terms of brands as well, the competitors are nowhere near Nestlé. Whereas, Nestlé offers over
2,000 brands worldwide, other competitors offer below 200 brands globally only (Bhasin, 2018).

Seventh, in terms of international expansion strategy, only Mondelez International can compete
with Nestlé, as both of these MNCs have adopted transnational strategy (a strategy characterized
by both high global integration and high local responsiveness). However, Mars Inc. adopted a
global strategy with high global integration and low local responsiveness. Kraft Heinz Company,
on the contrary, adopted a multi-domestic strategy characterized by low global integration and
high local responsiveness (Haynes, 2014). Nevertheless, MNCs adopting a transnational strategy
are at competitive stake over other competitors.

From the analyses addressed above, it can be understood that the top 3 competitors lag behind in
many factors while comparing to Nestlé. Therefore, according to our stand, the competitors of
Nestlé will not be able to follow Nestlé into foreign market with the same degree of success
due to the aforementioned shortcomings.

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3.0 Case Conclusion

Nestlé is a multinational corporation (MNC) since it operates in more than 60 countries besides
its Head Quarter in Switzerland. The company, therefore, has to adapt its products for foreign
markets, since it practices a core value that respects differences in peoples’ tastes, habits and
preferences in various culture. However, when shipping its products in long distance i.e. from
Canada to Britain, Nestlé experiences incurring high importing taxes with high freight charges
and freezing costs. Even after all, Nestlé is gradually expanding globally with significant
competitive advantages than its competitors in terms of worldwide area of operations, net annual
revenues and profits, total number of employees, total number of brands and international
expansion strategy.

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4.0 Bibliography

Bhasin, H. (2018). Top Nestle competitors across the world. Marketing91. [online] Available
from: https://www.marketing91.com/top-nestle-competitors-across-the-world/ [Accessed 27th
March, 2019]

Edwards, T., Marginson, P. & Ferner, A. (2012). Multinational companies in cross-national

context: integration, differentiation and the interactions between MNCs and nation states.
[online] Available from:
https://pdfs.semanticscholar.org/3842/091251760343d02a969df03dc1db50cde5a2.pdf [Accessed
27th March, 2019]

Fortune.com. (2017). Fortune Global 500: Nestlé. [online] Available from:

http://fortune.com/global500/nestle/ [Accessed 27th March, 2019]

Haynes, C. (2014). The Global Environment and Operations Strategy. [online] Available from:
https://slideplayer.com/slide/6674638/ [Accessed 27th March, 2019]

Jaiswar, P. (2017). Maggi noodles growth rate slows even as Nestle introduces new flavours.
Zeebiz. [online] 24th May, 2017. Available from: https://www.zeebiz.com/companies/news-
maggi-noodles-growth-rate-slows-even-as-nestle-introduces-new-flavours-16631 [Accessed 27th
March, 2019]

Jeffery. (2013). Nestle – international strategy. [online] Available from:

https://blogs.baruch.cuny.edu/mgt4880nestle/2013/04/08/nestle-international-strategy/ [Accessed
27th March, 2019]

Kannan, I. (2015). Made in India Maggi noodles safe in Canada, claims Nestle. India Today.
[online] 7th June, 2015. Available from: https://www.indiatoday.in/india/story/maggi-noodles-
india-canada-safe-vice-president-nestle-256017-2015-06-07 [Accessed 27th March, 2019]

Kraft Heinz. (2019). Employees located in 40+ countries around the world. [online] Available
from: https://www.kraftheinzcompany.eu/company/our-locations/ [Accessed 27th March, 2019]

Mars. (2018). #498 Mars. Forbes. [online] Available from:

https://www.forbes.com/companies/mars/# [Accessed 27th March, 2019]

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Mayrhofer, U. & Prange, C. (2013). Multinational Corporations (MNCs) and Enterprises

(MNEs). Encyclopaedia of Management. [online] 2013 Edition, Wiley. Available from:
https://www.researchgate.net/publication/319533213_Multinational_Corporations_MNCs_and_
Enterprises_MNEs [Accessed 27th March, 2019]

Mondelez International. (2018). 2018 fact sheet: leading the future of snacking. [online]
Available from:
https://www.mondelezinternational.com/~/media/mondelezcorporate/uploads/downloads/mondel
ez_intl_fact_sheet.pdf [Accessed 27th March, 2019]

Nestlé. (2018). Annual Review 2018: Enhancing quality of life and contributing to a healthier
future. [online] p. 55. Available from: https://www.nestle.com/asset-
library/documents/library/documents/annual_reports/2018-annual-review-en.pdf [Accessed 27th
March, 2019]

Nestlé. (2019a). Are Nestlé products the same throughout the world? [online] Available from:
https://www.nestle.com/ask-nestle/products-brands/answers/are-nestle-products-the-same-
throughout-the-world [Accessed 27th March, 2019]

Nestlé. (2019b). Lean Cuisine. [online] Available from:

https://www.nestle.com/brands/allbrands/lean-cuisine [Accessed 27th March, 2019]

Nestle. (2019c). Nestlé reports full-year results for 2018. [online] Available from:
https://www.nestle.com/media/pressreleases/allpressreleases/full-year-results-2018 [Accessed
27th March, 2019]

Raga, S. (2016). 10 facts you might not know about Lean Cuisine. Mental Floss. [online]
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cuisine [Accessed 27th March, 2019]

Saxena, S. (2016). Nestle India launches new flavours of instant noodles: Maggi 'Hot Heads'
available on Snapdeal. NDTV Food. [online] 12th September, 2016. Available from:
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hot-heads-available-on-snapdeal-1422082 [Accessed 27th March, 2019]

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Staley, O. (2017). To fill 70,000 jobs, chocolate giant Mars will have to overcome its deeply
secretive past. [online] Available from: https://qz.com/1047136/mars-recruiting/ [Accessed 27th
March, 2019]

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The Economist. (2012). Food for Thought. [online] Available from:

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The Financial Express. (2018). Mondelez International sets up operations in Bangladesh.

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