The Marketing Strategies of Unilever and Nestle - Case Study Example

International Marketing Table of Contents International Marketing 1 Table of Contents 1 Introduction 2 An Overview to the Organizations 2 Competitive Advantage 3 Foreign market entry strategies 6 Market Enhancement Strategies 9 Global and Local Strategies 11 Conclusion 13 Reference 14 Bibliography 16 Introduction With the globalization, the business environment is getting intensively competitive across the globe. Entering into the foreign countries is seemed to be the most popular way to enhance and expand any business. However, at the same time these global companies have to face enough challenges in coordinating among the local and global operation as well as aligning the global operation in accordance with the local requirements. The organizations need to struggle to build up their global brands and at the same time enhance their local position. As a consequence, the companies have realized that a proper framework for global and local strategies is required to be defined with enough flexibility to meld the same in accordance with the local demands. Unilever and Nestle, both these companies are among the leading global companies with their operation spread across a number of countries. This report is an effort to look at their competitive advantages, foreign market entry strategies and their local and global strategies to have a better idea about the practices, taking place in the arena of international marketing. At the end, a conclusion has been inferred from the above discussion. An Overview to the Organizations Unilever Unilever is a leading organization which has some 400 consumer product brands under its sleeves. The product brands include food, beverages, cleaning agents and personal care products. The company touches the lives of its consumers in a number of different ways. Unilever has a range of products starting from global brands like Lipton, Dove, Omo, Knorr to some trustworthy local brands like Suave and Blue Band. The organization employs around 163,000 people in 100 countries across the globe. With a turnover of € 39.8 billion, Unilever products are sold in more than 170 countries with its 264 manufacturing sites spread worldwide (Hoovers, 2010). According the company site, it helps “people feel good, look good and get more out of life, meeting their everyday needs for nutrition, hygiene and personal care with brands and services that are good for them and good for others” (Unilever, 2010). Nestle Nestle is a leading global name in the food and beverage divisions. The company offers product ranges starting from instant infant food, coffee and chocolate to bottled water and promotes the same in more than 130 countries across the globe. Nestle is one of the leading companies in the total sales amount. In Coffee, the company has some top-notch brand names. The company has left its mark with leading brands like Maggi, Nestea, Nescafe, Friskies and Nestle. The company is among the leading packaged water producers and is a significant player in the pet food industry. Apart from all these, the organization holds significant amount of shares in Alcon Inc and cosmetic giant L’Oreal. Starting its journey back in the year 1866, the company is continually stepping forward to achieve a sustainable growth in the coming future (Nestle, nod.). Competitive Advantage Unilever On any given day, around two billion people use the products of Unilever. From feeding the family to keeping the household clean and fresh, the products have become significant parts of daily life. Research and Development can be seemed to be the gateway to constantly enhancement of the brands to deliver more intense and rewarding product experiences. Consumer research has played a significant role in the success story of this organization. Unilever makes continual efforts to introduce new and enhanced products to meet the changing requirements of its large consumer base. The company invests around € 1 billion annually to meet the cutting edge research and development requirements. The company has five research laboratories across the globe; among them laboratories in Britain, Unite States, the Netherlands and India have been the significant sources of innovation. The research base of the company is of high quality, which not only provides the underpinning for the development of new products, but has also been crucial for the continual upgrading and renewal of the existing Unilever brands. Undoubtedly this has emerged as one of the biggest competitive advantages of the company in both local as well as global market. Another significant competitive advantage of the company is its strong capabilities of branding and marketing. The company is well acquainted with the local markets and knows the marketing strategies which could fetch the maximum success for the company. This has enabled the company to have significant market segmentation strategies in packaged consumer products. For an instance, the company introduced new product categories in the deodorants and household cleaning products. Unilever brands failed to block the growth of the private level brands in Europe; despite of this, Unilever was able to maintain its strong position in higher margin products. The company has leveraged its knowledge of the brands and products in various regions across the globe and has used the same to meet the income level and changing aspirations of the local inhabitants (Jones, 2005). Unilever had also developed its strengths through the acquisition of a number of firms. After failed merger attempts in the late 1960s, Unilever has been conservative and calculative in exploring the merger and acquisition prospective. Although as a consequence, it missed on certain opportunities, but also was able to avoid disasters. The ice cream and its food businesses were established by the acquisition of a number of local firms and mending the same in Unilever model. After the acquisition of National Starch, the large targets were being pursued by the company. Certain instances have displayed the fact the company takes the effective way by taking into account the individual circumstances. Since the 1980s, Unilever has been diversifying its business which has emerged as significant competitive advantage for the company. The company’s ability to identify acquisition targets and make those into successful deals has become the main competitive advantage of the company. Nestle Nestle has positioned themselves as the food, health and wellness company. The establishment of Nestle nutrition was focused to strengthen their core nutrition business. The company has its well developed corporate strategy which has enabled them to attain the leadership in the respective market. Undoubtedly, in today’s market consumers are more influenced by the food and beverage products enriched with nutritional contents. While making any purchase decision, this has worked as a significant motivational factor. The establishment of Nestle nutrition as a business unit has surely reinforced the competitive advantage in the specific sector. Apart from that, the company also has a corporate wellness unit which is responsible for the integration of wellness in the food and beverage products. The research and development division is one of the strong footholds of the company. This has emerged as one of the greatest competitive advantage of the company. The company has a well built innovation heritage with widespread visualization of the future (Bauer, n.d.). Availability of the resources is another competitive advantage for the company. The organization has got access to a pool of experienced suppliers to support Nestlé’s drive for innovation and excellence. This has enabled the company to avail better quality at a reasonable pricing. The company is operating on product differentiation along with better quality and this can be achievable through the contribution of the employees, suppliers, business units, processes and the research and development divisions of Nestle. The corporate strategy of Nestle is rooted in its drive for cost effectiveness and innovation. Nestle also has the advantage of economies of scale, helping them to offer products at comparatively low prices. Another significant factor which has helped them to attain such huge success is the knowledge about the consumers in the market. They are very much aware of the requirements of their local as well as global consumers. Technological innovation is another factor encouraging Nestle to touch new heights. The strong distribution network and well built transportation for the same is another strong competitive advantage of the company. To strengthen this, Nestle has also been involved in infrastructural development in many countries. Such an example has been already shown in China. Nestle had developed roads in China to carry out their distribution process with enhanced efficiency. All these factors including technology, business units, availability of the resources, strong distribution and transportation system, well built research and development unit collectively have helped the organization to gain success in both global and local markets. Foreign market entry strategies This segment will investigate into the foreign market entry strategies of both the companies, Unilever and Nestle. Undoubtedly, as the business environment is getting more competitive, more and more companies are looking forward to merger and acquisition processes as growth opportunities. As specified earlier, Unilever has extended its business by the calculated acquisition of local firms and aligning the same with Unilever’s core business operations. In many cases, Unilever had to face difficulties while enter into new foreign markets like Soviet Union. In view of these difficulties, the company was intensively cautious and made delayed entry into China. The organization used buyouts as the way to expand globally. The company went into partnership with organizations with popular brands in the domestic market. In most of the cases, these partnerships are resulted into buyouts with Unilever financing the business to grow further. When Unilever acquired Bestfoods, the company moved into joint ventures with CPC/ Aji, the producers of Knorr Soup and Hellmann’s Mayonnaise. After taking over the joint venture from Japan’s Ajinomoto, the company was able to attain full control over its subsidiaries in Malaysia, Singapore, Philippines, Thailand and Taiwan (Spulber, ). In some cases, Unilever had enjoyed the first mover advantage. For an instance, in India Unilever still holds the leading position in the FMCG industry. As the market is getting more flat, global companies like Nestle would be looking towards entering into new markets to explore its growth opportunities. Successful implementation of the strategies with enough flexibility to match the individual market situation is the significant factor for the companies entering into the global market. Nestle, being the first mover in the foreign markets, puts its efforts to enter the emerging markets in an early stage. Nestle does not prefer to take the long and expensive way to set up the brand names in the prospective markets; rather, it prefers to extend its business by buying out popular local companies. In most of the foreign markets, Nestle first started off its business with the introduction of basic consumer products like infant food and later on the company had expanded the business in the upscale market segments of chocolate, food and beverage items and soft drinks as per the consumer requirements. The strategy of Nestle is simple but pretty strong. The company strategy is to start from the satisfaction of fundamental requirements and thereafter move to the niche markets with the rise in the demand. The company also connects its expansion plans with the rising income of the population. Nestle has more than 8000 brands under its sleeves; however, around 750 are registered in multiple nations and only 80 are registered in more than ten different countries. Even in Asia, the company adopted a strategy to acquire the local companies in there. One significant reason was to acquire the assembly of independent regional managers. As they are more conversant with the local culture and markets than the foreign employees, it becomes easier for the company to deal with the local population and the respective requirements. For an instance, in Indonesia, the company had acquired Indofood, the largest noodle producer in the country. This was done mainly to expand its sales in the respective market. It can be expected that in the near future the company will step forward to export Indonesian food items to the other nations. It has been noticed that both these companies prefer to enter the foreign markets by acquiring local brands and companies. This actually helped the company to overcome the cultural hurdles and consumer resentments to the foreign brands. The approach is much easier as in this way the companies would be able to reach the consumers with local brand names as the local population is very much known and attached to these local names. Moreover, the marketing and distribution become easier in such a case as the local company would have its own distribution channel, goodwill and existing customer base. So, it becomes easier for the company as at the first stage it can take the advantages of being connected with the local brands and later on, it can start off with the marketing of its own products. Market Enhancement Strategies Both the companies Unilever and Nestle are putting enough efforts to develop the market or increase the business in a more profitable way. According to the Unilever website, presently the population across the globe is around 6.8 billion and is expected to grow to a huge number of 7.7 billion by the year 2020. According to today’s statistics, the population in the developing and emerging markets such as India, Indonesia and Brazil is around 5.9 billion. Although, in these countries the company has deep rooted its business, still it is required to penetrate the market more to extend the business. The company has identified three ways to develop the market: by increasing the market penetration, increasing the consumption level and getting more consumers to by the high priced products. In this process, however Unilever does not ignore the basic theories of market penetration and development. According to the theory, a company can enhance, develop and penetrate the market in four ways: introducing the existing products in the existing products, introducing new products in the existing market, introducing new products in the new markets and introducing existing products in the new markets. For an instance, Unilever has realized the fact that fragrance is a significant factor in choosing one friend over another. Launching new fragrance in Axe brand would help the company to increase the market penetration, introducing new users to the brand and ensuring the product mix to be in line with their requirements. These efforts have helped the brand to be one of the leading male deodorants and shower gel. Unilever’s market practices require a rigorous, consistent approach across all its product categories. During the year 2009, the global category development teams of Unilever have introduced market development models in each of the product categories. As of now, the local country teams are in possession of those models and use the same in line with the requirements of the local population. The market penetration and development efforts of Unilever have helped the company to achieve new heights and attain new results in the existing as well as new markets (Unilever, 2009). Nestle does its existing market penetration and development mainly in two ways: wither by extensive marketing of the existing product in the existing market or else introducing new products in the same market. Nestle started off its business with the marketing of milk product line including the infant food. In 1905, the company moved into a consolidation deal with Anglo Swiss Condensed milk to improve and enlarge the milk product line. In this case market penetration took the form of enrichment of existing products in the same existing markets. In market penetration, the risk is quite less as the market is very much aware of the existing product line of the company. Now, the new market development or diversification can be done by introducing new product ranges to the new market and introducing existing products in the new market. In the urge to look forward to other regions for long term growth perspectives, the company had realized its growth prospective in new regional market of Africa, Britain, Asia and America. So Nestle had also used the existing milk products and infant food products to introduce the same in the local markets. Undoubtedly, there are certain risks involved in the process, as the market is pretty new the company may have to take enough pain to introduce the same in the respective market. To improve the situation, the company adopts a strong strategy to move with the local brands and later on introduce own products. To increase the acceptance of the same, the company sometimes uses local ingredients in the products and let them marketed by the local managers. In the recent years, the company has introduced some brands with the acquisition of Maggi, Findus, Cross & Blackwell and Perrier. Acquisition and other consolidation techniques have been used by both the companies to enhance the market. Product development has been done through innovation and excellence. Undoubtedly, the market enhancement strategies of both the companies have resulted in great success; the significant market position of both of them reveals the same. Global and Local Strategies While entering and competing into the foreign market for the cosmetics and toiletries products, the company adopts ‘think and act global’ strategy. In this case, Unilever uses the same strategy across all the operational countries with minimal response to the local requirements. In such a case, Unilever sells off the same product everything with minimal adaption from the local environment. In these product categories Unilever tries to build up a global brand with a centralized action frame. A global strategy is advantageous from the end that it would give Unilever a good level of opportunity to unify its operations and focus on establishing a brand image and reputation, uniform across the countries. The strategy is successful in building up strong brand characters such as Dove, Lux, Sunsilk and Rexona. At the same time, Unilever is also focusing to strengthen its local roots. The company has a well built distribution network and by the help of same in both the traditional and modern outlets the company has shown enough capability to adapt the successful brand concepts to suit the local markets. In some countries Unilever got some specific strategies to win over the customers and sales from its competitors. For an instance, while entering the emerging markets, Unilever competes on low prices. Unilever pursued the strategy to fulfil the requirements of the local inhabitants in the emerging marketing as they are mostly focused on the prices while going for shopping. This strategy will definitely give Unilever an edge to as it would be able to attract the buyers with better quality at bargain prices. In China, Unilever had adopted a number of local strategies to remove the difficulties or minimize the same, the company was experiencing while connecting with mainstream Chinese economy. Hiring local people, opening up a research and development unit, putting on efforts for stock market listing are some of the company’s localized strategies to strengthen the country’s foothold in China. China has always prefers the products incorporating traditional Chinese sciences with technological advancements. The company stepped forward to position itself as quality conscious, but consistently putting Endeavour to meet the local needs and tastes. The global brands came with the promise from the international expertise but those were marketed by the local employees to inspire good communication. Unilever has always tries to balance the local and global needs to satisfy the demand of the target customers (ICMR, 2004). Nestle is one of the renowned companies with a wide range of presence across the globe. So undoubtedly, the global strategy would be in core of its corporate strategy. However, this company is quite decentralized with its operational responsibilities spread across the local units. In Nigeria, due to the poor infrastructure, Nestle had to build to small warehouses across the country. The company had been very much responsive to the diverse local conditions. Employing local people is one significant way to respond to the local demands at a more prompt manner. China is another example where Nestle has focused on local adaption. Soon after its entrance into China, the company realized that transportation infrastructure was quite inadequate to carry out its distribution and logistical activities. In response to that, the company built up its own road, connecting 27 villages and factory points, to effectively accumulate the milk and distribute the same to the centers. In Japan, Nestle lose a significant amount of share to Coca Cola as it was unable to introduce a coffee brand compatible with the Japanese weather (finntrack, n.d.). However, it cannot be denied that by using local ingredients and concentrating on the local requirements, the company has been able to achieve success in most of the regions. Conclusion Unilever and Nestle are among the strong and healthy companies in the world with a number of successful brands under their sleeves. Both the companies have relied on their research and development divisions for the enhancement of existing products as well as for the introduction of new products. Unilever has a strong marketing approach to sell off its products and on the other side Nestle focuses more on the transportation and distribution. Both of the companies prefer to acquire the local brands and companies to enter into any foreign market. In many product categories, Unilever prefers to have the same product across the countries, while in many cases it has shown enough adaption in product and marketing. The operation of Nestle is quite decentralized with more adaption to the local environments. Having a strong strategy framework has helped the companies to attain a remarkable position across the globe. Reference Bauer, W., I. No Date. Nestlé Research Strategy. [Pdf]. Available at: http://www.nestle.com/ [Accessed on January 05, 2011]. Finntrack. No Date. Nestlé: Global Strategy. [Pdf]. Available at: http://finntrack.eu/mba/mb210/intbus/hill4e_506_509.pdf [Accessed on January 05, 2011]. Hoovers. 2010. Company Description. [Online]. Available at: http://www.hoovers.com/company/Nestl%e9_SA/crxrhi-1-1njdap.html [Accessed on January 05, 2011]. ICMR. 2004. Unilever's Strategies in China. [Online]. Available at: http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy2/BSTR131.htm [Accessed on January 05, 2011]. Jones, G. November, 2005. Unilever: Transformation and Tradition. [Online]. Available at: http://hbswk.hbs.edu/item/5112.html [Accessed on January 05, 2011]. Nestle. No Date. Nestlé in Singapore. [Online]. Available at:http://www.nestle.com.sg/Corporate+Info/Nestle+in+Singapore.htm [Accessed on January 05, 2011]. Unilever. 2009. Winning in the market place. [Online]. Available at: http://annualreport09.unilever.com/our_strategy/winning_in_the_market_place.html [Accessed on January 05, 2011]. Unilever. 2010. Unilever at a glance. [Online]. Available at: http://www.unilever.com/aboutus/introductiontounilever/unileverataglance/?WT.LHNAV=Unilever_at_a_glance [Accessed on January 05, 2011]. Bibliography Cateora, P. R., Gilly, M. C. and Graham, J. L. 2009. International Marketing. New York: McGraw Hill. Ghauri, P. N. and Cateora, P. 2010. International Markerting. Maidenhead: McGraw-Hill. Keegan, W. J. and Green, M. C. 2011. Global Marketing. New Jersey: Pearson Education. Read More