How Nestle Manages to Achieve Global Competitive Advantage - Case Study Example

Achieving Global Competitive Advantage Place Introduction Over the last years there appeared the essential changes in the world economy removing the barriers to enable cross-border trade and investment among distant time zones and national peculiarities. Thus, differences in culture, government regulation and business systems are no more crossing for establishment of international ties and mergers with those areas that historically were separate. These huge shift have promoted the new global marketplace and allowed businesses to offer the same products and services across the world, creating a global market at the same time. However, in such a marketplace, organizations face many challenges, which include severe competitiveness among other companies with the similar products and services. Notwithstanding that fact, there are about five hundred largest companies that are ranked by revenues and performance records in 2013, according to the Fortune magazine that are able to stand in the top of the market and offer its consumers as much as possible. Nestle, a Switzerland-based food company is on the seventy- second place in the list with revenues of 99453 millions dollars. The following paper will examine how this company manages to achieve global competitive advantage. How the home country contributes to Nestle activities It is stated that a sustainable achievement orientation in global markets depends on certain geographic location and the diversity of the company’s operations (Craig, Douglas, 1999). For Nestle, as a private-sector business, profitability plays an essential role. It comes from the opportunity to make profit by selling products at home and in a foreign market and be able to attract more consumers. Since its home market is difficult due to the slow market growth and market saturation, the significant business growth will be a considerable advantage if it is made outside the home country of the company. Moreover, access to world markets lets Nestle to increase the scale of production and have lower unit costs (Miletnburg 2005). Economies of scale are vital for Nestle, because its home market is relatively small. They are applied not only to the production plant level, but also the organization entirely. Whether it is possible to have procurement of components and supplies at home, international engagement and relocation of operations will allow Nestle to undertake at lower cost abroad (Harrison, 2011). Besides, since 1945 it is the best time to introduce the well- known home country to the world markets, as most of the competitors experience the unexpected period of peace and stability in their international relations. For Nestle, the motives to go international are determined by the political and economic stability of the country of origin, its culture and institutions and Switzerland’s stock of created assets. These advanced factors, as identified by Porter’s factors that affect business, are those assets which a country obtained by means of investments over the years. These are such assets as communication infrastructure and technology and the competence for innovation and intellectual property. Due to the positive financial incentives that promoted the decision to invest, Nestle has a considerable advantage of being the Swiss company. It is also important to state, that Porters diamond model applied to the company’s activities is about the main reasons of this industry within nation to be more competitive among others on a global scale. The national home base of Nestle provides with specific factors that give competitive advantages on a global scale (Porter, 1990). Besides, for Nestle, it is a strategic ambition to be able to attract new markets of the developed economies and those that emerge, as both bring growth to Nestle. For the company like Nestle with the long history of its performing, its early entry into an emerging economy brought advantages of path-finders and the possibility to dominate the market rivals (Hill, 2010). How partner country contributes to Nestle’s competitiveness  Building a considerable advantage is a key factor that is determined by the effective marketing strategy. Nestle has now strong advantage in its marketing, distribution and manufacture spheres of fine food products. It has designed such international brand that covers ten worldwide corporate brands, forty- five worldwide strategic product brands, twenty- five regional corporate brands, a hundred of regional product brands, seven hundreds of local strategic brands and about seven thousands of local brands (Craig, Douglas, 1999). Besides, the wide geographic peculiarity enables Nestle to make sales from developed and emerging markets and use that potential and experience between those markets. Only through persistent collaboration and cooperation with the other markets it has become possible for Nestle to obtain its competitiveness under partner country. The company knows this well and has put all its efforts to capitalize on the merits of solid brand alliance. A brand that Nestle obtains for many years gives its product portfolio a unique identity that distinguishes it from other competitors in the marketplace. It also increases the awareness of the product that appear in the customers’ minds, because people simply know what Nestle food is. Thus, the company remains its loyal consumers and for the brand it creates those values that call for the sense of satisfaction and benefit. For Nestle, its brand is its main asset that is realized a competitive advantage of the company in the marketplace (Schee, Aurand, Pickens, Ma, Girap, 2011). For business a work in a brand alliance can be as beneficial as to perform its activities alone. One of such positive alliances of Nestle with the other company was the cooperation with General Mills, who in 1999, created a fifty-fifty joint venture presenting its new ice cream business. In 2010, Nestle Waters brand Perrier celebrated its anniversary of being a prominent sponsor of the French Open tennis Championship. In 2011 the two organizations continued their partnership, concentrating its activities on the exclusivity of the French Open tennis Championship and Perrier water that was available in cool boxes on the court. Another alliance of Nestle Company brought it great collaboration with Coca-Cola. To be able to compete with Unilever’s market leading Lipton brand, the Nestle Company and a Coca Cola created unique-branding relationship called Nestea. Coca-Cola was dealing with the product distribution and Nestle designed and marketed the product. This enable both companies to obtain benefit from the experts and avoided compromising the sales of other competing brands. The most recent alliance of Nestle is the successful co-branded innovations together with Inneov, the L’Oreal Company. In 2002, both organizations formed joint venture in order to develop a functional food, a nutritional supplement for cosmetic purposes taken orally, which purpose is to protect, correct and stimulate growth and beauty if skin, nails and hair. Such example of Nestle alliance with the other company proved that the organization have selected good product and the good partner, which gave both to enter the new industry and make food for the skin along with the rest products of Nestle Company. Main contributors of Nestle products: consumers Despite all the economic and political forces, the geographical location and ide that there are certain barriers to enter the new market, consumers are the final link between the chains of all the processes that the organization or company establish (Nicholson, 2012). Since the processes and dynamics with the chains affect consumers in positive and negative ways, it is naturally that the companies should do everything possible to attract and retain loyal consumers and be able to cover the more of new customers of certain products or services. However, it is not so easy to ear consumers’ power, as people are aware of the fact that the bigger are the buying volumes, the better buying prices will be and thus the inability to provide better terms for the suppliers, the more abuse of buyer power will be noticed. Most companies also state that their strategies are driven by the need and preferences of their consumers. However, the term customer is the most elastic one in the management theory and these are not only the buyers, but also wholesalers, retailers, purchasing departments and others. It is, therefore, important to identify the best customers for the company in order to involve assessing of every group of customers by such dimensions as perspective, capabilities, and profit potential. For Nestle, its brand marketing is the best way to attract the new consumers and retain loyal ones. Such consumers’ capabilities are built with time and are difficult to copy. This considerable advantage serves the needs of customers better than other organizations can offer. In order to understand what are the consumers’ values, companies implement different support tools and techniques that enable them to understand their customers’ ideas. Thus, Nestle uses a special “war room” that conducts analysis and monitors the social media chatters which relate to the effects of the company’s products. Special intelligence informs about the product research and marketing decisions and helps the company to evaluate how well its value products meet the needs of the customers. Such data enables the company to monitor a product and the website’s functionality to better understand customers’ needs (Simons, 2014). How supplier country contributes Nestle competitiveness As it is stated on the official website of Nestle Company, it is working on adding nutritional value to every step of food supply chain. The experts thoroughly choose sourcing ingredients, the processing is well managed and controlled and the manufacturing and distributing to the consumers is well set up. Its work in the value chain begins with the science and adds value to each aspect of work, because all the products are created for people (Nutritional Value Chain, n.d.). In Nestle, the value chain practices are fully integrated and thus the corporate social responsibility is easy to distinguish from its business. Since it works with small farmers in the industrialized countries, that enable people to provide the company with the source of its basic commodities, such as milk, coffee and cocoa and allows the company to make considerable investment in the infrastructure from where its takes its sources. All this process benefits not only the company, but also has the enormous social benefits, because of the improved health care, availabilities for education and economic prosperity. It also gives Nestle direct and reliable access to all the commodities it uses in its business (Porter, Kramer, 2006). Caring about the consumers as the final chain of the supply process, the company takes care also about packaging that is important for food safety and freshness. It provides consumers with necessary nutritional information and helps them to make the right choice of the products the company offers. Thus, the branded active benefit logos are used by Nestle to effectively inform the health benefit of certain products. All the processes of manufacturing and distribution are the essential areas for the companies, as they help to evaluate the nutritional value of food and beverage products and enable these products to be present on the supermarkets shelves of each location Nestle operates. Conclusion Globalization has changed the way modern companies run their businesses. The more consumers see new opportunities, the more their needs are changing as well. That requires from new visions and strategies from international organizations, particularly those who provide food and beverages to people. Managing its food and beverages in Europe, Americas and Asia, Oceania and Africa, Nestle includes such activities as Nestle Professional, Nespresso, Nestle Health Science and the Joint Ventures in Food and Beverages and Pharmaceutical activities (Profile: Nestle, n.d.). With the best though- out marketing strategy, thinking about the best food for its consumers, Nestle will be able to earn its respect as it did in the past years and will be able to be achievement- oriented among its rivals. References Cavusgil, S.T., Knight, G. & Reisengerger, J. R. 2008, International Business: Strategy, Management and the New Realities, Prentice Hall. Craig, C., Douglas, S. 1999, Configural advantage in global markets, Stern School of Business, New York University, Available from http://pages.stern.nyu.edu/~sdouglas/rpubs/config.html Harrison, A. 2011, International entry and country analysis, A Lecture Programme delivered at the Technical University of Košice, Available from http://www.ekf.tuke.sk/files/TUKE%20Lectures%202011-12.pdf Hill, C. 2010, International Business: Competing in the Global Marketplace (8thedn), McGraw-Hill/Irwin. 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