Brand Expansion by Nestle Company - Essay Example

? Global Marketing Global Marketing Executive Summary The purpose of this paper is to gather and present relevant facts and data about a targeted market which can be used for brand expansion by the Nestle Company. The paper has used PESTLE analysis of the targeted country in order to comprehend the influence of social, cultural and environmental factors on the corporate world. The paper has also taken into account the Porter’s 5 forces model to highlight the strength of market competition and survival strategies for the Nestle brand. Introduction The changing trends of the corporate world and effects of globalization have drastically changed the traditional ways of marketing and brand representation of a company. The term Global Marketing has become very familiar in the last few decades which explain that one great way of enlarging company’s sale is by expanding the brand globally. Gillespie, Jeannet, & Hennessey (2011) define that when a company has its operations limited to a single country, its strategies and focus plan is completely different as compared to when it expands to the global market. Tough, people around the world have different languages, cultures and believes, but there are similarities too and a company must know how to target these both these sides of the market. It is evident that a renowned company operating in one part of the world cannot expect the same number of sales and reputation in all parts of the world, due to the cultural and need difference. Expansion to a new region requires a great amount of principle money and other resources of the company. This could provide a company with a great platform for further expansion and increased sales, but can also left the company in despair. Gillespie, Jeannet, & Hennessey (2011) define that with the increased in world competition in almost every field and every product segment, it is more difficult for a brand than before to get visibility in the market (Gillespie et al., 2011). Purpose of the Report This purpose of this paper is to provide a product launch plan for Boost, a product of Nestle Company in Pakistan and analyze the potential implications for the brand in the company. This report will briefly discuss the environmental and social situation of the country, in order to examine the scope of the company to expand in Pakistan. This report will also highlight the market stability, economic condition and competitors in the country which will help in better picturing the future of the Nestle in the selected country, Pakistan. Scope This report is primarily based the information gathered from secondary sources related to the targeted product and market. Hence, the analysis done on this report will be based on the researcher’s own interpretation and understanding of the available data. Also, the findings of this report are confined to the Boost brand of Nestle Company and cannot be applicable to other Nestle brands or of any other company. The report will try to cover the social, cultural, political and environmental factors of the targeted market for Boost. This report will not include any statistical calculation of the trend of the food industry and findings will solely be based on observation and thematic analysis of the above mentioned factors. Limitations There are certain limitations of this report which are as under: 1. The report is based on secondary sources and there is a possibility of deviation of the report findings from the real scenario. 2. Since Pakistan is an emerging market, there has been less market research done on it, which limits the data available for the country. 3. Pakistan is a Muslim country and there are chances that the report fails to clearly interpret the religious impact of the community on their social life decisions. Background The Company Nestle is one of the leading food brands, having its market in more than 86 countries. It was founded in the year 1905 in Vevey, Switzerland and presently it enjoys the largest revenue than any of the other food and beverages company. The company has a wide range of food products and beverages, including frozen food items, food drinks, coffee, and nutritious drink items. The total revenue of the company in 2012 was 10611 million US dollars (Nestle, 2012). The company has gained enormous growth after it started its new product line of health related products that could help people in preventing several common but severe ailments. These ailments include diabetes, cardiovascular and some other diseases. At the current time, the company is expanding its product range and global market coverage and to acquire optimum market share around the world. The Product The product selected for this report is the nutritious drink of the Nestle Company by the name “Boost”. It was introduced in 1995, and has recently gained great acceptance in several Asian and American countries (Boost, 2012). The vast acceptance of the product has encouraged the company to expand the brand classification and currently Boost is available in 8 different varieties, including Boost Plus, Boost Kids Essential, Boost Breeze and few other varieties. It is basically an ‘energy drink’ which was initially introduced for the growing kids, to help balance their diet and protein level. The brand was then extended to further subclasses in order to cover both the young children and adults. The attraction for the product was captured by the flavours of the drink. As children are attracted to chocolate, Boost was introduced in chocolate flavour mixed with milk and fibre proteins. With the expansion in the product range, more flavours were introduced to give a push to the product and augment customer attraction (Nestle, 2013). The Country The country selected for the product marketing is one of the South Asian countries, “Pakistan”. One major reason for selecting Pakistan was its market similarity to India, where the product is already doing a great business (Just Food, 2007). Also, the social trends and the spoken language of the two countries are very similar to each other and that would help the company in entering Pakistan with no or less change in the marketing strategies. In addition to this, Pakistan is one of the biggest population of the world and a major importer of food products from other Asian and Western countries. Foods and beverages are imported in bulk in Pakistan and this tells that there is a market scope for a nutritious beverage in the country (Jamal, 2010). One critical fact about the country is that its economy is semi-stable but still has a great capacity of intake and as a growing trend in the food product industry. Considering the semi-stable factor, it has not been in the lame light of many companies, and for this Nestle- Boost would have a monopoly in the country. Moreover, there are more than 600 foreign companies have invested in Pakistan and this figure is growing speedily. This shows that the foreign policy is not strict in Pakistan and there is a significant scope for foreign companies in Pakistan (Gillespie et al., 2011). It is also important to highlight that there is already a wide product line of Nestle products been marketed in Pakistan, and the company will not have to face the problem of brand name build-up in the market. Nestle milk and food drinks are already the popular brands in the country and thus there is a potential market for Nestle-Boost to market in Pakistan (Khan & Amine, 2004). Environmental Analysis of Pakistan 1. Economic Environment The present economic condition of the country is not very encouraging due to the fact it has been hurt badly by internal wars and political conflicts in the country. Khan & Amine (2004) report that foreign inflows have been slowed down in Pakistan over the last couple of years, and this has further deepened the country into financial debts. The report also addresses that, although the economy of Pakistan is declining at the moment, but still it is still the 27th largest economy in terms of the Purchasing Power Parity (PPP). The total GDP of the country is 211.09 billion US dollars, which is the 44th largest economy of the world. This highlights that tough Pakistan’s economy is not one of the strongest economy of the world, but it still has the potential to benefit foreign investors from its current PPP and easy foreign policies (Trading Economics, 2012). One important factor of the overall economy of a country is its rate of population. This is one problematic thing for the country as its population growth rate of 2.8% is highest among all Asian countries. Comparing the population growth of the country with the per capita growth, it can be said that the improvement in the per capita rate is very low as compared to the population rate since the last 20-30 years. This augments the problem for the country where resources are inadequate as compared to the number of people in Pakistan (Afzal, 2009). This is one concerning factor for the company as they have to keep in mind that their product cost should be in accordance with the current economic situation of the company. However, there is a big economic gap in the elite class and the middle or low class people of the society. So, if the product price is high, the company can still target the high class people of the society who have been reported to have greater money reserves than other people. Also, if Nestle wants to target mass public, than the product Boost should be brought in a very large quantity to reduce the per product selling cost. The company can also lower the product quality to make it fit to the budget of the common people of the country. For this, Nestle has to ensure that its brand positioning, pricing and marketing strategies are efficient enough to achieve the desired objective of the company (Afzal, 2009). The cost of land and vehicles has increased in Pakistan and this is another challenge for the company when it will buy properties for product storage or other purposes. Since, Nestle already has a lease of several properties in Pakistan, it would be better to enhance the infra structure of the current stores to accommodate another product line than buying more lands, in the early period of launch (Rind, 2012). 2. Political Environment At the current time, political condition of Pakistan cannot be accurately defined as it presently lead by a temporary Caretaker Government. Economist of the country have met to the point that economic instability of the country is well because of the political instability, which is anticipated to improve after the coming governmental elections in a month’s time. The Nation Newspaper of Pakistan has highlighted the fact that the presence of so many political parties in the country is one big reason for conflicts and political instability in the country. In addition to this, Pakistan has been unfortunate to have a responsible and loyal politician in years, and this is one major reason of the improper distribution of wealth in the country. Many politicians look for foreign investors just to expand their own reserves and not to benefit the nation, due to which the proper growth of the country is never achieved (The Nation, 2012). There are various legal laws in Pakistan related to the manufacturing and distribution of foods and beverages in Pakistan. According to the Cantonment Pure Food Act (1966), manufacturing, distribution or selling of any food which is unhygienic or unhealthy for people’s health is prohibited in the country. Any person or organization involved in the manufacturing or distribution in the country will be penalized. In addition to this, this Act also prohibits the use of alcohol or pork’s meat in any kind of food or beverage for any purpose. So, any foreign manufacturing company has to provide samples of its food or beverage item to ensure that it is ‘Hilal’, that is non-alcoholic and do have any pork containing substance (Hafeez, 1999). The Pakistan Standards and Quality Control Authority (PSQCA) has been established in 1996, which ensure the quality standard and proper ratio of protein, fats and sugar in the product. Therefore, it is necessary for the company to make sure that all varieties of Boost which they want to introduce in Pakistan should meet all these standards made by the government. Boost Plus has a small quantity of alcohol in it, so Nestle should ensure this product is either made free from alcohol when launched in Pakistan or either it is not launched in the country (Hafeez, 1999). 3. Social and Cultural Environment The social environment of the country is a complex bend of cultural diversity and religious principles. One major factor in any culture of the society is its religion and religious norms. Majority of the people in Pakistan are Muslims and celebrate the occasions of Islamic Eid Festivals and the birth of Prophet Mohammad (P.B.U.H). The report of Khan & Amine (2004) has addressed the fact that religion is one of the most influential factors in the Pakistani culture and outlook. Wine and the meat of pork is forbid in Islam, therefore it is also legally prohibited by the government. This tells the influence of religion in both the culture and laws of the country. One great strategy adopted by many foreign and national companies in Pakistan, is to use religious connotation for brand promotion (Khan & Amine, 2004). It is evident that Boost, which is a nutritious drink, does not have any direct link with Islam, but launching it in the month of Eid and motivating people by religious sentiments, would help the brand to get quick acceptance by the people. A similar strategy was adopted by the Wall’s Ice-cream Company, when they associated their ice-cream as a nutritious food supplement for kids after fasting, in the Islamic month of Ramadan (Khan, 2011). Considering the literacy rate of Pakistan, it is nearly 55% which tells that many people in Pakistan would have no idea of what a nutritious drink means. Hence, the company has to communicate in a proper way in order to avoid a situation where it is not considered as another soft drink beverage by people. In addition to this, there is a status symbol prevalence in the Pakistani culture and many affluent people do not like to buy brands that is been bought by the middle class or low class people also. For this reason, the company can introduce two different categories of the product, with a different name and pricing, so to satisfy the financial and status need of all market segments (Khan & Amine, 2004). 4. Technological Environment It is a notable factor that Pakistan has emerged tremendously in its technology in the last few years. Technological uplift in health, education and marketing sector is one of the distinguished factors of the country. It is evident, that Nestle will have to setup its testing laboratories in the country as well, in order to verify the quality and health ingredients of its product. With the recent advancement in the field of medical and sciences, the company can hire specialists from within the country that will cut their labour cost. The Information Technology (IT) market of India is the largest in the world and that has improved the way India used to communicate with the world. Being a neighbour country, the IT wave has also been started in Pakistan, and the total revenue generated by the IT sector is well over $2.8 billion. The IT technology has helped in the export of the country and has also attracted investors to manufacture their products at cheaper prices in Pakistan and sell it to other counties (Haq, 2010). One astonishing technological improvement is in the advertising sector of Pakistan. Both print and digital media has grown substantially in the recent times and that is one important areas of focus for Nestle. The power of marketing through advertisements has allowed several local brands to enhance their visibility and reach people faster than before. Hence, the market competition has been intensified by this technological advancement and people in the country now have more options available for any sort of product. It is because of this reason that there is a vast market of Indian products in Pakistani stores, as there is a close association of the Pakistani media with the Indian media. Hence, promoting the Boost brand in India would be a dual strategy to grow sales in India, and also to generate brand awareness among the people of Pakistan. For achieving cheaper cost, the company can choose to produce and broadcast advertisement in Pakistan only. Also, the strength and usage of social networking websites have increased tremendously in the country. This is another root that can be utilized by the company for speedy promotion of the brand by using social posting advertisements on social forums and networks (Pak Galaxy, 2013). 5. Contemporary Environmental The contemporary environment of Pakistan is important to highlight, in order to comprehend strategies that would be viable with the environment. Pakistan is still considered, as one of the orthodox countries as there are people in the country who still believe that media channels and advertisements are against the Islamic teachings. On the other hand, the impact of media has gained phenomenal significance over the years and currently it is considered as one of the most powerful segment of the country, more than any politician or security officials. Media has been accused by many organizations and politicians of misusing their power, but no serious action has been taken against them yet (Pakistan Today, 2012). Terrorist activity is another prevailing issue in the environment of Pakistan. As the date of elections get closer, conflicts and anger between political parties grow more which results in violence in the country. This often results in calling strikes and shut downing the entire city market. The consequences of this are heavy losses to shop holders, daily workers and the country as a whole. Moreover, 2012 for Pakistan was very unfortunate for various reasons. There have been several cases of drone attacks by the US army to Pakistan, in search of Al-Qaida’s members in the country. This has caused great deaths and penalties over the year in the country and has also created an Anti-American environment all over the country (Tribune, 2013). A positive environmental change can be noted in the cellular sector of the country. Cell phones sales in Pakistan have surpass sales of all other sectors, including food sales, automobiles, computers and all other major market sectors (Ahmed et al., 2011). Nestle can capitalize its product marketing by involving cell phone brands to work as promotion engines for the company. In addition to that, the company has to keep in mind the power of media, which can work as both a positive or negative reinforcement for the brand. Competitors will try to present a negative image of the brand so to push people away from the product, and this can certainly drop down the sales of the product. Nestle should be able to design strategies in which media can be utilized positively, and is biased in favour of the brand (Tribune, 2013). Internal Environment Ahmed et al. (2011) reports that people of Pakistan have developed a brand sense in the last few years and buy products on the basis of its brand name. This is quite similar to the Western culture where product quality is judges by the brand name. So, it can be assured that spending in brand marketing and publicity will not be a waste of money for the company. It has also be reported that beverage is become a part of the everyday meal and the soft drinks companies are making enormous sales in the country. This can be taken as an opportunity for the company to make Boost as a nutritious alternate for the soft drinks. For this reason, the price of the Boost drink has to be made compatible with the soft drinks prices (Ahmed et al., 2011). A relevant factor to address here is the attachment of the people in Pakistan with sports, particularly Cricket. India is considered a traditional rival of Pakistan due to the conflicting history of the two nations. The rivalry is augmented largely on the Cricket field, and Pakistani people are more than concern for a one-to-one encounter of Pakistan and India in a cricket match. By applying the Theory of Persuasion, Boost can be made as a symbol of winners in Cricket. Pepsi has used a similar technique to get the attention of public by intensifying its advertisements in the cricket season and using cricket stars of Pakistan in their advertisements. A similar strategy can be used by Boost, to associate the power and energy b this drink with sports and victory. This has been one of the most applied strategies in brand advertisement, where celebrity factor is used to attract mass public (Shrum et al., 2012). 6. Market Competitors The beverage consumption in Pakistan has had a significant rise 70% from 2008-2012 and this indicates the growing number of food suppliers in the country. These beverages include soft drinks, fruit juices and milk. Until now, Nestle has a product for all these beverages in Pakistan and has been able to secure great profits being a dominant manufacturer in the market. However, recently several of its brands were beaten in sales by other local brands, and that has sufficiently decreased the total profit of Nestle in Pakistan. The two major competitors for the company are, the Engro Foods and Shehzan International (Jamal, 2010). By implicating the Porter’s Five Forces Model it can be analyzed that power of buyer is strong in the market, where the company has to provide good quality and reasonable prices to be the priority of people. Threat of Substitutes is the most important factor to be addressed as with multiple options to choose now, switching of people from one brand to another has become very common in the society (Note Desk, 2009). Engro Foods was founded in the year 1957 as a fertilizer company, which later expanded majorly in food products and beverages. Currently, it is one of the major competitors of Nestle water, milk and fruit juices in the market. Nestle can be considered a pioneer in the industry, but Engro is a smart follower and it has improved its product quality and packaging in the last few years. A great strategy adopted by Engro Foods is that it launches several brands for the same product to saturate the market with its product and capitalize the market share. Currently, it has three different milk brands in Pakistan by the name of Olperz, Omung and Haleeb Milk. Furthermore, they have several fruit juice brands as well which has further deemed the sales of Nestle products in Pakistan. So, it can be anticipated that after the launch of Boost in Pakistan, Engro Foods will also launch a similar product in the market to seize profits. One strategy to get a strong hold at the current market is to launch multiple Boost brands in the market with different names and prices, so when Engro Foods launches their product, the market is already seized by Nestle products (Engro Foods, 2013). Shehzan International Company is another strong competitor for Nestle and it is also known for optimum product quality and taste. It is also the first entrant in the fruit juice industry of the country, and since then Shehzan has been the first priority of customers for fruit beverages. However, the product line of Shehzan is not as vast as that of Engro Foods and so it has restricted itself to fruit juices and Ketchup only. Hence, it can be considered as a second most powerful competitor for Nestle as it still has the tendency to capture market by its brand reputation. Nestle can also make a profit-share agreement with Shehzan, in order to reduce the competition and also give an extra boost to the Boost marketing by using services of Shehzan company (Shehzan, 2013). Conclusion It can be concluded that the economic and political condition of Pakistan is not stable at the moment, but there are chances of its improvement in the future. Despite the factor that its overall economy is declining at the moment, its food and beverage market is still making fair profits. It can also be noted that the Pakistani culture and market has been influenced by Indian and Western culture over the years. Therefore, trends in these countries is adopted by people in Pakistan in some time, hence it can be said that practice of drinking nutritious drink instead of carbohydrate drinks will be soon adopted by the people. For this reason, Pakistan can be considered a suitable market to target for the expansion of Boost brand, where Nestle is already built a strong brand name. 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