Developing a Marketing Plan for Nestle - Essay Example

PAGE Developing a Marketing Plan Submitted to Marketing APRIL, Executive summary This paper focuses on Nestle, S.A., a multinational company based in Switzerland. This paper attempts to develop a marketing plan for the company in its plan to enter a new market. Paper discussed different modes of entry to an international market and the marketing approaches it should use. The marketing approach done goes along on the corporate objectives and mission. Since Nestle S.A. is financially capable to operate a subsidiary or ownership in a new territory, this set-up is recommended. Discussions are arranged in three parts: first is about research on history and economic environment of the country selected, and steps for implementation. Second part discusses the international marketing plan and third is the recommendation. This study will benefit marketing students in their study of international marketing practices. TABLE OF CONTENTS Executive summary i Part 1. Research and implementation 1. Introduction 4 2. Company profile 4 3. Company mission 4 4. Country selected 4 4.1 Historical country development 5 4.2 Business environment 5 4.3 Modes of entry 6 4.3.1 Exporting 6 4.3.2 Licensing 7 4.3.3 Joint venture 7 4.3.4 Ownership 8 5. Target market 6. .Marketing objectives 9 Part 2. Marketing strategies to reach marketing objectives 1. Product strategies 10 2. How innovative is the product 11 3. Compare it to competitor’s products 11 4. Pricing strategies 12 5. Customary mark-ups 12 6. Types of available discounts 12 7. Compare to competitor’s prices 13 8. Promotion strategies 13 9. Media used to reach target 13 10. Sales promotion used 13 11. Value of personal selling 14 12. Compare it to competitor’s promotion 14 13. Placement/distribution strategies 14 14. Port selection: mode of transportation 15 15. Packaging and documentation needed 15 16. Typical retail outlets and compare it to competitor’s distribution 16 Part 3. Recommendations 17 References Cited 19 DEVELOPING A MARKETING PLAN Introduction Nestle SA is a multinational company that has been successful in holding business in many parts of the world. As a matter of expansion, it is planning to enter a new territory. How they will enter the territory and its marketing strategies will be discussed in this paper. Part 1. Research and implementation Nestle SA is the holding company of Nestle Group that is based in Switzerland. It was founded by Henri Nestle whose name is retained as company’s name. Its main activities are the development and production of food and beverages. Nestle Group manages the food and beverage activities in three geographical areas (Europe, America and Asia, Oceania and Africa), and globally for Nestle Water, Nestle Nutrition, and other food and beverages). As of 2012, company has employed 328,000 people worldwide and earned CHF 92.2 billion. (Reuters. 2015). Top 3 competitors to Nestle are Mars, Inc., Danone and Mondelez, International, Inc. 2. Company mission Company mission of “Good food, good life” is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night.”(Reuters. 2015) 3. Country selected. Country selected is India because of its large population. Its developing economy is a promising market for Nestle’s products. 3.1 Historical developments of the country Discussion about relevant historical developments of India, in this paper, starts in the 19th wherein it was reigned by Great Britain. It was granted independence in 1947 after years of non-violent resistance was staged by its leader Gandhi. Earlier years were not peaceful, since after gaining independence, it was disturbed by three wars with neighboring countries, and the last one was in 1971 that resulted to the separation of Pakistan and India. There were nuclear threats in 1988 and a terrorists attack in Mumbai on the same year. (CIA Worldfactbook, 2015). Country remained calm after this. India’s growth started in 1991 after a series of economic reforms was instituted by the government. It is backed up by a large number of youthful populations that drives the country as an emerging global power. Pressing problems of the country include overpopulation, extensive poverty, environmental degradation, and widespread corruption. 3.2 Business environment Economic liberalization measures that started in 1990, included industrial deregulation, privatization of state-owned enterprises and reduction of controls of foreign trade, accelerated economic growth of the country. In 2011, India’s economy is dependent on traditional village farming, modern agriculture, modern industries and services. To date, the country derived its major economic growth from services. It has a labor force of 502.2 million, and a population of 1,236, 344,631. Out of this, 49% works in agriculture, 20% in industry 20%, and 31% in services. Unemployment rate is 8.6% in 2014, down from 9.1% in 2013. (CIA WORLD facts) Trade facts according to CIA: In 2014, its exports amounted to $342.5 billion up 7 % from 2013. It exports petroleum products, precious stones, machinery, iron and steel, vehicles, chemicals and apparel to US(12.4%), UAE(10.2%), China (4.7%), Singapore (4.3%) and Hong Kong (4.1%). Total importation in 2014 amounted to $508.1 billion, up by 5.4% in 2013. India imports crude oil, precious stones, fertilizer, machinery, chemicals and iron and steel. Eleven percent of its importation comes from China, from Saudi Arabia 7.6%, UAE. 7.1%. Switzerland 5.5%, US 4.8%, and Iraq 4.3%. 4. Modes of entry in international market are exporting, licensing, joint ventures, contract manufacture, and ownership. (Agriculture & Consumer Protection)1 4.1 Exporting Exporting is one of the established ways of entry to a foreign market. Advantages and strengths of this mode are manufacturing is done home based, so it is less risky; it gives the company an opportunity to learn the market before it decides to invest heavily, and exporting reduces the potential risks in foreign operation. Weakness of this mode is that company lacks of control and company is put at the mercy of agents. Exporting could either be passive or aggressive. Passive exporting means company waits for orders to come by chance, while aggressive exporter develops market strategies of what their firm intends to do in the market. They have plans and strategies that includes the proper marketing mix and researches. 4.2 Licensing This is a mode of entry whereby Nestle (the foreign company) agrees to give a permit to a company in another country, to use the manufacturing, processing, trade-mark and know-how. Benefits (strength of licensing ) of licensing are that it is a good way to start foreign operations and avoid the risks of manufacturing relationships; capital is not tied up to foreign operations; It has options to buy partner. The disadvantages owing to this kind of mode are: company has limited form of participation; as licensee develops know how, licensee becomes a competitor and licensed agreement is shortened. 4.3 Joint venture (JV) JV is a system of entry wherein an enterprise share ownership between two or more investors share ownership and control over property rights and operation. It has more extensive participation than exporting and licensing. Joint venture gives the foreign company the advantages of risk sharing, combined financial strength, and a source of supply. Disadvantages of this mode are partners have no full control of ownership, partners have different expectations of benefits, and impossibility of recovering capital in case of loss. 4.4 Ownership. This mode of entry needs 100% capitalization, extensive participation, and a great commitment than other modes require. The advantages of this mode is that it retains the tight control of technical know-how . When firms operate on a global scale, according to International Business, 1998 5. Target market India is selected as a region to operate in because of the availability of resources and a big number of population that could be possible customers of Nestle. As India is a very big market, it has to be segmented. Segmentation should be done according to geographic, demography, psychographic, and behavior. Geographic involves segmenting by region, and classifying it whether it is hot or cold. For instance, in hot regions, Nestle could offer Nescafe ice, Nestea, or its other drinks that could be filled with ice, and vice-versa for cold regions. Demography is based on gender, age, income marital status, education etc. It becomes important to Nestle if they want to target their marketing efforts based on generations. Since Nestle is offering baby products, they could divide market segment into new born babies and babies of different ages. Psychographic is a market segment based on lifestyles and personality. For instance chocolate could be a choice of people who enjoy the taste of chocolate, while the 3-in-1 coffee are for those who are too busy people engaged in activity and have no more time. Behavioral targeting are pointed to those who want to benefit from the product, like gaining nutrition for babies l year old and below and to those who want to benefit from a healthy life-style. 7. Marketing objectives. Marketing objectives are set of goals created by company to promote its products to potential customers that should be achieved in a specific time. Marketing objectives of Nestle are compatible with its overall corporate objective, that is “is to be the world’s largest and best branded food manufacturer while insuring that nestle name is synonymous with the products of the highest quality.” (Nestle). With this corporate objective as guide, marketing objectives for each product line could be shaped. Company could establish products objectives separately and set up a marketing objective individually. For instance, in offering Kit Kat brand to India, primary objective is to establish the brand as the number one selling confectionary brand in India. Following this marketing objective of the product, next step is the formulation of strategies that takes into consideration the 4 PS of marketing mix. First, product must be flexible and appealing. Taking Kit Kat as an example, product should be flexible and relevant to the generation of consumers. Nestle has introduced variants and attractive packaging while retaining quality. Second, pricing must be competitive. Pricing of Kit Kat has remained steady for a number of years. Its strong image is the product competitive advantage. Third is promotion. Several methods of promotions are available like advertisements and public relations. Kit Kat uses tie up with food chains, TV commercials and posters. Fourth is Place or distribution wherein Nestle tries to distribute Kit Kat to all possible wholesaler and retailers since their research shows 60% of consumers are impulse buyers. (Business Case Studies.2015). Part 2. Marketing Strategies to reach Marketing Objectives 1. Product strategies – Creating a product strategy entails knowing the market problem, understanding the competitive landscape, and how to differentiate the product. It requires knowing who are you selling to, what are you selling, what is the value of the product to customer, how will it be priced in the market, and how will it be distributed. A brief example of a product strategy for Nestle is given below: We offer nutrition to babies one year old and above. Our customers are young mothers in selected region in India. We sell our products through a retail channel Our prices are competitive. 2. How innovative is the product. Two areas of interest have to be defined here. For customer, innovativeness of the product refers to the product attributes and its newness, e.g. more contents, improved design in packaging, etc. while for the company, innovativeness mean technology, environment concern, project-firm fit. (Daneels and Kleinschmidt, 2001). For instance, innovativeness of Kit Kat is in its packaging, while for Nestle, innovativeness is the new process involved in its manufacture. 3. Product adaptations This strategy follows innovativeness, in that it involves modifying the product including price, and promotion in order to become suitable to the target market. For instance, Nestle implements Product taste adaptation in West Africa and China (Nestle.com 2015). It can implement same taste adaptation in India for some of its food products like noodles. Indians are particular to hot tasting food like curry powder and chiles. 4. Compare it to competitor’s price Company must continuously be aware of competitors costing and pricing so that it can compare its own, and adjust according to prevailing market prices. Luckily, there are available monitoring devices that could easily work on this. When company compares cost information, and finds relevant reasons where it could improve its pricing, then company can move on policy to competitive pricing. 5. Pricing strategies Pricing is one of the components of the product mix and has to be given careful attention. A product that is priced too low or too high might mean loss of sales. To arrive at a product price, company calculates its fixed and variable costs, keeps in mind competition, company objectives, strategies and the target group’s willingness to pay. (Learn Marketing) Company may use any one of the following pricing strategies: Penetration pricing –this scheme requires setting of prices very low to capture market. Price increase is introduced when market is captured Cost-plus pricing – is the average cost plus mark-up. This approach is customary for small businesses. Skimming pricing – a method that sets initial price high then slowly lowers it to make it available to a larger market. Competition pricing by either setting same price, lower or higher Source: Learn Marketing.net 6. Customary mark-ups Mark-up is the amount added to the price of goods to cover overhead expenses and profit. Mark-up pricing goes to three channels. Mark-up for manufacturers is 15%, wholesaler is 20%, and retailer 40%. (Gray,2012) . On the average, wholesalers’ mark-ups should not exceed 30 to 40 % in accordance with the Average Profit Margin for Small/Wholesale businesses. 7.Types of discounts available Discounts are reductions in prices of goods and services given to customers as a financial incentive. These are in the types of cash discount, trade discount, quantity and seasonal discounts. Other types are promotional and trade-in. Promotional allowance is given to wholesalers and retailers for their promotional activities, e.g. display and decoration of the product in their facilities. Trade in allowance is given to its regular retailers to return unsold old goods back to the company. This method drives loyalty of customers to the firm. 7. Promotion strategies Promotional activities drives attention, interest, desire and action of customers to the product. (Marc,2014) Activities related to promotion are advertising, public relations and sponsorship, personal selling, direct marketing and sales promotions. Some sponsorships done by Nestle are cooking lessons on TV, sports games on community level and marathon. 8. Media used to reach target Types of media used by advertisers have expanded over the years. Traditional media are Radio, television, print, direct mail, posters and billboards. As technologies emerge, we now have social media, internet ads thru websites, mobile devices and sponsorships. All of these are resorted to by multinationals involved in retail business like Nestle. 9. Sales promotion used There are two types of sales promotions, one is for consumers, and the other is for trade. Consumer promotion create incentives for them to buy quickly. Examples are coupons, free samples, rebates and contests. Recent sales promotion of Nestle Coffee is a raffle that attracted customers to join because of the million prize award. Sales promotion for trade are trade shows, event marketing, conventions, training, and sponsorships. According to Tanner, Jr. and Raymond (2015), trade show is a great way to introduce products, but company most often failed to follow up interested customers. 10. Value of personal selling Personal selling is a type of selling wherein sales people go face to face with buyer to persuade customers to buy. Personal selling is of value when product sold is of high value in content, or when product needs demonstration ,after service, or when a customer requires follow-up and persuasion. 11. Compare it to competitors’ promotion. Mars, the toughest rival of Nestle in the candy and chocolate division use TV sponsorships, newspapers and comic books in sales promotion. (Advertising Age, 2015) It has devoted in local TV spots and concentrated on making the logo and image of the product more appealable. Company indulged in heavy advertising that ultimately made it no. 1. Mars used promotions such as rebates, discounts, sweepstakes, bonus packs and sweepstakes. 12. Placement/Distribution strategies Distribution strategies for companies dealing with international market depends on the product, size of the target market, pricing and promotion policies of the company. It may be intensive, selective or extensive distribution. Intensive distribution saturates all available outlets that can be used to distribute its products. This is particularly useful in the sale of bottled water and confectionery products. 13. Port selection and mode of transportation. There are several considerations before an international company decides on its mode of transportation. Different type of goods needs different transport mode, like perishables need speed; shipment of animals and dangerous materials need specific rules and special type of vehicles. Modes of transportation for international company are as illustrated by Gov. UK (2012): 13.1 Sea transport Allows shipment of cargo in bulk (thru containers and at a lower cost). However, this mode is slower, exposed to risk of bad weather, tracking of delivery is difficult and added costs of port and taxes. 13.2 Rail transport It has fast link in Europe besides being environment friendly than road transport but load is limited. 13.3 Air transport Air transport provides a faster delivery of items, high levels of security for sensitive items, and can be used for a range of goods. This mode is very costly and not suitable to other goods, flight is subject to delay and cancelation plus paying additional taxes at each airport. 14. Packaging and documentation needed Company should be aware of the needs to protect the goods when shipping and should be aware of certain guidelines (export.gov) “goods must be packed in strong containers, adequately sealed, and filled. It should be properly braced, weight evenly distributed; packages and filler should be made of moisture-resistant material; properly palletized; use safeguards to avoid pilferage such as shrink wrap, straps, labeling and writing contents; and observe product specific hazardous materials packing requirements”. To reduce on cost, company can obtain containers from leasing companies and obtain packaging service of expert firms. In international shipment, two kinds of documents have to be presented: export documents and transport documents. Export documents are commercial invoice, export packing list and proforma invoice; while Transportation documents are airway bill, bill of lading, and electronic export information. Exporters also need to have Export Compliance Documents consisting of export licenses, and a destination control statement. (export.gov 2009) 15. Typical retail outlets and compare it to competitors’ distribution. Companies sell their products through different intermediaries. Most common ate through retail stores. Retail store types are department stores, merchandise store, discount stores, supermarkets, warehouse stores, specialty stores and malls. (Management Study Guide). Mars, Nestle’s competitor, uses drug stores, supermarkets and drug channels. Mars has created a licensing program with retail outlets co-branding with movie makers. Part III. RECOMMENDATIONS. After review of regional prospects and market strategies, recommendations are set below: A. Target market – region selected is India. Since company offers a range of food products, and target market is big, segmentation of market is needed. This could be by demography, (age and sex); psychograph (lifestyle) and behavior (intention) B. Unique selling proposition, by carrying USP, nestle is distinguished from competitors. It should continue to hold on with its value proposition of “Good Food, Good Life”. This is well known and connects to customers’ desire of good food. C. Pricing and positioning strategy – company should follow policy of uniform pricing in the region and penetration pricing in order to capture a large base of customers. D. Mark-ups – Company should follow average guideline of 15% mark-up on costs. E. Discounts – as introductory offer, company may offer cash discounts, or bundled offer (buy one –take one offer for customers, and trade discounts for wholesalers and retailers. F. Mode of entry – Considering the financial strength, management expertise and good quality of the product of Nestle Company, it would be advantageous for the company to choose ownership or to establish a wholly owned subsidiary in India. India offers liberalization of foreign investors and does not interfere with too many legislations. There is also availability of young workers, and supply of materials. G. Promotion Strategies - Being new in the territory, promotions should be widespread, like use of local and national TV, radio, newspapers and magazines, posters in retail outlets, and billboards. It should sponsor local events to build awareness. A health campaign tie-up with the government or municipality, a baby contest, or raffles would gain attention of the community. H. Distribution strategy should be intensive for confectionery and food items, and selective for baby foods. Examples of selective distribution are drug stores, groceries and marts for baby foods. I. Mode of transport – In region operation In India , hiring of expert transport services that will transport goods from point to point is recommended. The Marketing plan developed is not comprehensive, and needs to be updated as business expands and develops. REFERENCES Advertising Age. 2015. Mars, Inc. Retrieved from http://adage.com/article/adage-encyclopedia/mars/98761/ Agriculture & Consumer Protection. 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