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(Porter, 1985:15) Nestle’s growth strategy is what porter called as focused differentiation variant.
Nestle’s strategic business units concentrate on market entry in emerging markets to achieve sustainable growth. They analyze potential host countries. anticipate the shift in the competitive forces and exploits change by creating appropriate strategies. In this way, the company establishes itself and defends its position by capitalizing on its strengths and capabilities. The product based SBUs
The regional organization of Nestle, on the other hand, aims to penetrate the market and establish its presence by promoting several products. They achieve this by maintaining manufacturing facilities in the host country as well as importing other goods produced from another country. Differentiation provides Nestle insulation against competition through brand loyalty by customers. Through this local strategy, the company earns remarkable returns on capital employed and creates a defensible market position. A strong coordination between the R&.D, product development and marketing departments helps local Nestle firms achieve sustainable profitability and increase market share.
Hill mentions in his book that brand management is one of the most important aspects of companies doing international business. Product recognition while entering a new market is considered to be one of the most important strategic strengths of a company. Many researchers have tried to extrapolate this view resulting in the one-brand one-world school of marketing. According to this view the best strategy for a company is to go in to a new product segment or market with an already established brand name. This is considered to be one of the most fundamental principles of international brand management.
However, the success of Nestle and its branding strategy are a contrast to this popular belief. Nestle prefers its brands to be local and people regional, with only the technology being a common global factor. The company has pored billions of dollars into local acquisitions like Ralston Purina pet products in US. Nestle complete portfolio consists of a staggering 8,500 brands that are organized by geographical status and role. Together these brands create a hierarchy of brands in which each product is associated with at least two bands at different levels in the hierarchy (Kapfere, 2008:413). The geographical criterion allowed three groups of brands to be distinguished – international, regional and local brands. These brands fulfill different functions and roles depending on the customers and represent the principal families of brand architecture (Mhlbacher, Leihs and Dahringer, 2006:482).
Nestl’s brand strategy is organized into two categories:
The corporate brand – Nestle has formulated a basket of corporate brands under the umbrella of Nestle itself and others often acquired like Blackwell, Friskies and Buitono. The corporate brands are there to give the image of a company that is a reliable specialist in some area.