Case study: Founded is 1866, Nestl is a leading nutrition, health and wellness company in the wold. This Swiss

transnational food and drink company is headquartered in Vevey, Vaud, Switzerland. Initially, the

company sold only infant's cereal but they quickly diversified to include a variety of products including

chocolate, coffee, soup, yogurt, water and frozen foods in their portfolio. The organization employs nearly

a quarter of a million people from 70 different countries around the world. Nestl operates in almost

every part of the world. They have reached an impressive global audience both through their own efforts

and through joint ventures with companies like Coca-Cola. Nestl's success has been driven by a

combination of product innovation and business acquisition. It is their motivation for growth and diversity

that has allowed Nestl to become the key player in nutrition that it is today.

Nestl's main moto is - Good Food, Good Life and they are consistently committed towards enhancing

the quality of life -every day, everywhere.

Formation & Growth of Nestle:

Nestl's history begins back in 1866, by Heinrich Nestl, the founder of Nestle Company who developed

the first infant food in 1867 to save the life of a friend's baby who could not be breastfed. Since then, the

company has looked to build on a tradition of providing nutritious products. From the very beginning the

company was very keen to invest abroad, establishing its first foreign offices in London in 1868. In 1905,

the company merged with the Anglo Swiss Condensed Milk, thereby broadening the company's product

line to include both condensed milk and infant formulas.

The small size of the Swiss market was one of the primary reasons behind their vigorous expansion

strategies around the globe. Nestl established condensed milk and infant food processing plants in the

United States and Great Britain in the late 19th century and in Australia, South America, Africa, and Asia

in the first three decades of the 20th century. In 1929, Nestl went for diversification and acquired a Swiss

chocolate maker. This was followed in 1938 by the development of Nestl's most revolutionary product,

Nescafe, the world's first soluble coffee drink. The company grew significantly during the First World War

and again following the Second World War, expanding its offerings beyond its early condensed milk and

infant formula products to chocolate, coffee, soup, yogurt, water and frozen foods.

The end of the war marked a period of substantial growth for Nestl as they began to acquire new

companies and dozens of new products. One of the biggest acquisitions made was with Maggi, another

Swiss company. Maggi was founded around the same time as Nestl in 1872 by Julius Maggi. Over the

years the company has made several corporate acquisitions, including Cross & Blackwell (1960), Findus

(1962), Libby's (1970), Stouffer's (1973), Carnation (1985), Rowntree (1988), and Perrier (1992)

After the fall of the Berlin Wall in 1989, and formation of European Union presented better opportunities

for Nestle as larger portion of the European market once again became accessible to the sellers. China

became more accessible during this period, as well. For a company with international ambitions, like

Nestl, this was the ideal trade situation. With new diverse markets to serve, Nestl was presented with

a unique opportunity to become an even more diverse organization. The first major acquisition during this

period was in 2001 when Nestl acquired and merged with the Ralston Purina Company. A new company

in comparison, Purina created products like Friskies, which was a wildly popular brand of pet food in the

United States. After the merger, a new pet food company called Nestl Purina Pet Care Company was

established.

Nestl picked up the pace in 2002 when they took on two more of North America's most successful

companies. This time, the theme was frozen products, and Nestl picked up Dreyer's ice cream in July.

The next month, Nestl bought Chef America Inc, a frozen food manufacturer, for a cool $2.6 billion. The

plan to take on the freezer aisle continued in 2003 when Nestl acquired Movenpick Ice Cream, a luxury

Swiss ice cream company. The decade came to a head in a spectacular fashion when Nestl took over both

Jenny Craig and Uncle Toby's in 2006. Towards the end of the decade, Nestl made one of its biggest-ever

acquisitions when it purchased Gerber. This move was a return to Nestl's historic roots as Gerber

continues to be one of the key baby food manufacturers in the United States and Canada. Nestl

purchased the business for $5.5 billion in 2007.

Nestl has come a long way from its 19th-century Swiss-German origins in nutritious gruel to become one

of the biggest production conglomerates in the world. Nestl has carried with them their spirit of

innovation and nutrition from the 19th century into the 21st century. Today, Nestl owns more than 2,000

brands and manufactures around 10000 different products that are sold in more than 197 countries

around the world. They have a clear objective to be the leader in health and wellness. The company has

not limited itself to nutrition but moved into the beauty and health categories to creates a truly diverse

company. In 1974, Nestl made their first move outside the of the food production industry. It is one of

the main shareholders of L'Oral, the world's largest cosmetics company.

GLOBAL EXPANSION STRATEGIES

Despite its undisputed success, Nestl realized by the early 1990s that it faced significant challenges in

maintaining its growth rate. The large Western European and North American markets were saturated. In

several countries, population growth had stagnated and in some there had been a small decline in food

consumption. The retail environment in many Western nations had become increasingly challenging, and

the balance of power was shifting away from the large-scale manufacturers of branded foods and

beverages and toward nationwide supermarket and discount chains. Increasingly, retailers found

themselves in the unfamiliar position of playing off against each other manufacturers of branded foods,

thus bargaining down prices. Particularly in Europe, this trend was enhanced by the successful

introduction of private- label brands by several of Europe's leading supermarket chains. The results

included increased price competition in several key segments of the food and beverage market, such as

cereals, coffee, and soft drinks.

At Nestl, one response has been to look toward emerging markets in Eastern Europe, Asia, and Latin

America for growth possibilities. The logic is simple and obvious a combination of economic and

population growth, when coupled with the widespread adoption of market-oriented economic policies by

the governments of many developing nations, makes for attractive business opportunities. Many of these

countries are still relatively poor, but their economies are growing rapidly. For example, if current

economic growth forecasts occur, by 2020 there will be 1.2 billion people in China and India is set to

become the youngest country. According to Standard Chartered bank, China will surpass the US as the

world's largest economy by 2020. India's GDP by 2020 is expected to come in at $9.6 trillion from the $2

trillion a year ago. As income levels rise, it is increasingly likely that consumers in these nations will start

to substitute branded food products for basic foodstuffs, creating a large market opportunity for

companies such as Nestl.

In general, the company's strategy has been to enter emerging markets earlybefore competitorsand

build a substantial position by selling basic food items that appeal to the local population base, such as

infant formula, condensed milk, noodles, and tofu. By narrowing its initial market focus to just a handful

of strategic brands, Nestl claims it can simplify life, reduce risk, and concentrate its marketing resources

and managerial effort on a limited number of key niches. The goal is to build a commanding market

position in each of these niches. As income levels rise, the company progressively moves out from these

niches, introducing more upscale items, such as mineral water, chocolate, cookies and prepared

foodstuffs. Although the company is known worldwide for several key brands, such as Nescafe, it uses

local brands in many markets.

The company owns 2000 brands, but only 750 of them are registered in more than one country, and only

80 are registered in more than 10 countries. While the company will use the same "global brands" in

multiple developed markets, in the developing world it focuses on trying to optimize ingredients and

processing technology to local conditions and then using a brand name that resonates locally.

Customization rather than standardization is the key to the company's strategy in emerging markets.

Successful execution of the strategy for developing markets requires a degree of flexibility, an ability to

adapt in often unforeseen ways to local conditions, and a long-term perspective that puts building a

sustainable business before short-term profitability. Nestl knows how to tailor products to local niches

while leveraging its size. As a multinational corporation, Nestl crosses cultural borders. According to

Peter Brabeck-Letmathe, the founder's key attitudes like" pragmatism, flexibility, the willingness to learn,

an open mind and respect for other people and cultures" are still very much alive in the company's

corporate culture.

Since its beginnings in the 19th century, Nestl has grown to be one of the world's biggest companies.

Nestl sells over 1.2 billion products worldwide every day. Very important to this figure is the fact that

Nestl is home to over 8,000 different brands, which are organised and marketed in very different

fashions. In some cases, brands are only offered in one local market and therefore adjusted to the given

circumstances. These local brands are designed to perfectly meet the demand in that particular market

and are distributed solely in this one region. Other, global brands are distributed worldwide or at least in

several markets at the same time and advertised almost identically in most of those markets. Well-known

brands such as Nespresso, Nescaf or KitKat are typical examples. Logos and other basic features may be

slightly different from country to country, but the overall look remains similar in most cases. To achieve

this goal, Nestl managed to build up a single global identity that is able to incorporate various products,

brands and production strategies. For obvious reasons, Nestl is constantly trying to refine and optimise

its line of production to achieve higher revenues and gain larger shares in different markets.

One large obstacle to overcome is cultural borders, even more than country borders. Nestl tries to

carefully serve various cultural preferences while simultaneously creating economies of scale. It

understands that food is and has always been a local product. A Bavarian soup will not appeal to noodle

lovers in Taiwan. Thus, the company has been practicing a balancing act by trying to simultaneously

achieve economies of scale and yet cater to a variety of cultural preferences. In effect, Nestl is a "glocal"

company that thinks global but acts local.

Nestle is also the world's biggest producer of halal food for Muslims. Nestl generally understands how

to adapt their global and local brands to the given markets and find a suitable niche to place its products.

Through an intense process of research and development in local affiliates, Nestl is able to find certain

product variations that are suitable for a given market. For example, their global brands KitKat and Maggi

are very well adjusted to different markets. In Japan, for example, KitKat is sold in numerous flavours that

cannot be found elsewhere. Even within the country itself, Nestl implemented some variations for only

a small part of it. These variations range from yubari melon and baked corn from Hokkaido Island to cherry

and bean flavoured chocolate bars in the Tokyo region (Madden 2010). A similar tactic is also used for the

Maggi brand, where different types of soup are designed to fit individual market preferences.

By adjusting so well to the given market while keeping the brand on a global level, Nestl successfully

gains customers' trust all over the world. This "glocal" (think globally - act locally) approach has proven

to be very successful and is the basis for Nestl's international strategy. Due to the high number of in-

house brands and brands added to the company through acquisitions, Nestl often consolidates them

under one unified brand. Doing so is a very long and costly process, which generally takes up to 5 years.

Adding the Nestl brand name to the given package design alongside the local brand and slowly enlarging

it until it finally replaces the local brand altogether is a process that Nestl has executed numerous times.

MAJOR STRATEGIC ISSUES FACED BY NESTLE:

A boycott was launched in the United States on July 7, 1977, against the Swiss-based Nestl Corporation.

It spread in the United States, and expanded into Europe in the early 1980s. It was prompted by concern

about Nestl's "aggressive marketing" of breast milk substitutes, particularly in less economically

developed countries (LEDCs), largely among the poor. The boycott has been cancelled and renewed based

upon scrutiny of the business practices of Nestl and other substitute manufacturers monitored by the

International Baby Food Action Network (IBFAN). Organizers of the boycott claim that use of the

substitutes represent a health risk for infants and encourage the practice of new born nutrition via natural

breast milk. As of 2013, the Nestl boycott is coordinated by the International Nestl Boycott Committee,

the secretariat for which is the UK group Baby Milk Action.

A significant number of children work in the cocoa production sector in Nestle. This act violates the child

labour law. Human rights organizations are continually protesting the use of child labour by Nestle.

Nestl is also fighting a PR battle with Greenpeace over claims that it is continuing to source palm oil from

Sinar Mas, the Indonesian company accused of illegal deforestation and peatland clearance. Nestl, maker

of Kit Kat, uses palm oil from companies that are trashing Indonesian rainforests, threatening the

livelihoods of local people and pushing orang-utans towards extinction.

Despite of all its problems still Nestle Nestle continues its reign at the top of the food industry; it dropped

one spot to #34 on the 2017 Global 2000 but dominates the field thanks to the more-than $90 billion in

revenue and $8.6 billion in profit it recorded for the trailing twelve months ending on April 7, 2017.

Question: What ethical dilemmas are faced by the Nestl's management and why and how should the deal with it?