Nestle as One of the Worlds Leading Nutrition - Term Paper Example

? Nestle Table of Contents Table of Contents 2 0 Executive Summary 3 2.0 Introduction 3 2 International Expansion 4 2.2 Location 4 3.0 Culture and Lifestyle of UAE and Switzerland 5 3.1 Corporate culture in Switzerland & UAE 6 4.0 Entry Mode Strategy 10 5.0 Conclusion 11 References 13 1.0 Executive Summary The study will focus on the formation, product and service offerings of Nestle; it will also lay emphasis on the international expansion strategies to be followed by Nestle in UAE. The main objective of this study is to highlight the culture and lifestyle of UAE and Switzerland and the difference in the culture and lifestyle of these countries. In order to expand in UAE, Nestle needs to study the culture, habits and lifestyle of the people living in UAE. UAE is one of the most prospective countries for potential investors. The study will also focus on the key investment opportunities in UAE and the significance of the location chosen. The study will also suggest Nestle the appropriate mode of entering a particular country. The study will conclude with an overview of the study. 2.0 Introduction Nestle is one of the world’s leading nutrition, wellness and health company. It is a multinational company which is headquartered in Vevley, Switzerland. The company was formed in the year 1905 by the merger between two companies Anglo Swiss Milk company which was founded by Charles and George Page and Farine Lactee Henri Nestle which was founded by Henri Nestle in the year 1866 (Nestle, 2013b). Nestle has a strong presence in 83 countries (Nestle, 2013d) and has a brand portfolio that covers almost all food and beverage categories; baby food, bottled water, cereal, chocolate and confectionery, coffee, dairy, drinks, health care nutrition, ice cream, pet care and weight management. The company is a market leader in various categories like coffee, baby food cereal etc. (Nestle, 2013c). The company founder Henri Nestle was the first individual to manufacture the milk food products for the newly born babies and till now the company is the market leader in baby milk cereal. The corporate goal of the company is based on the innovation and knowledge management which involves collection, utilizing the collected information, innovation and knowledge resources for attaining the corporate goals and objectives of the company. Nestle aims at enhancing the lives of the consumers by providing good quality food and beverages that are tasty and also nutritious. Nestle Nutrition is a global organization developed by Nestle to strengthen their core nutrition business. This organization was developed by Nestle to deliver superior performance by offering nutritious products and services based on scientific research and development (Snipppapers, 2009). Nestle had also created the Corporate Wellness unit to integrate nutritional value added in their food and beverage category (Snipppapers, 2009). Nestle is one of the fewest companies to offer a digitalized virtual tour in their shopping centers in United Kingdom and USA (Nestle, 2013a). The shopping center was established to demonstrate how consumers behave while shopping their products. 2.1 International Expansion Globalization has become an integral and prominent part of the economic life and provides companies with huge opportunities and challenges. International expansion has become a strategic response to the global economic dynamics for a large number of companies. International expansion will provide opportunities to the companies to expand on a global scale and exploit the benefits of internalization like scope, learning, economies of scale etc. Nestle offers a varied range of edible products and targets consumers of all ages. The company has gradually established its presence worldwide and has successfully acquired various other companies in different countries to develop a strong footing in those countries. In the year 2003 Nestle acquired Dreyers a leading USA ice cream manufacturing company and Movenpick a leading German ice cream manufacturing company (Nestle, 2013e). Nestle aims to manufacture and market unique products for different customer segments and create a niche market for itself. International expansion will enable Nestle to spread their market risks evenly and gain high market returns on intangible resources and assets. Nestle has strong internal capabilities which will help the company to seek additional profits in the international market. In order to expand further in UAE, Nestle needs to comply with the external and internal food safety, regulatory and quality requirements. The foods manufactured by Nestle needs to comply with the safety and quality standards of the local national health regulatory body of UAE. This would help Nestle in gaining trust of the potential consumers and the government of UAE. 2.2 Location Nestle has decided to expand in United Arab Emirates (UAE) to especially set a strong footing in Abu Dhabi. UAE has emerged to be one of the few countries which are having a stable economic growth even amidst the current economic slowdown. UAE has become a huge investment opportunity for various foreign companies. The key potential areas for investment in UAE are 1) Oil & gas 2) Financial services 3) Training and education 4) Food and drink. Abu Dhabi is the second largest member city of UAE in terms of population and is near to the most important port of UAE. It is also called as commercial capital of UAE. Manufacturing and marketing in Dubai is relatively easy because the cost of raw material and the cost of marketing are relatively lower than the other cities of UAE. Currently, the market scenario of UAE is excellent and fund managers have predicted that it is one of the most lucrative business markets for potential investors. 3.0 Culture and Lifestyle of UAE and Switzerland Abu Dhabi culture is deeply rooted with the Islamic tradition of Arabia. Islam is more than a religion for the Muslims of UAE, it is a way of life that governs the everyday events right from what to drink and what to wear. The culture and heritage of the country is closely related to the religion of the country. However, Abu Dhabi is a very tolerant and welcoming city and the foreigners are allowed to practice their religion, wear liberal dresses and alcohol is also served at restaurants (Explorer Publishing, 2006). Woman discrimination is not practiced and they are allowed to move freely without being escorted by men unlike Iran and Saudi Arabia (Explorer Publishing, 2006). The residents of Abu Dhabi are very hospital and courteous and believe that these are the main qualities that attract the tourists. Polygamy is practiced in UAE and their religion allowing them to have more than four wives at a time (Explorer Publishing, 2006). The excellent economic development of the country had attracted many potential investors and the country has generated revenue for its tourism department. The country has a regulatory body whose main function is to safeguard the cultural heritage of the country from external factors that could be caused due to the access to outside cultures. Events like falconry, camel racing, dhow sailing, poetry, traditional art are an important part of the Arabic culture and are encouraged by the government (Explorer Publishing, 2006). Arabic is the official language of UAE but languages like English, Urdu and Hindi are also commonly spoken. Arabic is regarded as one of the toughest language to read, speak and write. To bridge the gaps between the cultures, a Sheikh Mohammad Center for Cultural understanding was established which would help the tourists visiting the countries to understand the culture of their country (Explorer Publishing, 2006). The widely practiced and the official religion of the country is Islam. On the whole, majority of the Arabic population wears the national dress in public. The national dress of men is known as Khandura and the national dress for women is known as Abaya. Sheikhs, politicians and business men wear a thin black or brown robe which is also termed as mishlah or bisht (Explorer Publishing, 2006). Weddings in UAE are considered as an important affair and are usually conducted in the hotel ballrooms or conventional center. The government of UAE has introduced the government sponsored marriage fund which helps the residents in getting married, loans up to Dhs 70,000 is granted (Explorer Publishing, 2006). However, the marriage fund strongly advises the national citizens to get married to their fellow national citizens in order to preserve their culture and heritage. The culture of Switzerland on the other hand has been known for its diverse historical heritage and the four languages which are spoken predominantly by the locals are German, Italian, French and Romansh. The country owes its popularity to its scenic beauty and the art, music and culture. Music is an important part of the lifestyle of the residents and there have been a number of music composers who have significantly contributed to the world of music. Swiss have invented the art of yodeling which is a form of voiceless singing at different pitch levels. The majority population in Switzerland is Roman Catholic while the rest are Protestants. Thus we can see that there is huge cultural difference between Switzerland and UAE and this has to be taken into consideration by the management team of Nestle. 3.1 Corporate culture in Switzerland & UAE Although most of the country’s wealth is attributed to the large reserves of extractable oil but sectors like tourism, banking, aluminum and petrochemicals have also been significant revenue contributors (Miller, 2011). Although, UAE is often viewed by westerners as a region of conflict the country is expected to increase by 3 or 4 percent in terms of Gross Domestic Product (GDP) (Miller, 2011). 80 percent of the workforce in UAE is made up of international workers (Miller, 2011). Mostly all the multinational corporations have similar ethical and corporate standards but equal amount of importance is laid on the work and socializing (Communicaid, 2009a).The employees are usually provided with long breaks so that the productivity and efficiency of the employee increases. Since, majority of the population is Muslim so frequent breaks for their prayer is given. Rituals are given more importance than the schedule of the meetings. In Switzerland, the companies lay emphasis on punctuality and discipline because it is believed that the above two factors are the key to a positive and successful business relationship slow (Communicaid, 2009b). Arriving even ten minutes late is considered rude and efficiency is very much valued and the business meetings are generally formal in structure and discussion is limited to the predetermined business topics slow (Communicaid, 2009b). The Swiss companies have a clear leadership structure and importance is laid on team decision making than independent decision making. They are more straightforward and clear in their communication and the decision making process is very slow (Communicaid, 2009b). The managers of the company believe in a quiet environment and loudness and aggressiveness is discouraged to a large extent. As per Green Hofstede culture is defined as “the collective programming of the mind that the collective programming of the mind that distinguishes the members of one group or category of people from others” (Safer Brain, 2008). Hofstede developed a model which evaluates the culture of the country through scores on four values which are known as cultural dimensions. The four main dimensions of the model are as follows Power Distance Index (PDI), Individualism (IDV), Masculinity and Uncertainty Avoidance Index (MAS) (Safer Brain, 2008). We will now analyze the cultural dimensions of Switzerland and UAE through the Hofstede model. Figure 1: Hofstede Model Scores (Source: The Hofstede Centre, 2013b) Figure 2: Hofstede Model Scores (Source: The Hofstede Centre, 2013a) Switzerland (34) UAE (90) A low PDI score reflects that the corporate culture is very good and the employers and employees are given equal opportunity. A high PDI score reflects that most of the companies in the country are centralized and there is a huge gap in the remuneration, authority between the employers and employee. Switzerland (68) UAE (25) A high IDV score reflects that high valuation is given to the needs and wants of the employees. Employees are expected to work sincerely and are rewarded for their hard work in return. A low IDV score signifies that emphasis is laid on the building and technical skills of the employees. Harmony is given more importance than honesty. Switzerland (70) UAE (50) A high MAS score reflects that there is well defined distinction between the work of women and men employee. A low MAS score signifies that women and men are treated equally and successful women are given due respect and rewards. Switzerland (58) UAE (80) A low UAI score signifies that there is an informal business attitude among the employees in the company and focus is given on long term planning than planning of daily activities. A high UAI score signifies that the there is a formal business conduct in the company with well defined rules and regulations. Switzerland (40) UAE (n/a) A low LTO score signifies that all employees are treated equally and any kind of discrimination is discouraged. N/A From the above Hofstede cultural dimension model we can observe that the organizational culture of both the companies are extremely different and this is mainly attributed to the fact that the religion practiced and national culture of both the countries are extremely different. The corporate culture of UAE is very formal and due importance is given to religion and the national culture of the employees. The corporate culture of Switzerland is informal and independent decision making by all the employees of the company are encouraged. Organizational culture would serve as a source of sustained competitive advantage (Lee and Yu, 2004). Nestle is a company which believes in manufacturing quality food products through their excellent research and development team. If they plan to expand their business in UAE then the management of the organization should make an effort to introduce a culture which encourages free flow communication among the employees, risk taking and experimentation and encourage employees to perform independent decision making. Culture of the company defines the relationship between the employer and employee and it creates the social interaction and determines how social knowledge can be used in a particular situation (Lopez, Peon and Ordas, 2004). Nestle is an employee friendly company and the all the departments of the company are expected to deliver equal amount of efforts. Superior performance in all the departments can be achieved through knowledge sharing & creative and independent thinking by the employees of the company. The corporate culture of the companies of UAE is traditional yet liberal. Nestle would be very successful in expanding in UAE because the corporate culture followed by the companies of UAE are almost similar to that of Nestle. However, one think should be borne in mind that religion is given utmost importance and employees should be excused for prayers even during an urgent official meeting. 4.0 Entry Mode Strategy Developing a market strategy for the international operations of the company is difficult as it involves dealing with multiple currencies, cultures and governments. Thus, Nestle should evaluate all the factors while selecting an entry mode strategy for expansion in UAE. There are usually four types of marketing strategies which are as follows: Figure 3: Entry Mode Strategy (Source: Lymbersky, 2008) From the above mentioned entry mode strategies, the appropriate market entry mode strategy for Nestle would be Multidomestic strategy. Under this strategy the subsidiaries are given the freedom to focus on the needs and wants of the consumers in the market that they operate in. The parent company gives the entire authority to the top level managers of the company and the managers can customize their advertisements, campaigns and operational techniques. This approach is apt for the Nestle unit of UAE as lot of power and authority is vested upon the top level managers and the culture diffrenec is huge between the parent and subsidiary company. The multi domestic strategy is utilized when the company needs to adapt to various conditions in each and every country. This strategy will also help Nestle to spread its market risk evenly. 5.0 Conclusion We have observed that the national culture and the organization culture would play a significant role for Nestle if they plan to expand in UAE. The national and corporate culture is very different from that of Nestle, Switzerland; hence first the management of Nestle should research thoroughly on the culture, habits and lifestyle of the people living in UAE. Researching about the habits, lifestyle, consumption pattern and personality about the consumers of UK would help the management team of Nestle to develop an effective marketing strategy. UAE is one of the most prospective countries for potential investors and especially for Nestle since it is already an established brand. The nutritional requirements of consumers of all countries are different and Nestle would develop quality food products for UAE keeping in mind the taste, preference and nutritional requirements of the potential consumers of UAE. As mentioned before Nestle has the potential of creating a niche market for itself and manufacturing products accordingly. References Communicaid. (2009a). Doing business in the UAE. Retrieved from http://www.communicaid.com/access/pdf/library/culture/doing-business-in/Doing%20Business%20in%20the%20UAE.pdf. Communicaid. (2009b). Doing business in Switzerland. Retrieved from http://www.communicaid.com/access/pdf/library/culture/doing-business-in/Doing%20Business%20in%20Switzerland.pdf Explorer Publishing. (2006). Dubai: The complete residents' guide. Dubai: Explorer Publishing & Distribution. The Hofstede Centre. (2013a). What about the Arab Emirates? Retrieved from http://geert-hofstede.com/arab-emirates.html The Hofstede Centre. (2013b). What about Switzerland? Retrieved from http://geert-hofstede.com/switzerland.html Lee, S.K.J., & Yu, K. (2004). Corporate culture and organizational performance. Journal of Managerial Psychology, 19(4), 340-359. Lopez, S. P., Peon, J.M.M., & Ordas, C.J.V. (2004). Managing knowledge: Link between culture and organizational learning. Journal of Knowledge and management, 8(6), 93-104. Lymbersky, C., (2008). Market entry strategies: Text, cases and readings in market entry management. Hamburg: Management Laboratory Publications. Miller, H. (2011). Culture and work style in Dubai. Retrieved from http://www.hermanmiller.com/MarketFacingTech/hmc/research/research_summaries/assets/wp_Culture_Workstyles_Dubai.pdf. Nestle. (2013a). Nestle’s virtual shopping centres deliver real competitive advantage. Retrieved from http://www.nestle.com/Media/NewsAndFeatures/nestles-virtual-shopping-centres-deliver-real-competitive-advantage. Nestle. (2013b). History. Retrieved from http://www.nestle.com/aboutus/history. Nestle. (2013c). Our Brands. Retrieved from http://www.nestle.com/aboutus/ourbrands. Nestle. (2013d). Nestle worldwide. Retrieved from http://www.nestle.com/aboutus/globalpresence. Nestle. (2013e). Key dates. Retrieved from http://www.nestle.com/aboutus/keydates Safer Brain. (2008). Cultural models and cultural dimensions. Retrieved from http://www.saferbrain.eu/LinkClick.aspx?fileticket=PsQ5JyGmQKI%3D&tabid=286. Snipppapers. (2009). Nestle’s competitive strategy & competitive advantages. Retrieved from http://resources.snippapers.co.in/marketing/nestle%E2%80%99s-competitive-strategy-competitive-advantages/ Read More