An international expansion plan for Nestle - Essay Example

?You Are Required To Develop an International Expansion Plan for a Product or Service Table of Contents Introduction and Summary 3 Introduction 3 Summary 3 A) A Description of the Product or Service 4 B) A Description of the Organisational Context 5 About Nestle USA 5 About Jamba, Inc. 6 C) A Description of the Host Country 7 Political, Environmental, Social, Technological, Environmental and Legal (PESTEL) 8 D) An Analysis of How the Product/Service Fits With the Environment of the Host Country 11 SWOT Analysis of Jamba Juice 11 E) An Analysis of How You Intend To Enter the Host Country Market, the Critical Risks Involved, and How Your Plan to Mitigate the Risks 12 An Analysis of How You Intend To Enter the Host Country Market 12 Market Entry Strategy 13 Critical Risks Involved 13 Plan to Mitigate the Risks 14 Conclusion and Recommendations 15 Conclusion 15 Recommendations 15 References 17 Introduction and Summary Introduction The advent of globalisation has paved a way for companies across the world to expand their business beyond the national boundaries. In the contemporary business environment, many business organisations have constantly been engaged in expanding their reach by entering into new and potential international markets. At the same time, these business organisations have also been facing certain challenges, such as increasing competition from local as well as global business organisations, which has limited their ability to exploit the prospects existing in the potential foreign markets. Correspondingly, the business organisations engaged in conducting operations in the global context are required to develop appropriate international expansion planning in order to enter into new market segments and to avail the opportunities lying in the new market in the best possible manner. Developing ideal international expansion plan is therefore essential for ensuring long-term sustainability and success of the business organisations (Twarowska & Kakol, 2013). Correspondingly, this paper intends to develop an international expansion plan for Nestle, the American leading nutrition, health and wellness multinational company, for launching its lately introduced product, “Jamba All-Natural Energy Drink” in the Australian market. Summary Expansion into a new market is considered to be the vital step for progression for every business as it not only provides an opportunity to gain more financial resources but also helps in expanding its brand awareness. Jamba All-Natural Energy Drink is considered to be one of the most renowned drinks in America which is manufactured in collaboration amid Nestle and Jamba. In this aspect, Australia has been selected as the market for expanding a line of business as it is amongst those countries which is regarded as one of the best markets for expanding a business that manufactures energy drink. From the evaluation, it has been revealed that Australia is an economically stable nation for business expansion and it provides ample opportunities for making sustainable progression with greater demand for energy drinks. However, there are certain key competitors that can pose a threat for the business. It is further determined that Jamba All-Natural Energy Drink can leverage proper help from Australian Trade Commission to expand its business in the nation by locating prospective options. In summary, it can be affirmed that business expansion to Australia can facilitate Jamba All-Natural Energy Drink to establish its presence in global platform as well. A) A Description of the Product or Service The lives of today’s people are considered to be very hectic in comparison with how people lived decades ago. People tend to buy products that would help them both physically as well as mentally to cope up the increasing pressure in one’s personal and professional life. In this regard, energy drinks are considered to be one such product that tends to provide mental and physical stimulation to an individual. With the advent of globalisation and the growing adaption of energy drink in an individual’s life, different organisations are developing new products specially targeting athletes, students and professionals. Jamba All-Natural Energy Drink is an energy drink that was launched in the year 2011 with a collaboration amid Nestle S.A. and Jamba Juice Company sold in almost 600 Jamba juice locations located across the United States of America (U.S.A). The product is available in three great fruit flavours which are strawberry banana, crisp apple and pomegranate blueberry. The energy drink is considered to have no artificial preservation, tastes or colours, 0g of trans-fats and no high fructose syrup. Furthermore, each 8.4 ounce contains a sum total of 70% real fruit juice, approximately 80mg of caffeine which is derived from natural sources and is assumed to provide 90 calorie per servings. The drink is the result of collaboration amid Jamba and Nestle that materialised in the late 2007 to launch the product. It is worth mentioning that Nestle is the sole manufacturer of the line of products. However, Jamba also holds the right to apply innovative approaches that could help in expanding the new growth phase of the product in a host country (1Jamba Juice Company, 2012; CSP Daily News, 2011). Correspondingly, the selected host country for launching of the product is Australia, which is determined to be a prospective market for healthy products. B) A Description of the Organisational Context Jamba All-Natural Energy Drink is considered to be an upcoming energy drink product in the United States of America (USA). It is the result of collaboration amid two well-known multinational companies i.e. Nestle recognised to be the world largest food and beverage organisation and Jamba Juice Company, a restaurant retailer. The two companies collaborated in the year 2007 to develop a line of ready-to-drink energy drinks especially for the northeaster part of America by 2011. The energy drink is mainly based on real fruit juice boosted with natural caffeine that would provide its consumers with great taste in comparison with other energy drinks available in the market (CSP Daily News, 2011).. About Nestle USA Nestle America is considered to be one of the most admired companies in the North America. Listed more than 13 consecutive years, the company is known for its quality brands and products that help an individual to start his/her day. From morning’s breakfast to dinner, Nestle makes a few of the most delicious, convenient and nutrition foods that help in meeting all the daily requirements of an individual in day-to-day life. It is estimated that till 2009, Nestle USA had a sales of around US$10.4 billion. The company provides employment opportunities to almost 25,000 employees worldwide with a total number of 25 manufacturing plants, 35 distribution centres and 15 sales offices around the nation. Nestle USA is assumed to have started operating in the nation in the early 1900s. It is worth mentioning that it was then when Nestle added chocolate products to its range of offerings (Nestle, 2013). The contribution of the company during the World War II is also noteworthy when it served as a staple beverage supplier to many of the military personnel who were involved in the war. Again, in the year 1984, Nestle improved its bottom line allowing the company to introduce a new round of purchase which included a public offering of US $3 billion for the American food based renowned company ‘Carnation’. It is till date considered amongst the largest acquisition in the mid-80s. The company is listed under the symbol Nestle SA (NESN.VX) in New York Stock Exchange (NYSE) and has also been listed No. 1 in the Fortune Global 500 as the world’s most profitable corporation with a capital amounting to US $233 billion (Cable News Network, 2011) and has been recently listed No. 9 in the year 2013. The company was originally not named Nestle. It was named so when two companies namely Anglo-Swiss Milk Company which was established in the year 1866 and Farine Lactee Henri Nestle was merged by Henri Nestle in the year 1905 in Switzerland. It is worth mentioning that till date the company’s headquarter is located in Switzerland (Nestle, n.d.). About Jamba, Inc. Jamba Juice Company is measured to be one of the leading cafeteria stores with it’s headquarter in Emeryville, state of California. It operates a total number of 750 stores in 26 states of the USA. Additionally, the company also operates in countries such as the Bahamas, Canada, Philippines and South Korea. It is worth mentioning that out of the 750 stores 307 are owned by the company while the remaining 443 are operated under franchise which includes 19 international locations. Established in the year 1990, today the company is considered to be amongst the leading restaurant retailers that specializes in beverages and foods which mainly include whole fruit smoothness, fresh squeezed juice hot coffee and teas and a variety of baked food items. The company also provides the facility to enjoy at home. The company came into notice with the acquisition of national wide Zukav Juice, Inc. in the year 1999. On March 13, 2006, Jamba Juice was acquired by Services Acquisition Corp with a total sum of US $265 million. It was then the company was renamed as Jamba Inc. However, with the increasing competition from other retail restaurant business, the company transformed its shop into modern restaurant chain business including wraps, sandwiches, salads and flatbreads. Additionally, it has also been viewed that the organisation takes certain initiatives that help in spreading awareness relating to the growing issues that can be viewed amid the people resulting from consumption of certain beverages (2Jamba Juice Company, 2009). C) A Description of the Host Country International expansion is determined to be a vital aspect for today’s companies, which aims at establishing themselves at the global platform. In this regard, Australia has been selected as the country for the expansion of the product named Jamba All-Natural Energy Drink. PESTEL analysis of Australia to understand the different aspects of the country is evaluated hereunder: Political, Environmental, Social, Technological, Environmental and Legal (PESTEL) Political The government of Australia follows a legitimate domain with a centralised division of controls. It uses a legislatorial structure of government with Queen Elizabeth II at its head as the Queen of Australia. In terms of political parties, there exist two major political groups i.e. the Australian Labour Party and the Coalition which is a formal grouping of the Liberal party. Economic, freedom and different policies are implemented with the protection of civil liberties and political rights. Moreover, the country is also a member of numerous organisations which aims at maintaining peace and a state of collaboration amid all nations. A few of the organisations where Australia seems to act as an active member include United Nations (UNAA, 2012), Commonwealth of Nations Organisation for Economic (The Commonwealth, 2013), World Trade Organization (World Trade Organization, 2013) and Asia-Pacific Economic Cooperation (Australia.gov.au, n.d.) among others. Economic Australia is considered to be a developed nation and is measured to be one of the richest nations in the world ranked in the 12th position (International Monetary Fund, 2013). It is worth mentioning that according to International Monetary Fund, the country had the fifth highest per capita income in the year 2012. In terms of reserve of foreign exchange and gold, the country has a whopping amount of AU $49.22 billion and a stock of AU $618.9 billion as reserve of direct foreign investment at home and AU $426.5 billion stock of direct foreign investment abroad as of 2012 (CIA, n.d.). Social The Commonwealth of Australia generally known as Australia is the sixth biggest nation by area in the world. The country comprises the mainland of the Australian continents i.e. the island of Tasmania and numerous small islands. The nation is also ranked high in terms of its national performance such as quality of life of its civilians, health and education. Out of the total habitat of Australia, 92% are whites, 7% Asian and 1% belongs to other nations with English being spoken the most. It is worth mentioning that out of the total population, 42% of them falls under the age of 25-54 years and over 99% of the total population is literate (CIA, n.d.). Technological Technological aspect is considered to be a crucial part of Australia. In terms of the communication facet, the nation provides excellent domestic along with international services with a total number of 10.47 million mainline and 24.4 million cellular users as of 2012. The aspect of transportation within the nation is also developed in comparison with other similar countries. The country has a total number of 480 airports out of which 349 have paved runways and 131 have unpaved runways. The nation also has its own railways route which runs around 38,445 km connecting different states with each other along with 823,217 km roadways spread all over the nation. Apart from this, the country also has a few of the major sea-ports in the world such as Brisbane, Cairns, Darwin and Sydney among others (CIA, n.d.). Organizations such as Australian Trade Commission assist in locating business opportunities, sources and trade partners which can be an additional advantage for the Jamba Juice’s international expansion plan. The nation also spends a considerable amount of money for conducting research & development (R&D) (SlideShare Inc., 2013). Environmental Australia is considered to be a country whose most of the areas are either deserted or semi-arid including a diverse range of habitants. However, the aspect of climatic change is determined to be a growing issue within the nation. Furthermore, since the literacy rate of the country seems to be considerably good, it can be accepted as a prime advantage for the new expansion plan (SlideShare Inc., 2013). It is worth mentioning that water restrictions are frequently in place in response to chronic shortage resulting from the increasing population in urban areas along with localised drought (BBC, 2013). Legal The government of Australia is determined to be amongst the best governments worldwide. For instance, during the last global financial crisis in 2007, it is viewed that regions such as the United States and European countries were suffering from recession however the Australian government implemented certain strategies that helped small businesses and industries to deal with the issue which kept the economy stable. Its implemented policies have helped in taking advantage of the situation for which the country is considered to be one of the best nations for export trade with a low risk. In terms of tariff and non-tariff barriers according to the law, every individual has to pay consumption tax of 10% on all goods and services bought. Moreover, Australian currency is considered to be amongst the most traded exchanges and the present changeability is controlled by the Reserve Bank of Australia (SlideShare Inc., 2013). D) An Analysis of How the Product/Service Fits With the Environment of the Host Country In order to analyse how the product i.e. Jamba Juice fits with the environment SWOT analysis seems to be the appropriate approach. SWOT Analysis of Jamba Juice Strengths (S) Nestle Jamba all-natural energy drinks owes strong brand equity in the global marketplace. The juice is available in three delicious taste/fruit flavours including strawberry banana, crisp apple, and pomegranate blueberry. Moreover, the juice does not contain any artificial preservative colours. Unlike other juices, Jamba Juices contains 0g trans-fat. Jamba Juice is considered to be a quality beverage that satisfies the growing portfolio of Nestle’s health and wellness products (CSP Daily News, 2011). Weaknesses (W) The customer service is ascertained to be inadequate in the current scenario. Moreover, the low costs and affordable price of the product may be lined up with low or medium quality. The profit margin of Nestle is relatively low, which may hamper the long-term success of the product (Castelarhost.com, 2005). Opportunities (O) One of the potential opportunities for Nestle Jamba all-natural energy drinks can be identified with the aspect that the demand for health drinks are constantly increasing across the world including Australia. Rise in health awareness amid the Australian population offers significant opportunity for Nestle Jamba all-natural energy drinks to exploit these opportunities to the greatest extent. The health drinks consumption in Australia has also grown due to the increasing active lifestyle of teenagers within the country (Deloitte Touche Tohmatsu, 2005). Threats (T) There also lays certain factors that may impose threats to Nestle Jamba all-natural energy drinks. In this regard, the existence of fierce competition in the Australian beverage market segment may possibly hinder the operational ability of the company. Moreover, the distribution system concerning with beverage industry of Australia is composed of multiple sales channels, which would require the Nestle Jamba all-natural energy drinks to develop considerable understanding for attaining success in the Australian beverage market segment. Regulations related with beverage safety are also more stringent in Australia. Above all, the uncertain economic conditions may also act as a threat for the Nestle Jamba all-natural energy drinks (Deloitte Touche Tohmatsu, 2005). E) An Analysis of How You Intend To Enter the Host Country Market, the Critical Risks Involved, and How Your Plan to Mitigate the Risks An Analysis of How You Intend To Enter the Host Country Market Expansion of a business in a new nation is considered to be today’s business strategy to conquer the international market. Considering the growing competitions Nestle should implements plans that would not only aid in establishing its product amid the first choice of the customers but would also aid in providing a tough competition to its competitors. Moreover, it has been ascertained that 1% of the total energy drinks sold are through vending machines, thus if vending machines are placed in parks, community halls and different recreational places it would not only help in attracting more customers but would also facilitate in creating brand awareness amid its customers. Since the product does not contain high amount of caffeine in comparison with other energy drinks and is manufactured using natural imprudence, celebrities can be hired to promote the product. Moreover, collaboration can be built with large break-fast chain businesses as it has been viewed that around 32% of the consumers consume energy drink before 11 A.M (Australian Beverages, n.d.). Market Entry Strategy The multinational companies that are involved in expanding into nations outside their home country, have to encounter challenges of selecting the ideal structural arrangement for entering in the new market. There are various entry mode alternatives that a multinational company can choose for successfully entering in the new market, such as exporting, joint venture, licensing, wholly-owned subsadaries and franchising. At the same time, aforementioned entry mode stratgies have their own advantages and disadvatnages. Despite the challenges and opportunities associated with the entry mode strategies, joint venture as an entry mode for the Nestle Jamba all-natural energy drinks, has been selected for entering into the host market i.e. Australia. The Nestle Jamba all-natural energy drinks will enter into joint venture with Vitaco Health Limited, which is one of the leading health and wellness manufacturing company in Australia (Vitaco Health Australia, n.d.). Critical Risks Involved However, it has been viewed that many organizations have often failed in successful integration in a foreign market resulting in huge monetary losses. Considering the aspect of expansion of business relating to energy drink in Australia, the first facet is the number of competitors. With the growing acceptance of energy drinks as a source of energy, it has been observed that many organizations are implementing strategies and policies to conquer the market. Well-known brands such as Red-Bull, Monster and Rockstar among others have almost conquered 92% of the total market share (exis, 2013). Therefore if no proper strategy is made the company who face a huge monetary loss. Plan to Mitigate the Risks With respect to the above stated data and facts, it can be viewed that Australia is one of the best countries for expansion especially for beverages. The first reason is the acceptance of energy drink as a food item. This not only provides an opportunity for both Nestle and Jamba to introduce a new line of product but it also renders a prospect for a new market for introducing similar products in the selected nation i.e. Australia. The second reason that supports the plan of expansion is the market size of energy drink. It has been determined that the energy drinks only cover 2.7% of the total market share. In this regard, it can be stated that the concerned product is based on natural imprudence specially fruits and contains only 80g of caffeine which is considerably low in comparison with other similar product present in the market. This would not only facilitate to attract more customers specially youth who have just started consuming energy drinks to boost their energy level. Furthermore, it has been viewed that 32% of the purchasers consume it before 11 A.M. therefore since the concerned product is fully based on fruits it would help in attracting more customers. This would help in mitigating the risk to a great extent. Conclusion and Recommendations Conclusion The American multinational, Nestle is planning for international expansion for its lately introduced product Nestle Jamba all-natural energy drinks. The company intends to launch this product in the market segment of Australia. The juice is available in three different flavours, viz. strawberry banana, crisp apple, and pomegranate blueberry. It has been ascertained in this regard that there exists a wide range of opportunities for the juice to succeed in the Australian health drink market. Correspondingly, the demand for health drink is ascertained to be increasing rapidly in Australia due to the changing lifestyle amid the Australian people. At the same time, it has been identified that increasing competition in the Australian beverage market will possibly hinder the successful penetration of the product. Moreover, the strict regulations pertaining to beverage safety may also impose certain obstacles for the juice to be successfully entering into the Australian market. Thus, in order to reduce the risk of failure, joint venture, as then most suitable entry mode strategy, has been selected. Correspondingly, joint venture will be made with one of the leading health drink firm namely Vitaco Health Limited for ensuring successful penetration in the Australian health drink market. Recommendations In order to ensure successful penetration in the Australian health drink market, it is essential to frame and implement effective strategies that would supplement the entry mode decision for Nestle Jamba all-natural energy drinks. It would be vital to take the advantages of brand recognition and price for Nestle Jamba all-natural energy drinks to effectively deal with the increasing competition. It is equally important to duly satisfy the entire legal requirement in order to omit any possible delay in entering into the Australian market. It is also crucial to hire experienced and versatile personnel who have the sufficient experience of dealing with overseas business environment. References Australia.gov.au, No Date. About Australia. APEC members. [Online] Available at: http://www.dfat.gov.au/apec/ [Accessed November 29, 2013]. Australian Beverages, No Date. Energy Drinks – An Industry Commitment. Energy Drinks -Regulations, pp. 1-4. BBC, 2013. Saving Australia's Water. Asia-Pacific. [Online] Available at: http://news.bbc.co.uk/2/hi/asia-pacific/7361210.stm [Accessed November 29, 2013]. CSP Daily News, 2011. Nestle Jamba All-Natural Energy Drinks. Beverage Products. [Online] Available at: http://www.cspnet.com/products/beverage-products/items/Nestle-jamba-all-natural-energy-drinks [Accessed November 29, 2013]. Castelarhost.com, 2005. SWOT Analysis Generator. Nestle LC1. [Online] Available at: http://articles.castelarhost.com/nestle_swot_analysis.htm [Accessed December 16, 2013]. Deloitte Touche Tohmatsu, 2005. Pro?table Growth and Value Creation In The Soft Drink Industry. Consumer Business. [Online] Available at: http://www.deloitte.com/assets/Dcom-Australia/Local%20Assets/Documents/White%20Paper_Soft%20Drinks(1).pdf [Accessed December 16, 2013]. Cable News Network, 2011. Top Companies: Most Profitable. Global 500. [Online] Available at: http://money.cnn.com/magazines/fortune/global500/2011/performers/companies/profits/ [Accessed November 29, 2013]. CIA, No Date. Australia. The World Fact Book. [Online] Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/as.html [Accessed November 29, 2013]. exis, 2013. The Top 15 Energy Drink Brands. Reviews. [Online] Available at: http://www.caffeineinformer.com/the-15-top-energy-drink-brands [Accessed November 29, 2013]. International Monetary Fund, 2013. Report for Selected Countries and Subjects. World Economic Outlook Database. 1Jamba Juice Company, 2012. Jamba, Inc. Announces Acceleration of Consumer Products Growth Platform To Expand Distribution of Jamba All-Natural Energy Drinks With Acquisition of Intellectual Property from Nestle. News Release. [Online] Available at: http://ir.jambajuice.com/phoenix.zhtml?c=192409&p=irol-newsArticle&ID=1685298&highlight= [Accessed November 29, 2013]. 2Jamba Juice Company, 2009. About Jamba, Inc. Nestle USA and Jamba Juice Close to Renewing Partnership for Launch of Ready-to-Drink Beverage Line Nestle Jamba All-Natural Energy Drink Expected to Launch in Retail in Early 2011. [Online] Available at: http://ir.jambajuice.com/phoenix.zhtml?c=192409&p=irol-newsArticle_pf&ID=1479071 [Accessed November 29, 2013]. Nestle, 2013. Nestle’s History. Nestle Family. [Online] Available at: http://www.nestle-family.com/our-company/english/assets/downloads/Nestle-History.pdf [Accessed November 29, 2013]. Nestle, No Date. All About Nestle. About Us. [Online] Available at: http://www.Nestle.in/aboutus/allaboutnestl%C3%A9 [Accessed November 29, 2013]. SlideShare Inc., 2013. Australia PEST. Viability of Exports to Australia. [Online] Available at: http://www.slideshare.net/JagdevSinghBhadauria/australia-pest [Accessed November 29, 2013]. The Commonwealth, 2013. Australia. Member countries. [Online] Available at: http://thecommonwealth.org/our-member-countries/australia [Accessed November 29, 2013]. Twarowska, K. & Kakol, M., 2013. International Business Strategy - Reasons and Forms Of Expansion Into Foreign Markets. Knowledge Management and Information, pp. 1005-1011. UNAA, 2012. Welcome to the UNAA. About Us. [Online] Available at: http://www.unaa.org.au/about-unaa.html [Accessed November 29, 2013]. Vitaco Health Australia, No Date. Why "Vitaco". About Us. [Online] Available at: http://www.vitaco.co.nz/about.html [Accessed December 16, 2013]. World Trade Organization, 2013. Australia and the WTO. Member Information. [Online] Available at: http://www.wto.org/english/thewto_e/countries_e/australia_e.htm [Accessed November 29, 2013]. Read More