nestle - My. _ C H Dealing with Competition { CHAPTER ll b...

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Unformatted text preview: My. _ C H Dealing with Competition { CHAPTER ll b 333 H Nestle of Switzerland is a leading marketer of consumer— packaged foods and beverageslt sells a hostofhousehold brand names in several packaged food and beverage categories:instant coffee (Nescafe), instant noodles (Maggi), instant tea {Nesteal, cereals (Nestum), baby formula tNeslac), pet food {Friskies}, creamers (Coffee-Mate), milk (Carnation), chocolates (KitKat and Smarties), and powdered chocolate drinks (Milo). It has also acquired Perrier,Hills Brothersand Buittoni,and itsjoint—venture partners include L‘Oreal, which sells Lancr‘Jme and Helena RubinsteinNestle's market leadership rests on several principles. r Customerknowiedge. Nestle studies its customers through continuous marketing research and intelligence gathering. Nestle listens to and advises over 200,000 customers worldwide dailylt hasa consumer relationship panel which gathers information from customers, and a consumer services network where experts in nutrition, food science, food safety,and cooking provide prompt,et‘ficlent,and high quality services to customers. r tong—term outlook. While Nestle aims to be the first food company to enter a new market, it analyzes an opportunity at length before committing itselffor the long run to make its investment a success. This patience is reflected in its negotiations to enter China. It was only after 13 years of talks that it finally entered Heilongjiang provinceNestle now has 13 factories in China. It also acquired stakes in Totole and Haoji, leaders ofthe bouillon market in western and eastern China respectively. p Product innovation. Nestle is an active innovator, tailoring its products to local tastes based on extensive consumer preference studies. Its first food technologists in the region were Asian chefs hired to cook dishes as they were prepared at home or in restaurants. It is expanding the use ofits brands outside the home by' working with hotels and airlines to make products suited for the needs of professional chefs. Nestle also trains R&D staff for two to three years and has exchange programs among its facilities. t Quality/strategy Nestle designs products of superior quality. Once launched, they are continuously improved. For examplethe gradual rejection by Asians of artificial flavors for naturally—derived ones has led Nestle to develop meaty flavors that may be extracted from biological processes such as fermentation. it is also developing more healthy and nutritious offerings such as Omega Plus Milk and Nestomalt which have lower satt, fat, and cholesterol content. i Brand strategy. In each market, Nestle selects two or three brands from some 8,000 different brands from a basket of l l strategic brand groupsThis limits risk and concentrates the attackThus only 750 of its brands are registered in more than one country, and only 80 are registered in to. t Line-extension strategy. Nestle produces its brands in several sizes and forms to satisfy varying consumer preferences. This gives its brands more shelf space and prevents competitors from moving in to satisfy unmet market needs. For example, in Thailand, it successfully extended its Bear Brand condensed milk by introducing Bear Brand with Honey, given that honey is a relatively rare ingredient in tropical countries like Thailand. Brand—extension strategy. Nestle’ will often use its strong brand names to launch new productsThis gives the new brand more instant recognition and credibility with lower advertising outlay. For example, Maggi, long synonymous with instant noodles, has been extended successfully into such lines as tomato ketchup, chilli sauce, and mixes for dishes from fish-head curry to chilli—plum duck. Heavyadvertising. Nestlé never stints on spending money to create strong consumer awareness and preference. For example, Nestle is willing to spend in a ratio of twice advertising share ofvoice to market share to grow its Friskies brand of pet foods in Japan. in South Korea, Kraft General Foods had dominated since the 19505. Seven years after it entered that market,Nestle took a 35-percent share in 1994, partly through heavy advertising. Aggressive sales force. Nestle has a strong field sales force, which works effectively with key retail customers to gain shelf space and cooperation in point-of~purchase displays and promotions. When the supermarket share of urban business increased in Thailand, Nestle overhauled its sales team, staffing it with university graduates fluent in English, many with MBAs. The team is trained in the latest shelf— management techniques in Switzerland, Hong Kong, and Australia, and assumed the job of selling to supermarkets and superstores like Makro. Effective sales promotion. Nestle has developed several effective sales promotion campaigns in Asia by creatively adapting successful promotions conducted elsewhereFor example, it latched onto a summer coffee promotion by Nestle Greece to launch Shake, a cold coffee product in Thailand. Promotions included a dance, called Shake, and a talent contest for an annual Shake girl. However, Nestle tries to minimize the use of sales promotion, preferring to rely on advertising to build long-term consumer preference. Strong deaierreiations. Nestle maintains close relationships with its trade partners. It pioneered point-of—sales merchandising activities in Japan,a practice it has since used extensively elsewhere. It also tailors its sales promotions to certain types of distribution channels and groups of wholesalers and retailersln Japan,it is fully integrated into the 5090 shosha system of wholesalers and retailers. To establish H 384 4 PART 4 k BUILDING STRONG BRANDS bl strong relationships with supermarkets inThaiiand,it provides and trains them on the latest inventory control systems. i Competitive toughness. Nestle‘s ea rly entry into most of Asia gives it a competitive edge. For instance, its products were sold in Japan since the lBBOsNestle is willing to pour money to outpromote new competitors and prevent them from gaining a foothold in the market. For example, a local producer in Malaysia sold store-labeled tomato ketchup priced about 25 percent below Nestle's Maggi brand. Nestle retaliated by test marketing a 20-percent price cut in north Malaysia. Nestlé‘s economies of scale and technical knowledge enable it to streamline production across Asia. This alleviates margin erosion pressure from large retailers. b Onir‘ne marketing. Nestle operates several 82C shopping Web sites such as Nestle Gift World, where gifts can be sent to those living in Japan. Nespresso coffee machines and coffee capsules can also be ordered online and delivered in most countries. It also operates several B2BWeb sites,including Nestrade, which offers product sourcing and trading facilities to its internal operating units and to business clients. D Manufacturing efficiency. Nestle spends much money developing and improving production Operations to keep its costs among the lowest in the industry. It has helped developing nations like Sri Lanka, lndia, China, Indonesia, Malaysia, and Thailand establish indigenous dairy industries and coffee cultivationThese projects create such goodwill for Nestle that it is often insulated from any instability that may arise. Nestle’ also has a program to take advantage ofa tariff reduction scheme in ASEAN. These include joint ventures with local partners producing KitKat chocolate wafer bars in Malaysia, soya-based products in Indonesia, 1. Bruce Einhorn, "Rebooting Toshiba,” BusinessWeek {May 31. 2004):28—29. 2. Leonard M. Fuld, The New Competitor intelligence: The Complete Resource for Finding, Analyzing, and Using information about Your Competitors (New York: John Wiley, 1995}; John A. Czepiel, Campetitive Marketing Strategy (Upper Saddle River, NJ: Prentice Hall, 1992}. 3. Chester Dawson, “An Endurance Test for Japanese Carmakers,” BusinessWeek (April 26, 2004]: 19. 4. Ian Rowley and Hiroko Tashiro, “Crazy for Cramming," BusinessWeek (April 28, 2005): 22—23. 5. Michael E. Porter, Competitive Strategy (New York:‘ihe Free Press, 1980}: 22—23. 6. Michael KrantL‘ClickTill You Drop,” Time (July 20, 1998}: 34—39;Michael Krauss,‘The Web Is Taking Your Customers for ltself,"Marketing News (June 8, 1998): 8. breakfast cereals in the Philippines,Coffee-Mate in Thailand and soy sauce powder in Singapore for the region. b Autonomous regional managers. Nestle's regiona| managers have autonomy in decision making. Some 100 or such managers worldwide spend their entire careers lnjust one region. Nestle managers travel frequently to pick up new marketing weaponry from Europe or Japan to adopt in other Asian nations. Nestle managers can also develop their career by moving across Asia. For example, a Filipino manager or technical Operations at the Nestle’ coffee factory in Bangkok was tasked to supervise a plant in Indonesia. lnstead of completely relying on expatriate talent, Nestle deepens the pool ofcross-border Asian managersTraining is paramount at Nestle. At any time, Nestle Japan has about IO of its Japanese staff working overseas for more than a year. Discussion Questions 1. What have been the key success factors for Nestle? 2. Where is Nestle vulnerable? What should it watch out for? 3. What recommendations would you make to seniOr marketing executives going forward? What should the ' company be sure to do with its marketing? SourcesrClara Chow'Nestlé‘s Cooking Up Something,‘ The Straits Times (Singapore) (August 14, 2002): L4; <www,nestle,com>; <>: Carla Rapoport,'Nestle‘s Brand Building Machine,'Eortune (September 19, 1994]: 137-141 .- Mark Clifford,‘Nestle Puts Down Roots,‘FarEastern Economic Review (December 30, i 993 and January 6, 1993);4i:Sharon Loh.‘R&D behind Maggi,'The Sundayiimes {Singapore}, Sunday Plus Section (May 1, 1994):; David M. Reid. Effective Marketing for Japan: The Consumer Goods Experience (Hong Kong: Business International Asia/Pacific Ltd.,June 1991):91—92, 139—141. 7. Allan D. Shocker,‘Determining the Structure of Product- Markets:Practices, Issues, and Suggestions,"in Barton A. Weitz and Robin Wensley eds, Handbook of Marketing, (London, UK: Sage Publications. 2002}: 106—1 25. See also Bruce H. Clark and David 3. Montgomery, 'Managerial Identification of Competitors,“ Journal of Marketing 63 (July 1999):67—83. 8. Jap Palmer, 'Palmed Off: Handy Gadgets Are Hot Today. But the Future Belongs to Wireless Phones,” Barron’s (February 28, 2000). 9. Alysha Webb, ‘Buying Binge,"8usinessWeek Asian Edition {January 29.2001}:16—18. 10. Kathryn Rudie Harrigan,‘The Effect of Exit Barriers Upon Strategic Flexibility,“ Strategic Management Journal 1 (l 980}: 165—176. 1 1 . Michael E. Porter, Competitive Advantage (New York: The Free Press, 1985}:225, 485. ...
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This note was uploaded on 02/07/2012 for the course MBA 102 taught by Professor Xxx during the Winter '11 term at American InterContinental University.

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nestle - My. _ C H Dealing with Competition { CHAPTER ll b...

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