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Nestle is a Swiss based company and has numerous branches across other parts of the world. Nestle Corporation was founded in 1860s by one Henri Nestle who sought to establish an enterprise that could supply a supplement and economical product for infants other than breastfeeding. The company has been performing well economically throughout its life while facing various assorted challenges. Nestle is among the global firms with the biggest economies and is the market leader in its operation industry having a market capitalization of approximately $247 billion. The company has also had numerous acquisition and joint ventures in its economic life. The political background of the firm has been good with minimal negative organizational politics. Transition of the company’s management has been smooth since the retirement of the founder in 1875. The external political environment has however had serious impacts on the firm. Significant effect was felt from the World War II activities where the company experienced a sharp decline in its sales and profits (Nestle, 2015).
The company has faced several legal issues since its inception and the most remarkable one being a boycott on Nestle’s products. The company was accused of unethical marketing procedures due to lack of properly labeling its products and an aggressive marketing style where it reportedly provided incentives to physicians to recommend the products to their clients. On another account, Nestle was involved in a legal tussle with Ethiopia over debt issues. In the social context, the company has been very supportive of the surrounding community. The company aims at improving its social value while carrying out its business operations. The company has also facilitates job training programs among its esteemed employees. The company has employed approximately 328,000 people working in different branches across the world (Nestle, 2015).
The management of Nestle Corporation has been faced with constant challenges of the constantly growing organization. Growth and expansion of the company’s activities have attracted a new set of challenges which the management needs to address every time they arise. The company was faced by the problem of child labor in the 1990s where under age children worked in cocoa plantations. This was a big problem to the company’s management since producers are among the members of the company’s supply chain. The firm’s management introduced a supply code which provides conditions of production. The code regulates all members of the supply chain while stetting labor guidelines among its core producers. This hence prompted to an additional problem of tainted relationship between the suppliers and the company due to prohibition of child labor which is convenient and cheap. The company’s management hence had to develop a code that would enhance its relationship with its suppliers (Bee et al, 2015).
Nestle’s management has also been faced with a boycott to the company’s products. This happened when Nestle arguably used unethical marketing tactics to market. The management had to act swiftly to avoid further damage to of the company’s image. The management had to move fast and change the mode and strategy of advertisement. Additionally, the company’s management advocated for a culture change where the recommended culture was centralized on production of high quality Nestle products. The management also encouraged the adoption of a culture of conformity of with international marketing regulations. Nestle Corporation has had a problem with its organizational structure where the company used a top-down management approach. The company had to change its culture of management and the manner of manager to subordinate employment (Bee et al, 2015).
Effects of Global Operations
According to Alden et al (2013) Nestle has faced numerous challenges upon operating globally. The company operates in countries whose employment laws are different from its parent country forcing it to adjust its employment policies and adopt policies of employment that are consistent with the requirements. Some countries have regulations and quotas regarding employment in foreign firms where a specific percent of employee are expected to be the locals. This significantly affected the operations of Nestle Corporation especially in developing countries where the largest number of employees is allocated for the locals with a less percentage of expatriate employees. Investing in developing countries hence attracted higher costs involved in training personnel since most prospective employees in developing nations are not best suited for recommended jobs. The company is also required to constantly change its organizational policies to fit the country’s investment guidelines. While the company’s investment policies are aimed at profit and value maximization, Nestle had to adjust its policies to poverty reduction and unemployment reduction upon investing in Indonesia since these are the chief objectives of the country’s provision of foreign investors.
The company also experiences business slumps upon investing in different countries. This result from structural difference in institutions and norms of conducting business in the host country compared to the domestic nation. The most common effect faced by the company is the structural legal difference between the host country’s legal institutions and those of the domestic country. This usually leads to inconveniencies where the company is denied an opportunity to perform some of its business activities as they are not permissible by the local authorities. For example, competition control institutions in Canada restricted Nestle to use aggressive strategy of marketing in the country (Alden et al, 2013).
Corporate Ethics and Corporate Social Responsibilities
Nestle corporation holds that for a business enterprise to succeed in the operative industry in the long run, it has to recognize the value of its customers and shareholders as well as enhancing the good of the society it is operating in. The company has however been accused of various ethical misdeeds. In 1997 for example, the company was accused of unethical marketing procedures. The company was accused of failing to label some of its products in Laos. This was termed as unethical marketing procedure since selective labeling of the company’s products was misleading. In another case, Nestle Corporation was accused with unfairly pricing its products. Nestle Canada was the main culprit where it was determined that the company had been colluding with competitors from the local market to inflate the product prices. Price fixing is unethical and unfair to the prospective customers. Despite being involved with unethical issues and other unfair business practices, the company high public relation standard among its esteemed customers and the general public. This results from the numerous socially constructive programs that the company has been involved in (Abdulrazak & Ahmad, 2014).
Nestle company is involved in production and supply of products aimed at supplementing breast milk. The products are aimed at supporting the life of an infant in the first 1000 days after it is born. The company is also involved in production, supply and marketing of beverage products. The company has got a strategic marketing arrangement which it uses to boost its reputation. The company has got a brilliant growth strategy where it aims to grow its market share by 10-12% annually. The company also aims at improving the reputation of its brand through production of high quality products. Product development and market penetration are the major strategic approach for the company (Nestle, 2015).
Nestle is among the most prominent and oldest multinational corporations in the world. The company was established by Heinrich Nestle who spotted a market niche for production of a product that would serve as a supplement for breast milk. The company has always sourced for growth opportunities from foreign nations. The company expanded its geographic scope for the business at its initial inception stages after merging with Anglo Swiss Company. The firm was among first to operate in the industry which was less saturated by that time. The firm was forced to internationalize at the early stages of its inception due to small geographical size of the parent country. Additionally, there was a high potential of industry growth outside the country. Currently, the industry has revolutionized due to technological complexities which have enabled Nestle to produce more diverse and high quality products. Despite the current industry challenges, due to branded products from retail chains, the firm still utilizes any growth strategy to boost market performance. In future, the industry is expected to become saturated with similar products and Nestle would be expected to differentiate its products from those of its competitors (Sethi, 2012).
The industry is infested with high competition especially from supermarket chains which are producing similar products and selling at a lower price especially in Europe which Nestle had a big market share. To withstand this competition, Nestle is highly differentiating its products while adjusting the prices downwards. This also works as a strategy to attract customers from outside the domestic region of operation. The company is located in almost all European nations, the USA and selective Asian countries. The reason for such diverse investment was the high demand of the firm’s products. Not incentives were offered to Nestle but the firm spotted such growth prospects and acted spontaneously. Nestle’s competitors are targeting the developed markets while it counters this by targeting emerging markets (Sethi, 2012).
Despite the constant increase in of competition in the industry, Nestle continues to position itself strategically in order to retain current clients while attracting new ones. The firm boasts of several sources of competitive advantage. First, Nestle has got a unique brand portfolio and highly differentiated products from its competitors. The competitive advantages comes from a mix of physical and structural advantages that are accrued from the from the value chain which the firm has build over decades of operation. The firm has got a strong R&D which cannot be matched to any other firm operating in the industry. Nestle has got a broad geographic market which no competitor has attained yet. The firm has got a wide market share which it satisfies with its products while competitors manage to occupy selective geographic regions. Additionally, the firm is able to connect its products and services to the attitudes, values and the culture of the target population. This hence increases the connection of the company with its customers which leads to increased customer satisfaction. In order to maintain the competitive advantage, Nestle should constantly use market indicators to establish which market segments need more effort. The firm should also embrace current technological advantages in its favor since it has adequate financial resources to acquire it (Porter & Kramer, 2006).