Company background
Nestlé is a Switzerland based international food and beverage producing organisation. The organisation is one of the most prominent food manufacturing chains in the global platform, when measured by revenues and production units. The revenues generated by the company in Australian in its last financial year is 21.4 billion AUD. Nestlé has listed itself on the 64th position in Fortune Global 500 in the year 2017 33rd Forbes Global 2000 in 2016. Nestlé also engages third party firms to interact with governments and parliaments in multiple jurisdictions. For instance, in South Australia, Nestlé interacts with Etched Communications, a telecommunication firm. Nestlé in Australian markets is strengthened by food and nutrition research bases. A strong employee base that is either directly or indirectly linked to R&D and corporate ventures has strengthened its strategic implementation. Nestlé is thereby aiming to respond to variations in customer needs that steadily drive toward wellness. [Refer to Appendix A]
Discussion
Food-focused agribusiness sector in Australia
Agriculture and food production are considered rudimentary to the survival of human beings. At present, Australian agricultural practices have undergone drastic changes and sophistications with the aid from technical instruments. As stated by Crino et al. (2015), Australia is one of the most efficient and innovative industries in agriculture when it comes to the global production of food. Farmers retain competition in the national as well as foreign food markets despite the low subsidy levels in Australia. According to the findings of Booth and Whelan (2014), national food security in this country can inextricably related to socio-political status of the host region. The capability of agricultural industry in Australia to innovate, adapt and design successful ventures can support Australia as a prosperous nation with ample food security.
In addition, food security affects national status as premier food exporter and cognitive well being of the population. As stated by Willer and Lernoud (2016), likelihood of food crisis affecting Australian population is remote. This is because the markets provide safe, cheap, fresh and good quality food to feed the national population of 24.1 million. Australia accounts for approximately 3.7% of global food sector, more than $30 billion AUD worth of products are exported annually (Jurgilevich et al. 2016). The Australian food sector produces enough food to feed 2% of entire Asian population. In order to address problems in global food security, the markets have to depend upon improved technologies that may lead to an elevation in the amount of food produced. This should be attained without increasing the stress on production areas.
As mentioned above, arable lands have started to become limited with the growing population and eroding terrains. Hence, measures are required that can multiply food production in their designated areas. Furthermore, Mialon, Swinburn and Sacks (2015) comment severity and frequency of climatic shocks can also increase owing to changing climates influenced by human activities. Agricultural has retained its significance in the Australian economy with effective development over the years and deliverance of innovative technologies. These developments and technologies have been strengthened by an effective research base comprising of skilled farming communities. The future ventures of Australia involve maintenance of their agricultural sector in the global economy by sustaining food production on drastic climate variability and poor quality soils. Continuous research and skilled labour provide solid backdrop to influence transformation in this industry and uphold food security.
Findings
International opportunities
A demand on food around the world has given rise to an imminent boom in agriculture industry in Australia. This inflation has been expected to increase the agricultural outputs several-fold to feed the growing demand on food. Nestlé has presented a long-term strategy that is derived from genuine scientific queries that involves meeting the questions about land, nutrients, water, and resource requirements. The company aims to provide knowledge to the nation with the help of extensive research in farming that can aid farmers to practice smarter agriculture. As opined by Lim-Camacho et al. (2015), soil bank strategy of Nestlé can access nutrients from earlier utilisation of fertilisers that can enhance agricultural productivity and decrease vulnerabilities of the farmers. International opportunities for Nestlé in Australian markets thus involve a steady growth in retail over the World Wide Web. The company aims to initiate distribution channels with Amazon Prime, which can provide them a competitive advantage over traditional retailers. Ingrao et al. (2016) state development of products that can meet the demands of middle class populations in Australia can lead to broadening of the client base for Nestlé. Similarly, increase in disposable income can elevate the demands for luxury items, such as ice creams, pet foods, probiotics and bottled water.
International strategies
Nestlé stresses more on customisation in comparison to universalism, to increase their international brand identity. As opined by Turner et al. (2018), Nestlé utilises a global identity that is strengthened by the usage of technologies and ingredients, which resonate with local markets. However, Carey et al. (2016) argue customisation of products can hinder its distribution and logistics that are implemented among factories and local farming communities. Australian infrastructure for supply chain of agriculture requires sustainable management. Nestlé has designed a strategy to replace old trucks and resolve conflicts in logistics that hinder successful carrying out of supply chain processes (Nestlé, 2018). The aforementioned food manufacturers have accepted a strategy that delivers its goods to the local warehouses. Trieu et al. (2015) argue this to be an expensive strategy, as it increases the burden on farmers to increase their production and supply. Execution of this strategy can benefit both the company as well as the national markets for a long term. The provision of autonomy given by Nestlé to the local markets in Australia to formulate distribution and pricing decisions act as key influencers of product diversification in the chosen market.
Analysis
Entry mode to international market
Popular modes of entry in foreign markets involve collaboration of Internet tools, exporting, franchising, licensing, joint ventures and acquisitions. Growing competition in the markets is apparent for Nestlé as it targets to expand its market from the perspective of sustainable growth. Successful strategic implementation for market entrance needs ability and flexibility to maintain company positions to change market conditions and visions to achieve organisational goals. Nestlé relies on direct investment to enter foreign markets. It attempts entering emerging markets in early stages and avoids the expensive protocol to set up the brand names in prospective markets. As stated by Mialon et al. (2016), Nestlé should target local companies that have larger brand image in the indigenous markets of Australia. This can help the company to mitigate consumer resentment and cultural hindrances that are usually faced by foreign brands.
Nestlé utilises this strategy to meet basic needs of its customers by providing infant food in the markets. Gradual expansion involves after their business have expanded in upscale markets of beverages, chocolates and instant foods as per consumer needs. The strategy is simple and effective as it covers one niche at a time as per the rising demands. As stated by Willer and Lernoud (2016), food manufacturers connect an expansion plan with collaborative franchises and brands depending on the present population. The company offers more than 8500 brands of product with more than 750 registered in international markets. More than 80 products are registered in ten major importing countries. Ridoutt et al. (2016) explain as customers are often emotionally attached to local names. This strategy is more convenient to the local farming communities for agriculture and milk production.
Consequently, marketing tends to grow easier where local company can utilise their innate distribution channel, customer base and reputation. Nestlé can initiate marketing for its own goods after it has ample foothold in the Australian markets. In this case, the company can concentrate on enhancing their product line and process innovation (Food Standards Australia New Zealand, 2015). Nestlé evaluates basic entry strategies prior to entering into new markets. The organisation should make choices influenced by long run profitability on various foreign markets. The strategy can bring cost balances that can give rise to sustainable benefits through excellence and innovation. According to Lim-Camacho et al. (2015), food manufacturers can mature by acclimatising components of the food and their processing in local environments. Nestlé can implement this by employing effective brand names in the local markets. The company utilises this strategy as it becomes easier to reach consumers with the help of local brand.
Recommendations
Future strategic direction
In order to facilitate Nestlé for maintaining competitive advantage, it must proceed with a specific market segment. As commented by Booth and Whelan (2014), its segments can be identifiable, stable, sizeable, and readily accessible to be coincided with organisational resources and goals. The following recommendations are identified after a thorough analysis of the present situation.
Figure 1: Recommendations
(Source: Given by Researcher)
Recognition of a market segment: In order to attain success, Nestlé must be successful where selected segments can be profitable and retain minimal changes that can adversely affect company processes. Hence, Nestlé must aim to change this perception by targeting demographic segmentation on to 18 to 30 year old customers (influenced by Mialon, Swinburn and Sacks, 2015). These clients are often graduates or are tertiary educational phase.
Effective analysis of market trends: Buying decisions that can be governed by specific segments of the market are thereby vulnerable to changing trends. This change can be thus related to segment parameters, like price, latest trends, and customer needs. Crino et al. (2015) suggest the products of Nestlé should thereby be made to capture the interest in health segments of younger generations. Hence, it can be recommended to Nestlé to consider market analysis and appraisal of changes in this segment.
Conclusion:
Based on the given information, it can be concluded that Nestle requires collaborating with local vendors to increase its foothold on Australian markets. The report has shed light on the agribusiness sector of Australian and its influence on organisational development of Nestlé. A limitation of this report is its time and budget bound genre. Lack of ample time has prevented the utilisation of primary sources. Absence of appropriate budget has limited the literature search to openly accessible journal articles. The agricultural industry of Australia is enriched by enhanced research and development. Hence, Nestle must venture in the pathway that is cooperative of its local competitors as well as cultural backgrounds.
Strategic implementation addresses relevant parameters that can reach desired objectives and goals. This present report aims to evaluate the strategic implementation of Nestlé in Australian markets. Nestlé is specifically chosen for the present report owing to its steady market growth and quality products provided to its customers. In addition, the researcher recognises several international strategies and opportunities for the company to expand its commercial reach. These strategies have helped to derive required market entry mode to global platforms. The researcher finally derives recommendations after studying the possible strategic direction of Nestlé in Australian markets
Reference:
Books
Blaikie, P., 2016. The political economy of soil erosion in developing countries. Abingdon: Routledge.
Willer, H. and Lernoud, J., 2016. The world of organic agriculture. Statistics and emerging trends 2016. Frick: Research Institute of Organic Agriculture FiBL and IFOAM Organics International.
Journals
Booth, S. and Whelan, J., 2014. Hungry for change: the food banking industry in Australia. British Food Journal, 116(9), pp.1392-1404.
Carey, R., Caraher, M., Lawrence, M. and Friel, S., 2016. Opportunities and challenges in developing a whole-of-government national food and nutrition policy: lessons from Australia’s National Food Plan. Public health nutrition, 19(1), pp.3-14.
Crino, M., Sacks, G., Vandevijvere, S., Swinburn, B. and Neal, B., 2015. The influence on population weight gain and obesity of the macronutrient composition and energy density of the food supply. Current obesity reports, 4(1), pp.1-10.
Ingrao, C., Bacenetti, J., Bezama, A., Blok, V., Geldermann, J., Goglio, P., Koukios, E.G., Lindner, M., Nemecek, T., Siracusa, V. and Zabaniotou, A., 2016. Agricultural and forest biomass for food, materials and energy: bio-economy as the cornerstone to cleaner production and more sustainable consumption patterns for accelerating the transition towards equitable, sustainable, post fossil-carbon societies. Journal of Cleaner Production, 117, pp.4-6.
Lim-Camacho, L., Hobday, A.J., Bustamante, R.H., Farmery, A., Fleming, A., Frusher, S., Green, B.S., Norman-López, A., Pecl, G.T., Plagányi, É.E. and Schrobback, P., 2015. Facing the wave of change: stakeholder perspectives on climate adaptation for Australian seafood supply chains. Regional Environmental Change, 15(4), pp.595-606.
Mialon, M., Swinburn, B. and Sacks, G., 2015. A proposed approach to systematically identify and monitor the corporate political activity of the food industry with respect to public health using publicly available information. Obesity reviews, 16(7), pp.519-530.
Turner, G.M., Larsen, K.A., Candy, S., Ogilvy, S., Ananthapavan, J., Moodie, M., James, S.W., Friel, S., Ryan, C.J. and Lawrence, M.A., 2018. Squandering Australia’s food security—The environmental and economic costs of our unhealthy diet and the policy Path We’re On. Journal of cleaner production, 195, pp.1581-1599.
Online articles
Jurgilevich, A., Birge, T., Kentala-Lehtonen, J., Korhonen-Kurki, K., Pietikäinen, J., Saikku, L. and Schösler, H., 2016. Transition towards circular economy in the food system. Sustainability, 8(1), p.69. [Online] Available from: https://www.mdpi.com/2071-1050/8/1/69/htm [Accessed on: 8/9/2018]
Mialon, M., Swinburn, B., Allender, S. and Sacks, G., 2016. Systematic examination of publicly-available information reveals the diverse and extensive corporate political activity of the food industry in Australia. BMC public health, 16(1), p.283. [Online] Available from: https://bmcpublichealth.biomedcentral.com/articles/10.1186/s12889-016-2955-7
Ridoutt, B., Sanguansri, P., Bonney, L., Crimp, S., Lewis, G. and Lim-Camacho, L., 2016. Climate change adaptation strategy in the food industry—insights from product carbon and water footprints. Climate, 4(2), p.26. [Online] Available from: https://www.mdpi.com/2225-1154/4/2/26/html [Accessed on: 8/9/2018]
Trieu, K., Neal, B., Hawkes, C., Dunford, E., Campbell, N., Rodriguez-Fernandez, R., Legetic, B., McLaren, L., Barberio, A. and Webster, J., 2015. Salt reduction initiatives around the world–a systematic review of progress towards the global target. PloS one, 10(7), p.e0130247. [Online] Available from: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0130247 [Accessed on: 8/9/2018]
Websites
Food Standards Australia New Zealand (2015) Food safety standards (Australia only), Viewed on 8 August, 2018, <https://www.foodstandards.gov.au/industry/safetystandards/pages/default.aspx>
Nestle (2018) Our commitments, Viewed on 8 August, 2018, <https://www.nestle.com.au/creating-shared-value/our-commitments>
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