Nestlés Expansion into China | Analysis

Nestls Expansion into chinaw be AnalysisThis paper is around the worlds largest and close famous nutriment association Nestl. If you read this paper, you forget not that learn some archives and management in homunculusation about Nestl, but you fuel overly f ar how Nestl studys the decision to come to China and the specific fulfil of development and nurtureting success in Chinese market place. This paper will mainly tell about four sections detailed for you. Besides, we will show you our come toing members thinking about Nestl in the conclusion. The followings argon main information about four sections. plane section I is about the history of Nestl Company. Henri Nestl found the company in Switzerland in the mid 1860s. Farine Lacte Henri Nestl, the name of Nestls first off product, which saved a premature babys life and soon marketed in Europe. Then Nestl expands really speedily either over the world. In 1905, Nestl interconnected with the Anglo-Swiss Condensed Milk Company and this is the beginning of Nestls expansion. Wars lot always bring big changes into the world. World War II has largely helped generalize Nescafe and Nescafe burnt umber became a kind of popular beverages for Ameri screwing servicemen. Nestl comes to China because of the large potential markets. Now, they puzzle manufacturing factories in many a(prenominal) cities in China. fraction II is about where did Nestl expand and whether did the company expand elsewhere. Nestl is one of the largest fare and beverage company in the world. It has abundant manufacturing facilities in al just about the entire world. It is in kindred manner about Nestl how to naturalise the relationship with Chinese government and citizen and make china become a good market for them. Because traditional Chinese didnt have the exercise to drink coffee, Nestl have to cultivate Chinese the style of habit by advertisement and a variety of means. Nestl tried his best to break market breas 2 rk that he tail integrated into Chinese market quickly. The Chairman of Nestl (China) who is c solelyed Mr. Dcor vet thought that there atomic number 18 much difference between Chinese conceptualizes food and western food. So if Nestl wants to integrate into local anesthetic market quickly, they must respect Chinese brands unique qualities.Section III is about the form that Nestl came into China. When Nestl first came into china in 1987, it chose Shuangcheng which is located in Heilongjiang province to develop itself. However, at that time, Nestl didnt have much power, so it chose coalition. In fix up to improve the level of cooking that was reard to the local farmers, Nestl decided to cooperate with the Shuangcheng government. After developing a long time, Nestl choose another partnership with Yinlu. Later, Nestl chose reefer gage with Yinlu and Hsu Fu Chi to strengthen itself. Resulting from these two forms approach shot into China, Nestl has got a great popularity in all generations in China. Nestl makes many profits and it bring much benefit to Chinese at the same time.Section IV is about the organization construction taken by Nestl in coming to China. Nestl is very successful and it used a proper organizational structure. The matrix structure is efficient and effective. The structure is very flexible and can respond rapidly to the need for change. The key strategy taken by Nestl in coming to China is developing partnership. The strategy helps Nestl achieve great success in the market of China. Nestl develops quickly in China with not yet partnership, but overly with joint venture. Nestl also have four levels in hierarchy. The four move are respectively, board of directors, executive board, honorary electric chair and financial transactions. Nestl Company is a decentralized and aligned organization. There are typically three levels of management in organizations top-level, middle-level, and first-level.Our group is made up of five persons who are Pauline, Serena, Quinn, Hathaway and Mike. Pauline is the attraction of the group and she is liable for the section III and the second question in the section IV. As the leader of the group, Pauline also writes the executive summary to completely introduce the whole paper. Quinn is responsible for the section I and the first question in the section II. Mike who is the only boy in our group is responsible for the remaining five questions in the section II. Serena and Hathaway are both responsible for the section IV. The former writes the front four questions except the second one and the latter(prenominal) introduces the eventual four questions. All of our group members write the conclusion together, because we feel that all of us should know what general content about our work is and we can finish the conclusion better with discussion. We decide this plan for the project, because Quinn as well as Mike is patient, so they are suitable for some detailed questions, such(prenomi nal) as history of Nestl. Pauline is good at organizing and combining the information, so she write about the form Nestl came into China, which is connected to the current curb of Nestl in China. Serena and Hathaway can do a good farm out in researching, so they write the organization structure. In order to be fair, each group member writes about three to four big questions. Section I starts at varlet 3. Three sections left start respectively at page 6, 8 and 10. We all feel very happy to finish the paper in this way.We divide the research and information into six groups, which are four sections, a summary and a conclusion. In four sections, we beginning introduce the history of Nestl from which people can know the basic information about Nestl. And then, we tell about the reasons for Nestl came to China and the form of Nestl came to China. The last section is about organization structure taken by Nestl that is deep-going content about Nestl. After reading these four sections, peo ple can know much about Nestl and how it goes in China. At last, we talk over each other and write the conclusion that expresses our further thinking and understanding about Nestl. We also use the executive summary to tell reader the general information about our company and the arrangement of our paper. We all sincerely hope that readers will like our paper about Nestl.Section I History ofNestlIn the mid 1860s, Nestl was run in Switzerland by Henri Nestl. At the very beginning, Nestl was found to help those mothers who have problems in breastfeeding babies. Henri realized the need for baby formulas and decided to create this kind of new products. He potpourried cows milk, flour and sugar up to provide babies with necessary nutrition. Farine Lacte Henri Nestl was the name of its first product. It saved a premature babys life and soon marketed in Europe. ( English Tea Store, English Tea Store, , October 30, 2012)The Anglo-Swiss Condensed Milk Company, whose founders were Americans C harles and George Page, merged with Nestl after they had been fierce competitors for a long time. Finally, they formed the Nestl and Anglo-Swiss Milk Company together. (Nestl, Nestl, , October 27, 2012)Heiko Schipper, managing director of Nestl Food Beverage, Greater China region claimed that they were planning to increase their enthronization in China and treated coffee tune as one of the key growth engines. (CHINADAILY, Li Fngfang, , October 27, 2012) latch on coffee as an example. As we all know, Brazil is famous for coffee. At the outset, Nestl veritable soluble coffee to help Brazilian farmers resolve problems about hardship and crop waste. This is an early example of fundament and sustainable development for Nestl Company. (Nescafe, Nescafe, , October 30, 2012)Nestl expands into China because of the potential of markets in China. The Chinese coffee market has increased 15 percent annually during these twelvemonths, far higher than the global average. Xiong Xiangru, secr etary-general of the Yunnan Coffee Association, predicted that Chinas coffee consumption will reach 1 trillion Yuan annually in 10 years, and the mature market could be deserving as much as 3 trillion Yuan by 2030. This may encourage Nestl to come to China to a great extent. (CHINADAILY, Li Fngfang, , October 30, 2012)In 1905 the Anglo-Swiss Condensed Milk Company merged with Nestl and this is Nestls first expansion. (Nestl, Nestl, , October 27, 2012)World War II has greatly helped popularize Nescafe. Before the war, initial launch of Nescafe was slow. Nescafe coffee became a very common beverage for American servicemen in Europe and Asia when USA entered the war. Coffee helps people relaxed and gives them energy when they feel tired. This kind of amazing beverage became popular very soon. (Nestl, Nestl,, October 27, 2012)In China, sales have gr avow around 20%, which shows the potential of developing economies. However, Nestl has been losing market share and this may be changed by purchasing. Take Pfizer as an example. Nestl bought Pfizer to be more competitive. Reports showed that about 85% of sales for Pfizers business came from developing economies and about one-third of the Pfizer units revenue is from China. The acquisition of Pfizers business which came at a premium p sift will go a long way to addressing that China problem by adding about $800 million in sales in that country people related said about that. (Msn MONEY, Jim J. Jubak,, October 27, 2012)Nestl has many manufacturing factories oversea. It obeys all rules and standards, such as ISO 14001 (environmental management), OHSAS 18001 (occupational health and safety) and ISO 22000 (food safety management systems). The company controls all parts of manufacturing. That doesnt mean that we will not co-manufacture where there are advantages to doing so, such as speed to market or access to applied science, McIntosh says, but we invariably find that we are much more cost-effective in-house than out -of-house. (FOOD PROCESSING, Bob Sperber, Plant Operations Editor, , October 30, 2012)Nestl set its first Chinese RD center in Shanghai in purpose to uncivil Asian markets. We continue to invest in our RD cap magnate in Asia, because we know this brings us closer to local consumers, and gives us a greater understanding of the raw materials used to make the products they enjoy, says Johannes Baensch, head of Nestls research and development division. (Tce, Richard Jansen, , October 30, 2012)Now Nestl has companies in many places, such as Guangdong, Shandong, Zhejiang, Shanghai, Jiangsu, Fujian, Anhui, Beijing, Sichuan and so on. It has been expanding steps by steps. (Food China net, Food China net, http//www.foodchinanet.com/supplier/Nestl/, October 28, 2012)Section IINestl ExpansionRoland Dcor vet, the food giants China chief executive, said that in spite of facing its own economic slowdown, offers Nestl long-term growth opportunities. As now, middle class is playing more importan t roles in society and this definitely leads to increasing need for dairy farm products and on-the-go foods. China is a country with a large popularity and it can provide Nestl with larger markets they dont assume before. Hsu Fu Chi, a famous candy company, Nestl bought a 60% interest from it to bet on big growth in China. This can be powerful evidence that predicts China is a part of a bigger globalization strategy for Nestl. The purpose of the company is to take more shares in Chinese markets and make its globalization conduct well. (THE WALL STREET JOURNAL, LAURIE BURKITT and JOHN REVILL,, October 30, 2012)Nestl is one of the largest food and beverage company in the world. There are more than 450 manufacturing facilities in over 80 countries and Nestl markets its products in 130 countries across the world. Nestl have planed to disease-resistant coffee plants to famers who are in many developing countries such as Mexico, Indonesia by private institutions because he wants to prod uce Raw materials and sell their product easily in these countries. In 60 countries, Nestl has more than 400 factories and employs abundant employees of local person. Nestl has expanded almost the entire world and it is a super company. (Facts and figures Nescafe Plan, Nestl, page 1, November 8, 2012)As a transnational enterprise who has a long-term development plan, the most important development strategy for Nestl is to find the market which has development potential. In 1987 of the China, the tide of reform and fount up is slowly forward, society as a whole business environment is in a vigorous development of the embryonic stage. Because of its vast size, many Chinese provinces, and each district economy development is not balanced, protectionism, these elements for any foreign enterprise especially transnational enterprise, is a strong resistance. In order to cultivate the relationship with Chinese local government and citizen, Nestl constructed a new farming institute in Heilo ngjiang province. Nestl agreed to support technical assistance and find out for local famers. Nestl want to get win-win by working with famers in this way. (Nestl leads dairy development in China with new training institute, Nestl,, November 8, 2012)For Nestl who has rich experience, how to break the market barrier and integrate into local market is very important. Nescafe knew that if he wants to root in china firmly, he must consider how to seek the economic benefits to the local people and win their favor in order to solve the problem of Nescafe that it can have milk enough, Nestl sent a team of experts from Europe. Not only did it establish a collection network and acquisition system to encourage farmers enthusiasm, but also he taught farmers about dairy technology and milking technology. This is a very difficult thing at that time and it is also more difficult than training a qualified engineer for Nestl. In this way, not only did Nestl solve the problem of raw materials supp lement, but also it provided a stable periodic income for local farmers, there are many farmers and their families living have been fundamentally meliorate due to its help. The development of ways that could assist the local economic development and help farmers to improve the income which got the Chinese government high approval, meanwhile it helped Nescafe win a good social image. (Nestls management of dairy allow for chain in China, Nestl,, November 8, 2012)Chinas coffees consumption is few at that time, so Nescafe had the problems of supplement at the beginning. tralatitious Chinese didnt have the habit to drink coffee. With natural, healthy concept winning the support among the people, tea beverage grows steadily in china. Nestls opponent is not the coffee sugar , but Chinese traditional tea. When Nescafes instant coffee was introduced to China, Nescafe planed to cultivate the Chinese habit of drinking coffee by advertisement and a variety of means in face of Chinese tradit ional tea drinking habits. It intended to attract a group of young to choose coffee by Propagandizing that drinking coffee is a kind of fashion, the trend, successfully, and then Nescafe coffee could increase his sales volume in the market. Nescafe admits that he has enough patience to cultivate market and improve product quality. At the same time, in order to suit ones measures to local conditions, Nestl designed promotional strategy that minimized the SP activity, and turn to advertise and public relations, to establish long-term consumption preference. For example, in Shanghai, Nescafe Company is enthusiast to support university community activities, such as theatrical festival land English corner. The company is also willing to make special subject report in University and give company information and culture to students. (The Nestl People Development Review, Nestl, page 37, November 8, 2012)Mr. Dcor vet who is Chairman of Nestl (China) thought that the Chinese conceptualize fo od and westerns have much difference, and Nestl must respect Chinese brands unique qualities and learn from them in order that company can integrate into local market quickly. He also thought that they need to teach farmers about dairy technology and milking technology because it can help them to cultivate the relationship with local government and Resident. (CELBS, June, , November 8, 2012)Section IIINestl in ChinaWhen Nestl first came into china in 1987, it chose Shuangcheng which is located in Heilongjiang province to develop itself. However, at that time, Nestl didnt have much power, so it chose partnership. In order to improve the level of training that was provided to the local farmers, Nestl decided to cooperate with the Shuangcheng government. In this way, Nestl could make much progress and improve its service and the quality of products, which can attract more consumers. They all knew that good training can improve peoples boilers suit quality which plays an important role in team work. Considering that local farmers lacked money, Nestl provided economic assistance for them and distributed many free milking machines to them. Due to this help, local farmers didnt need to manufacture dairy products with hand, which improved the efficiencies and effectiveness. This measure really did well to local farmers and improved the speed and quality of producing dairy products. Nestl made much effort to develop the rural body politic during years, and the company has also provided credit guarantees to farmers which ensure the potential to grow farmers businesses. Therefore, local farmers were all full of energy to expand dairy products and were confident that they can make success. The partnership work between Nestl and Shuangcheng government is called Creating Shared Value, which tried to make profits for the companys shareholders and those communities where it operates at the same time. During decades, Nestl has made Shuangcheng play the important role in the dairy districts. (Nestl leads dairy development in China with new training institute, Nestl,, October 30, 2012f)After cooperating with Shuangcheng government, Nestl has made many profits, and it also helped the local city develop a lot. Nestl didnt want to stop there, so it looked for another target and finally chose another partnership with a Chinese family-owned firm Yinlu. As Yinlu has a long history in China, it has already got a good reputation. Moreover, Yinlu established a significant market for ready-to-drink peanut milk as well as canned rice porridge in China. Nestl wanted to combine its technology with Yinlus reputation to make much progress. Therefore, Nestl declared that it had taken some stake in Yinlu. Considering that Yinlu is a co-manufacturer for ready-to-drink Nescafe coffee in China, Nestl has decided to cooperate with it and achieved successful achievement with Yinlu before this agreement. The CEO of Nestl considered that the partnership between two companies wo uld bring healthy, affordable and tasty products to all consumers in China. Of course, the antedate goal must be based not only on Yinlus entrepreneurship, product expertise, and consumer understanding, but also on Nestls innovation and renovation capabilities. The chairman Chen of Yinlu thought that the partnership represents a very significant landmark which is in Yinlus long-standing aspiration to be a typical and favorite brand for customers. As Nestl comes into China over twenty years and cooperates with local companies in China, it operates 23 factories and employs 14,000 people, which really do well for Chinese. (Nestl to enter partnership with Chinese food company Yinlu, Nestl,, October 30, 2012)However, partnership was not the only option of Nestl to come into China. As Nestl develops many years in China, it chose partnership at first and then it expanded for joint venture. Nestl uses two RD units in Xiamen and Dongguan to support its joint ventures with Chinese food compa nies Yinlu and Hsu Fu Chi. Moreover, the unit in Xiamen will specialize in ready-to-drink beverages and will support Yinlu. Hsu Fu Chi is a famous snack-selling company in China, and it enjoys the large popularity among all ages in China. Therefore, Nestl and Hsu Fu Chi had got much benefit from the joint venture. Two companies looked forward to the long-term cooperation. Head of RD in Nestl thought that Nestl would continue to invest in their RD because of this program bringing them closer to local consumers who are very important for their future market. The investment in Xiamen and Dongguan reflects its long-term commitment to improve nutrition and food science in China. The joint venture helps Nestl become more popular among Chinese and now almost each young person knows the watchword of Nestl which says Good Food, Good Life. (Nestl strengthens research and development capability in China, Nestl,, October 30, 2012)Nestl makes the decision that it chooses partnership and joint v enture to come into China, and these decisions are based on some considerable factors. China has a large amount of persons and its economy wasnt developed fast in 1980s. As this current condition in China, Nestl decided to expand its investment and development. Therefore, Nestl decided to exploit this potential market. However, at that time, Chinese couldnt be used to and accept Nestls products. In this way, Nestl chose partnership and joint venture, from which it can be easily accepted by local Chinese and it can improve its technology and taste of products. Nestl believed that its partnership and joint venture would get success. Whats more, Nestl will go further in China. (Cereal partners worldwide transcript, Nestl, page 3, October 30, 2012)Section IV Organization Structure in ChinaThe strategy is the most important contingency. The key strategy taken by Nestl in coming to China is developing partnership. In order to create supply chains, Nestl has built great infrastructure thro ugh the China. Through these years, Nestl in China has developed partnership with many brands, including 6 China famous brands, 1 strong regional brand. Besides, it has developed leadership in 11 categories.Nestl Company focuses on 3 platforms. All of platforms have clear strengths and expertise. Each of platforms has planned explicit strategies. Key accounts of Nestl Dry food product are few key distributors. Yinlu and Ready-to-drink coffee are high point of sales coverage, and distribute mostly to lower-tier cities. The direct distribution of Hsu Fu Chi is pick mix and impulse model. (Our partnerships have enhanced Nestls capability, Nestl, page 10, October 29, 2012)Besides, the human resources are also the most important contingency. Today, across the country, there are 21 factories and Nestls employs around China are 13,000 people. Every day, its coffee, bouillon, milk and ice cream products are distributed in China, which are its best-sellers. Nestls will also employ 1,500 wo rkers to meet the goals that that have settled for 2013.Nestls human assets are one of the most important characteristics that contrastingiate it in the marketplace. Identifying, recruiting, and retaining top talent across its company are only the beginnings of the story. Human resources teams of Nestl cultivate its culture through employee learning and foster its sustained growth by ensuring employee passion is directed to help deliver on business goals. (Nestl China hires 1,500 for new bouillon factory, Xieli Lee, Singapore,, October 29, 2012)Yes, I think it is organized in the best way. The partnerships have drastically changed the capabilities of Nestls with Yinlu, Hsu Fu Chi and so on. Human resources of Nestl in China cultivate culture through employee learning and foster sustained growth by ensuring employee passion is directed to help deliver on business goals.As a tycoon in the field of food, Nestl has an all-round system and uses part of job characteristics to manage its employees. Nestl applies good compliance to help it earn aver with its employees, consumers, investors and governments. Nestl opened Nestl Business Services Africa in Accra, Ghana. Result from Nestls compliance and reasonable arrangement, NBS will get support from employees from many countries with some activities such as invoice payment and payroll. All employees who are under these thoughtful arrangements try their best to use all kinds of skills to make contributions to Nestl, no matter in manufacturing or purchasing, which reflects skill variety. Furthermore, Nestl makes a project concerning health and safety regimes in all countries, and these countries make many operations. Nestl also pay much attention to protection of the health and welfare of employees and contractors. Therefore, employees can focus on the task, and be responsible for whole of it, which reflects the task identity. (Nestl annual report 2011, Nestl, , October 29, 2012)The CEO of Nestl (China) said that Nestl s manufacturing mission in China is to produce advanced, world class quality dairy products for all generations in China. Above all, the quality and safety of products are non-negotiable. In order to get this goal, all employees are committed to it, which reflects task significance. They set direct relationship with local farmers and make a unique dairy collection model. Besides, they make the initiatory production and processing, and apply the latest technology and safety standards. All of these actions are based on their attention to task significance. (Nestls management of dairy supply chain in China, Nestl,,) October 30, 2012As a manger of Nestl Company, in order to increase the number of tasks for a given job to reduce boredom, he can increase motivation by asking employees to do more sound counter-intuitive. The job can be enlarged.In order to increase the degree of province a worker has over a job and increase workers involvement. A manager can divided employees into departm ents. When workers typically specialize in one field of view and the manager instead pitch in wherever their help is needed, the job can be enriched.At last, active management of the enrichment and enlargement process will achieve the greatest return. The job of a manager can be enlarged and enriched.Nestl Company uses a matrix structure. The organizational structure groups people and resources by function and product. Each employee has two bosses- functional manager and product manager. The structure is very flexible and can respond rapidly to the need for change.As we can see, Nestls Company as a decentralized organization allows its subordinate organizations to enjoy a relatively high-level of autonomy. It makes major strategy decisions at the headquarter level, and daily operations are left up to subordinate organizations to derive and implement. (Organizational Chart Nestl TheOfficialBoard, Theofficialboard,, October 29, 2012)Some other organizational structures are greater e fficiency or effectiveness.Firstly, I think the move to a product team structure can lead to greater efficiency or effectiveness. The members are permanently assigned to the team and empowered to bring a product to market. The great strength of a product team structure is that this structure avoids two people with two divers(prenominal) ideas, since people always take different opinions on the same issue and it may sometimes cause a lot of conflicts. The weaknesses of matrix structure the Nestl in China uses is that it demands functional and product team bosses. So the product team structure solves the problem efficiency. A product team structure, with one manager in charge of the entire process, generally reduces a d cut down the conflicts between managers. The team remains focused on the product rollout, with the manager removing obstacles from the provide members path. Besides, a functional organization which is included in a product group can share information about its partic ular discipline. Whats more, cross-functional team is collected of a group of managers from different, so all of the members have a chance to grow within their functional area. Each employ can take more managerial roles and play the better role in a product team. In this way, staff members work together, chasing for the same goal and finishing the same product, and the job can be done quite well.Secondly, I think the move to a interbreeding structure can lead to greater efficiency or effectiveness. The structure of a large organization that has many divisions a simultaneously uses many different organizational structures. Manager can choose the best structure that can lead to the company more effective and efficient. There are many structures, like functional structure, geographic structure and so on. As the worlds biggest food company, the factories and markets of Nestl are settled up the entire world. In China, there have been 21 factories now. Different areas have different sit uations. So the company should divide different structures for each city in China. The ability to break a large organization into smaller units makes it easier to manage. For an example, in Chinas local market, Yihaodian, has grown rapidly and built up an amazing supply chain network in a short time. As the largest B2C online supermarket in China, it won the title of the most popular mall and the most popular food beverage mall of the year at 2011-2012 the second China top retail network selection list award this year in Beijing. As the new chain, if Nestl just use the same structure of Hsu Fu Chi or Yinlu, the chain may be not work well. So it is important to choose the best structure for each of the special chain.Whats more, as the worlds biggest food company, there are many challenges. The company need have the ability to adjust each structure for each chain when meet some emergencies and choose the best structure to meet challenges. In my opinion, the move to a Hybrid structure can lead to greater efficiency or effectiveness.