BUS6005 International Business

The exchange of commodities and services across national borders is known as international trade, and it can increase an organization's productivity. Nestle Australia Ltd. is a well-known international producer of food, health, and nutrition products in Australia (Nestle, 2022). It will do a PESTLE analysis and talk about the brand's company, product, and country profiles.

BUS6005 International Business T1 2022
Assessment 3: Project Report
Title: Expansion of Nestle in Eritrea
Student Name:
Student Number:
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Executive Summary
The report states the international business development of Nestle Australia Ltd. in Eretria. It has
focused on providing a detailed discussion of company, product and country profiles referring to
the international expansion. The report has included a PESTEL analysis that has helped to
identify opportunities and threats in Eritrea. Trade and agreement for import process and other
business aspects have been addressed here. Australian trade for Eritrea has been explained in this
report. International market entry strategies have been analysed and based on that one strategy
has been chosen. A SWOT analysis has been portrayed of the brand to highlight its core
competencies. SAP has been denoted as the brand. Several studies have been portrayed regarding
the exporting policies of Australia and importing of Eretria. Market segmentation, targeting and
positioning have been done for the organisation in Eretria and the company will target young
customers. Marketing mix for the organisation to be fowled in Eretria has also been done in this
report.
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Table of Contents
Introduction......................................................................................................................................4
Main Body.......................................................................................................................................5
1. Company Profile..........................................................................................................................5
2. Product/Service Profile:...............................................................................................................6
3. Country Profiling.........................................................................................................................7
4. SWOT Analysis of the Company:.............................................................................................10
5. Government Policy Study..........................................................................................................12
6 International Market Entry Mode...............................................................................................14
7 International Marketing Plan......................................................................................................16
8 International Business Plan.........................................................................................................19
Conclusion.....................................................................................................................................21
Reference List................................................................................................................................22
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Introduction
International business can be referred to as the commerce of goods and services across national
borders and can lead to the increment of productivity of the respective organisation (Ferraro,
2021). Nestle Australia Ltd. can be referred to as the multinational manufacturer of nutrition,
health and food items and is popular in Australia (Nestle, 2022). This project will highlight the
key strategies to be adopted by the brand to gain market attraction and increment productivity in
the market of Eritrea. It will discuss the company, product and country profile of the brand and
perform a PESTLE analysis. The next part of the report will highlight SWOT, SAP, government
policies, international market mode and plan along with business planning.
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Main Body
1. Company Profile
The chosen company for the report is Nestle Australia Ltd. In the nation, Nestle Australia Ltd. is
headquartered in Building D, 1 Homebush Bay Drive, Rhodes NSW 2138 (Nestle, 2022). The
brand is recognised to be the world’s largest food and beverage brand and has provided the
consumer with diversified products. It specialised in dairy, confectionery, frozen food and
healthcare nutrition goods. The brand is operating in the food and beverage services sphere and
was founded in the year 1867 by Henri Nestle (Nestle, 2022). It has over 339,000 employees and
it has been available in the Australian market since the 1880s. In 1906, the country had become
the second-largest expert territory and the majority of operations are structured around Oceania
since 1999. During the year 1908, the brand referred to a nationwide sale and distribution
network and led to the creation of an effective market in the same. In the year 1934, the brand
catered to the invention of Milo, which led to the creation of the sale of 500 million USD
(Nestle, 2022). The organisational structure of the brand resides in the hierarchal attribution
where roles and responsibilities are delegated according to the capabilities of the staff.
Information is commuted through the top-down approach and leads to the union of distribution
centres.
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2. Product/Service Profile:
Nestle Australia Ltd. is attributed with over 2000 brands that have transferred from being global
icons to a local favourite of the target market. Nescafe, Nespresso, Nesquik, Cheerios, Maggi,
Carnation, Milo and Kitkat are some of its recognisable brands (Nestle, 2022). Moreover,
customers are engaged to enjoy the products of OptiFast, Cerelac, Purina, Felix, Nancare
Soothers and others. In the Australian sphere, the brand has gained a sales increase of 3.5% to
the CHF of 45.5 billion USD (Nestle, 2022). It has allowed the brand to make significant
development towards the attainment of goals based on the revenue inculcated and smooth cash
flow of the same. In 2018, the sales accounted for about 43 Billion USD (Nestle, 2022). The
organic growth rate of the brand has been attributed to 3.6%. Products carted by the brand have
gained recognition from the masses owing to their attractive packaging and good quality and
taste. Moreover, the nominal pricing of the products has helped it to gain a large consumer base.
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3. Country Profiling
Country Risk Analysis
Eritrea can be referred to be the world's most repressive nation due to the governmental
implementation of forced labour laws (hrw.org, 2022). This can lead to the creation of problems
in the operational sphere of Nestle due to the conflict of interest regarding the absence of
freedom of labour and the expression of opinion of the same. Nestle initiates the development of
individuals to cater to personal development which can be opposed by the governmental sphere
due to the restriction of independent scrutiny in the nation. It has been prone to face droughts and
famine and is attributed to the less purchasing power of buyers. This can lead to the reduction of
profitability of the brand in the target market due to several restrictions.
PESTEL Analysis
PESTEL analysis is defined as the framework that identifies external factors and their impact on
a particular organisation.
Political
The political stability rate of Eritrea is -0.98 based on 2020 data (The global economy, 2022).
This data can show that the country may go through violence in culture. The political stability
rate of this country is negative and based on that it can be found that Nestle can find challenges
to drive its business.
Figure 1: Political stability rate of Eritrea
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(Source: The global economy, 2022)
Economic
The GDP growth of Eritrea is lacking and it is one of the poorest countries in the world. In the
country as compared to the previous GDP rate it has been found that in 2021 its rate has been
decreased to -0.60 GDP rate (Trading economics, 2022). It can be identified that with a low GDP
rate, Eritrea may face threat investment and for lack of GDP, it may face a low revenue rate.
Figure 2: GDP rate of Eritrea
(Source: Trading economics, 2022)
Social
In Eritrea, the population is increased and as compared to other years in 2020 the country has
gained its population by 3,546,421 (Worldometers, 2022). The medium age in Eritrea is 19.2
years and through that, it has been found that Nestle can find opportunities to target young
people for their business and provide unique coffee.
Technological
In Eritrea, the use of social media rate is 8% of the total population in 2022 (KEMP, 2022). It
can be identified that people use very low social media platforms in the 2022 era. It can bring
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challenges for Nestle to drive its business in this country as they can face difficulties within a
working process for promotion, sales and communication with communities.
Environmental
The climate of Eritrea is very bad as it is a tropical desert on the coast and it brings a little bit of
rain to the central and southern parts all over the country (Climates to travel, 2022). As per the
identification of climate in Eritrea, it can be found that Nestle may face challenges for the bad
climate and it is a disadvantage for the organisation.
Legal
Occupational safety and health rules have been generated in Eritrea and it is effective for
employees in the workplace (ILO, 2022). It can be positively impacted Nestle to maintain health
and safety in the country for customers and employees. The legal law is standard in this country
and it is maintained by many organisations.
Perspective Market Analysis
The market of Eritrea is attributed to an increase in sustainable concerns regarding the operations
of the brand. This can provide Nestle with an excellent opportunity to cater for its development
via implementing sustainable measures in the operational sphere. The customer perception of the
nation is tending to gain high-quality products at lower prices. It is attributed to be changed due
to the promotional features of the brand and is highlighted dependent on its reputation of the
same. This can provide Nestle with an excellent opportunity to cater for growth due to its
reputation in the international market and meet the demands of customers. Collaboration of
nutrition and science can help the brand to promote agility in the supply chain and provide
customers with good quality food products.
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4. SWOT Analysis of the Company:
SWOT Analysis
The SWOT Analysis is effective to understand the current growth status of an organisation and
can help to cater effective strategies to mitigate issues and utilise opportunities (Benzaghta et al.,
2021). SWOT Analysis of Nestle Australia Ltd is formatted below.
Strengths Weaknesses
 Nestle has been present in the
Australian market since 1908 (Nestle,
2022). Their products have fostered to
target the local environment and led to
the creation of a long-lasting impact on
the minds of the same.
 The supply chain of the brand has led
to the encouragement of locals to
incorporate technology and resources to
help in promoting agility in the same. It
helps the brand to gain efficiency in the
substantial operational sphere.
 The brand is highly dependent on the
advertising sphere to promote its
products and services. It leads to the
increment of marketing costs and can
result to the creation of risk within the
return sphere.
 The organisational structure of the
brand is based on the products catered
by the same and is inconsiderate of
geographical locations. It leads to the
creation of hurdles due to abrupt
decision-making and stagnant agility.
Opportunities Threats
 Eritrea is the major host of Bun coffee
ceremonies that can provide the brand
with an excellent opportunity for
displaying its high-quality products
(Hailemichael, 2018). Nestle can try to
portray the coffee specialities to locals
in the nation and gain huge attention
from the target market.
 It can indulge in diversifying the
product portfolio according to the taste
 The outburst of the Covid 19 pandemic
can be signified as a major threat to the
operation of the brand and can decrease
its growth percentage in the
international market. The lockdown
situations can hinder the establishment
of the agile supply chain of the brand,
which in turn can hinder its market
entry.
 Red Sea Trading Corporation can be
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palate of locals. This can help the brand
to significantly increase its target
market and gain the attention of the
same.
identified as the major food and
beverage brand in Eritrea (dnb, 2022).
This can pose a significant threat to the
operations of Nestle and hinder its
entry into the competitive market.
Table 1: SWOT Analysis of Nestle
SAP of the company
The inculcation of the SAP analysis helps organisations to run their business in profitable
attributes and adapt continuously to survive in the competitive sphere. Nestle looks forward to
expanding its business in the international market of Eritrea. In the system sphere, the brand has
been implementing several training and development systems for employees that have helped to
promote their productivity of the same. The marketing and sales system of the brand is dedicated
to enhancing its recognition in the target market and caters growth. Application of the brand has
been engaged to instil productivity through the operational sphere. It has helped the brand to
promote agility in the operational sphere and refer to its effective functionality in form of
website and productivity tools. The product of the brand is engaged to cater to good quality and
is attributed with nominal prices for the customers. Over 2000 brands are culminated in the
operations of the company and provide customers with different choices of goods (Nestle, 2022)
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5. Government Policy Study
Australian Government policy for exporting
The export laws of the nation look to develop and provide assistance to the business to protect
them from being disrupted in the overseas sphere (austrade.gov.au, 2022). It has around six free
trade agreements with other countries to bind commitment and invest in the foreign sphere
effectively. The nation has been committed to Word Trade Organisation to gain tariff quotas and
export subsidies to implement effective business among variable nations. Australian government
is engaged to provide export permission for prohibited goods via written permissions. The laws
of the nation are dedicated to establishing the engagement of several nations and cater to future
negotiation spheres.
Importing Country policy
In Eritrea, licensed businesses are given the opportunity to import goods. The customs and excise
division of the nation is responsible for getting the taxes on goods. Custom policies are engaged
in facilitating legitimate trade and protecting society from illegal economic activities
(howtoexportimport, 2022). Several businesses may require providing documentation of
imported materials depending on the nature and country of origin and cater smooth processes.
Enrolment methods are felicitated through importing and clearance procedures of the nation.
Licensing is strictly necessary along with the proper justification of products addressed via the
custom spheres in the nation.
Norms and standards for the product import
The import process is one of the important facts that Australia's government authority has given
importance. According to norms and standard, it has been found that, people or legal entities that
has an interest in involvement in international trade conduct import process in Australia
(Trade.gov, 2022). Imported customer goods and services including food products need to be
complied with by the state government as per packaging regulations. Duty taxes and permission
of the government are required to meet the requirements of the Australian Department of
Immigration and Border Protection. FTA or Free Trade Agreement is involved in Australian
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norms and standards in importing goods and services and goods for import in Australia require
classification.
International Trade Agreements of Australia for that country
The Australian trade agreement is involved with the Colluli potash mine and the Danakil area in
Eritrea in the southern area (Gov.au, 2022). The country is connected with Eritrea to bring better
development in trade and agreement. Australia’s Fred Hollows Foundation has built a long
relationship with Eritrea working and it can reduce the blindness that is caused by trachoma and
cataract. Australian embassy represents diplomatic representation to Eritrea in Cairo, Egypt
(Gov.au, 2022). The Australian embassy in Egypt is highly responsible for Eritrea. Economic
and trade information is connected with Eritrea. Trade and investment of Australia are involved
in Eritrea to reduce the elimination of certain barriers.
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6 International Market Entry Mode
Licensing
Licensing can be defined as international market entry and it involves granting permission to a
company in a different country for using its intellectual property for a particular time period. The
advantage of this international market entry is to gain market and strongly hold rapidly (Paul,
2019). The benefit of this market entry is not having tied up in foreign operations and it has the
benefit to expand the market with investment. The disadvantage of this market entry is limited
and required a monitoring process for enforcement. It does not use intellectual property to
become a competitor company. This strategy helps a company to expand the particular business
in several markets.
Franchising
Franchising is an international market entry strategy and it is owned by a semi-independent
businessperson who pays fees and royalties to the franchiser for trade marketing and selling
products or services. The advantage of this market entry strategy is business assistance that is
helpful for a particular company (Bretas and Alon, 2020). It brings a lower failure rate in
business and it has high involvement in bringing profit for an organisation with lower risk. In
this kind of market entry strategy, negative consequences are also involved including
governmental strict restrictions. Cost can be high in this process, which may be difficult for
organisations.
Joint venture
The joint venture is considered an international market entry strategy, it is a complicated
arrangement, and it is a combination of two or more parties that looks for development for an
enterprise (Bretas and Alon, 2020). The benefit of the joint venture is gaining new capacity and
expertise and entering in new geographic markets. It provides access to great resources including
staffing and technology. Through this strategy, it can be found that it shares the scope of risk
with the venture partner. The disadvantage of this international market entry is it does not
provide 100% clear objective and different culture may bring issues and partners does not
provide leadership.
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Chosen option
It has been chosen here as the franchising strategy for Nestle as compared to other international
market entry strategies including joint venture and licensing. A franchising strategy has been
chosen here to enter in new market or country. As it has low risk in business and it is engaged in
bringing profit for business, which can be identified as a competitive advantage. Though it has
some problems with high costs, it may not affect the organisation because Nestle is strong in
investment and funding. As compared to others, the market entry strategies are risky for this
organisation in another country.
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7 International Marketing Plan
Market Segmentation
Market segmentation process involves classifying the customers or market based on common
needs, features and characteristics (Romppanen, 2021). Market segmentation can be done based
on four factors like
 Demographic- Segmentation based on gender, age, education, ethnicity and several
others
 Psychographic- This is segmentation depending on personality, lifestyle, values and
others.
 Geographic- When segmentation is done based on geographical locations like state, city,
or nationality it is geographic segmentation.
 Behavioural- It is the loyalty of the customers, benefits that they look for from a product
and the ways people use refers to behavioural segmentation.
However, market segmentation in Eritrea will be one based on demographics and the aspect
based on which segmentation will be done is the age range of the customers.
Target Marketing
Target marketing involves selecting the most potential customers for the organisation that will
ensure increased revenue and profitability of the organisation. All age ranges especially the
younger generation will be the target customers for Nestle products in Eritrea. As most of the
people in the country are younger and the median age range that is most popular in the country is
19.2 years, the younger generation can be the most effective target population for Nestle
(Statista, 2021).
Market Positioning Strategy
Nestle in order to position itself in the minds of the customers in Eritrea will sell the products
using a value-based pricing strategy where the price for the products will be neither too high nor
low but equal to the perceived value derived from the same. Red Sea Trading Corporation, which
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High Price
Low quality High Quality
Low Price
Nestle
Red Sea Trading Corporation
can be the most effective competitor for the organisation sell quality products at high prices and
thus positions itself uniquely in the customer’s mind.
Figure 3: Positioning Map
(Source: Created by the learner)
Marketing Mix Analysis
Marketing Mix refers to identifying the strategies that will be used by organisations in a country
for enhancing customer reach and sales of the company products.
Product: The major products of the company that will be sold in the African country named
Eritrea are products like baby food, dairy products, tea, confectionery items, frozen food, ice
cream, chocolate and snacks.
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Price: A value-based pricing strategy can be selected by the organisation to sell the products of
the organisation. The products in Eritrea will be sold with this strategy and the customers will
perceive the products of the products as equivalent to their perceived value (Garner et al., 2108) .
Place: In order to ensure effective distribution of products the consumers will be able to buy
them from retail stores and online selling and delivery of the products can also be availed by the
customers.
Promotion: Television commercials can be used by the organisation to promote the products of
the organisation. Social media marketing can also serve to be effective in helping reach a larger
customer base and audiences (Durante, 2021).
People: Skilled and talented employees will be recruited from the country to form the workforce
of the organisation. It will be ensured that diverse staff members are selected and no one is
discriminated against on any grounds.
Process: The delivery process for the products of the organisation will be both offline and
online.
Physical Evidence: The logo of the organisation is the most important and valid evidence of the
physical existence of Nestle. Additionally, their product packaging is another potential physical
evidence of the organisation.
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8 International Business Plan
Budgeting the total required Investments for venture
The total budget that will be required for investing in venture is identified and stated in the table
below:
Components Expenses ($)
Marketing tools and techniques 15000
Research and Development 35000
Supply Chain Management 64000
Warehouse and Inventory Management 40000
Hiring 25000
Employee Management 85000
Human Resource management 46000
Distribution 54000
Total: 364,000
Table 2: Budget for total Investment
(Source: Created by Learner)
Selection of sources of finance
The different sources of finances that are available for Nestle Australia Ltd are identified and
stated below:
Personal Savings
When an individual saves up their own money and uses it with the vision of starting up their own
company where no added interest that is to be paid is known to be as personal savings (Danns
and Danns, 2019). One of the major benefits of this type of source of finances is that they would
not be any additional paperwork in terms of allocating finances for growth purposes. However,
with the personal saving, it would not be enough for the organisation to perform all the tasks that
they are willing to perform with utmost care.
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Commercial Banks
Another option that Nestle Australia has is to undertake a loan from a commercial bank. The
financial institution that performs the activity of attaining and accepting deposits from their
potential consumers and providing them with a loan as and when required is known to be a
commercial bank (Lyon and Owen, 2019). Commercial banks provide their consumers with
required advice that helps them to have higher financial value and a sense of budgeting. On the
contrary, it provides the organisation with the disadvantage of going bankrupt due to excessive
management requirements.
Trade Credit
Trade credits are defined as the process by which an organisation undertakes different goods and
services without actually paying for them either through cash or cheque (Allen et al., 2019).
Furthermore, it also provides the organisation to have significant value within the marketplace
that provides them with a higher competitive advantage. It has the greatest advantage that it is
flexible to attain and has certain favourable terms and conditions. On the other hand, trade credit
harms the cash flow system of the organisation.
The most appropriate method is bank loans through company will have a secure funding option
for its business expansion. Others are not effective as personal saving is suitable for start up.
Marketing Estimation
The target market group of Nestle Australia Ltd includes people of all the age groups where the
focus will be made on the young generation. Furthermore, effective usage of digital marketing
tools and techniques will be done so that attractive content can be made and provided to
consumers for targeting purposes.
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Conclusion
In this report, with the discussion that is being made above, it is being determined that Nestle
Australia Ltd is trying to expand its organisation in Eritrea. The company profile that is being
initiated highlights all the important details of Nestle Australia that they can use to engage within
the new market. For determining the risk that Nestle Australia is likely to face, has been
determined with the help of PESTLE analysis and the internal factor is being done with the help
of SWOT analysis. Determination of the governmental policies that Nestle Australia can face
while expanding in Eritrea is also being initiated in this report. Different mode of market entry
and marketing plan regards the same is also being initiated.
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