Global Marketing: Distribution Channel Analysis of Nestle in the USA

This report provides a comprehensive analysis of Nestle's distribution channels, focusing on the United States as a case study. The paper begins by exploring the relationship between a country's economic development and the structure of its distribution channels, arguing that more developed economies tend to have shorter, more efficient channels. It then identifies and researches the USA, examining its political and economic landscape. The report analyzes Nestle's operations within the US, outlining the challenges and opportunities the company faces related to supply chain, logistics, and transportation systems, considering factors such as ecommerce, infrastructure, and consumer behavior. Furthermore, the paper emphasizes the importance of contractual relationships between international marketers and distributors, highlighting the need for clarity and transparency in these agreements. The analysis draws on academic research and real-world examples to provide a nuanced understanding of global marketing strategies and distribution channel management.

Running head: DISTRIBUTION CHANNEL OF NESTLE
Distribution Channel Of Nestle
Name of the Student
Name of the University
Author note

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Table of Contents
Introduction:....................................................................................................................................2
Economic development of countries and distribution channel:.......................................................2
Identification and research of a country-the United States of America:.........................................5
Identification and research of a company-Nestle:...........................................................................7
Challenges and opportunities Nestle would face in the US:............................................................8
Reasons for Nestle and distributors expectations concerning contractual relationships:................8
Conclusion:......................................................................................................................................9
References:....................................................................................................................................10

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Introduction:
Distribution channels enable multinational companies to distribute their products in the
market to the end consumers and generate revenue from the market. Mau, Cvijikj and Wagner
(2018) define distribution channel or downstream supply chain as networks which companies use
to make their goods travel to end consumers. Seelig (2017) strengthens the definition by pointing
out that distribution channels experience two simultaneous movements. First, the goods flow
downwards towards the consumers while revenue flows upwards towards the companies
marketing. Thus, in other words distribution chains enable inflow of revenue and need require as
strategic control as upstream supply chains. The downstream supply chains or distribution chains
of corporate organisations consist of logistics companies, distributors, wholesalers and retailers.
This is actually a very gross presentation of the distribution chains. Today logistics chains are
extremely complex involving participation of several supporting companies like cloud
computing companies, payment gateway companies, banks and ecommerce companies. The
distribution channels of multinational companies are governed by macroeconomic factors and
are directly dependent on the rate of economic development of countries. The aim of the paper
would be to study these aspects through the lenses of Nestle as the company and the United
States of America as the chosen country.
Economic development of countries and distribution channel:
Economic development of host countries have direct implications on the length of the
distribution chains. This is because as per Easterly and Levine (2016) economically development
countries provide shorter distribution chains compared to poorer countries. For example, in
economically developed nations like the United States, there are strong availability of roads. This
availability of roads allow the companies transport their goods faster. Moreover, due to deep

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penetration of internet, the companies are able to sell goods using ecommerce which is not
possible in case of poor countries without deep accessibility of internet. The consumers can buy
goods from multinational companies using ecommerce websites and apps as pointed out by
Shaikh and Karjaluoto (2015). They further point out that the economically developed countries
have their own resident banks as well foreign banks. These banks enable fast transfer of funds
from consumers to the companies marketing the products using net bank and mobile banking
channels. Thus, it can it can be inferred from this discussion that multinational companies enjoy
shorter and more direct distribution chains in economically developed companies compared due
to smooth movement of goods to consumers and reverse movement of revenue. Ström, Vendel
and Bredican (2014) in the support of the opinion of the pervious author mention that the
economically advanced countries have retail chains which allow multinational companies to sell
the products directly to the consumers. Thus, once again it can be proved that economically
advanced nations provide shorter distribution channels, thus enabling the companies sell
products more directly to the end consumers. Khoury and Prasad (2016) point out that on the
contrary to the economically less advanced nations have poor infrastructure as far as roads and
logistics are concerned. This leads to increased cost of transportation to transfer finished goods
to end consumers. The economically poor countries have less internet coverage compared to the
economically advanced nations. This leads to increased costs of sell goods to consumers due to
involvement of large number of wholesalers and retailers. Thus, it can be inferred from the
discussion that economically advanced nations provide shorter and more profitable distribution
channels to multinational companies compared to their economically backward counterparts.
This fact can apply for the emerging economic giants like China and India. These nations are
undergoing fast economic development and thus, attract leading companies from developed

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economies. Kotabe and Kothari (2016) support this opinion by pointing out that multinational
companies headquartered in North America and Europe are increasing their presence in the
emerging Asian economies with direct presence in form of wholly owned subsidiaries, some of
which are public limited companies capable of raising capital from the host countries. It can be
also be pointed out that these emerging economies have their own resident multinational
companies which in turn have presence in the developed markets. It can be pointed out in this
respect that there exists a high rate of exchange of finished products and revenue between the
developed and emerging markets. The Egyptian daily The Daily News Egypt reports that the
emerging countries like China, India, Thailand and Vietnam are among the fast emerging
ecommerce markets (Dailynewsegypt.com, 2018). Thus, in this respect it can again be pointed
out that multinational companies can sell their products directly to consumers in through on the
ecommerce platforms. Further, the emerging nations have wide network of resident and foreign
banks, which make payment gateways easily available. Moreover, due to economic
developments in these countries, consumers have more disposable income to afford smart phones
and tablets to access ecommerce sites to buy goods. These countries also have strong retail
chains which again enable the multinational companies to sell goods to end consumers using
shorter distribution channels. Thus, it can be inferred while the economically developed and
emerging countries enable the multinational companies to hold shorter distribution channels,
poor countries cannot provide the facilities which the previous two groups of countries can offer,
thus leading to elongation of distribution channels.

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Identification and research of a country-the United States of America:
The country identified for the research would be the United States of America. A PEST
analysis of the country shows that is politically stable with bilateral ties with both developed and
emerging nations. The country also has bilateral relationship with economically backward
nations and help the latter to achieve economic development (State.gov, 2018). The outcome of
this strong bilateral foreign relationship of Washington enables the multinational companies
based in the country to expand into foreign markets. Similarly, foreign companies also enter the
American from other countries which increase the competition for the resident companies. As far
as threats to the American economy is concerned, it can be terrorism is one of the greatest
political threats in t6he US (Steele et al., 2015).
Figure 1. GDPI of the US graph
(Source: Bea.gov, 2018)
As far as the economic conditions of the United States are concerned, the nation
experiences a positive trend in GDP with minor falls. This is evident from the graph above
shows that the GDP of the United States of America fell in 2017 but in 2018, it has already
shown signs of recovery.

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Figure 2. Graph showing exchange rates of USD compared to EUR and GBP
(Source: Bloomberg.com, 2018)
The above graph shows that the currency of the United States of America, USD is
gaining strength against two international currencies namely EUR and GBP. This rising value of
USD actually reflecting the rising economic power of the United States. It can also be pointed
out that the United States of America is the home to several leading companies like Bank of
America in the financial sector, Amazon in the ecommerce sector, Google and Apple in IT and
P&G in the consumer goods, all of which are global leaders in the respective markets (Taglioni
& Winkler, 2016). Moreover, the country has a strong infrastructure both in terms of transport as
well as warehouse facilities. This factor of the United States of America enable the multinational
companies hold shorter distribution channels within the country, thus making American business
operations more profitable. The country is strong technology which enable multinational

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companies hold distribution channels comprising software based distribution and supply chain
management. Similarly as Hajli (2015) points out, the society in the United States of America
has more access to ecommerce platform due to the developed internet and financial infrastructure
of the country. This once again enables the multinational companies sell goods directly to the
consumers on the ecommerce platforms and receive payments directly on the payment gateway.
However, Prisha et al. (2017) contradict these opportunities which the United States offers to
multinational companies and point out that ecommerce portals are under continuous threats from
hackers and data thefts. Thus, it can inferred that though the United States allows MNCs hold
shorter distribution chains, terrorism and data theft risks are great threats which the MNCs need
to consider.
Identification and research of a company-Nestle:
Nestle is the leading food company based in Switzerland and having operations of mpore
than a hundred companies. The company is a public limited company listed primarily on the
Swiss Exchange (Nestle.com, 2018). Nestle has direct presence in its main markets like the USA,
China and India through wholly owned subsidiaries. These subsidiaries of Nestle are either
public limited companies listed on the top stock exchanges in the host countries or private
limited companies. The company operates in the countries in which it has no direct presence
using agents. Thus, it can again be pointed out that in economically developed countries Nestle
enjoys shorter distribution channels while in economically poor nations, the company has to
depend on long supply chains involving third party retailers and wholesalers. The product line of
the company consist of a wide range of dairy products and cereal based products. The consumer
segment of Nestle consist of children, adults and even pet animals. Nestle holds some of the top
brands like Nestum, Maggi and Kit Kat.

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Challenges and opportunities Nestle would face in the US:
Opportunities in the US Threats in the US
1. Global expansion.
2. Strong economy.
3. Highly developed transport and
warehousing facilities.
4. Highly developed ecommerce markets.
5. Advanced technology enables software
based control of distribution channels, thus
enabling management of multiple channels
with greater accuracy.
6. Ecommerce platforms enable direct selling
of the products to consumers.
7. Strong banking and payment network.
8. Highly skilled labour.
1. Terrorism
2. Threats from other companies.
3. Data thefts.
Reasons for Nestle and distributors expectations concerning contractual relationships:
The relationships between international marketers like Nestle and distributors should be
based on contracts in order to ensure high level of transparency between them. Contracts
determine the goods to be distributed, the price, the destination markets and all other crucial
details. This enables the marketers to maintain control over their goods even after the same is
handed over to the distributors. Secondly, the distribution channels are also certain about the

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payments. Thus, contracts in turn protect distributors against financially strong marketers. Thus,
the contracts ensures smooth business operations between distributors and marketers.
Conclusion:
Nestle should expand its distribution channels in poor countries as well. This would
enable it to shorten its distribution channel and operate more profitably.

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References:
Bea.gov. (2018). Retrieved from https://www.bea.gov/news/glance
Bloomberg.com. (2018). Retrieved from https://www.bloomberg.com/quote/EURUSD:CUR
Dailynewsegypt.com. (2018). Retrieved from https://dailynewsegypt.com/2018/04/01/countries-
fastest-growing-e-commerce-sales/
Easterly, W., & Levine, R. (2016). The European origins of economic development. Journal of
Economic Growth, 21(3), 225-257.
Hajli, N. (2015). Social commerce constructs and consumer's intention to buy. International
Journal of Information Management, 35(2), 183-191.
Khoury, T. A., & Prasad, A. (2016). Entrepreneurship amid concurrent institutional constraints
in less developed countries. Business & Society, 55(7), 934-969.
Kotabe, M., & Kothari, T. (2016). Emerging market multinational companies’ evolutionary paths
to building a competitive advantage from emerging markets to developed
countries. Journal of World Business, 51(5), 729-743.
Mau, S., Cvijikj, I. P., & Wagner, J. (2018). Understanding the differences in customer portfolio
characteristics and insurance consumption across distribution channels. working paper,
University of Lausanne.[Google Scholar].
Nestle.com. (2018). Retrieved from https://www.nestle.com/aboutus
Prisha, P., Neo, H. F., Ong, T. S., & Teo, C. C. (2017). E-Commerce Security and Identity
Integrity: The Future of Virtual Shopping. Advanced Science Letters, 23(8), 7849-7852.

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Seelig, M. J. (2017). U.S. Patent No. 9,754,265. Washington, DC: U.S. Patent and Trademark
Office.
Shaikh, A. A., & Karjaluoto, H. (2015). Mobile banking adoption: A literature
review. Telematics and Informatics, 32(1), 129-142.
State.gov. (2018). Retrieved from https://www.state.gov/r/pa/ei/bgn/
Steele, R. R., Parker, M. T., & Lickel, B. (2015). Bias within because of threat from outside: The
effects of an external call for terrorism on anti-Muslim attitudes in the United
States. Social Psychological and Personality Science, 6(2), 193-200.
Ström, R., Vendel, M., & Bredican, J. (2014). Mobile marketing: A literature review on its value
for consumers and retailers. Journal of Retailing and Consumer Services, 21(6), 1001-
1012.
Taglioni, D., & Winkler, D. (2016). Making global value chains work for development. The
World Bank.