Nestle Cereal Marketing Strategies

This assignment delves into the marketing strategies employed by Nestle for its diverse range of cereal brands. It examines the company's brand portfolio management approach, analyzing key factors influencing cereal consumption trends and consumer behavior. The assignment also explores the role of external factors like political and economic stability in shaping Nestle's marketing decisions within specific regions, using South Africa as a case study.

International
Marketing
1

Table of Contents
Introduction .....................................................................................................................................1
Section (A) Marketing environment of Nestle cereal in USA and South Africa ...........................1
Marketing environment of Nestle in USA ..................................................................................2
Pestle analysis .............................................................................................................................2
Key challenges faced by Nestle in USA......................................................................................4
Marketing environment of south Africa for Nestle ....................................................................4
Pestle analysis .............................................................................................................................5
Key challenges faced by Nestle cereal in south Africa ..............................................................6
(Section B) Analysis of whether global or domestic strategy should be adopted by Nestle .....7
Strategy for Nestle in USA .........................................................................................................8
Strategy for Nestle in South Africa .............................................................................................8
Conclusion ......................................................................................................................................9
References......................................................................................................................................10
2

Illustration Index
Illustration 1: Nestle cereal brands..................................................................................................2
Illustration 2: PESTEL Analysis .....................................................................................................3
Illustration 3: Nestle cereal brand....................................................................................................9
3

INTRODUCTION
International marketing is defined as the process in which marketing principles and
practices are applied in more than one nation. Further, manger of the organization is required to
deal with various aspects and issues at the time of performing marketing activities at the global
level (Che, 2014). Culture and business environment conditions varies from country to country.
It is also possible that marketing strategy for one nation may not be suitable for other. This report
is based on Nestle which is a Swiss transnational beverage and food company. In terms of
revenue, it is considered as the largest brand in all over the globe. The present report explains the
critical evaluation of cereal brands in USA and South Africa. Other than this, it also depicts the
strategy which should be adopted by the brand in both the above stated countries.
SECTION (A) MARKETING ENVIRONMENT OF NESTLE CEREAL IN USA AND
SOUTH AFRICA
Nestle is a leading brand of nutrition, wellness and health related products in the entire
world. At present, the brand is offering more than 2000 brand globally with a workforce of
339000 employees. Nestle operates in more than 197 countries of the world and its mission is to
become world’s leading brand in health, nutrition and wellness. Operating at global environment
is not an easy task as the business is required to take care of the working environment of each
and every country (Cunningham, 2013). Along with this, brand needs to ensure that it adhere the
laws, regulations and rules of each country in best possible manner. At the time of operating in
global environment, Nestle always ensure that quality products are provided to people. This
helps in enhancing brand image and level of customer’s loyalty.
1

Marketing environment of Nestle in USA
Marketing environment includes all forces and factors which helps business organization
to enhance its brand image. Further, it also affects the relationship between customers and
company. Nestle has always carried out effective analysis of a country's marketing environment
before expanding into another nation. United States of America (USA) is considered as one of
the most powerful countries in the field of research and innovations (Eppersona and Escalanteb,
2013). High rate of technological advancement assists business in their growth and
development. Organizations, such as Nestle, do not find any kind of difficulty in raising capital
for its growth and expansion. On the other hand, it can be argued that as compared to the
emerging markets in the world such as India and China, Nestle have difficulty in finding young
and skilled workforce in USA. Marketing environment of the country is explained below as:
Pestle analysis
Pestle analysis is an tools which is used to evaluate various kind of environmental
factors which can affect the activities and operations of a business enterprise. By carrying out
2
Illustration 1: Nestle cereal brands
(Source: Lichtenstein and Johansson, 2011)

Pestle analysis companies become aware of the fact that how factors such as political, economic,
social etc. can affect businesses.
Political factors
Nestle is very vulnerable to any kind of changes in the political environment of USA.
Further, the brand is required to adhere with the employment laws and legislation which has been
framed by the government. The country is facing political stability and is emerged as one of the
biggest and powerful nation in the world. Government has been always supportive and has
provided Nestle with adequate opportunities for growth and development (Florida, 2012).
Economic factors
Rate of unemployment in USA is around 7.5% which is very low as compared to other
developed countries. Despite of facing many challenges and issues at domestic level, the
economy of USA has been considered as most powerful in the world. One of the most interesting
facts about US economy is that it contributes to 20% of the total global output. Nestle cereals has
3
Illustration 2: PESTEL Analysis
(Source: Lichtenstein and Johansson, 2011)

been positively affected by the economic conditions of America. It has also helped the brand to
grow and develop all major areas of USA.
Social factors
Social factors of USA have always been supportive to brands like Nestle. People prefer
more healthier and quality food products at the time of breakfast. The demand of Nestlé’s cereal
is very high. Moreover, it can be stated that because of the high literacy level people are more
inclined towards branded and quality products (Fraser and Strategy, 2013). At present, one of the
major problems which have been faced by Nestle in terms of society is the rate of employee
turnover. In last few years, the volume of ingredients has increased to a great extent. This has
resulted in raising the issues such as discrimination at workplace and etc. There is adequate need
and demand of Nestle cereals in American market.However, it is facing problems related to
employment.
Technological factors
USA is considered as one of the most powerful nations of the world in terms of
technology. Rate of technological advancement is very high and it has helped businesses to
achieve adequate growth. Nestle cereal brand is affected by the technological environment of
USA in positive manner. It can be stated that with the help of advanced and up-graded
technology, the brand is able to lower down its overall cost of production. This has resulted in
enhancing the overall profit margin and quality of cereals (Hines and Gold, 2014).
Legal factors
Legal environment of USA is very strict in carrying out business. Government has
created laws and regulations related to employment practices. Nestle cereal brand is required to
follow the laws related to health and safety, employment equality etc. Brand is required to
ensure that it do not encourage any kind of discrimination and unfair practices at workplace.
Government of America is very strict in terms of protecting society and environment.
Now-a-days, businesses in the country are bound to lower down the negative impact of their
operations and activities on environment. Nestle cereal brand has been affected by the strict rules
and regulations of the country. It has been encourage in making use more sustainable practices
at the time of manufacturing and marketing its cereals.
4

Porter five force analysis
Porter five force analysis is an very important tool which can help businesses to
understand where the power lies in a particular business situation. In addition to this, it also
supports companies to identify whether products and services have the potential to earn adequate
profits or not.
 Supplier power- The power of suppliers for Nestle in USA is very high. There are very
few suppliers in the market which means that they have the power to control cost and
prices of all raw material and other ingredients required for cereals.
 Buyer power- Power of buyer is also high because of the high level of competition.
Customers of Nestle breakfast cereals are aware of the fact that other brand such as
Kellogg is present in market. Customers of Nestle have high power to drive the price
easily.
 Competitive rivalry- Nestle cereal is facing intense competition form market players
such as BakeryandSnacks and Kellogg's. Any kind of changes in price and strategies of
these brands forces Nestle to go for some changes. This means threat for competitive
rival is also very high for nestle in American market.
 Threat of substitute- Nowadays people have shifted there consumption of cereals in
breakfast to some healthier food products. Bars and yogurts have emerged as the some
of the biggest substitute for Nestle cereal brand,
 Threat of new entry- Nestle in America is facing very low threat of new entry. One of
the main reason behind this is that high capital is required to be invested to enter this
industry. New business also need to increases their human and financial resources for
carry out effective marketing.
Key challenges faced by Nestle in USA
One of the major problems which have been faced by Nestle in USA is decline in its
market share. Brand is facing intense competition from major player in cereal market which is
Kellogg. Now-a-days, people in America have also started to consume bars and yogurts in
breakfast instead of cereals. This has resulted in declining overall market share of Nestle in US.
Along with this, people in the country have become more health conscious and they have started
to include quality food products in their breakfast. United States in considered as one of the
5

major and most potential market for cereal brands of Nestle (Laforet, 2015). Therefore, drop in
sales, in leading or major market, is a big issue for the company. Other than this, the brand is
also facing issues related to employment as it is not able to find out effective and efficient
workforce in the country.
Marketing environment of South Africa for Nestle
South Africa environment is termed as one of the most challenging environment for
doing business. Despite of such situation, cereal brands such as Nestle consider South Africa as
one of the best countries to operate. Sound macro environment conditions, well managed and
developed transport system as provided Nestle with adequate growth and development
opportunities. In last few years there has been significant increase in the total number of
manufacturers of breakfast cereal in the country (Overseas business risk- south Afrcia., 2015).
Nestle has also started to import its cereal bands to South Africa and it is currently distributing
it with the help of retailers such as” Pick and Pay”. The major players in breakfast cereal brand
in South Africa is Pioneer food which is followed by Kellogs and then Tiger brand. Nestle is not
able to gain the good position in the breakfast cereal market of South Africa. The marketing
environment of country is mentioned below as:
Pestle analysis
By using tools such as Pestle analysis, organization can become aware of various kind of
factors which can impact the sales and profitability of an business enterprise. Further it can be
also stated that effective strategies can be formed easily by carrying out Pestle analysis as it will
make business enterprise aware about major environmental forces affecting it.
Political factors
Political environment of South Africa has stabilized democracy and it is dominated by
single political party. Further, company had promoted international trade due to which African
content has been recognized as emerging market. Due to this aspect, management of Nestle has
good opportunities for expansion by selling their cereal brand in the country. In addition to this,
there are minor restrictions of foreign investors through which Nestle is in position to earn good
profits in the country (Medina, Quevedo and Aguilera, 2013).
Company is able to operated by implementing their business policies without facing
interference of governing authorities. In South Africa, government had also announced tax
6

incentives for the companies. Nestle is in position to take benefit of these incentives to enhance
their wealth and strengthen their financial position.
Economical factors
South African economy provides growth opportunities to the Nestle cereal brand due to their
improvised fiscal policies. This country had achieved significant economic growth because of
strengthen position of the commodity market and increasing domestic demand. Unemployment
rate in South Africa is more than 20% due to which company can take benefit of cheap labor for
the enhancement of profitability. In addition to this, inflation and interest rate of country is
comparatively less due to which management of Nestle has to face less financial burden.
However, current statistics of the country shows that inflation rate is continuously increasing due
to which there is adverse impact on operational activities of company (Monge-Rojas and et. al.,
2011).
Social factors
Social factors of South Africa show that country is rich in culture and having good
spending habits. However, they prefer traditional food in comparison to cereal brands. Due to
this aspect, demand of Nestle cereal brand is low in country and further its has fewer growth
opportunities. Further, it is well known fact that people belonging to different culture along with
religion lives in South Africa due to which business enterprise has to consider taste and
requirement of every target market so that overall operations can be carried out in effective
manner. Social trends are changing at faster pace which business has to consider as its overall
growth along with survival is associated with this factor.
Legal factors
Legal factors are associated with the overall laws and regulations developed by
government which Nestle has to comply with so as to operate efficiently in the market. Laws
such as payment of taxes and duties are required to be followed by business. Nestle has to pay
taxes timely to government along with other duties (Terpstra, Foley and Sarathy, 2012). Apart
from this business enterprise has to follow employment laws where proper opportunities have to
be provided to each and every staff member hired by firm. This directly influences overall
performance of Nestle cereal in the market and corrective actions have to be taken by business
for smooth functioning.
7

Environmental factors
This factor has direct impact on business operations where environmental laws have been
developed by government of south Africa which nestle has to comply with. Further, overall
operations carried out by Nestle cereals has direct impact on surroundings and it may lead to
adverse impact also. Therefore, it is required for management to take corrective actions so as to
reduce its overall adverse impact on surroundings. This may allow business to enhance
performance in the market and can act as development tool (Turnbull and Valla, 2013). Apart
from this, Nestle cereals has started to introduce products in the market which are environmental
friendly and this can be regarded as one of the main reason behind success of firm in the market
of South Africa.
Porter five force analysis
Porter five force analysis is an model which can be used to take advantage of some
situation such as strengths. In addition to this, it also helps businesses to eliminate chances of
taking any kind of wrong step. Porter five force analysis analysis of Nestle cereal brand in South
Africa is mentioned below as:
 Supplier power- In terms of suppliers power it can be stated that they have high power.
There are few suppliers in South Africa which means that they have right to drive
prices.
 Buyer power- Nestle in South Africa have high power of buyer because there are many
players present in market. This means that tshe organization is required to make sure
that the it meet the changing need and demand of all its customers.
 Competitive rivalry- The biggest competitor of Nestle in South Africa are Tiger, Pioneer
food and Kellogg. Majority of the market share has been gained by these players.
Nestle in South Africa is facing high level competition.
 Threat of substitute- Nestle in South Africa has low threat to substitute as the people
have still not found a perfect substitute of breakfast cereals.
 Threat of new entry- The threat of new entry is also very low for Nestle in South Africa.
One of the major reason associated with this is that lack of proper facilities in the
country.
8

Key challenges faced by Nestle cereal in south Africa
One of the major challenge which has been faced by Nestle in South Africa is high
degree of competition. Existing market players such as Tiger, Pioneer food and Kellogg are
performing really well. Further African customers are also loyal to these brand and thus, Nestle
cereal is not able gain adequate sales and market share. Other than this, lack of electricity and
corruption has become one of the main reasons regarding why the brand is not able to become
popular in the market. Due to absence of proper electricity it is not possible for business
enterprise to carry out its overall operations smoothly as company carries out production on
larger basis where electricity is must and without this it is not possible to focus on key
operations. Apart from this, corruption as an issue is preventing firm from accomplishing its
9
Illustration 3: Nestle cereal brand
(Source: Wang, 2007)

main goals along with objectives (Jacobs, 2012). Regulatory authorities of the country are not
providing proper support to companies operating in the market due to presence of corruption and
sometime due to this reason business has to face high amount of loss which is unfavorable also.
Overall corruption in South Africa takes into consideration the private use of public resources,
bribery etc. Due to presence of such type of unethical activities overall performance of Nestle
cereal in the market is influenced and it is not at all under control of firm to deal with the
situation of corruption.
In short it is also leading to issue such as lack of government support where regulatory
authorities are not supporting business especially at the time of expansion or undertaking any
other type of activity (Vomberg, Homburg and Bornemann, 2014). Apart from this, some other
challenges are also present in the market of South Africa which is affecting overall performance
of Nestle cereals where poverty is major one as people living in the society are not able to satisfy
their basic need. Therefore, this is having adverse impact on business where Nestle is not able to
sell commodities which are costly and overall prices have to be kept moderate so that each and
every individual living in the society can afford it. This is also preventing business enterprise
from expanding overall operations in the market as response from target market is not up to the
mark. Therefore, in this way these are some of the key challenges being faced by nestle cereals
in the market of South Africa.
(Section B) Analysis of whether global or domestic strategy should be adopted by Nestle
In the present scenario, it is not easy for business to grow and earn adequate profits in
global market. Nestle operates in more than 197 countries all across the globe and it requires to
develop different strategies for different countries. One of the major problem which Nestle
encounters at the time of operating in various nations is related to decision making. The brand is
required to make decision regarding whether it should go for the strategy of standardization or
should adopt domestic strategy according to the marketing environment of a particular nation
(Lichtenstein and Johansson, 2011). Localization can be defined as the strategy where companies
manufacture and deliver products and services as per the demand of local market. Further
strategies and products changes as per the changing market needs. On the other side of this,
standardization can be defined as the process in which single strategy is adopted by business for
all its international markets. This means that rather than focusing on needs of market, single
10

strategy is implemented and products are offered to various kind of international markets.
Further it can be stated that both these strategies have their own set of advantages and
disadvantages which are required to be taken care of. Therefore, it become very important
aspects for a business such as Nestle to determine effective strategy. Global operations become
very expensive if organizations are not able to gain adequate customers. If strategy is developed
by keeping the environment of country in mind then in helps businesses to meet the need and
demand of people in market. On the other side of this the main drawback of such strategy is that
it can be very complicated for businesses. The strategy of standardization can results in efficient
monitoring system as a single strategy will be implemented for all the countries. Companies are
also required to take care of the fact if the strategy of standardization is adopted then the need
and demand of local people can be affected.
Strategy for Nestle in USA
In order to operate in the market of USA, strategy of adaptation will be more suitable.
The rational behind this is that it will help Nestle to have faster set up times for all its process.
Other than this, it will also help the brand to establish its global image. There are some
disadvantages of such strategy which needs to be taken care by the brand at the time of operating
in USA. One of the major drawback is that it can results in possible loss of the effectiveness of
advertisement. The local needs will not be satisfied if the strategy of standardization is adopted
by Nestle. Further both these drawbacks can be overcome with the help of increasing overall
scale of economies (Stavros, Pope and Winzar, 2008).
The reason why the strategy of standardization is suggested to Nestle for operating in
USA is that the current market is not stable. People have changed their preferences from cereals
to yogurts and other products. Therefore this strategy will help in lowering down the risk
associated at the time of operating in international market. Market of USA is highly developed
due to which standardization as a strategy is beneficial for business through which it is possible
for target market to keep specific standard in its product range which is being offered to target
market. Apart from this it will support business in attracting large number of customers and their
needs can be satisfied by offering products which is above their expectation level (Wang, 2007).
Further, time to time company has to raise its quality standard so that loyal customers can be
retained for longer period of time and in turn it can assist to accomplish main goals along with
11

objectives which is being set by management. Market of USA can provide ample of
opportunities to Nestle cereals.
Strategy for Nestle in South Africa
In last few years, the need and demand of breakfast cereals has been increased to a great
extent. Nestle can implement the strategy for adaption at the time of operating in South Africa. It
has been found that the cereal market of South Africa is already dominated by market players
such as Kellogg, tiger brand and Pioneer food. This means that in order to penetrate and explore
the market, Nestle will be required to first understand and then deliver cereals as per the need
and demand of customers in the country (Stover, 2007). The brand cannot adopt the strategy of
standardization as it won’t help in attracting customers. To increase sales, profits and market
share, Nestle will be required to ensure that all the breakfast cereal is provided as per the
changing demand of customers. Respecting local specifications and expectation will become one
of the main reason behind increasing sales and market share of Nestle in South Africa.
4P's in the strategy of adaption and standardization
 Product- As per this strategy, Nestle will be required to manufacture and offer products
as per the demand of people in various market. This means its products will vary from
one country to another. On the other side of this, in case if standardization strategy is
adopted than Nestle will have single products across all its markets.
 Price-The pricing will be adopted as per the trend of market which means that prices of
Nestle product will be based on various factors such as demand, customers etc. Along
with this changing needs, the prices will be also changed. In terms of standardization, the
price will be also standardize which means same price in all the markets.
 Place- If the brand will be required to make sure that it products are delivered from
convenient places. Along with this as per the strategy of adaptation the brand will be
required establish effective deliver system. If the organization adopts the strategy of
standardization the brand can provide products with the help of supermarket and online
retailers.
 Promotion- In localization strategy, Nestle will be required to carry out promotion which
can attract people from local market. This means promotion strategies will be based on
12

the need and expectations of market. On the other hand, in case if standardization strategy
is adopted than the promotion will be carried out by considering needs of global market.
CONCLUSION
From the above report it can be concluded that the marketing environment differs from
country to country. Nestle is a global brand which manufacture and delivers various kind of
products and services to customers all across the world. It products line also includes breakfast
cereal brand which is supplied to many countries in the world. It can be concluded that till now
the marketing environment of USA has been favorable for Nestle breakfast cereal. It can be
concluded that the key issue which is faced by the brand in USA is related to changing need and
demand of people. On the other hand, the issues which has been faced by the brand in south
Africa are related to intense competitions and corruption.
13

REFERENCES
Books and journals
Che, D., 2014. What happened to Tony the Tiger?: The rise and fall of Cereal City USA.
Routledge.
Cunningham, M. K., 2013. Reducing Channel Conflict. Journal of Marketing Development and
Competitiveness. 7(1). pp. 78-83.
Eppersona, J. E. and Escalanteb, C. L., 2013. The effect of the Eurozone crisis on US food
companies. Journal of Food Distribution Research. 44(1). pp. 75
Florida, R., 2012. For creative cities, the sky has its limit. Wall Street Journal. pp. 27.
Fraser, J. A. and Strategy, E. S., 2013. A return to basics. Image.
Hines, A. and Gold, J., 2014. An organizational futurist role for integrating foresight into
corporations. Technological Forecasting and Social Change.
Laforet, S., 2015. Managing brand portfolios: audit of leading grocery supplier brands 2004 to
2012. Journal of Strategic Marketing. 23(1). pp 72-89.
Lichtenstein, N. and Johansson, E., 2011. Creating hourly careers: a new vision for Walmart and
the country. Rapport pour l’organisation Jobs with Justice.
Medina, W. T., Quevedo, R. A. and Aguilera, J. M., 2013. Changes on image texture features of
breakfast flakes cereals during water absorption. Food Science and Technology
International. 19(1). pp. 45-57.
Monge-Rojas and et. al., 2011. Voluntary reduction of trans-fatty acids in Latin America and the
Caribbean: current situation. Revista panamericana de salud pública. 29(2). pp. 126-
129.
Stavros, C., Pope, N. K. L. and Winzar, H., 2008. Relationship marketing in Australian
professional sport: an extension of the Shani framework. Sport Marketing Quarterly, 17(3),
135-145.
Stover, J. S., 2007. Making marketing work for your library blog. Internet reference services
quarterly. 11(4). pp. 155-167.
Terpstra, V., Foley, J. and Sarathy, R., 2012. International marketing. Naper Press.
Turnbull, P. W. and Valla, J. P., 2013. Strategies for international industrial marketing.
Routledge.
Vomberg, A., Homburg, C. and Bornemann, T., 2014. Talented people and strong brands: The
contribution of human capital and brand equity to firm value. Strategic Management
Journal.
Wang, C. L., 2007. Guanxi vs. relationship marketing: Exploring underlying differences.
Industrial Marketing Management. 36(1). pp. 81-86.
Online
Jacobs, D., 2012. Political and Economic Stability in South Africa. [Online]. Accessed through <
http://www.hri.org/MFA/thesis/summer98/stability.html>. [Accessed on 14th Jan 2016].
Overseas business risk- south Afrcia., 2015. [Online]. Accessed through <
https://www.gov.uk/government/publications/overseas-business-risk-south-africa/overseas-
business-risk-south-africa>. [Accessed on 14th Jan 2016].
14