International Marketing Report: Nestle Cereal Strategies in USA & SA

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This report provides a comprehensive analysis of Nestle's international marketing strategies, focusing on its cereal brands in the USA and South Africa. It begins with an introduction to international marketing and Nestle's global operations. Section A examines the marketing environment in both countries, including PESTLE analyses, key challenges, and market conditions. Section B delves into strategic considerations, discussing whether Nestle should adopt global or domestic strategies in each market. The report concludes with recommendations and references, offering insights into market dynamics, competitive landscapes, and strategic adaptations required for success in these diverse markets. The analysis covers political, economic, social, technological, and legal factors, as well as Porter's Five Forces, to provide a complete understanding of the challenges and opportunities Nestle faces. The report emphasizes the importance of adapting marketing strategies to local contexts for optimal performance.
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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
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Illustration Index
Illustration 1: Nestle cereal brands..................................................................................................2
Illustration 2: PESTEL Analysis .....................................................................................................3
Illustration 3: Nestle cereal brand....................................................................................................9
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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.
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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
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Illustration 1: Nestle cereal brands
(Source: Lichtenstein and Johansson, 2011)
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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
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Illustration 2: PESTEL Analysis
(Source: Lichtenstein and Johansson, 2011)
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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.
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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
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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
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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.
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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.
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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
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Illustration 3: Nestle cereal brand
(Source: Wang, 2007)
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