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Section 2 Group 7 1

NESTLE S.A. : INTERNATIONAL MARKETING

KANIKA AGGARWAL FT12222

KUSHAGRA PRASAD FT12227

PRIYAKSHI GUPTA FT12242

RAGHAVENDRA B FT12243

VIVEK RATHOD FT12275

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Points to be addressed in the Presentation:

1. What are the external and internal forces providing reasons to adopt centralization or decentralization at Nestle?

2. How influential are the roles in Nestle in determining the degree of centralization or decentralization of local markets?

3. Whether Co-ordination by centre is more feasible & productive for Some elements of Marketing Mix over

others? Some Product Categories over other? Some Countries over Other?

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Internal Factors Influencing Centralization and Decentralization

CENTRALIZATION

DECENTRALIZATION

Worldwide efficiency and communication of Ideas.

Generation of new ideas of products by local managers (Mouseline in France), brand names (Bollino in France).

Nestle’s goal of reducing cost (economies of scales) and increasing profits.

Knowledge of local markets and customers by local managers.

Simplification of the organization.

Better relationship with local stakeholders.

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External Factors Influencing Centralization and Decentralization

CENTRALIZATION DECENTRALIZATION

Demographic convergence between countries.

Product Differentiation.

Cultural convergence between countries.

Differences in Consumer Languages.

Spill over Effect. Difference in Consumer Perceptions (advertising, branding).

Differences in Consumer tastes.

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How does Nestle exert Influence Flexibility given to regional and country

managers on every elements of marketing mix, except Branding.

Branding is controlled, standardized by central organization who charge license fees to country operating companies for the use of brands and brand names.

Product Positioning, Distribution, Trade Promotion, Consumer Protection and Media advertising decentralized.

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Continued…

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a) Degree of Centralization based on Marketing Mix

4P’s PLACE

Germany & France exhibit different product launch requirement which can be best understood and decided by a production Manager in a decentralized Model

PRICE Price points are sensitive to local market competition,

consumer’s purchasing power and brand value. Decision on Centralization is contextual and dependent on the extent of achievable economies of Scale. Bolino (France)– 13 million units sold – Reduction in Cost of

production needed from existing 20% Local Competition from Knorr.

5Minuten Terrine : 40 Million Units sold – 30% of total cost from COP

Centralization can help in achieving < 20% (COP) with good economies of scale.

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Contd..

Product: Low degree of Centralization would be feasible to cater local demands and consumer preferences. Design of a new product (Instant noodles)to suit Local taste

and provide sufficient shelf life. Promotion: Local coordination by product manager will be feasible

Best understands the market and a suitable branding model to address local needs.

5Minuten Terrine: Positioned to Women and Men in 30’s and 40’s Strengthened on Maggie’s Brand Name Value Promoted – Nutritious and convenient to cook.

Bolino : Positioned to Young ,Single consumers Down Played Maggie’s Brand Name Modified packaging as per market research and consumer

requirement.

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b) Degree of Centralization based on Product Category

Assumptions: Push products if more centrally coordinated

will increase profits by more sales and reduced operations cost.

Taste based products should be less centrally regulated.

Products already having high sales are assumed to be performing well because of higher degree of centralization.

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b) Degree of Centralization based on Product Category

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c) Degree of Centralization based on Country

Points to be considered before deciding on feasibility of centralization: Cross Cultural Understanding between different Countries

Demographic and cultural Trends Consumer Tastes and Preferences Family size, Population growth , away from food consumption and standard of

living. Spill Over National Boundaries

Contribute to conflicts in product positioning. 65% of the programming watched in French Speaking pat of Switzerland

emanated from France. Satellite Television – centralized coordination planned to

break down cultural barriers Offer same type of Advertising Cost effectiveness in Europe as in US. Harmonized Product Positioning, Packaging, Promotion and Pricing. Can be adopted for (Breakeven Volume)Cost/unit > Fixed Costs of

$200million/Satellite and other government hindrance issues.

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