Business Synoptic Analysis of Nestle Essay Example | Topics and Well Written Essays - 3750 words

Business Synoptic Analysis of Nestle - Essay Example Western countries led to a shift from the large scale manufacturers to the national discount chains and supermarkets. As a consequence Nestle directed its attention towards the emerging markets in Latin America, Asia and Eastern Europe for exploring the growth potential of the regions. The reason for this divergence is fairly simple- rapid growth of the emerging countries. Despite these countries being poor the fast economic growth coupled with the rapidly growing population of the region and the market friendly policies of the government of these developing markets makes these regions lucrative attractive business destinations. Though these countries are relatively poor the growth rate of their economies is commendable. For instance if the most recent growth forecasts are taken into account it was anticipated that by 2010 the population in India and China would reach 700 million. The income level of this population was assumed to be in line with the income level of Spain. With the a nticipated rise in the level of income the consumers are expected to substitute basic foodstuff with branded food items. This offers a host of opportunities for multinational food companies like Nestle. The main strategy of the company is to make a place in these markets before the entry of its rivals and establish its presence in the local markets by selling the items that are locally popular. The aim behind this strategy is to establish a commanding position in each of these markets. Once it is able to build itself then it can shift the focus on the upscale items like chocolates, mineral water, prepared food stuffs and cookies. The emerging markets are also popular on account of the pro-liberalisation policies of the national governments. This encourages the companies as it does not have to face any regulatory restrictions in setting up its operations. It is not likely to face any opposition. In some economies there are restrictions in businesses like retail however as Nestle is a consumer goods manufacturing company it does not have to face any such resistance thereby facilitating its smooth entry into the emerging economies. The emerging markets have been an attractive business destination for the multinational corporations. The main reason for this is that the emerging markets offer high skilled labour at low wages. Other than this the valuable untapped natural resources of the region adds to the potential of the region. Moreover, the rising middle income group of these countries indicates a substantial market for consumer goods (Cavusgil, et al., 2009, p.251). The attractiveness of the emerging markets is validated by Porter’s Five Forces model: 1. Threat of entry of new competitors: In general, Nestle identifies new markets at nascent stages and enters the markets much before its competitors do. This helps Nestle enjoy all the benefits of a first mover and creates substantial entry barriers for new entrants in the market. 2. Intensity of competitive rivalry: Nestle may face competition from 2 different kind of companies – companies native to the markets it is entering & other transnational competitors like Kraft foods. While native compani es are generally way too small for Nestle to pose a significant competition, bigger and resourceful transnational com