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Value Creation, the brand philosophy
Nestle- Your “Good Food, Good Life” partner is a global case study in winning business strategy. What started as a company in 1866 in Switzerland for manufacturing infant milk formula gradually became a household name with the subsequent addition of product lines by 2020. Winning products, meaningful mergers and acquisitions and superior business expansion across the globe is a testimony to Nestle's value-creating business model.
In one of the Interviews given by Mark Schneider, the chief executive of the Swiss food giant Nestlé, to New York Times in the last quarter of 2019, he explicitly expressed Nestle’s commitment towards striking a fine balance between being virtuous and profitable in business at the same time. it was further testified that Nestle makes it a practice to fortify Maggi bouillon cubes with iron to address the prevailing nutritional deficiency in Africa. These bouillon cubes are one of the staple Nestle products to be used in Africa.
The International Business Model
Nestle’s business model rests on four pillars and they are:
1. Localisation Approach - Nestle as a brand has always powered growth through innovation and a thorough understanding of consumer needs of the international markets. Nestle products are marked by its ingenuity and increased localization approach. The whole idea is to seamlessly root itself in different geographical locations by assimilating local flavours in products and embracing local language while marketing the same. This has helped the company address uncertainties when it comes to international trade.
For example, in China, Nestle launched a battery of nutrient drinks using locally sourced herbs in 2018. This led to the company recording double-digit growth in 2018.
2. Improve Margins - The stringent and meticulous cost management has always enabled Nestle to pivot its structural savings program not only across manufacturing units but also across its administration and procurement.
According to the report published, the company clocked in 1.9 billion Swiss Franc savings at the end of 2019. The redundant or low productive units were shut down and fixed overheads were minimized by 5.5%. The global buying witnessed significant traction from just 55% in 2018 to 61% in 2019. The entire approach was towards minimizing unnecessary costs and powering operational efficiency at all levels through standardized processes and improved automation. Nestle's approach towards improving margins can be accredited to its world-class executive team spearheading its foreign trade and policy matters. To be work in such a stimulating environment calls for a great deal of knowledge and understanding of international trade. For those aspiring to work in such amazing organizations, it is critical to developing specific capabilities by exploring courses such as the Executive Post Graduate Diploma in International Business Strategy (EPGDIBS) offered by IIFT (Indian Institute of Foreign Trade). The course curriculum revolves around offering an understanding of core concepts and working principles of International Business.
3. Allocate Capital and Resources with Clarity - Investing in growth drivers and value-creating acquisitions have been at the core of Nestle's success. Year-on-Year, the company has invested in R&D, brand support and towards sustainable operations. When it came to acquisitions, the company had its governance policies in place along with its targets. From first January 2020, it's Group Strategy and the Business Development Function became operational.
4. Create Shared Value between stakeholders and the company - Nestle is known for creating tremendous value for each stakeholder that make up brand Nestle. With 2000 brands run by 291000 employees globally, the company has taken it upon as a mission to:
So entire success story of Nestle builds on its exciting trade landscapes, challenging competition and commitment to deliver good!
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