Faced with a saturated market, companies have to internationalize themselves in order to extend their markets. Internationalization occurs when a firm expands its R&D, production, sales and other business activities in the international market. It is a very expensive process which needs to consider many factors to build a strong strategy. Several strategies exist for internationalization. Companies have to consider many internal and external factors to enter a market, adapt their product to the country targeted and avoid many entry barriers.
Nestle seems to be an ideal firm for internationalization, because it is a multinational enterprise, which is of the critical size to internationalize, a lot of available resources, international experience and a wide product range. We chose Nestle Waters because the bottled water industry is a rapidly growing market based on the ‘healthy living' trend. The Swiss company is not yet present in the Indian bottled water segment which is why we decided to target the Indian market.
First, we will present Nestle Waters by an internal scanning of the firm. In part two, we will analyze the environment in India in order to define opportunities and threats of this emerging market. And in the last part, we will consider and evaluate three market entry options, to define the strategy to follow.
"Nestle Waters", a Nestle subsidiary, is nowadays the largest bottled water company in value (Danone SA is the largest in quantity). The brand is present over all the continents. The company has 19% of market share and in 2006 achieved €6.1 billion in sales. It currently employs 32000 persons and produces its products via 105 manufacturers over 37 countries. This global location allows the company to control all the markets where it sells its products. A factor of the company's success can be shown by its wide portfolio, which represent 72 brands of bottled water, with some famous around the world, like Perrier, Vittel, Contrex, Aquarel or Pure Life distributed in 21 countries, which is the 2nd most sold water in the world.
"Nestle Waters" is led by the same values and mission as its parent group Nestle SA. Nestle has built its business on its social responsibility. The company promotes a really strong model, designed by the "creation of share value". These values determine all its actions, like its products, the subsidiaries strategy, the human resources policy, as well as its positioning. The Nestle Waters' idea about its missions is symbolized by three words: "Health, Wellness and Pleasure". These values are put in action in all countries.
Nestle Waters' strategy is based on some main purposes. Firstly, as we said before, the wide portfolio of brands allows strong complementarities and offers a good solution to the consumer's needs. In fact, among its 72 brands, 75% of the sales are achieved by local brands. That shows that the company market entry strategies differ according to the country. Sometimes the company launches a global brand, for example "Pure Life" in 1998 in Pakistan, or use joint-venture or merger strategy, like in 2006, when Nestle Waters acquired 60% of the company ERIKLI, to enter the Turkish market.
[...] The second key factor to succeed in the Indian bottled water market is purity. Because of the numeral problems linked to polluted drinking water in India and diseases related with these issues, consumers are really attracted by the perceived purity of the product. Due to the very competitive market, a good image is also necessary to penetrate the market and increase market shares. In order to improve their image, firms have to be seem attractive with good communication programs because multinational enterprises like Coca Cola or Danone are present on the market with positive image intact. [...]
[...] The bottled water market in India is becoming more and more competitive, implying that Nestle Waters has to integrate in it quickly, and "in some cases [ ]the market is changing so rapidly that acquisition becomes the only way to successfully enter the market" (Johnson, Scholes, Whittington, 2005: 350). Then, acquire a local brand allows to improve competition, because this method doesn't involve the entry of new competitors, but the purchase of an existing one. Moreover, as we said before, Nestle Waters would benefit from the knowledge of the market, and stakeholder of the venture it would buy, which forms a real advantage. [...]
[...] But, again, negotiations failed, and the local brand chose its previous partner, the company Tata Tea, to enter into a relationship with - External scanning 2.1 Micro-environment Analysis Competitors: Today, the bottled water industry is one of India's fastest growing industrial sectors. Between 1999 and 2004 it grew by 25% per annum. In this market, more than 200 brands are in competition, of which approximately 80% are local. There are a lot of small producers who serve the market, but it is normally dominated by international big players like: Coca-Cola, PepsiCo, Parle Bisleri or SKN Breweries. [...]
[...] Financial and media center (Mumbai) Appendix 2 SWOT STRENGHTS WEAKNESSES (Nestlé Waters is leader on its previous failure for Nestlé market Waters in India (Global company, located all around (Difficulties, in term of image, to the world (portfolio of 72 brands, launch products by Nestlé Water manufactories, employees) after a failure (Strong values based on the social responsibility of Nestlé (Different strategies, according to the market to entry, to allow more efficiency long background in India, started in 1912 lot of social actions led by Nestlé, which involves a good image OPPORTUNITIES THREATS ( Indian law: the owner of a land ( Very competitive market: more could owns the groundwater beneath than 200 bottled water brands ( India of the world's ( Heavy procedure to do business population ( Aging infrastructures ( This country has about of the ( Using technology is reserved to world's water resources the elite ( Development of a heavy private sector ( Rising of the middle class ( High attachment to Indian local brands Appendix 3 Porter's Five Forces (Hollensen p 97-103) Appendix 4 Source Doing Business 2008 Appendix 5 Appendix 6 Appendix 7 Appendix 8 Bibliography Books Aaker, David A Developing Business Strategies. [...]
[...] Literacy rate Consumer exepectations High value for low price Local brands : every wining company on the bottle water market ratail its products with a local brand (e.g Himilaya form Tata group) Raising middle class people (source National Council of Applied SOCIAL General General Indian Culture Indian Culture Must know Must know Hinduism and the Fatalism is link to traditional caste system spirituality, it is still influence business the opposite of practices and companies destiny it mainly organization. influence the notion Collectivism influences of time, the business particularly for consequence on a better acceptance of business could be a hierarchical settings, an longer time for avoidance of conflicts and negotiation. [...]
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