Today, many multinationals seek to expand their activities in the international market spurred by the growing trends of globalization. By investing substantially in foreign markets, they hope to establish themselves and gain market shares. This expansion of activities can only be undertaken subsequent to a thorough analysis of the external environment.
Indeed, companies' ability to identify and monitor external factors by taking into account their internal strengths will determine their success. In this report, we will focus on the French multinational Danone, in China and India. We will identify which country and market would be most suitable for Danone's business model and its international success.
Our study will be composed of two parts. The first one will deal with an overview of the group while the latter part bring will analyze the business environment of these two markets. Finally, we will conclude by presenting our point of view.
Groupe Danone, created in 1919 in Barcelona by Issac Carasso, initially concentrated on producing yoghurt. In 1929, ten years after its creation, the company was established in France to extend its market shares. A new entity was thus created under the name Gervais Danone following its merger with cheese manufacturer Gervais.
The Danone Group, the number one company on the international market for fresh dairy products, bottled water and infant nutrition, was born in 1970 of a merger between Gervais Danone and Boussois-Souchon-Neuvesel. This merger helped the Group to become the leading French agro-alimentary firm and a well-established multinational.
In 1998, Groupe Danone joined the New York Stock Exchange and was the official partner of the FIFA World Cup in France. Currently, the Group is present in more than 80 countries registering a turnover worth over 12 billion euros in 2007.
[...] Finally, the company should keep in mind that dairy products do not form part of the daily Chinese diet as the population is largely lactose intolerant. This represents a handicap for the company sale of dairy products sale and risks incurring additional costs. Products will have to be adapted to Chinese habits such as their inclination to eat with chopsticks. National Economy and production factors INDIA Today, India is the fourth biggest international economy in terms of GNP: 785 billion dollars in 2006. [...]
[...] Even though it is expected to reach 60% in 20 years, China remains a country to be modernized. This could be an impediment for the Danone implantation. Cultural consideration INDIA For Danone to establish itself effectively, it is necessary to study Indian cultures in all its complexity, the various languages, religions, castes, and ethics. Regarding languages, even though companies normally use English for its business activities, there still exist 23 official languages. It is an understandably tricky proposition for the company to deeply comprehend the various cultures, and satiate all customer expectations. [...]
[...] Danone has put up an exemplary performance regarding the last stage as testified by the hard earned success of its products which have been adapted to over ten countries in order to address nutritional deficiencies in children. Analysis of the business environment existing in these two markets Geography and Demography INDIA Currently, India is the second most populated country in the world. This country offers Danone considerable commercial perspectives: 1.136 billion inhabitants. Regarding this population, it should be noted that 29% reside in urban areas and 71% in rural areas. This constitutes a constraint for Danone's implantation: In which area should it be established? [...]
[...] Regarding production factors, labor is qualified, abundant and can speak and work in English. For example, the country produces more than 200,000 engineers each year, more than 300,000 graduates and 9,000 doctorates. It also should be known that India has been producing for the past ten years high level engineers on the labor market. These various positive points will facilitate the company implantation and will improve its results in Research and Development. Lastly, India became in 2001, the first dairy producer ahead of the United States with a production of 84 million tons. [...]
[...] Market Condition INDIA The dairy sector in India is witnessing a rapid growth of consumption. Dairy products accounted for 16% of food expenditure in 2006. The consumers demand was evaluated over this same year to 21 billion Euros. It should be known that imports are limited by a complex taxation system due to this high interior demand. The yoghurt market represents more than 2.9 billion euros a year and recorded a growth of 20% in 2007. It is a heavily consumed product which belongs to the culinary culture of the country. [...]
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