Case Study 6

Definition of
globalization

Nestle is a Multinational corporation, A

company that operates globally through

branches with their headquarters in one
country. This is made possible through
Globalization and Trade Liberalization
which encourages companies to expand
globally with fewer restrictions.

Reduced Trade Barriers and

Investment Restriction
Ever Since GATT ( General agreement on

Tariffs and trade) was introduced, the trade

barriers are slowly reducing . Encourage the
companies to free trade. effectively.
In 1990 trade barriers crumble thus, allowed

the company to use less costly import and

export duties .
The world market developed into more or

less integrated trade areas.

Development of technology
Due to advanced technology we had today we are able to

communicate and transport goods, increasing the efficiency

and effectiveness of conducting a international business
transaction.
For example, the existence of internet helps in every way,

Nestle is able to reach out of the customers globally through

Internet, online marketing and e-Commerce . Because of the
airplanes, Nestle are able to ship and transport the goods
without have to worry about the destination time compare to
the olden days.
Technology are able to join the countries together creating

better environment and serving the consumers with

satisfactions. Nestle is able to take advantage of the
technology and expand its business globally.

Convergence of global taste and

preference
In order for Nestle to go global, Nestle have to redesign

and recreate new products to satisfy different consumer

due to different cultural in other countries.
In order to make globalization work, Nestle have first

understand the social cultural of the environments and

acknowledge the implications of globalization. Nestle also
have to be adaptive because there must be constant
changes in order to keep up with the customers needs.
Nestl's goal is to bring consumers pleasure and

convenience by understanding their unique needs and

preferences. Nestl's believed that local brands are more
important than global brands. For example, most of the
Chocolate business product comes from the local brands.

Exporting
goods and services that are made in one
country and transmitted to foreigners
it does not matter how it service and goods to sent

can be shipped, sent by email, or hand-carried in personal

luggage on a plane.

tourism products and services are considered exports,

even though they are sold to foreigners.

Transportations

Licensing
The granting of permission to use

intellectual property rights, such as

trademarks, patents, or technology, under
defined conditions.
Franchising is the part of Licensing, which get

approved form the organization.

KFC . Mcdonads burger king

Licensing------franchising

Joint venture
Two or more compaies decided to cooperate with each

other to produce or provide certain services.

Each partner contributing a certain portion of capital.
Sharing profits form the original parent entries.
Join venture must possess similar objectives in which
both parties,or under the same regulations.
Foreign direct investment(FDI).
1 Being a requirement by the host government to enter
its contry

2 joint ventures with local compaies help forign

compaies to learn and adapt to local laws and
cultural requirements.

Wholly-owned subsidiary
A foreign firm invests into a subsidiary in host country

withut any partner,which is 100%percent of the subsidiary.

A company can use two methods.
1 greenfied--- foreign company establish a new operation in

the host country or merges with an existing company in the

host country.
2 Acquisition-An acquisition is a corporate action in which a

company buys most, if not all, of the target company's

ownership stakes in order to assume control of the target
firm.

Data Acquisition Methods

Wholly owned subsidiary

Whereby the parent company owns all the

stock

Advantages(Wholly owned)
Companies that must rely upon suppliers and

service providers can take control of their

supply chain by use of wholly owned
subsidiaries.
means ofvertical integrationwhere
companies in a supply chain are under the
control of a common owner.
Diversification and management of risk
factors.

Disadvantages( Wholly owned)

It is an expensive undertaking
Overpayment for company assets
Relationship management is time consuming
Subsidiary management gets difficult if right

efficiency cannot be utilized.

Licensing
When parent company allows another company
to use intangible assets to enter a foreign
market.

Advantages( Licensing)
Instant and guaranteed revenue for

licensing company.
Brand recognition. A more subtle advantage
of licensing a business process is the
promotion of brand recognition. The licensing
company should consider retaining the right
to market the fact that the licensee has
obtained a license from the licensing company

Disadvantages (licensing)
Competition. One of the major disadvantages

to issuing a license is that it creates competition.

In fact, the license places your competition on a
level playing field because the competitor now
has the right to use the same production
processes you use
Confidentiality. If another business is willing to
pay you for a license on your production process,
your production process is a valuable property
right. The risk with a license is that it increases
exposure of your confidential information.

International Business Strategies

Plans that guide commercial transactions taking

place between entities in different countries.

Pressures for cost

reduction

Pressures for Local

Responsiveness

Global Strategy

Global Strategy

Low Respo
nse!

Global Strategy
Company reaching on a global economy scale
Implement strategies from the home company
Single strategy implemented globally

International Strategy
Products made at home and sold

internationally
Decisions made at home country
Duplicate functions of its host country

Multinational Strategy

-Its also known as multidomestic strategy.

The companys foreign subsidiaries have roles
involve adapting to the local culture and
exploiting opportunities in the host country.

Transnational Strategy

-This strategy tries to balance both the needs

so as to reduce costs as well as to localize
products to the home countrys culture

Nestles Business Strategy

Nestles Strategy

Multinational
Strategy

Acquiring U.S company Raison

Purina : Intention was not only

to develop the food brands but
also to customize their
products to suit the tastes of
customers in countries around
the world.
Customers have been

More focus on adopting their

products and service to each

individual local market.
Create a new approach and

apply transformation following

by customers demand

demanding more nutritious

food products.
Adoption: Organic Approach

Worlds leading nutrition,

health, and wellness food
company

Global strategy
1990s Nestle started to begin a global

startegy
Nestles sales skyrocketed
Majority of its sales were from the western
countries

Transnational strategy
Customization was the key for their global

strategy
They realized Asia could be profitable
Focused on difference in Asian countries like
India and China.

Questions
&
Answers