International marketing Marketing Decisions on marketing MIX
International marketing
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Transcript of International marketing
International Marketing
International marketing is marketing beyond the national borders. It is a business activity
that directs the flow of goods/services/ideas/ and other resources from the producers or
suppliers of one nation to the consumers or users of another nations
Marketing is the process that allows you to direct your organisation's goods and services to
consumers in order to make a profit. The main difference between domestic marketing and
international marketing is that the process takes place in more than one country.
The international market is incredibly diverse, providing business managers with untapped
potential and a huge range of profitable opportunities. However, this diversity can make
international marketing operations quite complex, requiring the coordination of a variety of
processes in order to be successful.
In most cases, the basic marketing principles are applicable to all markets around the world.
The difference is that you need to be able to apply those principles in environments that
could be significantly different to what you are used to dealing with. Many of the issues
international marketers face are outside of their direct control, so they need to be prepared to
adapt their strategies to cope with unfamiliar situations and problems.
Some of the issues that can make international marketing difficult include the varying
political, economic, cultural, technological and social situations experienced in different
countries. As an international marketer, your task is to take the marketing elements that you
have control over (research, product, price, promotion and distribution) and adapt them so
that they work within your target market.
One of the most important factors to remember is that each market you enter is different.
There is no guarantee that what works in one country or region will work in another. This is
the reason that many international marketing attempts fail to achieve their desired results.
The key to success is your market research and how you use it to effectively adapt your
products and services.
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In the second half of the twentieth century, international business has become an important
economic force. Today few, if any, countries are economically self-sufficient. Even China,
with its vast human and natural resources, has not been able to remain aloof from the world
economy. In the United States, international business touch people's lives daily. Common
goods and services, often identified with the United States, are, in fact, foreign owned.
Examples include Burger King, Pillsbury, Scotty's hardware stores, Shell and Citgo gasoline
stations, Stouffer'sfrozen foods and Carnation evaporated milk. So, what is international
business? Who engages in international business? What are the rules governing it and who
sets them? What are the major contemporary international business issues?
Definition
International business is business conducted in more than one country. It is buying and
selling goods and services in foreign countries. Other international business activities include
marketing, manufacturing, mining, and farming. In sum, international business is all the
practices a business in a single country does, but at the international level.
Framework
International business does not function in a vacuum. It operates within the context of
international and, sometimes, regional rules and regulations set by appropriate governmental
organizations. Although each organization is distinct, some of their common characteristics
are fostering trade among member countries, establishing common rules and regulations,
promoting air trade practices among members, and protecting members from competition
from non-member countries. Other organizations exist to facilitate financial transactions
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among nations or the particular interest of members, such as trade in a specific commodity.
The following are some international and regional organizations:
The total foreign affiliates of MNCs, only little were developed countries.
Foreign investment has been growing substantially faster than world output and export.
MNCs have been emerging from the developing countries.
1. Multinational Corporation
A multinational corporation (MNC) is a corporation that is registered in more than one
country or that has operations in more than one country. It is a large corporation which both
produces and sells goods or services in various countries. It can also be referred to as
an international corporation.
The term ‘Multinational’ is widely used all over the world to denote large companies having
vast financial, managerial and marketing resources. MNCs are like holding companies
having its head office in one country and business activities spread within the country of
origin and other countries.
IBM computer and Pepsi-Cola from U.S.A., Siemens from Germany, Sony and Honda from
Japan Philips from Holland etc., are some of the MNCs operating at international levels.
1.1 Definition
According to ILO report (i.e. International Labour Organisation) “The essential nature of the
multinational enterprises lies in the fact that its managerial headquarters are located in one
country, while the enterprise carries out operations in number of other countries’.
A corporation that has its facilities and other assets in at least one country other than its home
country. Such companies have offices and/or factories in different countries and usually have
a centralized head office where they co-ordinate global management. Very large
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multinationals have budgets that exceed those of many small countries. Sometimes referred
to as a "transnational corporation".
Multinational Corporations no doubt, carryout business with the ultimate object of profit
making like any other domestic company. According to ILO report "for some, the
multinational companies are an invaluable dynamic force and instrument for wider
distribution of capital, technology and employment; for others they are monsters which our
present institutions, national or international, cannot adequately control, a law to themselves
with no reasonable concept, the public interest or social policy can accept. MNC's directly
and indirectly help both the home country and the host country.
Nearly all major multinationals are either American, Japanese or Western European, such as
Nike, Coca-Cola, Wal-Mart, AOL, Toshiba, Honda and BMW. Advocates of multinationals
say they create jobs and wealth and improve technology in countries that are in need of such
development. On the other hand, critics say multinationals can have undue political influence
over governments, can exploit developing nations as well as create job losses in their own
home countries.
Due to the tremendous growth of transportation, communication and technology particularly
during the last two decades, the world has now become a global village. The distance
between has becomes as shorter as ever and the geographical barriers between them have
virtually missing. As a result, the mutual dependence among the countries has increased. For
example coco cola origins in the united state, but a workers drinks coke ‘made in Nepal’ to
quench his thirst. Similarly, nescafe coffee is originally produce in Switzerland , but an
American family enjoys ‘necafe’ made in ‘USA’ every morning in the Chicago. There are
several other example of products which are originally manufacture in one country, and are
now being manufacture and consumed in the other countries. This has been possibly due to
the Multinational companies.
Multinational companies are mega form of business organization which carries out their
production and distribution of goods and services in at least two countries. Their owner ship
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and management are scattered around the countries wherever they operate. They
are incorporate in one country as parents company of multinational companies can viewed as
holding company and the branch companies as its subsidiaries.
Generally the majority of the shares in subsidiary are held by the parent company and the rest
by local people and institution .Similarly, the management and finance are under control of
the parent company giving some autonomy to the subsidiaries. Multinational companies are
engaged in the mass production and distribution of goods and serves around the world. IBM
corporation, nestle company, ford motor corporation.coco-cola company,etc are the
example of multinational companies.
1.2 Characteristics of Multinational Companies
Origin - The development of MNCs dates back to several centuries, but their real
growth started after the Second World War Majority of the MNCs are from developed
countries like U.S.A, Japan, UK, Germany and European countries. In recent years
MNCs from countries like Korea, Taiwan, India, China, etc. are operating in the world
markets.
Area of operation - The MNCs operate in many countries with multiple products on
large scale. A MNC may operate both manufacturing and marketing activities in a
number of countries. Some MNCs operate in several countries, whereas, others may
operate in a few countries. Mostly MNCs from developed countries dominate in the
world markets.
Giant Size - The most important feature of these MNCs is their gigantic size. Their
assets and sales run into billions of dollars and they also make supernormal profits.
According to one definition an MNC is one with a sales turnover of f 100 million. The
MNCs are also super powerful organisations. In 1971 out of the top ninety producers
of wealth, as many as 29 were MNCs, and the rest, nations. Besides the operations,
most of these multinationals are spread in a vast number of countries
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Ownership and control - The ownership of such company is shared by both parent
company and branch companies as per their capital investment. However parent
company manages and control the operation of its branches and subsidiary through
trade mark, technology, and patent right.
Comprehensive Term - In general, the term ‘MNC’ is a Comprehensive term and
includes international and transnational corporations. The term global corporation is
also included in the list of ‘MNC’.
Profit Motive - MNCs are profit oriented rather than social oriented. Such
corporations do not take much interest in the social welfare activities of the host
country.
Large scale business - The capital of multinational companies considerably large. Its
assets and volume of sales are also quite large. The sales turnover of
some multinational companies are much more then the annual budget of many
developing countries.
Global operation - Multinational companies operate globally. The parent company
manufacture and sells its products and services through its subsidiaries established in
other countries. Hence, they perform their business scale at the global scales.
Create Maximum Operation - The multinational companies are extended to many
countries. People can grasp the opportunity. People can join the multinational
companies according to their capabilities. Manpower can be well utilized in the
multinational companies.
Advanced Technology - Multinational companies invest a huge amount of money on
research and development of latest technology. They transfer advanced technology to
developing countries through subsidiaries and branches,
High Efficiency Advanced - technology are used are for multinational companies. So,
manpower can give well training which increase efficiency of manpower. Due to this
cause, the multinational companies can provide large volume of quality products at
cheaper price.
Product/service organization - A multinational company is based on product/service
which produces a mass production of varieties of goods and services. The company 6
consists own trade mark, patent right , copy right and technology for production and
distribution of such goods in the international market.
Management - The Parent company works like a holding company. The subsidiary
companies are to operate under control and guidance of parent company. The
subsidiaries functions as per the policies and directions of parent organisation.
Manufacture and Marketing Activities - MNCs undertake both Manufacturing and
Marketing Activities and they are predominantly engaged in hi-tech and consumer
good industries. Majority of the MNCs are engaged in pharmaceutical, petrochemicals,
engineering, consumer goods, etc
Quality Consciousness - MNCs are quality and cost conscious and managed by
professionals and experts. They have their own organisation culture and systems.
MNCs believe in the concept of total quality management.
1.3 Advantages of MNC's for the host country
MNC's help the host country in the following ways
Improving the balance of payments - Inward investment will usually help a country's
balance of payments situation. The investment itself will be a direct flow of capital into the
country and the investment is also likely to result in import substitution and export
promotion. Export promotion comes due to the multinational using their production facility
as a basis for exporting, while import substitution means that products previously imported
may now be bought domestically.
Providing employment - FDI will usually result in employment benefits for the host country
as most employees will be locally recruited. These benefits may be relatively greater given
that governments will usually try to attract firms to areas where there is relatively high
unemployment or a good labour supply. Multinational corporations play a big role in creating
employment in the foreign countries. Because of their many branch companies, they employ
local people in those countries to work for the corporation. This is especially important in
developing countries where unemployment is high
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Source of tax revenue - profits of multinationals will be subject to local taxes in most cases,
which will provide a valuable source of revenue for the domestic government.
Technology transfer - multinationals will bring with them technology and production
methods that are probably new to the host country and a lot can therefore be learnt from
these techniques. Workers will be trained to use the new technology and production
techniques and domestic firms will see the benefits of the new technology. This process is
known as technology transfer.
Increasing choice - if the multinational manufactures for domestic markets as well as for
export, then the local population will gain form a wider choice of goods and services and at a
price possibly lower than imported substitutes.
National reputation - the presence of one multinational may improve the reputation of the
host country and other large corporations may follow suite and locate as well.
Research and development activities - Developing countries lack in research and
development areas. Expenditure on research and development is essential for the promotion
of technology. Multinational corporations have greater capability for research and
development activities in comparison to national companies. Multinationals survive in the
international market through their advanced research and development activities.
Far-reaching effects on the economic, social and political conditions of the host country.
Multinational corporations provide a number of benefits to the host country in the form of
Economic growth
Increased profits
Developing of new products
Reduced operational costs
Changing social and political structure, etc. 8
Thus, it helps in the exploitation of resources of host countries for their own economic
advancement.
Product innovation - Multinational corporations have research and development
departments engaged in the task of developing new products, diversification in the product
line, etc. Their production opportunities are far greater as compared to national companies.
Financial superiority - Multinational corporations generate funds in one country and use
such funds in another country. They have huge financial resources at their disposal as
compared to national companies. Moreover, multinational corporations have easier access to
external capital markets.
Technological superiority - Multinational corporations can participate in the industrial
development programmes of underdeveloped countries because of their technological
superiority. They can produce goods having international standards and quality specifications
by adopting the latest technology. Generally, multinationals transfers technology through
joint venture projects.
Potential source of capital and advanced technology - Economically backward countries
invite multinational corporations as a potential source of capital and advanced technology to
generate economic growth and to create employment opportunities.
Lower cost of production - Multinational corporations carry on operations on a large-scale,
which ensure economics in material, labour and overhead costs.
Multinationals not only provide financial resources but they also supply a “package” of
needed resources including management experience, entrepreneurial abilities, and
technological skills.
Other Beneficial Roles - The MNCs also bring several other benefits to the host country.
The domestic labour may benefit in the form of higher real wages.
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The consumers benefits by way of lower prices and better quality products.
Investments by MNCs will also induce more domestic investment. For example, ancillary
units can be set up to ‘feed’ the main industries of the MNCs
1.4 Disadvantages of MNC's for the host country
Outdated Technology - MNC's may transfer technology which is outdated and is not
suitable for the host country.
Environmental impact - multinationals will want to produce in ways that are as
efficient and as cheap as possible and this may not always be the best environmental
practice. They will often lobby governments hard to try to ensure that they can benefit
from regulations being as lax as possible and given their economic importance to the
host country, this lobbying will often be quite effective.
Access to natural resources - multinationals will sometimes invest in countries just to
get access to a plentiful supply of raw materials and host nations are often more
concerned about the short-term economic benefits than the long-term costs to their
country in terms of the depletion of natural resources.
Uncertainty - multinational firms are increasingly 'footloose'. This means that they
can move and change at very short notice and often will. This creates uncertainty for
the host country.
Increased competition - the impact on the local industries can be severe, because the
presence of newly arrived multinationals increases the competition in the economy and
because multinationals should be able to produce at a lower cost.
Influence and political pressure - multinational investment can be very important to
a country and this will often give them a disproportionate influence over government
and other organisations in the host country. Given their economic importance,
governments will often agree to changes that may not be beneficial for the long-term
welfare of their people.
Transfer pricing - multinationals will always aim to reduce their tax liability to a
minimum. One way of doing this is through transfer pricing. The aim of this is to
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reduce their tax liability in countries with high tax rates and increase them in the
countries with low tax rates. They can do this by transferring components and part-
finished goods between their operations in different countries at differing prices.
Where the tax liability is high, they transfer the goods at a relatively high price to
make the costs appear higher. This is then recouped in the lower tax country by
transferring the goods at a relatively lower price. This will reduce their overall tax bill.
Low-skilled employment - the jobs created in the local environment may be low-
skilled with the multinational employing expatriate workers for the more senior and
skilled roles.
Health and safety - multinationals have been accused of cutting corners on health and
safety in countries where regulation and laws are not as rigorous.
Export of Profits - large multinational are likely to repatriate profits back to their
'home country', leaving little financial benefits for the host country. Companies are
often interested in profit at the expense of the consumer. Multinational companies
often have monopoly power which enables them to make excess profit
Cultural and social impact - large numbers of foreign businesses can dilute local
customs and traditional cultures. For example, the sociologist George Ritzer coined the
term McDonaldization to describe the process by which more and more sectors of
American society as well as of the rest of the world take on the characteristics of a
fast-food restaurant, such as increasing standardisation and the movement away from
traditional business approaches.
A large sums of money flows out of the country in terms of payments towards profits,
dividends and royalty.
MNC's transfer the capital from the home country to various host countries causing
unfavourable balance of payment.
As investments in foreign countries is more profitable, MNC's may neglect the home
countries industrial and economic development.
Multinational companies have highly competitive advantages due to low prices over
local firms and can destroy local competition. These local companies hard to survive.
Many of these multinational companies seek take advantage the political system by 11
pressuring because they have such a strong impact on the economy. The companies
can just pay off government officials to protect their company from being shut down.
They may avoid tax by practicing transfer pricing.
Their market dominance makes it difficult for local small firms to thrive. For example,
it is argued that big supermarkets are squeezing the margins of local corner shops
leading to less diversity.
In developing economies, big multinationals can use their economies of scale to push
local firms out of business.
MNCs have been criticised for using ‘slave labour’ – workers who are paid a pittance
by Western standards
MNCs may pay low wages by western standards but, this is arguably better than the
alternatives of not having a job at all. Also, some multinationals have responded to
concerns over standards of working conditions and have sought to improve them.
1.5 Applicability to particular business
MNC's is suitable in the following cases.
Where the Government wants to avail of foreign technology and foreign capital e.g.
Maruti Udyog Limited, Hind lever, Philips, HP, Honeywell etc.
Where it is desirable in the national interest to increase employment opportunities in
the country e.g., Hindustan Lever.
Where foreign management expertise is needed e.g. Honeywell, Samsung, LG
Electronics etc.
Where it is desirable to diversify activities into untapped and priority areas like core
and infrastructure industries, e.g. ITC is more acceptable to Indians L&T etc.
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2. Responsibility of Multinational Corporation in INDIA
2.1 Developing Country
A developing country, also called a less-developed country (LDC), is a nation with a low
living standard, underdeveloped industrial base, and low Human Development Index (HDI)
relative to other countries. There is no universal, agreed-upon criterion for what makes a
country developing versus developed and which countries fit these two categories, although
there are general reference points such as a nation's GDP per capita compared to other
nations.
Countries with more advanced economies than other developing nations but that have not yet
demonstrated signs of a developed country, are often categorized under the term newly
industrialized countries.
Developing countries are, according to certain authors as Walt Whitman Rostow, countries in
transition from various traditional lifestyles towards the modern lifestyle begun by
the Industrial Revolution in the eighteenth and nineteenth centuries.
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3. Company Profile
Nestlé is the world's leading Nutrition, Health and Wellness company. Our mission of "Good
Food, Good Life" is to provide consumers with the best tasting, most nutritious choices in a
wide range of food and beverage categories and eating occasions, from morning to night.
The Company was founded in 1866 by Henri Nestlé in Vevey, Switzerland, where our
headquarters are still located today. We employ around 2,80,000 people and have factories or
operations in almost every country in the world.
The Nestlé Corporate Business Principles are at the basis of our Company’s culture,
developed over 140 years, which reflects the ideas of fairness, honesty and long-term
thinking.
Nestlé is into :
Milk products and nutrition – milk powder, cerelac baby food, dahi, etc.
Beverages – coffee, milo health drink, cold tea
Preapared Dishes and Cooking Aid – Maggi noodles, Jams, Pastam Ketchups, etc.
Choclates and Confectionery – Kitkat, Bar one, Munch, etc.
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These ancient words mean ‘May all the people in this universe live with happiness and
prosperity’. They embody the spirit at Nestlé and reflect its business philosophy and
social responsibility initiatives. Nestlé believes that business and long-term social
benefit go hand in hand, entwined like the branches of a banyan tree.
Nestlé's business philosophy demands compliance with laws and conventions, and
emphasises the preservation of the environment for sustainable growth. It is the third
dimension - the creation of long-term value for both society and stakeholders - that makes it
unique. Nestlé calls this 'Creating Shared Value'.
Nestlé is a leading Nutrition, Health and Wellness company that continues to create
economic value for society. With its philosophy of ‘Creating Shared Value’, Nestlé has gone
a step further.
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‘Creating Shared Value’ goes beyond philanthropy. It also reflects the Gandhian philosophy
of trusteeship; that we are mere custodians of our resources, not the owners of it. Therefore
we must make judicious use of what we have, and use what we need with efficiency.
When we see our business bringing happiness, prosperity and smiles to people across India,
we believe we are doing good work. We apply this philosophy in a manner that touches all
our stakeholders across the value chain: farmers, consumers, communities around our
factories, employees, associates, vendors and investors. The ultimate expression of what we
believe in and what we endeavour to do is to provide ‘Good Food, Good Life’.
Nestle is one of the oldest of all multinational business company. Its operate food basis
business around the world. In order to satisfy both developed markets and developing
markets. Nestle adopt the transnational strategy that contain the element of global
standardization strategy and localization strategy to operate its company by the 21st century.
By using the transnational strategy, Nestle enjoys the low cost through economies of scale
and offers different product to different markets with high local responsiveness in order to
defend its old markets in the developed markets and look for potential growth in emerging
markets.
Nestle use the localization strategy to operation its business in the developing world where
Eastern Europe, Asia, and Latin America to optimize ingredients and processing technology
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to local conditions and then using a brand name resonates locally as the cultural habits
difference in different nations.
Customization rather than globalization is the key to Nestle's strategy in emerging. For
example, Nestle has taken as much as 85 percent of the market for instant coffee in Mexico,
66 percent of the market for powdered milk in the Philippines, and 70 percent of the market
for soups in Chile. Besides, Nestle hired local singer to promote its products in Nigeria, the
organization of a delivery system to increase efficiency in China, and using local material
and focusing on local demand such as make ice cream in Dubai.
Nestle focus on increasing profitability by customizing the firm' products so that it provides a good match to tastes and preference in different nation.
3.1 Nestle’s Contribution to India
Nestlé's relationship with India dates back to 1912, when it began trading as The Nestlé
Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished
products in the Indian market.
After India's independence in 1947, the economic policies of the Indian Government
emphasised the need for local production. Nestlé responded to India's aspirations by
forming a company in India and set up its first factory in 1961 at Moga, Punjab, where the
Government wanted Nestlé to develop the milk economy. Progress in Moga required the
introduction of Nestlé's Agricultural Services to educate, advise and help the farmer in a
variety of aspects. From increasing the milk yield of their cows through improved dairy
farming methods, to irrigation, scientific crop management practices and helping with the
procurement of bank loans.
Nestlé set up milk collection centres that would not only ensure prompt collection and pay
fair prices, but also instil amongst the community, a confidence in the dairy business.
Progress involved the creation of prosperity on an on-going and sustainable basis that has 17
resulted in not just the transformation of Moga into a prosperous and vibrant milk district
today, but a thriving hub of industrial activity, as well.
Nestlé has been a partner in India's growth for over nine decades now and has built a very
special relationship of trust and commitment with the people of India. The Company's
activities in India have facilitated direct and indirect employment and provides livelihood
to about one million people including farmers, suppliers of packaging materials, services and
other goods.
The Company continuously focuses its efforts to better understand the changing lifestyles
of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and
Wellness through its product offerings. The culture of innovation and renovation within
the Company and access to the Nestlé Group's proprietary technology/Brands expertise and
the extensive centralized Research and Development facilities gives it a distinct advantage in
these efforts. It helps the Company to create value that can be sustained over the long term
by offering consumers a wide variety of high quality, safe food products at affordable prices.
Nestlé India manufactures products of truly international quality under internationally
famous brand names such as NESCAFÉ, MAGGI, MILKYBAR, KIT KAT, BAR-ONE,
MILKMAID and NESTEA and in recent years the Company has also introduced products of
daily consumption and use such as NESTLÉ Milk, NESTLÉ SLIM Milk, NESTLÉ Dahi and
NESTLÉ Jeera Raita.
Nestlé India is a responsible organisation and facilitates initiatives that help to improve the
quality of life in the communities where it operates.
3.1.1 FIRST FACTORY: Nestlé built its manufacturing site in Moga in 1961.
Nestlé is helping to address micronutrient deficiency among lower income consumers in
India and other emerging markets with its affordable, fortified ‘Popularly Positioned
Products’ (PPP).
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Nestlé’s PPPs are smaller or ‘daily-portion’ packs designed to be bought on a regular basis.
They are manufactured locally, using local raw materials to minimise value chain costs.
PPP products in India include the iron-, iodine- and vitamin A-fortified Maggi Masala-ae-
Magic spice mix and Maggi 2-Minute Noodles with added calcium and protein.
Nestlé India has a factory in Uttarakhand dedicated to PPP production.
The new Nestlé S.A. R&D centre in Manesar will also work predominately on PPPs.
Nestle is concerned about people’s (where it supply its products) health and try to
provide the best food for consumption.
3.1.2 Presence Across India
Nestlé’s Presence In India
After more than a century-old association with the country, today, Nestlé India has presence
across India with 8 manufacturing facilities and 4 branch offices.
Nestlé India set up its first manufacturing facility at Moga (Punjab) in 1961 followed by its
manufacturing facilities at Choladi (Tamil Nadu), in 1967; Nanjangud (Karnataka), in 1989;
Samalkha (Haryana), in 1993; Ponda and Bicholim (Goa), in 1995 and 1997, respectively;
and Pantnagar (Uttarakhand), in 2006. In 2012, Nestle India set up its 8th manufacturing
facility at Tahliwal (Himachal Pradesh).
The 4 Branch Offices located at Delhi, Mumbai, Chennai and Kolkata help facilitate the sales
and marketing activities. The Nestlé India’s Head Office is located in Gurgaon, Haryana.
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Nestlé S.A. announced the establishment of the first R&D Centre in India in 2010, a part of
the global R&D network. The foundation stone for the new Centre was unveiled on 22nd of
September, 2010, in Manesar, Haryana.
Mr. Subodh Kant Sahai, Honourable Minister of Food Processing Industries, Government of
India, was the Chief Guest for the ceremony. Also present at the ceremony were His
Excellency Mr. Philippe Welti, Ambassador of Switzerland, Mr. Ashok Sinha, Secretary for
Ministry of Food Processing Industries, Mr. Klaus E. Zimmermann, Global Head of R&D
Centres, Nestlé S.A., and Mr. A. Helio Waszyk, Chairman and Managing Director, Nestlé
India Limited. Mr. Zimmermann commented that the event not only marked Nestlé’s
continuing long-term commitment to R&D, but also celebrated the building of Nestlé’s first
R&D Centre in India.
The R&D Centre would allow Nestlé to offer consumers in India and beyond, the
choice of tasty, healthy, and nutritious products. Mr. Waszyk emphasized that the
Nestlé Board’s decision to establish an R&D Centre in India at the request of
Nestlé India, would be an additional competitive advantage. It would help
accelerate the Company’s growth and at the same time contribute towards reducing
nutritional deficiencies in the country.
Better nutrition for India is a perpetual challenge. It's meaning changes with the country’s
stage of development, the degree of social awareness, and scientific consensus. The new
Nestlé R&D facility in India will help develop great tasting food solutions that are relevant
for consumers in India, creating products that take the promise of taste and health to a
broader economic and social section than ever before. It will also strengthen Nestlé’s
leadership in emerging markets and fortify Nestlé India’s position as the leader in Nutrition,
Health and Wellness.
Ms. Shivani Hegde, Chairperson of R&D India and also Head of the Foods Business,
reiterates that Nestlé India has always had Research and Development support from the
Nestlé R&D network across the world, and now, with the foundation being laid for the new
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R&D Centre in Manesar, the Company for part of its research, will benefit from a greater
‘Indian-consumer’ focus. “Having an R&D Centre close to the Nestlé India Head Office will
bring Research and Development closer to Businesses, and reflects the Nestlé spirit of R&D-
Business partnership towards developing ‘Winning’ concepts, suited to the local consumer. It
will help Nestlé R&D to bring out strong localised concepts that are in accordance with the
Nestlé Group thrust on ‘affordable Nutrition, Health and Wellness’. Ultimately, these
concepts will not just be relevant for emerging markets like India, but could be transferred to
Nestlé worldwide.”
3.1.3 Rural Development
Nestlé’s approach to rural development aims at ensuring thriving farmers and thriving
communities while respecting natural capital. We work at both a farm and community level
to improve yields, safeguard incomes, contribute investment and make a difference to
people’s quality of life.
3.1.4 Milk
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Nestlé has been a partner in India’s growth since 1912, establishing a special relationship of
trust and commitment with its people. When Nestlé India set up its first manufacturing plant
in Moga in 1961, the local milk economy was virtually nonexistent. On the first day, we
collected only 511 kgs of milk from 180 farmers.
Since then, Nestlé has set up milk collection centres that ensures prompt collection and pays
fair prices, transforming Moga into a prosperous and vibrant milk district. By supplying milk
to Nestlé, farmers are benefited from the assurance that our collection centers will purchase
their entire quantity of milk, however big or small, as long as it meets Nestlé’s stringent
quality standards. Furthermore farmers are paid monthly, guaranteeing them a regular
income that would not be possible with seasonal crops. Since there is continuous demand
from Nestlé for milk throughout the year, their occupations are stable ones, assuring them of
long term relationships and fair prices.
In addition to collecting milk, Nestlé has embarked on a number of other initiatives to
support the development of dairy farmers in India.
3.1.5 Coffee Farmers: our partners in progress
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As demand for NESCAFÉ soluble coffee grows in the country, we have already begun
training our coffee farmers to develop their agricultural practices in terms of quality,
productivity and sustainability.
The first batch of 20 farmers trained under the NESCAFÉ Plan were felicitated during the
official inauguration of the NESCAFÉ Plan in India, and provided with the training
manual ‘NESCAFÉ Better Farming Practices’.
“NESCAFÉ is the world’s leading coffee brand. As a leader we have the responsibility to
continue to supply good quality coffee to consumers, while ensuring that coffee farming
remains attractive for farmers and is sustainable across the value chain.
The NESCAFÉ Plan demonstrates our commitment to working with thousands of farmers
around the world, including in India, to provide training and technical assistance. By
working with farmers in this way, we know where the coffee comes from, and they know
they have a partner who will give them competitive prices for high quality produce.
“Indian coffee is very good and currently amongst the best in the world. We would therefore
like to use our own expertise in coffee to help it retain its excellence in the future as well. In
the NESCAFÉ Plan our team will work with coffee farmers, other experts and the Nestlé
R&D Centre in France to combine the traditional experience of the coffee farmers in India
with the benefits of modern science to make coffee farming more successful and
sustainable.”
3.1.6 Sanitation Facilities
23
One of the main reasons for female student dropouts in rural schools are a lack of basic
sanitation facilities. In an effort to promote Universal Primary Education and ensure
availability of basic sanitation facilities, Nestlé India sponsors the construction of sanitation
facilities (toilets) for female students in village schools around our factories. 37 sanitation
facilities have been invested in village communities by Nestlé so far, benefiting over 15,000
female students.
3.1.7 Farmers
Since agriculture is responsible for the largest consumption of water, Nestlé India works with
its farmers in Punjab, Haryana and Rajasthan to create awareness regarding water
conservation and protection of water resources in agricultural and irrigation practices and
also in dairy farms.
3.1.8 Water
24
Our factories not only create world class products to deliver Nutrition, Health and Wellness
but they also add value to farmers by processing agricultural products in a sustainable
manner.
Summit on water
On November 6 ahead of the formal event opening, Nestlé Chairman Peter Brabeck-
Letmathe chaired a discussion on the challenge of water management in India organised by
the WEF.
He outlined how the increasing need for food, generating energy for industrial and municipal
use, and inefficient water usage is impacting on India’s water availability.
Mr Brabeck-Letmathe also highlighted a recent water study focusing on 27 industry sectors
in India, led by the Federation of Indian Chambers of Commerce and Industry (FICCI) and
the Columbia Water Center (CWC).
Results revealed that nearly 90% of Indian companies surveyed believe that water supply
limitations will affect their business within the next decade.
To combat the problem Mr Brabeck-Letmathe said that companies should assess the different
levels of water scarcity and develop concrete strategies for individual watersheds.
“Various governmental and non-governmental organisations, industry associations and
academic institutions need to build a multi-stakeholder platform where they can agree on
water issues and develop partnerships to face the shared goal of improving water
management,” he said.
Water challenge
During the session Mr Brabeck-Letmathe participated in a discussion to focus on how the
2030 Water Resources Group (WRG) is helping governments like Karnataka in India to
tackle the global water challenge. The WRG is a public-private initiative that provides
guidance and new policy ideas on water resource scarcity.
25
Nestlé is part of the group working alongside other corporate members and governmental
development agencies such as the Inter-American Development Bank and the World Bank
Group.
Mr Brabeck-Letmathe, Chairman of the WRG, believes that the development of fact based,
comprehensive approaches to local water management can help all stakeholders make better
decisions.
3.1.9 Nestle’s Partner for Water
Nestlé continues to partner with institutions with expertise in the field of water research and
outreach across the country to develop awareness regarding water conservation and
sustainability.
3.1.10 Energy Consumption
Energy consumption per tonne of product has reduced substantially and energy use
efficiency improved by 65.8% through the following key initiatives:
Continuously review energy to track and replace energy inefficient equipment
Investment in processes to reduce energy losses. For example, installation of Variable
Frequency Drivers on high capacity motors, auto operations and controls
Process modification to reduce energy utilisation. For example, installation of Wipe
Film Evaporator
Innovatively using the waste heat of one process as input for another. For example,
exhaust heat of the generator is used to produce steam for manufacturing
26
3.1.11 Water Awareness Programme
Students
We conduct Water Awareness Programs for students at the schools where we build our
drinking water facilities. Through this program, we aim to create awareness amongst students
regarding water conservation and protection of water resources to ensure the responsible
utilization of water for a sustainable future.
Students are taught through posters and demonstrations on water saving and purification
methods such as the Drip method, Solar Water Disinfection Process (SODIS), Rain water
harvesting model, etc. Water committees comprising of school children are set up in these
schools to propagate judicious water consumption and ensure proper upkeep and
maintenance of the project. Water saving tips on the water storage tanks reinforce key
messages on water conservation.
“Now our children come home and explain to us how to make proper use of water. For
example, while brushing teeth one should use a cup of water rather than letting water taps
flow freely. This will lead to proper management in the village community.”
We have reached 27,000 students to date with Nestlé’s water awareness programmes in
India.
Nestlé Chief Executive Officer Paul Bulcke has highlighted how businesses can contribute to
boosting sustainable economic growth in India during a discussion at the World Economic
Forum (WEF) in New Delhi.
27
The session called for action from businesses, government and civil society on how to do
this. Mr Bulcke was joined by panellists Rahul Bajaj, Chairman of Bajaj Auto; Natarajan
Chandrasekaran, Chief Executive Officer of Tata Consultancy Services; Gita Gopinath, of
the Global Agenda Council on the International Monetary System and Chanda Kochhar,
Managing Director for ICICI Bank in India.The session was moderated by Shekhar Gupta of
the Global Agenda Council on India.
3.1.12 World Economic Forum in India
More than 2,500 international leaders from business, government and civil society will attend
this year’s two day summit event which focuses on the theme ‘From Deliberation to
Transformation’.
Nestlé is celebrating a century of deep engagement in a country which over that period
has proven its potential to be one of Asia’s economic superpowers.
Nestlé’s first sales agents in India began work in Chennai and Kolkata in 1912.
Today, the company directly employs 6,000 people in India and more than half a
million indirectly.
Its products are sold in more than 3.5 million outlets across the country.
3.1.13 Growth potential
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MOST POPULAR: Nescafé is the leading instant coffee in India.
Nestlé recorded sales of CHF 1.4 billion in India in 2010. Its most popular brands are
Maggi, the country’s leader in instant noodles, and Nescafé instant coffee.
Nandu Nandkishore, Nestlé’s Executive Vice President and Zone Director for Asia, Oceania,
Africa and the Middle East thinks there is much potential for further growth.
“India is a success story in the making,” he said. “It has a large, progressive population.
“Consumers trust our products for their high quality. Opportunities will continue to
grow as more and more people want to buy nutritious, branded food and beverages.”
3.1.14 Scientific expertise
India faces significant nutritional challenges.
The majority of Indian women and children suffer from basic micronutrient deficiencies such
as vitamin A, iron, iodine and zinc.
At the same time a large proportion of the population also suffers from non-communicable
diseases such as obesity and diabetes.
Mr Nandkishore believes that tackling the double burden of under and over nutrition will
make a positive impact on India’s productivity and that Nestlé has a role to play in this.
“Nestlé is an integral part of India,” he continued. “Our unmatched research and
development capabilities have enabled us to create products which offer improved,
affordable nutrition to consumers in all segments of Indian society.”
“With our expertise in science based nutrition, we can contribute significantly to improving
Indian consumers’ health and wellbeing, as well as creating value for the economy.”
29
Nestlé addresses growth challenge in India at World Economic Forum[Nov 7, 2012]
WEF INDIA: Nestlé CEO will highlight how businesses can boost economic growth in
India.
Nestlé Chief Executive Officer Paul Bulcke will highlight how businesses can contribute to
boosting sustainable economic growth in India during a discussion at the World Economic
Forum (WEF) in New Delhi.
Mr Bulcke, co-chair of the WEF in India, will discuss what should be done to encourage
policy reforms with leading industry experts from India.
The session aims to call for action from businesses, government and civil society on how to
do this.
Mr Bulcke will be joined by panellists Rahul Bajaj, Chairman of Bajaj Auto; Natarajan
Chandrasekaran, Chief Executive Officer of Tata Consultancy Services; Gita Gopinath, of
the Global Agenda Council on the International Monetary System and Chanda Kochhar,
Managing Director for ICICI Bank in India.
The session will be moderated by Shekhar Gupta of the Global Agenda Council on India.
Summit on water
On November 6 ahead of the formal event opening, Nestlé Chairman Peter Brabeck-
Letmathe chaired a discussion on the challenge of water management in India organised by
the WEF.
He outlined how the increasing need for food, generating energy for industrial and municipal
use, and inefficient water usage is impacting on India’s water availability.
Mr Brabeck-Letmathe also highlighted a recent water study focusing on 27 industry sectors
in India, led by the Federation of Indian Chambers of Commerce and Industry (FICCI) and
the Columbia Water Center (CWC).30
Results revealed that nearly 90% of Indian companies surveyed believe that water supply
limitations will affect their business within the next decade.
To combat the problem Mr Brabeck-Letmathe said that companies should assess the different
levels of water scarcity and develop concrete strategies for individual watersheds.
“Various governmental and non-governmental organisations, industry associations and
academic institutions need to build a multi-stakeholder platform where they can agree on
water issues and develop partnerships to face the shared goal of improving water
management,” he said.
Water challenge
During the session Mr Brabeck-Letmathe participated in a discussion to focus on how
the 2030 Water Resources Group (WRG) is helping governments like Karnataka in India to
tackle the global water challenge.
The WRG is a public-private initiative that provides guidance and new policy ideas on water
resource scarcity.
Nestlé is part of the group working alongside other corporate members and governmental
development agencies such as the Inter-American Development Bank and the World Bank
Group.
Mr Brabeck-Letmathe, Chairman of the WRG, believes that the development of fact based,
comprehensive approaches to local water management can help all stakeholders make better
decisions.
World Economic Forum in India
More than 2,500 international leaders from business, government and civil society will attend
this year’s two day summit event which focuses on the theme ‘From Deliberation to
Transformation’.
31
3.1.15 Benifits of Nestle to India
Nestle became the 1st organisation in 2006 to adopt creating share value approach
Nestle has focussed its Creating Shared Value efforts in 3 areas Nutrition, water and rural
development as these are core to their business activities.
CSV builds on a strong base of performance in environmental sustainability and compliance.
Goals met by Nestle
Eradicate extreme poverty and hunger
Achieve universal primary education
Promote gender quality and empower women
Reduce child mortality
Improve maternal health
Ensure environmental sustainability
Social Responsibility
Milking machines were provided to the farmers maintaining large diary farms.
Investing in renewable sources such as spent coffee grounds and wood from sustainably
managed forests as well as solar and wind energy.
Veterninary services are provided free, and medicines provided at wholesale cost.
Nestle India supports local schools, helps in the maintenance of public parks and green belts,
facilitates blood donation camps and health awareness programs.
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Reducing greenhouse gas (GHG) emissions from our operations by improving energy
efficiency, switching to cleaner fuels.
The nestle group is 1 of the first companies achieving the certification of clean industry for
all of its factories.
Nestle ensures safety for employees and the improvement in labour quality.
This allows the workers to increase their knowledge and skill, which results in innovation.
Innovation increases the company;s reputation
Nestle constantly innovates and keeps on changing their products to fulfil their customers
need. Nestle plans to double number of nutrition and physical activity education around the
world.
National Agricultural Services has used the experience gained by nestle in different parts of
the world to set up a system of direct and efficient contact with the farmers in India.
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Nestlé built its first Indian factory in Moga in 1961, developing milk production in the
region. The company now has seven factories in the country. Nestlé’s Moga factory
was set up in 1961 and comprises of the primary milk collection area for our
operations. Since its inception in Moga, Nestlé has been working with its milk
farmers and ancillary suppliers towards improving quality and productivity.
Over the years, Nestlé has helped to develop the area around that first factory, setting
up milk collection points and training farmers to improve productivity and quality.
The company’s agronomists provide farmers with technical support to improve
sustainable water management, including help with irrigation and rainwater
harvesting.
Nestlé India has built more than 160 drinking water fountains in schools near its
factory in Moga, providing about 65,000 students with access to clean water.
The company has also improved the sanitation facilities in girls’ schools close to the
factory to encourage young women to continue with their education.
These efforts are part of what Nestlé calls ‘Creating Shared Value’, an approach to
business that aims to create value for shareholders at the same time as for those
communities where the company operates.
The Third World Centre for Water Management, a knowledge based, application
oriented think tank based in Mexico, conducted a study in the Moga region to assess
the impact of Nestlé’s Moga factory on the surrounding area. The study was conducted
by a team of specialists including Prof. A.K. Biswas, President, Third World for Water
Management. The study consisted of field study where the team interviewed over 200
milk farmers, Suppliers, Academicians from the local Agricultural University,
Government Officials and Politicos and Nestlé factory staff, municipal documents,
factory records and secondary data.
The study highlights Nestlé’s way of doing business through its philosophy of
Creating Shared Value and how it contributed to the development of the region
through direct and indirect employment, steady income for milk and other suppliers
and technology transfer.
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Nestle is acknowledged as India’s most repected companies and amongst the top
wealth creator of India.
3.1.16 Investment
Nestlé India has invested USD 500 million to increase its capacities over the last two
years.
This includes CHF 70 million in a new manufacturing site in Nanjangud to produce
Maggi products.
The construction of Nestlé’s eighth factory in Tahliwal, Himachal Pradesh, is
progressing rapidly. Existing factory sites in Moga, Samalkha, Ponda and Bicholim
are also being expanded.
Nestlé S.A. is investing CHF 50 million in a new research and development centre in
Manesar, Haryana, which will become operational towards the end of 2012.
4. Criticism of Nestle
One of the most prominent controversies involving Nestlé concerns the promotion of the use
of infant formula to mothers across the world, including developing countries – an issue that
attracted significant attention in 1977 as a result of the Nestlé boycott, which is still
ongoing. Nestlé continues to draw criticism that it is in violation of a 1981 World Health
Organization code that regulates the advertising of breast milk substitutes. Groups such as
the International Baby Food Action Network (IBFAN) and Save the Children claim that
the promotion of infant formula over breastfeeding has led to health problems and deaths
among infants in less economically developed countries. Nestlé's policy states that breast-
milk is the best food for infants, and that women who cannot or choose not to breast feed
need an alternative to ensure that their babies are getting the nutrition they need.
Nestlé has in the past faced criticism for the manner in which it promoted powdered baby
milk in the developing world. The scandal stretches back to 1977 but it's a criticism the
company has found difficult to shake off
35
Nestlé has rejected allegations from India's premier environmental health lobby group that its
Maggi instant noodles could harm consumer health.
Speaking to just-food, a Nestle spokesperson said its Maggi product line is "adapted to
Indian tastes and we have been constantly improving its nutritional profile and have reduced
salt, reduced trans-fatty acids and added nutrients".
The government said on Thursday it would investigate allegations by charities that
multinational corporations Nestle, Heinz and Abbott were breaking the law by promoting
milk formula and infant cereals and undermining efforts to boost breastfeeding in the
country.
36
5. Conclusion
Nestle with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestle and is
today the world's biggest food and beverage company. Sales at the end of 2005 were CHF 91
bn, with a net profit of CHF 8 bn. We employ around 250,000 people and have factories or
operations in almost every country in the world.
The Company's strategy is guided by several fundamental principles. Nestle's existing
products grow through innovation and renovation while maintaining a balance in geographic
activities and product lines. Long-term potential is never sacrificed for short-term
performance. The Company's priority is to bring the best and most relevant products to
people, wherever they are, whatever their needs, throughout their lives.
Our ambition is to produce tasty and nutritious food and beverages that also have the lowest
environmental footprint, so we strive to continuously improve our operational efficiency and
environmental performance.
Through creating and increasing awareness to help preserve the environment, we continually
strive to create value for society
Thomas Donaldson, a professor at the Wharton School of the University of Pennsylvania in
Philadelphia, states it best, When it comes to shaping ethical behavior, companies must be
guided by three principles: respect for core human values, which determine the absolute
moral threshold for all business activities; respect for local traditions; and the belief that
context matters when deciding what is right and what is wrong.
100's of MNCs coming into Indian Market in the name of liberalization every year. What are
the primary responsibilities, accountability and moral responsibility to be set and imposed on
Multi-national companies spreading their wings in India?
Globalization is the driver to multi-nationalism. Large MNCs (Fortune 500 companies) have
looked at India as potential growth market, as Indian Economy would be the 4th Largest
37
Economy in terms of Purchasing Power parity and by 2025 it is projected to be about 60% of
US Economy.
Large corporations whose entry into Indian Economy has resulted in mergers and
acquisitions in a big way through FDI, etc., Yes, those who have/having potential to do
multi-million $ business are being acquired and/or merged with the world's large
organizations. This has created and/or increased the wealth of the stake holders of Indian
companies including employees. However, with this, the balancing act between the RICH
and the POOR is not maintained.
On the other hand, there has been huge loss to small and medium enterprises when a foreign
company enters Indian market to offer their products and services. Not all such companies
see growth & profits unless the local needs are met in terms of requirements, logevity,
emotional fitment and the cost. In this process, such companies end up selling with
desparation and close down their business in a short span. SMEs in specific, who have
invested in products and solutions stand nowhere, but to lose the money where they have
paid it through nose.
Another instance where entrepreneurs are running anciliary and distribution business for
large retail and industrial manufacturers like 3M India, GE, etc., for example under huge
trust and confidence. These MNCs load these small and medium enterpreneurs with such
terms and conditions that protect the principal companies than the entrepreneurs. Recent
experience in the Indian market, where one of the large MNCs established the business
through distribution network (where direct selling was self-prohibited) has started direct
selling, pouching of resources from those distributors, creating havoc in the latter's
organizations, etc., Such brutal act on MNC's part is killing the enterpreneurship in India.
For such MNCs, global strategies matters more, than the economic condition of our country
and its people. It is just a minute's job for them to close down the business leaving all its
employees and distributors in lurch.
38
The question is, how do we protect the interest of our own people's interest and how our
Governments act in favor of our own countrymen in the days to come. In this corrupt
economy, the imbalance between rich and poor is well maintained and no such efforts are
being put in to bring the living of millions of our country.
Clearly, multinational corporations can provide developing countries with critical financial
infrastructure for economic and social development. However, these institutions may also
bring with them relaxed codes of ethical conduct that serve to exploit the neediness of
developing nations, rather than to provide the critical support necessary for countrywide
economic and social development.
When a multinational invests in a host country, the scale of the investment (given the size of
the firms) is likely to be significant. Indeed governments will often offer incentives to firms
in the form of grants, subsidies and tax breaks to attract investment into their countries. This
foreign direct investment (FDI) will have advantages and disadvantages for the host country.
. 39
6. REFERENCES AND BIBLIOGRAPHY
International Marketing, Michael Vaz, 2013, Manan Prakashan
http://www.authorstream.com/Presentation/dsdimt-1017271-mnc/
http://www.sunday-guardian.com/business/mncs-shaping-indian-economy
http://hellboundbloggers.com/2011/05/24/infosys-contribution-india-growth-story/
http://www.munfw.org/archive/49th/ecosoc2.htm
http://www.nestle.in/media
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http://www.nestle.in/aboutus/allabou tnestl%C3%A9
www.nestle.in
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