Group 6 presentation Case

Group 6

Group Members
Roll number Benedict Mponzi 1428 Esha Namusanga 1434 Queen Wakasenyi 1446 Jared Mushi 1432 Joe Bendera 1202 Flora Malla 1421 James Nyamryakunge 1436
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Background
In the mid-1860s, Henri Nestle (Henri), a merchant, chemist, and innovator experimented with various combinations of cow's milk, wheat flour and sugar. The resulting product was meant to be a source of infant nutrition for mothers who were unable to breast-feed their children. In 1867, his formula saved the life of a prematurely born infant. Later that year, production of the formula, named Farine Lactee Nestle, began in Vevey, and the Nestle Company was formed. Henri wanted to develop his own brands and decided to avoid the easier route of becoming a private label. He also wanted to make his company a global company.
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How Nestle Achieved International Expansion

Nestle achieved international expansion through global diversification of offerings by having; 7 world wide strategic business units (SBUs) E.g. Coffee & beverages, Chocolate, powdered milk confectionery (sweets) & ice-creams. 5 regional organizations E.g.. Network of factories in the Middle East: ice-cream in Dubai, soups and cereals in Saudi Arabia, yogurt and bouillon in Egypt, chocolate in Turkey and ketchup and instant noodles in Syria. Strong R&D Team of; Expatriates army of about 700 managers going from country to country 18 different groups operating in 11 countries International training center in Switzerland
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How Nestle Achieved International Expansion (Contd)

They Sourced Assets, Not Just Products

By building plants abroad. Through purchasing local companies. E.g Goplana in Poland
Through having a Flexible organization structure
Nestle adopts a matrix organization which is highly decentralized in decision making.

Regions

SBUs
SBU1 SBU2 SBU3 SBU4 SBU5 SBU6 SBU7 North Am e rica Europe Asia Africa Middle -Ea st
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Nestles Branding strategy

Use of Nestles Brand Equity. Nestle had a brand power derived from the goodwill and name recognition that it has earned over time (Family of names strategy). The Nestle brand itself had played a key role in the company's globalization efforts. In 1996, about 40% of the total revenues were generated from products covered by the Nestle corporate brand. Nestle's logo was an important part of the company's corporate identity. The nest' was a graphic translation of Henri Nestle's name, which meant Group 6 "little nest."..

Life before Nestle. Acquiring of Rowntree Brand

When Nestle acquired Rowntree's brands in 1988, the major challenges before Nestle aquired the company were: Rowntree had a "one product, one brand" policy this ment that brands like Kit Kat, After Eights, Smarties and Rolo were marketed with no mention of Rowntree. Rowntree's brands were not strongly managed European brands. Even though Kit Kat was a leading brand in UK, it was ignored outside the country.In the early 1980s, Rowntree established Rowntree Continental Europe, which handled business responsibilities outside the UK in Europe. However, this did not benefit Kit Kat, which was launched in Europe by Rowntree Continental Europe as a multi-local brand

After Nestle acquired the Rowntree brand, it instilled its branding strategies that were built around The Nest henceforth strategically making the kit kat name into a household name consumer brand.

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Does The company Nestle need to have many brands?

It doesnt have to have many brands, but it needs to manage how it roll outs new products. Some of the benefits of having many brands include
It makes acceptance of new product easy. It increases brand image. The risk perceived by the customers reduces. The likelihood of gaining distribution and trial increases. An established brand name increases consumer interest and willingness to try new product having the established brand name. The efficiency of promotional expenditure increases. Advertising, selling and promotional costs are reduced. There are economies of scale as advertising for core brand and its extension reinforces each other. Cost of developing new brand is saved. Consumers can now seek for a variety. There are packaging and labeling efficiencies. The expense of introductory and follow up marketing programs is reduced. There are feedback benefits to the parent brand and the organization. The image of parent brand is enhanced. It revives the brand. It allows subsequent extension. Brand meaning is clarified. It increases market coverage as it brings new customers into brand franchise. Customers associate original/core brand to new product, hence they also have quality associations.

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Nestle Brands
Some of the Nestle Brands include; Nescafe instant coffee Perrier bottled water Breakfast cereals including Cheerios Kit Kat bars Stouffers prepared meals Bouitoni pasta and Maggi cooking sauces. Pet food like friskies Baby food like Nido

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Nestle Brands (Contd)

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Problems Associated with having many Brands

Brand extension in unrelated markets may lead to loss of reliability if a brand name is extended too far. An organization must research the product categories in which the established brand name will work. There is a risk that the new product may generate implications that damage the image of the core/original brand. There are chances of less awareness and trial because the management may not provide enough investment for the introduction of new product assuming that the spin-off effects from the original brand name will compensate. If the brand extensions have no advantage over competitive brands in the new category, then it will fail
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How to strategically reduce many brands in a company

Nestle had 7500 brands, they easily could cut down to 1300 by applying the following method of brand classification;
Brand Location based classification Local Regional Global Brand need based classification Product Family Corporate

The above table with brand classification has both a one to one relation from one column to another and has a one to many relation originating from Brand location based classification which has the one relation to many classifications on column 2. Using the above method of classification, if Nestle decide to cut-down its brands from 7500 brands up to 1300 brands . All they need to do is cut from outside of the two sides of extremes i.e from Local product brand and Global corporate brand and start working their way backwards. That is cut from Local Product, Local Family ,Local corporate to Regional product And also cut from Global Corporate ,Global Family, Global Product, Regional Corporate to Regional Family. Through using this method Nestle will be able to greatly reduce the massive number of brands that they carry and just remain with the more important brands such as Regional product, regional family and regional corporate that will be appealing to a particular region that has the same market trends.

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What companies should do if they want to reduce number of brands

Relinquishing of the brand name rights. This is a legal agreement to allow other parties to use your brand name Through Mergers which is basically, when two companies become one. This decision is usually mutual between both firms. Through Acquisitions which 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.
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Conclusion
Nestle management philosophy is to develop as much as can be decided locally, but the interest of the corporation as a whole has priority Due to the industry Nestle is in, it is perhaps undesirable for it to become fully global however. Nestles aim is to customize to the local tastes and leave a lasting impression of The nest always taking care of you.

GOOD FOOD, GOOD LIFE

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