Internationalization of Nestle

Nestlé is one of the oldest multinational businesses in food and beverages. The company was created in Switzerland by Henri Nestlé, a pharmacist, in 1866. He wanted to develop food for babies who had difficulties in breastfeeding. The company has partnered with the Anglo-Swiss Milk Company in 1905. They began to expand their business during the first World War and then during the Second World War by acquiring other corporations (Maggi (1947), Cross & Blackwell (1960), Findus (1962), Libby's (1970), Stouffer's (1973), Carnation (1985), Rowntree (1988) and Perrier (1992)).

Nowadays, Nestlé has business in more than 125 countries and propose about 10,000 different products. But the company did not reach this famous leadership position in one day. They spent about 150 years to expand their activities and to become an international company. This situation brings also some challenges that every global company has to face. Indeed, they have to manage their internal organization, to fight the domestic competitors on different countries, to adapt to the environmental changes and to the cultural differences between the countries.

The process of internationalization is not an easy task!

From its creation, Nestlé has to look outside its borders to find growth opportunities. The company established first its operating firms in the United States and in Great Britain (late 19th century). Then they started to built warehouses in strategic Asian cities to satisfy the growing need and they developed its manufacturing plants in Latin America and Africa during the second World War in order to enjoy low labor costs. The company also extended its product offerings by acquiring other companies. At the end of the century, Nestle created headquarters in Asia (India, China, Japan,…), to have a better implementation and to facilitate the exports.

The main strategy of Nestle is to move in emerging markets before its competitors and to build a strong position with the basic attractive products. We can assume that Nestle followed Uppsala Internationalization model in its process of internationalization. In this model, the company's position in the specific country market develops according to an organization chain that has four steps. Nestle was first involved in export before to move in subsidizing, franchising, acquisition and finally in foreign direct investments. The company began to expand in countries geographically and culturally close to establish a strong position before to go global.

From the organizational structure Nestle is divided according to different criteria: the function, the geography, and the type of product. It is a mixed organization to better run the company internationally. They need to delegate power and to separate their activity into different parts in order to have a better control of the globality.

At the beginning, Nestle had a centralized management structure but they changed it to practice a decentralized approach in order to benefit more opportunities. They divide the world in three major geographical areas (Europe, America, Asia). Local managers have the responsibility of determined areas that they know well and can better develop strategies that fit with the local needs.

At the same time, the company is divided into several strategic business units that have each one a specific responsibility in high level decisions and business development. Each unit is in charge of the strategic development in their domain (coffe and beverage, ice cream, infantile products,…) and can decide their market entry strategy, their acquisitions,…

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