Identify the problems Environmental issues are one of the key issues that could impact on the success of Nestle’s internationalization strategy. This Nestle’s global strategy case represented two major environmental issues which are economic factor and competitiveness factor. Economic factors are important influences on a firm’s motivation to embark upon international business and they have a profound impact on the benefits, costs and risks of doing business in different countries (Hill, Cronk, Wikramasekera, 2008, p. 258).
In the case, during early 1990s Nestle Corporation faced the problem of sustaining growth rate when their major market place, Western European and North American had condition of reduced food consumption and inactivity of population growth rate. Therefore nestle corporation had to look at another emerging markets to maintain profit and choosing those markets is required doing the research to success the expansion. Another environmental issue which impacts on success of business is competitive environment in the market.
In this Nestle case, the problem was shown that Nestle lost its market share from another competitor, Coca-Cola. While coca-cola occupied about forty percent share in Japanese instant coffee market, Nestle only could able to capture four percent share because it suffered to fail to enter the market until the 1980s. It was caused by failure to adapt cold canned coffee trend in the 1960s and let Coca-cola to develop this segment in the market. Intension competitive rivalry is important for the multinational firm to gaining more market share.
Less opportunity at home has made succeeding in international competition particularly important for firms, and the absence of buoyant growth has reshape the attitudes of government toward foreign penetration at home and the success of local companies abroad (Michael, 1986). Alternative solutions To solve this problem the company had to examine the economic environment situation of potential markets. Looking at economic systems of country is significance factor that could impact on its business. The country with market economy where the private sector owns and controls the esources is closer to potential successive market than command economy. The key economic indicators used to find new market was size and growth of population and per capital income. Developing countries as China and India had satisfied this concerns by growing economic. As the case stated, by 2010, 700 million people in china and India reach the income will reach to Spain income in the mid 1990s. When the income level goes up, it means the standard of living increase and people want prefer to choose branded product rather than trusting unknown product for their health issue.
Then they would like to buy the product to satisfy their want instead of purchasing for survive. The examples of them are mineral water and chocolate introduced by Nestle. On the other hand, nestle should look through the population size and growth also. The quantity and quality of the people available in an economy will have a considerable impact upon the economy’s ability to produce (Washington and Britton, 2003, p. 121). The quantity of people depends on the total population, age structure, working population and wage level.
Moreover training or education, working condition, motivation and welfare service are factors of quality of people these affect productivity. Especially since nestle uses decentralization management structure, it needs high quality of labor to improve efficiency and profit. To solve this problem, there are few alternatives Nestle could follow. First, the company could try to catch coming trend and enter the market before other competitor gain market share. Opening up a new field is one of the strategies to win competitors by quick development compared with them.
Second solution is nestle should do deep research on their competitors and domestic markets those already occupy the market share in oversea before it expand their business. Importance of research helps to reduce the risk of failure in foreign investment therefore it is strongly suggested. Finally the recommendation for nestle is nestle should focus on research for further investment in Japan. Improve the weakness of Coca-cola is essential to turn back customers and settle in the market in higher position.