NESTLE

Background:
Nestle S.A. is the world's largest Iood and nutrition company. Founded and headquartered in
Vevey, Switzerland, Nestle originated in a 1905 merger oI the Anglo-Swiss Milk Company,
established in 1867 by brothers George Page and Charles Page, and Farine Lactee Henri Nestle,
Iounded in 1866 by Henri Nestle. The company grew signiIicantly during the First World War
and again Iollowing the Second World War, eventually expanding its oIIerings beyond its early
condensed milk and inIant Iormula products. Today, the company operates in 86 countries
around the world, and employs over 280,000 people.
Mission:
Vision:
Objectives:
Products
Nestle has some 6,000 brands with a wide range oI products across a number oI markets,
including coIIee (NescaIe, Nespresso, etc.), bottled water (Buxton, Perrier, etc.), milkshakes and
other beverages (Nesquik, Milo, Carnation, etc.), chocolate (Milky Bar, AIter Eight, and many
others), ice cream (Hagen-Dazs, Skinny Cow, etc.), breakIast cereals (Cheerios, Golden
Nuggets, Shreddies, etc.), inIant Ioods (now including Gerber products), perIormance and
healthcare nutrition (Nesvita, PowerBar, etc.), seasonings, soups and sauces (Maggi, Buitoni,
etc.), Irozen and reIrigerated Ioods (Findus, Lean Cuisine, etc.), conIectionery (Rowntree
products, Caramac, Wonka products, etc.), and pet Iood (Winalot, Felix).
Forward Integration:
Nestle is the world`s largest Food and Beverages Company, and a global leader in health and
wellness Consumers around the world. Though headquartered in vevey, Switzerland, they now
have 487 Iactories dotted around the globe, employing 250,000 people in 86 countries.
The company dates to 1867 when two separate Swiss enterprises were Iounded that would later
Iorm the core oI Nestle. In the succeeding decades, the two competing enterprises aggressively
expanded their businesses throughout Europe and the United States.
In August 1867 Charles and George Page, two brothers Irom Lee County, Illinois, USA,
established the Anglo-Swiss Condensed Milk Company in Cham. Their Iirst British operation
was opened at Chippenham, Wiltshire, in 1873.
In September 1867 in Vevey Henri Nestle developed a milk-based baby Iood, and soon began
marketing it. In 1877 Anglo-Swiss added milk-based baby Ioods to their products and in the
Iollowing year the Nestle Company added condensed milk so that the Iirms became direct and
Iierce rivals.
In 1905 the companies merged to become the Nestle and Anglo-Swiss Condensed Milk
Company, retaining that name until 1947 when the name Nestle Alimentana SA was taken as a
result oI the acquisition oI Fabrique de Produits Maggi SA (Iounded 1884) and its holding
company Alimentana SA oI Kempttal, Switzerland.
The end oI World War II was the beginning oI a dynamic phase Ior Nestle. Growth accelerated
and companies were acquired. In 1947 came the merger with Maggi, a well-known manuIacturer
oI seasonings and soups. In 1977, Nestle made its second venture outside the Iood industry, by
acquiring Alcon Laboratories Inc.
In 1984, Nestle's improved bottom line allowed the company to launch a new round oI
acquisitions, notably American Iood giant Carnation and the British conIectionery company
Rowntree Mackintosh in 1988, which brought the Willy Wonka brand to Nestle.
The Iirst halI oI the 1990s proved to be Iavourable Ior Nestle. Trade barriers crumbled, and
world markets developed into more or less integrated trading areas. Since 1996, there have been
various acquisitions, including San Pellegrino (1997), Spillers PetIoods (1998), and Ralston
Purina (2002). There were two major acquisitions in North America, both in 2002 in June,
Nestle merged its U.S. ice cream business into Dreyer's, and in August a US$2.6 billion
acquisition was announced oI CheI America, the creator oI Hot Pockets. In the same time-Irame,
Nestle came close to purchasing the iconic American company Hershey's, one oI its Iiercest
conIectionery competitors, although the deal eventually Iell through.
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Another recent purchase
included the Jenny Craig weight-loss program, Ior US$600 million.
In December 2005, Nestle bought the Greek company Delta Ice Cream Ior t240 million. In
January 2006, it took Iull ownership oI Dreyer's, thus becoming the world's largest ice cream
maker, with a 17.5 market share.
In November 2006, Nestle purchased the Medical Nutrition division oI Novartis Pharmaceutical
Ior $2.5B, also acquiring, in 2007, the milk-Ilavouring product known as Ovaltine.
In April 2007, returning to its roots, Nestle bought US baby-Iood manuIacturer Gerber Ior
$5.5 billion.
In December 2007, Nestle entered into a strategic partnership with a Belgian chocolate maker,
Pierre Marcolini. Nestle agreed to sell its controlling stake in Alcon to Novartis on 4 January
2010. The sale was to Iorm part oI a broader US$39.3 billion oIIer, by Novartis, Ior Iull
acquisition oI the world`s largest eye-care company.
On March 1, 2010, Nestle concluded the purchase oI KraIt's North American Irozen pizza
business Ior $3.7 billion.
In July 2011, Nestle SA agreed to buy 60 percent oI Hsu Fu Chi International Ltd. Ior about $1.7
billion.
Backward integration:
Backward integration is a strategy oI seeking ownership or increased control oI a Iirm`s
suppliers. This strategy can be especially appropriate when a Iirm`s current suppliers are
unreliable, too costly, or cannot meet the Iirm`s needs.
Nestle does not Iavor backward integration to ownership oI Iarms or plantations that provide the
raw materials input Ior its products. The Iirm does establish a service with veterinarians,
agronomists, and other agricultural experts to assist its suppliers, many oI whom are small and
medium size Iarmers. For example, nearly 70 percent oI its milk supply comes Irom small and
medium size producers who receive technical assistance Irom Nestle. The Iirm also contracts Ior
the pickup and delivery oI milk Irom rural areas.
Horizontal Integration:
Nestle is a global organization. Knowing this, it is not surprising that international strategy is at
the heart oI their competitive Iocus. Nestle`s competitive strategies are associated mainly with
Ioreign direct investment in dairy and other Iood businesses. Nestle aims to balance sales
between low risk but low growth countries oI the developed world and high risk and potentially
high growth markets oI AIrica and Latin America. Nestle recognizes the proIitability
possibilities in these high-risk countries, but pledges not to take unnecessary risks Ior the sake oI
growth. This process oI hedging keeps growth steady and shareholders happy.
When operating in a developed market, Nestle strives to grow and gain economies oI scale
through Ioreign direct investment in big companies. Recently, Nestle licensed the LC1 brand to
Mller (a large German dairy producer) in Germany and Austria. In the developing markets,
Nestle grows by manipulating ingredients or processing technology Ior local conditions, and
employ the appropriate brand. For example, in many European countries most chilled dairy
products contain sometimes two to three times the Iat content oI American Nestle products and
are released under the Sveltesse brand name.
Another strategy that has been successIul Ior Nestle involves striking strategic partnerships with
other large companies. In the early 1990s, Nestle entered into an alliance with Coca Cola in
ready-to-drink teas and coIIees in order to beneIit Irom Coca Cola`s worldwide bottling system
and expertise in prepared beverages.
European and American Iood markets are seen by Nestle to be Ilat and Iiercely competitive.
ThereIore, Nestle is setting its sights on new markets and new business Ior growth.
In Asia, Nestle`s strategy has been to acquire local companies in order to Iorm a group oI
autonomous regional managers who know more about the culture oI the local markets than
Americans or Europeans. Nestle`s strong cash Ilow and comIortable debt-equity ratio leave it
with ample muscle Ior takeovers. Recently, Nestle acquired IndoIood, Indonesia`s largest noodle
producer. Their Iocus will be primarily on expanding sales in the Indonesian market, and in time
will look to export Indonesian Iood products to other countries.
onclusion:

ReIerence:
1. http://articles.castelarhost.com/nestlecompetitivestrategy.htm
2.http://books.google.com/books?idVlNVIvR6yGkC&pgPA212&lpgPA212&dqbackward
integrationstrategyoInestle&sourcebl&otsd5HbKtJWwR&sigq9Tc6OjDCMJJcRsvPoO
we36gjpo&hlen&eiElvOTs-
oJaGM4gSl3eVh&saX&oibookresult&ctresult&resnum5&ved0CDkQ6AEwBA#vone
page&qbackward20integration20strategy20oI20nestle&IIalse
3. http://en.wikipedia.org/wiki/NestlC3A9