Introduction

The world is rapidly transforming into a single global economy. Markets, which

were dominated by local and national, are now vulnerable to competition from firms in

all corners of the world. As such, companies expand their businesses to include foreign

markets, thus making them more global in perspective in order to remain competitive.

These companies must now be able to excel in more than one of the global drivers to

ensure that the business will be afloat.

Advances in technology in recent years have been the key factor and at the same

time played a significant role on establishing one’s company as a global brand.

Information technology allows one to collect data on individual costumers so that one can

produce products that would meet their needs. (Davies, 1999) The use of robotics as well

as automation had permitted to produce the quality of goods that is being manufactured.

More importantly, a business to survive in this current trend of the market needs

to strike a balance among the different forces that govern globalization. Technology is

only a portion of achieving an excellent balance, other factors such as the economic and

financial forces, physical and environmental forces, sociocultural and labor forces and

legal forces needs to be considered.

Over the years, Nestle has maintained its reputation as the leading multinational

company in the food industry. Nestle is based on Switzerland and is operational in 86

countries worldwide. It has a variety of products that caters to the specific needs of their

region. Some of the famous brands that is under Nestle corporation are Nescafe coffee,

the world’s largest bottled water (Perrier), the world known food brand of Maggi,
Nestea, Kit Kat and of course its flagship chocolates to name a few. It is without a doubt

that they continue to be the biggest food corporation in the world.

The different food products that Nestle carry is in accordance of the regional

qualification that has been identified. This is the secret of success of this multinational

company. It was able to establish balance between localizing and globalizing their

products. This was achieved through its efforts of improving its packaging.

As a company, Nestle had ensured that its vision is being achieved in all its

endeavors regardless of its location. It is the thrust of the company to be practical and

realistic in its business transactions. It promotes positive attitude towards work

maintaining the atmosphere of mutual trust among its employees and management. It

also had instilled in the different satellite companies to be open minded in the changes of

the environment. These practices are being promoted in all its subsidiaries to ensure and

maintain its integrity as a multinational company.

Major Drivers of Globalization

Simply put, globalization is the process wherein different companies are able to

relocate their resources in different parts of the world at a faster rate. This is being done

to be able to maximize available resources, both raw and human and thus increase profit.

(Ritchie, 2006) This simple definition of course to some has ethical and moral

implications such as this would mean exploitation of different aspect of local economies

especially that of the developing countries. This would mean the subordination of the

rights of a consumer, which include labor and environmental ones to give way to trade
and investment. However, in as much as this reality holds true, many of the multinational

companies that are still leading in its own right have already learn to balance their needs

without sacrificing the rights of their regional companies. Nestle have tried its best

efforts to minimize controversies that could surround their global brand.

Nestle, with its many regional companies are able to provide job opportunities to

people at a higher salary rate. This helps not only in increasing the buying power of its

employees but at the same time provide a better life to its family members. Nestle also

help increase the profits of the different domestic firms by providing products and

services that share the same quality as those abroad. The proliferation of local chains

with regional products would mean lower cost in terms of investment. Likewise, due to

Nestlé’s efforts to localize their products, the needs of the regions are met. In addition,

regionalizing the packaging which increases the shelf life of its products ensure safety to

its consumers.

With the efforts of globalizing their brand, Nestle maximizes the 3 Globalization

drivers namely market, cost, and government drivers.

Market Drivers

There is a sudden increase in the potential of the different regional markets to house

Nestle products. This was done through its aggressive campaign featuring the culture and

values of its clientele through packaging. For example in the United States, Coffee-mate

is being sold in 32 oz pack. This does not hold true when it is being sold in Europe and
Asia. This is because the Europeans and Asians find it inconvenient to avail this much of

a creamer. Nestle also consider the existing economic conditions of the region. (Nestlé’s

packaging wraps up the world: a truly international food company combines local and

global strategies in packaging its huge array of products, 2004) As an example, a

seasoning, Maggi bouillon in West Africa is being sold in cubes of 1.5 grams while for

other countries it can be sold until 25 g since they have a higher purchasing power.

(Demetrakakes , 2004) Asian markets are more into soft packs and pouches which Nestle

utilizes in its products while in the US, plastic container are still the trend. This simple

consideration of the company to the nature of the regional market has helped them

establish their name in the said regions.

Nestle also believes in satisfying the needs of its consumers. With the current trend of

saving the environment, Nestle have already established an environmental marketing

approach. The company together with its affiliates seeks ways of advertising and more

importantly packaging their products in agreement with specific requirements and

causing no damage to the environment. It is the thrust of the company to promote

minimal wastage in its promotional materials, which includes the materials used and the

printing process that was done. These efforts of Nestle would help them market their

products since most of the consumers nowadays are also seeking to support companies

that could help save the environment.

In today’s fiercely competitive environment, no company can rely on the

successful launch of a new product. Product life cycle is growing increasingly shorter,

and the more successful firms are reducing new product development times to a fraction
of what they once were. This is because competition has the ability to react more quickly

to changes in the marketplace thereby substantially reducing the advantages of any one

new product introduction. As such, companies need to invest on (a) generate new

product ideas (b) convert these ideas into functional and reliable designs that are user-

friendly and (c) ensure that these designs are readily producible and answering the needs

of the consumers. (Eisenhardth, 1998)

Nestle also takes pride in its innovation of having an integrated and developmental

research aimed in improving the different products. More so, Nestle invests on

endeavors involving research aimed at the physiology of its consumers including his

physiology, health and nutrition. This is crucial since the different food products offered

by the company must be able to sustain its users and at the same time serve as a source of

survival. The primary production of the different products is being done by Nestle but its

raw products are being outsourced. It is the practice of the company that strict quality

check be done to ensure that these raw materials are safe and free from environmental

contaminants. In addition, the company has already pledge its support to the different

agricultural and livestock methods that preserve soil and protect water supply, uses least

amount of energy and uses only safe chemicals. Protecting the rights of its potential

market is important to ensure their support to the products.

Aside from this research, the company is also engage in seeking innovations in its

packaging. The company not only to ensure the quality of existing products but more

importantly to encourage and help resolve the different environmental problems

spearheaded this. Nestle, with its research and development group seeks to transform

materials that would be harmless and suitable to the needs of the consumers.

Nestle also utilizes the different cultures, mentalities and realities of their region of

operation. This is what they refer to as decentralization. While it is true that the mother

company is stationed in Switzerland, policies and practices of the company needs to be

attuned with that of their regions. This move of Nestle would help them ensure that

employees who have genuine care for the company maintain their market. This is

because they share the same value system and beliefs as their management. This is

essential in making the existing market more pleasant and acceptable to the region.

Cost Drivers

Within every industry, there is usually a segment of the market that buys strictly based

on low cost. To successfully compete in this niche, a firm must necessarily, therefore be

the low-cost producer. However, one should take note that this does not always

guarantee profitability.

With the acceleration of technological advancement and innovation, the cost of the

products can now be manipulated benefiting both the company and the consumers as

well.(Flaherty, 1996) Through globalization, different developing countries are being

known to be able to manufacture different food products with high quality and low labor

costs. This interchange of resources is made possible through advancement in

transportation and of course information technology.

 Nestle is able to recognize possible sources of their raw materials. As such, this

would mean job opportunities to the said regions. Nestle is known to have imported

4,886 tons of powdered milk from Uruguay and Argentina. (Paez, 2002) In Antioquia,

with the daily production of 224,000 liters of milk, 65% is being imported. In 2005,

Nestle announced that their new coffee brand called “Nescafe Partners Blend”, supports

fair-trade. (Nestle and Fairtrade, 2005). This implies that the production of this coffee

brand supported the living wages of its local farmers to name one.

While Nestle is able to outsource their production to minimize the price, in general,

they also help the economies of these nations. This was made into a reality because of

globalization.

However, in spite of a benefit that is being obtained from the labor forces that is

utilized by Nestle, controversies are also plaguing the multinational company.

The first issue is on outsourcing. Due to immense demand for the raw materials on

these products, the local companies supplying it are already exploiting their own

resources just to meet the demands. As such, some of these raw materials are not of

high-grade quality, as it is not strictly monitored. One of its suppliers reported this that

the product already causes diseases to its consumers.

The next issue is on labor policies. It is said, that Nestle with its efforts to ensure

maximum production instill stringent policies in the manufacturing companies. In

Colombia for example, the right of the workers to privacy is violated through the

installation of video cameras in the workplace. (Paez, 2002) There is also a reported
halting of the production line and even harassment of the workers. It was said that

management of this factory have disregarded the function of the union leaders. This of

course had greatly affected the families of the workers. Another report was given that in

the Philippines, police brutality was employed. This happened in the height of the

workers strike with respect to violations of the rights of the pensioners. Once again, the

leaders of the workforce was disregarded and created terror in the community.

Legal Drivers

In as much as the Nestle wants to continue its trade, the legal aspect of its sales and

outsourcing must also be considered. Due to globalization, more and more companies,

including nestle has become internationally oriented. This is because because of this

phenomenon, there are more global alliances that are being formed. To support this, the

different government had imposed economic policies such as reduction of tariff barriers

and non-tariff barriers. Thus, market liberalization and privatization is being employed.

In addition, common standards among the countries are also evident.

Nestle respects the by-laws of the state and supports its policies. Management of the

satellite companies are active participant in panel discussion on food legislation and

regulations. They also take part in support of policies pertaining to the environment.

Nestle also promotes their policy on environment and transmits this information from

their company to all subsidiaries all over the world.

Economy and Nestle

 Monetary policies have become the central constituent of the stabilization strategy

of different countries because it is faster and more flexible than fiscal policy. In addition,

monetary policy is secluded from political demands. There are three main monetary tools

by which it can control and influence the money creating abilities of the commercial

banking system. They are the open market operations, reserve ratio and discount rate.

These tools influence the money supply and affect macroeconomic factors. These tools

are important as it strikes a balance between economic growth, low inflation, and a

reasonable rate of unemployment.

The amount of money circulating in the economy can be adjusted through open-

market operations, specifically with selling and acquiring government securities bonds in

the bond market. The federal funds rate dictates the interest charge at which commercial

banks loan balances at the Federal Reserve to other reservoir organization overnight. If

the supply of money is more than the production of goods, the government will increase

interest rates and bring money supply downward to what it deems to be the “equilibrium”

level. Likewise, if the government deems that economic expansion is more than the

money supply, which leads to deflation, interest rates are then lessened. The implication

of a lower interest rate is that it will be cheaper for individuals to obtain loans in new

business ventures or procure goods and services. This also means dejecting them from

keeping their money in a bank since its interest is much lower. (NematNejad, 2007).

Nestle maximizes these resources and utilizes it to engage in new investments and

develop their research project as they geared on ensuring quality products for their

consumers.
 On the global fronts, Nestle choose carefully the foreign trade partners based on

the questions i.e. "what to produce" and "for whom to produce", on one to one basis.

While working on for the overseas buyers, one analyzes the overseas buyer’s demand

sensitivity on two fronts - price elasticity & cross elasticity which helps in finding

answers of “how to produce". This further leads to the analysis and determination of the

costs structure at the optimum production level to meet its overseas buyer’s requirements.

Conclusion

Globalization of most industries has intensified significantly in recent years, especially

among international firms, and this trend is expected to continue. This movement

towards a single world economy has occurred for several reasons. The first one is due to

the advances in information technology. This advancement had facilitated the rapid

travel of information regardless of location. Everything that one needs to know about a

specific commodity as well as monitoring the delivery of one’s order is just a click away.

The second proponent of globalization is the growing trend of lowering trade barriers.

This includes the formation of different groups that even help facilitate the distribution of

goods and lowering of taxes of import products. The third is the emergence of high-

growth markets with associated high profit margins in newly industrialized countries.

In order to survive and to prosper in this current situation of the economy, a company

needs to differentiate itself from the competition. It also needs to maximize the different

drivers of globalization taking into account the current situation of the market it wish to

enter.
 Nestle is the leading company of the food industry. They have established themselves

to be one of the largest corporation covering key cities worldwide. It was able to

maintain itself in this position by utilizing the different resources at hand because of

globalization.

Nestle was able to penetrate different markets for the primary reason that it was able

to balance its global brand with the local taste. It was able to do so by manufacturing

products that answer the needs of the locals and more importantly marketing it by

targeting the sensibilities of its consumers. It used packaging as the main tool,

exhausting the culture of the region and evaluating its purchasing power. Nestle also

establish itself in the market with its thrust of promoting sustainable development as

evident in its products, packaging and marketing efforts.

Nestle also, through globalization, minimize the cost of its products through

outsourcing. It was able to find countries that can supply them with raw materials at a

low price. The said company to ensure its safety further checks these materials for its

quality. Aside from this, human resources from different countries were also tapped.

However, in this aspect of the company’s management that brought about some

controversies. These problems are centered on labor rights and company policies and

practices.

The last globalization driver that was maximized by Nestle was the government

drivers. It was able to utilize the market liberalization in the different regions where the

mother company find potential marketplace. In addition, Nestle have initiated their

participation in policymaking and standardization in the different regions that they have
companies in. This move of Nestle just proves the companies efforts to ensure that their

products are geared on serving the consumers, safe and worthy to be called a global

brand.

Works Cited

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Companies, Inc., 1999.

Demetrakakes, P. Food and Drug Packaging. 2004

Eisenhardt, K. “Time-Pacing: Competing in Markets that won’t Stand Still” Harvard

Business, 1998.

Flaherty, M. Global Operations Management. New York: The Mc-Graw Hill

Companies, Inc., 1996.

“Nestlé’s packaging wraps up the world: a truly international food company combines

local and global strategies in packaging its huge array of products” 2004.
Retrieved 19 November 2009 at http://findarticles.com

Nestle and Fairtrade” November 29, 2005

Paez, J. The Transnational nestle continues repression. 2002. Retrieved 19 November

2009

at http://www.nadir.org/nadir/initiativ/agp/free/colombia/txt/2002/0630nestle.html
Ritchie, M. Globalization vs. Globalism. International Forum on Globalization. 2006