Section 2 Group 7




3.Points to be addressed in the Presentation: 2 1. What are the external and internal forces providing reasons to adopt centralization or decentralization at Nestle? How influential are the roles in Nestle in determining the degree of centralization or decentralization of local markets? Whether Co-ordination by centre is more feasible & productive for  Some elements of Marketing Mix over others?  Some Product Categories over other?  Some Countries over Other? Section 2 Group 7 8/7/2011 . 2.

brand names (Bollino in France).Internal Factors Influencing Centralization and Decentralization 3 CENTRALIZATION Worldwide efficiency and communication of Ideas. Knowledge of local markets and customers by local managers. . Simplification of the organization. Better relationship with local stakeholders. Section 2 Group 7 8/7/2011 Nestle·s goal of reducing cost (economies of scales) and increasing profits. DECENTRALIZATION Generation of new ideas of products by local managers (Mouseline in France).

Cultural convergence between countries. Spill over Effect. Difference in Consumer Perceptions (advertising. Differences in Consumer Languages. branding). Differences in Consumer tastes.External Factors Influencing Centralization and Decentralization 4 CENTRALIZATION Demographic convergence between countries. Section 2 Group 7 8/7/2011 . DECENTRALIZATION Product Differentiation.

Branding is controlled. Distribution. except Branding. Product Positioning. standardized by central organization who charge license fees to country operating companies for the use of brands and brand names.How does Nestle exert Influence 5    Flexibility given to regional and country managers on every elements of marketing mix. Section 2 Group 7 8/7/2011 . Trade Promotion. Consumer Protection and Media advertising decentralized.

Continued« 6 Section 2 Group 7 8/7/2011 .

Section 2 Group 7 8/7/2011  PRICE  . Decision on Centralization is contextual and dependent on the extent of achievable economies of Scale.  5Minuten Terrine : 40 Million Units sold ² 30% of total cost from COP  Centralization can help in achieving < 20% (COP) with good economies of scale.  Bolino (France)² 13 million units sold ² Reduction in Cost of production needed from existing 20% Local Competition from Knorr. consumer·s purchasing power and brand value.a) Degree of Centralization based on Marketing Mix 7   4P·s PLACE  Germany & France exhibit different product launch requirement which can be best understood and decided by a production Manager in a decentralized Model Price points are sensitive to local market competition.

Single consumers  Down Played Maggie·s Brand Name  Modified packaging as per market research and 8/7/2011 requirement. Bolino :  Positioned to Young . 8  Product: Low degree of Centralization would be feasible to cater local demands and consumer preferences. 5Minuten Terrine:  Positioned to Women and Men in 30·s and 40·s  Strengthened on Maggie·s Brand Name  Value Promoted ² Nutritious and convenient to cook.  Design of a new product (Instant noodles)to suit Local taste and provide sufficient shelf life. Best understands the market and a suitable branding model to address local needs..Contd. consumer Section 2 Group 7  Promotion: Local coordination by product manager will be feasible    .

b) Degree of Centralization based on Product Category 9  Assumptions: Push products if more centrally coordinated will increase profits by more sales and reduced operations cost.  Section 2 Group 7 8/7/2011 .  Taste based products should be less centrally regulated.  Products already having high sales are assumed to be performing well because of higher degree of centralization.

b) Degree of Centralization based on Product Category 10 Section 2 Group 7 8/7/2011 .

Packaging. Can be adopted for (Breakeven Volume)Cost/unit > Fixed Costs of $200million/Satellite and other government hindrance issues. † Spill Over National Boundaries   Satellite Television ² centralized coordination planned to † † † † break down cultural barriers Offer same type of Advertising Cost effectiveness in Europe as in US. 65% of the programming watched in French Speaking pat of Switzerland emanated from France. Section 2 Group 7 8/7/2011 . Contribute to conflicts in product positioning. Harmonized Product Positioning. Promotion and Pricing.c) Degree of Centralization based on Country 11 Points to be considered before deciding on feasibility of centralization: † Cross Cultural Understanding between different Countries    Demographic and cultural Trends Consumer Tastes and Preferences Family size. Population growth . away from food consumption and standard of living.

12 THANK YOU Section 2 Group 7 8/7/2011 .

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