Nestle Globalization

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<p>Description of the Business</p> <p>Introduction to NestleName of Company: Nestl S.A. Nestl AG Nestl Ltd. Nestl Caribbean Inc. Nestl Trinidad and Tobago Ltd.</p> <p>Motto: Good Food, Good Life</p> <p>Brief HistoryThe Multinational Corporation known globally as Nestl Limited was founded in 1866 by Henri Nestl and is today the world's biggest food and beverage company. In 1905 Nestl, the Swiss infant formula producer merged with the Anglo-Swiss Condensed Milk Company and by 1914 the company was operating factories in the United States, Britain, Germany and Spain. Finally, in 1957 the</p> <p>1</p> <p>Nestl and Anglo-Swiss Condensed Milk Company (new name after merger) commenced its operations in Picton Street, Port of Spain, Trinidad. In 1962 the Anglo-Swiss Condensed Milk Company founded the Trinidad and Tobago Food Products Ltd. and has made many breakthroughs since then. Up until 1991 the Anglo-Swiss Condensed Milk Company changed its name to Nestl Trinidad and Tobago Ltd. Since 1866 Nestle has established 495 branches to date and Nestl Trinidad and Tobago Ltd. ranks within the first 10 in the Nestle worldwide rankings. In conclusion Nestl Worldwide Ltd. is a private limited multinational corporation with Sales of CHF 98.5 billion, with a net profit of CHF 9 billion. It employs around 265,000 people and has factories or operations in almost every country in the world</p> <p>2</p> <p>ReportAnalysis Multinational Corporations</p> <p>Nestl Ltd. is a Multinational Corporation, A company that operates globally through branches with their headquarters in one country (Stimpson&amp; Singh, 2007, p.65). This is made possible through Globalization and Trade Liberalization which encourages companies to expand globally with fewer restrictions. Internal Factors that have led to Nestls global growth are; Nestl continues to maintain its commitment to follow and respect all applicable local laws in each of its markets. Nestl has positioned itself as a company promoting health and dietary preference to its consumers. Nestl acquires dependable worldwide brands to build up its product range. The Multinational Corporation chosen to be assessed is Nestl Trinidad and Tobago Ltd. (NTTL), a branch of the Nestl Worldwide Corporations with its3</p> <p>head office in Switzerland and regional office in Dominica (Nestle Caribbean Inc.). Decentralization will occur in NTTL operating in Trinidad and Tobago because according to their International Corporate Business Principles located in appendix #2, it states that Nestle as a consumer driven company it allows the countries local, cultural desires to reflect the products and services they provide. Resulting in different decisions to be made by the manager of NTTL compared to other regional managers. The selection of host countries is important because the head office will want to maximize productivity and obtain a thriving global market share. The factors that led to Nestl Caribbean establishing a base of operations in Trinidad and Tobago are; Demand for products that catered to nutrition and dietary preference among consumers Geographical growth of the region</p> <p>Local market and the purchasing power held by the consumer</p> <p>Economic stability because of petroleum base</p> <p>Liberalized Economy</p> <p>Productive capacity</p> <p>Natural resource over ability4</p> <p>Firstly, like most economies operating in the Caribbean region, Trinidad and Tobago is a mixed economic system. Meaning there is both private and governmental influence on economic activity in the country resulting in significant fluctuations in the level of economic activity. Reasons for Multinational Corporations establishing bases of operations in Trinidad and Tobago are; to establish a thriving world market share and because of its natural resources. According to Questionnaire and interview information, go to appendix #1, operating within Trinidad and Tobagos mixed economic environment NTTL experiences several problems. These problems are centralized around the competition that a mixed economy allows from imported products. This causes NTTL to be more efficient in terms of pricing; the price must be right, effective and competitive, and productive efficiency must be right. This problem is a result of Secondary companies who because of an open market are able to export goods at a lower price and escape high labour cost. This also benefits NTTL because as part of the Nestl Worldwide group they use the liberalized environment to import their products and sell at competitive prices. Change in economic climate can greatly affect the size and growth of businesses operating within the environment. Inflation has been fluctuating within the Trinidad and Tobago economy. Presently Trinidad and Tobago is in an economic Boom due to the rising prices of oil, natural gas, petroleum and also its investment into infrastructure but it experienced a recession in the late 1980s</p> <p>5</p> <p>and medium 1990s. Nevertheless, NTTL has been operating within Trinidad and Tobago since 1957 and has continued to fortify its growth locally through the expansion of its manufacturing facility and its product range shown in appendix #3. NTTLs growth has been exceptional despite the many problems associated with operating as a Multinational Corporation within Trinidad and Tobago. These problems include environmental legislations that are forced on Multinational Corporations to regulate their activity, the lack of skilled labour and the lack of technology within Trinidad and Tobago. These cause many issues for new Multinational Corporations looking to invest in the Trinidad and Tobago business environment.</p> <p>6</p> <p>Globalization and Trade LiberalizationAn assessment of how Globalization and Trade Liberalization affect the decision-making process and growth of Multinational Companies in Trinidad and Tobago cannot be made without first defining the terms. Globalization is defined as The integration of economic, cultural, political, religious, and social systems reaching the whole world and practically all human beings. (WorldTradeOrganization.org, 2007, Globalization). Also, Trade Liberalization can be defined as A market model in which trade in goods and services between or within countries flow unhindered by government-imposed restrictions to trade like taxes, legislation, tariff and non-tariff trade barriers (WorldTradeOrganization.org, 2007, Free-trade). Firstly, the effect of Globalization and Trade Liberalization on the Trinidad and Tobago economy causes changes in governmental policies, consumer wants and competition among businesses.</p> <p>Trade Liberalization removes environmental protectionist policies placed by the government of Trinidad and Tobago, and where the laws are present it is difficult to enforce them.</p> <p>Consumer wants change drastically because of the wider range of goods offered from foreign suppliers causing consumers to live above their means.</p> <p>7</p> <p>Local businesses are forced to increase the quality of goods and services that they provide due to foreign competition. This will increase their cost of production and may eventually lead to closure of the business.</p> <p>These changes in The Trinidad and Tobago economy brought upon by Globalization and Trade Liberalization will affect NTTL as a Multinational Corporation operating in the business environment. In relation to economic changes NTTL operates on a survival of the fittest policy. In accordance to this policy NTTL has continued to improve its, quality, productivity and competitiveness since its manufacturing facility opened in St.Augustine in 1962. An example of this can be seen in their production methods implemented since 1972. The process is called the UHT (Ultra high Temperature) which allows dairy and juice products to be stored without freezing for long periods of time. Other processes used are Tetra Packing; this is a cheap, lightweight, efficiently sealed container. NTTL was the pioneer of these processes in the Caribbean region and it allowed NTTL to produce at a greater scale. As a result of Globalization and Trade Liberalization commercial economies of scale occurs and large organizations like NTTL can benefit from the cost reduction per unit it offers when it produces large outputs . This in turn makes NTTL more competitive and can import the products the consumer wants. Recent changes in consumer wants caused by the rapid exchange of free information which Globalization allows is a cause of concern for Multinationals in Trinidad and Tobago, particularly NTTL. Being a supplier of food and beverage, NTTL has to be conscious of both the ageing and growing population.</p> <p>8</p> <p>Consumers today are more health conscious than they were 20 years ago so more focus would be held on products that contain dietary fiber and anti-oxidants(Medical healthJournals.com, 2008, Conclusion section, para. 1). In remedy to this</p> <p>NTTL has added to their Corporate culture, innovate and renovate, this meaning a continual research and development of their products to suit changing consumer interests. This led to the creation of their Skim milk brand and other health awareness products, which can be found in appendix #3. NTTL has a stable approach to the policies imposed by the Government of Trinidad and Tobago, meaning NTTL has an agreement with the government to produce its goods with few or little restrictions and regulations. Trinidad and Tobagos economy is developing due to Multinational involvement so Government policies will aim to satisfy all four macroeconomic objectives and maximize taxation according to Dearden (1994). Therefore only environmental policies like the Consumer Protection Act (amended 1998) will affect how NTTL does business because they have been responsible for years of wealth to the local economy. Finally, CARICOM (Caribbean Community) and the introduction of the CSME (Caribbean Single Market and Economy) would have affected NTTLs operations. CARICOM promotes locally manufactured products when companies use local inputs in its production. Without Globalization and Trade Liberalization, CARICOM and the CSMEs function would not be possible. When NTTL sponsors activities in Trinidad and Tobago like their annual aerobics competitions or</p> <p>9</p> <p>endorses local dairy farms to improve their level of activity the government provides NTTL with tax breaks for their assistance in the local economy. Complying with the many effects and changes brought upon by Globalization and Trade Liberalization NTTL continues to maintain quality, innovative and positions itself as the number one food and Nutrition Company locally and globally.</p> <p>10</p> <p>Decision Making ProcessIn accordance to the Globalized and Liberalized market in which Trinidad and Tobago operates, NTTL has to make decisions to uphold and further develop Nestls worldwide market share. These decisions must be accurate, timely, relevant and cost effective based on internal and external business information gathered. The branch manager for NTTL has to make decisions in accordance to the vision Nestl Worldwide has set for its companies. NTTL engages in the decision making process and has to follow the stages involved in decision making, these are; 1. Problem Analysis 2. Data Collection 3. Analysis and Evaluation of Data 4. Formulate and Test Alternative Strategies 5. Implement The Decision 6. Evaluate The Decision Following the decision making process will benefit NTTL when making future important, strategic decisions. NTTLs objective is to think local, get global, since the organization is decentralized from its head office in Switzerland, this method of decision-making makes the act of decision-making slower as it will take time to run through the department heads. In the event that an important structural change happens, NTTL carries out that decision in a structured and11</p> <p>systematic manner and communication comes after according to questionnaire information, go to appendix #1. Also, operating within the Trinidad and Tobago economy there are other factors which affects how NTTL makes its decisions. NTTL makes its decisions by looking at the long-term benefit of these decisions. A factor affecting decisionmaking in Trinidad and Tobago will be the lack of Technology available for mass production. This affected NTTL until they decided to upgrade to Tetra packing in 1972, this was costly, but it increased production to 20,000 quarter-litres tetra packs per hour. This decision resulted in a future of large scale production for NTTL. Another factor affecting decision-making in NTTL is the social and cultural constraints of Trinidad and Tobago. According to the Nestl Corp orate BusinessPrinciples, go to appendix #2, NTTL sup ports the United Nations Global Comp acts two guiding principles on human rights. Therefo re NTTL sup ports the p rotectio n of human rights within Trinidad and Tobago. These human rights laws forces NTTLs employees to comply with the laws Trinidad and Tobago. This therefo re imp acts on the social and cultura l decisions made by their Human Resourc e Dep artment as NTTLs rec ruitment and selec tion methods must be in comp liance with the traditions of Trinidad and Tobago but to maintain standa rds of other Nestls op erati ng worldwide.</p> <p>NTTL is aware that increasing globalization is leading to the development of more international recommendations to developing countries. These recommendations are addressed to governments; they inevitably have an impact on a firms decision-making. Trinidad and Tobagos government in an attempt to12</p> <p>cure unemployment increased spending in the areas of construction, education and healthcare in the past few years. This results in an increase in wages and higher national income. This is beneficial to NTTL because of the income elasticity of demand for the goods that they provide within Trinidad and Tobago. The manager has to make strategic decisions to supply goods that cater to consumers increasing income and spending patterns. NTTL has maintained its low income elasticity through its attempts to sustain a competitive price therefore making it recession proof to allow for clearer planning and steady growth. Questionnaire data has concluded, go to appendix #1, that NTTLs manager uses various decision-making tools, these include;</p> <p>Critical Path analysis (CPA); This assesses the shortest possible time in which a product can be completed</p> <p>Cost-Benefit Analysis (CBA) - a measure of the costs paid alongside with the benefits gained of completing a product.</p> <p>Decision Trees- a quantitative decision-making approach of tracing the alternative outcomes of any decision.</p> <p>These decision-making tools are a quantitative approach as NTTL focuses more on profit based objectives. The manager of NTTL also believes that there isnt one way of doing things and applies contingency theories to his decision-making focusing at the micro and macro economic elements aiming at both market and consumer interests.</p> <p>13</p> <p>EvaluationBased on objective one o...</p>