Justification for the choice of the second country international market:
The choice of the U.S. as an international market for Nestle arises from various socio-economic and political factors. The economic climate of the United States currently provides various benefits for Nestle to promote their healthy foods initiative. First, the country has strong foreign investment policies and is also experiencing an increasingly growing number of obese children.
The U.S. is a predominantly market oriented economy where decisions are made by businesses and private institutions making the states and federal governments acquire goods and services from the domestic private market. The political and economic stability, free market policies and democratic values of the United States make the country a desirable market by foreign investors (“United States - Foreign Investment Climate,” 2013).
The fact that more than a third of American adults already suffer from obesity, and there is a growing number of children becoming obese to is a cause of concern for the Centre for Disease Control and therefore, Nestles promotion of Healthy foods are seen as a welcome venture (Nestle, 2012).
The United States economy is growing and recovering from the recent recession and with correct marketing and pricing strategies, a venture into the U.S. health foods market is a profitable venture. Again, Nestle already has an established market in the U.S. and their new consciousness about healthy foods to reduce the obesity menace will only increase their dominance in the food market.
The political climate of the U.S. however is still unpredictable. Current government efforts are centered in the economic restoration. This has seen an increase in taxation of the wealthiest Americans. Further research also raises the issue of how farmers will survive without healthy crops due to drought in some regions. However, whether America is heading for another recession or will remain stable is a fact only time will tell (“United States - Foreign Investment Climate,” 2013).
Appropriate channel strategy for Nestlé’s domestic and international markets:
According to consumer research, people seek to adopt healthier lifestyles. Governments and corporations are educating people on the benefits of healthier living. With the current obesity epidemic in the U.S., a proper marketing channel strategy chosen by Nestle will depend on the provision of products meeting new customer needs and responding to their changing requirements.
Nestle is a large food products producer and to effectively market healthier products, an appropriate marketing approach would be the consumer based channeling approach. This choice of strategy heavily relies on Nestlé’s expansive scientific research and consumer knowledge and will help them make and market healthier products for consumers (Nestle, 2012).
This consumer approach however needs to be more specific to the products, and in this case, healthy foods. The best strategy then would be developing a ‘Wellness’ approach that will build on Nestlé’s tradition of producing highly nutritional products. Wellness is being in an enhanced state of health based on exercise, good diet and habits. It is also associated with a feeling of vigor and being in good physical shape (Nestle Sustainability Review, 2002).
For effective implementation of this strategy in both the international and domestic markets, Nestle will have to match this strategy to the prevailing environment in which the business operates. In this case, the environment would be social since consumers are seeking nutritional products that complement healthy lifestyles. The strategy must also be consistent to organizational values and principles that underpin the way a company should operate in general.
Nestlé’s principles underpinning consumer communication include stress on moderate food consumption, depiction of children in healthy and energetic pursuits in advertising and avoiding advertising methods that encourage eating of snacks, as opposed to meals. In terms, of resources, Nestle is a strong, trusted, well-established brand with companies all over the world and thus possesses the necessary scientific, financial and human resources to meet these customer requirements (Nestle Sustainability Review, 2002).
If Nestle pursues this strategy, then they can effectively deliver foods that contribute highly to general wellness of consumers and of high nutritional value.
Pricing strategies for entering both the domestic and international markets:
In terms of pricing, Nestle can stick to their non-price competition. Their current strategy which is well established includes offering a single National Price List (NPL) for all both local and international markets and keeping tabs on distributors to maintain this set NPL. However, Nestle offers discounts to distributors (Nestle, 2012).
Nestle is a well-established company both locally and internationally, and they produce large quantities of product units. This accumulated production helps them enjoy large economies of scale with low production costs and high profit margins. They also set the products final prices after comparing to competitors and thus have a flexible price control mechanism. This way, Nestle can counter competition in both their domestic and external markets.
The company has also built consumer trust on its product based on quality versus price and thus consumers are not particularly much affected by changes in Nestlé’s product prices since they are assured of quality (Nestle, 2012).
Implications of changing environmental factors on organizational choices for the domestic and international market:
Food marketing environments are a significant influence on food consumption. The marketing environment factors therefore have adverse effects on both domestic and international consumers regarding healthy eating and prevention of obesity (Hill & Peters, 1998, p.280).
Efforts to reduce obesity may fail unless organizations, in this case Nestle, counterbalance the marketing of low-nutrition, energy dense foods with marketing of high nutrition, low energy and healthy foods.
The organization therefore has to make choices and re-assess their marketing strategies, tactics and advertising methods from a marketer’s perspective and marketing framework to allow for increased awareness on the implications of marketing to the consumption of unhealthy foods.
This will involve understanding domestic and international marketing environments for various consumer segments, identifying gaps and establishing how marketing efforts for unhealthy products may counteract the efforts made to encourage healthy food consumption and reduce obesity (Hill & Peters, 1998, p.1371).
QUESTIONS:
Why are marketing channels and intermediaries necessary? What is the most important function carried out by intermediaries? Why? Why do channel arrangements sometimes have to be modified over time?
Marketing channels refer to business structures between interdependent organization and they reach out from the point of origin of the product to consumers with the sole purpose of moving products physically to the final consumer. Intermediaries are organizations/entities that assist in the movement of goods and services from producers to both home and industrial consumers.
Marketing channels and intermediaries are needed so as to create continuity in the supply chain and provide economies to the distribution process through specialization and division of labor. This helps overcome discrepancies in assortment, time, space, quantity and provide contact efficiency (Kotler & Keller, 2006, p.468).
Manufacturers do not usually need intermediaries but intermediaries have the principal function of creating exchange effectiveness and efficiency by reducing the number of contacts needed in marketing exchanges. This implies that they better in performing these market exchanges than manufacturers and consumers.
Channel arrangements sometimes have to be evaluated and modified with time after assessing their performance and to determine whether they are necessary, effective, efficient or outdated. They may also have to be modified to reduce costs and create a competitive advantage (Kotler & Keller, 2006, p.489-490).
What are some types and sources of channel conflict? What are some of the ethical considerations in channel relations?
Channel conflicts arise when channel members begin to perceive the actions and behaviors of other members as a hindrance to their goal attainment.
Sources of channel conflicts include domain clashes, different reality perceptions and competing roles. Channel structures and marketing strategies may also raise conflicts. Conflicts are of different types and can be pre-contractual (arise before members get into an agreement) or post contractual (arise after members get into an agreement). Channel conflicts can also be horizontal, vertical or multi-level (Kotler & Keller, 2006, p.491).
For effective channel functioning, various ethical considerations have to be made and conflict resolution and management approaches used. These may include behavioral and structural conflict resolution methods such as problem solving, persuasion, negotiation, co-opting, mediation and arbitration. Channel members can also avoid conflicts by personnel exchange between channels and association with trade organizations that resolve conflict and also act as channel regulators (Kotler & Keller, 2006, p.491).
How the internet as a channel has threatened or destroyed other channels to market. Give an example of a firm that has successfully implemented an Internet channel without severe consequences to its existing channel relationships.
The internet is a direct marketing channel that manufacturers can use to eliminate wholesalers, retailers and distributors by directly marketing their products themselves. This is threatening the existence of wholesalers and retailers in the market since consumers can get goods at cheaper prices directly from the manufacturer than if they bought from a retailer (Kotler & Keller, 2006, p.493-494).
Websites such as Amazon.com and E-Bay.com help consumers find any product on the web, no matter where it is sold making them a force to reckon with in the marketing channels.
However, companies such as Hewlett Packard have successfully opened internet channels to market products without severely affecting channel relationships. HP have opened three websites for direct sales: Shopping Village for consumers, HP Commerce Centre for businesses that buy from authorized resellers and Electronic Solutions for existing customers who may need to upgrade software, continued support or maintenance. However, HP forwards all web orders to resellers to complete them, ship the products and earn commissions thus avoiding conflicts with established reseller channels. Not only does this boost HP’s direct sales, but also improve business for their resellers (Pride & Ferrell, 2006, p.406).
References:
- Kotler, P., & Keller, K. L. (2006). Marketing management. Upper Saddle River, NJ: Pearson Prentice Hall.
- Hill JO, Peters JC. (1998). Environmental contributions to the obesity epidemic: Mc Graw Hill
- Pride, W. M., & Ferrell, O. C. (2006). Marketing: Concepts and strategies. Boston: Houghton Mifflin Co.
- Nestle Sustainability Review, 2012.Retrieved from http://www.nestle.com/asset library/Documents/Reports/CSV reports/Environmental sustainability/Sustainability_review_English.pdf
- United States - Foreign Investment Climate. (2013). CountryWatch. Retrieved from
http://www.countrywatch.com.ezproxy.apollolibrary.com/cw_topic.aspx?type=text&vcountry=182&topic=INFIC
- Nestle. (2012). Research & Development. Retrieved from http://www.nestle.com/randd/globalnetwork
