Description of the Business

Introduction to Nestle

Name of Company: Nestlé S.A.

Nestlé AG

Nestlé Ltd.

Nestlé Caribbean Inc.

Nestlé Trinidad and Tobago Ltd.

Motto: Good Food, Good Life

Brief History

The Multinational Corporation known globally as Nestlé Limited was founded

in 1866 by Henri Nestlé and is today the world's biggest food and beverage

company. In 1905 Nestlé, 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

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Nestlé 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

Nestlé Trinidad and Tobago Ltd. Since 1866 Nestle has established 495 branches

to date and Nestlé Trinidad and Tobago Ltd. ranks within the first 10 in the

Nestle worldwide rankings. In conclusion Nestlé 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

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Report

Analysis

Multinational Corporations

Nestlé Ltd. is a Multinational Corporation, “…A company that operates

globally through branches with their headquarters in one country” (Stimpson&

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 Nestlé’s global growth are;

Nestlé continues to maintain its commitment to follow and respect all

applicable local laws in each of its markets.

Nestlé has positioned itself as a company promoting health and dietary

preference to its consumers.

Nestlé acquires dependable worldwide brands to build up its product

range.

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The Multinational Corporation chosen to be assessed is Nestlé Trinidad and

Tobago Ltd. (NTTL), a branch of the Nestlé Worldwide Corporations with its

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 Nestlé 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

Local market and the purchasing power held by the consumer

Economic stability because of petroleum base

Liberalized Economy

Productive capacity

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Natural resource over ability

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 Tobago’s 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 Nestlé 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

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also its investment into infrastructure but it experienced a recession in the late

1980’s and medium 1990’s. 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.

NTTL’s 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 Corporation’s 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.

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Globalization and Trade Liberalization

An 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.

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.

Consumer wants change drastically because of the wider range of goods

offered from foreign suppliers causing consumers to live above their

means.

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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.

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 Multinational’s

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.

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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 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

Tobago’s 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 NTTL’s

operations. CARICOM promotes locally manufactured products when companies

use local inputs in its production. Without Globalization and Trade

Liberalization, CARICOM and the CSME’s function would not be possible.

When NTTL sponsors activities in Trinidad and Tobago like their annual

aerobics competitions or endorses local dairy farms to improve their level of

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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.

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Decision Making Process

In accordance to the Globalized and Liberalized market in which Trinidad and

Tobago operates, NTTL has to make decisions to uphold and further develop

Nestlé’s 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 Nestlé 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. NTTL’s 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 and

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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

decision-making 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 Nestlé Corporate Business

Principles, go to appendix #2, NTTL supports the United Nations Global Compact’s

two guiding principles on human rights. Therefore NTTL supports the protection of

human rights within Trinidad and Tobago. These human rights laws forces NTTL’s

employees to comply with the laws Trinidad and Tobago. This therefore impacts on

the social and cultural decisions made by their Human Resource Department as

NTTL’s recruitment and selection methods must be in compliance with the tradit ions

of Trinidad and Tobago but to maintain standards of other Nestlé’s operating

worldwide.

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 inevi tably have an impact

on a firm’s decision-making. Trinidad and Tobago’s government in an attempt to

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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 NTTL’s manager

uses various decision-making tools, these include;

Critical Path analysis (CPA); This assesses the shortest possible time in

which a product can be completed

Cost-Benefit Analysis (CBA) - a measure of the costs paid alongside with

the benefits gained of completing a product.

Decision Trees- a quantitative decision-making approach of tracing the

alternative outcomes of any decision.

These decision-making tools are a quantitative approach as NTTL focuses more

on profit based objectives. The manager of NTTL also believes that there isn’t

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.

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Evaluation

Based on objective one outlined earlier in the internal assessment on

Multinational Corporations, NTTL has done a considerable amount in the

development of Trinidad and Tobago’s food and nutrition industry; see NTTL’s

timeline of important events in Appendix #4.The timeline shows how NTTL has

continued to fortify its size, growth and profitability as it became one of the

worlds largest Multinational Corporations and the largest food and beverage

company by maintaining its standards worldwide. NTTL continues to uphold its

customer protection, labour and an environmental standard stated in its

Corporate Business Principles, go to appendix #2, and is one of the most ethical

companies operating on the global market.

Compared to other Multinational Corporations operating within Trinidad and

Tobago NTTL has grown to be a part of the daily life of citizens creating goods

like Orchard, Nestum and Nescafe to satisfy all age and ethnic groups within

Trinidad and Tobago.

Based on objective two on the effects of Globalization and Trade

Liberalization, NTTL has been operating effectively despite the disadvantages

like competition associated with free trade. NTTL reaps the benefits of

economies of scale allowing it to produce a lower unit cost compared to other

small organizations operating within Trinidad and Tobago.

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Based on objective three in this internal assessment on Decision-Making NTTL

continues to make important strategic decisions which help it operate on the

long-term and consumer-market based interests. This can be seen when NTTL

upgraded to Tetra Packing in 1972. NTTL also continues to make decisions that

benefit Trinidad and Tobago’s economy like the sponsorship of local events,

including the annual savannah run and assistance of local dairy farmers.

In conclusion, based on observations of NTTL being a Multinational

Corporation operating and making decisions in Trinidad and Tobago it has

grown significantly. This is only possible because of the expert decisions made

by the local manager to implement contingencies as remedies to situations which

involve the local and global-liberalized market. This expertise decision making

despite its decentralized nature has led NTTL to achieve a place in Nestlé’s

worldwide top ten rankings. With respect to Globalization and Trade

Liberalization it does more good than harm. The changes encountered in the

social, economical, international and cultural only elevate NTTL’s

competitiveness on the global market.

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Recommendations

From the analysis and evaluation I have concluded some recommendations

which will help the business to achieve further profitability.

Invite more schools to test out new products, so culture developed

products can be assessed.

Invest further into customer service to satisfy local consumers.

More focus on environmental protection is needed. NTTL has to make

their environmental protection policies more publicized.

Establish environmental objectives, monitor progress, checks results and

define future actions.

Communicate decisions beforehand to employees, when a change is about

to be made.

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APPENDIX #1

Questionnaire

Thesis: An examination on how Trade Liberalization (TL) and Globalization

(GL) affect the decision making process and growth of Multinational

Corporations (MNC’s) in Trinidad

Business and Economic Systems

1. What type of Company is Nestle?

………………………………………………………………………………………

…

2. How does operating in a mixed economic system affect the production of

Nestlé’s goods?

………………………………………………………………………………………

….

3. Are there any advantages of operating in Trinidad’s mixed economy?

………………………………………………………………………………

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Also, are there any possible disadvantages to nestle, by operating in a

mixed economy?

…………………………………………………………………………………………...

4. What are some of the advantages and disadvantages of operating in the

Caribbean Business environment?

………………………………………………………………………………………

……..

5. How have the economic practices of Trinidad and Tobago impacted on

Nestle Trinidad in terms of size and growth?

………………………………………………………………………………………

…….

Multinational Corporations

6. What are the reasons that contributed to the growth of Nestle worldwide?

………………………………………………………………………………………

……..

7. Describe the disadvantages associated with Nestle operating on a global

level.

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………………………………………………………………………………………

……..

8. What are the factors that have influenced Nestle to establish a branch of

operations in Trinidad?

………………………………………………………………………………………

……...

The Impact of Trade Liberalization and Globalization on Nestle

10. The impacts of Trade Liberalization and Globalization are as follows,

how do these impacts affect Nestle?

These impacts are:

(a) Changes in the economy

………………………………………………………………………………………

………..

(b) International agreements

…………………………………………………………………………

(c) Changes to governments’ policies

………………………………………………………………………………………

……….

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(d) Changing consumer tastes and wants

………………………………………………………………………………………

………..

(e) Competition from other Multinational firms

………………………………………………………………………………………

……….

11. Does Nestle export its products to neighboring Caribbean territorities?

Yes NO

12. What major social and economic changes as a result of globalization and

trade liberalization within Trinidad and Tobago, has the company experienced

while operating?

………………………………………………………………………………………………

..

13. What measure has been taken to adapt to these changes?

………………………………………………………………………………………………

..

14. What approaches has Nestle taken to maintain global market share?

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………………………………………………………………………………………………

..

15. How have CARICOM and the introduction of the CSME affected Nestlé’s

operations?

………………………………………………………………………………………………

..

Decision Making process in Nestle

16. What type of decision making process is used by nestle?

………………………………………………………………………………………………

..

17. List the benefits and drawbacks of the decision making process used?

………………………………………………………………………………………………

..

18. Does nestle practice centralized or decentralized decision making?

19. Are important decisions based upon market interest or consumer interest?

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………………………………………………………………………………………………

20. How has the decision making process in Nestle Trinidad Limited been

affected by Government (political and Legal)

………………………………………………………………………………………………

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Appendix#2

Nestlé Corporate Business Principles

Nestlé is committed to the following Business Principles in all countries, taking

into account local legislation, cultural and religious practices:–

Nestlé’s business objective, and that of management and employees at all

levels, is to manufacture and market the Company’s products in such a

way as to create value that can be sustained over the long term for

shareholders, employees, consumers, business partners and the large

number of national economies in which Nestlé operates;

– Nestlé does not favor short-term profit at the expense of successful

long-term business development, but recognizes the need to generate a

healthy profit each year in order to maintain the support of our

shareholders and the financial markets, and to finance investments;

– Nestlé recognizes that its consumers have a sincere and legitimate

interest in the behavior, beliefs and actions of the Company behind

brands in which they place their trust, and that without its consumers the

Company would not exist;

– Nestlé believes that, as a general rule, legislation is the most effective

safeguard of responsible conduct, although in certain areas, additional

guidance to staff in the form of voluntary business principles is beneficial

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in order to ensure that the highest standards are met throughout the

organization;

– Nestlé is conscious of the fact that the success of a corporation is a

reflection of the professionalism, conduct and the responsible attitude of

its management and employees. Therefore recruitment of the right people

and ongoing training and development are crucial;

– Nestlé operates in many countries and in many cultures throughout the

world. This rich diversity is an invaluable source for our leadership. No

single document can capture every legal obligation that may be required

in each of these countries. Indeed, there may be conflicting legal

requirements. Nestlé continues to maintain its commitment to follow and

respect all applicable local laws in each of its markets. If an

interpretation of anything contained in this document is construed as

contrary to local laws, such interpretation should not be followed in that

country.

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Appendix #3

Nestlé’s Main Brands

Today Nestlé© is present in different markets with the following main brands:

CoffeeNescafe©, Nespresso,Taster’s Choice, Ricoré,

Ricoffy, Bonka, Zoégas, Loumidis

Water

Poland Spring, Nestlé© Pure Life, Arrowhead,

Vittel, Deer Park, Levissima, Perrier, S.Pellegrino,

Ozarka, Contrex, Ice Mountain, Zephyrhills, Nestlé©

Aquarel, Hépar, Acqua Panna,

Other beveragesNestea, Nesquik, Nescau, Milo, Carnation,

Libby’s, Caro, Nestomalt, Nestlé©

Dairy - Shelf stable

Nestlé©, Nido, Nespray, Ninho, Carnation,

Milkmaid, La Lechera, Moça, Klim, Gloria, Svelty,

Molico, Nestlé© Omega Plus, Bear Brand, Coffee-

Mate

Dairy - ChilledNestlé©, Sveltesse, La Laitière, La Lechera, Ski,

Yoco, Svelty, Molico, LC1, Chiquitin

Ice cream

Nestlé©, Antica Gelateria del Corso, Dreyer's/Edy's,

Drumstick/Extrême, Maxibon/Tandem, Mega,

Mövenpick, Sin Parar/Sem Parar/Non Stop, Delta  

Infant nutrition Nestlé©, Nan, Lactogen, Beba, Nestogen, Cerelac,

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Nestum, Neslac, Guigoz, Good Start

Performance nutrition PowerBar, Pria, Musashi

HealthCare nutrition Nutren, Clinutren, Peptamen, Modulen

Bouillons, soups,

seasonings, pasta, sauces

Maggi, Buitoni, Thomy, Winiary,Torchin, Osem,

Totole, Haoji

Frozen foods (prepared

dishes, pizzas, small

meals)

Stouffers€™s, Lean Cuisine, Hot Pockets, Buitoni,

Maggi, Wagner, La Cocinera

Refrigerated products

(cold meat products,

dough, pasta, pizzas,

sauces, snacks)

Nestlé©, Buitoni, Herta, Toll House, Sabra

Chocolate, confectionery

and biscuits

Nestlé© Crunch, Cailler, Galak/Milky bar, Kit Kat,

Smarties, Butterfinger, Aero, Polo

Nestl驠 Professional Chef, Davigel, Minor’s

Pet care

Purina, Friskies, Fancy Feast, Alpo, Gourmet, Mon

Petit , Felix, Dog Chow, Cat Chow, Pro Plan, Purina

ONE, Beneful, Tidy Cats

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Appendix #4

Nestlé Trinidad and Tobago Timeline

Key dates

1866   Foundation of Anglo-Swiss Condensed Milk Co.

1867   Henry Nestlé’s Infant cereal developed

1929   Merger with Peter, Cailler, Kohler Chocolats Suisses S.A.

1934   Launch of Milo

1938   Launch of Nescafe©

1947   Nestlé© Alimentana S.A. (New name after merger with Maggi)

1957 The Anglo-Swiss Condensed Milk Company commenced its

operations in Picton Street, Port of Spain, Trinidad.

1962 The Anglo-Swiss Condensed Milk Company founded the Trinidad

and Tobago Food Products Ltd

1948   Launch of Nestea and Nesquik

1969   Vittel (initially equity interest only)

1971   Merger with Ursina-Franck

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1973   Stouffer (with Lean Cuisine)

1974   L’Oreal (associate)

1977   Nestlé© S.A. (new company name)

1985   Carnation (with Coffee Mate and Friskies)

1990   Cereal Partners Worldwide (joint venture with General Mills)

1991 the Anglo-Swiss Condensed Milk Company changed its name to

Nestlé Trinidad and Tobago Ltd

1991   Beverage Partners Worldwide (joint venture with Coca-Cola)

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