Monday, 18 June 2012

Nestle - Adaptations to the Global Market & Exposing Market Opportunities

Nestle - Adaptations to the Global Market &
Exposing Market Opportunities

                What is the competitive advantage? Derived from this question is the single most important factor that to any business model. However, what might have been prosperous and successful two years ago might not be the case today. The global marketplace is constantly changing; with it, the needs and desires of consumers are rapidly evolving as well.  Companies who adapt through refreshing innovations will emerge or continue their dominance while the less flexible will fall.

                To further toss up the implications, not all cultures within the vast geographical regions are the same. This might not oppose a threat to a local business who operates under one municipality, but can be a huge road block for multi-national companies as they have to consider different strategies, for the different environments. Nestle, the world's largest health food company, is a prime example of doing things right - within the baby formula market anyways.

                China's market demand can never be simplified in one piece of publication. However, there are unique features worth noting. With the one child policy enforced in most urban cities, parents value their child as top their priority and this starts from day one. Chinese parents spend as much as they can on their one and only child; they try to provide the best within, and sometimes outside of their capabilities. Like a business, capital is invested, intangibles are nurtured and competitive inputs are exhausted from resources all in hopes of a future return on investment.

                In the western society, parents are comforted by the safety of the nutritional foods their babies consume. Baby formulas must be 100% safe and limited trust is displaced on any brand when it comes to checking the credibility and sources. However, many Chinese consumers equate the quality of the product, with the name of the brand. Instead, they are looking for other "upper hands" when purchasing baby formula. Formulas rich in DHA & RHA fatty acids, Omega 3 and Omega 6; formulas that will increase brain development from the earliest age possible.

                An overwhelming majority of Chinese parents would not mind paying 150% the price for those added ingredients and commercialized claims and Nestle recognizes this market opportunity. In April 2012, Nestle acquired the baby food unit Pfizer for $11.9 billion USD. Why? Because this specialized company is pharmaceutically capable of enhancing product development through added nutritions that parents want to see. These strengths give Nestle the power to attract emerging markets while maintaining their reliable reputation domestically.

                Nestle understands and exposes the values of the various countries in which they operate under; they do not fail in making the right moves to advance in the ever-changing global market. China has been a primary target throughout the years and those initiatives, as a return, have paid off substantially. 

Sunday, 3 June 2012

The Value Beneath Haggling

Reaching a good deal when it comes to making a purchase is always preferable within every
individual; who would rather pay full price, as oppose to enjoy the benefits of having the same item
when it's 30% off? This simple concept however, whether we are aware or not, goes much further in the
minds of a Chinese consumer. Shadowed by the Chinese social-economic goals and mentalities of
chasing superiority, achieving the greatest success, and ultimately winning, there is definitely a set of
unique cultural values created.

It is rooted deeply within our intuition to beat the system - this concept is the same when
consuming. There is a lack of satisfaction until we can "beat the system," and the value cannot be
optimized until we do.

In the same way how individuals communicate their persona through various forms of art and
creative writing, Chinese consumers also have different methods of expressing this intuitive desire.

In a Chinese oriented environment, those who are aggressive will haggle ferociously with the in-
store owner for a deal that would seem to be unable to meet gross margins and unfathomable to
Westerners. Pooling together the strategic knowledge of these seemingly relentless hagglers would be
enough to publish a hefty book! On the other hand, the more passive Chinese consumer will constantly
browse online catalogues, search for sales on blogs and social media channels, and compare the prices
until they feel that they have found an exclusive and superior deal. This pattern is omnipresent from
purchasing clothing, to having their tires changed at an auto shop.

Realistically, the efforts spent only translates to savings of 5% to 10% on the lowest price a
retailer is willing to go. However, the hidden value within these transactions is a sense of
accomplishment. The accomplishment that one has successfully achieved the best deal that not many
other people could achieve and it is not enough to have a discount directly presented to the Chinese
consumer. When this occurs, there is an excitement since the consumers' intuitive desires are fulfilled
and this will create a positive impression on the serving businesses' image.

As many people know, the key to successfully reaching out to consumers is knowing their
values. However, values aren't always universal and globalization is always adding complexity to this
assessment. How are you going to adapt?