International Marketing

International marketing is marketing beyond the national borders. It is a business activity

that directs the flow of goods/services/ideas/ and other resources from the producers or

suppliers of one nation to the consumers or users of another nations

Marketing is the process that allows you to direct your organisation's goods and services to

consumers in order to make a profit. The main difference between domestic marketing and

international marketing is that the process takes place in more than one country.

The international market is incredibly diverse, providing business managers with untapped

potential and a huge range of profitable opportunities. However, this diversity can make

international marketing operations quite complex, requiring the coordination of a variety of

processes in order to be successful.

In most cases, the basic marketing principles are applicable to all markets around the world.

The difference is that you need to be able to apply those principles in environments that

could be significantly different to what you are used to dealing with. Many of the issues

international marketers face are outside of their direct control, so they need to be prepared to

adapt their strategies to cope with unfamiliar situations and problems.

Some of the issues that can make international marketing difficult include the varying

political, economic, cultural, technological and social situations experienced in different

countries. As an international marketer, your task is to take the marketing elements that you

have control over (research, product, price, promotion and distribution) and adapt them so

that they work within your target market.

One of the most important factors to remember is that each market you enter is different.

There is no guarantee that what works in one country or region will work in another. This is

the reason that many international marketing attempts fail to achieve their desired results.

The key to success is your market research and how you use it to effectively adapt your

products and services.

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In the second half of the twentieth century, international business has become an important

economic force. Today few, if any, countries are economically self-sufficient. Even China,

with its vast human and natural resources, has not been able to remain aloof from the world

economy. In the United States, international business touch people's lives daily. Common

goods and services, often identified with the United States, are, in fact, foreign owned.

Examples include Burger King, Pillsbury, Scotty's hardware stores, Shell and Citgo gasoline

stations, Stouffer'sfrozen foods and Carnation evaporated milk. So, what is international

business? Who engages in international business? What are the rules governing it and who

sets them? What are the major contemporary international business issues?

Definition

International business is business conducted in more than one country. It is buying and

selling goods and services in foreign countries. Other international business activities include

marketing, manufacturing, mining, and farming. In sum, international business is all the

practices a business in a single country does, but at the international level.

Framework

International business does not function in a vacuum. It operates within the context of

international and, sometimes, regional rules and regulations set by appropriate governmental

organizations. Although each organization is distinct, some of their common characteristics

are fostering trade among member countries, establishing common rules and regulations,

promoting air trade practices among members, and protecting members from competition

from non-member countries. Other organizations exist to facilitate financial transactions

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among nations or the particular interest of members, such as trade in a specific commodity.

The following are some international and regional organizations:

The total foreign affiliates of MNCs, only little were developed countries.

Foreign investment has been growing substantially faster than world output and export.

MNCs have been emerging from the developing countries.

1. Multinational Corporation

A multinational corporation (MNC) is a corporation that is registered in more than one

country or that has operations in more than one country. It is a large corporation which both

produces and sells goods or services in various countries. It can also be referred to as

an international corporation.

The term ‘Multinational’ is widely used all over the world to denote large companies having

vast financial, managerial and marketing resources. MNCs are like holding companies

having its head office in one country and business activities spread within the country of

origin and other countries.

IBM computer and Pepsi-Cola from U.S.A., Siemens from Germany, Sony and Honda from

Japan Philips from Holland etc., are some of the MNCs operating at international levels.

1.1 Definition

According to ILO report (i.e. International Labour Organisation) “The essential nature of the

multinational enterprises lies in the fact that its managerial headquarters are located in one

country, while the enterprise carries out operations in number of other countries’.

A corporation that has its facilities and other assets in at least one country other than its home

country. Such companies have offices and/or factories in different countries and usually have

a centralized head office where they co-ordinate global management. Very large

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multinationals have budgets that exceed those of many small countries. Sometimes referred

to as a "transnational corporation".

Multinational Corporations no doubt, carryout business with the ultimate object of profit

making like any other domestic company. According to ILO report "for some, the

multinational companies are an invaluable dynamic force and instrument for wider

distribution of capital, technology and employment; for others they are monsters which our

present institutions, national or international, cannot adequately control, a law to themselves

with no reasonable concept, the public interest or social policy can accept. MNC's directly

and indirectly help both the home country and the host country.

Nearly all major multinationals are either American, Japanese or Western European, such as

Nike, Coca-Cola, Wal-Mart, AOL, Toshiba, Honda and BMW. Advocates of multinationals

say they create jobs and wealth and improve technology in countries that are in need of such

development. On the other hand, critics say multinationals can have undue political influence

over governments, can exploit developing nations as well as create job losses in their own

home countries.

Due to the tremendous growth of transportation, communication and technology particularly

during the last two decades, the world has now become a global village. The distance

between has becomes as shorter as ever and the geographical barriers between them have

virtually missing. As a result, the mutual dependence among the countries has increased. For

example coco cola origins in the united state, but a workers drinks coke ‘made in Nepal’ to

quench his thirst. Similarly, nescafe coffee is originally produce in Switzerland , but an

American family enjoys ‘necafe’ made in ‘USA’ every morning in the Chicago. There are

several other example of products which are originally manufacture in one country, and are

now being manufacture and consumed in the other countries. This has been possibly due to

the Multinational companies.

Multinational companies are mega form of business organization which carries out their

production and distribution of goods and services in at least two countries. Their owner ship

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and management are scattered around the countries wherever they operate. They

are incorporate in one country as parents company of multinational companies can viewed as

holding company and the branch companies as its subsidiaries.

Generally the majority of the shares in subsidiary are held by the parent company and the rest

by local people and institution .Similarly, the management and finance are under control of

the parent company giving some autonomy to the subsidiaries. Multinational companies are

engaged in the mass production and distribution of goods and serves around the world. IBM

corporation, nestle company, ford motor corporation.coco-cola company,etc are the

example of multinational companies.

1.2 Characteristics of Multinational Companies

Origin - The development of MNCs dates back to several centuries, but their real

growth started after the Second World War Majority of the MNCs are from developed

countries like U.S.A, Japan, UK, Germany and European countries. In recent years

MNCs from countries like Korea, Taiwan, India, China, etc. are operating in the world

markets.

Area of operation - The MNCs operate in many countries with multiple products on

large scale. A MNC may operate both manufacturing and marketing activities in a

number of countries. Some MNCs operate in several countries, whereas, others may

operate in a few countries. Mostly MNCs from developed countries dominate in the

world markets.

Giant Size - The most important feature of these MNCs is their gigantic size. Their

assets and sales run into billions of dollars and they also make supernormal profits.

According to one definition an MNC is one with a sales turnover of f 100 million. The

MNCs are also super powerful organisations. In 1971 out of the top ninety producers

of wealth, as many as 29 were MNCs, and the rest, nations. Besides the operations,

most of these multinationals are spread in a vast number of countries

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Ownership and control - The ownership of such company is shared by both parent

company and branch companies as per their capital investment. However parent

company manages and control the operation of its branches and subsidiary through 

trade mark, technology, and patent right.

Comprehensive Term - In general, the term ‘MNC’ is a Comprehensive term and

includes international and transnational corporations. The term global corporation is

also included in the list of ‘MNC’.

Profit Motive - MNCs are profit oriented rather than social oriented. Such

corporations do not take much interest in the social welfare activities of the host

country.

Large scale business - The capital of multinational companies considerably large. Its

assets and volume of sales are also quite large. The sales turnover of

some multinational companies are much more then the annual budget of many

developing countries.

Global operation - Multinational companies operate globally. The parent company

manufacture and sells its products and services through its subsidiaries established in

other countries. Hence, they perform their business scale at the global scales.

Create Maximum Operation - The multinational companies are extended to many

countries. People can grasp the opportunity. People can join the multinational

companies according to their capabilities. Manpower can be well utilized in the

multinational companies.

Advanced Technology - Multinational companies invest a huge amount of money on

research and development of latest technology. They transfer advanced technology to

developing countries through subsidiaries and branches,

High Efficiency Advanced - technology are used are for multinational companies. So,

manpower can give well training which increase efficiency of manpower. Due to this

cause, the multinational companies can provide large volume of quality products at

cheaper price.

Product/service organization - A multinational company is based on product/service

which produces a mass production of varieties of goods and services. The company 6

consists own trade mark, patent right , copy right and technology for production and

distribution of such goods in the international market.

Management - The Parent company works like a holding company. The subsidiary

companies are to operate under control and guidance of parent company. The

subsidiaries functions as per the policies and directions of parent organisation.

Manufacture and Marketing Activities - MNCs undertake both Manufacturing and

Marketing Activities and they are predominantly engaged in hi-tech and consumer

good industries. Majority of the MNCs are engaged in pharmaceutical, petrochemicals,

engineering, consumer goods, etc

Quality Consciousness - MNCs are quality and cost conscious and managed by

professionals and experts. They have their own organisation culture and systems.

MNCs believe in the concept of total quality management.

1.3 Advantages of MNC's for the host country

MNC's help the host country in the following ways

Improving the balance of payments - Inward investment will usually help a country's

balance of payments situation. The investment itself will be a direct flow of capital into the

country and the investment is also likely to result in import substitution and export

promotion. Export promotion comes due to the multinational using their production facility

as a basis for exporting, while import substitution means that products previously imported

may now be bought domestically.

Providing employment - FDI will usually result in employment benefits for the host country

as most employees will be locally recruited. These benefits may be relatively greater given

that governments will usually try to attract firms to areas where there is relatively high

unemployment or a good labour supply. Multinational corporations play a big role in creating

employment in the foreign countries. Because of their many branch companies, they employ

local people in those countries to work for the corporation. This is especially important in

developing countries where unemployment is high

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Source of tax revenue - profits of multinationals will be subject to local taxes in most cases,

which will provide a valuable source of revenue for the domestic government.

Technology transfer - multinationals will bring with them technology and production

methods that are probably new to the host country and a lot can therefore be learnt from

these techniques. Workers will be trained to use the new technology and production

techniques and domestic firms will see the benefits of the new technology. This process is

known as technology transfer.

Increasing choice - if the multinational manufactures for domestic markets as well as for

export, then the local population will gain form a wider choice of goods and services and at a

price possibly lower than imported substitutes.

National reputation - the presence of one multinational may improve the reputation of the

host country and other large corporations may follow suite and locate as well.

Research and development activities - Developing countries lack in research and

development areas. Expenditure on research and development is essential for the promotion

of technology. Multinational corporations have greater capability for research and

development activities in comparison to national companies. Multinationals survive in the

international market through their advanced research and development activities.

Far-reaching effects on the economic, social and political conditions of the host country.

Multinational corporations provide a number of benefits to the host country in the form of

Economic growth

Increased profits

Developing of new products

Reduced operational costs

Changing social and political structure, etc. 8

Thus, it helps in the exploitation of resources of host countries for their own economic

advancement.

Product innovation - Multinational corporations have research and development

departments engaged in the task of developing new products, diversification in the product

line, etc. Their production opportunities are far greater as compared to national companies.

Financial superiority - Multinational corporations generate funds in one country and use

such funds in another country. They have huge financial resources at their disposal as

compared to national companies. Moreover, multinational corporations have easier access to

external capital markets.

Technological superiority - Multinational corporations can participate in the industrial

development programmes of underdeveloped countries because of their technological

superiority. They can produce goods having international standards and quality specifications

by adopting the latest technology. Generally, multinationals transfers technology through

joint venture projects.

Potential source of capital and advanced technology - Economically backward countries

invite multinational corporations as a potential source of capital and advanced technology to

generate economic growth and to create employment opportunities.

Lower cost of production  - Multinational corporations carry on operations on a large-scale,

which ensure economics in material, labour and overhead costs.

Multinationals not only provide financial resources but they also supply a “package” of

needed resources including management experience, entrepreneurial abilities, and

technological skills.

Other Beneficial Roles - The MNCs also bring several other benefits to the host country.

The domestic labour may benefit in the form of higher real wages.

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The consumers benefits by way of lower prices and better quality products.

Investments by MNCs will also induce more domestic investment. For example, ancillary

units can be set up to ‘feed’ the main industries of the MNCs

1.4 Disadvantages of MNC's for the host country

Outdated Technology - MNC's may transfer technology which is outdated and is not

suitable for the host country.

Environmental impact  - multinationals will want to produce in ways that are as

efficient and as cheap as possible and this may not always be the best environmental

practice. They will often lobby governments hard to try to ensure that they can benefit

from regulations being as lax as possible and given their economic importance to the

host country, this lobbying will often be quite effective.

Access to natural resources  - multinationals will sometimes invest in countries just to

get access to a plentiful supply of raw materials and host nations are often more

concerned about the short-term economic benefits than the long-term costs to their

country in terms of the depletion of natural resources.

Uncertainty  - multinational firms are increasingly 'footloose'. This means that they

can move and change at very short notice and often will. This creates uncertainty for

the host country.

Increased competition - the impact on the local industries can be severe, because the

presence of newly arrived multinationals increases the competition in the economy and

because multinationals should be able to produce at a lower cost.

Influence and political pressure  - multinational investment can be very important to

a country and this will often give them a disproportionate influence over government

and other organisations in the host country. Given their economic importance,

governments will often agree to changes that may not be beneficial for the long-term

welfare of their people.

Transfer pricing  - multinationals will always aim to reduce their tax liability to a

minimum. One way of doing this is through transfer pricing. The aim of this is to

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reduce their tax liability in countries with high tax rates and increase them in the

countries with low tax rates. They can do this by transferring components and part-

finished goods between their operations in different countries at differing prices.

Where the tax liability is high, they transfer the goods at a relatively high price to

make the costs appear higher. This is then recouped in the lower tax country by

transferring the goods at a relatively lower price. This will reduce their overall tax bill.

Low-skilled employment  - the jobs created in the local environment may be low-

skilled with the multinational employing expatriate workers for the more senior and

skilled roles.

Health and safety - multinationals have been accused of cutting corners on health and

safety in countries where regulation and laws are not as rigorous.

Export of Profits  - large multinational are likely to repatriate profits back to their

'home country', leaving little financial benefits for the host country. Companies are

often interested in profit at the expense of the consumer. Multinational companies

often have monopoly power which enables them to make excess profit

Cultural and social impact - large numbers of foreign businesses can dilute local

customs and traditional cultures. For example, the sociologist George Ritzer coined the

term McDonaldization to describe the process by which more and more sectors of

American society as well as of the rest of the world take on the characteristics of a

fast-food restaurant, such as increasing standardisation and the movement away from

traditional business approaches.

A large sums of money flows out of the country in terms of payments towards profits,

dividends and royalty.

MNC's transfer the capital from the home country to various host countries causing

unfavourable balance of payment.

As investments in foreign countries is more profitable, MNC's may neglect the home

countries industrial and economic development.

Multinational companies have highly competitive advantages due to low prices over

local firms and can destroy local competition. These local companies hard to survive.

Many of these multinational companies seek take advantage the political system by 11

pressuring because they have such a strong impact on the economy. The companies

can just pay off government officials to protect their company from being shut down.

They may avoid tax by practicing transfer pricing.

Their market dominance makes it difficult for local small firms to thrive. For example,

it is argued that big supermarkets are squeezing the margins of local corner shops

leading to less diversity.

In developing economies, big multinationals can use their economies of scale to push

local firms out of business.

MNCs have been criticised for using ‘slave labour’ – workers who are paid a pittance

by Western standards

MNCs may pay low wages by western standards but, this is arguably better than the

alternatives of not having a job at all. Also, some multinationals have responded to

concerns over standards of working conditions and have sought to improve them.

1.5 Applicability to particular business

MNC's is suitable in the following cases.

Where the Government wants to avail of foreign technology and foreign capital e.g.

Maruti Udyog Limited, Hind lever, Philips, HP, Honeywell etc.

Where it is desirable in the national interest to increase employment opportunities in

the country e.g., Hindustan Lever.

Where foreign management expertise is needed e.g. Honeywell, Samsung, LG

Electronics etc.

Where it is desirable to diversify activities into untapped and priority areas like core

and infrastructure industries, e.g. ITC is more acceptable to Indians L&T etc.

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2. Responsibility of Multinational Corporation in INDIA

2.1 Developing Country

A developing country, also called a less-developed country (LDC), is a nation with a low

living standard, underdeveloped industrial base, and low Human Development Index (HDI)

relative to other countries. There is no universal, agreed-upon criterion for what makes a

country developing versus developed and which countries fit these two categories, although

there are general reference points such as a nation's GDP per capita compared to other

nations.

Countries with more advanced economies than other developing nations but that have not yet

demonstrated signs of a developed country, are often categorized under the term newly

industrialized countries.

Developing countries are, according to certain authors as Walt Whitman Rostow, countries in

transition from various traditional lifestyles towards the modern lifestyle begun by

the Industrial Revolution in the eighteenth and nineteenth centuries.

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3. Company Profile

Nestlé is the world's leading Nutrition, Health and Wellness company. Our mission of "Good

Food, Good Life" is to provide consumers with the best tasting, most nutritious choices in a

wide range of food and beverage categories and eating occasions, from morning to night.

The Company was founded in 1866 by Henri Nestlé in Vevey, Switzerland, where our

headquarters are still located today. We employ around 2,80,000 people and have factories or

operations in almost every country in the world.

The Nestlé Corporate Business Principles are at the basis of our Company’s culture,

developed over 140 years, which reflects the ideas of fairness, honesty and long-term

thinking.

Nestlé is into :

Milk products and nutrition – milk powder, cerelac baby food, dahi, etc.

Beverages – coffee, milo health drink, cold tea

Preapared Dishes and Cooking Aid – Maggi noodles, Jams, Pastam Ketchups, etc.

Choclates and Confectionery – Kitkat, Bar one, Munch, etc.

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These ancient words mean ‘May all the people in this universe live with happiness and

prosperity’. They embody the spirit at Nestlé and reflect its business philosophy and

social responsibility initiatives. Nestlé believes that business and long-term social

benefit go hand in hand, entwined like the branches of a banyan tree. 

Nestlé's business philosophy demands compliance with laws and conventions, and

emphasises the preservation of the environment for sustainable growth. It is the third

dimension - the creation of long-term value for both society and stakeholders - that makes it

unique. Nestlé calls this 'Creating Shared Value'.

Nestlé is a leading Nutrition, Health and Wellness company that continues to create

economic value for society. With its philosophy of ‘Creating Shared Value’, Nestlé has gone

a step further. 

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‘Creating Shared Value’ goes beyond philanthropy. It also reflects the Gandhian philosophy

of trusteeship; that we are mere custodians of our resources, not the owners of it. Therefore

we must make judicious use of what we have, and use what we need with efficiency.

When we see our business bringing happiness, prosperity and smiles to people across India,

we believe we are doing good work. We apply this philosophy in a manner that touches all

our stakeholders across the value chain: farmers, consumers, communities around our

factories, employees, associates, vendors and investors. The ultimate expression of what we

believe in and what we endeavour to do is to provide ‘Good Food, Good Life’.

Nestle is one of the oldest of all multinational business company. Its operate food basis

business around the world. In order to satisfy both developed markets and developing

markets. Nestle adopt the transnational strategy that contain the element of global

standardization strategy and localization strategy to operate its company by the 21st century.

By using the transnational strategy, Nestle enjoys the low cost through economies of scale

and offers different product to different markets with high local responsiveness in order to

defend its old markets in the developed markets and look for potential growth in emerging

markets.

Nestle use the localization strategy to operation its business in the developing world where

Eastern Europe, Asia, and Latin America to optimize ingredients and processing technology

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to local conditions and then using a brand name resonates locally as the cultural habits

difference in different nations.

 Customization rather than globalization is the key to Nestle's strategy in emerging. For

example, Nestle has taken as much as 85 percent of the market for instant coffee in Mexico,

66 percent of the market for powdered milk in the Philippines, and 70 percent of the market

for soups in Chile. Besides, Nestle hired local singer to promote its products in Nigeria, the

organization of a delivery system to increase efficiency in China, and using local material

and focusing on local demand such as make ice cream in Dubai.

 Nestle focus on increasing profitability by customizing the firm' products so that it provides a good match to tastes and preference in different nation.

3.1 Nestle’s Contribution to India

Nestlé's relationship with India dates back to 1912, when it began trading as The Nestlé

Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished

products in the Indian market.

After India's independence in 1947, the economic policies of the Indian Government

emphasised the need for local production. Nestlé responded to India's aspirations by

forming a company in India and set up its first factory in 1961 at Moga, Punjab, where the

Government wanted Nestlé to develop the milk economy. Progress in Moga required the

introduction of Nestlé's Agricultural Services to educate, advise and help the farmer in a

variety of aspects. From increasing the milk yield of their cows through improved dairy

farming methods, to irrigation, scientific crop management practices and helping with the

procurement of bank loans.

Nestlé set up milk collection centres that would not only ensure prompt collection and pay

fair prices, but also instil amongst the community, a confidence in the dairy business.

Progress involved the creation of prosperity on an on-going and sustainable basis that has 17

resulted in not just the transformation of Moga into a prosperous and vibrant milk district

today, but a thriving hub of industrial activity, as well. 

Nestlé has been a partner in India's growth for over nine decades now and has built a very

special relationship of trust and commitment with the people of India. The Company's

activities in India have facilitated direct and indirect employment and provides livelihood

to about one million people including farmers, suppliers of packaging materials, services and

other goods.

The Company continuously focuses its efforts to better understand the changing lifestyles

of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and

Wellness through its product offerings. The culture of innovation and renovation within

the Company and access to the Nestlé Group's proprietary technology/Brands expertise and

the extensive centralized Research and Development facilities gives it a distinct advantage in

these efforts. It helps the Company to create value that can be sustained over the long term

by offering consumers a wide variety of high quality, safe food products at affordable prices.

Nestlé India manufactures products of truly international quality under internationally

famous brand names such as NESCAFÉ, MAGGI, MILKYBAR, KIT KAT, BAR-ONE,

MILKMAID and NESTEA and in recent years the Company has also introduced products of

daily consumption and use such as NESTLÉ Milk, NESTLÉ SLIM Milk, NESTLÉ Dahi and

NESTLÉ Jeera Raita.

Nestlé India is a responsible organisation and facilitates initiatives that help to improve the

quality of life in the communities where it operates.

3.1.1 FIRST FACTORY: Nestlé built its manufacturing site in Moga in 1961.

Nestlé is helping to address micronutrient deficiency among lower income consumers in

India and other emerging markets with its affordable, fortified ‘Popularly Positioned

Products’ (PPP).

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Nestlé’s PPPs are smaller or ‘daily-portion’ packs designed to be bought on a regular basis.

They are manufactured locally, using local raw materials to minimise value chain costs.

PPP products in India include the iron-, iodine- and vitamin A-fortified Maggi Masala-ae-

Magic spice mix and Maggi 2-Minute Noodles with added calcium and protein.

Nestlé India has a factory in Uttarakhand dedicated to PPP production.

The new Nestlé S.A. R&D centre in Manesar will also work predominately on PPPs.

Nestle is concerned about people’s (where it supply its products) health and try to

provide the best food for consumption.

3.1.2 Presence Across India

Nestlé’s Presence In India

After more than a century-old association with the country, today, Nestlé India has presence

across India with 8 manufacturing facilities and 4 branch offices.

Nestlé India set up its first manufacturing facility at Moga (Punjab) in 1961 followed by its

manufacturing facilities at Choladi (Tamil Nadu), in 1967; Nanjangud (Karnataka), in 1989;

Samalkha (Haryana), in 1993; Ponda and Bicholim (Goa), in 1995 and 1997, respectively;

and Pantnagar (Uttarakhand), in 2006. In 2012, Nestle India set up its 8th manufacturing

facility at Tahliwal (Himachal Pradesh).

The 4 Branch Offices located at Delhi, Mumbai, Chennai and Kolkata help facilitate the sales

and marketing activities. The Nestlé India’s Head Office is located in Gurgaon, Haryana.

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Nestlé S.A. announced the establishment of the first R&D Centre in India in 2010, a part of

the global R&D network. The foundation stone for the new Centre was unveiled on 22nd of

September, 2010, in Manesar, Haryana.

Mr. Subodh Kant Sahai, Honourable Minister of Food Processing Industries, Government of

India, was the Chief Guest for the ceremony. Also present at the ceremony were His

Excellency Mr. Philippe Welti, Ambassador of Switzerland, Mr. Ashok Sinha, Secretary for

Ministry of Food Processing Industries, Mr. Klaus E. Zimmermann, Global Head of R&D

Centres, Nestlé S.A., and Mr. A. Helio Waszyk, Chairman and Managing Director, Nestlé

India Limited. Mr. Zimmermann commented that the event not only marked Nestlé’s

continuing long-term commitment to R&D, but also celebrated the building of Nestlé’s first

R&D Centre in India.

The R&D Centre would allow Nestlé to offer consumers in India and beyond, the

choice of tasty, healthy, and nutritious products. Mr. Waszyk emphasized that the

Nestlé Board’s decision to establish an R&D Centre in India at the request of

Nestlé India, would be an additional competitive advantage. It would help

accelerate the Company’s growth and at the same time contribute towards reducing

nutritional deficiencies in the country.

Better nutrition for India is a perpetual challenge. It's meaning changes with the country’s

stage of development, the degree of social awareness, and scientific consensus. The new

Nestlé R&D facility in India will help develop great tasting food solutions that are relevant

for consumers in India, creating products that take the promise of taste and health to a

broader economic and social section than ever before. It will also strengthen Nestlé’s

leadership in emerging markets and fortify Nestlé India’s position as the leader in Nutrition,

Health and Wellness.

Ms. Shivani Hegde, Chairperson of R&D India and also Head of the Foods Business,

reiterates that Nestlé India has always had Research and Development support from the

Nestlé R&D network across the world, and now, with the foundation being laid for the new

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R&D Centre in Manesar, the Company for part of its research, will benefit from a greater

‘Indian-consumer’ focus. “Having an R&D Centre close to the Nestlé India Head Office will

bring Research and Development closer to Businesses, and reflects the Nestlé spirit of R&D-

Business partnership towards developing ‘Winning’ concepts, suited to the local consumer. It

will help Nestlé R&D to bring out strong localised concepts that are in accordance with the

Nestlé Group thrust on ‘affordable Nutrition, Health and Wellness’. Ultimately, these

concepts will not just be relevant for emerging markets like India, but could be transferred to

Nestlé worldwide.”

3.1.3 Rural Development

Nestlé’s approach to rural development aims at ensuring thriving farmers and thriving

communities while respecting natural capital. We work at both a farm and community level

to improve yields, safeguard incomes, contribute investment and make a difference to

people’s quality of life.

3.1.4 Milk

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Nestlé has been a partner in India’s growth since 1912, establishing a special relationship of

trust and commitment with its people. When Nestlé India set up its first manufacturing plant

in Moga in 1961, the local milk economy was virtually nonexistent. On the first day, we

collected only 511 kgs of milk from 180 farmers.

Since then, Nestlé has set up milk collection centres that ensures prompt collection and pays

fair prices, transforming Moga into a prosperous and vibrant milk district. By supplying milk

to Nestlé, farmers are benefited from the assurance that our collection centers will purchase

their entire quantity of milk, however big or small, as long as it meets Nestlé’s stringent

quality standards. Furthermore farmers are paid monthly, guaranteeing them a regular

income that would not be possible with seasonal crops. Since there is continuous demand

from Nestlé for milk throughout the year, their occupations are stable ones, assuring them of

long term relationships and fair prices.

In addition to collecting milk, Nestlé has embarked on a number of other initiatives to

support the development of dairy farmers in India.

3.1.5 Coffee Farmers: our partners in progress

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As demand for NESCAFÉ soluble coffee grows in the country, we have already begun

training our coffee farmers to develop their agricultural practices in terms of quality,

productivity and sustainability.

The first batch of 20 farmers trained under the NESCAFÉ Plan were felicitated during the

official inauguration of the NESCAFÉ Plan in India, and provided with the training

manual ‘NESCAFÉ Better Farming Practices’.

“NESCAFÉ is the world’s leading coffee brand. As a leader we have the responsibility to

continue to supply good quality coffee to consumers, while ensuring that coffee farming

remains attractive for farmers and is sustainable across the value chain.

The NESCAFÉ Plan demonstrates our commitment to working with thousands of farmers

around the world, including in India, to provide training and technical assistance. By

working with farmers in this way, we know where the coffee comes from, and they know

they have a partner who will give them competitive prices for high quality produce.

“Indian coffee is very good and currently amongst the best in the world. We would therefore

like to use our own expertise in coffee to help it retain its excellence in the future as well. In

the NESCAFÉ Plan our team will work with coffee farmers, other experts and the Nestlé

R&D Centre in France to combine the traditional experience of the coffee farmers in India

with the benefits of modern science to make coffee farming more successful and

sustainable.”

3.1.6 Sanitation Facilities

23

One of the main reasons for female student dropouts in rural schools are a lack of basic

sanitation facilities. In an effort to promote Universal Primary Education and ensure

availability of basic sanitation facilities, Nestlé India sponsors the construction of sanitation

facilities (toilets) for female students in village schools around our factories. 37 sanitation

facilities have been invested in village communities by Nestlé so far, benefiting over 15,000

female students.

3.1.7 Farmers

Since agriculture is responsible for the largest consumption of water, Nestlé India works with

its farmers in Punjab, Haryana and Rajasthan to create awareness regarding water

conservation and protection of water resources in agricultural and irrigation practices and

also in dairy farms.

3.1.8 Water

24

Our factories not only create world class products to deliver Nutrition, Health and Wellness

but they also add value to farmers by processing agricultural products in a sustainable

manner.

Summit on water

On November 6 ahead of the formal event opening, Nestlé Chairman Peter Brabeck-

Letmathe chaired a discussion on the challenge of water management in India organised by

the WEF.

He outlined how the increasing need for food, generating energy for industrial and municipal

use, and inefficient water usage is impacting on India’s water availability.

Mr Brabeck-Letmathe also highlighted a recent water study focusing on 27 industry sectors

in India, led by the Federation of Indian Chambers of Commerce and Industry (FICCI) and

the Columbia Water Center (CWC).

Results revealed that nearly 90% of Indian companies surveyed believe that water supply

limitations will affect their business within the next decade.

To combat the problem Mr Brabeck-Letmathe said that companies should assess the different

levels of water scarcity and develop concrete strategies for individual watersheds.

“Various governmental and non-governmental organisations, industry associations and

academic institutions need to build a multi-stakeholder platform where they can agree on

water issues and develop partnerships to face the shared goal of improving water

management,” he said.

Water challenge

During the session Mr Brabeck-Letmathe participated in a discussion to focus on how the

2030 Water Resources Group (WRG) is helping governments like Karnataka in India to

tackle the global water challenge. The WRG is a public-private initiative that provides

guidance and new policy ideas on water resource scarcity.

25

Nestlé is part of the group working alongside other corporate members and governmental

development agencies such as the Inter-American Development Bank and the World Bank

Group.

Mr Brabeck-Letmathe, Chairman of the WRG, believes that the development of fact based,

comprehensive approaches to local water management can help all stakeholders make better

decisions.

3.1.9 Nestle’s Partner for Water

Nestlé continues to partner with institutions with expertise in the field of water research and

outreach across the country to develop awareness regarding water conservation and

sustainability.

3.1.10 Energy Consumption

Energy consumption per tonne of product has reduced substantially and energy use

efficiency improved by 65.8% through the following key initiatives:

Continuously review energy to track and replace energy inefficient equipment

Investment in processes to reduce energy losses. For example, installation of Variable

Frequency Drivers on high capacity motors, auto operations and controls

Process modification to reduce energy utilisation. For example, installation of Wipe

Film Evaporator

Innovatively using the waste heat of one process as input for another. For example,

exhaust heat of the generator is used to produce steam for manufacturing

26

3.1.11 Water Awareness Programme

Students

We conduct Water Awareness Programs for students at the schools where we build our

drinking water facilities. Through this program, we aim to create awareness amongst students

regarding water conservation and protection of water resources to ensure the responsible

utilization of water for a sustainable future.

Students are taught through posters and demonstrations on water saving and purification

methods such as the Drip method, Solar Water Disinfection Process (SODIS), Rain water

harvesting model, etc. Water committees comprising of school children are set up in these

schools to propagate judicious water consumption and ensure proper upkeep and

maintenance of the project. Water saving tips on the water storage tanks reinforce key

messages on water conservation.

“Now our children come home and explain to us how to make proper use of water. For

example, while brushing teeth one should use a cup of water rather than letting water taps

flow freely. This will lead to proper management in the village community.”

We have reached 27,000 students to date with Nestlé’s water awareness programmes in

India.

Nestlé Chief Executive Officer Paul Bulcke has highlighted how businesses can contribute to

boosting sustainable economic growth in India during a discussion at the World Economic

Forum (WEF) in New Delhi.

27

The session called for action from businesses, government and civil society on how to do

this. Mr Bulcke was joined by panellists Rahul Bajaj, Chairman of Bajaj Auto; Natarajan

Chandrasekaran, Chief Executive Officer of Tata Consultancy Services; Gita Gopinath, of

the Global Agenda Council on the International Monetary System and Chanda Kochhar,

Managing Director for ICICI Bank in India.The session was moderated by Shekhar Gupta of

the Global Agenda Council on India.

3.1.12 World Economic Forum in India

More than 2,500 international leaders from business, government and civil society will attend

this year’s two day summit event which focuses on the theme ‘From Deliberation to

Transformation’.

Nestlé is celebrating a century of deep engagement in a country which over that period

has proven its potential to be one of Asia’s economic superpowers.

Nestlé’s first sales agents in India began work in Chennai and Kolkata in 1912.

Today, the company directly employs 6,000 people in India and more than half a

million indirectly.

Its products are sold in more than 3.5 million outlets across the country.

3.1.13 Growth potential

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MOST POPULAR: Nescafé is the leading instant coffee in India.

Nestlé recorded sales of CHF 1.4 billion in India in 2010. Its most popular brands are

Maggi, the country’s leader in instant noodles, and Nescafé instant coffee.

Nandu Nandkishore, Nestlé’s Executive Vice President and Zone Director for Asia, Oceania,

Africa and the Middle East thinks there is much potential for further growth.

“India is a success story in the making,” he said. “It has a large, progressive population.

“Consumers trust our products for their high quality. Opportunities will continue to

grow as more and more people want to buy nutritious, branded food and beverages.”

3.1.14 Scientific expertise

India faces significant nutritional challenges.

The majority of Indian women and children suffer from basic micronutrient deficiencies such

as vitamin A, iron, iodine and zinc.

At the same time a large proportion of the population also suffers from non-communicable

diseases such as obesity and diabetes.

Mr Nandkishore believes that tackling the double burden of under and over nutrition will

make a positive impact on India’s productivity and that Nestlé has a role to play in this.

“Nestlé is an integral part of India,” he continued. “Our unmatched research and

development capabilities have enabled us to create products which offer improved,

affordable nutrition to consumers in all segments of Indian society.”

“With our expertise in science based nutrition, we can contribute significantly to improving

Indian consumers’ health and wellbeing, as well as creating value for the economy.”

29

Nestlé addresses growth challenge in India at World Economic Forum[Nov 7, 2012]

WEF INDIA: Nestlé CEO will highlight how businesses can boost economic growth in

India.

Nestlé Chief Executive Officer Paul Bulcke will highlight how businesses can contribute to

boosting sustainable economic growth in India during a discussion at the World Economic

Forum   (WEF) in New Delhi.

 Mr Bulcke, co-chair of the WEF in India, will discuss what should be done to encourage

policy reforms with leading industry experts from India.

The session aims to call for action from businesses, government and civil society on how to

do this.

Mr Bulcke will be joined by panellists Rahul Bajaj, Chairman of Bajaj Auto; Natarajan

Chandrasekaran, Chief Executive Officer of Tata Consultancy Services; Gita Gopinath, of

the Global Agenda Council on the International Monetary System and Chanda Kochhar,

Managing Director for ICICI Bank in India.

The session will be moderated by Shekhar Gupta of the Global Agenda Council on India.

Summit on water

On November 6 ahead of the formal event opening, Nestlé Chairman Peter Brabeck-

Letmathe chaired a discussion on the challenge of water management in India organised by

the WEF.

He outlined how the increasing need for food, generating energy for industrial and municipal

use, and inefficient water usage is impacting on India’s water availability.

Mr Brabeck-Letmathe also highlighted a recent water study focusing on 27 industry sectors

in India, led by the Federation of Indian Chambers of Commerce and Industry (FICCI) and

the Columbia Water Center (CWC).30

Results revealed that nearly 90% of Indian companies surveyed believe that water supply

limitations will affect their business within the next decade.

To combat the problem Mr Brabeck-Letmathe said that companies should assess the different

levels of water scarcity and develop concrete strategies for individual watersheds.

“Various governmental and non-governmental organisations, industry associations and

academic institutions need to build a multi-stakeholder platform where they can agree on

water issues and develop partnerships to face the shared goal of improving water

management,” he said.

Water challenge

During the session Mr Brabeck-Letmathe participated in a discussion to focus on how

the 2030 Water Resources Group (WRG) is helping governments like Karnataka in India to

tackle the global water challenge.

The WRG is a public-private initiative that provides guidance and new policy ideas on water

resource scarcity.

Nestlé is part of the group working alongside other corporate members and governmental

development agencies such as the Inter-American Development Bank and the World Bank

Group.

Mr Brabeck-Letmathe, Chairman of the WRG, believes that the development of fact based,

comprehensive approaches to local water management can help all stakeholders make better

decisions.

World Economic Forum in India

More than 2,500 international leaders from business, government and civil society will attend

this year’s two day summit event which focuses on the theme ‘From Deliberation to

Transformation’.

31

3.1.15 Benifits of Nestle to India

Nestle became the 1st organisation in 2006 to adopt creating share value approach

Nestle has focussed its Creating Shared Value efforts in 3 areas Nutrition, water and rural

development as these are core to their business activities.

CSV builds on a strong base of performance in environmental sustainability and compliance.

Goals met by Nestle

Eradicate extreme poverty and hunger

Achieve universal primary education

Promote gender quality and empower women

Reduce child mortality

Improve maternal health

Ensure environmental sustainability

Social Responsibility

Milking machines were provided to the farmers maintaining large diary farms.

Investing in renewable sources such as spent coffee grounds and wood from sustainably

managed forests as well as solar and wind energy.

Veterninary services are provided free, and medicines provided at wholesale cost.

Nestle India supports local schools, helps in the maintenance of public parks and green belts,

facilitates blood donation camps and health awareness programs.

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Reducing greenhouse gas (GHG) emissions from our operations by improving energy

efficiency, switching to cleaner fuels.

The nestle group is 1 of the first companies achieving the certification of clean industry for

all of its factories.

Nestle ensures safety for employees and the improvement in labour quality.

This allows the workers to increase their knowledge and skill, which results in innovation.

Innovation increases the company;s reputation

Nestle constantly innovates and keeps on changing their products to fulfil their customers

need. Nestle plans to double number of nutrition and physical activity education around the

world.

National Agricultural Services has used the experience gained by nestle in different parts of

the world to set up a system of direct and efficient contact with the farmers in India.

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Nestlé built its first Indian factory in Moga in 1961, developing milk production in the

region. The company now has seven factories in the country. Nestlé’s Moga factory

was set up in 1961 and comprises of the primary milk collection area for our

operations.  Since its inception in Moga, Nestlé has been working with its milk

farmers and ancillary suppliers towards improving quality and productivity.

Over the years, Nestlé has helped to develop the area around that first factory, setting

up milk collection points and training farmers to improve productivity and quality.

The company’s agronomists provide farmers with technical support to improve

sustainable water management, including help with irrigation and rainwater

harvesting.

Nestlé India has built more than 160 drinking water fountains in schools near its

factory in Moga, providing about 65,000 students with access to clean water.

The company has also improved the sanitation facilities in girls’ schools close to the

factory to encourage young women to continue with their education.

These efforts are part of what Nestlé calls ‘Creating Shared Value’, an approach to

business that aims to create value for shareholders at the same time as for those

communities where the company operates.

The Third World Centre for Water Management, a knowledge based, application

oriented think tank based in Mexico, conducted a study in the Moga region to assess

the impact of Nestlé’s Moga factory on the surrounding area. The study was conducted

by a team of specialists including Prof. A.K. Biswas, President, Third World for Water

Management. The study consisted of field study where the team interviewed over 200

milk farmers, Suppliers, Academicians from the local Agricultural University,

Government Officials and Politicos and Nestlé factory staff, municipal documents,

factory records and secondary data.

The study highlights Nestlé’s way of doing business through its philosophy of

Creating Shared Value and how it contributed to the development of the region

through direct and indirect employment, steady income for milk and other suppliers

and technology transfer.

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Nestle is acknowledged as India’s most repected companies and amongst the top

wealth creator of India.

3.1.16 Investment

Nestlé India has invested USD 500 million to increase its capacities over the last two

years.

This includes CHF 70 million in a new manufacturing site in Nanjangud to produce

Maggi products.

The construction of Nestlé’s eighth factory in Tahliwal, Himachal Pradesh, is

progressing rapidly. Existing factory sites in Moga, Samalkha, Ponda and Bicholim

are also being expanded.

Nestlé S.A. is investing CHF 50 million in a new research and development centre in

Manesar, Haryana, which will become operational towards the end of 2012.

4. Criticism of Nestle

One of the most prominent controversies involving Nestlé concerns the promotion of the use

of infant formula to mothers across the world, including developing countries – an issue that

attracted significant attention in 1977 as a result of the Nestlé boycott, which is still

ongoing. Nestlé continues to draw criticism that it is in violation of a 1981 World Health

Organization code that regulates the advertising of breast milk substitutes. Groups such as

the International Baby Food Action Network (IBFAN) and Save the Children claim that

the promotion of infant formula over breastfeeding has led to health problems and deaths

among infants in less economically developed countries. Nestlé's policy states that breast-

milk is the best food for infants, and that women who cannot or choose not to breast feed

need an alternative to ensure that their babies are getting the nutrition they need.

Nestlé has in the past faced criticism for the manner in which it promoted powdered baby

milk in the developing world. The scandal stretches back to 1977 but it's a criticism the

company has found difficult to shake off

35

Nestlé has rejected allegations from India's premier environmental health lobby group that its

Maggi instant noodles could harm consumer health.

Speaking to just-food, a Nestle spokesperson said its Maggi product line is "adapted to

Indian tastes and we have been constantly improving its nutritional profile and have reduced

salt, reduced trans-fatty acids and added nutrients".

The government said on Thursday it would investigate allegations by charities that

multinational corporations Nestle, Heinz and Abbott were breaking the law by promoting

milk formula and infant cereals and undermining efforts to boost breastfeeding in the

country.

36

5. Conclusion

Nestle with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestle and is

today the world's biggest food and beverage company. Sales at the end of 2005 were CHF 91

bn, with a net profit of CHF 8 bn. We employ around 250,000 people and have factories or

operations in almost every country in the world.

The Company's strategy is guided by several fundamental principles. Nestle's existing

products grow through innovation and renovation while maintaining a balance in geographic

activities and product lines. Long-term potential is never sacrificed for short-term

performance. The Company's priority is to bring the best and most relevant products to

people, wherever they are, whatever their needs, throughout their lives.

Our ambition is to produce tasty and nutritious food and beverages that also have the lowest

environmental footprint, so we strive to continuously improve our operational efficiency and

environmental performance.

Through creating and increasing awareness to help preserve the environment, we continually

strive to create value for society

Thomas Donaldson, a professor at the Wharton School of the University of Pennsylvania in

Philadelphia, states it best, When it comes to shaping ethical behavior, companies must be

guided by three principles: respect for core human values, which determine the absolute

moral threshold for all business activities; respect for local traditions; and the belief that

context matters when deciding what is right and what is wrong.

100's of MNCs coming into Indian Market in the name of liberalization every year.  What are

the primary responsibilities, accountability and moral responsibility to be set and imposed on

Multi-national companies spreading their wings in India?  

Globalization is the driver to multi-nationalism.  Large MNCs (Fortune 500 companies) have

looked at India as potential growth market, as Indian Economy would be the 4th Largest

37

Economy in terms of Purchasing Power parity and by 2025 it is projected to be about 60% of

US Economy.  

Large corporations whose entry into Indian Economy has resulted in mergers and

acquisitions in a big way through FDI, etc., Yes, those who have/having potential to do

multi-million $ business are being acquired and/or merged with the world's large

organizations.  This has created and/or increased the wealth of the stake holders of Indian

companies including employees.  However, with this, the balancing act between the RICH

and the POOR is not maintained.

On the other hand, there has been huge loss to small and medium enterprises when a foreign

company enters Indian market to offer their products and services.  Not all such companies

see growth & profits unless the local needs are met in terms of requirements, logevity,

emotional fitment and the cost.  In this process, such companies end up selling with

desparation and close down their business in a short span.  SMEs in specific, who have

invested in products and solutions stand nowhere, but to lose the money where they have

paid it through nose.

Another instance where entrepreneurs are running anciliary and distribution business for

large retail and industrial manufacturers like 3M India, GE, etc., for example under huge

trust and confidence.  These MNCs load these small and medium enterpreneurs with such

terms and conditions that protect the principal companies than the entrepreneurs.  Recent

experience in the Indian market, where one of the large MNCs established the business

through distribution network (where direct selling was self-prohibited) has started direct

selling, pouching of resources from those distributors, creating havoc in the latter's

organizations, etc.,  Such brutal act on MNC's part is killing the enterpreneurship in India.  

For such MNCs, global strategies matters more, than the economic condition of our country

and its people.  It is just a minute's job for them to close down the business leaving all its

employees and distributors in lurch.  

38

The question is, how do we protect the interest of our own people's interest and how our

Governments act in favor of our own countrymen in the days to come.  In this corrupt

economy, the imbalance between rich and poor is well maintained and no such efforts are

being put in to bring the living of millions of our country.

Clearly, multinational corporations can provide developing countries with critical financial

infrastructure for economic and social development. However, these institutions may also

bring with them relaxed codes of ethical conduct that serve to exploit the neediness of

developing nations, rather than to provide the critical support necessary for countrywide

economic and social development.

When a multinational invests in a host country, the scale of the investment (given the size of

the firms) is likely to be significant. Indeed governments will often offer incentives to firms

in the form of grants, subsidies and tax breaks to attract investment into their countries. This

foreign direct investment (FDI) will have advantages and disadvantages for the host country.

. 39

6. REFERENCES AND BIBLIOGRAPHY

International Marketing, Michael Vaz, 2013, Manan Prakashan

http://www.authorstream.com/Presentation/dsdimt-1017271-mnc/

http://www.sunday-guardian.com/business/mncs-shaping-indian-economy

http://hellboundbloggers.com/2011/05/24/infosys-contribution-india-growth-story/

http://www.munfw.org/archive/49th/ecosoc2.htm

http://www.nestle.in/media

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http://www.nestle.in/aboutus/allabou tnestl%C3%A9

www.nestle.in

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