Background

The business world has become competitive in almost all facets. The levels of competition have skyrocketed due to the number of businesses joining different markets now and then. The Food and Beverages industry has not been left behind. As a result, every company is trying to find ways of surviving and expanding its consumer base in light of the existing competition. This has made internationalization an aspect of great interest for companies in different countries. Most of the businesses commence their operations domestically but work with a long-term plan of operating in the global market. These companies tend to be recognized as multinationals. Internationalization has helped to change the landscape of businesses by creating dynamic market situations that help consumers get a variety to choose from. This is something that has prompted companies to invest in research and development to ensure elements of creativity and innovation are high to help keep competition at bay. Most of the markets indulge in internationalization because the domestic is no longer adequate, the prospects of economies of scale, and viable opportunities available in the foreign markets (Glowik and Bruhs, 2014). Companies use different entry modes while moving to foreign markets depending on the most suitable strategy.

In this case, Nestle is not entering the Norway market since it has been operating there for some time. However, Nestle is looking to expand its operation both in the volume of existing products and introduction of new products in the market. Nestle has been facing increased competition from other established multinational companies in the foods and beverage industry. Since the company already has a significant presence in most countries, expanding its operations in some of the countries is the way to go.

Introduction

As from 2014, Nestle is now recognized as the largest company in the food and beverages industry (Nayak and Waterson, 2017). It is a food and drinks company with its headquarters in Vevey, Switzerland. The company encompasses a variety of products including breakfast cereal, medical food, dairy products, baby foods, pet foods, frozen food, ice cream, bottled water, coffee and tea among others. The food and beverage industry is prone to the challenges of new regulations and higher expectations (Nayak and Waterson, 2017). Regulations are necessary for the industry due to health risk associated with consumption of undesirable food components such as sugar.

Norway is regarded as an easy and safe country to conduct business. For several years, the World Bank has been including Norway in the top 10 countries with ease of doing business. The country has a population of around 5.2 million, but its purchasing power compares to larger economies as a result of the even distribution of wealth and high standard of living. The competitiveness of the country’s economy benefits from the openness it has established in global commerce and establishment of a regulatory environment encouraging entrepreneurial activity (Heritage, 2017).  Norway also enjoys a monetary stability coupled with an independent judicial system that helps to provide protection of property rights.

The report will aim at assessing Nestle and its expansion into the Norway market. The report will provide information on Nestle and the business environment in Norway through use of appropriate data and relevant examples. The report is based on secondary research on data collected from journals, websites, books and magazines. This will help in the collection of viable information relevant for completing the report.

Nestle Company

Nestle is a multinational food and drink corporation with its headquarters in Vevey, Switzerland. Nestle has established its operations in all the continents, and it is now being regarded as the largest company in the food and drinks industry with regards to revenue and other metrics measures. Nestle came about in 1905 as a result of a merger between Farine Lactee Henri Nestle and Anglo-Swiss Milk Company (Klöpping, 2012). Nestle’s brands include beverages, prepared dishes & cooking aids, milk & nutrition and chocolate & confectioneries. The company has incorporated several objectives in its operations that help in actualizing the current status it enjoys in the industry. Among them is the provision of products that create value and focusing on long-term business development. Nestle also takes the initiative of adhering to prescribed legislation to ensure there are no conflicts with authorities and also to ensure that they do not compromise the health of the consumers. There is also the desire to express professionalism and conscientious attitude in different operations to help create a positive rapport with relevant stakeholders.

Among the core values that the company promotes include transparency and integrity. These are viewed as important values while communicating with people as it helps in sharing competencies. There is also that eagerness to enhance collaboration that assists in the facilitation of promotion and progression in the company (Klöpping, 2012). Nestlé’s company culture, on the other hand, is very strong and concentrates on teamwork. Team is viewed as an integral element to enhance innovation and creativity in the organization. It also helps to avoid duplication of activities since every employee is aware of what the other did hence promoting efficiency.

Porter’s Five Forces

Threat of New Entrants

The threat of new entrants is low for Nestle. The food and drinks industry is very lucrative given the potential profits involved. However, the industry is quite diverse making it difficult for new entrants. Existing organizations have already taken large market shares and are well experienced to help understand the needs of the consumer (Nayak and Waterson, 2017). There is also the development of consumer loyalty that is hard to breach for new entrants and the distribution networks established are quite strong too.

Bargaining Power of Suppliers

Nestle is currently holding the largest market share in the food and drinks industry. For this reason, the company requires suppliers in large quantities, and this makes it ideal buyer for these suppliers. As a result, suppliers working with Nestle do not have the power to interfere, bargain or even influence the prices. Nestle usually prefers long-term supplier relations hence takes care of them and holds them in esteem.

Threat of Substitute Goods

The threat of substitutes is high. There are innumerable products that can be used to satisfy the same purpose in the market. This is why Nestle strives to provide products that are being demanded by consumers to help counter this aspect.

Competitive Rivalry

Competitive rivalry in the industry is high too. Nestle operates in an industry experiencing intense competition. Its major competitors include P&G, Kraft Foods and Group Danone. All these enterprises have the relevant capital outlay to establish strong marketing and advertisement campaigns more so during product launches (Klöpping, 2012). The competition involved is not just for the prices but also creativity, product variety and promotional offers among others.

Bargaining Power of Consumers

The bargaining power of consumers is high due to the high level of competition in the industry. Consumers can easily switch from one brand to another with ease if they are not satisfied with the current brand of consumption. This is something that Nestle recognizes, and that is why it strives to ensure its consumers are satisfied at all times.

Norway

Norway is among the three Scandinavian countries with a population of around 5.2 million. Over the years, it has been ranked among the best countries to live in by the United Nations Development Report given that the crime rate in the country is low (Eckstein, 2015). The essence of this security prospect makes an attractive destination for tourists and international students. Norway is also ranked high with regards to literacy levels hence making it easy for businesses to engage the community on different levels. The country borders Finland, Russia and Sweden on the east side, and has an extensive coastline that faces the North Atlantic Ocean (Eckstein, 2015). The major cities are based on the coastline.

Norway’s PESTEL Forces Analysis

Economical

Norway has always been recognized for having a mixed economy where the government owns adequate shares in strategic areas. Since the inception of the industrial era, Norway’s economy has been showing robust growth. The country enjoys a favourable standard of living compared to most European countries, and the welfare system is strongly integrated. As of 2016, the state’s GDP (PPP) stood at $356.2 billion while the growth rate was at 1.6%. The per capita income was $68,430 while unemployment stood at 4.2%. Inflation, on the other hand, was at 2.2% (Heritage, 2017). These are prospects of a favourable and strong economy. Despite the economy being open, there is the establishment of comprehensive social programs that help to protect the citizens from adverse effects emanating from globalization.

The country’s competitive economy benefits from a regulatory environment encouraging entrepreneurial activities and openness to global commerce. Given the prevailing fiscal rule, budgets ought to aim for 3% structural deficit with regards to the value of the oil fund (Eckstein, 2015). The country’s economy also relies on a financial reserve established through the exploitation of natural resources like North Sea oil. The economy is expected to grow even further over the years; though gradually.

Political

Politics is an integral element for any business aspiring to venture into the country’s market. The political factors have the ability to influence the operations either in a negative or positive way. This depends on how the inherent company acts upon the prevailing political environment. Norway enjoys adequate political stability given that it operates within the confines of a constitutional monarchy (Eckstein, 2015). The stability being enjoyed acts as an indication of the satisfaction that the people have towards the leadership of the country. The government has played a significant part in ensuring that the standards of living keep improving now and then. There has also been a provision of opportunities with regards to personal, social and financial growth. The country has not encountered serious transnational disputes in the past hence showing how the government is committed to enhancing personal security in the country.

Given the emphasis that the government has on improving the living standards in the country, the political factors are likely to affect the operations of a business greatly. The government usually favours those businesses with the ability to help to fulfil these prospects. This means businesses with the ability to create employment opportunities for the citizens and awarding them competitive wages and benefits. Organizations that ensure there is the provision of high quality products and services also get on the good side of the government. Simply put, multinational companies aspiring to operate favourably in Norway should ensure that they practice positive corporate social responsibility to ensure that there are no clashes with political forces at some point (Eckstein, 2015).

Technology

Norway has always taken technology with high regard due to the benefits that are likely to occur to the economy as a result. As early as 1987 to 1997, Norway was already investing 1.6% of its GNP on basic technological development and scientific research (Nationsencyclopedia.com). This has come a long way to help the country advance as it is now a highly industrialized nation. The investment in technological development is meant to ensure that the country remains innovative and creative in all facets of the economy. This helps in the creation of new ventures and advancement of existing ventures to help in the creation of increased employment. The government is always providing support to organizations that show favourable prospects to invest in technology research and development.

The level of internet usage in the country has increased significantly over the years too. Close to 98% of the country’s population are internet users (Nationsencyclopedia.com). This is a good thing for the economy as it helps to boost e-commerce in the region. Small businesses find it easy to establish online stores and compete with big enterprises compared to offline means. The internet penetration percentage ensures that there is sufficient market for such businesses.

Source: http://www.internetlivestats.com/

Legal

Norway is regarded as an easy region to conduct business due to the prevailing favourable laws and regulations. They have a legal system that can be trusted while doing business. It is important for businesses to know that they have to uphold the law at all times with regards to various regulations (Eckstein, 2015). A business that adheres to the stipulated regulations finds it easy to operate.

Social

Most of the families in Norway are nuclear, but marriage is not a prerequisite for starting a family as couples stay together without legalizing with a marriage arrangement. There is a high belief in equality, and the people promote the “Jante Law” that makes it easy to co-exist with others (Eckstein, 2015). Norwegians regard themselves as an egalitarian society where the culture is founded on democratic principles of interdependence and respect. There are various etiquette and customs observed in the country; those of meeting and greeting, giving gifts, business meeting and negotiation among other etiquettes. It is important for international businesses to observe these aspects for success to be actualized.

Environmental

Since the 1960s, the country has been trying to mitigate environmental damage resulting from different industrial sectors. This has been the reason why the country has been moving from hydroelectric power towards other energy sources. A company working on cutting its carbon footprint is favourable in the eyes of the authority.

Recommendation and Conclusion

Nestle should take the initiative of expanding its activities into the Norwegian market since it has favourable prospects. Norway’s economy has been doing great since the inception of the industrial era, and the prospects of growth keep improving. Among the reasons Nestle should go ahead and expand its operations in this market is the favourable standard of living that keeps getting even better with time. This has been enabled by the government taking adequate measures to reduce unemployment rates and ensure that employees are getting favourable wages. When the standard of living is high, the purchasing power of households also improves. This is an opportunity that Nestle should strive to take advantage of. Norway’s political environment is also favourable for the expansion prospects. The company only needs to operate according to the set regulations and bring along desirable social corporate responsibilities to remain on the good side of the government. A company that creates employment and treats the employees fairly is always welcomed by the Norwegian government.

Nestle in itself is a huge company that is recognised as a leader in the industry of operation. As a result, the company will not have problems expanding into this market. It has the necessary resources to make this happen and desired knowledge of operating in different markets. The market forces in the industry tend to favour the company since it has a competitive advantage over most companies due to the economies of scale that it enjoys. Brand recognition also acts as an advantage since the company does not require aggressive marketing to create awareness of the additional products that will be brought into the market. Nestle has also ventured into many viable markets already. As a result, prospects of increasing the company’s revenues and competitiveness lie on expansion in already existing markets of operation.

References

Eckstein, H. (2015) Division and Cohesion in Democracy: : A Study of Norway. Princeton: Princeton University Press.

Glowik, M. and Bruhs, S. (2014) Business-to-Business: A Global Network Perspective. New York: Routledge.

Heritage (2017) Norway Economy: Population, GDP, Inflation, Business, Trade, FDI, Corruption. [online] Heritage.org. Available at:<http://www.heritage.org/index/country/norway>

Klöpping, L. (2012) Nestlé – A Global Company Comes Under Fire. München: GRIN Verlag GmbH.

Nationsencyclopedia.com (2017) Science and technology – Norway – located, policy. [online] Nationsencyclopedia.com. Available at: <http://www.nationsencyclopedia.com/Europe/Norway-SCIENCE-AND-TECHNOLOGY.html> (Accessed 23 Nov. 2017).

Nayak, R. and Waterson, P. (2017) The Assessment of Food Safety Culture: An investigation of current challenges, barriers and future opportunities within the food industry. Food Control. 73 pp.1114-1123.

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