The Customisation Case of Nestlé on French and Chinese Dairy Markets
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The Impact of Customer Orientation on the Business Strategies: the Customisation Case of Nestlé on French and Chinese Dairy Markets Author: Ingrid Mignon & Hui He Avdelning, Institution Datum Division, Department Date 2005-01-21 Ekonomiska institutionen 581 83 LINKÖPING Språk Rapporttyp ISBN Language Report category Svenska/Swedish Licentiatavhandling ISRN LIU-EKI/STR-D--05/007--SE X Engelska/English Examensarbete C-uppsats Serietitel och serienummer ISSN X D-uppsats Title of series, numbering Övrig rapport ____ URL för elektronisk version http://www.ep.liu.se/exjobb/eki/2005/impsc/007/ Titel The Impact of Customer Orientation on the Business Strategies: the Customisation Title Case of Nestlé on French and Chinese Dairy Markets Författare Ingrid Mignon & Hui He Author Sammanfattning Abstract Background: As Porter’s diamond (1990) suggested, the business environment highly influences firms’ strategies. Today, most of the companies have to decide their strategy depending from a worldwide business environment. Yet, strategy researches and the growing importance of marketing for business success also show that customer dimension must be taken into consideration. On some markets and in certain industries, the offer is much higher than the demand and then, companies need to attract customers. On the national level, companies multiply customer surveys in order to reach their expectations. On the global level, this is more complicated. Adaptation seeks to customise product offerings to be more tailored to a particular culture’s needs and tastes, and thus, can gather a greater market share than would be allowed by offering only a standardised product. In this thesis, we decide to look deeper at industry circumstances, corporation’s customisation strategies and competitive advantages of customisation in order to know whether companies can use customisation to be more profitable. We also want to investigate how the development situation of the industry and the function of customer orientation influence the company’s strategies; and how companies use their customer adaptation strategies to adapt their products and marketing to local markets. Purpose: The purpose of our work is to develop companies’ awareness on the effects of customisation and of adapting their products to customer behaviours by developing customers’ point of view and by comparing it to companies’ strategies. Results: According to the research results, Nestlé has adopted the customised strategies to adapt to French and Chinese dairy markets. Based on the Sheth’s model, we refined a new model by completing Sheth’s one with two dimensions— customer focus dimension and market type dimension. We characterised the customer orientation strategy and the standardisation strategy, which are the two principal choices the companies need to do regarding the product design. Moreover, to add a new element in those well-known strategies, we introduced a nuance into the corporate strategies depending on the aiming market situation. Nyckelord Keyword Customer orientation, customisation, corporate marketing strategy, Nestlé, French/ Chinese Dairy market Table of Contents 1. INTRODUCTION……………………………………………………………...1 1.1 Background…………………………………………………………………………………...1 1.2 Problem Discussion…………………………………………………………………………..2 1.2.1 Marketing………………………………………………………………………………...2 1.2.2 Market Orientation and Customer Orientation…………………………………………..4 1.2.3 Customer and Consumer…………………………………………………………………6 1.3 Purpose………………………………………………………………………………………..6 1.4 Research Questions…………………………………………………………………………...6 1.5 Scope……………………………………………………………………………………….....7 1.6 Disposition…………………………………………………………………………………....7 2. METHODOLOGY……………………………………………………………10 2.1 Research Position………………………………………………………………………….....10 2.2 Research Type………………………………………………………………………….…….12 2.3 Research Design……………………………………………………………………….…….13 2.4 Data Collection………………………………………………………………………………16 3. THEORETICAL PART………………………………………………………18 3.1 Why Customer Orientation…………………………………………………………………..18 3.1.1Organisational Culture………………………………………………………………….18 3.1.2Management Influence………………………………………………………………....19 3.1.3 Market and Customer Types…………………………………………………………...20 3.1.4 Sheth’s Model of Product and Customer Differentiations…………………………..…21 3.2 Customer Orientation and Global Corporate Strategy…………………………………….....24 4. EMPIRICAL PART………………………………………………………...…30 4.1 Dairy Industry Introduction………………………………………………………………….30 4.2 Nestlé………………………………………………………………………………….……..34 4.3 France…………………………………………………………………………………….….36 4.3.1 French Dairy Market……………………………………………………………….….37 4.3.1.1Presentation……………………………………………………………………....37 4.3.1.2French Dairy Consumption………………………………………………….…...38 4.3.1.3French Consumption Habits and Tastes……………………………………….…39 4.3.1.4Main Actors on the Market…………………………………………………….…40 4.3.2 Nestlé in France……………………………………………………………….……….42 4.3.2.1Product…………………………………………………………………….……..43 4.3.2.2Marketing………………………………………………………………………...47 4.3.2.2.1Brand……………………………………………………………………….47 4.3.2.2.2Advertising………………………………………………………….……...49 4.3.2.2.3Promotion……………………………………………………………….….50 4.3.2.2.4Packaging……………………………………………………………….….51 4.3.2.2.5Price & Distribution………………………………………………………..51 4.3.2.3Short Conclusion…………………………………………………………….…...52 4.4 China………………………………………………………………………………………...53 4.4.1 Chinese Dairy Market……………………………………………………………….…54 4.4.1.1Presentation…………………………………………………………………….....54 4.4.1.2Chinese Dairy Consumption……………………………………………………...56 4.4.1.3The Factors that Influence Chinese Dairy Consumption………………………....57 4.4.1.4Main Actors on the Market…………………………………………………….…63 4.4.2 Nestlé in China…………………………………………………………………..……..65 4.4.2.1Product………………………………………………………………………..…..66 4.4.2.2Marketing………………………………………………………………………....69 4.4.2.2.1Brand……………………………………………………………………..…69 4.4.2.2.2Advertising……………………………………………………………….....70 4.4.2.2.3Promotion…………………………………………………………………...72 4.4.2.2.4Packaging………………………………………………………………..….72 4.4.2.2.5Price & Distribution……………………………………………………..….73 4.4.2.3Short Conclusion……………………………………………………………….....74 4.5 Summary…………………………………………………………………………………..…75 5. ANALYSIS…………………………………………………………………….77 5.1 Analysis of Nestlé’s Strategy………………………………………………………………...77 5.1.1Marketing Strategy Analysis for French Diary Market…………………………….…..79 5.1.2Marketing Strategy Analysis for Chinese Diary Market…………………………….….81 5.1.3Two Different Strategies for Two Different Markets…………………………………...83 5.2 Discussing Sheth’s model and Developing Our Own Model………………………………..84 5.2.1Reviewing Sheth’s Theory……………………………………………………………...84 5.2.2Limits of Sheth’s Model and Dissimilarities with Our Empirical Observation……………………………………………………………….……………85 5.2.3New Dimensions, Revision of Sheth’s Model………………………………………….87 6. SUMMARY………………………………………………………………..92 7. CONCLUSION………………………………………………………………..94 8. SUGGESTIONS FOR FURTHER STUDIES……………………………….95 9. REFERENCES………………………………………………………………..97 1. INTRODUCTION The goal of this chapter is to clarify the topic of our study. We will explain the context of our subject through a short introduction and a problem discussion regarding the chosen vocabulary. We will finish that part by developing the purpose of our research and by presenting the disposition of this thesis. 1.1 Background As Porter’s diamond (1990) suggested, the business environment highly influences firms’ strategies. This is more and more accurate as the business environment is growing. Today, most of the companies have to decide their strategy depending from a worldwide business environment. However, strategy researches and the growing importance of marketing for business success also show that customer dimension must be taken into consideration. On some markets and in certain industries, the offer is much higher than the demand and then, companies need to attract customers. On the national level, companies multiply customer surveys in order to reach their expectations. On the global level, this is more complicated. Some companies, such as Mc Donalds, develop a product standardisation strategy. They create a standard product likely to be bought by any national customer all over the world, without adapting to it or adapting to the marketing strategy. However, while many professionals and academicians see product standardisation as the most efficient way to develop and manufacture a product for international commerce, there is still a very strong following of professionals and academicians who believe that product adaptation is the better system for international trade. Adaptation seeks to customise product offerings to be more tailored to a particular culture’s needs and tastes, and thus, can gather a greater market share than would be allowed by offering only a standardised product. In this thesis, we decide to look deeper at industry circumstances, corporation’s 1 customisation strategies and competitive advantages of customisation in order to know whether companies can use customisation to be more profitable. We also want to investigate how the development situation of the industry and the function of customer orientation influence the company’s strategies; and how companies use their customer adaptation strategies to adapt their products and marketing to local markets. 1.2 Problem discussion 1.2.1 Marketing Marketing like most of the business concepts is intangible and is really difficult to define as discussions in the literature prove it. The first official definition of marketing was adopted in 1935 by the National Association of Marketing Teachers. This original