for Daisy Arabella

The term international expansion comprises market entry strategy including crucial choices regarding primary markets of focus, determination of target customer and channel strategy, resource allocation, product and service value offerings, brand positioning, and creation of an operating model. This will allow the Cuban government and other operating officials to see what Nestlé has done in other parts of the world and investigate why they have been so successful. By allowing Nestlé to operate within Cuba will open the door for more companies to come in and stimulate the economy while creating jobs as well for the local communities. This will play into a win-win scenario for both Nestlé and the country of Cuba and other local suppliers that will help create better partnerships and learn firsthand on the tricks of the trade that has made Nestle so successful within it business model.

2. Nutritional focus

With Milk and other dairy based product that Nestle makes that helps provide the consumer of rich vitamins the body craves it also has an objective to providing the consumer with wellness and nutritional goals. This is shown in 2010 Nestle under its other brands names such as Drey’s, Haagen-Daz and skinny cow brands provided a new product line of ice-cream that was pre-measured into smaller cups to provide portion control. This method implemented in its United States stores and was deemed as a success playing towards America’s obesity epidemic which has plagued this country for decades shows a company with its consumer in mind while showing compassion and a focus of a brighter tomorrow. Before entering the Cuban market, this will help show to a new place of business that they are much more than a money-making business purely looking for profit and higher revenues.

3. Product diversification

With Nestle already being an established powerhouse worldwide and a house hold name as well it brings more than just one simple product to the table. With milk coming in powered and liquid forms to ice-cream and pre-made cookie dough it is compatible with helping the consumer in more than just one area of their milk-based product needs. This will help Nestlé expand business opportunities through additional market potential of existing products that will greatly influence the Cuban consumer in buying its products over other local or outsourced competitions. Each country has its own unique make-up that dictates how companies will prosper. By Nestlé applying its own market strategy in other countries and succeeding their business model of success is known to work everywhere by having a product that is needed for all ages and applying sustainability practices unless you’re a competitor nestle practices are always welcomed. By entering a foreign area where business has not been done before you will also have competitors wanting to protect its business and by applying multiple products this strengthens your ability to succeed by avoiding putting your eggs all into one basket.

4. Joint Venture

As stated in the Harvard case study that nestle announced to its investors and stockholders in the 2003 annual report that is was going to operate within Cuba starting in Havana’s El Cortorro neighborhood. Cuba being an inland must source out its own products that are a necessity and bring in products that are scarce or obsolete from having on the island. By Nestlé marking an agreement to develop its business for a finite amount of time into a new entity it has not been before it will help both parties involved by expanding Nestle product into new areas it has the potential to strengthen its image while sharing the power and unity of milk and other dairy base products. Cuba on the other hand benefits from Nestle doing business within its country by stimulating the economy while supplying jobs to the local people as well.

Seven Cons of Nestle entering the Cuban market

1. Operations

Operating within Cuba is no easy task and by this being a new entity of business for nestle it had variables of operation it had not seen before. With the agricultural production of Cuba being extremely low and still declining it is stated in the case study that “annual output of Cuban sugar and milk fell by 85% and 55%, respectively, between 1989 and 2011.” With the production of its products demands a high volume of both the respected ingredients it made nestle not able to operate at full capacity thus taking away from its normal day to day operations. The image below taken from the Harvard case study “Nestlé ice cream in Cuba” is deemed as (exhibit12) shows the sacrifice in consumption Nestle had to make just to operate within Cuba. By the government heavily regulating business within Cuba it halted Nestlé from using products by local consumers which was a practice heavily used in Nestlé and implemented into its business model.

2. Marketing strategy

With Nestlé facing new factors in how everyday business is normally handled it had to adjust quickly before it would phase out. There would be three strategies Nestlé would have to use market strategy to counter act, this would include Coppelia an already cheap and popular domestic ice-cream, limited purchasing power of consumers and the country’s dual currency. The image below taken from the case study deemed as (Exhibit13) shows that coppelia not only being extremely cheap but already had a strong and respected presence within the community. With consumer demand not being able to afford Nestlé products this hurt the company from the get go and would have to implement smaller portions so the price would seem cheaper. Even with marketing towards tourist would be the bulk of their consumption in the beginning the goal was to be a heavily purchased product by everyone. Nevertheless, with the use of dual currency being used would hurt the company financially by not being able to work with the Cuban government and implementing methods of single use payments and potentially losing money on orders as well as production.

3. Number of foreign owned joint ventures in Cuba

The opportunities for exchange are on the rise in Cuba after reading the article but the way the government regulates business and being a foreign company in a strange and new land has shown to provide its fair share of problems in all sectors of business. The image below taken from the case study deemed as (Exhibit-8) shows through 1990-2011 the number of foreign-owned joint ventures in Cuba. As stated in the case study Cuba would not allow permanent residence to any foreign business but would rather have extensions with new terms of agreement which would be deemed as a shake down for more money and harder regulations for businesses to be conducted. From 1990 to 2001 it showed signs of improvement but then steadily falls back down with a slight rise in 2011. I believe with a slight slump and losing momentum along with regulations and political issues being a foreign owned company has far more dis-advantages working inside Cuba’s laws and regulations.

4. Social and economic policy

Under the Fidel Castro regime had an effect while he was in power and the effects can still be seen to this day. The image below taken from the case study known as (Exhibit-7) shows in a timeline of the Social and Economic policy cycles under the Castro regime from 1959 to the present. This will be split up into two periods that overlap with each other over time being the idealist and pragmatic periods. Both periods shared their own economic crisis’s primarily due to the dissolution and existence of the Soviet Union. By the remains of the actions having partaken in Cuba the government shows this by regulating and over observing using business foreign or in house. Because of this it will stray away businesses to strive and succeed within its own walls thus declining any ecumenic stimulation and deterring any progress towards being a successful country. This has presently labeled the country with a negative atmosphere and will help show the world on how they are not willing to put the past behind them and try and prosper into new and healthier ventures.

5. Advertising

Although nestle is a global house hold name, because of their absence of business in Cuba the use of advertising is crucial for their success. With their main store being open in Havana the tourist from outside of Cuba will know of the product but for them to reach the people and beat out competitors its vital to the success of nestle to spread images and billboards displaying and advertising their product. However, because the newspapers and other broadcast media were state-controlled there isn’t any free media or advertising and a quote taken from the article stated that “Only three percent of Cubans had access to the internet and mobile penetration was similarly low.” This will show rather than tell how hard it is for business to advertise their products as well as the consumer knowing of the existence of products that can benefit their everyday lives.

6. Controlled product pricing

The Cuban government-controlled product pricing for nestle products. This will show the regulations and overall control of the government has on business’s operating within Cuba laws. The major problem is the Nestle ice-cream is considered as a luxury product and a quote taken from the article of the Harvard case study stated “the typical retail price of Nestle-coralac ice cream was 1.5-2 CUCs, equal to about one-tenth of the average monthly salary in Cuba. This will be a hard barrier to cross while dealing with their local rivals who market much cheaper and already have a presence within the community.

7. Hiring employees with government regulation

As we read about Nestle in other case studies the importance of hiring local people is important to the company. Because Nestlé is a foreign company in Cuba government regulation are put in place that workers are hired by a government employment agency which the term used in the case study deems this as essentially “loaned” employees to firms. The problem with this is that Nestlé will be paying employee wages to the government agency in the currency of CUC’s and then in return the agency pays the worker in CUP’s. Essential playing into a heavy taxation where the worker and business can’t get around.