The two firms, Danone and Nestle are on the same segments of the food and beverage industry, they both produce dairy products, bottled water and biscuits. They also cracked the Chinese market at the same time in 1996 but not through the same market segment, which forced Danone to reconsider its position on key markets, i.e. fast-growth markets. In terms of staff, Danone employs about twice as more Chinese people than Nestle does. This should however, not be regarded in the perspective of contribution to the local social development but as a result of massive short-term investment policies to perform mass-production. Indeed, Danone has seventy factories in China, when Nestle only operates twenty-one of them. In terms of market share, we must recognize that Danone is better than Nestle as we can see in the following ranking: Danone ranks second in the segment of dairy products, first in the segment of bottled water and first in the segment of biscuits. Indeed, Danone is making higher profits in the Chinese market, about twelve times more than Nestle.
[...] In the early 1990s, Danone adopted a different approach and started what became the initial phases of their implantation in mainland China by setting a partnership with a company in the food industry in Hong-Kong, called Amoy, to get used to the consuming habits of Chinese people by first getting used to westernized Chinese consumers. Danone is now considered to have cracked the Chinese market through the industry of beverages in 1996 when the group acquired of Wuhan Dongxihu Beer and established five jointventures with Wahaha (group in the beverage industry producing bottled water). [...]
[...] It may not be 8 considered by Danone and Nestle as a solution to maintain their position on the Chinese market in a long term perspective. On the other hand, the market concentration related to the nature of the activity – massproduction of food and beverages – should also be taken into account as an element compensating a potential competition from other foreign firms that are not yet on the Chinese market. So, in terms of potential competition, the industry is to fear local emerging actors and not foreign firms. [...]
[...] So, there is a one-best-way according to one's objectives and both Danone and Nestle applied this rule. Danone decided to focus a short-term profits on adopted a very aggressive profit-oriented behaviour on the Chinese market. This is very noticeable at all steps of their implantation and development in China, from the way they decided to crack the market (through a joint-venture) to the market segmentation they operated to focus on fast-growth markets (products targeting poor population or at the opposite wealthier populations). [...]
[...] Nestle, due to the fact that they are targeting a future middle-class, took care of the social environment it evolves in and contributed to the local social development. This is perceived as very good behavior and ensures Nestle with good legitimacy in China. Critical point of view about the strategy developed by each group so far Considering the analysis of the strategies of Danone and Nestle, I would tend to think that there is no one-best-way in terms of strategy. A good strategy is one that is developed with the appropriate tools according to its objectives. [...]
[...] Specificities of the range of products (localization), market segmentation and education The objectives of Danone and Nestle have heavily conditioned their strategies on the Chinese market to create, maintain and develop their respective market share: the short-term-based strategy of Danone induced a focalization on marketing whereas Nestle, with a long-term-based strategy, chose to bet on the development of products fitting the future mature Chinese market. As it has been mentioned above, Danone chose to focus on markets with a potential fast growth, such as beverages and biscuits and first let apart its main activity of dairy products – and especially yoghurts. [...]
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