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Dairy Partners Worldwide (DPW)
Group 5
Strategic Alliances & Joint Ventures
Sagar Gupta
Radhika Bhatter
Rakshit Sharma
Soumyajit Sengupta
Varun Gopal
Aneesha Chandra
Cristina Morini
12P041
12P096
12P160
12P171
12P174
12P186
Exchange
Agenda
Scheme of Presentation
Business Case
Partner
Selection
Negotiations
Alliance
Management
Alliance
Assessment
Business Case
Nestle (Switzerland)
Company Snapshot
Brief Company Snapshot
Competitive Positioning
Headquartered in Vevey, Switzerland, the company is the world leader

in food manufacturing
Largest packed food company in the world, with focus on nutrition,

health and taste
The company has transformed itself into a nutrition, health and wellness
company
Key brands include Maggi, KitKat, Milo, Nescafe, Purina, Herta, Dreyers
and Gerber
Well diversified product portfolio with leading global market positions in

coffee, infant nutrition, confectionary, ice cream, bottled water and pet CHF 61.9
food
Brand portfolio consists of 30+ Billionaire brands

Nestle employs nearly 339,000 people in 468 factories in 86 countries
#1 player in global infant nutrition

Largest global player in coffee (mainly instant coffee) with 22% global
market share
Largest emerging market exposure absolutely

There are several nutrition product lines in which Nestle has low or no
presence namely yoghurt, nutrition bars, dark chocolate etc.
Business Segment Breakdown
Geographic Breakdown
Financials
Water
8%
Confectionary
11%
Nutrition
11%
2011A
2012A
2013E
2014E
89,190
100,938
106,994
112,344
(4.9)%
13.2%
6.0%
5.0%
13,278
15,232
16,250
17,247
% Margin
14.9%
15.1%
15.2%
15.4%
Net Income
10,438
12,092
12,802
13,564
% Margin
11.7%
12.0%
12.0%
12.1%
Revenue
Beverages
22%
ROW
27%
Americas
45%
Milk Products
20%
Pet Care
12% Prepared
Dishes
16%
% Growth
Europe
28%
EBIT
Nestle
444 Roadmap
Mission Statement
Good Food, Good Life
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
Objective
To be the leader in Nutrition, Health and Wellness, trusted by all stakeholders
444 Roadmap
Builds strong alignment within the company of what they want to achieve, strategically and financially, and how to go
about it
Competitive Advantages
Growth Drivers
Operational Pillars
Diverse Product and brand portfolio
Leadership in Nutrition, Health and Wellness
Leadership in innovation and renovation
Unmatched R&D capability
Popularly Positioned Products (PPP)
Operational efficiency
Unmatched geographic presence
Premiumization strategy
Products are available whenever, wherever

and however
Out-of-home consumption
Consumer engagement
Source:
Company
website,
filings
People,
culture,
valuesCompany
and attitude
Nestle
SWOT Analysis
Strengths
Weaknesses
Diverse product portfolio with several strong

brand names
Widespread geographic presence in 86
countries with well-established distribution
channel
Strong marketing and advertising skills
Strong R&D capabilities and focus on
innovation
Proficiency in M&A, strategic alliances and
joint ventures
Lack of consistency in product lines across

geographies
Swift strategic decisions and aggressive steps
by competitors has led to lagging behind of
Nestle in some areas and business segments
Weak financials (particularly profit margins)
Increasing emphasis on mature markets
Opportunities
Threats
Increasing focus of consumers on health and

nutrition
Increased focus on developing nations
Penetration of rural markets
Tapping into the growing out-of-home eating
market
Deterioration in consumer environment in

developed regions
Strengthening of Swiss Franc
Higher input cost inflation
Increase in competition
Increase in competition from private labels
Key markets are maturing
Yoghurt Industry
Key Trends
Changes in the Dairy Industry
Key Growth Drivers
The global dairy industry is undergoing a paradigm shift
Surge in consumer demand in most countries for drinkable yogurt,

organic yogurt, bio yogurt, or fruited / flavoured yogurts due to:
Advent of functional products
The rising awareness about lifestyle related health concerns such as

diabetes and obesity
Emphasis on low calorie, low sugar, digestive products

Instead of the traditional milk, cheese, and butter concepts, more
functional products such as yogurt, probiotics, etc. are now being
accepted as the medium of delivery for beneficial functional
ingredients
The conventional spoonful of plain yogurt is increasingly substituted by
drinkable yogurt, organic yogurt, bio yogurt, or fruited / flavoured
yogurts.
CHF 61.9
Rising awareness about the benefits of yogurt, with its positioning as a

health-promoting product that improves metabolism, has a positive
impact on digestive mechanism, and enhances the immune system
Increasing consumers willingness to try the new and innovative product
offerings available, as a result of their wider international exposure
Emergence of dual income households with higher disposable incomes
Yoghurt In Europe and Emerging Economies

As per the GIA, the European and Asia-Pacific markets, which account
Yoghurt In USA
Package Facts estimated the U.S. market for yogurt sold at retail to be
for a more than 80% share of volume consumption, dominate the global
yogurt market
$7.3 billion in 2012, up 6.6% from 2011. They also estimated that by 2017,
sales will hit almost $9.3 billion. This growth is attributed to one sub
category: Greek yogurt whose sales increased more than 50% in the last
year in food, drug and mass channels
Within the Asia-Pacific region, China is the fastest growing regional

market for yogurt in terms of consumption (value and volume)
As per Euromonitor estimates, emerging markets, including China and

India, will contribute 95% of the global dairy markets growth between
2011 and 2016
When compared to high consumption markets as France (which sees

an annual consumption of25 kg), Germany (24 kg), and Holland (23 kg),
the per capita consumption in India is a meagre 2.3 kg per year
Refrigerated yogurt is the eighth largest selling subcategory in food,

CHF 61.9
drug and mass market (excluding Walmart)
Yogurt sale is growing in food services menus

The top three marketers of yogurt account for almost three quarters of
all yogurt sales in food, drug and mass market channels
Partner Selection
Partner Selection
Selection criteria
Complementary Capabilities
Technical Resources & Skills should be complementary in nature
Optimum Mutual Dependency
There has to be some identifiable mutual need and middle level of

dependency, not too much or too less
Similar Company Size
Elephant & the Ant complex has to be avoided at all costs
Financially Stable
The partner should be financially capable of investing in the JV
Strategic Complementarity
Goals and objectives of the partners have to have strategic fit
Compatible Operating Philosophy
Inconsistencies related to normal operations should be as low as

possible, like the accounting system or employee benefits
Low Culture Barriers
Cultural, Communication barriers should be as lo as possible to

reduce effort and time allocated to solving cultural issues
Compatible Management
Close personal rapport if available, should be treated with

premium as it helps JVs succeed exponentially
Ethical and Trustworthy
Partners should look at all business issues with the same and
highest levels of integrity and honesty
General Mills (United States)

Company Snapshot
Company Sales
Complementary
Capabilities
Located in Minneapolis, USA the company holds #1 or #2

positions in growing food categories in USA and around the world
Bakeries and
Foodservice
12%
Main product categories in the US Retail markets are ready-toeat products, frozen products, mixes, grain, cereals, snacks and
organic products
International
25%
Mutual Dependency
Non-US
25%
US Retail
63%
US
75%
Main product categories in the international arena include
superpremium ice cream and frozen desserts, refrigerated yogurt,

snacks, frozen products, and dry dinners
Financially Stable
Financial Snapshot
USD
2011A
2012A
2013E
2014E
Revenue
14,880
16,658
17,774
18,218
EBIT
2,774
2,562
2,852
3,040
Net
Income
1,804
1,589
1,892
1,938
Share Price Performance
Market Capitalization
USD
32,282
54
Enterprise Value
USD
39,966
50
Share Price
USD
48.53
EV/Revenue 2013E
2.2x
EV/EBITDA 2013E
11.2x
P/E 2013E
17.3x
46
42
Compatible Operating
Philosophy
38
34
Jun/2011
Oct/2011
Key Brands
Feb/2012
Jun/2012
Oct/2012
Feb/2013
Jun/2013
Company Overview
With 30 manufacturing facilities spread across the world, the company

distributes its products in over 100+ countries
Founded in 1866, the companys goal is to generate balanced longterm growth
The key growth drivers for the company are innovation, brand-building,
leading customer growth, margin and international expansion
General Mills (United States)

Company Snapshot
General Mills has the yogurt production capabilities while Nestle has the global marketing & distribution capabilities.
Complementary
Capabilities
Both General Mills and Nestle are big market players and will be dependent on each other for Yoplaits international expansion
Mutual Dependency
Both General Mills and Nestle are market leaders in their fields of business, one nationally and the other, globally
General Mills and Nestle have been at the forefront of announcing high profits over the years and have given increasing dividends every year
Financially Stable
General Mills hopes to increase revenues to touch the $20 billion mark while Nestle wants to increase its product portfolio in emerging nations
Philosophy
Having previously collaborated in a continuing JV globally, GM and Nestle should have lower cultural barriers than most America-European JV partners
CPW has allowed both the managements to get in touch with the different styles of management of the partner and this will help in increasing the success
potential of this new JV due to the personal rapport that the top management of GM and Nestle share between themselves
Nestle and General Mills have been highly vocal in their use of organic food and have been donating generously to fund product innovations. Both the firms
maintain the highest forms of honesty and integrity in their operations, exhibited by the low number of product recalls or controversies.
Groupe Danone (France)

Company Profile
Company Sales
French food-based Multinational Corporation
Products include fresh dairy products, bottled water, cereals

17%
World No.1 in fresh dairy products
World No.2 in bottled waters, by volume
World No.2 in baby nutrition
European No.1 in medical nutrition
2012A
2013E
2014E
Revenue
19,310
20,870
21,590
22,570
EBIT
2,843
2,958
2,730
3,044
Net
Income
1,671
1,672
1,505
1,795
60%
56%
20%
8%

Dairy
Baby Nutrition
Water
Medical Nutrition
France
BRIC
USA
Others
Financially Stable
Share Price Performance
Market Capitalization
Euro
34,618
Enterprise Value
Euro
41,048
Share Price
Euro
54.86
EV/Revenue 2013E
Mutual Dependency
22%
Financial Snapshot
2011A
10%
6%
and baby foods and yogurts
Euros
Complementary
Capabilities
Philosophy
1.9x
EV/EBITDA 2013E
12.2x
P/E 2013E
21.6x
20/11/08
Key Brands
20/12/08
20/01/09
20/02/09
20/03/09
20/04/09
20/05/09
20/06/09
20/07/09
20/08/09
20/09/09
20/10/09
20/11/09
Company Overview
Company strategy is based on two pillars: Strong Brands &

Clearly defined Geographies
Over 7 billion customers
Over 50 production facilities globally
Market Capitalization: 34.5 Billion
Groupe Danone (France)

Company Profile
Danone has the yogurt production capabilities while Nestle has the global marketing & distribution capabilities.
Complementary
Capabilities
Mutual Dependency
Both Danone and Nestle are market leaders in their fields of business, one in the dairy business globally , the other in the F&B industry globally
Danone and Nestle have been announcing high profits every year with Nestle sales around $90b and Danone at $20b
Financially Stable
Philosophy
Both the companies are headquartered in Europe leading to the possibility of low cultural barriers
Danone and Nestle both are highly regarded for their ethical standards of operations and have been voted as two of the most trusted companies globally
Chobani Inc. (United States)

Company Snapshot
Started in 2005, after founder CEO- Hamdi purchased an

abandoned yogurt production plant from Kraft
Started with 5 employees in 2005 with current strength well
Recent Events
above 2000 with the 1st Chobani yogurt hit store shelves in 2007
Products include only yogurt, but in different flavors and sizes
Currently present in USA, Canada and Australia
Earlier called Agro Farma, name changed in 2012
Chobani has partnered with Cornell University to support

Dairy Innovation with a $1.5milion gift
Andreas Sokollek was appointed SVP, SC & D to bring
about greater coherence throughout the supply chain &
retail distribution chain
Recent revenue estimates peg the value at $634m
Recently launched 14 new product flavors across all
yogurt product categories
Recent Controversies
Complementary
Capabilities
Mutual Dependency
Financially Stable
Key Executives
Name
Hamdi Ulukaya
David Denholm
Andreas Sokollek
Peter McGuiness
James McConeghy
Chobani had to recall its Greek yogurt product line from all
across the USA due to product concerns after numerous
customers were taken ill, post consumption
Purists have slammed Chobani for using technology to bypass
the authenticity of milk required to produce Greek yogurt
Key Products
Designation
Founder & CEO
President & COO
Senior VP, Supply Chain & Distribution
CMO & Chief Branding Officer
CFO
Company Overview
Philosophy
Company thrives to grow over the next few years with

primary focus being on new flavor launches every quarter
Fastest growing yogurt manufacturer in USA and Canada
Headquartered in New York, Production facility in Idaho
Privately listed company
Chobani Inc. (United States)

Company Snapshot
Chobani has the yogurt production capabilities in Greek yogurt while Nestle has the global marketing & distribution capabilities.
Complementary
Capabilities
Mutual Dependency
Choabani is a small player in the overall sector, but one of the biggest yogurt producers in the world while Nestle is the global FMCG powerhouse
Chobani is on track to becoming a $1b company by 2015 while Nestles profits have ranged around $13b in recent year
Financially Stable
Chobani employees get benefits that have been modelled on Nestles employee benefits program leading to greater coherence among their employee
efforts and morale
Philosophy
Chobani has been involved in a number of controversies, most recent being the one in which 89 people were taken ill after consuming Chobani yogurt while
Nestle is one of the most respected and relatively blemish-free track record in regards to ethical operations
Fage S.A. (Greece)

Company Snapshot
FAGE is an international dairy company with a focus on yoghurt
Leading market position in the Greek yoghurt market
Primarily distributes its products in USA
Sales in over 35 countries
Manufactures, distributes and sells dairy products including
Recent Events
yoghurt, dairy dessert, milk, cream and cheese
Key Products
FAGE USA recently entered into a long-term agreement

with Proliant Dairy that will provide a sustainable outlet for
the whey from FAGEs production facility into New York
General Mills and FAGE resolved their trademark conflict
on the use of the word Total. Now both can use this
word in the names of their respective products
FAGE recently won a court case against Chobani
according to which Chobani would not be able to
market its products as Greek yoghurt in UK. Chobani
has decided to withdraw from UK currently.
Awards and Recognitions
Financially Stable
Philosophy
FAGE Total was named as the best plain yoghurt by Mens

and Womens Health Magazines
Mutual Dependency
FAGE Total 0% received BiteoftheBest.com Seal of

Approval
Complementary
Capabilities
Sante, the magazine for restaurant professionals, honored

FAGE with their Gold Star Award
Fage S.A. (Greece)

Company Snapshot
FAGE has the yogurt production capabilities in Greek and other low-fat yogurt while Nestle has the global marketing & distribution capabilities.
Complementary
Capabilities
Mutual Dependency
FAGE is a small player in the overall sector, but one of the few European companies with a pan-USA presence and in 35 other countries
FAGE is is looking at $3b revenues company by 2015 with international expansion being done through internal accruals creating high unutilized debt
capacity for the company
Financially Stable
FAGE has been trying to enter the emerging markets to drive its revenues but has almost no distribution set up in the high growth regions with most of its
revenues coming from developed markets while Nestle wants product access to yogurt
Philosophy
FAGE has not been involved in any major controversy related to its production or operations giving it an image of a well run and honest company, which fits
Nestles own story of integrity and success
Competitor Radar Screen for Nestle

Identifying the Competitors
Mars,
Incorporated
Starbucks
General Mills
PepsiCo
Heinz
Current
Competitors
Group
Danone
Kraft
Foods
Near-Term
Competitors
Nestle
Unilever
Conagra
Kellogg's
Mondelez
International
Coca Cola
Associated
British Foods
Hershey
Distant
Competitors
Among the possible partners we have

suggested:
Group Danone is a current competitor
General Mills is a near-term

competitor
FAGE and Chobani are not on the

competitor radar screen currently
Selecting Joint Venture Partner

Partner FIT
Company
General Mills
Dannone
Chobani
Fage
N/A
N/A
N/A
Origin Country
Primary Sales Regions
Complementary Capabilities
Optimal Mutual
Dependency
N/A
Financial Stability
Policy
N/A
N/A
N/A

Management Compatibility
Ethics & Trust
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Yoplait Yogurt
General Mills
Nestle wanted to
acquire Yoplait too
due to the market
leading brand it had
and to augment its
product portfolio
General Mills won the

bidding war for
Yoplait after a grim
battle with Nestle,
valuing the company
at $2.3billion
General Mills
0.9
1.3
1.4
1.55
1.65
Nestle
0.6
1.1
1.35
1.5
1.6
Bright Foods
0.7
1.2
Lactalis
0.6
However, after acquisition, the market share of Yoplait has decreased in the Americas from 32% to 26% and is currently no.2 in the yogurt space after Danone and
No.3 in the Greek Yogurt space after Chobani and Danone. The expansion of Yoplait in the emerging markets has also taken a hit due to decreasing sales figures in
the US market. Thus, expansion has taken a backseat and consolidation of the US market is more important to General Mills as of now. Hence, Nestle with its global
distribution network seems like the best candidate to help GM in expanding the brand in emerging markets without much recourse on its finances and resources.
Formation of Joint Venture

Key Motives for Nestle
Internal Benefits
Nestle will be able reduce its risks and share

costs in the production and distribution of a
new product line Greek yoghurts
Nestle has been working towards

transforming itself into a leader in
Nutrition, Health and Business. Addition of
the yoghurt product line is another step
in this directionx
Strategic Benefits
Competitive Benefits
Most of Nestles current and near-term competitors are

getting into the production of Greek yoghurt. This joint
venture allows Nestle to level the playing fieldx
Formation of Joint Venture

Key Motives for General Mills
Internal Benefits
General Mills would be able to share risks of

marketing a new product and reduce its costs
of setting up a global distribution channel
This will be an important step in

increasing the brand value of General
Mills across the globe and will be a step
towards the transformation into a truly
global company
Strategic Benefits
Competitive Benefits
General Mills derives 75% of its revenue from USA. Given the
mature market in USA, General Mills and its competitors have
been trying to increase their presence in emerging economies
Nestle + General Mills

Theoretical Justifications for the Joint Venture
Theory
Understanding This Joint Venture

Nestle:
Nestle is known for having a strong global distribution network
Also, it is ranked number 4 in the Effie Effectiveness Index which measures
the advertising and marketing effectiveness of companies
It wants to build up on its nutrition portfolio
Resource Based View
General Mills
It has a strong history of innovation
It has got strong yoghurt brand (Yoplait was named as the Yoghurt Brand
of the Year 2013 in USA)
It wants to increase its presence outside USA
The companies have complementary resources and capabilities and both
can gain by co-operating

Theory

Nestle:
Make: Making is not a viable option, as most competitors have already
entered this market and any further delay should be avoided. Production
costs are not low (R&D, advertisement, manufacturing, marketing)
Acquisition: The growing yoghurt market is a new opportunity and an
acquisition at this stage may be too risky an alternative. Further, most
yoghurt companies have a high valuation currently
Transaction Cost Rationale
A joint venture is appropriate

General Mills
Make: The company can either set up its own global distribution network,
but that would involve large costs, time and effort
Acquisition: Most companies having a well-established distribution
network are too large for General Mills to acquire
A joint venture makes the most sense
In case of these two companies, the transaction cost involved in setting up a
JV would be low due to their prior relationship and track record

Theory

Nestle:
Most recent additions to Nestles portfolio have been through
acquisitions rather than organic growth
This JV in which Nestle would get to work with General Mills to innovate
new dairy products will be an important learning ground for Nestle
General Mills
Organization Knowledge
and Learning Theory
General Mills marketing skills need to be improved upon

Further, it is still majorly a US centric company. It needs to learn how to
mould and innovate products which suit the tastes of the developing
and emerging nations
This JV will allow General Mills to learn key elements of these while
working with Nestle
Thus, both companies would be able to add to their learning and experience
with this joint venture.

Alliance v/s Acquisition
Synergies
Modular
In case of Yoplait, General Mills would be involved in

the production of the products. The completed
products would be passed on to Nestle, who would
be responsible for marketing and distributing the
product
Sequential
Reciprocal
The joint venture would also bring together the

technical and managerial acumen of the both the
companies so as to create new products and
innovations in the field of dairy. This would involve an
interactive knowledge-sharing process and both the
firms personnel closely working with each other

Assets
Hard
The companies would be sharing hard assets like

production facilities, distribution network
Soft
The companies would be contributing manpower

(both technical and managerial)

Degree of
Uncertainty
Low
Medium
The degree of uncertainty is medium. The two firms

have a joint venture already. Thus, there has already
been a fair degree of due diligence. However, as
their earlier venture focussed on cereals, there is still
some uncertainty about the other businesses of the
each firm.
High

Forces of
Competition
Low
Medium
High
The forces of competition are high. Most of Nestles

competitors have already entered the yoghurt
market (through organic growth/alliances/
acquisitions). In case of General Mills, most
competitors are expanding into the emerging
economies. Thus, there are high competitive
pressures

Criteria
Type
Synergies
Sequential (initially)and
Reciprocal (over time)
Equity Alliance (currently)
Assets
Hard and Soft
Equity Alliance/Acquisition
Degree of Uncertainty
Medium
Equity Alliance
Forces of Competition
High
Acquisition
An equity alliance is more appropriate than an acquisition. An acquisition is

further ruled out because of the existing joint venture agreement between
Nestle and General Mills whereby either company cannot put in a hostile
takeover bid for the other company before three years from the termination
of the joint venture agreement.

Snapshot of Rationale
Entry into a growing category

An important addition to its
nutrition portfolio
Greater innovation and new
product development through
close interactions with General
Mills
Leveraging strong brand names of
General Mills product
Sharing of costs and risks
Entry into the emerging economies

Leveraging the strong brand
name and the strong distribution
channel of Nestle
Learning how to create products
which satisfy the needs of the
customers in emerging economies
Learning advertisement and
marketing skills
Dairy Partners Worldwide

A Nestle and General Mills Venture
Joint Venture: Theoretical Tenets
Does the Joint Venture Make Sense?

Political Factors and Resource Requirement
The resource requirements are high, as General Mills has a

product line which has high growth potential and Nestle has a
strong distribution system leading to greater market access
Resource Requirement
Low
High
In case of a strategic alliance

between Nestle and General
Mills, the political factors are
low as there are no regulatory
requirements which make an
alliance mandatory/the only
available option
Political Factors
Low
High
Given low political
factors and high
resource requirement, a
Strategic Alliance/Joint
Venture makes sense
this case
Strategic Alliance/Joint Venture Orientation

Key Resources and Risks
Primary Risk
Property
Knowledge
Primary Resource
Relational Risk
Performance Risk
Control
Security
Flexibility
Productivity
Key Resource: Property

The alliance would involve sharing of production
facilities, distribution network and product lines
Key Risk: Performance Risk
As the company already has a successful joint

venture, the relational risk is low
Performance risk is high as they would be

introducing a product across several
geographies. Thus, the macroeconomic factors
may worsen, the product may not work, the
competition may be high etc.
In this case, the strategic alliance orientation needs to

be focussed on flexibility
This can be done by having an incremental approach

to the alliance and having clear performance metrics
Nature of Alliance/Joint Venture

Proactive v/s Defensive
Criteria
Business
Future
Proactive Alliance
Defensive Alliance
Reason
Expand Business
Survival in Existing
Business
Nestle is entering into new product

lines. General Mills is expanding
its geographic presence
Competition
Competitive
Advantage
Competitive
Pressures
Nestles competitors have already

entered into this product line.
General Mills competitors are
expanding into emerging markets
Market
Phase
Growing Market
Declining Market
The dairy product market is

growing in most geographies
Other Firms
Resources
Strategic
Option
Leverage
Create Options
Critical
Dependency
To effectively ward off competition,

the companies need each others
resources
No Option
Most other potential partners are

already collaborating with
competitors
Proactive Alliance
Nestle
+
General Mills
Defensive Alliance
Key Drivers
From The Perspective of Co-opetition
Setting Standards
The yoghurt market is highly fragmented. The coming together of two giants like Nestle and General Mills will set clear standards for the
industry
Sharing Risks
With any new product, there is a performance risk attached
At the same time, it also involves costs like setting up production facilities and distribution systems, marketing and advertisement
expenditure. This alliance will allow the two companies to share these risks and costs
Entering Emerging Markets
Both companies would be able to increase their presence in the emerging economies
Expanding Product Lines
Nestle will be able to enter into the Greek yoghurt market and hence add to its nutrition portfolio
Reducing Costs
By setting up combined production facilities, both the companies would be able to achieve economies of scale
Gaining Market Share
With the help of General Mills product line and Nestles strong distribution system, the companies will be able to increase their
market share across geographies
Creating New Businesses
The two companies already have a successful joint venture

This joint venture would allow them to further strengthen their relationship while addressing a gap in their product portfolios
and geographic strength
Key Risks
From The Perspective of Co-opetition
Technology Leakage
General Mills and Nestle had a face-off in the acquisition of Yoplait in which General Mills emerged victorious
However, General Mills has till now been unable to effectively market and distribute its yoghurts products
While this alliance will allow it to leverage the marketing expertise of Nestle, but at the same time there is a risk that Nestle
might be able to glean into the technology/processes involved in the production of yoghurt
Telegraphing Strategic Intention
The two companies may come to know which geographies and products the other company is planning to target based on
the nuances of management decisions
Customer Defection
Based on how the products of the joint venture are promoted and marketed (use of brand names/company names),
customers of one company may come in contact with the other company, hence increasing the risk of defection
Slow Decision Making
This is a major drawback of strategic alliances and joint ventures. As the alliances/ joint ventures decision affects both the
companies, and as the companies may have differing goals and objectives, there is slow decision making so as to satisfy
both the parties
Typology of Alliance/Joint Venture

Organizational Interaction and Conflict Potential
Extent of Organizational
Interaction
Low
Strategic Objective
Alliance Type
High
Flexibility
Core
Protection
Learning
Value
Adding
Low
Procompetitive
Alliance
Noncompetitive
Alliance
Competitive
Non-Competitive
Pro-Competitive
High
Conflict Potential
Pre-Competitive
PreCompetitive
Alliance
Competitive
Alliance
In this alliance, given the lower extent of geographic and product overlap, the
conflict potential is low-medium. Further, the success of their earlier joint venture
also points towards a low conflict potential
The extent of organizational interaction will be high as of shared control on most
decisions
Thus in this alliance, the key strategic objective would be learning followed by value
adding, flexibility and core protection
Negotiations: Role Play

Financial Ownership and Management Control
Structure
Joint Venture
Financial Control
50:50
The parties are equally strong and have a history of a successful 50:50 IJV called CPW
Management Control
Nestles Perspective and General
Mills Perspective
Our Recommendation
Both companies would want
CEO should be externally appointed so that the JVs objectives are not subordinated to
greater managerial control. They
the individual objectives of the two companies.
would want to choose the CEO
Split Control: Nestle responsible for marketing communication, distribution, operation and
to ensure that their companies
logistics. General Mills responsible for branding, content and manufacturing.
interests are met
Shared Control: R&D, HR and talent management and finance

Scope of Joint Venture
Nestles Perspective
General Mills Perspective
Our Recommendation
USA should not be a part of the joint
venture because that would encourage
direct competition between General
Nestle would want the joint venture to

be involved in production and
distribution of dairy products across all
geographies (including USA)
General Mills would not want to give up

its control on the US market as it derives
75% of its revenue from this geography
Mills and Nestle and hence could lead

to mis-alignment of incentives.
If either firm comes up with a
competing/substitute product on its
own, the JV should get first right of
distribution/promotion/bringing it to
market globally

Governance & Regulatory Issues
Nestles Perspective and General Mills Perspective
Both would want greater representation on the board.

Further, they would prefer to have their own CEO and
Chairperson heading the joint venture
Our Recommendation
CEO should be externally appointed

Chairperson should be rotated every 3 years
The JV should be located in Switzerland as the country boasts

of the one of the most favourable tax regulations and legal
Both would want the JV to be situated in their home country
stipulations, along with being a favourable business ground,
of operation to lend greater influence on the JV implicitly
as regulatory approvals are required only in financial services

companies, real estate business, healthcare and trading in
specific goods

Exit Options
Our Recommendation
Initial lock-in period of 5 years with no change in equity structure
If the firm suffers increasing net losses for three consecutive years, the JV should be re-evaluated
If there is change in ownership in any of the partner firms, the JV will be dissolved with first right of refusal to the other partner
If one partner is looking to sell, the other partner has first right of refusal
In case of any breach of covenants of the JV by any partner, the aggrieved party can buy out the stake of this partner in the JV or
liquidate the JV
Management of the Joint Venture
Nestle + General Mills = International Joint Venture

Determinants of Performance
Addressed during negotiation of structure,

control and governance
Control of the IJV

by Parent Firms
Autonomy Granted
to IJV
Management
Corporate Cultural
Differences
Key
Determinants
Corporate and National Differences exist,
but as the company has been able to work
successfully in the past, future co-operation
is expected to be fruitful
National Cultural
Differences
Trust Between the

IJV Partners
Should have been strongly established

during the previous joint venture
Role of the Joint Venture Manager

5 Key tenets to effective Joint Venture Management
InterOrganizational
Trust
Focus on
Internal
Harmony
Contribution
Monitoring
Joint Venture
Management
Periodic
Strategic
Assessment
Efficient
Information
Flow
Alliance Management
Inter-organizational trust
InterOrganizational
Trust
Joint Venture
Management
Nestle and General Mills have been

trusted partners in one segment of the
market
This JV should be looked at as an
extension of that relationship and more
Regular meetings between the top
management and R&D wings of both
Nestle and General Mills should be
convened
Bring on board people who have
worked in CPW previously so as to lend
credibility to DPW, as a long lasting bond
Alliance Management
Partner Contribution Monitoring
Contribution
Monitoring
Joint Venture
Management
Nestle and General Mills have been

global partners for over 20 years
The JV manager should have the
authority to initiate corrective action in
case either partner is found lacking in its
resource contribution (GM-Product //
Nestle-Market)
The best product developers should be
made available to DPW by GM while the
best marketers should be made
available to DPW by Nestle, in principle
JV has to be monitored continuously,
some aspects periodically while others
daily
Alliance Management
Efficient Information Flow Management
Joint Venture
Management
Efficient
Information
Flow
CPW has been one of the most

successful and long lasting JVs in the
FMCG industry primarily due to the
efficient processing of information
Managing information flow has to be a
priority task rather than an incidental
management mechanism
Care has to be taken not to pass on
proprietary knowledge from one firm to
another while maintaining the JVs
interests
A decentralized approach needs to be
taken as product-market JVs tend to
suffer from problems that require quick
decision making
Alliance Management
Periodic Strategic Assessment
Joint Venture
Management
Periodic
Strategic
Assessment
General Mills and Nestles previous JV:

CPW was a defensive alliance to
counter the threat of Kelloggs in Europe
DPW is envisaged with a view to
counter competitive pressures in the
yogurt market globally, but with greater
focus on latent geographies where
Nestles distribution strength is greatest
There should be a lock-in period of at
least 5 years to allow for the resources
ploughed into the JV to have room for
productive growth and output
GM currently wants to increase its
geographic diversity while Nestle is
aiming for product diversity which
might change in the long run, in the
case of which there should be a clear
exit policy singled out and accepted
by both parties
Alliance Management
Focus on Internal Harmony
Focus on
Internal
Harmony
Joint Venture
Management
Internal relationships between functional

managers and divisional managers must
be kept intact and away from any JV
related pressures and conflict
JV managers selected to run the new
firm should be credible with exemplary
prior track record at the parent firm
Importance of the JV to the respective
firm has to be clearly outlined to the
middle level management for greater
coherence in the parents activities
People involved in the processes that
are replaced by the JV should be
streamlined into the JV to promote
internal harmony and consistency of
strategic intentions of the firm
Assessment of the Joint Venture
Assessment of Alliance
Key Factors
Shared Risk
Both partners share common value
systems and complement each
others corporate culture. Such
shared value systems is the
foundation of this relationship
providing the means, motivation
and commitment to resolve
partnership related problems and
mutually grow the relationship
Shared Values
The partners share a common vision, common

views of the objectives, results and outcomes
of the alliance
Shared Vision
Both partners bear a fair and appropriate share of risks

in the alliance, no partner has unnecessary burden
Shared
Resources
Shared Rewards
Each partner commits an

appropriate amount of resources be
it capital, people, knowledge etc.
Both partners share appropriately in the

rewards, the partners work together to create
mutual wins whether to attain success via
similar market, similar customer base etc.
Performance Metrics
Assessment of the Key Factors
A precise set of meaningful parameters is the best way to drive performance and produce desired benefits from the partnership. These metrics
should include shared measurements that are similar to both partners.
Metrics
Operational
Timeliness
Productivity
Innovation
Quality
Measurements
Process
improvement
Partnership
Technology
Integration
New business
gained
Profitability
gained across
portfolio
Developing an Evaluation Plan

Assessment of Joint Venture
Rationale for the Relationship

A strategic intent by partner companies establishes the need/business case for a relationship.
The nature of the objectives will drive the type of partners sought, the manner in which the relationship operates, and thus the type of evaluation
metrics selected
Strategic Objectives of Relationship

They provide a critical part of the foundation on which the management control system for the relationship is built
The evaluation criteria for assessing the performance should be developed according to the relative importance of the various strategic objectives
established by managers
However, it follows that as strategic objectives are modified during the lifetime of the alliance, to remain effective the evaluation criteria must be
adapted as well.
Selection of Evaluation Criteria

The balanced scorecard framework can be used for this purpose. It shows how the strategy of a firm can be translated into performance measures
based upon four perspectives: financial, customer, internal business process, and learning and growth
These four perspectives provide the balance necessary for a company to focus on issues that are indicative of longer-term success, rather than
concentrating on short-term financial measures
Customization is necessary in using the balanced scorecard in an alliance relationship.
Emphasizing Specific Metrics

Another benefit of the balanced scorecard approach is the potential to tailor the system to meet the needs of a given relationship
Implementing the Evaluation Plan

Formalized and regular assessment is essential for those involved in the alliance to attach credibility to the process and to learn from the results
The evaluation process will also need to be refined throughout the life cycle of the alliance to assure that timely information is being collected
The final link in the evaluation process is to consider how the output of the evaluation will be used to determine individual and team performance
and rewards
Assessment frequency should consider the evaluation metrics, as well as the environment in general
Thank You

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Dairy Partners Worldwide (DPW)

Brief Company Snapshot

Headquartered in Vevey, Switzerland, the company is the world leader

Largest packed food company in the world, with focus on nutrition,

Well diversified product portfolio with leading global market positions in

Brand portfolio consists of 30+ Billionaire brands

#1 player in global infant nutrition

Largest emerging market exposure absolutely

Business Segment Breakdown

Diverse Product and brand portfolio

Leadership in Nutrition, Health and Wellness

Leadership in innovation and renovation

Unmatched R&D capability

Popularly Positioned Products (PPP)

Unmatched geographic presence

Products are available whenever, wherever

Diverse product portfolio with several strong

Lack of consistency in product lines across

Increasing focus of consumers on health and

Deterioration in consumer environment in

Changes in the Dairy Industry

Key Growth Drivers

The global dairy industry is undergoing a paradigm shift

Surge in consumer demand in most countries for drinkable yogurt,

Advent of functional products

The rising awareness about lifestyle related health concerns such as

Emphasis on low calorie, low sugar, digestive products

Rising awareness about the benefits of yogurt, with its positioning as a

Yoghurt In Europe and Emerging Economies

Within the Asia-Pacific region, China is the fastest growing regional

As per Euromonitor estimates, emerging markets, including China and

When compared to high consumption markets as France (which sees

Refrigerated yogurt is the eighth largest selling subcategory in food,

drug and mass market (excluding Walmart)

Yogurt sale is growing in food services menus

Technical Resources & Skills should be complementary in nature

Optimum Mutual Dependency

There has to be some identifiable mutual need and middle level of

Similar Company Size

Elephant & the Ant complex has to be avoided at all costs

The partner should be financially capable of investing in the JV

Goals and objectives of the partners have to have strategic fit

Compatible Operating Philosophy

Inconsistencies related to normal operations should be as low as

Low Culture Barriers

Cultural, Communication barriers should be as lo as possible to

Close personal rapport if available, should be treated with

Ethical and Trustworthy

General Mills (United States)

Brief Company Snapshot

Located in Minneapolis, USA the company holds #1 or #2

Main product categories in the international arena include

Similar Company Size

superpremium ice cream and frozen desserts, refrigerated yogurt,

Share Price Performance

Low Culture Barriers

With 30 manufacturing facilities spread across the world, the company

Founded in 1866, the companys goal is to generate balanced longterm growth

Ethical and Trustworthy

General Mills (United States)

Similar Company Size

Low Culture Barriers

Ethical and Trustworthy

Groupe Danone (France)

General Mills (United States)

General Mills (United States)

Groupe Danone (France)

Groupe Danone (France)

Chobani Inc. (United States)

Chobani Inc. (United States)

Fage S.A. (Greece)

Fage S.A. (Greece)

Competitor Radar Screen for Nestle

Selecting Joint Venture Partner

Formation of Joint Venture