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Nestle and Rowntree

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Submitted By maunaARaj
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Nestle and Rowntree

This is a scope and scale deal for Nestle. Nestle wants to achieve an inorganic growth by acquiring Rowntree and with that access to its different countline which complement theirs and also additional foot holding in the block chocolate business(Exhibit 1). Nestle wants to achieve this in minimum amount of time, so the need for accomplishing this kind of growth only comes through acquisition. Nestle could leverage on Rowntree’s stronger position in the UK and the continental Europe market and grow. Rowntree had achieved significant operational efficiency in its production line and merging these companies could result in Nestle achieving synergies in the research & development, administration and sales force.

Applying Zook’s analysis, we can say that this is a core. Nestle is in the food business with chocolate being one of its products and Rowntree is big on chocolates. So we can say that this is a core and maybe a 1-step considering that chocolate is not a big and profitable segment of Nestle’s. If we consider the fact that this acquisition is also getting Nestle the much needed presence in the international market, this is building a stronger core.
The entrance of a competitor (Suchard) gives Rowntree an upper hand to go either with Nestle or with Suchard for the merger. According to Dyer’s this calls for an acquisition otherwise the competitor will become stronger in the industry and competing with the merged company will be harder.
According to Bruner’s(Exhibit 2) the need to control is high due to the presence of a competition company in which case an alliance is not strategic and only an acquisition can make Nestle feel safer and protect its stake in the market.

Nestle had a very clear organisational structure where everyone knew their responsibilities and the authority given to each was very well defined and established. Nestle’s…...

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