Intra- and inter-regional strategies of FMCG-firms : impact of core sectors and home regions on the regionalization of FMCG-firms : a multiple case study

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INTRA- AND INTER-REGIONAL STRATEGIES

OF FMCG-FIRMS

IMPACT OF CORE SECTORS AND HOME REGIONS ON THE REGIONALIZATION OF FMCG-FIRMS A MULTIPLE CASE STUDY

Master Thesis

MSc. Business Studies-International Management Supervisor: Dr Johan Lindeque

Second reader: Drs. Daniel van den Buuse Student: Charlotte Geerse

Student ID: 10245812

Date: 15 August 2014

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2 Abstract

The majority of firms listed in the Global Fortune 500 of 2001 and 2012 operate on regional level (Rugman and Verbeke, 2004). The regionalization theory assigns this fact to liability of foreignness and transaction costs as a result of distances between the firm’s home location and the host region. Firms that operate outside its home region were able to overcome these liabilities by transferring its firm-specific advantages (FSAs). This study focuses on the regionalization strategy of firms within the fast mover consumer good-industry (FMCG) from which the majority operates outside its home region. By defining the distances and the transferring of FSAs this study aims to explain the relevant factors in the FMCG-firms’ regionalization strategy with taken its core sector and home region into account.

Applying a multiple-case research design, this study used quantitative data from five selected firms’ annual reports (2008-2012) and is supported by qualitative data retrieved from e.g. newspaper articles published during the same period in the Financial Times.

Almost all of the firms in this study are seeking for new markets and increasingly expanding towards emerging countries. These new markets result in a shift within the FMCG MNEs’ strategy; the cultural distance is the major LoF and the firm has to change its transferable FSAs to overcome this new distance. The core sectors and home regions are not significantly changing the FMCG MNEs strategies. Firms focused on food and beverages face more inter-regional uncertainties than firms focused on personal and household care-products due to the cultural distances and firms home-based in Europe receive slightly more benefits from its location than firms home-based in North America.

Key terms: globalization, regionalization, inter-regional strategy, FMCG, home region, core sector.

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3 Acknowledgements

Firstly I thank everyone who helped and supported me in writing this thesis. Especially Johan Lindeque who guided me through the process of writing this thesis and helped me to deliver this result by providing me with valuable input and feedback. Also I want to express my gratitude for the patience he has shown with me. Without his counsel this thesis would not have been here.

Also I thank the other students with whom I could share the experience of studying the regionalization theory and with whom I put together the data set for our studies. Our discussions have helped me shape my views on the topic and have proven to be key for finishing this document.

Thirdly all of my friends with whom I had great fun the last few years and kept me motivated during my studies till the final moment.

Finally I would like to thank my family who have supported me throughout my studies and cheered me up during the difficult moments enabling me to reach this result.

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Tables and figures

Tables

1 Quantifications of the MNE international sales levels and classification of the Fortune Global 500-list of 2001 and 2012 (Rugman and Verbeke, 2004; own research).

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2 FMCG-firms listed in Fortune Global 500-list (2012) divided by home region and core sector.

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3 Overview of selected cases in this study (data based on annual reports). 31

4 Qualitative data collection for focal firms 33

5 Coding system used in this research 34

6 Within-case analysis Nestlé, 2008-2012 37

7 Nestlé’s regional cultural differences based on The Hofstede Centre (2014) 40

8 Within-case analysis P&G, 2008-2012 42

9 P&G’s regional cultural differences based on The Hofstede Centre (2014) 45

10 Within-case analyse Unilever, 2008-2012 48

11 Unilever’s regional cultural differences based on The Hofstede Centre (2014)

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12 Within-case analysis Kraft Foods, 2008-2012 52

13 Kraft Foods’ regional cultural differences based on The Hofstede Centre (2014)

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14 Within-case analysis L'Oréal, 2008-2012 59

15 L'Oréal’s regional cultural differences based on The Hofstede Centre (2014)

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16 Cross-case analysis Nestlé, P&G, Unilever, Kraft Foods and L’Oréal, 2008-2012

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17 Results for the propositions in this study 73

Figures

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Abbreviations

ASEAN - Association of Southeast Asian Nations CSA - Country specific advantage

DP - Degree of Presence

EU - European Union

F&B - Food and Beverages FDI - Foreign direct investment

FE - Focus on Entry

FMCG - Fast mover consumer good FSA - Firm specific advantage IB - International business IBV - Institution-based view MNE - Multinational enterprise

MP - Model Path

NA - Not Available

NAFTA - North American Free Trade Agreement NLB FSA - Non-location bounded firm specific advantage

LA - Location Advantage

LB FSA - Location bounded firm specific advantage LoF - Liability of foreignness

P&HC - Personal and household care P&G - Procter and Gamble

PP - Physical Presence

RBV - Resource-based view

UK - United Kingdom

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1. Introduction

This study will focus on the inter- and intra-regional strategies of firms operating in the industry of fast mover consumer goods (FMCG). The aim of this study is to understand and explain the motives of five large FMCG-firms (Nestlé, P&G, Unilever, Kraft Foods and L'Oréal) to expand within the region of its home country or to expand to specific foreign regions. In addition to this aim are the influences of the firms’ home region and core sector taken into account.

The research to regionalization strategies of the FMCG-industry is interesting for two reasons. The first reason covers the sensitivity of the inter-regional FMCG-market. FMCG-firms are in international business (IB) relatively sensitive to influences on their performance as a result of cultural-, administrative-, geographic-, and economic distances (Ghemawat, 2001). The firms have overcome the liabilities of foreignness (LoF) in host countries by export its minimal transferable strengths (brand image and financial resources), act according to the institutional settings and interact with local partners. This combination of imitating factors results in an interesting inter- or intra-regional strategy.

The second reason is the gap in studies done so far on regionalization within the FMCG industry. The regionalization strategies of various companies and core sectors within the FMCG industry have been studied (Fillipaios and Rama, 2008; Oh and Rugman, 2006; Gardner and McGowan, 2010) but there is no overall study done in which the firms’ core sectors are compared to each other, nor are the home regions included. The FMCG-firms’ core sectors and home region influence its LoF, which are major predictors for a company’s international success (Rugman and Verbeke, 1992). The aim of this study is to fill this gap in the IB literature and give an overview of the complexities in inter- and intra-regional strategies of FMCG MNEs based on their core products and home regions.

This study encompasses five longitudinal within-case analyses of the five earlier mentioned FMCG MNEs listed in the Fortune Global 500 and two cross-case analyses focused on the two core themes; the firms’ core sector and home region. The longitudinal analyses include the sales data of the five FMCG MNEs over the period between 2008 and 2012. This period provides information about changes over time

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and insights in their international strategy. The first cross-case analysis will study the differences between FMCG MNEs international strategy based on its core sector food and beverages (F&B) versus personal and household care-products (P&HC). The second between-case analysis studies the differences between the five cases based on its home regions; three firms are home-based in Europe and in two cases is the home region North America. With the help of these analyses, this study will answer the following research question:

How do core sectors and home regions affect the regionalization of FMCG MNEs?

In order to answer the research question, this paper starts with an overview of the relevant IB literature so far. Based on this literature, the author has set up four working propositions encompassing potential relevant factors in answering the research question. In the third chapter, the methodology section, the research philosophy, case selection, and data analysis will be discussed. The methodology chapter will be followed by the results of the five within-case analyses and two cross-case analyses. The thesis concludes by drawing implications of the findings, reflecting on the limitations of the study and identifying opportunities for future research.

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2. Literature review

This study researches the influences of core products and the location of the firms’ home country on the regionalization strategy of FMCG MNEs. In order to build a research foundation this chapter provides an overview of the IB literature on regionalization to date. With help of the two main views, the resource-based view and the institutional-based view, the relevant factors of regionalization strategy are discussed, this is followed by a focus on the FMCG-industry, that emphasises the role of the home region and core sectors of the focal FMCG MNEs.

2.1 IB literature and the regionalization theory

An MNE is a company that owns and/or, controls value-adding business activities in more than one country (Buckley and Casson, 2009: 1564). These value-adding activities are results of foreign direct investments (FDIs) by companies seeking new markets, more efficient product lines, new resources, and, or strategic assets (Dunning, 1998: 53). The recent increase of FDI, an outcome and cause of international economic integration and technological development (Dunning, 1998, 46; Garrett, 2000: 942), triggered the attention of globalization theories within the international business (IB) literature (Peng, 2009; Garrett, 2000; Buckley and Casson, 2009; Rugman, Verbeke and Nguyen, 2011).

The IB literature disputes the actual existence of globalization. On the one side literature paraphrases this phenomenon (Garrett, 2000: 942; Peng, 2011: 16), discusses the causes (Garrett, 2000), and appoints the role of MNEs (Levitt, 1983), while on the other side literature contests the actual appearance of it (Ghemawat, 2003; Rugman, 2001; Rugman and Verbeke, 2004). Clearly, there are limitations to the level of globalization; there is no total global integration of countries and people, and there is no sign of a development towards this scenario (Garrett, 2000; Ghemawat, 2003). The regionalization theory is a reaction on the globalization theory (Rugman and Verbeke, 2004; Rugman, Verbeke, and Nguyen, 2011). This paragraph starts with the globalization theory on macro-level and focuses on the process towards the regionalization theory on micro-level.

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11 2.1.1 Process toward the regionalization theory

Globalization in general is ‘the close integration of countries and peoples in the world’ (Peng, 2011: 16). By using the term ‘integration’, Peng (2011) assumes that countries and people get increasingly dependent and intermixed all around the world while this previously used to be segregated. This process of intermixing is widely studied in IB, resulting in the statement that globalization has increased during the last three decades (Peng, 2011; Garrett, 2000; Buckley and Casson, 2009).

According to Garrett (2000) total integration of countries and people in the world is not realistic; not all national markets will appear equally globalized due to country size, level of development, democratic government, and interactions of political power within countries. Ghemawat (2003) corroborates the limitations and argues the appearance of semiglobalization instead of globalization. His criticism of globalization is focused on the optimistic view of globalists that market integration reached new heights and is therefore a sign of enormous globalization. These conclusions are premature; the level of market integration is still far from Levitt’s (1983) economic theory’s ideal of perfect integration. Distances results in trade barriers or links between markets and make it impossible to reach total global integration or total insulation (Ghemawat, 2001: 2003). Semiglobalization points out the complex area between integration and insulation (Ghemawat, 2003).

Semiglobalization focuses on the location of the country, and country-specific dimensions in the process of market integration by pointing to the influence of distance (Ghemawat, 2001: 2003). The country’s geographic location is indeed important; Johanson and Vahlne (1977) argued, in the so called Uppsala model, that firms internationally expand in stages starting by the geographically most nearby country as it may have similar country specifics what could overcome the possibility of LoF. Focusing on international trade, Franklin and Rose (2002) conclude that locations of countries indeed matter; “belonging to the same regional trading bloc, belonging to a common currency union, and geographic proximity are all strong predictors of trade between countries, suggesting that cross-border integration may be stronger within such regions than between them” (Asmussen, 2008: 1192). This conclusion on macro-level is confirmed and extended by Rugman and Verbeke (2004) on micro-level. Their study focuses on the degree of internationalization of the Global

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Fortune 500 firms, that were also studied in the original work on regionalization theory.

2.1.2 Regionalization theory on firm level

Rugman and Verbeke (2004) extend the focus on regions to market integration at the firm level. They distinguish four types of MNEs; those who operate on global level, mainly in a host region, in their home region, or operate on bi-regional level. Out of the 500 largest MNEs listed in the Global Fortune 500 of 2001 just nine MNEs are classified as operating globally. The vast majority of the 500 MNEs operated in 2012 within the home region (64.0%) followed by bi-regional (5.0%) and host region orientated (2.2%) (see Table 1). The quantifications for an MNE to be classified as operating in its home region is that at least fifty percent of its total sales is generated in the region of its home country (see Table 1). Most MNEs benefit from higher degrees of integration in the home regions such as North America (NAFTA), Europe (EU) or Asia (ASEAN) (2004). These three regions are based on the three triads mentioned by Ohmae; the United States of America, Europe, and Japan, and are updated to more recent splits (2004: 6). A research group from the University of Amsterdam (UvA) replicated Rugman and Verbeke’s study and collected the data from 2012. Comparing these results to the Rugman and Verbeke’s (2004) findings shows increasing global and bi-regional orientated MNEs and a decrease in MNEs focusing on its home region (see table 1). These results show an increasing inter-regional trend in which a major amount of the MNEs is still focused on its home region.

International strategy

Rugman & Verbeke (2004) Classification Decision Rules

Rugman & Verbeke (2004) Results UvA Data Collection 2012 % Sales home region % Sales second region % Sales third region No. of 500 MNEs % of 500 MNEs No. of 500 MNEs % of 500 MNEs Home region oriented ≥ 50 320 64.0 215 43.0 Bi-regional ≥20-<50 ≥20-<50 25 5.0 39 7.8 Host region oriented ≥50 11 2.2 13 2.6 Global ≥20-<50 ≥20-<50 ≥20-<50 9 1.8 26 5.2 Insufficient

data & no data 135 27.0 207 41.4

Total 500 100 500 100

Table 1. Quantifications of the MNE international sales levels and classification of

the Fortune Global 500-list of 2001 and 2012 (Rugman and Verbeke, 2004; own research).

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13 2.1.3 Critical thinking on regionalization in IB

Rugman and Verbeke (2004) challenge the globalization phenomenon by arguing that the arguments about international integration do not fit on micro- and firm level. The MNEs listed in the Fortune Global 500 are responsible “for most of the world’s trade and investment. Indeed, the largest 500 MNEs account for over 90% of the world’s stock of foreign direct investment (FDI) and they, themselves, conduct about half the world’s trade” (Rugman, 2000 in Rugman and Verbeke, 2004: 1). These 500 MNEs therefore cover a major amount of the world’s trade but operate mainly on regional level. The results on firm level (mainly regional integration) do not fit with the beliefs on macro level (global integration). This mismatch is based on scale and scope of the results in advance of the regionalization theory and thus provides new arguments against the globalization theory (Rugman and Verbeke, 2004; Burr and Fischerman, 2008; Asmussen, 2008).

Beside critics on the globalization phenomenon, IB literature also contests the regionalization theory. The majority of the critics on regionalization is based on used methods, conceptualizations and possible influence of home-country effects (Dunning, Fujita and Yakova, 2006; Osegowitsch and Sammartino, 2008). On the other side, regionalization continues to be a relatively unexplored field of study (Rugman and Verbeke, 2008; Kolk, 2010).

2.1.4 LoF and views on regionalization strategy

The majority of the firms listed in the Fortune Global 500 operate at a regional level (Rugman and Verbeke, 2004). Five statements explain their regional strategy. First, most of MNE’s sales are not equally distributed all over the world, what it doesn’t make them attractive for all local demands (Rugman and Verbeke, 2004). Second, the MNE’s FSAs can be location bound (LB) to the home country and therefore not transferable to other regions, when this is a significant portion of the home region presence it is called a ‘home country effect’. Third, the non-location bound (NLB) FSAs have to be combined with the LB FSAs from the host country, with limited development and access to these LB FSAs are the benefits of it limited as well. Fourth, different market positions in different regions of the world lead to different business roles and counter the overall competitive strategy. Finally, a lack of success

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of an MNE in other regions can be explained by the presence of multiple environmental circumstances (Rugman and Verbeke, 2004). The regionalization literature argues that an MNE’s lack of success in host regions is largely depending on the presence of the LoF (Zaheer, 1995), specifically inter- and intra-regional LoF.

The LoF is “(…) the costs of doing business abroad that result in a competitive disadvantage for an MNE subunit” (Zaheer, 1995: 342). These costs arise from several sources; “(1) costs directly associated with spatial distance, such as the costs of travel, transportation, and coordination over distance and across time zones; (2) firm-specific costs based on a particular company’s unfamiliarity with and lack of roots in a local environment; (3) costs resulting from the host country environment such as the lack of legitimacy of foreign firms and economic nationalism; (4) costs from the home country environment such as the restrictions on high-technology sales to certain countries imposed on U.S.- owned MNEs” (Zaheer, 1995: 343). Additional to these finding Rugman and Verbeke (2007) argue that LoF is applicable on regions and distinguish inter- and intra-regional LoF. Between regions, inter-regional LoF, the costs of doing business abroad are higher than between countries in same region (intra-regional LoF) and so is the level of LoF (Rugman and Verbeke, 2007). Due to the different levels of LoF, MNEs will prefer intra-regional expansion.

Figure 1. Overview of factors involving the firms’ preferred strategy.

The degree to which MNEs experience inter- and intra-regional LoF is explained by the relative degree of non-transferability of FSAs (Rugman, 2005) and the institutional environment. The regionalization strategy can thus be explained by the use of the resource-based view (RBV) and the institution-based view (IBV). According to the RBV a firm creates its competitive strategic advantages by combining specific resources and capabilities (Barney, 1991) or FSAs (Rugman and

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Verbeke, 1992). FSAs are argued to be more easily transferable and adapted in intra-regional business compared to inter-intra-regional business (Rugman and Verbeke, 2007). According to the IBV the firms’ internationalization strategy is a result of considerations about the different transaction costs associated with a specific region or country’s institutional environment (Rugman and Verbeke, 2005). The different transaction costs are a result of the institutionally determined LoF, guided by various distances between the home- and host regions or countries (Zaheer, 1995; North, 1991; Ghemawat, 2001).

2.2 FSAs’ explanation of regionalization

This paragraph discusses the first mentioned view, the RBV, and is especially focused on the firms’ internal “strengths relative to rival companies” (Verbeke, 2009: 5). The firms’ core sectors and location of the home country are resources that influence the degree of FSAs, inter- or intra-regional LoF and in the end the inter- or intra-regional strategy.

2.2.1 The resource-based view

The RBV is a theoretical innovation in the IB literature pioneered by Wernerfelt (1984) and Barney (1991) as leading researchers in the development of strategic management (Peng, 2001). Wernerfelt’s (1984) strategy focuses on the firms’ ability to create sustainable competitive advantage based on a unique combination of resources and capabilities. This strategy is, in contrast to other views, focussing on the firms’ advantages instead of the firms’ possible market opportunities (Wernerfelt, 1984). In order to create a sustainable competitive advantage, the unique combination of the firms’ resources and capabilities has to meet Barney’s (1995) requirements of being at least valuable, rare, imperfect imitable, and organisable.

The RBV contains three factors important for MNEs: NLB FSAs, LB FSAs, and location advantages (Rugman and Verbeke, 1992). These factors will be discussed in the next paragraphs.

2.2.2 FSAs and location advantage

FSAs are resources and capabilities, or knowledge, which strengthens the firm relatively to competitors (Verbeke, 2009: 5). Verbeke (2009: 4-5) distinguishes seven

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types of FSAs: (1) physical resources, (2) financial resources, (3) human resources, (4) upstream knowledge, (5) downstream knowledge, (6) administrative knowledge, and (7) reputational resources. These types can be NLB or LB FSAs.

NLB FSAs are the firms’ resources and capabilities that are transferable into other countries or regions than its home location (Verbeke, 2009). These FSAs are, for example, (end)-products, licenses, knowledge or business routines. LB FSAs are resources and capabilities that are not transferable to the firms’ host country. There are four types of resources defining the non-transferability of these FSAs (Verbeke, 2009). The first type is the stand-alone resource; this FSA is linked to location advantage and encompasses for example profits from local networks. The second type includes intangible immobile resources such as local marketing knowledge and reputational resources. These resources are not entirely immobile; a good reputation can be extended towards other regions, but this does not have the same value in the host regions as in the home country. Third, firms cannot transfer their local best practices towards a host region. These resources include for example the highly effective and efficient routines in the supply-chain. The last type of immobile resources is the firms’ local recombination capability (Verbeke, 2009).

The combination of NLB FSAs and LB FSAs results in positive performance within the local market. Transfer of the NLB FSAs towards a host region builds a foundation for performance, but will not be successful on itself; these FSAs need their complementary LB FSAs (Rugman, 2005). The firm has to ensure that its NLB FSAs interact with the host regions’ location advantages or has to develop its own LB FSAs as well to reach positive performance abroad (Rugman, 2005). In the interaction with the host country it is important to take bounded rationality and bounded reliability into account (Verbeke, 2009). These terms reflect limitations on the behavioural characteristics that influence the international success, e.g. the limited human capacity to decide based on incomplete information or the “insufficient effort to deliver on promised behaviour or performance” (Verbeke 2009, 9).

Based on the firms’ goal in the host country, for example natural resource seeking, market seeking, strategic resource seeking or efficiency seeking, it is important to take the host country’s location advantages into account (Verbeke, 2009). Selecting host countries based on relevant advantages increases the successful development of LB FSAs in the host country and decreases the LoF.

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17 2.2.3 FSAs and the regionalization theory

Rugman and Verbeke (2007) argue that the majority of firms operate on regional level due to limitations on developing the LB FSAs in host regions, the non-transferability of NLB FSAs and less costly transfer of LB FSAs within the home region. In contrast to the theoretical assumption that NLB FSAs are mobile, Rugman and Verbeke (2007) state that it is not possible to transfer these advantages universally around the world. The degree of transferability of the NLB FSAs depends on the distance between the firms’ home- and host country in which an increase in distance leads to a decrease in transferability. On the other side it is easier and less costly to extend the LB FSAs into other countries within the same region, especially when markets in this region become increasingly depending on each other, e.g. within the EU (Rugman and Verbeke, 2007; Rugman, 2005). Increase of a shared market decreases the LoF. These implications support the regionalization theory and explain why firms would prefer a regional strategy; because of the difficulty to develop LB FSAs in a host region, the non-transferability of NLB FSAs in host regions with a high distance from the firms’ home country and the transferability of LB FSAs within the home region.

2.3 Institutional explanations of regionalization

This paragraph discusses the second view on regionalization, the IBV. “An institution-based view of strategy focuses on the dynamic interaction between institutions and organizations, and considers strategic choices as the outcome of such an interaction” (Pent et al., 2008: 922). This paragraph starts with the two dominant perspectives in the IBV literature, Scotts’ (1995) sociological approach and Norths’ (1991) economic approach, followed by a focus on the economic approach and applying it to the regionalization theory to discuss the considerations based on the interaction between institutions and organizations.

2.3.1 The institution-based view

The institutional approach includes the influence of institutions on IB. This view includes two dominant perspectives; the sociological approach of Scott (1995) and the economic approach of North (1991). Scotts’ sociological approach (1995) focuses on the threats of coercive, normative and cognitive pressures from host countries on organizations. In host countries interested foreign organizations first have to

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overcome these pressures in order to obtain legitimacy followed by possible success. Norths’ (1991) economic approach is focused on the host country’s institutions that determine the level of transaction costs for organizations. The levels of transaction costs are in a higher degree measurable than the level of social pressures. This study will therefore focus on the economic approach of institutional influences in firms’ expanding strategy.

2.3.2 Institutional environment

Formal and informal institutions have influence on the (economic) attractiveness of host countries. The formal institutions include influences based on laws and regulations (North, 1991). These influences are variable and can change in a relative short period of time, for example after elections, when there is a shift in dominant political party that changes the immigration regulations (Williamson, 2000). The informal institutions include culture-related aspects as traditions and customers’ preferences (North, 1991). In contrast to formal institutions these aspects change very slowly. Both institutional dimensions have to be taken into account when a firm wants to enter a host country.

In the economic approach institutions are defined as “the humanly devised constraints that structure political, economic and social interaction” (North, 1991: 97). The aim of these institutional constraints is to reduce the uncertainties involved by (international) transactions or exchanges. These levels of uncertainties are measurable for organizations, as among others firms, by the level of transaction costs; an increase in uncertainty is linked to an increase in transaction costs. The transaction costs can decrease by an increase in formal institutions (North, 1987). The decrease in transaction costs is not unconditionally linked to a decrease in uncertainty due to the remaining possibilities of cheating and renegotiations (North, 1987). To avoid these possibilities, “elaborate institutional structures must be devised that constrain the participants and so minimize the costly aspects I have just described. As a result, in modern Western societies we have devised formal contracts, bonding of participants, guarantees, brand names, elaborate monitoring systems and effective enforcement mechanisms” (North, 1987: 421). Despite the important influence of formal institutions on the firms’ international strategy, the firms’ aim to enter a country is to add value to the company. The final decision to enter a host country is therefore based

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on the expected value minus the transactions costs as a result of institutions. A lack of favourable formal institutions does not necessarily result in a strategy that avoids that specific country.

2.3.3 Institutional environment and the regionalization theory

Institutions are built to reduce uncertainties (North, 1991). Besides reducing the uncertainties from the firms’ point of view, institutions also reduce the uncertainties of the host country by design of formal institutions to protect their domestic market (Peng et al., 2008). Such entry-barriers increase the LoF (Zaheer, 1995) and therefore transaction costs. The protection of a country’s domestic market is not entirely based on entry-barriers but needs reciprocity of markets, products and services with other countries (Rugman and Verbeke, 2005). As a result of this reciprocity, countries sign bilateral, multilateral or regional trade agreements (Rugman and Verbeke, 2003). The regional trade agreements are the most efficient and effective as “the demise of global trade and investment liberalization leads to second best arrangements in the form of regional, triad-based government policies and corporate strategies” (Rugman and Verbeke, 2003: 2). The higher level of efficiency and effectiveness of regional agreements increase the firms’ preferences of an inter-regional strategy above an intra-regional strategy (Rugman and Verbeke, 2003).

2.4 Relevant key themes in the regionalization theory

The regionalization theory encompasses two other relevant key themes; home-country effect and industry specificity. This paragraph discusses these factors and their impact on the firms’ regionalization strategy.

2.4.1 Home-country effect

The home-country effect refers to an MNEs dominant market in its domestic country (Asmussen, 2008; Hezaji, 2007). As a result of Rugman and Verbeke’s (2004) conclusions on regionalization, Asmussen (2008) studied the MNEs national home market as a factor in regionalization. In Rugman and Verbeke’s study (2004) the sales data in MNEs home-countries are not separated from the sales in other countries within the same home region what could have biased the results (Asmussen, 2008; Hezaji, 2007). Asmussen (2008) concluded that MNEs regionalization in their home

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regions are in fact mostly based on sales within their domestic country and with limited internationalization to other countries within the same region. These results, also founded by Hejazi (2007), show the importance of the MNEs home country in the regionalization strategy and the limited role it received yet in the regionalization literature.

2.4.2 Industry specificity

Industry specificity is an important element in the regionalization literature. Based on Rugman and Verbeke’s (2004) initial study, Rugman (2005: 20) extended the results and divided the regional nature of MNEs into two types, manufacturing- or service firms, as well as in one of the sixteen specific industries. Manufacturing firms of the 2001 Global Fortune 500, in general, operate more often than service MNEs in other regions beside their home region (Rugman, 2005: 21). Especially in the industries in which “value added-in production is made at the customer end, intra-regional sales are lower. Such sectors include food, drugs, and tobacco” (Rugman, 2005: 21) like current study’s focal industry. Other studies focused on one specific industry or product such as personal care (Oh and Rugman, 2006), food and beverages (Filippaios and Rama, 2008), or soft drinks (Gardner and McGowan, 2010) what results in different regionalization strategies for each specific industry or product. Industry specificity is therefore an important factor for a firms’ global, regional, or national strategy. This study extends this research by focusing on one industry, FMCG, and compares the firms within this industry based on their core sectors and home regions.

2.4.3 Asset specificity

Asset specificity extends the findings in industry specificity toward a level of analysis within an MNE. To expand in a host market, an MNE can opt for different upstream and downstream FSAs (Rugman and Verbeke, 2008c). Upstream FSAs is focused production and takes “advantage of market imperfections in markets for raw materials, labor, components and other intermediate good, and even to source final goods” (Rugman and Verbeke, 2008c: 308). Downstream FSAs are focused on the geographic scope of sales, the global dispersion of generated sales (Rugman and Verbeke, 2008c). To use the similar division as in the latter paragraph, manufacturing

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firms have the ability to decouple their upstream and downstream FSAs on the supply chain what makes them more flexible in their host country’s requirements adaption and can fully focus on maximization of sales (Rugman and Verbeke, 2008b). Another advantage for the inter-regional strategy of manufacturing firms is that location choice is a key part of their supply chain. This in contrast to service firms, which as a result of delivery close to the customer, are not able to decouple upstream and downstream activities within the value chain (Rugman and Verbeke, 2008b). Direct interaction with consumers therefore exposes distances between the characteristics in the firms’ home country and its host country whereas manufacturing firms can mitigate these distances by decoupling upstream and downstream activities.

2.5 Inter- and intra-regional strategies in the FMCG-industry

The firms’ preference for an inter- or intra-regional strategy is based on the transferability of its FSAs and the institutional environment of the host country (see figure 1). As described in this chapter, both factors include various parts that influence the transferability of FSAs and institutional framework, followed by the level of LoF, transaction costs and the final decision in strategy. This paragraph applies the described theory on the FMCG-industry and focuses on the influences of the firms’ core sector and home region.

2.5.1 FMCG-industry

The FMCG-industry is divided in two sectors; personal and household care (P&HC), and food and beverages (F&B). Both sectors include products that are frequently purchased and consumed within a period of one year. For consumer the majority of these products are easy to purchase at relatively low costs. Due to these obtainable consumption products the FMCG-industry is highly competitive. The international competitive advances in this industry are based on strong brand identity, significant amounts of innovation (research and development) and increasing the number of customers (Deloitte, 2007).

2.5.2 FMCG-industry and LoF

A firms’ LoF in a host country is the result of a selection or combination of four factors; distance between the firms’ home- and host country, unfamiliarity and lack of

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roots in host country, lack of legitimacy and home country restrictions (Zaheer, 1995). Starting with the distances between the firms’ home- and host countries, firms in the FMCG-industry are relatively sensitive to distance (Ghemawat, 2001). Ghemawat (2001) distinguishes four types of distances that firms will face when they expand to host countries; cultural-, administrative-, geographic- and economic distance and in his study the FMCG-industry receives a high score on all of these distances.

The unfamiliarity and lack of roots in the host country is also applicable to the FMCG-industry. Unlike some other industries, the FMCG-industry has strong competition from initiation onwards; in countries where customers are willing and able to purchase foreign FMCG products, customers are at least willing and able to purchase the same products from local suppliers as they did before the foreign firm integrated. The possible combination of cultural distance (unfamiliarity) and lack of roots with the host country leads to a customers’ disadvantage. The competition and LoF is therefore higher for firms in the FMCG-industry than it is for some other industries.

The lack of legitimacy in host countries could be trade barriers based on the entry of a new and probably highly influencing competitor to the national FMCG-market or based on political sanctions. In case of political disadvantages between countries trade barriers on F&B-products are possible as boycotts. F&B-products are sensitive to boycotts as it is a ‘soft spot’ for the firms’ home region, e.g. the political boycott in August 2014 of Russia in food from the US and fruit and vegetables from the EU (Financial Times, 2014). FMCG-products are not sensitive for home country restrictions, as they do not involve e.g. confidential information that could potentially threaten the home country.

The FMCG-industry faces LoF when expanding in host countries. Factors leading to LoF are distances, host country local competition and trade barriers. Due to the relatively high LoF, compared to other industries, intra-regional expansion is a more favorable option for firms operating in the FMCG-industry (Rugman and Verbeke, 2007). Expanding within the same region leads to a decrease in the LoF and is therefore a safer strategy. On the other side, LoF can be overcome with FMCG-firms’ FSAs and similarity in institutional frameworks or when the FMCG-firms’ activities are perceived to be such high value adding that those revenues will overcome the costs linked to the LoF. The next paragraphs discuss these options to overcome LoF.

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The firms’ goal influences the selection of host countries and its choice for NLB FSAs. F&B firms and firms in P&HC aim to seek new markets to increase the amount of customers (Filippaios and Rama, 2008; Oh and Rugman, 2006). The market seeking strategy is preferred when firms “conclude that deploying productive activities and selling in the foreign market confers higher value to the firm than engaging in alternative investment projects at home” (Verbeke, 2009: 32). As a result, the firms’ goal is to select a host country that is likely to have customers who are willing and able to purchase its products.

The market seeking-goal will only succeed when the firm is able to overcome the LoF and find a gap in the already existing FMCG-market. Based on the host country’s characteristics (e.g. local competition) and the knowledge that FMCG-products are highly dependent on the cultural preferences (e.g. religion, taste of food and vision on beauty), it is not preferable to just export the FMCG-products to the host country. The FMCG-firm has to interact with host countries to gain knowledge about characteristics to overcome LoF instead of trusting on the existing knowledge gained in the home country (Verbeke, 2009).

According to the regionalization theory prefers a firm with minimal NLB FSAs that depends highly on the location advantages of the host country to expand into countries within the same region or in case of inter-regional strategy, to countries with the lowest distance from the home country (Rugman and Verbeke, 2007). The distance between the FMCG-firms’ home country and host country is based on the earlier mentioned factors from Ghemawat (2001); cultural-, administrative-, geographic- and economic distance.

Proposition 1: The lower the degree of international transferability of an MNEs' FSAs, the larger the degree of inter-regional LoF and the less internationalised the MNE will be outside its home region.

The IBV on regionalization agrees with the proposition that FMCG-firms are likely to expand to countries with low distances compared to its home country. The formal institutions influence the distances by increasing or decreasing the LoF due to agreements and regulations (North, 1991). Countries with low distances tend to have a highly comparable formal institutional framework what the environment makes

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more predictable for the FMCG-firms and decrease the LoF. Harmonisation between formal institutional environments is a result of e.g. the Preferred Trade Agreement (PTA) or regional trade blocks as NAFTA and the EU (Peng, 2011).

Proposition 2: The greater the degree of harmonisation between home and host regions' formal institutional environments, the lower the inter-regional LoF and the higher the degree of MNE internationalisation outside the home region.

Due to the interaction between the NLB FSAs and host country’s LA, the influence of distance is important to FMCG-firms. Hofstede (1994) did research towards culture resulting in six dimensions that indicate and measure the level of cultural distance between two or more countries; power distance; individualism; masculinity; uncertainty avoidance; pragmatism; and indulgence. Within the core sector of F&B-firms cultural distances are a specific factor of interest (Filippaios and Rama, 2011). Due to the importance of diet and cooking in specific cultures F&B-products are highly sensitive for distance resulting in expansion within their own, or similar to the own, cultural area.

Proposition 3: The lower the degree of difference between home and host regions' informal (cultural) institutional environments, the lower the inter-regional LoF and the higher the degree of MNE internationalisation outside the home region.

As mentioned earlier, FMCG-firms are market seekers (Filippaios and Rama, 2008; Oh and Rugman, 2006). Based on the findings on distance, FMCG-firms are seeking for markets within their home region or in regions similar to their home region. As the majority of the FMCG-firms are home based in Western regions such as North America and Europe, its expansion is expected to be, based on the regionalization theory, in these similar regions as well. Despite these finding, the F&B sector is facing challenges in Western markets; “stagnant demographics; an aging population; declining income elasticities with growing income levels; new preferences of consumers for fresh, organic and artisan products; the entry of large tobacco and pharmaceutical firms in F&B markets and competition from retailers’ cheap own brands” (Filippaios and Rama, 2008: 59). In addition, markets in emerging countries (e.g. China, India) are facing rapidly increasing populations, purchasing power per

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capita growth and demand for new products which provides great opportunities for market seeking FMCG-firms (IBEF, 2010).

Next to the increasing purchasing power per capita, customers in emerging countries also spend an increasing amount of their income on F&B-products (Selvanathan and Selvanathan, 2006). In 2009 Indian consumers spent forty percent of income on groceries, totaling more than the total spending (in USD) in groceries of Russia, Brazil and Thailand together (IBEF, 2010). For FMCG-firms in the F&B sector this, in combination with less attractive Western markets, makes it attractive to shift focus towards the markets in emerging countries, despite the high LoF.

FMCG-firms in the P&HC sector are not facing the same challenges in Western countries as the F&B-firms (Oh and Rugman, 2006). Products in the P&HC-sector are highly dependent on brand images and consumers’ trust. Especially consumers’ trust results in a strong connection with the brand and a solid base for sales. As a result this sector is less sensitive to challenges such as new market entrants and competition from retailers’ cheap own brand. The relatively stable positions in the P&HC-sector does not force firms to shift focus to other markets but provides the opportunity to expand to markets next to the already owned markets. Due to increasing purchasing power, expansion in to markets in emerging countries is a good option.

By expanding into emerging markets face firms a higher degree of, at least cultural, distances and LoF. To overcome this LoF, the firm has to invest. This investment can be the transportation of NLB FSAs but also in the choice of an entry mode (Pan and Tse, 2000). Firms have the choice between an equity and non-equity based entry mode; an equity based entry involves merges and/or acquisition (M&A) and comes with high costs. A non-equity entry is an agreement what involves less financial investments (Pan and Tse, 2000).

Proposition 4: The greater the degree to which market seeking is driving the internationalisation of FMCG MNEs, the more they are expected to invest to overcome the inter-regional LoF.

The following chapter, the methodology section, provides the methods used in this research in order to study these four propositions

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3. Methodology

This chapter describes the methodology used in this study. It starts with the research philosophy including the ontological and epistemological foundations, followed by a description of the multiple case study research design, the selected cases and ending with a discussion about the dataset and analytical strategy.

3.1 Research philosophy

The research philosophy includes the ontological and epistemological foundation of the methodology (Brannick and Coghlan, 2007). The chosen methodology depends on several variables that include the aim of the research, the available data, and the research philosophy. This philosophy describes the researcher’s assumptions about the nature of reality and the knowledge claims that are possible as a result.

The ontological foundation describes the assumption about the nature of reality, according to the researcher (Morgan and Smircich, 1980). Reality includes two perspectives; subjective or objective (Brannick and Goghlan, 2007). These perspectives can be seen as a continuum (Morgan and Smircich, 1980) with on the one side subjectivity, “what is taken as reality is an output of human cognitive process” (Brannick and Goghlan, 2007: 62), and on the other side objectivity, where “social and natural reality have an independent existence before human cognition” (Brannick and Goghlan, 2007: 62).

The epistemological foundation focuses on knowledge; what it is and how it is acquired by researchers (Brannick and Goghlan, 2007). This foundation can be seen in the same objective-subjective continuum as used by the ontological foundation (Morgan and Smircich, 1980). Subjectivity, on the epistemology continuum, views measured knowledge as a ‘construct of the individual mind’ and objectivity views knowledge as a ‘fact’.

This research, for both foundations, relies on the objective perspectives in the continuum. The ontology is more objective than subjective as it studies organizations, which can be seen as “objective material entities” (Reed, 2005: 1622). In the epistemological foundation the objective side is dominant as well due to the source of

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knowledge. Data used in this research is primary data and collected, controlled and studied by more than one person what results in a less subjective view.

The goal of this study is to generalize results of the analysis to theory (Yin, 2003) and add understanding to the regionalization theory. To reach this goal, the researcher studies data objectively and keeps distance from it. The research paradigm of this methodology is, as a result of these objective foundations, generalizable theory, methodological reflexivity, and a ‘distanced from data’ role of the researcher positivism (Brannick and Goghlan, 2007: 63).

3.2 Qualitative multiple-case study research design

This research is based on a qualitative multiple-case study as it aims to provide an understanding of the firms in the cases and explore the differences between them.

A multiple-case study is highly suitable for deriving an in-depth understanding of the selected cases as it studies the cases in their ‘real world-context’ (Yin, 2003). In this context boundaries between the studied phenomenon and influence of the context vanish while more insights about interaction of possible influences and underlying relationships are provided (Yin, 2003). In the IB it is not possible to study firms without taking their context into account; the IB context is one of the drivers of the firms’ international strategy. Therefore qualitative multiple-case studies provide useful contextual information; this goes beyond isolated variables (Yin, 2003).

In order to properly conduct a multiple-case study, Yin (2003) set up two research conditions. The first condition includes the research question; the ideal research question is explanatory to a hardly explored phenomenon. This study’s research question fits this condition, as it is explanatory in a barely explored field. The second condition is the ability to collect data in a natural context (Yin, 2003). This study focuses on existing firms within a natural setting and therefore also fits the second condition. A qualitative multiple-case study fits the purpose of this study and is a suitable research approach. Critics on qualitative multiple-case study design are mainly focused on the lacking possibility to generalise the results (Yin, 2003). This study does not have the aim to provide generalizable results and is therefore not limited by these critics.

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Beside the research conditions, Yin (1994) designed four criteria to protect the quality of a multiple-case study; construct validity, internal validity, external validity and the reliability. Construct validity is focused on the correctness and measurement of the studied concepts (Yin, 1994). The study has a valid construct in case it uses multiple sources of evidence, a chain of evidence and uses key informants to review the study. This study uses multiple sources of evidence as it relies on relevant literature, firms’ annual reports, newspaper articles and relevant additional information from other sources. The second criteria includes internal validity; the observed relationships (Yin, 1994). The reliability of the observed relationship is measurable due to inferences that are made based on theoretical propositions (Yin, 1994) as in this study. The third criteria encompasses the external validity of the research; the generalizability of the results (Yin, 1994). This study does not have the aim to provide generalizable results as it analyses a theoretical sample. A case study provides therefore generalizable results to a theory what in this study means that the results are generalizable to the regionalization theory. The reliability of a study is focused on the option to replicate the study resulting in similar findings (Yin, 1994). To improve the study’s reliability is it important to describe every step in the research process carefully.

In addition to Yin’s (1994) criteria improves a case study by using multiple resources (Hussein, 2009). The use of triangulation will increase the validity and reliability of the study by making use of multiple data sources. This study uses both earlier mentioned quantitative and qualitative resources to improve its validity and reliability.

3.3 Case selection

This research aims to understand and explain the inter- or intraregional strategy of FMCG-firms listed in the Fortune Global 500. This paragraph describes the process of case selection and the selected firms.

This study does not have the aim to provide a representative sample of the population and therefore uses the theoretical sampling technique to select cases (Eisenhart and Graebner, 2007). As this study is an extended and updated version of the regionalization study done by Rugman and Verbeke (2004), the sampling technique is

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applied on the updated version of their data, the firms listed in the Fortune Global 500 of 2012. This data is a list including the globally 500 largest firms in terms of sales. From this list of 500 firms five cases are selected. The selection process is explained in the next paragraphs and is based on the different focuses of this study; the FMCG-industry, the firms’ home regions and its core sector.

In order to answer the research question it is important to select firms that operate in the FMCG-industry. In this study, FMCGs are defined as easy obtainable consumption products that are frequently purchased and consumed within a period of one year. The Global Fortune 500-list of 2012 includes thirteen firms that fit the FMCG definition; Nestlé, Procter and Gamble (P&G), PepsiCo, Unilever, Kraft Foods, Coca-Cola, Anheuser-Busch InBev, Philip Morris International, L’Oréal, Danone, British American Tobacco, Imperial Tobacco Group, and Heineken Holding. This study selects cases from these thirteen firms based on home regions and core sector.

The second selection criterion is based on the home regions of the thirteen firms. To study the influence of the home region is it important to select firms from at least two home regions. The thirteen firms have their home countries diffused over two regions, five firms have North America as its home region and eight firms have the home country within Europe (see table 2). This study will compare influences of North America and Europe as home regions on the internationalization strategy of FMCG-firms.

The third selection criterion is based on the core sector of the selected firms. The FMCG-industry covers a lot of different products that are not, based on their purpose, equally comparable. This study divides the FMCG-products in the sector of food and beverages (F&B), the sector of personal and household care (P&HC), and the combination of both sectors. As a result of sector selection this study excludes the tobacco-firms from the research as this product does not fit in one of the three sectors. In order to answer the research question it is necessary that at least one firm from each combination of home region and core sector is present in the cases. This selection is based on the comparability of the firm to the other firm with the same core sector and another home region. The F&B-firms as a whole will be compared with the P&HC-firms as a whole. To increase the internal validity it is important that the firms within these groups are, based on their core sector, highly related to each

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other. In terms of home region the internal validity covered by having the firms’ home country within the home region of North America or Europe.

2012 Home region

Core sector North America Europe

Food and beverages PepsiCo Nestlé

Kraft Foods Anheuser-Busch InBev

Coca-Cola Danone

Heineken Holding

Personal and household

care P&G L'Oréal

Combination Unilever

Table 2. FMCG-firms listed in Fortune Global 500-list (2012) divided by home

region and core sector.

Within the F&B-group Kraft Foods and Nestlé are the highest related firms based on their core sector as these firms are focused on both food and beverages (see table 3). The other firms are mainly focused on beverages or offer a less diverse assortment. The selected firms in the P&HC-group are P&G and L’Oréal; two firms that are focused on personal care-products (see table 3).

Nestlé P&G Unilever Kraft Foods L'Oréal

Home country Switzerland US UK/The Netherlands US France Home region Europe North America Europe North America Europe Sector Food and

beverages

Personal and household care

Both Food and

beverages

Personal and household care Total sales

2012 (mln) CHF 92.186 USD 83.680 EUR 51.324 USD 18.339 EUR 20.343 Total assets

2012 (mln) USD 126.229 USD 132.244 EUR 31.699 USD 33.329 EUR 28.230 Ranking in

Fortune Global 500

#71 #86 #139 #170 #391

Table 3. Overview of selected cases in this study (data based on annual reports).

Next to the personal care-products operates P&G in household products, e.g. detergents. These products are not included in the assortment of L’Oréal, this is a difference which is taken into account during the research. The final selected firm,

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Unilever, provides indeed household products, next to the food, beverages and personal care sector (see table 3). This firm is selected for the household products-part as a counter firm to P&G and to provide in-depth information about the international strategy of a firm in both F&B and NF&NB.

3.4 Data collection

This study encompasses two different types of data collection to provide the qualitative multiple-case study; quantitative and qualitative data collection. This paragraph starts with describing the quantitative data collection, followed by the qualitative part of the collection.

The quantitative data collection in this study is based on Rugman and Verbeke’s (2004) research design. A study group of eight students and their supervisor at the University of Amsterdam replicated Rugman and Verbeke’s design (2004) and projected the research design on the Fortune Global 500 of 2012. The regional presence of the 500 firms listed in the Fortune Global 500 is based on appearance in terms of sales, assets, and number of employees in each region. Data is collected for all 500 firms by analysing and selecting the relevant information out of the annual publications of 2012; annual reports, financial reviews, and corporate responsibility reports. The collected date is bundled into one database providing a more recent version of Rugman and Verbeke’s (2004) data based on the Fortune Global 500-list of 2001.

Next to replicating Rugman and Verbeke’s (2004) research design, this study focuses on the longitudinal research on regionalization strategies in the FMCG-industry. Individually, students collected the same data (sales, assets, and number of employees in each region based on the firms’ annual publications) for their focal firms for a certain period of time. This study collected data for Nestlé, P&G, Unilever, Kraft Foods, and L’Oréal over the period 2008 till 2012. Not all relevant data is available for the years prior to this period; neither is all data with regards to assets and number of employees for each region in the selected research period. Due to these limitations the focus of this study is on the firms’ sales data for each region between 2008 and 2012.

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The qualitative data collection includes newspaper articles published in The Financial Times that include the focal firms’ company names. These reports are collected in order to obtain information about the firms’ internationalization strategies to support and explain the results of the quantitative data selection. The newspaper articles published in The Financial Times between 2008 and 2012 are collected from the LexisNexis Academic database. The collection is based on the search terms: ‘Nestlé’, ‘Procter’, ‘Gamble’, ‘P&G’, ‘Unilever’, ‘Kraft’, and ‘L’Oréal’. Each search term provides a broad amount of articles that are systematically reviewed and selected for coding (see table 4).

Focal firm Search term

No. articles in The Financial Times 2008-2012

No. articles used for coding

Nestlé Nestlé 1082 86

P&G Procter; Gamble 995 76

Unilever Unilever 1263 97

Kraft Foods Kraft 1191 92

L'Oréal L'Oréal 436 46

Table 4. Qualitative data collection for focal firms.

3.5 Data analysis

Within this study the collected data is analysed in two ways; based on the quantitative data collected from the firms’ annual reports and based on the qualitative information collected from newspaper articles in The Financial Times. All the collected data is supplied in the period 2008 till 2012.

The inter- or intraregional presences of the selected firms are measured by the quantitative sales data obtained from the firms’ annual reports in 2008 till 2012. The sales data provides important information about the international presence of the market seeking FMCG-firms and is a commonly used variable in the regionalization theory (Rugman and Verbeke, 2004). This study is based on Rugman and Verbeke’s (2004) research on regionalization and therefore uses the same classification decision rules to distinguish global-, bi-regional-, host-region- and home-region orientation (see table 1) and the same classification on regions; North America, Europe, Asia-Pacific, Latin America and the Middle East and Africa, unless other specified.

The qualitative data from the newspaper articles in The Financial Times is analysed by coding the content in order to understand and explain the firms’ inter- or

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intraregional presence found in the quantitative data, also called explanatory research (Ryan and Bernard, 2003). The used process in coding in this research is thematic coding (Ryan and Bernard, 2003). This procedure bundles the relevant codes into separated categories that are important for this research and are linked to the proposition in chapter two. The categories and codes are presented in table 5.

Category Code Description Proposition

NLB FSAs NLB FSAs The role of transferable FSAs in the

regionalisation strategy 1 Formal institutional environment Institutional connection

The influence of formal and/or informal institutional agreements between the firms’ countries

2 Informal

institutional environment

Cultural

differences The influence of cultural differences _{between the firms’ countries} 3 Market seeking Market seeking FMCG-firms' aim to seek for new

markets 4

Emerging countries

FMCG-firms' interest in emerging

countries 4

Western market FMCG-firms' position in the

Western market 4

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4. Results

This thesis studies the inter- or intraregional, and internationalization strategy of five FMCG-firms; Nestlé, P&G, Unilever, Kraft Foods and L'Oréal. These firms are selected based on its appearance in the Fortune Global 500-list of 2012, its home region (North America versus Europe) and its core sector (F&B versus P&HC). This chapter starts with the within-case analyses of each firm followed by the cross-case analyses in which the firms are clustered and compared based on home region and core sector.

4.1 Within-case analyses

4.1.1 Nestlé

Nestlé is an FMCG-firm focussing on F&B-products and is based in Switzerland, Europe. In the period between 2008 and 2012 Nestlé developed from a bi-regional MNE towards an MNE operating on global level.

Regional orientation and market seeking

Nestlé’s sales dispersion has changed during the five years of research from being focused on the home region (Europe) and North America towards Asia. In contrast to increasing sales in Asia, the sales in Europe have decreased and sales in other regions (North America, Latin America and Africa) have been stable (see table 6). Nestlé continues to generate most sales from its home region, however this is not a result of the home country effect as Switzerland contributes less than ten per cent of total sales in Europe (Asmussen, 2008; Hezaji, 2007).

Decreasing sales generated in Europe, in combination with Nestlé’s aim “to become the world’s leading food group” (Wiggins, 2009: 21), are a driver of seeking new markets and expanding towards emerging countries to reach customers who are able and willing to pay for Nestlé’s products (Filippaios and Rama, 2008). The inter-regional strategy in this situation results in higher values than continue investing in the home region (Verbeke, 2009).

As result of the market seeking strategy Nestlé changed its global spread of plants (Nestlé, 2008; 2009; 2010; 2011; 2012; see table 6). The amount of plants in Europe decreased and the amount of plants in Asia, Oceania and Africa increased

Intra- and inter-regional strategies of FMCG-firms : impact of core sectors and home regions on the regionalization of FMCG-firms : a multiple case study