Danone is a French-based multinational company that has excelled in the food and beverage industry headed by Frank Riboud who is, the companys CEO. During his 16 years tenure, Riboud has transformed Danone into an international supplier of nutritional foods, baby foods, dairy products, and bottled water. Before the internationalization of Danone, the company operated in Spain, France, and Italy as a diversified glass container, food, and beverage selling organization. However, the company shifted its strategic position by pursuing mergers and acquisition in its generic strategy of growth and expansion. Currently, the multinational company is recognized as the Danone Group. One of the key strategic and competitive advantages that have driven the companys success is through its international research and development (R&D). The Danone Group values R&D for innovation and tailor-made products that suit international and local products. The success of mergers and acquisition at the company has gone hand in hand with its global R&D strategy (Morschett, Schramm-Klein, and Zentes, 2015). The corporate governance has promoted the growth of its organizational culture that encourages and accepts diversity. The appreciation of cultural diversity and collaboration with local scientists and policy-makers has been a successful initiative for the Danone Group internationalization of the companys research and development.
The Danone Group uses a geocentric centralized R&D approach because the company is dependent on the success of both local and foreign market competencies. In this method, the R&D is centralized in the home country. Danone has its research and development center in France but maintains external collaboration and unrestricted flow of information. The Danone Vitapole Research and Development allows the company to centralize the R&D in France while supporting internationalization physically. The center carries out research and development and innovation of new products followed by the collaboration with over 300 global scientists that implement the sale and approval of Danones products in local markets. As such, the Danone group carries out international research to provide products that suit the local markets regarding their cultural practices and most importantly providing nutritional and health benefits. The geocentric research and development approach allows the company to hire a pool of foreign employees to increase the sensitivity of international clients. It is a simple approach that helps the Danone Group to internationalize R&D while maintaining the efficiency of a physically centralized center that further promotes effective communication and coordination. Furthermore, the geocentric R&D strategic position is vital to the continued success of Danone because it helps the company gather the available knowledge and information available in global technologies (Lasserre, 2012).
International cultural practices in an organization are important for the success of an organization. Danone is a company that appreciates diversity by integrating cultural practices that promote the success of its mergers and acquisition. The Danone Group has acquired some international businesses like Wahaha, a Chinese-based company in its penetration of the Chinese market (Morschett, Schramm-Klein, and Zentes, 2015). For mergers and acquisition to be successful, they must acknowledge the cultural themes and differences. Every society has its set of cultural themes which have a significant impact on the way of doing business. Culture affects effective communication in an organization. Communication is essential for the success of multinational companies, and communication channels should be designed to allow cultural integration and understanding of the information. Due to differences in cultural themes, communication should be precise and straightforward. Similarly, body cues are essential in effective communication, and cultural practices have their cues of body language. Therefore, the cultural factor of doing business determine the success of mergers and acquisition. Danone has been successful in cross-cultural communication, R&D by hiring individuals who have different cultural backgrounds. Apart from that, the organizational culture and behavior promote the acceptance of cultural diversity (Barmeyer and Franklin, 2016). This strategy has helped in innovative research and development skills because Danone understands its foreign market. Coupled with the geocentric research and development model, cross-cultural communication, research, and practices have been a fundamental aspect in the globalization of the Danone Group.
However, the Danone Group could adopt a polycentric decentralized R&D. The polycentric approach entails the decentralization of the research and development units with little or no global coordination by the corporate R&D center. The generic strategy also entails minimal supervision. The polycentric decentralization position is adopted by companies with the aim of regional market domination like was the case of the European MNCs formed through mergers and acquisition (M&A) in the 1970s (Morschett, Schramm-Klein and Zentes, 2015). Since Danone is on the path of extensive globalization following deep cultural integration and practices, Danone could change its R&D approach to allow the growth of regional oriented growth. For instance, the Danone Group has invested heavily in the ASEAN region that is rich in unique cultural practices. The organizational policies have been favorable to cultural diversity and communication practices that have promoted successful innovations in the food, dairy, beverage, and nutritional products. Independent research and development could spur growth potential because the company could hire more local scientists and experts leading the growth of the companys international business. On the contrary, the polycentric decentralized research and development approach is limited. The high autonomy in the units of research and development and the lack of communication leads to corporate level inefficiency. It also leads to a parallel development of research and development activities especially if the research units strive to maintain cultural and national identity (Barmeyer and Franklin, 2016).
The Danone Group has always focused on product quality and its products are considered some of the healthiest, tastiest, and well-structured. One of the key features that Danone uses in the promotion of new innovations is attractive packaging and differentiation. The strategy makes Danone standout as compared to other rival brands such as Nestle and Unilever. The company also has a varied product line that has made it achieve market niche by meeting the customer demands across the world. The Danone Group understands that promotion in the food and the beverage industry is significant to achieve market penetration. The company carries out massive advertisement campaigns to connect with customers while educating potential customers about the new products regarding their nutritional and health benefits. Danone values the essence of advertisement and uses all media channels from print media, social media, and all media outlets in local languages in different countries. It also focuses on advertising new products using the internationally acclaimed English language that is commonly used for business across the world. Strong marketing campaigns with brilliant advertisements excite and attract clients across the globe (Lasserre, 2012). Apart from advertisements, the price is considered as the Danone Group premium brand. Danone has always maintained a competitive pricing strategy but on the high-end. Danones products are known for their high price compared to rival brands. The company follows a high price marketing mix strategy supported by discount coupons, especially for new product innovations. The Danone Group utilizes the discount coupon as a strategic position to reduce the sales price while maintaining profit margins. It also works for the company because it generates a strong customer relation because of premium and quality products. Another way in which Danone promotes innovations is through the distribution channel. The company uses an intensive value chain for its distribution by enhancing product reach. The company has a pool of effective distributors and also through the creation of joint ventures to expand business operations and maintain close contact with the market (Lasserre, 2012).
Danone could accelerate new product entry by carrying out extensive market research. Market research helps a multinational company to strengthen its market reach, especially in foreign markets. Currently, Danone has 300 scientists that promote new products in foreign markets. The number of experts is low compared to the global market. Therefore, Danone should invest more in market research and professional brand ambassadors to represent the brand in all international and local markets. This will ensure that consumers are educated about new products. Another approach is by carrying out extensive branding that is acknowledgeable and distinguishable by consumers. Lastly, young people across the world have realized the importance of health eating. However, this population is known as the digital age that has adopted technological innovation. The use of smartphones and the internet has broken cultural boundary. Therefore, Danone should invest in digital marketing and advertisement to reach out the vast number of online users continues to grow and who have adopted online purchases via e-commerce platforms (Morschett, Schramm-Klein, and Zentes, 2015).
In conclusion, Danone is a successful food and beverage multinational company that has excelled in the globalization of R&D in the height of diverse cultural practices. Danone Continues to use a geocentric research and development approach that allows the company to maintain the physical centralization of the R&D facility while maintaining the international flow of information that has strengthened its research. Furthermore, the organizational culture of the organization has promoted the integration of cultural diversity especially through its mergers and acquisition approach in the foreign market entry. With this note, Danone could use M&A to accelerate the penetration and promotion of new products. Joint ventures help in business expansion and market penetration. Innovations are crucial to the companys continuous success in global competition in the heights of rivals such as Nestle and Unilever. Danones marketing mix continues to surpass rival firms because of branding differentiation and extensive promotion campaigns and international research and development. In a nutshell, the Danone Group faces many opportunities that promise the companys continuous success due to cultural integration and extensive investment in research and development.
List of References
Barmeyer, C. and Franklin, P 2016, Intercultural Management. London: Palgrave Macmillan.
Lasserre, P 2012, Strategic Management). Global. Houndmills, Basingstoke, Hampshire:
Morschett, D., Schramm-Klein, H. and Zentes, J 2015, Strategic International Management.
Wiesbaden: Springer Gabler.
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