Nestlé and Totole: A Foreign-invested Enterprise in China
(7 pages of text)
After acquiring a majority stake in the Shanghai Totole Food Company, a leader in the Chinese chicken powder industry, Nestlé faced dilemmas regarding maintaining control over this foreign-invested enterprise (FIE). Despite its 80 per cent stake, and in a departure from past practice, the Swiss company let its minority Chinese partner remain firmly in control. The circumstances surrounding the integration of Totole posed questions about the strategic decisions surrounding investment in a Chinese enterprise by a multinational firm and the challenges of integrating local and global operations. In 2012, Nestlé began talks with the general manager of Totole about acquiring the remaining 20 per cent of the company. Should Totole sell the remaining 20 per cent of shares and, if so, how and when should it do it?
This case focuses on issues related to foreign direct investment, strategic alliances/joint ventures, cross-border mergers and acquisitions (M&A), and multinational enterprises in China. The primary learning objectives are to evaluate the factors that determine the success of a cross-border acquisition/joint venture and appreciate the ownership and control dilemmas that surround a transaction once consummated. The case will:
- Evaluate the strategic interests of the acquirer(s) and the target(s) and examine how these interests affect the process and outcomes of a transaction.
- Illustrate the gap between ownership and control in joint ventures.
- Illustrate the drivers versus barriers of integrating local operations within a global enterprise.
- Showcase differences between Western and Chinese management styles.
This case can be used in classes on international business, strategy, and general management. It is appropriate for a diverse audience, including business major undergraduates, MBAs, EMBAs, and participants in standard or customized executive education programs.
Accommodation & Food Services
China, Large, 2014
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