Nestle Ics Cream in Cuba
1. How would you characterize the Operating environment for foreign firms in Cuba? Has the Cuban government made it attractive for foreign firms to enter Cuba? Explain why or why not?
With regard to the issue of the operating environment for foreign firms in Cuba, I would like to view this particular question with the dialectic way, since it could be said that the macro environment both brings about the merits and deficits. On one hand, the policy on foreign investment has dramatically become more flexible during Castro regime ever since Cuba revolution, which means the development of foreign firms in Cuba has gradually received the recognition. More importantly, as the deepen of globalized trend and international connection, Cuba has established the partnership with other countries, such as the plan to normalize diplomatic relations between Cuba and America, the position of foreign firm is highlighted in today’s Cuba to some extent. However, on the other hand, the operating environment in today’s Cuba society is also fatal, the politics in Cuba is unstable and changeable, from encouraging foreign investment and attracting multinational companies from 1990 to reversing its position towards foreign investment from 2000 till today, the related policy is ever-changing and contradictory in different period so that it usually brings the unsafe feeling to foreign investors, as the consequence, most companies still hold the conservative opinion on entering Cuba, the whole development process of Cuba society does not fully meet the demand on foreign firms. In the meantime, the biggest threat to the existence of foreign firms in Cuba’s economic environment is the over local protectionism, although it declares the significance of foreign investment entering, the government still stipulates a series of regulation to protect the local business in Cuba, which has formed the huge entry of barriers to those foreign investment. Therefore, I think the operating environment for foreign firms in Cuba has more disadvantageous factors compared with advantages, in this sense, Cuba government has not made it appealing for foreign firms to enter Cuba combined with all rational condition.
2.What are the major issues facing foreign firms considering entering into Cuba?
When the foreign firms considering entering into Cuba, there are many major issues they would directly need to face with, here are generally three factors taken into my consideration.
1.Local law policy limitation. According to the legislation of Cuba’s trade, all business venture are required to be approved by the local government, it would almost take quite long time for those foreign markets to get approval, even the renegotiation process is very possible to be neglected by Cuban government, the barriers of entry in Cuba is relatively high for those outside companies and the policy has cause the initial difficulty for those foreign business to have the international business with Cuba.
2.Dual currency system policy. Since the limitation of used currency of CUPs and CUCs, many products sold by foreign investors are only accepted by tourists since usually the price is too expensive to local people after currency exchange. Furthermore, the conversion of different exchange ratio of distinguished currencies would increase the cost fee of the corresponding products, no matter payee to employees or product pricing and customer segmentation, currency difference largely determines the high restraint of product selling range and the development route in Cuban market.
3.Social and comprehensive background. The changeable policies on foreign investment brings many uncertainties to its entry, developing technology level in Cuba would cause the bad influence on the products quality and the brand image of those foreign companies. The only choice they have is to import the material from outside, which would higher the cost and lower the profit to some extent. Under the macroscopical conservative social background, Cuba still stays in the period of developing and exploring. The media channel has restrained strictly by the government interference and the using of Internet in Cuba is not extensive, this point is fatal to the adoption of the marketing strategy, the foreign companies are not able to effectively construct the media communication and the advertisement propaganda.
3.Perform a SWOT (Strength,weakness, Opportunity/Threat) analysis of Nestle in Cuba? Comment on your findings.
As for Nestle’s expansion to Cuban market, the SWOT analysis is as followed:
S(Strength):
Nestle is the world’s largest food and beverage company which shares the widely recognition and profound history, it provides the high quality products and insists on the advanced food ideology of product diversification and renovation, the sustainable nutrition health and wellness is the advocation of Nestle, this point is very essential to its development direction in Cuban market since customers in Cuba would be more easy to grow the sense of trust towards Nestle. Besides the product itself, Nestle is also one joint venture, which has stock in domestic Cuban market, this firm foundation has brought the precondition to its pioneering.