Embeddedness of Nestlé’s Nescafé business in the Philippines: a win-win situation for farmers and the company

Andreas Schmidli

Abstract

The study focuses on identifying and measuring positive externalities that may result from the embeddedness of Nestlé’s green coffee bean sourcing operations for its Nescafé brand in the Philippines. We hypothesize that embedded (economic) activities of a company lead to the sustainable development of an entire value chain. Embeddedness is important for Nestlé in order to access local skills, knowledge and supply of raw materials.

The paper examines whether the presence of a multinational enterprise like Nestlé does generate positive externalities such as improved livelihood for coffee growers and the members of the wider community. The hypothesis is confirmed when there is a win-win situation in which Nestlé makes significant profits from the extent and quality of its embeddedness which helps it to capture market opportunities such as the growing demand for coffee on the one hand and addresses threats such as climate change, mitigates rural exodus and displacement of communities.

The study reveals the embedded ties that create value through mechanisms such as trust, knowledge transfer, and jointly seeking solutions to solve pertinent problems; bringing international standards to local businesses and integrating them into markets. By assessing the quality and extent of «local embeddedness» the study contributes to the designing of a tool-kit that should measure the degree of embeddedness and the positive sustainability effects of locally embedded Swiss-based multinational companies in developing countries.

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