European integration process and its influence for business: Case of Danone

Résumé du document

Within the last decades, globalization has changed the face of the world with a shift from ‘nationalism and protectionism' to the idea of a ‘global village'. A new world economic order emerged and the regional and multinational trade agreements and free trade areas played a key role in this changing worldwide economy. Nowadays, every multinational group that is located in one of the European state members has to take into account the ‘Europe influence' and no strategy is possible without Europe. Danone undertook its global expansion in the early stages of the company. In the meantime, Western countries remained and it still represents the base camp of the company as this geographic area represents the main part of Danone's sales. As a consequence, we can easily assume that the European Union was strongly involved into the company's expansion and success story.

This report is divided into four parts that aim to show how this multinational company is influenced by European policies. Firstly, the analysis will emphasize the EU influences on general business setting so as to provide a general background. Secondly, this report will describe the main EU policies that generate consequences and have an impact in the food industry sector. Then, the idea is to illustrate how the tactical and strategic choices of Danone may be influenced by the EU. Finally, the last part will focus on the ways in which the EU might influence Danone's operational aspects and it will put into evidence the fact that EU policies play an obvious role in the company's strategy.

Before starting the analysis of the company according to the EU influences, it seems relevant to provide a description of Danone so as to get a clear understanding of the background. Danone is a French food-products multinational corporation and this group belongs to the top ten global players in the food industry. The first analysis that has to be undertaken consists of the description of the EU policies that influence the general business setting. This general overview is the first step that has to be done to focus then on the EU policies that influence the sector of our company and DANONE's choices. It seems that the main strategy that should be followed throughout this report is to create the setting and to shift from a general overview to a specific analysis.

The influence of the European Union on the global market and business activity is constantly evolving with significant impact on investment and trade. Nowadays, the major companies in the EU are expanding worldwide so as to become important players. The EU is a regional agreement and supranational union of 27 European member states. A key activity of the EU consists in establishing and representing the administration of a common single market, composed of a customs union, a common trade policy, the single currency (the Euro that created a new business setting) and a common agricultural policy. Danone is a multinational company and has its head offices in Paris. Its worldwide presence and the head office's location explain the fact this multinational corporation is influenced by EU policies.

Extraits

[...] What was the influence of the European Commission on the acquisition of Numico? The European Commission has conducted a market survey and found several problems: In France, the main overlap of activities occurred on the market for ‘baby milk', where Danone and Nestlé's positions are challenged by Numico with its brands Nutricia and Milupa. The market investigation commission said that Numico had played an important role in making the market more competitive in both pricing and innovation. In Belgium, the survey showed that Danone and Numico are involved into a direct competition in the market for baby meal and acquisition transaction would reduce competition significantly. [...]

[...] This nutritional information should be displayed for 100 g ml or per serving. The original text also proposed to approve supplementary systems, mandatory or optional, which would coexist with the EU regulations. By cons, he proposes giving manufacturers the freedom to use their own systems (mainly based on the recommended daily intake) in addition to European requirements. In addition, the Council wishes to leave the industry if they choose to place nutrition information at the front or back of the pack. [...]

[...] However, many of the EU's trading partners benefit from special import arrangements known as Tariff Rate Quotas (TRQs) whereby imports can come in at lower tariffs. Consequences Example: consequences of milk price on Danone. This law directly impacts on the pricing strategy of Danone. Furthermore theses last years the milk sector is experiencing a peak in price, due to a higher volatility of the market. Therefore Danone has to follow up with the rules and take it into account when pricing its products and dealing with its suppliers. [...]

[...] Nowadays, the European Union plays a big part in influencing business activity through laws, directives and regulations. ( The Common Commercial Policy has been and is still one of the most dynamic fields of EU external relations. The CCP is often described as the external face of the single market and defined as the external commercial policy. It deals with a policy that reflects the EU trade policy and that decides on interactions between countries outside the EU. The CCP is composed on principles that are similar among the EU members, particularly with regard to changes in tariff rates, the conclusion of tariff and trade agreements relating to trade in goods and services, and the commercial aspects of intellectual property, foreign direct investment, the achievement of uniformity in measures of liberalization, export policy and measures to protect trade such as those to be taken in the event of dumping or subsidies (Article 207 TFEU, ex Article 133 TEC). [...]

[...] This EU trade instrument is really relevant and influent on general business setting. ( Besides, the EU has a strong influence on a specific business setting that is related to competition matters among companies because sometimes companies try to limit competition. In order to preserve well- functioning product markets, authorities like the European Commission implement competition policies that must prevent or correct anti- competitive behaviors and are likely to set up a liberalized setting. The Commission monitors: agreements between companies that restrict competition, mergers, abuse of a dominant position or efforts to open up markets to competition and develop the liberalization. [...]