Nestlé and L’Oréal: The “Elephant in the Room”

Name: Nestlé and L’Oréal: The “Elephant in the Room” (English version)
SKU: 9B19M125

Ram Subramanian

Product #:9B19M125

Supplier:Ivey

Discipline:General Management, International Business

Setting:Switzerland, 2018

Details:Case (PDF) • 7 pages • 2019-10-29

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In 2018, Nestlé, the Switzerland-based, multinational food and nutrition company, faced an activist campaign by Third Point LLC regarding the company's passive stake in L'Oréal. In its June 2017 letter, which was followed up by a July 2018 reminder, the activist fund urged Nestlé to sell its L'Oréal stake and use the funds to strengthen its position in its core health and nutrition markets. L'Oréal was also asking Nestlé to clarify its position regarding the investment. Nestlé's recently appointed chief executive officer needed to make a decision regarding the L'Oréal stake. How should he address the activist fund and respond to L’Oréal’s request?

Learning Objectives

This case is suitable for both senior-undergraduate-level courses and graduate-level courses on corporate strategy—specifically, for a discussion on where a company should compete and where it should deploy its resources. The conceptual foundations underlying the case are typically taught in the second half of a strategy course. The focus of this case is on analysis, application, synthesis, and evaluation. After working through the case and assignment questions, students will be able to

understand the importance of clearly delineating a firm's boundaries;
examine the pros and cons of managing a portfolio of businesses; and
analyze the fit of business units in a multi-business firm.

Nestlé and L’Oréal: The “Elephant in the Room”

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Learning Objectives