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Task environment Threats of new entrance Nestle as a giant food and beverage company that operate in Malaysia face

less threat from new entrance in Malaysia. Nestle has been around for over a century and boasts a long history of quality products and consumer satisfaction, which has allowed the company to obtain a considerable share of the market. As the market share had been dominated by few giant companies like Unilever ,Kraft, Groupe Danone , it is hard for new entrance to penetrate the market. The marketing effort that spends on the product of Nestle had made new entrance difficult to survive. Aggressive marketing tactic is vital to survive in consumer product. The Group invested significantly in building its brands with strong marketing and consumer promotions aimed at stimulating consumer demand. Several marketing campaigns were launched, such as NESCAF Antioxidants, MILO Play More, Learn More and MAGGI Mee My Way The MAGGI 2-Minute Noodles Tribute campaign won the coveted Gold Award for marketing effectiveness at the Malaysian Effi e Award 2008, which was for signifi cant and breakthrough marketing campaigns based on true performance in the marketplace.

Strong distribution network of Nestle enables the company to make product available to maximum number of consumers. For instance wholesale retailers, grocery and convenience stores are the sources where consumers buy food products. Consumers look for branded product when other options available. Sometimes branded products are costly but also creates the quality stamp for consumer, hence consumer go for branded product. Brand names like Maggi can have significant competitive advantage over their competitors.

Bargaining power of buyer Nestle is running its business in consumer goods sector, its product range from ice cream, coffee and beverages, milk, foods, confectionary to chilled dairy. In this sector buyer has high

bargaining power as the option available for them is vast. In order to stay competitive, economics of scope in production is used by nestle to reduce its price. Nestle minimize marginal cost by ordering raw materials in bulk and switching production to multiple products hence expanding multiple products in portfolio give economic advantage. Yet in some product Nestle had advantage against its buyer, example of it is Milo product that monopoly the market of Malaysia.

Threat of substitute product As mentioned earlier, the food and beverage industry is full with competition, there are arrays of similar products that compete directly with Nestl. The substitute product is also easy available to consumer. Whether in same product category or different such as: Ice cream product- Nestle faces a stiff competition from Walls and Magnolia. Chocolate product- Nestle face competition from Cadbury Coffee and beverages product- Nescafe that can be substitute with other coffee brand like Ali caf, Power root. Besides that it can be also be substitute by other beverage like Lipton tea.

Bargaining power of supplier Nestl prides itself on creating and maintaining positive relationships with its suppliers all over the world. Due to the large purchasing power of Nestl, and because the suppliers of agricultural commodities offer a product that is far from unique, Nestl holds more bargaining power than its suppliers. Aside from this, Nestl prefers to create and preserve long-term relationships with its suppliers as this helps to ensure the quality of the raw materials being purchased. In addition, Nestl also offers useful advice to its suppliers on how to perform more efficiently to minimize unnecessary costs.

Rivalry among competing firm Nestle as a multinational food and Beverage Company had share the market place with other food industry giant, which are : Unilever NV UN - A Dutch company that produces packaged foods and products for the home and personal care markets. Unilever is one of Nestles largest international competitors. Unilever brand in Malaysia include Knorr, Lady choice, Lipton, Walls and Planta. Kraft Foods KFT - A U.S. company that produces packaged foods products. Kraft is one of Nestle's largest U.S. based competitors. In early 2010, Kraft bought Cadbury Schweppes CSG, creating the largest candy company in the world and strengthening Krafts international presence. Cadbury Schweppes CSG is a U.K. company that produces products for the confectionery and non-alcoholic beverages markets; they compete with Nestle's beverage and confectionery products internationally and in the U.S. Cadbury Dairy Milk chocolate, Kraft Singles is a timeless family favorite that has been a part of many childhood memories. The delicious, smooth cheese slices are high in Calcium and Vitamin D that aid in the development of strong bones and teeth GROUPE DANONE DA - A French company that produces packaged foods and beverages. Groupe Danone competes with Nestle internationally and in the U.S. powdered milk, Dumex. F&N- Fraser and Neave, Limited (F&NL) has been quenching the thirst of consumers since 1883 and has since established itself as a leading player in the food and beverage arena in Singapore and Malaysia. F&N has built a strong beverage portfolio to meet this trend. Its

portfolio of healthy beverages and food products include 100PLUS isotonic drink, F&N MAGNOLIA Milk, F&N FRUIT TREE juices, F&N NUTRISOY, F&N NUTRITEA, F&N SEASONS Asian-inspired drinks and teas, F&N ICE MOUNTAIN water, F&N aLIVE yoghurt, ZESTA, alongside F&Ns range of sparkling drinks.

Relative power of union, government special interest group

CERELAC- The baby nutrition expert, with NESTL, the nutrition expert, strengthen and entrench Nestls position as the baby nutrition expert. 2008 was a major milestone for NESTL Infant Cereals with the rebranding to NESTL CERELAC, launched together with additional protection benefits from BL BIFIDUS PRO PLUS.

Government of Malaysia- Nestle Corporate Responsibility commitment supporting the Governments efforts to improve the nutritional status of all Malaysians. One of the worthy achievements during the 2008 was the market expansion of the Popularly Positioned Products (PPP) range that offers Malaysians nutritionally balanced products at more affordable prices. The Governments swift action to reduce and mitigate the impact of the global economic uncertainties on the local economy by reducing petrol prices, introducing tax incentives and other fiscal incentives, have helped to reassure investors of Nestle. Lower tax expenses, stemming from the Government tax incentives, nudged the profit margin after tax from 8.5% to 8.8% of the turnover for the financial period 2008.

UKM- Nationwide survey Nestle conducted jointly with UKM helped Nestle understand the nutritional profile and eating habits of primary schoolchildren, which can be addressed through tactical measures to counter the worrying trend of obesity and diabetes.


Consumer demand healthier food product- Nearly all of Nestle's revenues come from sales of food and beverage items. Thus, changing consumer demand for different types of food and beverage items can have an impact on Nestle's sales. With the consumer awareness toward healthy food increase, Nestle is attempting to take advantage of trends such as these by putting the "Nutritional Compass", which prominently displays nutritional information, on over 90% of its products' packaging, and repositioning itself as a nutrition and health company. Focus on developing economic- realize the huge potential in developing country Nestle invest heavlty in production capacity in new market, such as South Africa, Brazil, Russia, and India.Nestle's expects emerging markets to account for 60% of future growth. Nestle "Popularly Positioned Products- Products that are lower cost and are priced at a level where poor consumers in the developing world can purchase them every day Create huge business opportunities for nestle. With the explicit goal of having emerging market sales account for 45% of revenues by 2020, Nestle is heavily investing in Brazil, Russia, and India from 2010-2012, and encouraging local acquisitions by their geographic subsidiaries.