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Nestle Project Asif Sahb PDF
Nestle Project Asif Sahb PDF
Nestle
Founded in 1866,150 years ago
Introduction
Merge with 1905
Our history begins in 1866, with the foundation of the Anglo- Anglo Swiss
Swiss Condensed Milk Company. Henri Nestlé develops a Headquarter Switzerland
breakthrough infant food in 1867, and in 1905 the company he
CEO Paul bulcke
founded merges with Anglo-Swiss, to form what is now known
Chairman Peter brabek
as the Nestlé Group. During this period cities grow and railways
Employees 3,35,000(2016)
and steamships bring down commodity costs, spurring
international trade in consumer goods. Over 1,500 glasses of Pure Life water are drunk every
second! And canned food was invented in 1810. 2000+ brands are worldwide and 3 35 000
employees worldwide. Number of countries we sell in 447 factories in 86 countries. CHF 89.5
billion sales in 2016. The number of registered shares amounts to 3'112'160'000 with a nominal
value of CHF 0.10 each.
Nestlé Pakistan
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Nestlé in Pakistan is operating since 1988 under a joint venture with Milk Pak ltd and took over
management in 1992.
The company’s strategy is guided by Nestlé’s Corporate Business Principles which are in line with
internationally accepted best practices and ethical performance culture. Nestlé’s existing products
grow through innovation and renovation while maintaining a balance in geographic activities and
product lines. Long-term potential is never sacrificed for short-term performance. The Company’s
priority is to bring the best and most relevant products to people, wherever they are, whatever their
needs are, and for all age groups.
Nestlé Pakistan today is the leading Food & Beverages Company in Pakistan with key focus on
Nutrition, Health and Wellness and reaching the remotest of locations throughout Pakistan to serve
the consumers. Nestlé Pakistan also prides itself in being the leaders in Nutrition, Health &
Wellness. Ever since 1867, when Henri Nestlé invented the first infant food, nutrition has been in
our DNA. Today more and more consumers mirror our emphasis on nutrition, as they realize that
food choices affect their health and quality of life.
Nestlé Pakistan operates in many ways but people, products and brands are the main flag bearers
of the Company’s image, and we continue to enhance the quality of life of Pakistanis
Number of Total employees
Integrated management, investment & technology & mostly the commitment of our workforce &
employees, bonded together with trust & integrity.
Nestle Pakistan is the FMCG company which has major industry to cater food & beverages. Which
has sub industry of Diversified goods for food and its major industry is FMCG industry.
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Major Industry: Food & Beverages
Regional Offices
Vision
Nestlé’s vision is to be the globally recognized leading Nutrition, Health and Wellness (NHW)
Company. Nestlé Pakistan subscribes fully to this vision and the values that come with it.
Leading a dynamic, passionate and professional workforce, proud of our heritage and positive
about the future
Meeting the nutritional needs of consumers of all ages – from infancy to old age, from nutrition
to pleasure, through an innovative portfolio of branded food and beverage products of the highest
quality
Delivering shareholder value through profitable long-term growth, while continuing to play a
significant and responsible role in the social, economic, and environmental sectors of Pakistan
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Mission
“Nestlé is dedicated to providing the best foods to people throughout their day, throughout
their lives, throughout the world. With our unique experience of anticipating consumers’ needs
and creating solutions, Nestlé contributes to your well-being and enhances your quality of life.”
Components of mission
Components
Customers
Markets
Public image
Products
Self-concept
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Nestle products in Pakistan
NESTLE Worldwide
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Target market
Urban
Suburban
Social stratification
Upper class
Middle class
Lower class
Age segmentation
Behavioral Segmentation:
Firstly, the segment includes people who are interested and like enjoying Nestlé products.
Secondly, it includes people who are willing to buy but not finding any other in the region up to
the level they desire with respect to quality, hygiene and taste.
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Strategies
Nutrition plays a profound role in everyone’s life. Our strategy focuses on delivering distinct
benefits to people through the food and beverages, products and services we provide. Over 150
years we have built a successful business by understanding and anticipating the needs of society,
and continuously adapting ourselves to seize the opportunities presented to us.
The fast-evolving needs and expectations of society today reconfirm the validity of our Nutrition,
Health and Wellness strategy. The world is at an inflection point. The speed, intensity and the
breadth of change is unprecedented. Digital disruption is reshaping our industry, our relationships
with our suppliers and retailers, and with the people who buy our brands.. In a world where
hundreds of millions of people are under-nourished, malnourished or over-weight we are well
positioned to help contribute solutions.
Innovation strategy:
Digital innovation is a strong competitive advantage and a cornerstone of the company’s future
development. For some time now we have been creating a digital-first culture that enables us to
manage and to benefit from the disruption digital is bringing. As the ‘fourth industrial revolution’
takes hold, we are confident that we can capitalize on the efficiencies and the opportunities digital
brings.
We use quality ingredients people know and trust, adding nutrients where appropriate. We are
substantially reducing sugar, saturated fat and salt. By communicating clearly about the
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contribution each product makes to a healthy diet, we are helping people make informed decisions
about what to eat and drink.
The innovation is broad-based across all categories, brands and markets. It comes in many forms
from blockbusters like Nespresso, to renovating products to keep them fresh and relevant as we
have done with brands like Nescafé and Nescafé Dolce Gusto, Nido, Milo and Maggi.
Growth strategy
Positioning strategies
By creating product, service, channel, people and image differentiation nestle reach the customer
touch point more effectively and efficiently in comparing with their competitors.
Product differentiation:
Nestle bring a lot of products for target customers. They provide 25 types of minerals in nido for
children. It also provide Cerelac and lectogen for newly born children. Nescafe has also 4 types.
Channel differentiation:
Nestle reach their products to customers through their expert market salesman and transportation.
So their products are much available to customers.
Image differentiation:
Nestle logo is totally different from its competitors that are greatly accepted by customers. For that
customers easily identifies the nestle products.
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Nestlé Strategic Roadmap
The Nestlé Strategic Roadmap guides us in these turbulent times. The glue is our purpose and
values, and our culture. The roadmap says what we want to be as a company, what we want to
leverage as competitive advantages to fuel growth, where we want to grow and how we will do
that efficiently, effectively and responsibly. It drives internal alignment behind our goals.
Operational pillars
Consumer engagement
Operational efficiency
Growth drivers
Out-of-home consumption
Competitive advantages
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Strategic priorities
We have a strong cost control culture. Through Nestlé Continuous Excellence we continuously
improve our operations and deliver savings. With Nestlé Business Excellence we simplify,
standardize and share. This is creating back office efficiencies, helping us to leverage our size and
scale to deliver competitive advantage, and unlocking resources. These are the fuel for growth,
brand support, Research and Development, innovation and renovation.
We challenge ourselves continuously to look for new opportunities and for areas where we can
make a contribution to the issues society faces. This creates shared value for the communities
where we operate and for our shareholders. We are contributing to society while growing our
business. Trust is fundamental to our success. Trust helps deliver growth, creating shared value
for our shareholders and for society. Quality and compliance underpin that trust, and are the best
way to ensure the long-term success of our business.
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Management structure
Nestlé has a Board of Directors, led by our Chairman Paul Bulcke, who was the former Nestlé
CEO and in Pakistan director of nestle is Syed Babar Ali.
Managing Director
Syed Babar Ali
Marketing and Technical Supply Chain Manager Financial Control Corporate Quality
Sales Manager Manager Corporate HR Manager Assurance Manager
Manager
National Sales
Manager
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Key functional department
There are the following functions in nestle. There occurs a whole process of the collection of the
milk from different areas of Pakistan.
Accounts Department
Marketing Department
Finance Department
Agriculture department
Accounts Department
Accounts department at MCDD prepares financial statements such as Balance sheets, Income
Statements, Cash Flow Statements on daily basis. As, the milk purchase is done along with
purchase of milk all the entries has to be prepared.
This department has to ensure that the hygiene, the environment in which the milk is being
collected and to ensure the safety measures. This department ensures all employees are covered
by a certified safety and health management system.
Many developments are being happening so make things more productive. The expert of this
department fully coordinate with the marketing department and very efficiently and effectively
interprets their findings for collecting milk in more appropriate way.
Marketing Department
This Marketing department has un-beatable marketing forces that on regular basis conduct
market surveys in order to look into Competitors position and customer’s taste. At time when the
forces feel a change in customer preferences they immediately undertake distinctive steps and
make new sales plans.
Finance Department
Finance department at MCDD performs various functions. The payment have to be given to all
the milkman and they also make recommendation letters for loan to banks by the farmers who
are supplying good quality milk. Also all the expense of the department is handled by finance
department.
Agriculture Department
The people of this department facilitate the farmers of the dairy farms establishment and manage
the locations from where milk is being collected. They also give trainings to the farmers to make
their work more efficient.
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Human Resource Department
HR department is handling the personnel of both power and appliances division. Whenever it
gets any new plan either from power or from appliances it starts searching the best talent to be
hired for the respective need and prepares salaries estimates statement. In MCDD, the HR works
for hiring employees and settling down all issues related with employee’s needs, wants and
hurdles. The employees of the HR department also visits the fields to interact with the farmers.
They also arrange some meetings and also the other events.
SWOT ANALYSIS
STRENGTHS
Parent support
Nestle Pakistan has a strong support from its parent company, which is the world’s largest
processed food and beverage company, with a presence in almost every country.
Company Image
Nestle company has a great image in the mind of people. Nestle company has worldwide reputation
which helps them to retain the market even in bad situations & unfavorable conditions.
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Well-developed strategy
Nestle has recognizes there is a right time and place for their product; therefore, their strategy
makes room for adjustments, Nestle captured a market with great sweep with the developed
strategy.
Market Share
Nestle juices has a highest market share almost in every SBU’s line, such as in Milk pack & Nestle
pure life. High market share always depicts the quality of the firm & its strong management
decisions.
Product innovation
The Company has been continuously introducing new products, thus expanding its product
offerings. With the extra ordinary technology adoption nestle able to produce innovated products.
.
WEAKNESSES
Less Proactive
Nestle being a company is less proactive they create changes but usually unless competitor doesn’t
change they doesn’t adopt a change.
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Limited Distribution Channel
Nestlé’s major & bad factor is the limited distribution channel because they distributes their
products to whole seller in their own factory vehicles.
No outlets in Pakistan
They don’t have direct outlets to whole sellers to create less burden on the factory distribution
channels however their competitors give them a major threat by this.
OPPORTUNITES
Health conscious
Increasing health and hygiene awareness among Pakistanis has greatly increased sales of nestle
products. Both the government and the media have started health awareness campaigns to make
Pakistanis realizes that consumption of Nestle’s hygienic products is as essential as eating food.
Fruit/ juices & eatable products are doing very well in both urban and rural areas.
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Market growth
Nestle market expands very fast. A new research proves that in future (2012) every person use
85.5 liters juices per years & uses more hygienic products because of the low hygienic conditions
of the environment.
THREATS
Government Regulation
They face problem if government employ taxes on them which force them to raise the price of
their product.
No Entry Barrier
There are no many entry barriers so a large numbers of local companies enter in various Nestle’s
product market.
Inflation rate
Increase inflation rate very fast .In 2008 expected inflation rate 23.3% so with the increasing
inflation rate the prices will go down which creates the market slump, so inflation is very true bad
factor which can affect Nestle.
Unfavorable Changes in Consumer Demand
With the increase in the competitors there will be a increase in the number of related products
which eventually harm the Nestlé’s market. Due to which the consumers demand pattern fluctuate.
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Key external forces
“External environments are the forces and events outside a company that have the potential to
influence or affect an environment” Williams, C. & McWilliams, A. 2013. MGMT 2nd Asia-
Pacific Edition.
The General environment represents the forces that exist outside of the company that have the
potential to indirectly affect it in some way. During a manager’s analysis of the general
environment, four specific areas will be assessed which are economy, technology trends,
sociocultural trends, and political/legal trends.
Economic
Economic is the totality of economic factors, such as employment, income, inflation, interest
rates, productivity, and wealth, that influence the buying behavior of consumers and institutions.
What Nestle company define sustainable development as the process of increasing the world’s
access to higher quality food, while contributing to long term social and economic development,
and preserving the environment for future generation.
Technology
External factors in technology that impact business operations. Changes in technology affect how
a company will do business. A business may have to dramatically change their operating
strategy as a result of changes in the technological environment. Nestle is one of the largest food
and beverage companies in the world. Nestle have many food products such as Baby foods, bottled
water, cereals, chocolate, coffee, chilled and frozen food, dairy, drinks and ice cream.
Nestle from packaging and equipment, to food processing technologies and manufacturing new
beverage systems such as Nespresso,Nescafé Dolce Gusto, Special. T and BabyNes. They have
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also developed a large number of different technologies. For example; Fermentation and
probiotics, Extrusion, Healthier fats, Foam booster technology, Malt extraction, and Portion
dispensing systems.
Socio-cultural.
Socio-cultural environment is a set of beliefs, customs, practices and behavior that exists within
a population. International companies often include an examination of the socio-cultural
environment prior to entering their target markets.
Political/legal trend.
The basic understanding of the political legal environment is when the government implement’s
laws and or regulations which effects the way a business operates. Not only do corporations in the
food and beverage industry have to follow the political and legal aspects of their home country,
they are required to follow the political laws and regulations of other countries the corporation is
doing business in. Nestlé operates and sells their products in over a hundred countries. In each and
every country they (Nestlé) are operating in, they are being regulated for the specific country’s
laws and taxes, whether it is through their products or employment. For example, Nestlé operates
in Saudi Arabia and United Arab Emirates among others. In these two countries, Nestlé faces the
Islamic Law and has created the Nestlé Halal Committee to foresee the Halal products produced
by Nestlé Malaysia.
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Porter five forces model
The threat of new entrance means when any other company that is not operate in that product
category but operate in the other product market or the company that start it new venture see a
opportunity in this field like juices and they decided to enter in this market. So the current company
that is operating in the market has a Low threat for the new entrance. New entry can raise the threat
of competition. But however the Nestle is big organization being it competitor is not an easy task.
There is some barrier for stop the new entrance
Economies of Scale
Product Differentiation
Capital Requirements
Switching Costs
Access to Distribution Channels
Cost Disadvantages Independent of Scale
Government Policy
If all these things present in the market then no company want to enter in that market because
they know there is no any opportunity for it.
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Bargaining Power of Suppliers
The company needs raw material, labors, component and other supplies. These requirement leads
to buyers-suppliers relationships between industry and the suppliers. Suppliers, if powerful can
exert an influence on the producing industry, such as selling raw materials at high price to capture
some of the industry profits. Suppliers have great bargaining power if the company cannot produce
its raw materials or other ingredients. Suppliers have weak bargaining powers, if in the market
many suppliers and demand of raw material is low.
The bargaining power is low because Nestle doesn’t rely on any supplier they produce there
on raw material or import it from parent company, even they have no reliance on the distributors
they have their own factory trucks to supply the material.
Buyer power is the most important factor of porter’s fiver forces model, because buyer are the
consumers of the product, for nestle it’s a major impact factor because the competition is intense
& competitors have the same products may differs in quality but providing the same needs. For
that particular reason we can say that Nestle have high bargaining power from buyers. They can
lose the customer if the prices & quality form the competitor meet their products.
So if Nestle can control the factor of their competitors may be they eliminate this buyer power all
to gather. After all switching cost not as much high to engage in using another brand however
nestle with the time & quality became a Generic brand in Pakistan.
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Threats from Substitutes
Substitute products refer to products in other industries. To the economist, a threat of substitutes
exists when a product demand is affected by the price change of a substitute product. A products
price elasticity is effected by substitute product – as more substitute become available, demand
becomes more elastic since customer have more alternative . A close substitute products
constrains the ability of firms in an industry to raise prices.
Nestle have a major threat from it substitute products from other competitor due to which there
product can lost the market share, there are many competitors so the threat from substitutes product
are high.
Competitive Rivalry
The big factors determining the strength of rivalry is how actively and aggressively are rivals
employing the various weapons of competition in jockeying for a stronger market position and
seeking bigger sales. In the market rival create a great threat. Many companies introduce same
products such as milk, water, cereals & many more items to hamper the nettle’s impact in market
and increase threat. Many local company enter in market, there is also great threat for establish
company. Nestle also face lot of HIGH competitor rivalry.
We can conclude that the FMCG industry is unfavorable for the new entrant to enter in the market.
However existing firms can control these five forces & attain the edge over their competitors as
nestle is following a sound strategy.
Nestle Pakistan have many competitors in market to cut their market & capture the market they
have. These competitors are;
Haleeb Ltd.
Engro food Ltd.
Shezan Ltd.
“Do not Compete with your Rivals just make them Irrelevant”
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EFE matrix
External Factor Evaluation (EFE) matrix method is a strategic-management tool often used for
assessment of current business conditions. The EFE matrix is a good tool to visualize and prioritize
the opportunities and threats that a business is facing.
Description
Company total weighted score is 3 which shows that nestle company has strong external
position.
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CPM matrix
A competitive matrix is an analysis tool that helps you establish your company’s
competitive advantage. It provides an easy-to-read portrait of your competitive landscape and
your position in the marketplace.
Description:
This CPM matrix shows that nestle company has internally strong positon from Haleeb and also
strong from Engro company.
So, Haleeb is stronger than Engro foods company.
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Ratio analysis
Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick
indication of a firm's financial performance in several key areas. The ratios are
categorized as Short-term Solvency Ratios, Debt Management Ratios, Asset
Management Ratios, Profitability Ratios, and Market Value Ratios.
Liquidity ratio:
Current ratio = current asset/current liabilities
2017 2016
0.78 0.90
Interpretation
A ratio under 1 indicates that a company’s liabilities are greater than its assets and suggests
that the company in question would be unable to pay off its obligations if they came due at that
point.
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Quick ratio
The quick ratio is an indicator of a company’s short-term liquidity, and measures a company’s
ability to meet its short-term obligations with its most liquid assets.
Interpretation
While a quick ratio lower than 1 does not necessarily mean the company is going into default or
bankruptcy, it could mean that the company is relying heavily on inventory or other assets to pay
its short term liabilities.
Leverage ratio
A leverage ratio is any one of several financial measurements that look at how much capital
comes in the form of debt (loans), or assesses the ability of a company to meet its financial
obligations.
Interpretation:
It shows that nestle has average 20% of its debts like investors or shareholders and other 80 %
have of company of its own.
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Time interest earned ratio
Times interest earned is a measure of a company's ability to honor its debt payments.
Time interest earned ratio = EBIT/ interest charges
2017 2016
37.16time 31.89time
Interpretation:
The higher the number, the better the firm can pay its interest expense. If the TIE is less
than 1.0, then the firm cannot meet its total interest expense on its debt.
This means that the company's income is 10 times greater than its annual interest expense
If the company is in debt more than 40-50%, the company needs to look at its financial
statements more carefully and compare itself to other companies in the industry as it may
be in financial difficulty.
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Interpretation:
A high debt/equity ratio generally means that a company has been aggressive in financing its
growth with debt.
Activity ratios
Activity ratios measure a firm's ability to convert different accounts within its balance sheets
into cash or sales. Activity ratios measure the relative efficiency of a firm based on its use of its
assets, leverage or other such balance sheet items and are important in determining whether a
company's management is doing a good enough job of generating revenues and cash from its
resources.
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Interpretation:
A high ratio indicates the business has less money tied up in fixed assets for each unit of currency of
sales revenue. A declining ratio may indicate that the business is over-invested in plant, equipment,
or other fixed assets.
Total asset turn over
The asset turnover ratio is an efficiency ratio that measures a company’s ability to generate sales
from its assets by comparing net sales with average total assets. In other words, this ratio shows
how efficiently a company can use its assets to generate sales.
Total asset turnover= sales/total asset
2017 2016
0.34 time 0.32 time
Interpretation:
A ratio of 1 means that the net sales of a company equals the average total assets for the year. In
other words, the company is generating 1 dollar of sales for every dollar invested in assets.
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2017 2016
99.93 days 104.97 days
Interpretation:
This indicates that how much time company takes to recover its account receivables.
Profitability ratio:
Profitability ratios, which are used to determine the company's bottom line and its return
to its investors.
Gross profit margin:
Gross profit margin is a measurement of a company's manufacturing and distribution
efficiency during the production process. It tells managers, investors, and other
stakeholders the percentage of revenue / sales remaining after subtracting the cost of goods
sold
Gross profit margin = gross income /sales
2017 2016
14 % 15%
Interpretation:
It tells us that nestle is much more efficient in the production and distribution of its product
than most of its competitors.
Return on asset
Return on assets measures the amount of profit the company generates as a percentage of the
value of its total assets.
Return on asset= net income / total assets
2017 2016
0.4% 0.3%
Interpretation:
The higher the ROA number, the better, because the company is earning more money on less
investment.
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Return on equity
Return on equity (ROE) is the amount of net income returned as a percentage
of shareholders equity. Return on equity measures a corporation's profitability by revealing how
much profit a company generates with the money shareholders have invested.
SWOT matrix
SWOT matrix is used to measure the strengths and weakness by relating with threats and
opportunities. There are four strategies that are used in SWOT matrix.
1. S-O strategy
2. S-T strategy
3. W-O strategy
4. W-T strategy
Strengths Weakness
Parent support Less proactive
Company image Limited distribution
High quality products channel
Well-developed No outlets in Pakistan
strategies More concerned profit
Market share
Good marketing skills
Brand strength
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R & d team
Product innovation
Opportunities S—O strategies W-O strategies
Support of foreign 1. get support from investors 1 Through investment
investors and parent to expand make active products.
Changing social trend worldwide 2 Limited distribution channel
Enhance distribution 2. Company image changes can’t change a social trend.
channel the social trend of each 3 Without outlet market
Market growth country. growth is decreased.
Health conscious 3. High quality products can 4 By focusing health not on
increase the distribution profit company can grow
channel. more.
4. market share increases the
market growth
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BCG Matrix
BCG matrix is used to check the
Company or business position in according
To market share and relative industry growth.
Nestle noodles
Market share is 75 % Nestle water
Market share is 85 %
Market share is 55 %
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Quantitative strategies planning matrix (QSPM)
we use it at decision stage which alternative strategies are used and which alternative strategies
are implemented .
Weakness
Intrepretation:
This matrix shows that nestle internal environment market penetration is greater than market
development which is also beneficial for a company.
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Key external factors
Oppertunities
Threats
Intrepretation:
These results shows that in external eniveronment market penetration which is 2.60 also greater
than market development which is 2.50.
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Conclusion
In a conclusion we can say that whether the company is international or local both of the
organizations have strengths & weaknesses which lead them to avail opportunities & remove
threats. So for nestle it important or recommended that they should pay more attention to their
weaknesses & threats in order to compete for a long time & maintain the sustainable competitive
advantage. Nestle is doing so far in a good way they compete with their competitor with full &
strong response. They are proactive but less reactive which is not good for the firms or
organizations that are reactive.
Gift Vouchers
Nestlé can start some schemes that can help to boost sales like free gift vouchers at different
events throughout ear.
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