1.

0 Nestle’s Corporate Social Responsibility for Malaysia

According to Mr Brabeck-Letmathe, the Chairman and CEO of Nestlé b S.A., to Nestlé,
Corporate Social Responsibility is an inherent part of Nestlé business strategy and Nestlé
business principle that guide the way they lead and most importantly, it is not something that is
imposed from the outside. Nestlé has make a lot of contribution in enriching the lives of
community across the world where they operate and at whatever place possible achieve the main
objectives of UN Millennium Development Goals, which are to reduce poverty and the
occurrence of pandemic diseases as well as focusing on the health and education.

First of all, Nestlé has been continuously strived to stress on the nutrition and health of
community in Malaysia. They are aware of this issue due to the increasing occurrences of obesity
among children and adults in our country. To solve this problem, they have decided to improve
the knowledge of public on nutrition and healthy eating habits by organising the ‘How Am I?’
campaign. The aim of this activity is to help Malaysians keep track of their health as well as
educate them on how to read and understand food labels as a way to ensure that they are able to
choose food correctly. Besides that, Nestlé also focus on more sports activities and encouraging
people to practise healthy lifestyle. They organised Nestlé Walking Days and World Walking
Day with the aim to reinforce the important of exercising as a way to keep healthy to the public.
The activities create opportunities for people to meet up with their families and friends to carry
out simple yet effective exercise together. Apart from walking activities, the corporate also
continue to organise their annual ‘MILO PLAY MORE LEARN MORE’ programme to
encourage parents to involve their children in sports activities and instil good values to the young.
According to Milo, play is a fundamental and vital part of a child development. The values such
as teamwork, determination, courage, confidence, discipline and respect that can be gained from
the respected sports activities are important in reaching their potential and helping them to shape
better future. In addition, Nestlé carried out and support existing research about health and
nutrition in order to comprehend the issue better and seek more effective solutions to tackle them.
These are done by the corporate through continuing and increasing collaboration with
universities such as UKM and UPM in nutrition research. In respect of this effort, the corporate
created Nestlé Obesity Forum for health and nutrition experts as well as members of the media to
attend in order to discuss on the topics related to obesity reduction. The objectives of this
initiative are to raise public awareness on the alarming increase in obesity and find ways to solve
the problem. Not to mention that the corporate also continue their collaboration with Nutrition
Society of Malaysia for the Nestlé Healthy Kids Programme which aim at improving nutrition
knowledge and promoting a healthy lifestyle among school-going children in Malaysia. Many
interactive games were added to NHK website to create a fun and interesting experience for the
children. Longitudinal intervention study also been conducted to create an educational module
about basic healthy eating principles.

Secondly, Nestlé also place great importance in rural development. The corporate has put a
lot of effort in providing sustainable livelihoods for the community. Nestlé has starts up contract
farming projects by creating Chilli Farming Scheme in Kelantan and Sarawak Traditional Red
Rice initiative. Nestlé initiated the contract farming to create opportunity for the farmers to be
part of Nestlé Supply Chain as an approach to improve their income. Nestlé also installed a pilot
mechanical drier on-site to help those farmers who experiencing difficulty in maintaining quality
of grain during wet season harvests. The corporate also hopes to decrease rice farming’s
environmental footprint to the minimum while increase the participating farmer’s real income at
the same time through the use of environmental-friendly microbial supplements that effectively
deliver incremental yields and reduce costs. In addition, Setiu Sustainable Development project
also been carried out by Nestlé to enhance the livelihood of local communities, particularly the
women who are the co-income earners and caregivers of the families in the village. The aim of
the project is to provide support for women from the poor families to increase their socio-
economic level and family income through profit-making activities as well as to increase
activities for the local community. Industry experts from Nestlé also visited the Group to share
their knowledge with these women. At the same time, the corporate also award a laptop and a
printer to the women to assist them in the cottage industry. Besides that, the PEWANIS Group
were also sponsored to attend a workshop for SMEs to upgrade their knowledge. Apart from
these projects, Nestlé has helped build eight kindergartens in some of the most uninhabited parts
of Sabah through the partnership with Raleigh International. Through the fund providing by
Nestlé, many children between the ages of two to six in the rural areas now are able to receive
pre-school education in a dedicated building which in turn provides them with the opportunity to
reach the desired grade to enter the Malaysian school system and further the educational
possibilities for generations.

Lastly, Nestlé also greatly emphasize on the quality of water and environment. It has been
noticed that the public is lack of communication and awareness of environmental issues. In
respect to this, the corporate has cooperated with councils to educate media practitioners on
critical role of water and its role in the future survival of mankind to allow them to report such
issues in an effective ways. At the same time, the corporate is also raising awareness among the
factory staff to eliminate waste and re-use of water when appropriate. In addition, Nestlé also run
conservation and deforestation project. The corporate conducted Nestlé Project RiLeaf
restoration programme in the Kinabatangan area to create a natural riverine buffer as a way to
minimise the impact of soil-sedimentation and chemical fertilizers run offs and at the same time
giving the Kinabatangan river an opportunity to restore itself over the course of time. Besides
that, this programme also aims to create a landscape where people, nature and agriculture can co-
exist harmoniously in their need for water. Not to mention that Nestlé has committed to plant at
least 100,000 trees within the year along the lower Kinabatangan River.

To conclude, Nestlé has strived to fulfil their social and environmental obligations by
emphasizing on the importance of nutrition and health to the community, developing the rural
areas and improving the quality of water and environment. It can be clearly seen that the
corporate has a high commitment to improve the lives of the local communities.
2.0 Computation and Analysis of Ratios
2.1 Profitability Ratios
Measures of Profitability Ratios are used to assess whether the business has succeeded in
making an acceptable level of profit. This ratio expresses the company’s net profit as a
percentage of this amount of capital invested in the company.

 Return on Capital Employed (ROCE)

= Net Profit before Tax and Interest X 100
Total Assets – Current Liabilities
2010 2011
ROCE ROCE
= 465,744,000 X 100 = 558,809,000 X 100
1,778,681,000 – 720,915,000 2,002,323,000 – 914,740,000
= 465,744,000 X 100 = 558,809,000 X 100
1,057,766,000 1,087,583,000
= 44.03% = 51.38%

Function:
Measure the overall earning power of all the funds used in the business.

Analysis:
 In year 2011, the ROCE of Nestle Company is at 51.38% compared to that in year
2010 which is 44.03%. ROCE had been increased by 7.35% within one year period.
This shows that Nestle is earning more profit than year 2010. It is due to the sales
volume of Nestle is increasing in both domestic and export sales in year 2011. The
strong rebound of Malaysian economy had a positive impact on consumer confidence,
which led to the strong performance in domestic sales. Besides, Nestle was also
introducing a lot of new products to boost their sales. These reasons caused the strong
growth in demand from the domestic as well as export markets resulted in overall
production rising by approximately 10% in 2011.
  Therefore, as the sales volume had increased, Nestle decided to increase their
inventories to support the domestic and export based demand. At the same time, the
current liabilities of Nestle were also increasing in year 2011. It resulted in slight
increase, RM29,817,000 between two years’ capital employed (total assets less
current liabilities), but there was greater raise in net profit earned between two years
which is RM93,065,000 as sales volume increased. Hence this leads Nestle to have an
increasing ROCE figure.

 Gross Profit Ratio

= Gross Profit X 100
Net Sales
2010 2011
Gross Profit Ratio Gross Profit Ratio
= 1,344,292,000 X 100 = 1,542,117,000 X 100
4,026,319,000 4,700,994,000
= 33.39% = 32.80%

Function:
1. Measures how much profit the business earned in relation to the amount of sales it
has made.
2. This ratio enables us to judge how successful the entity has been at trading.

Analysis:
 Nestle had introduced a lot of new products such as NESTEA, MILO Sejuk, MAT
COOL Ice Cream, NESTLE Crunchy Bite Wafer and NESTLE Menu Kopi O which
were well received by consumers. By recommending all these new products that meet
the consumers’ tastes, there were be more consumers attracted as Nestle provided
them more new choices than other companies, and thus results in Nestle rising sales
volume.
 Nevertheless, there is a decrease in Nestle’s Gross Profit Ratio which is 0.59%. In
year 2011, the Gross Profit Ratio of Nestle Company is at 32.80% compared to 33.39%
in year 2010. In year 2011, both revenue and costs of sales was increasing. After
 subtracting costs of sales of revenue, the increase in gross profit is actually lesser than
the increase in net sales which referred to revenue. Thus we can say that the revenue
in year 2011 was able to cover costs of sales incurred in that year but it still had to be
boosted to gain more profit and show a positive trend in comparing two year’s Gross
Profit Ratio.

 Net Profit Margin

= Net Profit before Tax and Interest X 100
Net Sales
2010 2011
Net Profit Margin Net Profit Margin
= 465,744,000 X 100 = 558,809,000 X 100
4,026,319,000 4,700,994,000
= 11.57% = 11.89%

Function:
1. Measures the percentage of revenue earned in the net profit.
2. This ratio could be to make inter-company comparisons.

Analysis:
 Net Profit Margin of Nestle was increased by 0.32% from year 2010 to year 2011. It
showed a positive effect that Nestle had experienced a growth in their profit earned.
Although there was a drop in percentage of Gross Profit Ratio in year 2011, but the
actual number of gross profit showed an increasing trend by RM197,825,000.
 Moreover, Nestle had a slight decrease in its finance costs. At the same time, Nestle
went through their share of profit compared to the loss in year 2010. Thus, this caused
the percentage of Net Profit Margin to have a slight increase.
2.2 Efficiency Ratios
Indication of the extent to which the assets of the business have been efficiently managed.

 Asset Turnover
= Sales .

Total Asset – Current Liabilities

2010 2011
Asset Turnover Asset Turnover
= 4,026,319,000 . = 4,700,994,000 .

1,778,681,000 – 720,915,000 2,002,323,000 – 914,740,000

= 4,026,319,000 . = 4,700,994,000 .

1,057,766,000 1,087,583,000
= 3.81 times = 4.32 times

Function:
Measures the efficiency with which the company fixed assets have been used to generate
sales revenue.

Analysis:
 From efficiency ratios that we computed, Total Asset Turnover of Nestlé is showing
increasing figures and this show that the company has been using their assets
efficiently to grow profit. From the financial report of year 2010 and year 2011, there
is a decreasing in the amount of equipment yet the capital of the company still
remains the same figure. This shows that Nestlé is becoming more and more efficient
in its production process. In other words, Nestlé achieved larger economies of scale
by using their assets efficiently to produce more of the outputs. Throughout the year,
the Group experienced challenges on the input cost side due to high and further
increasing raw material costs. This put continuous pressure on the company’s gross
margins and highlighted the need for further internal cost saving measures. They were
able to partially mitigate the higher input costs through their on-going Nestlé
Continuous Excellence (NCE) initiative which aims to cut waste and increase
efficiencies across the whole value chain. During the year, the Group continued to
 make the necessary capital investments to meet future higher production demand.
Investments were channelled towards a new processing and filling line.
 Nestlé has a great increasing in the amount of inventories compare to year 2010.
Nestlé produces more output in year 2011 and leads to higher revenue.

 Stock Holding Period

= Cost of Sales .

Average inventory
2010 2011
Stock Holding Period Stock Holding Period
= 2,682,027,000 . = 3,158,877,000 .

(2,220,687,000 + 380,539,000) / 2 (2,641,229,000 + 517,573,000) / 2

= 2,682,027,000 . = 3,158,877,000 .

1,300,613,000 1,579,401,000
= 2.06 times = 2.00 times

Function:
Measures how many times a company’s inventory has been sold and replace during a
year.

Analysis:
 Stock Holding Period of Nestlé has slightly decreasing in the amount. This shows that
the company has faced difficulty in selling or overstocked yet they still able to
overcome this problem by launching new products such as Chilled Dairy, a new
noodle production line in East Malaysia, a new wafer production line in Chembong,
increasing the filling capacity for 3in1 packing lines, installing a new coffee roaster
and increasing the capacity of the KIT KAT lines. The company has clear focus on
fewer but bigger and bolder innovations and renovations helped the Group to launch
several exciting new products which are aimed to capture new market segments and
to drive future growth. MILO Sejuk, NESTEA Ice Lemon Tea, NESTLÉ CRUNCHY
BITE Wafer and NESCAFÉ Dolce Gusto Beverage System were key launches that
 were well received by the market. Nestlé was able to sell their products with ease and
therefore generated revenue on year 2011.
 Stock holding period is 2.06 times in 2010 whereas the stock holding period is 2.00
times in 2011. This shows a decrease in stock holding period from 2010 to 2011.
High stock holding period shows either good sales or ineffective buying. The higher
stock holding period in 2010 may be due to the corporate has promoted a variety of
new products into the markets as well as innovating and redesigning current product
to suit the customer needs. Low stock holding period indicates that poor sales,
ineffective in managing inventory or carrying out-of-date inventory to avoid writing
off inventory losses against income which resulting in excess inventory. On the other
hand, lower stock holding period in 2011 means the corporate might facing some
problem on the revenue. The raising strength of its competitor and economic crisis
might lead to the drop in the period.

 Debtors Collection Period

= Credit Sales .

Trade Debtors
2010 2011
Debtor Collection Period Debtor Collection Period
= 4,026,319,000 = 4,700,994,000
162,666,000 211,587,000
= 24.75 times = 22.22 times

Function:
Measures how many days on average it takes to collect account receivable.

Analysis:
 For Debtor Collection Period figures that we computed, the figures shows decreasing
number. This means that the company use a shorter time to collect back their debts
from the debtors. Nestlé shows efficiency on collecting their debts, if they use shorter
time continuously to collect their debts, they will face lesser risk of their debtors to be
a bad debt.
 Creditors Payment Period
= Credit Purchase .

Trade Creditors
2010 2011
Creditors Payment Period Creditors Payment Period
= 841,879,000 = 1,035,221,000
420,553,000 576,508,000
= 2 times =1.79 times

Function:
Measures the average number of days which elapse between the date of a credit purchase
and the date on which payment made to supplier.

Analysis
 Creditors Payment Period of the company has shown a decreasing figure from year
2010 to year 2011. This shows that the company the time lag in the account payables
period has came down which point out that a precise payment of all the payables is
taking place, which is a healthy sign for Nestle.
2.3 Liquidity Ratios
A measure of debt paying ability when due by a business.

 Current Ratio
= Current Assets .

Current Liabilities
2010 2011
Current Ratio Current Ratio
= 783,869,000 . = 1,015,064,000 .

720,915,000 914,740,000
= 1.09 : 1 = 1.11 : 1

Function:
1. Relationship of current assets to current liabilities.
2. Indicator of a business’s liquidity.
3. Measures short-term paying ability.

Analysis:
 In 2010, the current ratio of the year is 1.09: 1, where current assets of the business
are greater than its current liabilities. This ratio showing us that Nestlé is still having a
small quantity of stocks that have not been sold out and there are still some
uncollectible debts from the debtors. So, it can be concluded that the business are
financially stable to clear all its debts in 2010.
 The current ratio has increased from 1.09:1 in 2010 to 1.11:1 in 2011. Current asset
are also in excess of current liabilities for the year 2011. This is due to the increase of
inventory and lesser obligations that have to be met in the future. This indicates that
the business is financially more stable to pay all of its debts compared to last year.
 Generally, the current assets exceed the current liabilities in both years. We can infer
that the corporate would not facing any immediate liquidity problems as long as
receipts from trade debtors can be kept in step with payments to trade creditors.
 Acid Test Ratio
= Current Assets – Closing Stock .

Current Liabilities
2010 2011
Quick Ratio Quick Ratio
= 783,869,000 – 380,539,000 . = 1,015,064,000 – 517,573,000 .

720,915,000 914,740,000
= 403,330,000 . = 497,491,000 .

720,915,000 914,740,000
= 0.56 : 1 = 0.54 : 1

Function:
1. A more severely accurate measure of short-term debt paying ability.
2. Measure the ability of a business to pay its debt when due without the need of
liquidating its inventory.

Analysis:
 Quick ratio in 2010 is 0.56: 1, whereas quick ratio in 2011 is 0.54: 1. This shows a
decrease in Nestlé immediate liquidity position. So, by the end of 2011, the corporate
had insufficient of cash to pay its proposed dividends. Nestlé has to solve this
problem either by getting a loan from the bank or request the debtors clear their debts.
 In overall, Nestlé is in a dangerous position if stocks are excluded from current assets
because the value of current liabilities exceeded the value of differences between
current assets and closing stock in both years. The decrease in the quick ratio from
2010 to 2011 makes the situation even more worrying.
2.4 Investment Ratios
These ratios are mainly of interest to investors or potential investors and may help these users
to decide whether or not a business represents a worthwhile investment. These ratios are
suitable for companies only.

 Earnings per Share

= Net Profit after Tax, Interest and Preference Dividend X 100 cents
Number of Ordinary Shares in Issue
2010 2011
Earnings per Share Earnings per Share
= 391,398,000 X 100 cents = 456,301,000 X 100 cents
234,500,000 234,500,000
= 166.91 cents = 194.58 cents

Function:
1. A measures the amount of profit which has been earned for each ordinary share.
2. Earnings from the basis for dividend payments and future increases in the value of
shares of stock.

Analysis:
 The earnings per share in 2010 is 166.91cents, whereas the earnings per share in 2011
is 194.58 cents. This value of earnings per share in this two years are net profit after
tax, interest and preference dividend are greater than the number of ordinary share in
issue.
 Price Earnings (P/E) Ratio
= Market Price per Ordinary Shares
Earnings per Share
2010 2011
P/E Ratio P/E Ratio
= 4334 . = 5620 .

166.91 194.58
= 25.97 cents = 28.88 cents

Function:
1. Relationship of earning per share to the market price of an ordinary share.
2. High ratios are viewed as more attractive than lower ones.
3. Investors are willing to pay a premium for a company's stock because of its optimistic
future growth prospects.

Analysis:
 In 2010, the price earnings ratio is 25.97. The market price per ordinary shares is in
excess of earnings per share for the year 2010. The price earnings ratio for the year
2011 is 28.88, whereas the market price per ordinary shares greater than the earnings
per share. The price earnings ratio of 2011 are viewed as more attractive than 2010.
This means that investors are willing to pay a premium because of its optimistic
future growth prospects.

 Dividend Cover
= Net Profit after Tax, Interest and Preference Dividend .

Ordinary Dividends
2010 2011
Dividend Cover Dividend Cover
= 391,398,000 . = 456,301,000 .

269,675,000 293,125,000
= 1.45 times = 1.56 times
 Function:
1. A measure the number of times that the ordinary dividend for a year could have been
paid out of the available profits.
2. A high dividend cover indicates the company is gaining more profits.
3. A low dividend could indicate the difficultly in maintaining the payout for dividends.
4. Investors who seek dividends prefer it to be higher.

Analysis:
 Dividend cover in 2010 is 1.45 times, whereas dividend cover in 2011 is 1.56 times.
From these data, we can see that dividend cover in 2011 is higher than that in 2010,
with the differences of 0.11 times between the 2 years. A high dividend cover means
that the company can easily afford to pay the dividend and a low value means that the
business might have some difficulties in paying a dividend. So, we can conclude that
the payment of dividend in 2011 can be settled with ease as compared 2010.
Generally, there are no problems for the corporate to settle the dividends for both
years since the value of net profit after tax, interest and preference dividend is greater
than the value of ordinary dividends in 2010 and 2011 or the ratio is greater than 1.

 Dividend Yield
= Dividends per Ordinary Share X 100
Market Price per Ordinary Share
2010 2011
Dividend Yield Dividend Yield
= 165 X 100 = 180 X 100
4334 5620
= 3.8% = 3.2%

Function:
This ratio measures the rate of return that would be earned by an investor who buys
common stock at the current market price.
 Analysis:
 The percentage of dividend yield in 2010 is recorded as 3.8%, while the percentage of
yield in 2011 is recorded as 3.2%. The difference of percentages of dividend yield
between the two years is 0.6%, with the percentage in 2010 is higher than the
percentage in 2011. A high dividend yield can be considered as evidence that a stock
is under-priced or that the company has fallen on hard times and future dividends will
not be as high as previous ones. Similarly, a low dividend yield can be considered as
evidence that the stock is overpriced or that future dividends might be higher. A
higher dividend yield brings a lot of benefits to the corporate. For an example, the
business might use this fund to promoting and advertising their products. In addition,
higher dividend yield might due to the corporate is economically tied-up. On the other
hand, it is one of the factors that contribute to the increase of a corporate’s tax bill.

 Capital Gearing Ratio

= Preference Share Capital + Long Term Loans X 100
Share Capital + Reserves + Long Term Loans
2010 2011
Capital Gearing Ratio Capital Gearing Ratio
= 319,264,000 X 100 = 324,264,000 X 100
234,500,000+37,016,000+319,264,000 234,500,000+10,560,000+324,264,000
= 319,264,000 X 100 = 324,264,000 X 100
590,780,000 569,324,000
= 54.04% = 56.96%

Function:
A measure of the proportion of a company’s long term funds which have been provided
by the lenders.

Analysis:
 In year 2011, the Capital Gearing Ratio of Nestle had increased by 2.92% from year
2010. This showed that Nestle increased their capital by getting debt funding from
borrowers rather than getting equity funding from its shareholders. It may have the
 risk that costs of business will be rapidly increased if the interest paid on debts
increased. Since the difference in two years’ Capital Gearing Ratio is considered as a
slight increase, we can assume that Nestle is adventurous in its expansion plans, and
may have taken opportunity to invest by borrowing at low rates.

 Interest Cover
= Net Profit before Tax and Interest .

Long Term Interest Payable

2010 2011
Interest Cover Interest Cover
= 465,744,000 . = 558,809,000 .

642,000 1,528,000
= 725.46 times = 365.71 times

Function:
1. A measure of the number of times that the loan interest payable for a year could have
been paid out of the available profits.
2. This is the most common measure of a company's ability to protect its long-term
creditors.
3. Based on earnings before interest and income taxes.

Analysis:
 In year 2011, Interest Cover Ratio of Nestle had dropped. This meant Nestle’s ability
to meet its interest obligation was dropped too. Yet it is still under control of Nestle
itself as at 365.71, its interest cover ratio is more than satisfactory. It means that the
necessary profit is 365.71 times larger than the interest payments that the business
had incurred.
3.0 Conclusion on Performance of Nestle for year 2010 and 2011
From the computed ratios that we have completed, we found that actually Nestle has a very
good achievement in business performance in year 2010 and 2011. Our comment towards Nestle
is that Nestle is in the status of positive developing on its overall performance as the information
we obtained is showing us a positive effect.

From the computed profitability ratio, we acknowledge Nestle is actually able to make an
acceptance level of profits. The ROCE figures show that investment on capital of Nestle has
actually generated profits as the ratio shows a rising trend in year 2010 and 2011. It increased
from 44.03% to 51.38% which mean Nestle was using the funds wisely and effectively in
company to generate the maximum profits as possible as well.

Nestle had a drop in its Gross Profit Ratio shows that costs of goods sold had increased much
more than revenue had increased. This indicates Nestle’s revenue cannot cover all the cost of
goods sold. However, from the Net Profit Margin computed, we found that after adding other
income and less those expenses, Nestle has a slight increase in the results gotten. Nestle is still
operating under a satisfactory situation because there was profit earned.

For liquidity ratio, we obtain the information through the figures from the computation of
current ratio and acid test ratio. We know that Nestle has the ability to sell off all its currents
assets to clear their short-term debts. However, if Nestle does not have any inventory in the year
end, they might have some problems in covering all their short-term debts as Nestle’s closing
inventory had occupied the largest percentage in their current assets.

Furthermore, it comes to efficiency ratio. It is a measure of the level of activity and

production. Different industries have different asset turnover ratios, primarily because of
differences in technology. The fixed assets turnover in 2010 is 4.68 times while 2011 is 5.24
times, the figure increases means that the fixed asset turnover in 2011 is better than the 2010.
Both the fixed assets turnover and the assets turnover are increases in 2011, they seemed more
desirable. In the analysis of stock holding period, 2.06 times in year 2010 is better than 2.00
times in 2011, that means the stock turnover period is not desirable in 2011. The debtors
collection period in 2011 was shorter than 2010, it shown a better credit control in year 2011.
The debts in year 2011 could be recovered more than 2010, while company could pay more
efficiently in 2011.

Lastly, for the investment ratios, we can say it is in good situation from Nestle’s overall
performance. We can see that Nestle was planning to expand its business as much as possible.
Nestle made a lot of efforts to increase the market price of their shares listed in Bursa Malaysia.
These were going to encourage investors to invest in their business and at the same time, they
can easily borrow funds at the lower rates from banks or other companies as their good
reputation and their ability to pay the interest.

4.0 Future Plans and Prospects of Nestle

Nestlé expect 2012 to be another challenging year due to many uncertainties in the global
economy. However, they believe that the country has good fundamentals and is sufficiently
diversified to be resilient in facing the global uncertainties. Their plans are based on a projected
growth of the Malaysian economy of between 4% – 5%.
This augurs well for the Group for the year ahead as we aim to capitalise on the positive
domestic demand through continued innovation and renovation of our products and further
promotion of nutritional diets and healthy lifestyles in line with the Government’s goal of
creating a healthy and productive society.

Nestlé expect volatile commodity prices to continue in 2012. The Group will remain vigilant
and will take all necessary measures to mitigate and soften any impact on the company’s
business. A key element will be the continuation of the company’s NCE initiative with roll-out to
more units.

2012 is a very special year for Nestlé Malaysia, as they are celebrating the 100 years
anniversary of their operations in Malaysia. Nestlé has been by the side of Malaysians for the
last 100 years, providing them with GOOD FOOD, GOOD LIFE, and they are committed to
continue doing so for many, many years to come.
5.0 Global Competitive Advantages of Nestle in year 2011
The Nestle Corporation use principles, not rules, which have been translated into more than
40 languages and distributed worldwide. The Corporation is built on key beliefs that include
Nestle's business objective to manufacture and market its products in a way that creates value
that can be sustained over the long term for shareholders, employees, consumers, business
partners and the national economies in which Nestle operates. Nestle does not favour short-term
profit at the expense of successful long-term business development.

There are four major global competitive advantages that Nestle has over its competitors in
local market in the year 2011. Firstly, people, cultures, values and attitudes. Nestle is a multi-
cultural business. Throughout Nestle history, we can see that the ability of management and
leadership of the personnel of Nestle makes it becomes a experienced and successful company.
A strong foundation has been formed, approached and recognized by top Harvard academics as
having generated real benefit both for Nestle and the people. In the other hand, Professor
Michael and Mark Kramer from Harvard Business School have stated that, Nestle is put in the
top ranking in the companies who create real share value. They make an investment to maximize
the production of goods and minimize the consumption of cost and resources. Over many years,
this investment and the efforts of the personnel have led Nestle to continuous improvement.
Nestle corporate with the farmers, they will produce better quality of raw materials, and therefore
better products. In these ways, Nestle be able to improve their contributions to people and
standard of living.

Secondly, unmatched product and brand port folio. A brand and product with characteristic
of hard-to-copy is a truly competitive advantage that made Nestle built up over decades. These
brands have been presented in many markets for many generations, even over 100 years. Nestle
owned largest range of foods and beverages of any food organizations. Almost all ages consume
its products, from the young to the old from many countries, any culture. Many of its products
are market leaders and have built powerful consumer loyalty. These products are perfectly well-
established and have become part of people’s everyday life. Nestle becomes an integrated part
and sales are broadly spread across the world because of those expertise, talent, experience, local
knowledge and traditions.
 The third global competitive advantage is unmatched research and development (R&D)
capability. Nestle has strong R&D teams to make sure that everything produced are accepted by
consumers and full with innovations. R&D department also will help the marketing department
to achieve the visions and brand objectives. Nestle also ensured that the consumers’ benefit
remains at the core of all people activities. To create products that taste with nutritional benefits,
R&D department has to apply nutritional science and expertise to create those products. The
Nestle group invests around 1.5 million Swiss Francs in R&D every year. The Nestle Research
Centre in Switzerland is a constant source of new ideas and scientific knowledge that feeds the
pipeline for all its products. It covers 100 different professional areas, for examples, nutritional
science, the life sciences, raw materials, ingredients and other. This department is transforming
nutrition and food science in the major two ways which are from consumers’ needs into research
priorities and from emerging science into customers’ benefits and services. These days,
corporation moved from being a technology-led company that produced convenient, tasty foods
and beverages for sustenance, to being a science driven, nutrition, health and wellness company.

The last competitive advantage is unmatched geographic presence. Nestle aims to be a local
company in each of the 130 countries where they can market their product efficiently. Local
units work within a global framework based on the Nestle principle: “centralize what you must,
but decentralize what u can.” Essentially, Nestle is a company made up by many local units. The
global sales are the result of adding together the sales of each local company. Nestle believes that,
investments have to be good for the country as well as for the corporation. The company has
always found that constructing long-term value not only for the country but also for the company.
These make Nestle be able to have environmental and economical development. Capable in
long-term investment, transfer of technology and training in agriculture are the forces for good
around the company.

There is also Asia competitive advantages of Nestle have over to become the food
manufacturing leader in the markets. In Asia, Nestle' s competitive advantage has been to acquire
local companies in order to form a group of autonomous regional managers who know more
about the culture of the local markets than Americans or Europeans. Nestle' s strong cash flow
and comfortable debt-equity ratio leave it with ample muscle for takeovers. Nestle has employed
a wide-area strategy for Asia that involves producing different products in each country to supply
the region with a given product from one country. Lately, Nestle acquired Indofood, Indonesia' s
largest noodle producer and in time will look to export Indonesian food products to other
countries.