You are on page 1of 34

Final Project (Nestle

Pakistan)

Qasim Ali Pracha


L1S16MBAM0160
Muhammad Saqib Riaz
L1S16MBAM0020
Tauqeer Ahmed
L1S16MBAM0030
Muhammad Ali Shahzad
L1S16MBAM0034

An Overview of Project

Internal:

Actual & Proposed Vision


and Mission
Economic Performance
Evolution of Financial Ratios
Strengths and weaknesses
Analysis: IFE

External:

Industry overview and


comparison of financial
ratios
Manufacturing
Opportunities and threats
Analysis: EFE
Competitors
Market Share
Analysis: CPM

Analysis

SPACE
BCG
IE matrix
Grand Strategy Matrix
QSPM

Possible strategies: Matrix


Analysis

History of
Nestle

History
1866-1905
In the 1860s Henri Nestl, a pharmacist, developed a food for babies who were
unable to breastfeed. His first success was a premature infant who could not
tolerate his mother's milk or any of the usual substitutes. sold in much of Europe.
1905-1918
In 1905 Nestl merged with the Anglo-Swiss Condensed Milk Company. By the early
1900s, the company was operating factories in the United States, Britain, Germany
and Spain.
1918-1938
After the war Government contracts dried up and consumers switched back to fresh
milk. However, Nestl's management responded quickly, streamlining operations and
reducing debt. The 1920s saw Nestl's first expansion into new products, with
chocolate the Company's second most important activity
1938-1944
Nestl felt the effects of World War II immediately. Profits dropped from $20 million in
1938 to $6 million in 1939. Factories were established in developing countries,
particularly Latin America. Ironically, the war helped with the introduction of the
Company's newest product, Nescaf, which was a staple drink of the US military.
Nestl's production and sales rose in the wartime economy.

1944-1981
Nestl's growth in the developing world partially offset a slowdown in the Company's
traditional markets. Nestl made its second venture outside the food industry by
acquiring Alcon Laboratories Inc..
1981-1995
Nestl divested a number of businesses1980 / 1984. In 1984, Nestl's improved
bottom line allowed the Company to launch a new round of acquisitions, the most
important being American food giant Carnation.
1996-2002
The first half of the 1990s proved to be favorable for Nestl: trade barriers crumbled
and world markets developed into more or less integrated trading areas. Since 1996
there have been acquisitions including San Pellegrino (1997), Spillers Petfoods
(1998) and Ralston Purina (2002). There were two major acquisitions in North
America, both in 2002: in July, Nestl merged its U.S. ice cream business into
Dreyer's, and in August, a USD 2.6bn acquisition was announced of Chef America,
Inc.
2003 +
The year 2003 started well with the acquisition ofMvenpick Ice Cream,
enhancingNestl's position as one of the world market leaders in this product
category. In 2006, Jenny Craig and Uncle Toby's were added to the Nestl portfolio
and 2007 sawNovartis Medical Nutrition, Gerber and Henniez join the Company.

Company Introduction

Nestl is the world's leading Nutrition, Health and Wellness


Company. It is committed to increasing the nutritional value of our
products while improving the taste. The Nestl Company has
aimed to build a business as the world's leading nutrition, health
and wellness companybased on sound human values and
principles
While Nestl Corporate Business Principleswill continue to evolve
and adapt to a changing world, basic foundation is unchanged
from the time of the origins of their Company, and the basic ideas
of fairness, honesty, and a general concern for people.
In the 140 years since then, we have expanded around the world
and developed a range of products designed to suit every taste,
need and cultural preference. Our distinctive seal is recognised
everywhere as a guarantee of quality and healthfulness

OUR
BRANDS

Our Brands
We believe that food plays a key role in achieving a well-balanced person. And
so our philosophy is Good Food for a Good Life!
At Nestl, our products are developed keeping our consumers, their
preferences and health in mind.
Millions of consumers the world over trust Nestl products for good reason:
when they choose a Nestl product they have the satisfaction of choosing
quality, taste, variety, convenience and the good nutrition.

Brand Names

Milk, Dairy and Chilled Dairy


Beverages
Bottled Water
Baby Food
Food
Breakfast Cereals
Chocolate and Confectionary

Vision

The Nestl global vision is to be the


leading health, wellness, and
Nutrition Company in the world

Mission Statement

Lead a dynamic, passionate and professional workforce proud of our


heritage and positive about the future.

Meet the nutrition 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.

Deliver 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

Mission Statement(Proposed)

Striving to sustain market leadership in food & beverages


industry to meet needs of our customers of all ages by
providing quality products enriched with nutrition and pleasure
produced at highly sophisticated production system, employing
vibrant and zealous workforce with a strong concern for
shareholders values through long term profitable growth while
ensuring significant role in promoting the prosperity of social
economic and environmental sectors of Pakistan.

Components of Mission
Statement
1. Customers

Yes

2. Products or services

Yes

3. Markets

Yes

4. Technology

Yes

5. Concern for survival, growth, and profitability

Yes

6. Philosophy

Yes

7. Self-concept

Yes

8. Concern for public image

Yes

9. Concern for employees

Yes

THE INPUT STAGE

IFE Internal Factor Evaluation Matrix


Internal Factors Evaluation (IFE)
Sr. No.

Key Internal Factors

Weightage

Rates

WS

Strengths:
1 Highly Diversified Company

0.07

0.28

2 Customer Loyalty

0.02

0.08

3 Research & Development

0.06

0.24

4 Relations with Farmers & Retailers

0.06

0.24

0.1

0.4

6 Self-Milk Collection System

0.09

0.36

7 Brand Image

0.09

0.36

8 Potential for Acquisition & Merger

0.02

0.06

9 Sales & Profit volume

0.07

0.28

0.05

0.2

1 Narrow Market

0.01

0.02

2 Bargaining Power of Suppliers & Retailers

0.12

3 Old Fashioned Products

0.06
0.01

0.02

4 Distribution Costs

0.08

0.08

5 Affordability of customers for products

0.04

0.08

6 Quality Assurance in distribution Channels

0.03

0.06

7 Communication b/w HO & ROs

0.04

0.08

8 Preferability of products
9 Packaging of Products

0.03

0.03

0.04

0.04

0.03

0.06

5 Market Share

10 Management
Weaknesses:

10 Higher Inventory Level


Total

3.09

EFE External Factor Evaluation Matrix


External Factors Evaluation (EFE)
Sr. No. Key External Factors

Weightage

Rates

WS

Opportunities:
1 High Trend for E-Commerce

0.02

0.06

2 Growing Middle Class in Pakistan

0.05

0.2

3 Changing Life Styles

0.06

0.24

4 Higher Demand for Tea related products

0.05

0.1

5 Increased interest in Health & Nutrition

0.07

0.28

6 Reduced Interest Rates by SBP

0.05

0.1

7 Increasing Urbanization in Pakistan

0.08

0.24

8 Improved Economic Conditions in country


9 Productivity of Milk Producing Animals PA

0.05

0.2

0.04

0.12

10 Market penetration of Milk related products

0.03

0.09

1 Increased interest in Restaurant Meals

0.03

0.12

2 Suspicion of Pre-packed Foods

0.05

0.2

3 Increased Govt. Oversight & Regulations

0.05

0.1

4 Devaluation of money

0.03

0.06

5 Uncertainty of economic conditions

0.08

0.16

6 Global Economic crises

0.05

0.1

7 Competition with Smuggled brands

0.02

0.08

0.1

0.3

0.08

0.16

0.01

0.04
2.95

Threats:

8 Entry Barrier
9 Higher Inflation
10 Private labeling
Total

CPM

Competitive Profile Matrix


Nestle

Critical Success
Factors

Weig
ht

Engro Foods

Shakarganj

Rate

Score

Rate

Score

Rate

Scor
e

0.1

0.4

0.2

0.1

Quality Standard

0.15

0.6

0.45

0.3

Profit Margin

0.05

0.2

0.15

0.1

Costs of Production

0.1

0.2

0.3

0.4

Growth Potential

0.1

0.4

0.2

0.1

0.05

0.2

0.15

0.1

Sales & Distribution

0.1

0.4

0.3

0.2

Human Resource

0.1

0.3

0.4

0.3

Advertisement

0.1

0.3

0.4

0.2

Technology

0.1

0.3

0.4

0.2

0.05

0.2

0.1

0.05

3.5

3.05

2.05

Market Share

Corporate
Environment

Research &
Development
Total

BCG Matrix Workings


Milk Div.

2015

2014

Engro (Olpers)

49,834,000

43,027,377

Shakarganj
(Goodmilk)

6,578,986

11,356,340

Nestle Milkpak

81,686,079

77,432,902

Total

138,099,065

RMS = Own Share / Leader's Share


IG = [(Current Year Sales - Last Year Sales)/Last Year
Sales]x100

RMS

131,816,61
9

81686079/81686079

IG

(138099065-131816619)/131816619x100

5%

BCG Matrix Workings


Beverages

2015

2014

Sheezan

6,817,635

6,760,527

Coka Cola

11,073,500

9,199,600

Nestle

20,729,151

18,251,270

Total

38,620,286

RMS = Own Share / Leader's Share

34,211,397

IG = [(Current Year Sales - Last Year Sales)/Last Year Sales]x100

RMS

20729151/20729151

13%

IG

(3862028634211397)/34211397x100

BCG Matrix Workings


Others

2015

Mitchels

Nestle
Total

2014

661,569

486,282

570,686

773,571

1,232,255

RMS = Own Share / Leader's Share

1,259,853

IG = [(Current Year Sales - Last Year Sales)/Last


Year Sales]x100

Other
(Confectionary)
RMS

570686/661569

0.86

IG

(1232255-1259853)/1259853x100

-2%

BCG Matrix

Products
Milk & Nutrition
Beverages
Others
(Confectionery)

Stars

RMS
1
1

IG
5%
13%

Revenues
81,686,079
20,729,151

0.86

-2%

570,686

Question Marks

BCG Matrix
15%
10%
5%

RMS

1.2

0.8

0.6

0%

0.4

0.2

-5%
-10%

Cash
Cows

-15%

Industry Growth

Dogs

SPACE MATRIX
Financial Position
Liquidity (Current ratio): +6
Return on Investment (ROA & ROE): +5
Leverage (Debt to Equity Ratio): +4
Profitability (Earnings Per Share): +6
Efficiency (Inventory Turnover): +5
FP = +26/5 = +5.2
Economic Position:
Inflation: -5
Gov. Policies (Taxation): -4
Demand Variability: -1
Price Elasticity of Demand: -4
Risk Factor: -4
EP = -18/5 = -3.6
Industry Position:
Growth Potential: +6
Capacity utilization: +5
Profit Potential: +6
Ease of Entry in Industry: +4
Financial Stability: +4
I.P = +25/5 = +5

Competitive Position:
Market Share: -1
Product Life Cycle: -2
Customer loyalty: -3
Product Quality: -4
Technology: -2
CP= 12/5 = -2.4

Net Scores for Space Matrix


X-axis

Y-axis

FP = +5.2

IP = +5.0

EP = -3.6

CP = -2.4

Total = +1.6

Total = +2.6

Conservativ
e

F
P

Space Matrix
6

Aggressive

IP

CP

-6

-4

-2

-2

Defensiv
e

Competitiv

-4e
-6

SP/EP

I/E Matrix
IE Matrix for Milk Division
EFE
Opportunities

Key Factors
1

Threats

Weightage

Rates

WS

Increased Demand for Packed Milk due to urbanization

0.15

0.6

2 More demand for hygienic food items like milk


3 Growth in Middle Class population in Pakistan

0.09

0.36

0.1

0.4

4 Productivity of Milk producing animals


5 Market penetration of processed milk

0.15

0.6

0.12

0.48

1 Increased interest in Restaurant meals


2 Suspicion in prepacked milk

3 Market growth is attracting new competitors


4 Inflation is affecting consumers purchasing power
5 Increased Govt. oversight and regulations
TOTAL
IFE
Strengths

0.12

0.09

0.18

0.1

0.3

0.1

0.4

0.06

0.18

3.62

1 Strong Brand Name of Nestle MilkPak & Cream

0.12

0.48

2 Strong Management

0.09

0.36

3 Self-Milk collection system

0.14

0.56

0.1

0.4

0.11

0.44

4 Research & Development factor


5 Largest market share of Milk related products
Weaknesses

0.04

1 Loosing market leadership (MilkPak)

0.15

0.15

2 Higher distribution costs

0.08

0.16

3 Affordability of costumers

0.07

0.14

4 Lack of Quality assurance while collecting milk

0.05

0.1

5 Old fashioned products (Milo)

0.09

0.18

TOTAL

2.97

I/E Matrix
IE Matrix for Beverages Division
EFE
Opportunities

Key Factors
1

Threats

1
2
3
4

Weaknesses

IFE

Strong Brand Name of Nestle Pure Life


Strong Management
High customer satisfaction
Research & Development factor

5 Largest market share among Water and Juices brands

1 Expiry Product scandals


2 Higher distribution costs
3 Lack of awareness and Poverty in rural areas
4 Lack of Availability in remote areas
5 Products are relatively expensive than other brands
TOTAL

Weightage

Changing lifestyles pull up demand for branded beverages

Increased interest in Restaurant meals triggering higher demands


2 for bottled water
3 Growth in Middle Class population in Pakistan
4 Attractive weather conditions in Pakistan
5 Lack of pure drinking water in country

1 Private labeling
2 Market growth is attracting new competitors
3 Inflation is affecting consumers purchasing power
4 Increased Govt. oversight and regulations
5 Increasing cost of plant
TOTAL

Strengths

Rates

WS

0.12

0.48

0.07
0.08
0.11
0.15

3
3
3
4

0.21
0.24
0.33
0.6

0.08
0.11
0.12
0.09
0.07
1

0.13
0.15
0.12
0.1
0.14

3
4
4
2
2

0.24
0.44
0.48
0.18
0.14
3.34

4
4
3
4

0.52
0.6
0.36
0.4

0.56

0.05
0.06
0.1
0.08

2
1
2
2

0.1
0.06
0.2
0.16

0.07
1

0.14
3.1

I/E Matrix
IE Matrix for Other Division (Confectionery)
EFE

Key Factors

Weightage

Rates

WS

Opportunities

1
2

Changing lifestyles pull up demand for branded products


More innovative products can be launched, such as low fat or for diabetic patients.

3 Growth in Middle Class population in Pakistan


4
5
Threats

More than 1.6 Million population is below the age of 15 in Pakistan.


Better marketing campaigns like animated series can increase their sales volume.

0.06

0.12

0.12

0.36

0.08

0.24

0.1

0.4

0.15

Rumors about chocolates containing Haram ingredients

0.1

2 Some competitors are gaining more market share


3 Inflation is affecting consumers purchasing power

0.15

0.3

0.08

0.16

4 Increased Govt. oversight and regulations


5 Negative growth of the industry

0.06

0.12

0.1

TOTAL

Strengths

0.3
2.55

1 Strong Management

0.15

0.6

2 Globally recognized multinational brand

0.12

0.48

3 Diversified Workforce

0.09

0.27

4 High growth potential

0.12

0.36

5 Strong Brand Name of Nestle products

0.12

1 Higher distribution costs

0.48

0.1

0.1

2 Lack of awareness of Nestle Products and Poverty in rural areas

0.14

0.14

3 Lack of Availability in remote areas

0.07

0.14

4 Products are relatively expensive than other brands

0.12

0.24

0.15

5 Less focus on marketing of products other than milk & beverages


TOTAL

0.1

IFE

Weaknesses

0.45

0.15

2.96

I/E Matrix
Divisions
Milk & Nutritions
Beverages
Other (Confectionery)

IFE Weighted Scores


2.97
3.1
2.96

EFE Weighted Scores


3.62
3.34
2.55

Grand Strategy Matrix (GSM)


Particulars

2015

Total Sales

2014

177,951,606

167,287,869

Industry Growth

6.37%

Competitive Position

-2.40

Rapid Market Growth


Quardrant-II

Quardrant-I

Weak Competitive Position

QuardrantIII

QuardrantIV

Slow Market Growth

Strong Competitive Position

Grand Strategy Matrix

Quantitative Strategic Planning Matrix


(QSPM)
QSPM Matrix

IFE
Forward Integration
(Opening Retail
Outlets)
AS
Sr. No.

Key Internal Factors

Product Development
(Lassi & Icecream)

TAS

AS

Unrelated Diversification (Tea


Products)

TAS

AS

TAS

Weightage
Strengths:

1 Highly Diversified Company

0.07

0.14

0.21

0.28

2 Customer Loyalty

0.02

0.08

0.06

0.04

3 Research & Development

0.06

0.12

0.18

0.24
0.12

0.06

4 Relations with Farmers & Retailers

0.06

0.18

0.1

0.3

0.2

0.1

6 Self Milk Collection System

0.09

0.18

0.36

0.09

7 Brand Image

0.09

0.36

0.27

0.18

5 Market Share

0.02

8 Potential for Acquisition & Merger


9 Sales & Profit volume
10 Management

--

--

--

--

--

--

0.07

0.28

0.14

0.07

0.05

0.1

Weaknesses:

0.15

0.2

1 Narrow Market

0.01

0.02

0.04

0.04

2 Bargaining Power of Suppliers & Retailers

0.06
0.01

0.24

0.18

0.12

3 Old Fashioned Products

0.01

0.04

0.03

4 Distribution Costs

0.08

0.32

0.16

0.24

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

-0.09

5 Affordability of customers for products


6 Quality Assurance in distribution Channels
7 Communication b/w HO & ROs
8 Preferability of products of competitors
9 Packaging of Products
10 Higher Inventory Level
Total

0.04
0.03
0.04
0.03

0.12

0.06

0.04

--

--

--

--

--

--

0.03

0.12

0.06

0.03

2.45

2.29

1.87

QSPM (Continued)
Opportunities:
0.02

1 High Trend for E-Commerce

0.05

2 Growing Middle Class in Pakistan

0.06

3 Changing Life Styles


4 Higher Demand for Tea related products
5 Increased interest in Health & Nutrition

0.07

0.08

7 Increasing Urbanization in Pakistan


8 Improved Economic Conditions in country

10

0.05

0.05

6 Reduced Interest Rates by SBP

0.05

Productivity of Milk Producing Animals PA

0.04

Market penetration of Milk related products

0.03

0.08

0.04

0.02

0.2

0.24

0.1

0.15

0.18

0.12

0.15

0.05

0.2

0.28

0.14

0.21

0.2

0.1

0.15

0.24

0.16

0.08

0.15

0.05

0.1

0.08

0.16

0.04

0.12

Threats:
1 Increased interest in Restaurant Meals
2 Suspicion of Prepacked Foods
3 Increased Govt. Oversight & Regulations
4 Devaluation of money
5 Uncertainty of economic conditions
6 Global Economic crises
7 Competition with Smuggled brands
8 Entry Barrier
9 Higher Inflation
10 Private labeling
Total

Grand Total

0.03
0.05
0.05
0.03
0.08
0.05
0.02

0.06

0.03

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

0.08

0.04

0.02

0.1

--

--

--

--

--

--

0.08

--

--

--

--

--

--

0.01

0.02
1.14

0.04
1.86

4.31

0.03
1.11

3.4

3.01

Decision

We had to choose from 3 strategies, 1) to go for a Forward


Integration, 2) towards Product Development and 3)
Unrelated Diversification. The interesting fact was that from
2008-2009 Nestle Pakistan has introduced three new products
into the market which could not gain much of an attraction
including NESQUIK milk enhancer, NIDO BUN YAD, LACTOGEN
GOLD, and CERELAC fruit cereals.

Our Recommendation:
Considering this fact now we recommended Nestle Pakistan
should go for Forward Integration by the way of Opening
Retail Outlets to meet the market trend i.e. people now prefer
to buy from retail outlets rather than traditional shopkeepers.
This can retail the loyalty of our customers as well as there will
be chances to gain more customers for our products.

Evaluations

NESTLE annual financial reports.


Annual Financial reports of
competitors.
Data acquired from KSE 100 Index
and SBP website.

Thank You