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MANAGERIAL ECONOMICS 2013

Submitted By: Muhammad Ahad

MBA(P)

Final Project School of Business and Economics

MANAGERIAL ECONOMICS 2013


Executive Summary:

In this report we begin our project with the background of our selected company NESTLE. In which we discuss background of our organization firs that how this firm came to existence then we explain who the key persons that plays an important role in the organization. Then we discuss the hierarchy of the organization as well as how their material flows from dairy forms to final product. After that we begin our important points of the organization and that is Internal and External Analysis of the organization in form of SWOT analysis. In which we discuss in detail what the actual strength are and weaknesses of the organization and what are the opportunities they avail and what are the threats they have been facing. Then finally we conclude with our recommendations.

MANAGERIAL ECONOMICS 2013

Acknowledgment

Firstly we would thank Allah for giving us the opportunity and the resources to be able to do something productive with our lives. Without His blessings we would not have been able to come as far as we have. Then our sincere thanks to Sir Dawood Mamoon for helping us throughout this report. His guidelines have been very useful for us in preparing this report. He helped us find new ways of being innovative and creative. This report would not have been possible without his cooperation and continuous direction.

MANAGERIAL ECONOMICS 2013

Contents
Introduction: ................................................................................................................................... 6 VISION, MISSION AND VALUES OF NESTL ..................................................................... 8 Vision: ......................................................................................................................................... 8 Mission:....................................................................................................................................... 8 Values: ........................................................................................................................................ 8 Number of Total employees ......................................................................................................... 9 Nature of the Business .................................................................................................................. 9 Products of Nestle: ...................................................................................................................... 10 Ambient Dairy: ......................................................................................................................... 10 Chilled Dairy:............................................................................................................................ 11 Coffee and Beverages: .............................................................................................................. 11 Nestl Fruita Vitals: .................................................................................................................. 11 Organizational Chart of Nestle .................................................................................................. 12 Process (From Raw to Finished Product) ................................................................................. 13 Companys Environment: .......................................................................................................... 14 SWOT Analysis ........................................................................................................................... 14 Strengths ...................................................................................................................................... 15 Parent support (Milk Pak) ......................................................................................................... 15 Company Image ........................................................................................................................ 15 High Quality Products............................................................................................................... 16 Well-developed strategy ........................................................................................................... 16 Market Share ............................................................................................................................. 16 Good marketing skills and services .......................................................................................... 16 Brand strength ........................................................................................................................... 16 Research & Development Team ............................................................................................... 17 Product innovation .................................................................................................................... 17 HR department .......................................................................................................................... 17 High Skilled and Coordinal Staff .............................................................................................. 17 Health Consciousness ............................................................................................................... 17

MANAGERIAL ECONOMICS 2013


Weaknesses: ................................................................................................................................. 18 Less Proactive ........................................................................................................................... 18 Limited Distribution Channel ................................................................................................... 18 No outlets in Pakistan ............................................................................................................... 18 More concerned about profit ..................................................................................................... 18 Most of the employees are overloaded with work .................................................................... 18 Opportunities............................................................................................................................... 19 Support from Foreign Investors ................................................................................................ 19 Support from Foreign Investors ................................................................................................ 19 Enhance Distribution Channel .................................................................................................. 19 Changing Social Trend ............................................................................................................. 19 Health conscious ....................................................................................................................... 19 Market growth ........................................................................................................................... 20 Adopting e-business. ................................................................................................................. 20 Total spending on R&D ............................................................................................................ 20 Threats: ........................................................................................................................................ 21 Government Regulation ............................................................................................................ 21 Increase in Competition among Competitor ............................................................................. 22 No Entry Barrier ....................................................................................................................... 22 Inflation rate .............................................................................................................................. 22 Unfavorable Changes in Consumer Demand ............................................................................ 22 Loss of Market Share ................................................................................................................ 22 Taxation Law (Economical factor) ........................................................................................... 22 Political instability .................................................................................................................... 23 Recommendations ....................................................................................................................... 23

MANAGERIAL ECONOMICS 2013


Introduction:
Nestl Pakistan Ltd is a subsidiary company of Nestl S.A. - a corporation of Swiss origin headquartered in Vevey, Switzerland. Nestle is a food processing corporation, register on the Karachi and Lahore stock exchanges and working in Pakistan since 1988 under a company with Milk Pak ltd and took over management in 1992. For ten years in a row, the company has won a place amongst the top 25 companies of the Karachi Stock Exchange. Nestl S.A. entered in Pakistan by a joint venture with a local national company Milkpak Limited. Milkpak Limited came into existence in 1979 as a dairy company that was producing packaged milk at that time. Milkpak Limited was having only a single production unit i.e. Sheikhupura Factory. Later, Nestl Milkpak Limited acquired Kabirwala Factory. In 2001, Nestle Milkpak Limited merged with two more local companies; Eva & Fontalia. These companies were having water business in Karachi and Islamabad. In 2005, Nestl Milkpak limited was replaced with Nestl Pakistan Limited. Headquartered in Lahore, the Company operates four manufacture facilities. Two factories are in Kabirwala and Sheikhupura are different products factories. One factory in Islamabad and one in Karachi produce bottled water. Through its efficient marketing and a vast sales and supply network throughout the country, it ensures that its foodstuffs are made available to customers at anytime, anywhere and however. Nestl Pakistan operates in many ways but people, foodstuffs and brands are the major flag bearers of the Companys likeness. Nestl Pakistan now operates the largest milk collection process in Pakistan, at present; Nestl Pakistan collect milk from an estimated 190,000 farmers extend over 145,000 sq Kms in the state of Punjab and Sindh. Nestl believes in creating shared value and is dedicated to the communities it works and lives with. In Pakistan, the company is working closely with the community in areas related to nourishment, Water and Rural Development, and continues to improve the quality of life of people right through its value chain. Nestl Pakistan today is the most important Food & Beverages Corporation in Pakistan with key focus on nourishment, healthiness and Wellness and reaching the outmost of locations throughout Pakistan to serve the customers. Nestl Pakistan also prides itself in being the best in nourishment, healthiness& Wellness. Ever since 1867, when Henri Nestl invented the first infant food, nutrition has been in our DNA.

MANAGERIAL ECONOMICS 2013


Today more and more customers represent our importance on nutrition, as they understand that food choices affect their health and excellence of life. Nestle strategy is guide by company Business Principles which are in sequence with globally accepted best practice and moral performance culture. Nestls existing products grow up through improvement and renewal whereas maintaining equilibrium in geographic behavior and product lines. Long-standing potential is never sacrifice for temporary performance. The Companys main concern is to fetch the best and most appropriate products to people, wherever people are, whatever they needs are, and for all age groups. It is not an unknown company catering to nameless consumers, but is a human being company providing an answer to individual human needs. It complements the cultures of the country it operates in and recognizes the need for superiority of life of their people. In line with Nestls worldwide viewpoint, Nestl Pakistan is arrogant of its promise to brilliance in product safety and quality and aims to be the most important Nutrition, Health and Wellness Corporation. As a publicly responsible business, we always focus on atmosphere friendly operations, ethical business practices and our liability towards the communities.

MANAGERIAL ECONOMICS 2013


VISION, MISSION AND VALUES OF NESTL
Vision:
Nestls global vision is to be the recognized leading Nutrition, Health and Wellness Company. Nestl Pakistan subscribes fully to this vision of being the number one Nutrition, Health, and Wellness Company in Pakistan.

In particular Nestl envision is to lead a dynamic, motivated and professional workforce, proud of its heritage and bullish about the future. Meet the nutrition need of consumers of all age groups from infancy to old age, from nutrition to pleasure, through an innovative portfolio of branded food and beverages products of highest quality. Deliver shareholder value through portfolio long-term growth, while continuing to play a significant and responsible role in the social, economic and environment sector of the country.

Mission:
Dedicated to providing the best food to the people, throughout their day, throughout their lives, throughout the world

Values:
Consumer Expectations: Convenience, Care and Feasible prices. Service: Personalized and Courteous. Innovation: Cherishing new ideas, translating into actions. Reliability: Loyalty and Consistency. Safety: Environment and Consumers health, Employees.

MANAGERIAL ECONOMICS 2013


Cohesiveness: Respect for individuals, Team work and Effective communication. Integrity: Business ethics, Accountability and Transparency.

Number of Total employees

Nestle have more than 231,000 employees worldwide but however have more than 2500 employees in Nestle Pakistan. Nestles Pakistan is the best in its HR systems and which has approximately 2435employees. Nestles performance is the result of professionally integrated management, investment &

technology & mostly the commitment of our workforce & employees, bonded together with trust & integrity.

Nature of the Business


Nestle Pakistan is the FMCG company which has major industry to food cater & beverages. Which has sub industry of Diversified goods for food and its major industry is FMCG industry. Major Industry: Food & Beverages Sub Industry: Diversified foods

MANAGERIAL ECONOMICS 2013


Products of Nestle:

Nestl is trying hard to develop new products and improve existing ones, and serve the consumers better and their products are carefully aligned to the local tastes and needs. That's why through constant renovation and innovation they always testing or launching value added products and making them available in sizes that will suit every requirement

Ambient Dairy:
Nestl MILKPAK (UHT Milk) Nestl SUPLIGEN Nestl NESVITA (ProBones) MILKPAK (UHT Cream) Nestl NIDO 1+ Nestl NIDO 3+ Nestl NIDO (Fortified Milk) Nestl NIDO Bunyad Nestl CREATIONS Nestle has recently introduce Nestle Every day in liquid form with the name TEA WHITNER

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Chilled Dairy:
Nestl Fruit Yogurt Nestl NESVITA (Pro-Bones Yogurt) Nestl RAITA Nestl Yogurt (Sweet n Tasty) Nestl Rivayati Mazaa

Coffee and Beverages:


Nescaf Nestl Milo Nesquik Nestl Pure Life

Nestl Fruita Vitals:


NESTL FRUITA VITALS Orange Juice NESTL FRUITA VITALS Apple Nectar NESTL FRUITA VITALS Red Grape NESTL FRUITA VITALS Pineapple Nectar NESTL FRUITA VITALS Chaunsa Nectar NESTL FRUITA VITALS Guava Nectar NESTL FRUITA VITALS Mango

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Organizational Chart of Nestle
Managing Director (MD)
(Magdi Btato)

Director of IT department

Director of Finance department

Director of marketing department

Director of R&D department

Director of HR department

Director of Production department

Manager of IT department

Manager of Finance department

Manager of Marketing department

Manager of R&D department

Manager of HR department

Manager of Production department

Assistant manager of IT department

Assistant manager of Finance department

Assistant manager of Marketing department

Assistant manager of R&D department

Assistant manager of HR department

Assistant manager of Production department

Managing staff & MTOs of IT department

Managing staff & MTOs of Finance department

Managing staff & MTOs of Marketing department

Managing staff & MTOs of R&D department

Managing staff & MTOs of HR department

Managing staff & MTOs of Production departmen t

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MANAGERIAL ECONOMICS 2013


Process (From Raw to Finished Product)
Here we only show one process of Nestle in order to clear that how there supply chain moves. We show the milk process.

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Companys Environment:
Companys Environment

Internal Environment

External Environment

Strength and weakness

Opportunities and Threats

SWOT Analysis
As NESTLE is multinational firm so it has many strengthens and weaknesses point but on the other hand there were also faces threats and availing opportunities that we will discuss below in detail.

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MANAGERIAL ECONOMICS 2013

Strengths
Parent support Company Image High Quality Products Well-developed strategy Market Share Good marketing skills and services Brand strength Research & Development Team Product innovation HR Department High Skilled and Coordinal Staff Health Consious

Parent support (Milk Pak)


Nestle Pakistan has a strong support from its parent company, which is the worlds largest processed food and beverage company, with a presence in almost every country. The company has access to the parents hugely successful global folio of products and brands.

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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MANAGERIAL ECONOMICS 2013

High Quality Products


Nestle produce a good quality products. Nestle cannot compromise on quality because people are more quality conscious now days with the best quality they can attain loyal customers. Nestle being the worldwide renowned brand creates qualitative product to retain that image

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 market with great sweep with the developed strategy.

Market Share
Nestle juices has a highest market share almost in every SBUs line, such as in Milk pack & Nestle pure life. High market share always depicts the quality of the firm & its strong management decisions.

Good marketing skills and services


Nestle is now a days working on this concept because they want to increase their market share. They are providing quality products to the customers that include their service and product

Brand strength
In Pakistan Nestle has some very strong brands like Nescafe, Maggie, Cereals, Nestle water and these brands are almost generic to their category of products. So when a brand becomes generic then it creates the feel of strong brand in the eyes of customers such as Google.com etc.

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Research & Development Team
Research and development department keeps Nestle in continuousknowledge about itself and co mpetitors. It has a competitor advantagebecause many local companies have no research & Development Department.

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

HR department
Nestle company has a strong HR department which depicts nestles strong committed management of the company

High Skilled and Coordinal Staff


Nestle have high skilled and coordinal staff who posses necessary knowledge according to the demand of their work and in case of any

Health Consciousness
Today people are more health conscious so nestle products byidentifying this need of the people they are also producing health conscious products with more elements of pure & quality, which create the market for Nestle & trend of its products in the market. However when launches it Milk in 1988 back then it was not so much popular but now a days people are more health conscious.

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MANAGERIAL ECONOMICS 2013


Weaknesses:
Less Proactive Limited Distribution No Outlets in Pakistan More concerned about profit Overload of work

Less Proactive
Nestle being a company is less proactive they create changes butusually unless competitor doesnt change they doesnt adopt a change.

Limited Distribution Channel


Nestles major & bad factor is the limited distribution channel because they distributes their products to whole seller in their own factory vehicles. As compare to their major competitor they have limited distribution channel but they are maintaining to penetrate the market as far

No outlets in Pakistan
They dont 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.

More concerned about profit


As being less proactive they are more concerned about profits, & their market share the main objective of every company is to gain profits but as compare to competitors its a drawback.

Most of the employees are overloaded with work.


Due to no outlets in Pakistan the distribution is direct from factory to warehouse and in this case employee workload increase which is the main weakness of Nestle.

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Opportunities
Support from Foreign Investors Enhance Distribution Channel Changing Social Trends Health conscious Market growth Adopting e-business Investment in R& D

Support from Foreign Investors


Government support foreign investors to invest in Pakistan whicheventually is the opportunity for Nestle.

Enhance Distribution Channel


Nestle should be working on the distribution network to enhance the companys network against its competitor.

Changing Social Trend


Consumers in urban areas now adopt Western lifestyles, especially the younger generation which is hugely influenced by the Western media. Younger consumers tend to follow Western life style. There was an increase in demand for Nestle products over the review period.

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 Nestls 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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MANAGERIAL ECONOMICS 2013

Market growth
Nestle market expands very fast. A new research proves that in future every person use 85.5 liters juices per years & uses more hygienic products because of the low hygienic conditions of the environment.

Adopting e-business.
Nestle as far as technology taking place in this era they are going to plan to adopt new business in order to increase effectiveness in their business they may cover the problem of their supplier due to no outlets in Pakistan.

Total spending on R&D


Spending on R&D is long term investment for any organization. Nestle has R&D department and Nestle total spending on R&D 70 millions because with true technological changes this research & development cannot takes place. So with the help of technological changes Nestle can enhance its products & diversify its portfolio of products.

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Threats:

Government Regulation Increase competition among competitors. No entry Barriers Inflammation rate Unfavorable changes in consumer demands Loss of Market share Taxation law

Government Regulation
They face problem if government employ taxes on them which force them to raise the price of their products.

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Increase in Competition among Competitor
Competition among competitors is major threat to Nestle which can be controlled by the help to retaining more customers & making more loyal ones

No Entry Barrier
There are no many entry barriers so a large numbers of localcompanies enter in various Nestles 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 an increase in the number of related products which eventually harm the Nestls market. Duet which the consumers demand pattern fluctuate.

Loss of Market Share


When the market saturates the loss of the market share of Nestls products is there major threat to Nestle.

Taxation Law (Economical factor)


If government imposes heavy taxes on the industry then it badlyeffects the industry growth. The taxes impose is from government side and it varies from industry to industry. FMCGs have to pay heavy taxation, changes in any taxation system can badly affect Nestls productivity and sales (Productivity). Nestls some product has like butter and cream which has more taxes

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Political instability
The government stability also plays a great role for any industry. In Pakistan government face lot of difficulty from the side of terrorism and also its activity that badly effect environment of the country which is totally very upset. Recently in Punjab instability of government creates lot of problem for the industry like shortage of electricity, gas, and water that badly affects the industry operational process. Nestle have not much affect this condition but in future it may be face some difficulty for operating

Recommendations
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.

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