Report on:

Nestle

Submitted to:

Dr Noman Abbasi

Submitted by:

Shargeel Qasim
MBA 1.5(Eve)

BZU IMS MULTAN

 NESTLE:
Henri Nestle, the founder of “Nestle” created the trade-mark of the Nest, a translation of
his last name. In German, Nestle means “Little Nest.” The symbol showing 2 young
birds being fed by their mother perched in a nest on an OAK tree depicts in the
motherhood, the arm, and loving, caring, protective and sincere feelings of a mother for
her younger ones. So, this symbol helps to give a visual sign that nobody other than
Nestlé can care about its consumers friendly.

It shows that the Nestle provides the purest food product to its consumers because it is
as sincere with them as a mother. It is universally understood that this reflects the
maternity and affection, and thus helps to draw a visual link between the name, “Nestle”
and its products.
Nestlé is the world’s leading nutrition, health and wellness company. The company
employs more than 280,000 people and has 456 factories in 84 countries.
Nestlé products are sold in almost every country in the world. Founded in 1866 in
Vevey, Switzerland, where it is still based, Nestlé has often been called “the
multinational among multinationals”.
Only about 1.5percent of its sales are generated in its home country, and all but 12 of its
factories are situated abroad.

The CEO is Paul Bulcke, and the General Management includes a Belgian, two Canadians,
one Dutch, a Frenchman, a German, a South African/British, three Spaniards, one Swiss,
one American and one Swiss American.
Nestlé is a truly public company with over250,000 shareholders of which around one
third are Swiss.
As the world’s leading nutrition, health and wellness company, Nestlé is the worldwide
leader in product categories such assoluble coffee, infant nutrition, bottled water,
condensed and evaporated milk, ice cream, as well
as chocolate and malt drinks, and culinary. The Group is also a co-leader in pet care. The
Company is committed to delivering shareholder value through sustainable, capital
efficient and profitable long-term growth. Over the past years it has concentrated on
furthering organic growth.

MISSION STATEMENT

At Nestlé, we believe that research can help us make better food so that people live a
better life.

Good Food is the primary source of Good Health throughout life. We strive to bring
consumers foods that are safe, of high quality and provide optimal nutrition to meet
physiological needs.

In addition to Nutrition, Health and Wellness, Nestlé products bring consumers the vital
ingredients of taste and pleasure.

VISION STATEMENT

The vision of Nestle Group is,

“Nestlé aim is to meet the various needs of the consumer every day by marketing and
selling food of a consistently high quality.

The confidences that consumers have in our brands is a result of our company’s many
years of knowledge in marketing, research and development, as well as continuity –
consumers relate to this and feel they can trust our products”.

SLOGAN:

“Good food, Good life”

Nestle System:

Nestle has best systems but others are also consulted. Following are the own systems of
Nestle

 Nestle quality management system-NQMS

  Nestle good manufacturing practices-NGMP (production, environment,
 building, designs)
 Safety, health environment-SHE
 Total performance management-TPM (make policies to support business)
 Nestle continuous excellence-NCE

Swot Analysis
Strength:

Brand:

One of the greatest strengths of nestle is its brand name and brand image in the local
Pakistani market. People trust nestle.
They see nestle as a top priority product. Although the price matters a lot for a
customer but when the name comes of nestle, the customer is willing to pay any amount
for the products of nestle.
So they have not only the increasing customer demand but also the customer retention
as well. Similarly the consumers taste is changing, the consumer is more aware, and
consumer gives lot of importance to the hygiene and Nestle has positioned its products
in the mind of consumers as top hygienic products. So it is also a great strength.

Time Spent in market:

Nestle has been serving its consumers since 140 years and it is a very long time span.
Similarly Nestle Pakistan has been serving Pakistan since so long.

If we talk about specifically Nestle Kabirwala Factory, it has also been become very
experienced in the market. In 1990, Milkpak acquired the Kabirwala factory, located in
Khanewal district of the Punjab, as a subsidiary.
By 1997 it was a fully owned unit of Nestlé Pakistan Ltd.
Soon after it was acquired, we began upgrading its capacity.

Human Resource:

“You can copy the policies, you can copy the procedures, but you cannot
copy the people.” No doubt the Human Resource at Nestle is very competitive and if we
specifically talk about Nestle Kabirwala Factory, the management as well as the
workers, all are the greatest asset of Nestle Kabirwala Factory.

So it is one of the greatest strength of Nestle Kabirwala Factory which is ensuring its
sustainability and continuous growth in the market. The diversified workforce has been
proved very effective in the way to continuous excellence.

In Nestle Kabirwala Factory there has been so many people working and They are all
from different backgrounds, caste, color, religion and different mindsets.
So the diversified workforce has b been proved to be very productive and competitive.
The management is also diversified and this is helping the Nestle Kabirwala Factory to
ensure the idea generation process.

The top management is no doubt the greatest strength of Nestle Kabirwala Factory.

World Wide R&D:

Research and Development is a key competitive advantage for Nestlé.

Without our R&D Nestlé could not have become the food industry leader in nutrition,
health and wellness. With 29 research, development and technology facilities
worldwide, Nestlé has the largest R&D network of any food company. Nestlé’s research,
development and technology network, together with local market application groups,
employs over 5,000 people.

Weakness

Strong unionization:

The increasing influence of unionization in Nestle Kabirwala Factory has been the sign
that employees have been lacking trust on management. Therefore they are joining the
unions. It can also be due to the increasing job security, sense of having less benefits and
not having competitive salaries, so thee employees are joining union and want
negotiations with the management.

Communication problems and grapevine:

Because the Nestle is a multinational Company and it is serving in a market where the
effective communication is very important to gain the confidence of the employees. The
people at Nestle Kabirwala Factory are very use to the grapevine and therefore they
immediately lose the confidence from the management without any confirmation. So the
management needs to get the people in confidence that it cares for its employees as
well.

Third Parties:

One of the weaknesses of Nestle Kabirwala Factory is that it is relying on the

third parties in most of its operations. For example it has been working since so long but
still it has not focused on the forward integration and is completely relying on the
distributors.

Similarly for the following jobs the contractual labor is hired;

 Labor, NDC, R & P, Canteen, Gardening

 Mechanical works
 Mechanical Engineering
 Paint Job
  Repair and maintenance of the buildings
 Security Services
 Scrap disposal
 Electrical services
 Laundry
 Transportation

Opportunities

Market Opportunities:

The local market is not fully saturated and still there is a huge market that
can be captured by Nestle. Specifically talking about the Nestle Kabirwala Factory There
are substantial growth opportunities considering the average yield of Pakistani animals
at only 1,100 liters/annum as compared to 6,000 liters/annum for animals in Europe
and USA. There are nearly 20 million milk producing animals in the country, mostly in
Punjab (80%).
The overall milk market in Pakistan is 20 billion liters; out of which processed milk
contributes only 3 million liters. Nestlé MilkPak along with other processed milk
businesses contributes only 2% to this large market. Nestlé MilkPak has expanded its
product range by entering the cold dairy market recently by launching Nestlé plain
yogurt and now fruit yogurt is also added to it.

1. Competitors are also not there to serve the market which is not captured.

2. Nestle is only a food company but it can target other FMCG’s as well similarly it
can diversity its products and become a conglomerate as well.

3. It can gain more supplier integration which has not been done yet. For this
purpose nestle has developed two model forms in Rinala and Sahiwal With the
name of “Dairy Hub” and “Sursubz Form” respectively .For this purpose
European breeds have been imported and are given on easy installment to the
farmers. The expertise are provided free of cost.
4. Nestle can educate the supplier and for this purpose it has started the project
named UHTP in which lady livestock workers have been given training from
villages.
5. Nestle has been relying on two distributors in south Punjab. One is located in
Multan and other is in Bahawalpur. Nestle can go for forward integration as well.
6. As nestle has targeted upper and middle class consumers, it has the greater
opportunity to

Third largest producer of milk:

Pakistan is the Third largest producer of milk in the world with a total production of 32
billion liter of milk a year, whose value is more than that of the combined value of wheat
and cotton, from a total herd size of 50 million animals (buffaloes and cows). Livestock
accounts for 46.8 percent of agricultural value added and about 10.8 percent of the GDP.
Milk is the largest commodity from the livestock sector accounting for 51 percent of the
total value of the sector.

Due to the steps taken by the government and private sector, country’s annual milk
production is
expected to grow at an additional 3 billion liters in the next few years. This is quite an
opportunity for Engro foods as there is lot of growth in this part of the sector.

 Improving Economy Population growth rate.

 High urbanization rate and high literacy rate.
 Flexible government policies for food industry.
 Have significant growth opportunities
 Has sufficient capital to expand.
 Has the potential to innovate and differentiate the company's products to
sustain
 competitive advantage

Threats

Following can be the threats for Nestle Kabirwala Factory;

Too much dependence on third parties:

As nestle has been very efficient in its operations but it is getting the services of the
third parties. So too much relying on the third parties can also be a threat for nestle.
Because it involves in so many uncertainties. So it can be a threat for the company to
rely many of its operations on the third parties.

Limited distribution:

Having a very limited number of the distributors and solely relying on them can also be
a threat. Because too much reliance on them may cause Nestle to lose of control and
power over
distributor and high dependence on the distributors.

Uncertainty in economic condition in Pakistan:

Price fluctuations due to rupee devaluation as raw material are imported.

The uncertainty of economic conditions poses a great threat as the major
funds invested in the country come from outside Pakistan.

Entry of new competitors:

Market is growing and is attracting new competitors so the entry of new

Competitors is one of the major threat for Nestle Pakistan. As already thee entrance of
Engro Foods has been a very competitive situation for Nestle Pakistan.
Unionization:

Increasing trend of unionization is also a threat for nestle. Because it can weaken the
company’s
image as well. The negative activities by the union can be an alarming situation for
Nestle Kabirwala Factory Limited.

GOALS & OBJECTIVES

Goals & Objective of Nestle Pakistan is Simple & well designed with the core strategy
to meet the demand of the consumers & to fulfill the needs of the customers. The goals &
objectives are;

To be the best & quality brand in Pakistan

To meet the needs & requirements of the consumers

To capture the desired market share

To dwell in to the life of people & consumers

To be the number one nutritious company of Pakistan

To be the leading FMCG company around the world as well as in Pakistan

To be the socially responsible company & be helpful in bad times.

Nestle aims to be proactive innovation and renovation culture, which is the key
to Nestle’s success in the marketplace.

Nestle aims to have fully integrated systems with suppliers & retailers so that
every single market can be tapped & focused.
EXTERNAL (PESTLE) & INTERNAL ASSESSMENT

PESTLE Analysis

PESTLE analysis is a powerful tools to visualize your external surroundings,

which enables you to understand the external factors such as Political, Economical,
Social, technological, Legal & environmental affecting your business. So for
understanding Nestle’s position in the market & to visualize the Nestle’s position among
its competitor Pestle analysis is the best technique to understand the external forces.

Political & Legal Forces

Taxation Law

If government imposes heavy taxes on the industry then it badly effects the
industry growth. The taxes impose is from government side and it varies from industry
to industry. FMCG’s have to pay heavy taxation, changes in any taxation system can
badly effect Nestle’s productivity & sales (profits). Nestle’s some product has like butter
and cream which has more taxes.

Labor Laws

Labor is being privileged here having all the laws. Nestle company also follow
these law like government announce minimum salaries of an employ Rs 6000. But if any
labor laws changes it will affect the Nestlé’s management all to gather because it’s
difficult to get potential labor now a days. Nestle’s main aim to or key potential factor is
to keep their employees happy & contended because as one said happy employees
happy management & it leads to prosperity.

Laws on hiring & promotions

Hiring & promotion is followed by law. People with better capabilities are
privileged because they deserve it, for the betterment of the organization. As well as a
well educated& skilled experienced person is a precious asset for the company suit
should be hired on better term & conditions and be promoted on the basis of it
capabilities.

Environmental Protection Laws

They do concern for environment and contribute more and more for the
betterment of environment. Nestle’s considers a lot about CSR, Nestle is worldwide a
environmental company so as Nestle Pakistan, Nestle care for poor & urban areas, in the
start Nestle gave the concept about friendly environment & to care for your
environment.
 Foreign trade Regulations

Foreign trade regulation does not affect the overall policy and the working of the
Nestle because they operate nationally not internationally. However it affect when the
condition get so worst. But as the last two years whole the world is suffering from great
depression so any economy of the world.

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 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.

Economic Forces

Inflation Rate

Now in Pakistan inflation rate is almost 22.3%, so if any increase in inflation rate
then increase in prices of Nestle products which eventually affects the Nestle Pakistan.
So inflation rate affect mostly everyone in the industry so as nestle but nestle by the
great decision making able to retain 55% of market share in Milk & Nestle Pure life.

Economic growth rate

Economy growth rate accelerate is 7% and plus which eventually affect the
Nestle productivity & sales.
 Social Forces & Cultural

Health Consciousness

Today people are more health conscious so Nestle products by identifying 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 day’s people are more health conscious.

Environmental concerns

About the environmental concerns of Nestle products are the symbol of good
health & nutrition no matter which product is under consideration. Nestle also consider
a lot about the environmental factors because they are very much socially responsible
towards nature & humans.

Work life quality

Quality of work life is very safer & environment friendly company of the world as
every MNC is maintaining the same standards abroad with a slight cultural changes.
 Technological forces

New Products

Nestle focusing concentric and conglomerate diversification because in present

era it is not possible for any organization to exist in market for long run by providing
just one product. So Nestle are diversifying according to changing demand of customers
and trends. Nestle wants to diversify its portfolio with the change or need of market
needs.

Product innovation

Product innovation is becoming more necessary for the organization because of

globalization people are becoming aware about the changes being taken place around
them so in order tackle the situation nestle is focusing on product innovation by
introducing new products with help of technological factors.

Productivity improvement through automation

Automation doesn’t matter a lot but to some extent it contributes towards

productivity and improvement. Now by the help of technology Nestle maintain the
efficient scale of production which normally called economies of scale.

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.
 New communication technology

All the modern as well as traditional ways of communication are being adopted
by Nestle including own emails, letters, faxes and monthly visit in different offices of
Nestle for better communication among customers. Nestle has also established own
web site which can be visited any one for most recent news innovation and activities
being taken in the organization. With the technological change adoption the whole
organization can be increased.

Porter’s five forces Analysis

Michael Potter's five forces framework can be used to determine whether the
industry is attractive enough to sustain a small or medium size enterprise. The five
forces of Entry, Rivalry, Substitutes, Buyers and Suppliers jointly determine the
intensity of competition and profit potential for a small and medium size firm in a
given industry or market sector. In analyzing each market force, the question is
whether it is sufficiently strong to reduce or eliminate industry profits. The focus at
this stage is at the industry level because industry dynamics and profits of necessity
dictate profits of other firms that enter the industry.

Threat of New Entrants

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.

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.

Bargaining Power of Buyers

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.

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 nestle’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.

In a nutshell now we can conclude whether the company is MNC or local it will face
the tough competition from its competitors because competitive edge is the most
volatile thing in business world now-a-days companies are reactive & they react to the
change. 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.

Competitive Analysis or Competitors Analysis

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.

Others

They have to face many hurdles in order to be the best & deliver because they
cutthroat competition with all of the competitors.

“Do not Compete with your Rivals just make them Irrelevant”
 Haleeb Ltd

Strengths

1.The thickest milk

2.Taste

3.Nutritious

4.Hygienic

5.Packaging

Weaknesses

1.Focus Shifted form Main Product to other products

2.Lack of Research & Development

3.Weak distribution

4.Low spending on advertisement

Engro Foods LTD

Strenghts

1.PR with farmers

2.Positive response form customers

3.Strong consumer &products research

4.Third generation plant

5.Haing a good reputation in the market by strong brand name

Weaknesses
 1.Packaging

2.Milk collection & distribution costs

3.Narrow brand portfolio

4.Under utilization of the capacity

5.Not yet ISO certified

PROBLEM SECTION FOR NESTLE

According to the analysis we did nestle only have few problem otherwise company
is doing their best in the industry so far. They have attained the highest market share
for their brands. The only problem they can face is from “pressure groups” & “limited
Distribution Channel”.

Pressure groups or religious groups are the major threats to the Nestle’s
management & their targets. So to control the threats from the pressure groups good
marketing strategy can be adopt to eliminate the threat. Nestle should work on the
distribution channel & expands the distribution channel to control the market &
untapped areas, which eventually give them an edge to increase the market share of
Nestle.

STRATEGIC SOLUTION TO PROBLEMS

Nestle’s problem can be eliminated by strategically thinking & implementing some

strategies which can be effective in terms of both profit & growth. Solutions to the
problems which have been discussed before is that ; for eliminating the pressure groups
threat they should include a strong religious person for advertising their products
which can easily arose the demand for the product & people have less question to ask.
This will eventually increase the market share & profit of the company through
extensive sales. Taking an example same strategic strategy was implemented in Pepsi
Co. for Lays.

Strategically speaking as nestle falls in aggressive strategy, so they should go joint

ventures with their distributors cut short their own tensions & make others to their job
as Pepsi co. have Riaz bottlers for their distribution which eventually gave them an
edge. So if they go forward integration then they might be able to have more market
share & demand for the product can be increased & more market can be taped.

These are two extensive solutions for the problem faced by the management of
Nestle, & this should be taken in to account for the more market share.