3.3
CPM MATRIX TABLE 3.3: CPM between Nestle and Competitors
NESTLE
YEO’S
DUCTH LADY
CRITICAL SUCCESS FACTORS
WEIGHT
RATING
SCORE
RATING
SCORE
RATING
SCORE
Advertising
0.1
4
0.4
3
0.3
3
0.3
Product Quality
0.1
4
0.4
4
0.4
4
0.4
Price competitiveness
0.1
4
0.4
4
0.4
4
0.4
Management
0.1
3
0.3
3
0.3
3
0.3
Financial Position
0.2
4
0.8
3
0.6
2
0.4
Customer Loyalty
0.2
4
0.8
3
0.6
3
0.6
Global Expansion
0.1
4
0.4
3
0.3
3
0.3
Market Share
0.1
4
0.4
3
0.3
3
0.3
TOTAL
1
3.9
3.2
3.0
Competitive profile matrix is a vital strategic management tool to compare the firm with the major companies of the industry. Competitive profile matrix displays the well-defined picture to the firm about their strong points and weak points relative to their competitors. The primary competitors to Nestle are Dutch Lady and Yeos, so we used those two companies in this matrix. After an in depth analysis of the external and internal environment we came up with these critical success factors: Advertising, Product Quality, Price Competitive, Management, Financial Position, Customer Loyalty, Global Expansion and Market Share. After we came up with that factor, we must rate each field. The rating in the CPM represents the response that the firm has towards the critical success factors. The response scale is from 1 – 4. The ratings refer to strengths and weaknesses, where 4 represent major strength, 3 stand for minor strength, 2 shows minor weakness and lastly 1 indicate major weakness. In this industry we found Nestle has the highest effort in their advertising field. Nestle had done various type of advertisement whether its newspaper ads or commercials or online advertisement. Also their advertising is more eyes catching and appealing to the public eye compare to Dutch Lady and Yeos. According to Nestle managing director, Alois Hofbauer, to The Edge Financial Daily, Nestle is one of the top three advertisers in Malaysia. They also planning to double their advertising and promotion on digital media. Product quality is rapidly becoming an important competitive issue. There are five major approaches to the definition of quality can be identified. First is the transcendent approach of philosophy, second is the product-based approach of economics, followed by the user-based approach of economics. Next is the manufacturing-based and lastly is value-based approaches of operations management. Overall all three companies shows good performance in product quality where each of them do consider seriously in manufacturing their product start from the raw material, food packaging material, method development, get certification of packaging materials for food products and certification of materials used for serving product.
A next critical success factor is price competitive. Competitive pricing stand for setting the price of a product or service based on what the competition is charging. Competitive pricing is used more often by business selling similar products, since services can vary from business to business while the attributes of a product remain similar. Businesses have three options when setting the price for a good. They can set it below the competition, at the competition or above the competition. As a leader in food industry, Nestle tend to set the price of food product in the market and the other businesses tend to follow it or either they choose to sell their product lower or above the market price. Yeos score 0.3 for price competitive as they still maintain their price product while Nestle and Dutch Lady has decided to increase their product price from 4% to 8% starting year 2013, citing rising global dairy prices as the cause of the increase. Even they decided to increase their product, still consumer buy their product. Meanwhile, all the three companies score the same result as 3 in management sector. A business cannot survive without management because management is its means of support. Management is concerned with acquiring maximum prosperity with minimum efforts. Management is essential wherever group efforts are required to be directed towards achievements of common goals. All the companies deserve to get 3 as their scores as they use their available resources to the fullest to generate profit and at the same time take care of their workers. Further to this, financial position also plays important role in determine the success of the company. Financial position will shows the status of the assets, liabilities, and owner’s equity of an organization and their interrelationship as reflected in financial statement. They serve as financial scorecard and a tool for future planning. We rated financial position based on their net sale. Nestle is the leader in the food diversified industry so it is obvious that their response is a 4 because they are leading the pack. Dutch Lady wasn’t too far behind so they are above average because they are ahead majority of everyone else in this industry. Yeos is lower in this field for the fact they don’t offer as much as there other two companies.
The next factor is customer loyalty, which tell the chances of previous customers to continue to buy from a specific organization. Great attention is given to marketing and customer service to retain current customers by increasing their customer loyalty. The Nestle win over Dutch Lady and Yeos by scoring 0.8. From the survey done Readers Digest Trusted Brand 2014 (Malaysia), Nestle product had win over their competitors in Food and Beverage category. Plus, they has a very diverse product line and already exist in the market more than 100 years that show they have loyal customer around the world not only in Malaysia. Equally important critical success factor we found is global expansion. Again Nestle leading in this factor where their Nestle headquarter in Switzerland; they are based off international and global expansion. Many of their product in undeveloped countries. The last factor that we focus is market share. We found this important because companies need to be able convert sales targets into market share because this will exhibit whether forecasts are to be attained by growing with the market or by capturing share from competitors. As Nestle share are the blue chip stock, it show how strong they stand in the market. The weight attribute in CPM indicates the relative importance of each of the factors to being successful in the firm’s industry. The sum of all weighted score is equal to the total weighted score; final value of total weighted score should be between ranges 1.0 (low) to 4.0(high). The average weighted score for CPM matrix is 2.5 any company total weighted score fall below 2.5 consider as weak. The company’s total weighted score higher than 2.5 is considered as strong in position. In this case Nestle received a total weight of 3.9, Dutch Lady weight 3.6 and Yeos weight of 3.2. This indicates that Nestle is the premier company in this matrix, and the other two still strong competitors in the industry.
