INTRODUCTION
Why Organizations Focus on Customer Satisfaction?
Businesses monitor customer satisfaction in order to determine how to increase their customer base,customer loyalty, revenue, profits, market share and survival. Although greater profit is the primary driver,exemplary businesses focus on the customer and his/her experience with the organization. They work tomake their customers happy and see customer satisfaction as the key to survival and profit. ustomersatisfaction in turn hinges on the !uality and effects of their experiences and the goods or services they receive.
Customer Satisfaction
The definition of customer satisfaction has been widely debated as organizations increasingly attempt tomeasure it. ustomer satisfaction can be experienced in a variety of situations and connected to both goodsand services. "t is a highly personal assessment that is greatly affected by customer expectations. #atisfactionalso is based on the customer$s experience of both contact with the organization %the &moment of truth' as itis called in business literature( and personal outcomes. #ome researchers define a satisfied customer withinthe private sector as &one who receives significant added value' to his/her bottom line)a definition that mayapply *ust as well to public services. ustomer satisfaction differs depending on the situation and the productor service. A customer may be satisfied with a product or service, an experience, a purchase decision, asalesperson, asalesp erson, store, service provider, or an attribute or any of these. #ome researchers completely avoid&satisfaction' as a measurement ob*ective because it is &too fuzzy an idea to serve as a meaningfulbenchmark.'+ "nstead, they focus on the customer$s entire experience with an organization or service contactand the detailed assessment of that experience. or example, reporting methods developed for health care patient surveys often ask customers to ratetheir providers and experiences in response resp onse to detailed !uestions such as, &-ow well did your physicians keep you informed' These surveys provide &actionable' data that reveal
ustomer satisfaction is a highly personal assessment that is greatly influenced by individual expect expectati ations ons#om #omee defini definitio tions ns are based based on the observa observatio tion n that that custom customer er satisf satisfact action ion or diss dissat atis isfa fact ctio ion n resul results ts from fromei eith ther er the the conf confirm irmat atio ion n or disc discon onfi firm rmat atio ion n of indi indivi vidu dual al expe expect ctat atio ions ns rega regardi rding ng a servi service ce or produ product ct.. To avoi avoidd ddif iffi ficu cult ltie iess stem stemmi ming ng from from the the kaleid kaleidosco oscope pe of custom customer er expect expectati ations ons and diffe differenc rences, es, some some expert expertss urgecom urgecompan panies ies to &con &conce cent ntra rate te on a goal goal that that$$s more ore clos closel ely y link linked ed to cust custom omer er e!ui e!uitty.' "nst "nstea ead d of askingwhether customers are satisfied, they encourage companies to determine how customers hold themaccountable ustomer satisfaction, a business term, is a measure of how products and services supplied by acompany meet or surpass customer expectation. "t is seen as a key performance indicator within businessustomer satisfaction depends on the product$s performance relative to a buyer$s expectation, thecustomer is dissatisfied. "f preference matches expectations, the customer is satisfied. "f preference preference isexceeds expectation expectation,, the customer is highly highly satisfied satisfied or delighted delighted outstanding outstanding marketing marketing insurance companiesgo companiesgo out of their way to keep their their customer customer satisfied. satisfied. #atisfied #atisfied cust custom omer erss make ake repe repeat at purc purcha hase sess insu insura ranc ncep epro rodu duct ctss and and tell tell othe otherr abou aboutt thei theirr good good experi experienc ences es with with the product product.. The key is to match match custom customere erexpec xpectat tation ionss with with compan company y performance. #mart insurance company$s aim to delight customers by promisingonly what they can deliver, then delivering more than the promise. onsumers usually face a broad array ofproducts and services that might satisfy a given need. -ow do they choose among these many marketingmakers offers ons onsum umers ers make make choi choice cess base based d on thei theirr perce percept ptio ion n of the the valu valuee and and sati satisf sfac acti tion on that that variousproducts and services deliver. ustomer value is the difference between the values the customer gains from owning and using a productand the costs of obtaining the products customers from expectations about the valu valuee of vari variou ouss mark market etin ingo goff ffer erss and and buy buy acco accord rdin ingl gly y. -ow -ow do buye buyers rs from from thei their r expectations ustomer expectations are based onpast buying experiences, the opinion of friends and marketer and competitor information and promises.ustomer satisfaction with a purchase depends on how well the product$s performance lives up to thecustomers$ expectations. ustomer satisfaction is a key influence on future buying behaviour. #atisfied customers buy again and tell others about their good experiences diessatisfied customer$s of
theref therefore ore not includ included ed in the the rankin rankings, gs,achi achieve eved d a satisf satisfact action ion rankin ranking g e!ual e!ual to that that any insurance company. "n general, customer satisfaction with auto insurance providers decreased significantly, with 01 of the02 companies surveyed decreasing decr easing in satisfaction from the previous year. "nsurance is the only carrier thatdid not experience a decline in satisfaction. Though consumers report their insurance carriers are resolvingtheir claims and problems faster. Businesses survive because they they have have cust custom omers ers who who are are will willin ing g to buyt buythe heir ir produ product ctss or servi services ces.. -owe -oweve ver, r, many many businesses fails to &check in' with their customers to determinewhether they are ar e happy or not and what it will make to make or keep them happy.According to 3.# consumers$ affairs department, it costs five times more to gain a new customer thanto retain an existing one. 4ther studies have repeated that with *ust a five percent increase in ustomerretention$s a firm can can rais raisee its its profi profita tabi bili lity ty cust custom omers ers spen spend d sala salary ry at first first,, but but with with succ succee eedi ding ng years years of goodexperience, they will spend increasingly more.5epending on the industry and the nature of the the bad bad expe experi rien ence ce,, diss dissat atis isfi fied ed cust custom omer erss will will comp compla lain into to 21 to 01 frie friend ndss and and ac!uaintances, which is three times more than those with good experiences are.-ence, the negative information is influential, and consumers generally place significant weight on it whenmaking a decision. "f that is not the reason enough, fierce competitor is needed more and more todifferentiate firms from one another. 6ith technology available to virtually every one today, the traditionalfeatures and cost advantages are no longer relevant. #till product and service !uality provides an enormousopportunity to distinguish a firm from the rest. The 7apanese have recognized this and have though us toexpect !uality. Today$s consumers do, and they know more about products and services than they ever did. ustomers are the best source of information. 6hether to improve an existing product or service orwhether firms are planning to launch something new. There There is no substitution for &getting &g etting it from horse$smouth' 6hen you talk to your customer directly, to increase your odds for achieving success you &mistakeproof'your decisions and work on what really matters. 6hen you routinely ask the customers for feedbackand involve them in business they, in turn, become committed to the success of your business.
Customer Satisfaction Measurement:
A basi basicc and and effe effect ctiv ivee base base line line cust custom omer er satis satisfa fact ctio ion n surve survey y prog program ram shou should ld focu focuss on measuring customer perceptions of how will the company delivers on the critical success factors and dimensions of thebusiness as defined by the customers8
For e!am"#e:
• • • •
#ervice 9romptness ourtesy of #taff :esponsiveness 3nderstanding the customer problem, etc.
The findings of the company performance should be analyzed both with all customers and by key key segm segmen ents tsof of the the cust custom omer er popu popula lati tion on.. The The esse essent ntia iall star starti ting ng poin pointt for for ust ustom omer er #atisf #atisfact action ion ;easure ;easuremen mentt %;#( %;#( isexpl isexplora orator tory y researc research. h. #ince #ince satisf satisfact action ion is about about an organi organizat zation ion$s $s abilit ability. y. To meet meet custom customer er re!uire re!uireme ment nt onehas onehas to start start by clarif clarifyin ying g with with customers exactly what those re!uirements are. This is done throughexploratory research using focus groups or one to one depth interviews. Two main factors determine the accuracy of ;#. The first is the asking the right !uestion and thesecond is the asking them to the right people sample of customers which accurately reflects the customerbase. Three things decide the accuracy of a sample. They are8.
• • •
"t must be representative. "t must be randomly selected. "t must be ade!uate enough.
4rganizations need to retain existing customers while targeting noncustomers. ;easuring customer satisfaction provides an indication of how successful the organization is at providing products and/or services to the marketplace. ustom ustomer er satisfa satisfacti ction on is an abstrac abstractt concep conceptt and the actual actual manifes manifestat tation ion of the state state of satisfaction will vary from person to person and product/service to product/service. The state of satisfaction depends on a number of both psychological and physical variables which corre correla late te with with sati satisfa sfact ctio ion n beha behavi viors ors such such as return return and and recom recomme mend nd rate rate.. The The level level of satisfaction can also vary depending on other factors the customer, such as other products agai agains nstt whic which h the the cust custom omer er can can compa compare re the the orga organi niza zati tion oneonard >( between 2?@ and 2?@@ delivered #:CD3A> #:CD3A> which provides the basis for the measurement of customer satisfaction with a service by using the gap between the customerinker Techni!ue or scale. The customer is asked to evaluate each statement in terms of their perception and expectation of performance of the service being measured.
Metho$o#ogies
Amer Americ ican an ust ustom omer er #ati #atisf sfac acti tion on "nde "ndex x %A# %A#"( "( is a scie scient ntif ific ic stan standa dard rd of cust custom omer er satisfaction. Academic research has shown that the national A#" score is a strong predictor of Fross 5omestic 9roduct %F59( growth, and an even stronger predictor of 9ersonal onsumption xpenditure xpenditure %9( growth. 4n the microeconomic microeconomic level, level, research research has shown that A#" A#" data predicts stock market performance, both for market indices and for individually traded
for more than 011 companies in +G industries and 21 economic sectors. in addition to !uarterly reports, the A#" methodology can be applied to private sector companies and government agencies in order to improve loyalty and purchase intent. Two companies have been licensed to apply the methodology of the A#" for both the private and public sector8 " Froup, "nc. appl applie iess the the meth method odol olog ogy y of the the A#" #" offl offlin ine, e, and and ores oresee ee :esul :esults ts appl applie iess the the A#" #" to websites and other online initiatives. A#" scores have also been calculated by independent researchers, for example, for the mobile phones sector, higher education, and electronic mail. The Hano model is a theory of product development and customer satisfaction developed in the 2?@1s by 9rofessor Ioriaki Hano that classifies customer preferences into five categories8 Attractive, 4ne5imensional, ;ust Be, "ndifferent, :everse. The Hano model offers some insight into the product attributes which are perceived to be important to customers. Hano also produced a methodology for mapping consumer responses to !uestionnaires onto his model. #:C #:CD3A> D3A> or :AT :AT: is a service service!ua !ualit lity y framewo framework rk that that has been been incorpo incorporat rated ed into into customersatisfaction surveys %e.g., the revised Iorwegian ustomer #atisfaction Barometer( to indicate the gap between customer expectations and experience.
7.5. 9ower and Associates provides another measure of customer satisfaction, known for its topbox approach and automotive industry rankings. 7.5. 9ower and Associates< marketing research consists primarily of consumer surveys and is publicly known for the value of its product awards. 4ther 4ther researc research h and consul consultin ting g firms firms have have custom customer er satisf satisfact action ion soluti solutions ons as well. well. These These include A.T. Hearney
Im"ro%ing Customer Satisfaction
9ublished standards exist to help organizations develop their current levels of customer satisfaction.
The Internationa# Customer Ser%ice Institute &TICSI' has released The "nternational
ustomer #ervice #tandard %T"##(. T"## enables organizations to focus their attention on delivering excellence in the management of customer service, whilst at the same time providing recognition of success through a Grd 9arty registration scheme. T"## focuses an organization$s attention on delivering increased customer satisfaction s atisfaction by helping the organization through a #ervice Duality ;odel.
T"## #ervice Duality ;odel uses8The ( )*s L
⇒
)o#icy+ )rocesses )eo"#e+ )remises+ )ro$uct,Ser%ices+ as -e## as "erformance measurement.
The implementation of a customer service standard should lead to higher levels of customer satisfaction, which in turn influences customer retention and customer loyalty.
Customer Satisfaction Sur%eys:
#urveys and !uestionnaires are the most common marketing research rese arch methods. Typically, Typically, they they are used to8 •
• • • • •
Assess the level of customer satisfaction with a particular product, service or experience "dentify factors that contribute to customer satisfaction and dissatisfactionM 5etermine the current status or situation of a product or serviceM ompare and rank providersM stimate the distribution of characteristics in a potential customer populationM or -elp establish customer service standards.
#urveys #urv eys all allow ow an org organi anizat zation ion to !ui !uickl ckly y capt capture ure vit vital al inf inform ormati ation on wit with h rel relati ativel vely y lit little tle expense and effort. A primary advantage of this method is its directness8 &the purpose is clear and the responses straightforward.' Additionally, the information gathered by surveys can easily easil y be analyzed and used to identify identify trends over time. The public views consumer consumer product polls and pollsters in a generally positive manner compared to political and other polls. 4ne study found that at least sixty percent of the public feels that market research about products and services has a positive impact on society. #eventy percent consider the people who conduct such surveys to have positive impacts on societyA ma*or disadvantage of customer surveys is that the responses may be influenced by the measurement itself through various forms of bias. or example, most surveys are voluntary, and some researchers have found differences between survey respondents and nonrespondents.
Iestle "s The 6orlds 6orlds >argest >argest ood 9rocessing ompany ;arketing ssay
IestlO #.A. is the world$s largest food processing company and is head!uartered in Cevey, #witzerland. The company was founded by -enri IestlO in 2@PP. IestlO ompany had made several name changes from 2@PP to 2?+J, and finally adopted IestlO #.A. in 2?JJ as the company$s name. Iestle #.A. has factories or office in almost every region of the world and markets a wide range of brands. The company is often described as Ethe most multinational of the multinationals.E in the current food industry market.
-enri IestlO, also know as of the main originator of condensed milk. "n 2@PJ, he developed the first milk food for infants and a baby who could not be breastfed was rescued. IestlO$s invention responded to the need n eed for a nutritionally safe alternative to breast milk. Thus, IestlO #.A has targeted targeted to build a business busine ss based on sound human values and thoughts.
The key to success of the company is due to its huge :esearch and 5evelopment network within the food processing industry. 6ith 6ith :Q5 as the competitive advantage, IestlO has become the world$s leading nutrition, health, and wellness company. The company is devoted in continuing to improve the nutritional value of their products while enhancing the flavor. IestlO achieves this through its brands and with with initiatives like the Iutritional ompass and P1/+1R. ;illions of people choose to consume IestlO products everyday because the company sustain the !uality as the fundamental ingredient in all of its brands. onsumers choose to place their trust in IestlO due to to the company$s dedication to achieve distinction distinction and turn to IestlO brands to preserve nutritional balance in today$s today$s fast paced world. world.
#witzerlandbased IestlO #.A. has the highest ranking as the largest player throughout the entire world in the competitive position within the food industry. The rating reflects the company$s competitiveness and market attractiveness. 6ith combined sales of 221 billion %#wiss ranc( in 011@, IestlO states a diversified business portfolio, being the market leader in numerous product categories worldwide including bottled water, instant coffee, milk and cheese products, nutrition and baby food, ice cream, frozen foods, culinary preparations, and
The vision of IestlO :Q5 is long term, it helps shape the future of foods making consumer needs into research priorities and convert new technologies into consumer benefits, and services
•
4B7T"C#
IestlO$s purpose is to offer safe, tasty, tasty, convenient and nutritious foods to improve health and wellbeing of consumers of all ages all over the world. To meet the needs and desires of today$s and tomorrow$s consumers, IestlO is strongly committed co mmitted to :esearch and 5evelopment %:Q5( to improve existing products and develop new foods with specific health benefits.
•
Iestle "ndia listed company → IestlO "ndia is a public listed → IestlO #A holds P0.JPK share → ;arket capitalisation "I: +10 bn
•
; a
;ilk products and nutrition %+K(
r k e
9repared 5ishes and ooking Aids %0?K(
hocolates and onfectionery %2GK(
Beverages %2GK(
#egmentation or getting the maximum market share and respect of the product in the minds of the consumer, as per observation it is been concluded that Iestle segmentation is based on two points. Feographic #egmentation 5emographic #egmentation Feographic #egmentation The company has divided its geographic segmentation in several regions. irst they •
have the segmentation of a whole country and from each provincial capital, they divided it$s areas into north, east, west, south. #o that it could be easy for the company
t
Iestle isn$t a supreme !uality !uality product that only the high class uses. The product is for all classes. "nfant to seniors. There is no age, sex, income and any other kind of limitation on use of the product. The product pr oduct is for all. Anyone can use the product pr oduct as per need. •
9roducts of Iestle ;ilk 9roducts Iutrition 9roducts 9repared 5ishes and ooking Aids Beverages hocolate onfectionery nergy 5rinks "nstant Ioodles
•
#64T AIA>N#"# "I I#T>
nvironmental scanning has the management scan internal environment and external
"nternal nvironment #trengths • → B:AI5 #T:IFT-8 Duality brands and products M Top selling brand8 Iescafe, •
;aggi, Hit Hat, -oney #tars, 9epsi and etc.
→
9:453T "II4CAT"4I8
ontinuously introducing new products Q manufacturing is efficiency. #trengths include anything a company does well and its resources and capabilities for developing a competitive advantage. The greatest strength of IestlO is culture that is team focused and an open door policy. IestlO focuses on collectivism and performance orientation attitude attitude which encourages employees to work harder. IestlO achieves broader range of products by improving existing and innovating innovating new products. onsumer demands are switched to changes of taste, colours colours and design that have been undertaken to products such as IestlO$s #marties and Hit Hats. The launch of Hit Hat
→
9arent support ompany "mage -igh Duality 9roducts 6elldeveloped 6e lldeveloped strategy ;arket #hare Food marketing skills and services Brand strength :esearch Q 5evelopment Team Team 9roduct innovation -: department
→
:#A:- Q 5C>49;IT A9AB">"T"#8 A9AB">"T"#8 have the largest :Q5 network of
→ → → → → → → → →
any food company in the world, with G0 :Q5 centres and over ,111 people directly →
involved in :Q5 ;A:HT #-A:8 high level of market share and that people all over the world trust and recognizes Iestle as a big brand name.
Wea0nesses
The lack of certain strengths and things a company does not do well are viewed as weaknesses. IestlO is poor in targeting some of its products. IestlO ;ilk9ak is a premium premium product targeted to upper middle middle and high class consumers. ;ost consumers in "ndia are from lower middle and poor class. They are not afford to purchase it due to the premium price. IestlO has a complex supply chain configuration too and traceability is a critical issue for IestlO "ndia. -igh standards of hygiene, !uality !uality of edible inputs and workforce are re!uired in the food industry. ragmented nature of the "ndian market will cause more problems. >ess 9roactive 8 Iestle being a company is less proactive they create changes but usually unless competitor doesn$t change they doesn$t adopt a change. >imited 5istribution hannel 8 Iestle$s ma*or ma*or Q bad factor is the limited distribution channel because they distributes their products to whole seller seller in their own factory vehicles as compare to their ma*or competitor they have limited distribution channel but they are maintaining to
;ature markets 8 Iestle is entering into markets markets that are already mature and can give a tough competition to new entrants #upply hain 8 complex chain management manage ment
•
xternal nvironment
O""ortunities
The external environmental analysis a firm$s new opportunities for profit and growth. IestlO has a great opportunity for expanding its milk products because "ndia is the seventh ma*or milk producer in the world with annual output more than 00 billion litres. #upport from oreign "nvestors 8 Fovernment support foreign investors to invest in "ndia which eventually is the opportunity for Iestle. nhance 5istribution hannel 8 Iestle should be working on the distribution network to enhance the company$s network against its competitor. hanging #ocial Trend 8 onsumers in urban areas ar eas now adopt adop t 6estern 6estern lifestyles, especially the younger generation g eneration which is hugely influenced by the 6estern 6estern media. Nounger Nounger consumers tend to follow 6estern 6estern life style. There was an increase in demand for Iestle products over the review period. -ealth conscious 8 "ncreasing health and hygiene awareness among people has greatly increased sales of nestle products. Both the government and the media have started health awareness campaigns to make make "ndians realizes that consumption consumption of Iestle$s hygienic products is as essential as eating food. ruit/ *uices Q eatable products are doing very well in both urban and rural areas.
;arket growth 8 Iestle market expands expand s very fast. A new research proves that in future every person use @. liters *uices per years Q uses more hygienic products because of the low low hygienic conditions of the environment. -ealthbased products transition to Iutrition ompany Threats
Ad*ustments in the external environment present threats to a firm. or an example, shifts in consumer$s preferences. The ma*or threats to IestlO$s products is 3nilever$s 6alls, 6alls, a famous icecream brand. "t is distributed nationwide and has total control within the local market. Besides, economic slowdown can reduce demand, and inflation is getting higher and higher causing the purchasing power of consumers is decreasing day by day.
Fove Fovernm rnmen entt :egu :egula lati tion on 8 They They face face prob proble lem m if gove governm rnmen entt emp emplo loy y tax taxes es on them them which force them to raise the price of their product.
"ncre "ncreas asee in in om ompe peti titi tion on amon among g om ompet petit itor or 8 8 om ompe peti titi tion on amon among g com compe peti tito tors rs is ma*o ma*orr threat to Iestle which can be controlled by the help to retaining more customers Q making more loyal ones.
Io ntr ntry y Barr Barrie ierr 8 8 The There re are are no no man many y entr entry y barr barrie iers rs so so a lar larg ge num numbers bers of of loc local al companies enter in various Iestle$s product market.
3nfa 3nfavo vorab rable le han hanges ges in onsu onsume merr 5ema 5emand nd 8 6ith the the incr increa ease se in the the comp compet etit itor orss there will be a increase in the number of related products which eventually harm the Iestle$s market. 5ue to which the consumers consumers demand pattern fluctuate.
>oss >oss of ;arke ;arkett #har #haree 8 6hen hen the the marke markett satu saturat rates es the the los losss of the the marke markett shar sharee of Iestle$s products is there ma*or threat to Iestle. Iestle.
"nte "ntern rnat atio iona nall ;ark ;arket etin ing g #tan #tanda dard rdsM sM han hangi ging ng ons onsum umer er Trends ends
#ect #ector or 6o 6oes 8 8 :isi :ising ng pri price cess of raw raw mat materi erial alss and and fue fuels lsMM "ncr "ncrea easi sing ng pac packa kagi ging ng and and manufacturing costs
.
12O/32 COMMITM4NT
IestlO firmly supports the principles of the 3nited Iations Flobal ompact and is committed to
reflecting
these
in
its
business
principles
and
practices.
#earch
for
trust8
IestlO is the world
this corporation. "n order to be able to give this !uality and safety assurance, company deve de velo lope ped d a Ie Iest stlO lO Du Dual alit ity y ;a ;ana nage geme ment nt #y #yst stem em,, wh whic ich h co coll llec ects ts th thee ex expe perie rienc ncee of our :esearch Q 5evelopment, on which we spend - @11 million a year. or a company such as IestlO, economic success depends on winning the public
Iestle company$s #uccess is built on !uality 8
5ua#ity is the cornerstone of com"any6s success.:veryday, millions millions of people all over the
world show their confidence in company by choosing IestlO products. This confidence is based on our !uality image and a reputation for high high standards that has been built up over many years. very product on the shelf, every service and every customer contact helps to shape this image. A IestlO brand name on a product is a promise pro mise to the customer that it is safe to consume, that it complies with all regulations and that it meets high standards of o f !uality. ustomers expect company to keep this promise every time. 3nder no circumstances company compromise on the safety of a product and every effort must be made to avoid hazards to health. 9eople, e!uipment and instruments are made available to ensure safety and conformity of IestlO products at all times. The customer comes first:
ompany does want to win and keep customers, distributors, supermarkets, hotels, shopkeepers and the final consumers. They have very different re!uirements. Trade Trade customers expect excellent service, correct information infor mation and timely delivery. onsumers onsumers consider taste,
ompany serves various groups of consumers and there is demand for products at different levels of perceived !uality and price. All All customers expect good !uality at a reasonable price. ustomers are central to company$s business and company always respects their needs and preferences. 5ua#ity is a com"etiti%e a$%antage:
ompany lives in a competitive world and must never forget that their customers have a choice. "f they are not satisfied with a IestlO product, they will switch to another brand. ompany$s goal is to provide superior value in every product category and market sector in which
it
competes.
The pursuit of highest !uality at any price is no guaran guarantee tee for success success,, nor is a singl singlemind eminded ed costcutting approach. >asting competitive advantage is gainedfrom a balanced search for optimal value to customers, by simultaneous improvement of !uality and reduction cost. Duality units at different levels of the organization provide specific support, promote !uality awareness, assume guardianship and audit the system. syste m. Duality departments monitor operations against agreed standards and must intervene in case of nonconformity nonconfor mity.T .Training raining and teamwork are crucial to the successful implementation of high !uality standards. ontinuous training ensures that everyone understands his tasks and has the necessary skills to carry them out. Teamwork allows us to achieve results that are greater than the sum of individual efforts. 6e motivate employees by demonstrating management commitment to Duality, by setting challenging
goals
and
by
giving
them
responsibility
and
recognition..
9rogr 9ro gres esss is fo foll llow owed ed by li list sten enin ing g to ou ourr cu cust stom omers ers an and d by me measu asuri ring ng ou ourr pe perf rform orman ance ce.. IestlO
ons o nsum umers ers co confi nfide denc ncee in th thee fo food od th they ey ar aree bu buyi ying ng is su supp pport orted ed by ha havi ving ng ac acce cess ss to information. IestlO
4N8IRONM4NT OF T94 COM)3N
;AIAF;IT The executive board, a distinct entity from the board the board of directors, directors, includes8 9eter Brabeck>etmathe, Brabeck>etmathe, hairman Q 4 arlo 5onati, C9, C9, hairman, hairman, and 4 of IestlO 6aters rits van 5i*k, C9 of Asia, 4ceania, Africa, ;iddle ast divisions >ars 4lofsson, C9 of #trategic Business 3nits and ;arketing rancisco astaSer, C9 of 9harmaceutical and osmetic 9roducts, >iaison with ><4rOal -uman :esources ;ichael 9owell, C9 of 3nited Hingdoms5iivision 9aul Bulcke, C9 of Americas divisions 9aul 9olman, C9 of inance, ontrol, >egal, Tax, Tax, 9urchasing, xport >uis antarell, C9 of urope divisions :ichard T. >aube, 5eputy C9 of Iutrition #trategic Business units 6erner 6e rner 7. Bauer, C9 of :esearch and 5evelopment, Technical, 9roduction, nvironment.
Cor"orate 1o%ernance
Fovernance :eport, Articles of Association, ommittee charters etc. "t is also visible in IestlO
Nestle, How Consumer Insights Can Lead Product Development Nour first association with the uropeanbased uropeanbased Iestle Iestle brand brand may be hot chocolate, but this ma*or food and agribusiness company holds a portfolio of products that include8 •
IescafO %coffee(
•
#marties, HitHat %confectionery(
•
9errier, Buxton %water(
•
Buitoni %pasta(
•
#hredded 6heat %cereal(
;any of these subbrands may resonate with you as delicious, but they may not signal &health conscious.' The ma*or trend today in the nutrition space is a focus on health and weight loss. Iestle, with its consumerled product development process, immediately began to develop products in its verticals that would meet these changes and keep the company$s customer global base loyal.
An important aspect of maintaining longterm customer satisfaction is evolving your product portfolio to meet the changing demands of the times. Iestle$s marke markett researc researchers hers conducted conducted !ualit !ua litati ative ve %foc %focus us gro groups ups(( and !ua !uanti ntitat tative ive %sur %survey veys( s( rese researc arch h to und underst erstand and how bes bestt to translate the company$s brand e!uity and customer loyalty into products geared toward the rapidly growing segment of dieters and health conscious eaters. nter #veltesse %which translates to &#limness' or &legance' in rench(, a line of lowcal and zero calorie options. As the market researchers determined what was needed in terms of product varieties, they partnered with Iestle$s food scientists to develop products ranging from yogurts to dessert. The mar market ket rese researc arch h rev reveal ealed ed ins insigh ights ts int into o the dir direct ection ion the com company pany$s $s cus custom tomers ers$$ foo food d preferences were moving. This led to an overall strategic and positioning pivot for the comp co mpan any y, an and d in 01 0112 12 Ie Iest stle le an anno noun unce ced8 d8 6 6ee wa want nt to gr grow ow fr from om th thee re resp spec ecte ted d an and d trustworthy food company that we are known as now, into a respected and trustworthy food, nutrition and 6ellness company$. or Iestle, &6ellness' &6ellness' embodied the concepts of healthy foods, fitness, and vitality. 3ltimately, Iestle developed a range of products for people who needed enhanced nutritional support or lowfat options. The company reformulated more than J11 products so that they were lower fat, lower sugar, and lower salt. The company paired these product development efforts with consumer education and brand initiatives L including websites with nutritional info, better information on packaging, and wellness related outreach. 6hat can other businesses businesses learn from Iestl Iestle$s e$s approach approach The compan company$s y$s longevity longevity is due in largee part to their ability larg ability to stay tuned into their custom customers$ ers$ changing changing preferences. preferences. ood is an area whe where re tre trends nds cha change nge and con consum sumers ers are bec becom oming ing mor moree dem demandi anding ng abo about ut opt option ions, s, transparency, and accountability accountability.. Being in touch with those evolving expectations, and using that information to inform product
Ask yourself the following !uestions8 •
-as anything changed about the way customers consume your products or example, authors and publishers are now confronted with the realities of electronic publishing.
•
-ave expectations about what is acceptable changed in your niche The demand for increasingly environmentally healthy products has changed the cleaning products industry forever.
•
5o your customers have access to resources that could turn them into better customers for your business ;any content publishers are now reaching subscribers in print, via the web, and on mobile devices L often in the same day.
Maggi Ste-s in 2ea$ an$ MS1 )ot: Contro%ersy o%er In$ia6s fa%ourite instant Noo$#es Maggi Ste-s in 2ea$ an$ MS1 )ot: Contro%ersy o%er o%e r In$ia6s fa%ourite instant Abstract Maggi Noo$#es
The Maggi imbroglio escalated to an unprecedented level with India's food regulator Food Safety and Standards Authority of India (FSSAI) ordering a total recall of all nine variants of the bestselling instant noodles brand! This is the first ever recall of a popular food product in India! The transformation of Maggi from being staple food for students and bachelors to being declared unfit for consumption has been "uite instant! The #estl$%s maggi noodles were banned across states after samples of it were found to contain e&cess amounts of lead and MS a flavor enhancer! The recent controversy around Maggi noodles that has every
The disput disputee has placed placed the proc processe essed d food food indust industry ry regul regulato ators rs govern governmen ment t and even even consumers in uncharted territory!This dispute has raised serious "uestions about processed food industry *hat caused such a vehement reaction against what was ad+udged as the Most ,owerful -rand in recent times and to answer this "uestions the research research cum case study paper would li.e to e&plore e&p lore the controversy surrounding around #estl$%s maggi in particular and food industry in general and highlight the shortcomings of food safety apparatus at central and state level and suggest the strategies to revamp the same
Standards Authority of India (FSSAI) (FSSAI) Maggi! Key WordsWords- Food Safety and Standards
Intro$uction
;any fast food items have flooded the markets but noodles remained as the most popular item of all of them. 3rban and semiurban markets are controlled by ;aggi and other players are Top Top :amen and other brands. ;aggi has revolutionized the concept concep t and this product has gone to ma*ority ma*ority of the urban households. households. As an offshoot offshoot of this development, development, noodles noodles have become very popular in "ndia. The current version of noodles has been around for over half a century on the global menu card. acing intense food shortages after world war "", 7apan was forced to import bread from the 3#, the move didn didn t sit well the Tai Taiwanese wanese 7apanese 7apanese business business man ;omofuku ;omofuku Ando Ando who ‟
after months of flashfrying experiments, finally invented instant noodles, the founder of Iissin ood 9roducts in 2?@ 2 ?@ in 7apan. 9ackaged under the brand name hikin :amen, they were priced around six times that of traditional 7apanese noodles and were considered a luxury item %The Times of "ndia, 012(. -owever, in 011 an evidence of the oldest noodles is believed to be found, which were discovered inside an overturned sealed bowl buried under three meters of sediment in Dinghai, northwest hina. #cientists determined the +,111 year old, long, thin yellow noodles were made from broomcorn millet and foxtail millet and show a fairly high level of food processing and culinary sophistication.
Asia9acific represents the largest regional market for noodles worldwide, as stated by the new market research report on Ioodles. The region is portended to continue its dominance
associa associatio tion n in its report report 1#o7a# Deman$ for Instant Noo$#es provides a comprehensive review of the noodles markets, per capital annual consumption Q packs eaten in the world in a year. %The Times of "ndia, 012(.
The continent
Im"act Factor ;.(<= Case Stu$ies >ourna# ISSN &=;((@A' B 8o#ume 8o#ume + Issue B >u#y=E(
Figure No.E 1#o7a# Deman$ for Instant Noo$#es
Global Demand of Instant Noodles (Figures in Million
Source: Wor#$
Packs)
Instant Noo$#es
5000
3ssociation
0 4500
44400
0 4000
lobal /emand
0
means pac.s
3500 0
eaten in the
3000
world in a year
0 500
Figure in in million
0 000
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!3430
0
igu igure re Io.2 Io.2 show showss
!000 0
5500 5340 5000 5000
4"0
the the Flob Flobal al dem demand and 35#0
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for for "nsta "nstant nt Iood Ioodle les, s, hina Q -H is one the larges largestt consum consumer er
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for instant noodles 210.J billion servings of instant noodles were eaten in 012+. 4n average, everyone on this planet ate 2+ servings in a year. :egardless of the area, age and gender, instant noodles are loved as U1#o7a# foo$6. "n "n "nd "ndia ia it s a comfort foo$6. ‟
=. /ac0g ac0grroun un$ $
trading trading as The IestlO Anglo#wiss Anglo#wiss ondensed ;ilk ompany %xport( >imited, >imited, importing and selling finished products in the "ndian market.
Begi Beginn nnin ing g with with its its firs firstt inves investm tment ent in ;oga ;oga in 2?P2 2?P2,, Iest IestlO lO s regul regular ar and and subs substa tant ntia iall ‟
investments established that it was here to stay. "n 2?PJ, IestlO set up its next factory at holadi %Tamil Iadu( as a pilot plant to process the tea grown in the area into soluble tea. The Ian*angud factory %Harnataka(, became operational in 2?@?, the #amalkha factory %-aryana(, in 2??G and in 2?? and 2??J, IestlO commissioned two factories in Foa at 9onda and Bicholim respectively. IestlO "ndia has commissioned in 011P its Jth factory at 9ant Iagar in 3ttarakhand.
;. Nest#e6s Nest#e6s Maggi Noo$#es Noo$#es in in In$ian In$ian Mar0et
;any fast food items have flooded the markets but noodles remained as the most popular item of all of them, . ;aggi has revolutionized the concept and this product has gone to ma*ority of the urban households. As an offshoot of this development, noodles have become very popular in "ndia.
"t is a far cry from the initial launch days when ;aggi was distributed free in schools to promote trialM in 2?@1s during the launch period. The company made an attempt in the mid ?1s to change the formulation formulation of the product, which was outright outright re*ected by the consumers and the company had to go back to it old formulation formulation and the company had to do a massive communication campaign. Today "ndia is the largest market for ;aggi noodles. ;aggi pioneered the concept of packaged instant noodles in "ndia three decades back and despite several several brands brands enteri entering ng the fray, fray, dominate dominatess the space." space."T T oods< oods< #unfea #unfeast st Nippee ippee has garnered 2@01K of the market. -industan 3nilever, which markets Hnorr soupy noodles, holds the balance share with other brands.
Im"act Factor ;.(<= Case Stu$ies >ourna# ISSN &=;((@A' B 8o#ume 8o#ume + Issue B >u#y=E(
"n 012+, the instant noodles category added on average 2J,111 outlets a month. Ioodles were among the most widely distributed products in the country, in addition to biscuits, soaps and detergents. According to Iielsen, products in the fast moving consumer goods %;F( space are sold at close to @. million outlets.
Before the controversy over lead and monosodium glutamate found in ;aggi
Table Io.2 Nest#e6s mar0et share in In$ia G Maggi6s com"etitors
M311I6S -orlicks
foodles
COM)4TIT
N4ST246S M3RH4T S93R4
ORS F#H
IN INDI3
consumer
#ource8
M3RH4 C3T41OR
T S93R4
R3NH
delweiss research
in
Table Io
Hnor 2
r #unfeast
-3>
Nippee "T Top :amen "ndo Iissin Maggi /ran$ )ro$ucts V "nstant noodles "nstant
"nfant ;ilk ereals
?P
2
shows the Iestle s ‟
Noo$#es 6afers And 6hites 9asta "nstant offee
<.= P@. P.J 2.@
E
2 2 2
market share in "ndia in various
V 9asta
Tea ream "nfant ;ilk
+?.?
2
V Hetc Hetchu hup p and and #auc #aucee V "n " nstant ;asala V #oups
Iutrition Hetchup
+2 0P.?
0 2
4verall hocolate
2@.@
0
product categories
. Contro%ers Contro%ersy y o%er 2ea$ an$ an$ Monoso$ium Monoso$ium 1#utamate 1#utamate &MS1' &MS1'
The ood #tandards and #afety Authority of "ndia %##A"( which is entrusted with ensuring that all food in "ndia is safe, issued an eight page statement pointing out three &ma*or& violations by Iestle, and kept its options open for prosecution on these counts under the ood #afety and #tandards Act 011P.
The violations are presence of lead in the product in excess of the maximum permissible levels of 0. parts per million %ppm(, misleading consumers by printing &Io added ;#F& on the ;aggi packets and release of ;aggi 4ats ;asala Ioodles in the market without risk assessment and grant of product approval. #imultaneously, ;aggi producer Iestle "ndia, whic which h cont contro rols ls over over @1K @1K of the the inst instan antt nood noodle less mark market et in the the count country ry , anno announ unce ced d a with withdr draw awal al of ;agg ;aggii from from the the shel shelve vess beca becaus usee of &unf &unfou ound nded ed conc concer erns ns&& and and &an &an environment of confusion for the consumer&. A highlevel Iestle delegation, led by its global 4, met ##A" officials at their 5elhi head!uarters and disputed the claims about lead being found in the product, the ;#F content and the ;aggi oats noodles issue.
The ##A" rebutted each of these arguments in detail.
According to Iestle, ;aggi noodles packs contain a tastemaker sachet and the noodles cake. Both parts put together should be tested for lead levels, not separately . ##A" has re*ected this and said that they will test the product as it is soldin two partsnot as it is processed by the consumer.
&#tandards have to be applied in respect of each of these two components independently and have no linkage with the processing of the end product as it is consumed,& it said.
##A" argued that consumers are going to add water while making ;aggi, so should they start taking the water also into consideration Fiving details of lead tests from various states, ##A" said that in 5elhi, Fu*arat and Tamil Iadu, lead levels were found to be higher than permissible levels. "t said that Iestle had claimed in 0120 that lead levels were *ust 1.12Gppm in its noodles. Iow tests were indicating levels as high as 2J.0ppm which is dangerously high. The ##A" also said reports from certain other states were not in the desired format and hence they had been sent back for clarification.
5ismissing Iestle
#o, what happens now The ##A" has called upon Iestle to &reascertain the safety of its products&as per the law and issued show cause as to why permission to produce ;aggi noodles should not be withdrawn. Iestle has been asked to report to the
Im"act Factor ;.(<= Case Stu$ies >ourna# ISSN &=;((@A' B 8o#ume 8o#ume + Issue B >u#y=E(
##A" on a daily basis. As indicated by the regulator, reg ulator, food safety commissioners in states are free to launch prosecutions pr osecutions against Iestle for violation of the law.
(. Causes for concern concern in "rocesse$ "rocesse$ foo$ foo$ in$ustr in$ustry y
The dispute has placed the processed food industry, regulators, government, and even consumers in uncharted territory.
5ata collected by ##A" gathered from all states and union territories clearly shows a pattern in rise in adulteration over the last few years. 6hile less than 2G per cent of the samples collected by all states were found to be not conforming to the standards in 012220, the percentage rose to 2+.@ per cent cen t in 01202G and further *umped to 2@.@ per cent cen t in 012G2+. Also this has resulted into a rise in conviction/ penalties and amount collected in penalties *umped five times from JP+ in 012220 to G@+ in 012G2+. 6ith 6ith rising instances of adulteration, the government is looking to sensitize sen sitize its officials to check on the same.
Ta7#e Ta7#e No. = Foo$ stan$ar$s an$ safety 3uthority of In$ia &FSS3I' 4nforcement
Near
012220 01202G 012G2+ 012+2
#amples examined P+,?G P?,?+? J0,011 +?,0?1 #ource8
Ion 9rose 9rosecut cution ion onvic onvictio tions/ ns/ 9enalt 9enalties ies %:s r( conforming launched 9enaltie ties P,@+ IA @,0+J JP+ ,@+1 G,2J 21,G@1 .0 G,@+ 2G,J2 21,0G J.G J,1?@ 0,J12 @,+P? P.?
FSS3I
Table Io. 0 shows the scenario of food adulteration in "ndia, and the action taken by ood standards and safety Authority of "ndia %##A"( nforcement. nfor cement.
;aharashtra, ;9, Herala and Andra 9radesh account for more than ?1 percent of the total penalties levied in the year 012+2 and @+ per cent of the the total amount raised in penalties. penalties.
A recent "ndia #pend report mentions "ndia has only 2+@ food testing laboratories. or a nation of 2.0P billion people, and millions of independent, largely unorganized retail point ofsale outlets for food products %including grocers, street vendors, restaurants, dhabas, road side eateries, and mithai shops etc.(, it translates to *ust about 2 lab for about @. million population and thereby severely *eopardizing the health and wellbeing of millions of unsuspecting "ndians.
ood adulteration comes under the ood adulteration Act, which is administered entirely by the the state statess and ther therefo efore re the the powe powerr for for seiz seizur ure, e, for for cond conduc ucti ting ng insp inspec ecti tions ons,, for for seizi seizing ng samples, filing cases etcM lie with the state governments. The regulator, however, is the ood standards standards and safety Authori Authority ty of "ndia %##A"( %##A"( which falls under the ;inistry ;inistry of health health so the standards set by the ##A" have to be enforce and implemente implemented d essentially essentially by the #tate governments. 3nlike other sector regulators, this is one such case where the regulator does not have enforcement powers and it has to rely on the states for the same.
"n light of this incident, it is crucial to examine the implications this can have on various other products. There are also other similar categories such as instant soups, vermicelli, and oats oats.. 6hat hat abou aboutt road roadsi side de eate eateri ries es that that sour source ce thei theirr nood noodle less and and sauc sauces es from from loca locall manufacturers The ##A" should take a key role in getting such eateries registered and ensure compliance and monitoring is done.
The collateral damage following the ban on popular instant noodles brand ;aggi, which food safety regulator ##A" has declared
&unfit' for consumption, is not *ust impacting suppliers, but an estimated 2,11 workers, as well. These workers are mainly involved in manufacturing ;aggi noodles across Iestle "ndi "ndiaa s pla plant nts. s. ‟
22 workers involved in the production of ;aggi noodles have now been engaged in the production of other company products. And in plants where only ;aggi noodles were being made, the workers are being trained in other teambuilding activities.' -owever, workers, especially especially temporary temporary ones, in companies that are suppliers suppliers to Iestle Iestle "ndia are the worst hit. ;ogabased ;ogabased 9aras #pices 9vt >td, the largest supplier supplier of spices to Iestle "ndia, has already already asked nearly 011 temporary
mpl mploy oyee eess not not to repor reportt to work work,, or repo report rt twic twicee or thri thrice ce in a week week,, foll follow owin ing g the the ban.9arasBudhira*a, 5irector at the company, co mpany, said supplies to Iestle "ndia contribute nearly near ly + per cent to overall business. &6e are now talking to new clients and getting them on board. #ince we follow strict !uality standards, we believe we have strong potential to step up our exports,' he added.
J. Measures Measures to re%am" re%am" the foo$ foo$ regu# regu#atory atory structur structuree
onsid onsideri ering ng the 9andora 9andora s Box that this this incident incident has opened opened up, what what steps do we need to ‟
take to uphold food safety Banning is a knee*erk reaction that takes us nowhere. "nstead, some practical measures re!uire to be taken.
6.1 Increase the Number of private labs ::ecently after the incidence of ;aggi imbroglio,
The ##A" ##A" has notifi notified ed @0labo @0laborat ratorie oriess accredi accredited ted by Iation Iational al Accredit ccreditati ation on Board Board for Testing Testing and alibratio alibration n >aboratories >aboratories %IAB>( in "ndia for testing testing food samples taken under the ood #afety and #tandards Act, 011P and :ules and :egulations made there under on April 2, 012,& said the ##A" order issued on 7une 2. IAB> is an autonomous body under the aegis of department of science and technology
Im"act Factor ;.(<= Case Stu$ies >ourna# ISSN &=;((@A' B 8o#ume + Issue B >u#y=E(
and is registered under the #ocieties Act. ood -ygiene and -ealth >aboratory rece receiv ived ed the the IAB> IAB> accr accred edit itat atio ion n in 011P 011P whic which h the the labo labora rato tory ry has has been been maintaining since then not all state government and 3nion government run food laboratories are accredited. &Barring a few government run laboratories that have comp compli lied ed with with the the stri string ngen entt accr accred edit itat atio ion n proc proces esse sess and and bagg bagged ed the the IAB> IAB> accr accred ediitati tation on,, most ost gove govern rnm ment ent labo aborato ratori ries es are are yet yet to get get the IAB> AB> accreditation,&
6.2Constitute a tas force of e!perts from food technology institutes, such as T:",
apart from renowned food scientistsworking with leading companies such as Amul, 3nilever, IestlO, Tatas and others. "t is necessary to balance theory with practice. "n addition, ##A" and the processed/ packaged food industries must also work closely with each other so that appropriate norms and guidelines are in place, and then are ideally supported by voluntary and proactive compliance by the industry, so that another fiasco reminiscent of ;aggi does not recur, and that the consumers
‟
health is not put to risk at the altar of convenience, taste, or corporate profit.
6."Create clear# uniform uniform $uidelines on how to go about monitoring the industry
6ith a clear timeframe such that such random, arbitrary testing is done away with. This will ensure transparency. transparency. #implify the ##A" guidelines.
6.%&ive a $race period of, say, P to 20 months to all manufacturers to conform to the
new guidelines and correct the packagingdeclarations packagingdeclarations as well.
6.'(riorities the issues and go about monitoring the same in a systematic, planned
and regular manner with clear timeframes onimplementation. "f we are able to clean up a couple of categories over the next one year we would have moved significantly forward. "f going after market leaders like ;aggi and IestlO really helps clean up the system, it would have achieved some greater good. But the way " see it is if ;aggi is unsafe, then there are at least a million other things we shouldn shouldn t be eating eating right right now now.. ‟
6.6India 6.6India nee needs ds to embrac embracee struct structura urall chan$e chan$ess to ensu ensure re food food safe safety ty for for futu future re
generations. ;y main concern stems from theood #afety #tandards Authority of "ndia %##A"(, created under the ood #afety and #tandards Act, 011P. This has been enacted in accordance with international codex guidelines. There are a lot of provisions in the Act Act that re!uire revamping, but what we re seeing is a patchwork ‟
implem implement entati ation on of both both the old 9A 9A %9revent %9revention ion of ood ood Adult Adultera eratio tion n Act( guidelines as well as the new ##A" laws.
6.)*evampin$ the Central and +tate Authorities :An investigation by "ndian express
had revealed revealed a number of shortcomin shortcomings gs inthe country country s food safety safety at central and ‟
state authorities including lack of staff, technology and accreditation for most state labs.
urrently ?? per cent of the food inspection function is with the states, that is why it is important to revamp the states authorities, but there is also a realization that a central authority needs to have its own staff on the field to avoid what happen in the case of maggi noodles. The authority was literally caught napping leaving it to
all states has also ment that re*ected product approval application information that is routinely made public by the authority is not paid heeds to by the states.
. Con Conc#u c#usio sion
The maggi controversy has shattered many hearts, maggi was not merely a product or a brand in "ndia, "ndian consumer who is not unused to suspect food standards, feels a deep sense of betrayal by one of the most trusted food brand in "ndia.
The maggi controversy has exposed the the pathetic condition of "ndia s processed and and ‟
packaged food industry. There
oming to the Iestle "ndia, the company has disclosed having spent :s ++ crore on Advertising and sales promotion last year while the expenses towards !uality testing was less than per cent of such amounts that itself explains everything, the comp compan any y need needss to be more more fort forthc hcom omin ing g in comm commun unic icat atin ing g acti active vely ly and and transparently to the public. #ince IestlO sells similar products across the world, it means complying with numerous international food safety standards. Therefore, ;aggi and other packaged food products must of course be held accountable for
violating guidelines.
