20
2018Submitted by:[Type the company name]1/1/20182018Submitted by:[Type the company name]1/1/2018
2018
Submitted by:
[Type the company name]
1/1/2018
2018
Submitted by:
[Type the company name]
1/1/2018
Strategic Management Report on Nestle PakistanStrategic Management Report on Nestle Pakistan
Strategic Management Report on Nestle Pakistan
Strategic Management Report on Nestle Pakistan
ASSIGNMENT
On
STRATEGIC MANAGEMENT REPORT ON NESTLE PAKISTAN
Submitted to:
Sir Owais
Submitted by:
Mahnoor Shah Jhan
BPA-15-28
Strategic Management
INSTITUTE OF SOCIAL SCIENCES
BAHAUDDIN ZAKARIYA UNIVERSITY MULTAN
EXECUTIVE SUMMARY
Nestle is one of the best food companies not only in Pakistan but all over the world. It has been serving this world for over one hundred and thirty years. It has differentiated itself through its high-quality product mix and positioned itself as health and Nutrition Company while targeting the health-conscious people throughout the world. Nestle started its operations in Pakistan back in1988, by acquiring a diary company Milkpak ltd. when people of Pakistan actually needed it. The Members working in the Organization are concern about developing the high standards in the Market. They basically focus on making sure that their products are best to use.
Since Pakistan is the fifth world's largest milk producing country therefore Nestle deals mainly in dairy products. Moreover, it also sells juices, chocolates, prepared food like noodles, baby food, infant formula milk and breakfast cereals in Pakistan.
Nestle is a low-cost leader with its efficient operations hence it provides its customers with high quality products and sells them at a premium price. Therefore, it is earning good profits. Nestle has set its manufacturing plants at in Karachi, Lahore, Islamabad and Kabirwala. The milk processing plant at Kabirwala district is the Nestlé's world largest milk processing plant.
When nestle introduced its products in Pakistan people were neither aware nor accustomed to them. Therefore, nestle ran an extensive marketing campaign to educate people and create a need for its products. Pakistan is a land where fresh eatables are readily available. Nestle should sell the same quality of products in Pakistan as it sells abroad. It should also introduce more brands in Pakistani market which it offers in other markets of the world since consumers in Pakistan are becoming more demanding day by day.
Table of Contents
S.No.
Topic Name
Page No.
Organization's Introduction
4
Vision, Mission and Core Values
4 - 6
Role of management
7
Competitive Advantage
8
Products and services analysis
9 - 13
Competitors
14 -15
Annual objectives
15
SWOT Analysis
16 - 37
PESTLE Analysis
38 - 43
General strategies adopted by Nestle
44 - 47
Market segmentation and positioning strategy
48 - 56
Strategies required for next five years
57 - 60
References
61 - 62
INTRODUCTION
Nestle Pakistan Limited is a Pakistan- based food and beverages company. The Company is engaged in manufacturing, processing and sale of food products. Nestle has been serving Pakistani consumers since 1988, when their parent company, the Swiveled- based Nestle SA first acquired a share in Milkpak Ltd. Nestle Pakistan Limited is registered on the Karachi and Lahore stock exchanges for the past ten years.
Company has been declared one of the top 25 companies on the Karachi Stock Exchange by 2014. Nestle Pakistan aims to be a Rs.100 billion company. Nestle, as a social company, offers tremendous opportunities for career growth and learning at domestic and international levels. With over 8000 brands preferred for their good quality, taste and health benefits. Nestle is the number one food company in the world.
Nestle is leading the change in the food industry as it is also the leading food company in terms of having the largest set up of research and development in food science and nutrition. They are uniquely positioned to provide products that help consumers live a good life. Many Nestle brands have benefited from the active ingredients developed by Nestle research and with over 130 years of expertise, consumers know they are getting the best in quality when they choose a Nestle brand. Happy and healthy consumers are at the heart of what they do. Their philosophy is summed up in the phrase "Good Food, Good Life: and they remain committed to help consumers choose better tasting and healthier products to help them enjoy happier, healthier lives.
CORE VALUES
The Company Core values are as follows:
They focus on to develop a workforce which is highly motivated and can perform well in the workplace.
They focus to meet the requirements and needs of their consumer which comprises of all age groups. They can be from small infant to older age. They focus on creating high quality products and provide services which are helpful in capturing great customer value.
They also focus on maintaining the shareholder's wealth but keeping in mind that to perform their operations well with environmental and social responsibilities.
Their brands are preferred in comparison of High quality food and Beverage products.
They Communicate with their customer and provide them with the relevant information they need.
They promote their employees and motivate them to compete and to become specialized in their work.
They also have milk collection services which help to develop dairy sector in the rural areas of Pakistan.
The organization follows proactive approach which helps them to compete in the market.
VISION & MISSION
As the company continued its growth so they also develop new plans and strategies focusing on their Mission Statement which is "Good Food, Good Life". These are not just Simple words there is a meaning of Existence of the Nestle Company which describes the purpose of company's existence. That is, they focus on making an influence to the social environment and operate responsibly and making food which is good for health and utilizing the resources carefully keeping the environment safe produces good healthy food.
Nestle wants to become a company which is preferred always, like among its competitors the customer should choose their company. So, keeping their vision and mission in mind they focus their products and its availability in the market and which is easily accessed by their valuable consumer.
Existing vision statement
"Nestles global vision is to be the recognized leading nutrition, health and wellness company. Nestle Pakistan subscribes fully to this vision of being the number one nutrition, health and wellness company in Pakistan. Envision to:
Lead a dynamic, passionate and professional work force – proud of our heritage and positive about the future.
Meet the nutrition needs of consumers of all ages - from infancy to old age, from beverage products of the highest quality.
Deliver shareholder value through profitable long – turn growth, while continuing to play a significant and responsible role in the social, economic, and environmental sectors of Pakistan."
Existing mission statement
"To positively enhance the quality of life of the people of Pakistan by all that we do through our problem, our brands and products and our CSV activities."
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. As consumers continue to make choices regarding foods and beverages they consume, Nestlé helps provide selections for all individual taste and lifestyle preferences.
Nestlé is dedicated to providing the best foods to people throughout their day, throughout their lives, throughout the country. With our unique experience of anticipating consumers' needs and creating solutions, Nestlé contributes to your well-being and enhances your quality of life.
"Research is a key part of our heritage at Nestlé and an essential element of our future. We know there is still much to discover about health, wellness and the role of food in our lives, and we continue to search for answers to bring consumers Good Food for Good Life."
Proposed vision statement
"To be the number one nutrition, health, and wellness company in Pakistan."
Proposed mission statement
"To positively enhance the quality of life of the people of Pakistan by all that we do through our world-renowned people, brands, technology, products, and creating shared value (CSV) activities; in a manner that is consistent with long- term growth."
Analysis of existing Mission statement
#
Component
Y/N
1.
Customers
Y
2.
Concern for employees
Y
3.
Concern for Public image
Y
4.
Self-concept
N
5.
Philosophy
Y
6.
Concern for survival, growth and profit
N
7.
Technology
N
8.
Markets
Y
9.
Product services
Y
The statement includes products and services, markets and self-concept concepts but lacks other 6 essential components. The company doesn't mention any values, which guides its actions, in the statement but provides them in addition to their vision
"To be a leading, competitive, Nutrition, Health and Wellness Company delivering improved shareholder value by being a preferred corporate citizen, preferred employer, preferred supplier selling preferred products."
Nestle's vision and values address more stakeholders than the original mission and should be combined into it to provide more information about the business. The vision and values statement additionally include concern for survival, public image and employees' components that the official statement lacks. The combined statement would better communicate Nestle's 'reason for being' in the business to its stakeholders.
Role of Management
Top Level of Management
It contains of board of directors, chief executive or managing director. The top management is the final source of authority and it manages aims and policies for an initiative. It dedicates more time on planning and coordinating functions.
The role of the top management can be summarized as follows:
Top management broad policies of the enterprise and lays down the objectives.
It issues necessary instructions for preparation of subdivision procedures, schedules, budgets, etc.
It prepares strategic policies & plans for the initiative.
It appoints the executive for middle level for instance departmental managers.
It coordinates & controls the activities of all the departments.
It is also responsible for maintaining a contact with the outside world.
It provides direction and guidance.
The top management is also responsible towards the stockholders for the performance of the initiative.
Middle Level of Management
The branch managers and departmental managers constitute middle level. They are responsible to the top management for the operative of their department. They devote more time to directional and organizational functions. Their role can be highlighted as:
They execute the plans of the organization in accordance with the policies and directives of the top management.
They make plans for the sub-units of the organization.
They participate in training & employment of lower level management.
They understand and explain policies from top-level management to lower level.
They are also responsible for inspiring lower level managers towards better performance.
Lower Level of Management
Lower level is also known as operative/supervisory level of management. It contains of supervisors, superintendent section, officers etc. Their activities include:
Assigning of jobs and tasks to various workers.
They instruct and guide workers for day-to-day activities.
They are responsible for the quality as well as quantity of production.
They are also entrusted with the responsibility of maintaining good relation in the organization.
They communicate workers problems, suggestions, and recommendatory appeals etc to the higher level and higher-level goals and objectives to the workers.
They help to solve the complaints of the workers.
COMPETITIVE ADVANTAGE
For a company to survive the company must maintain and sustain its competitive advantage. So, these are the major 10 reasons why Nestle Pakistan is still competing and is successful.
Nutrition, Health and Wellness: Nestlé's core aim is to enhance the quality of consumer's lives every day, everywhere by offering tastier and healthier food and beverage choices and encouraging a healthy lifestyle. Nestle express this via their corporate proposition 'Good Food, Good Life'. Nestlé Nutritional Profiling System
Quality Assurance and product safety: Everywhere in the world, the Nestlé name represents a promise to the consumer that the product is safe and of high standard. Nestlé Quality Policy
Consumer Communication: Nestle Pakistan is committed to responsible, reliable consumer communication that empowers consumers to exercise their right to informed choice and promotes healthier diets. Nestle respect consumer privacy. Nestlé Consumer Communications Principles Nestlé Policy and Instructions for Implementation of the WHO International Code of Marketing of Breast-milk Substitutes.
Human rights in Nestlé's business activities: Nestle fully support the United Nations Global Compact's (UNGC) guiding principles on human rights and labor and aim to provide an example of good human rights' and labor practices throughout our business activities. International Labor Organization
Nestlé's success is based on Nestlé's people: Nestlé's treat each other with respect and dignity and expect everyone to promote a sense of personal responsibility. The Company recruit competent and motivated people who respect their values, provide equal opportunities for their development and advancement, protect their privacy and do not tolerate any form of harassment or discrimination.
Safety and health at work: Company is committed to prevent accidents, injuries and illness related to work, and to protect employees, contractors and others involved along the value chain.
Supplier and customer relations: The Company require their suppliers, agents, subcontractors and their employees to demonstrate honesty, integrity and fairness, and to adhere to their non-negotiable standards. In the same way, they are committed towards their own customers.
Agriculture and rural development: The Company is contributed towards improvements in agricultural production, the social and economic status of farmers, rural communities and in production systems to make them more environmentally sustainable.
Environmental sustainability: The Company is committed to environmental sustainability. At all stages of the product life cycle they strive to use natural resources efficiently, favor the use of sustainably-managed renewable resources, and target zero waste.
Continuous improvement in water management: The Company recognize that the world faces a growing water challenge and that responsible management of the world's resources by all water users is an absolute necessity. Nestlé Water report Nestlé continues to maintain its commitment to follow and respect all applicable local laws in each of its markets.
PRODUCTS AND SERVICES
Most people know Nestle through their brands. Their portfolio covers practically all food and beverage categories. Nestle has a wide range of products across a number of markets. With over 140 years of experience and expertise they take great pride in bringing us the best products because happy, healthy consumers are important to them. They develop their products keeping our preferences, tastes and needs in mind. Their products are carefully aligned to Pakistani tastes and needs. They always try hard to develop new products and improve existing ones and serve their consumers in a better way.
List of Products:
Milk, dairy and chilled diary
Nestle Milkpak
Nestle Nido
Nestle Neslac
Nestle Everyday
Nestle Yogurt,
Nestle Raita & Nestle Desi Ghee
Nesvita
Beverages & bottled water
Nescafe
Milo & Juices
Pure Life
Breakfast & cereals
Cornflakes
Honey stars
Koko crunch
Chocolate, confectionary & baby food
Kit Kat
Cerelac
Prepared meals
Maggi
TARGET MARKET OF NESTLE PRODUCTS
Milk, dairy and Chilled dairy
wide variety of dairy products is available to cater almost every segment of customer. Liquid Milk especially Nesvita is produced especially for the females as it contains high content of iron, beneficial for them.
Beverages
It includes Nescafe, Milo, Nesquik, and Nestle Friuta Vitals. Their main target market includes people of all ages.
Bottled water
Businesses, students, for the people who do not have access to clean drinking water.
Baby food
Target market of baby food is all the parents
Food
It includes Maggie noodles which mostly caters children and teenagers.
Breakfast cereals
Children, teens and adults benefits from it
Chocolates and confectionary
People of all ages.
Sports nutrition
It specifically targets sports persons for a nutritive protein diet
LIST OF SERVICES BY NESTLE PAKISTAN
Feed improvement
Livestock breeding and health
Equipment provision
PRODUCT ANALYSIS
Boston Consulting Group Matrix
Star Category
Nestle Milkpak
Pure life
Nido
Cerelac
Nestle Fruita Vitals (Nestle Juices)
These products are widely used by peoples in Pakistan. So, they help company to increase market share. Nestle should decrease the price of these products.
Question Mark Category
Everyday
Milkpak Cream
There is some minor default in above mentioned products like there taste and expiry dates. These products can become star product if these defaults be removed.
Cash Cow Category
Nestle Dahi
Maggi
KitKat
Polo
These products can made star products of nestle if nestle add new flavors and do penetration instead of skimming.
Dog Category
Nestle Koko Crunch
Nestle Cornflakes
Milo
Nestle Raita
These products are not sold as much due to following factors.
Targeting specific economic class.
Not according to taste of peoples.
Rare peoples like these products.
MARKETING MIX OF PRODUCTS
Product
Three Nestlé's Products of Milk Category are selected for the marketing mix.
Nestle Milk (Liquid)
Nestle Condensed Milk (Dense Liquid)
Nestle Everyday (Powdered Milk)
Nestle Launched First Powder milk in 2003 and then they came into Liquid powder. The Nestle Powder milk because of its good quality helps Nestle to capture a great customer value.
Milk Powder introduced by Nestle has good taste, more stable, ready to drink, and less volume.
The Production of Nestle Everyday is carried out in Sheikhupura and Kabirwala. They improved the quality of milk by the UHT process.
The target markets for these products are the consumers who drink Tea in their daily routine. Industrial consumers of Nestle Everyday instant milk are PIA, Mc-Donald's and pearl continental Pakistan.
Price
Nestle basically sets prices by keeping in mind that they have to capture a greater customer value and that their products are in the reach of their consumer i.e., the consumer has the Pocket to pay for their product. So, in this way the Nestlé's product demand increases in:
Profit margin of the product
The Company has set its profit margin high because of their products good quality.
Price Fluctuation
The product is related to dairy farms. So, there are chances of price fluctuation.
Scale of prices
There is a price scale which is set to a specific level. So, the consumer can pay for the product.
Promotion
Channels adopted for promotion
They basically promote their products through Media, New papers, magazines, Boarding's.
Advertisement Cost
As every company planned their financial year. So, nestle also has a Specific budget for advertising
Nature of marketing
The product is marketed aggressively in the market.
Online promotion methods
Nestle does not have yet adopted online promotion methods in Pakistan but in future it may be possible.
Placement
Outlets of product located
Nestlé's products are located all over in Pakistan regardless of big and small cities.
Directly sales to the consumers or via distributors
Nestlé's products are not sold directly to the customers because of the extensive consumer groups. It's the reason they use the sale the products through distributors for easiness of company.
Insurance policies of companies
Nestlé's insurance policies are maintained but they are highly confidential.
Warehousing facilitation of company
Nestle has its own warehouses for the storage of products as well as it has also hired some warehouses.
Transportation modes of the product
Usually Nestlé's mode of transportation is road.
COMPETITORS
Nestlé is the market leader in the water industry. It is the first company which launched bottled water for first time in Pakistan and that's why it has maximum market share than others because of being pioneer in this industry. Nestle Pure Life introduce the bottled water culture. No doubt Nestle pure life is currently a dominant leader in Pakistan market in Mineral Water Industry. Nestle Pure Life is currently dominating more than 80% of bottled water market share. It is also leading the other firms in new product introductions, distribution coverage, and promotional intensity.
Competition typically is defined as among forms within an industry producing products that are substitutes for one another. Therefore, the identification and evaluation of marketplace competitors is a key element of strategic marketing and a vital element of the corporate survival.
For different product categories there are different competitors of Nestlé. Nestle pure life (NPL) major competitors at this time who are also offering their water product in market are following:
Pepsi is offering Aqua Fina
Askari water
There are also other small competitors as well e.g. Classic, Nova etc., which have very low market segments.
According to market view, competition is defined as:
The competition between the firms, which are satisfying the same customer, needs.
So according to concept the competitors of NPL are all those companies, which are satisfying the need of thrust of the customers are the competitors of the Nestle.
Main Competitors:
Engro foods and Haleeb foods are the main competitors of Nestle in Pakistan
& the main strong competitor is Shezan.
Engro Foods Pakistan Major product lines: Olpers milk, Olwell, Olper Cream, Tarang Tea whitener, Tarkka Ghee
Haleeb Foods Major product lines: Bread, snacks, desserts and meals.
Shezan Foods Pakistan Major product lines: Food Products, Jams Jellies & Marmalades, Tomato Ketchup, Sauces & Pickles, Fruit Juices Syrups & Squashes
The other main competitors of Nestle Pakistan are:
Unilever
Proctor and Gamble
Tapal danedar
Pepsi
Coca cola
Gourmet is also giving a very tough competition to Nestle pure life as their price is less than Nestle pure life. Moreover, gourmet is approaching the other cities and rural areas of the country and possibly will emerge as a strong competitor of Nestle pure life in near future.
There are also other competitors found within a local market which include Sparklet, Acqacare, Pure, Aafi, Oura, Aabshar and many other local brands, but their market share is very low as compare to the Nestle Pure Life.
ANNUAL OBJECTIVES
Annual objectives of Nestle Pakistan are simple & well designed with the core strategy to meet the demand of the consumers & to fulfill the needs of the customers. Annual objectives are compatible with the overall corporate objectives of nestle. Company's biggest objective is to be the country's largest and best branded food manufacturer while insuring that nestle name is synonymous with the products of the highest quality.
The other annual 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.
To achieve compatibility with international voluntary standards on environmental management systems.
To build mutual trust with consumers, governmental authorities and business partners.
To ensure continuous improvement of nestles environmental performance.
Conservation of natural resources and minimization of waste.
To establish the benchmark for good business practice.
Employing new technologies and processing.
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
SWOT ANALYSIS
This section presents a SWOT analysis to review the micro environment of the frim reflecting specifically upon the strengths and weaknesses of Nestle Pakistan and the opportunities and threats the firm must respond to through an alignment of firm strengths to such forces. A SWOT analysis is often used, as a strategic tool to allow a presentation of the firm's resources and capabilities, which can be further, developed to aid competitive advantage. A SWOT analysis therefore underpins the development of future strategic options. A desirable competitive advantage is one obtained through a minimization of threats aligned with the seizing of opportunities.
STRENGTHS
Brand Image
Making a good first impression is important, especially in business. Consumers create an impression of the business and brand based on a variety of factors, such as the way employees are dressed, their website, business cards, the cleanliness of store and more. Call it superficial, but these small details are points of contact.
Brand image (describes the consumer's belief and thoughts towards a specific product) enhances the consumer's trust and enables the company to differentiate its services from other enterprises in the industry and to satisfy the consumers.
In this case, presentation is everything.
Over the years, Nestle Pakistan with positive brand image have attracted the clients and built associations which have ultimately cultivated better profits.
Nestle Pakistan has witnessed a steady growth on the back of the strong brand image. The company reported overall earnings of 4.10 billion for the three months ended on March 31, 2017 as compared to 3.44 billion in the corresponding period in 2016.
For over two decades, Nestlé Pakistan, have strived to bring high quality products that have won the hearts of all Pakistanis. Their bedrock values of respect, trust, integrity and teamwork have helped them become the premier Nutrition, Health and Wellness Company and earn a positive brand images in the minds of the customers.
Brand name has helped the Nestle Pakistan to differentiate the products of its companies.
Nestlé Pakistan today is the leading Food & Beverages Company in Pakistan with key focus on nutrition, health and wellness and reaching the remotest of locations throughout Pakistan to serve the consumers.
Today more and more consumers mirror their emphasis on nutrition, as they realize that food choices affect their health and quality of life.
Development of trust and loyalty highlight the capability development of the firm.
So, brand image in either perspective, directly or indirectly, more or less, early or late whatsoever the case may be, it has affected the company's profitability.
Market strategies
Marketing strategy focuses on what you want to achieve for your business and marketing efforts.
Marketing strategy is a section of the business plan that outlines the overall game plan for how to find and attract clients or customers to business.
Marketing strategies established by the Nestle Pakistan are innovative.
Marketing strategies of Nestle Pakistan are fluid, changing as needed to improve the results. They assess and adjust their marketing strategy from time to time to account for changing market conditions, shifts in demand, and other factors that impact their sales, as a result of their market research activities and performance of their business.
Nestle Pakistan has a good marketing strategy that incorporates with the 5 Ps of marketing to develop techniques and tactics that help them to achieve marketing objectives.
Marketing strategies just like financial and sales strategies are formulated by gauging the periodic research carried out to judge market trends.
They set prices of their own because Nestle is the trendsetter in the market. Competitors, not really, bother price policy of the company.
The profit margin of company is usually high because of the high quality of the product. Its prices generally tend to fluctuate. The prices are fixed on a reasonable scale so that majority of public can afford. They don't give price discounts to the final consumers, but it is considered for the organizational consumers like Nestle has given discounts to PIA. They never return the paid money back but if the claim is valid they replace the products.
Company has adopted channels for promotion such as TV, newspapers, magazines and doctors. The advertisement budget of the company is preplanned by the start of financial year. It is kept secret b the company.
The product is marketed aggressively in the market. Nestle is 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.
Their outlets are located all over in Pakistan regardless of big and small cities that are easy to approach.
Quality Products
The common element of the business definitions is that the quality of a product or service refers to the perception of the degree to which the product or service meets the customer's expectations.
Quality has no specific meaning unless related to a specific function and/or object.
The Company's priority is to bring the best and most relevant products to people, wherever they are, whatever their needs are, and for all age groups.
Nestlé Pakistan has its commitment to excellence in product safety and quality.
Nestle has the products with specific features that make them different from other similar products present in the market i.e., Nestle has introduced the milk powder which outshined others because of its great taste, refrigeration, ready to drink, less volume, more stable shelf life. The entire production of this product is carried out in Pakistan at Sheikhupura and Kabirwala.
Nestlé's existing products grow through innovation and renovation while maintaining a balance in geographic activities and product lines.
The technology for the manufacturing of products is imported and is latest. Nestle continuously make changes in the product or its manufacturing process such as the factory mil powders spray drying capacity was doubled in 1999 with commissioning of new evaporator.
Long-term potential is never sacrificed for short-term performance.
Growing Sales and profits
Making your business more profitable involves looking at ways to increase sales revenue as well as decreasing your costs and benchmarking your business to see where you can save money.
Nestle Pakistan has the major shareholder in the food industry of Pakistan.
Nestlé Pakistan mentioned in its financial statement for the nine months period ended September 30, 2017 that the sales revenue increased by Rs8.0 billion, yielded a growth of 9.5 percent largely driven by volume. The company's export sales during the period reached at Rs3.7 billion recording a growth of 3.6 percent.
The company delivered an operating profit of 19.6 percent. The rise is mainly owing to enhanced gross margin, operational savings and effective cost management.
Furthermore, Nestlé Pakistan's net profit-after-tax (PAT) reached at Rs11.3 billion, recording a strong growth of 15.4 percent.
It has a firm foot on the ground. Over the years, the Company has invested quite significantly in its product development and enhancing its market share. The Company has the potential to continue its growth on account of an unprecedented hike in consumption of packaged food and drinks by a middle class that is rapidly expanding in numbers, the food producing giants like Nestle have been faring remarkably well over the course of the last five years.
Market Share
Nestle juices has a highest market share almost in every SBU's line, such as in Milk pack & Nestle pure life.
High market share always depicts the quality of the firm & its strong management decisions.
Although the competition is growing around Nestle, however, it has a firm foot on the ground. Over the years, the Company has invested quite significantly in its product development and enhancing its market share. The Company has the potential to continue its growth on account of an unprecedented hike in consumption of packaged food and drinks by a middle class that is rapidly expanding in numbers, the food producing giants the likes of Engro and Nestle have been faring remarkably well over the course of the last five years.
Skilled labor
Skilled labor is a segment of the work force with a high skill level that creates significant economic value through the work performed (human capital).
Skilled labor is generally characterized by high education or expertise levels and high wages.
Skilled labor in an increasingly global competitive world is essential and Nestle is creating competitive edge by its high skilled labors.
With rapid changes in the economy with respect to the growth of knowledge-based jobs, skilled labor of the future may be different from the skilled labor of the past and present and Nestle Pakistan provides training to its labors to meet the requirements of the present and future.
The "rise of the machine" is engendering great debate and a certain level of anxiety among skilled workers. Labors in Nestle does not have to wonder if they will eventually be replaced on the job by a robot or a computer algorithm.
Reduced costs because of skilled labors.
Reduced downtime.
Strong supply chain network
Businesses are often part of a larger network of organizations, a supply chain network can be used to highlight interactions between organizations; they can also be used to show the flow of information and materials across organizations.
Supply chains and supply networks both describe the flow and movement of materials & information, by linking organizations together to serve the end-customer.
To create value among suppliers, technical training is provided to farmers level which in return will improve quality.
factoryfactory
factory
factory
Carrying and forwarding agentCarrying and forwarding agent
Carrying and forwarding agent
Carrying and forwarding agent
DistributorDistributor
Distributor
Distributor
Super-StockiestSuper-Stockiest
Super-Stockiest
Super-Stockiest
DistributorDistributorWholesalerWholesaler
Distributor
Distributor
Wholesaler
Wholesaler
RetailerRetailerRetailerRetailer
Retailer
Retailer
Retailer
Retailer
ConsumerConsumer
Consumer
Consumer
The Nestlé Supplier Code establishes non-negotiable minimum standards. They ask their suppliers, their employees, agents and subcontractors to respect and to adhere to always when conducting business. The Nestlé Supplier Code helps to implement commitment. To ensure both responsible sourcing and supplier relationships that deliver a competitive advantage
Replicable and consistent quality and food safety
Predictable timing and volume
Increased price stability
Sustainable production
Farmer loyalty
Efficient Distribution networks
A distribution network is an interconnected group of storage facilities and transportation systems that receive inventories of goods and then deliver them to customers.
Efficient Distribution networks throughout the country
Nestle employs different distributers for different areas
Increasingly considered a critical asset in this new age
Parent support
Nestle Pakistan has a strong support from its parent company, which is the world's largest processed food and beverage company, with a presence in almost every country.
The company has access to the parent's hugely successful global folio of products and brands
Good background of the company
Nestlé has a place in the heart of consumers due to its longstanding history.
Global recognition driven by the number of strong brands within the firm's portfolio.
Diversified and varied brand portfolio.
Environment Friendly
Nestle Pakistan understands the sense of well-being requires that its products are made in a caring and responsible way that preserves the environment for future generations.
Company is focusing on three areas and is supported by these commitments:
Caring for water
Work to achieve water efficiency and sustainability across their operations
Advocate for effective water policies and stewardship
Treat the water that is discharged effectively
Engage with suppliers, especially those in agriculture
Raise awareness on water conservation, and improve access to water and sanitation across our value chain
Acting on climate change
Provide climate change leadership
Promote transparency and proactive, long-term engagement in climate policy
Safeguarding the environment
Reduce food loss and waste
Improve the environmental performance of their packaging
Assess and optimize the environmental impact of their products
Provide meaningful and accurate environmental information and dialogue
Preserve natural capital, including forests
Packaging Achievements
Company is opposed to labelling with a single indicator, such as water footprint, because it is misleading to consumers and neglects other important factors such as the product's impact on CO2 emissions and non-renewable energy resources.
Communication with customers
Nestlé is committed to using a range of communication methods to engage consumers on environmental issues. For example, Nestlé has launched the world's first free, mobile application for iPhone and Android devices to help people recycle waste packaging correctly.
Bio-Gas Plant
After a pilot project for Bio-Gas plant of capacity 200 m3 at Sukheki Farm, Nestlé Pakistan installed another Bio-Gas plant with a capacity of 400 m3 at Sarsabz Farm in 2014. Most of the Bio-Gas produced is used in power generation where it saves 50% of diesel fuel (60 Liter/Diesel per day) equivalent to reduction of 58,000 kg CO2. Green energy has therefore resulted in reduced carbon footprint.
Solar Energy
The success story of the pilot project encouraged the Company to install two more solar energy projects for its 1,000-litre chiller in the Collection Center at Pull Mangni sub-center and the Dallan area in 2013. Nestlé Pakistan installed 8 solar energy systems at its Milk Collection centers in 2014 and foresees hopes to install 15 to 20 solar energy units of 5-6 KW each. The continuing effort of Nestlé Pakistan in solar energy would set an example in the dairy industry to make use of a renewable energy solution for sustainable business.
Paper and Board
22 tons of paper and board was saved by the optimization of corrugated cases. It was achieved through re-designing the cases for dimensions and material combination without any compromise on the functionality of packaging or the quality of product.
Plastic Laminates
As much as 231 tons of plastics, mainly polyethylene, was saved by optimizing the structure of laminates for milk powders and cereals. The biggest initiative in this regard was the optimization of the sealing layer of the laminates. Many trials and studies were conducted to ensure that this optimization should not have any negative impact on the final quality of our products.
Green Supply Chain
Nestle Pakistan is delivering more volume with less kilometers travelled and have taken the following steps to ensure environment friendly operations throughout Pakistan.
Optimizing vehicle capacity
Utilization by increasing dispatch of North zone through cross dock model
Induction of new heavy capacity vehicles
By introducing HUB model in South, having positive impact on vehicles utilization and less diesel consumption
By increasing road safety/ vehicle management awareness in Pakistani drivers through NH&MP training sessions.
Highest ever density: 16 Liter of milk collected / KM of vehicle travelled
Organization Culture
The biggest strength of nestle is it includes team focused and good policy. Nestle Pakistan looks on collective and oriented employees to work hard. And second thing is Nestle has a big brand name mostly because of exceptional capabilities of its employees.
Strong cultural values stemming from the firms integrated approach to business and commitment to their stakeholders.
Current strategic position of Nestlé supported by three key areas of business 'quality leadership, customer satisfaction and sustainability
Nestlé have a strong commitment to corporate social responsibility with reference being made to 'long term commitment never being sacrificed for short-term performance.
Strong teamwork within the firm promoting good levels of job satisfaction and employee commitment.
Large number of offerings
Company is offering a large number of products within the category of chocolate and confectionary, baby food, prepared meals, breakfast cereals, etc. The strength of Nestlé's brands has given the company an unparalleled position on a global basis across a wide range of product categories. These brands are the first choice of consumers around the world. brands enable consumers to express their individuality and to respect their traditions whilst still enjoying the quality of a Nestlé product and, as such, are key elements of the Nestlé portfolio.
Products of Nestle are its brand strength.
In Pakistan Nestle has some very strong brands like Nescafe, Maggie, Cereals, nestle water and these brands are almost generic to their product categories. So, when a brand becomes generic then it creates the feel of strong brand in the eyes of customers.
Nestlé's brands and products are the focus of continual innovation and renovation so that they will be relevant and appealing to today's and tomorrow's consumers. As important as ensuring that our brands meet and beat our consumers' expectations is ensuring that they are available whenever, wherever and however our consumers want them.
Strong research and development department
Research and development is a continuous process at Nestle. It gives updated info on consumer behaviors, changing trends and consumer demands; this helps Nestle to adapt to changing trends.
Research and development department keeps Nestle in continuous knowledge about itself and competitors. It has a competitor advantage because many local companies have no research & development department. Research and development department is developing new technology and improving existing technology for the company to uncover cost-effective manufacturing methods. New ways to manufacture existing popular products can allow the company to realize the revenue associated with the sales of the product but reduce the costs of getting the product out to the public.
Acquisition
It is a large-scale organization, with abundant funds and has the capability of acquiring weaker firms by throwing them out of competition.
For example, nestle had submitted the pre-merger application for acquisition of the nutrition business of Pfizer Inc. Both parties operate in the same relevant geographic market, i.e., in the nutrition business in Pakistan. The market comprises of two relevant products: Infant and Follow-On Milk (IFFO Milk) for babies aged 0-12 months; Growing-Up Milk (GUM) for children aged 12 months and above. Nestlé is already a dominant player in the relevant product markets in Pakistan. With the proposed acquisition, Nestlé was able to strengthen its already dominant position, which might result in lessening of competition in the IFFO Milk and GUM markets of Pakistan by the removal of a competitor in the relevant markets.
Goodwill
The value of a company's brand name, solid customer base, good customer relations, good employee relations and any patents or proprietary technology represent goodwill. The goodwill account can be found in the assets portion of a company's balance sheet. it contributes significantly to a company's value and success. The reputation of Nestlé's brand is estimated to be valued at $7billions.
Huge amount of capital
Year on year Nestle Pakistan Ltd grew revenues 8.74% from 112.39bn to 122.21bn while net income improved 23.59% from 11.85bn to 14.64bn. Huge amount of capital is contributing a larger profit to the firm.
New technology
Company always adopt new technology. For example, the Milk Powder Plant has been modified with new technology and has an additional yearly capacity of 30,000 tons. The power generation capacity and waste water management system have also been upgraded and additional filling lines have been set up.
WEAKNESSES
Target market
Target market of any company should be well defined and match with the economic circumstances of the country. Price should be like that customers are motivated to buy more.
Target market of Nestle products is upper middle and high class because lower middle and poor class cannot afford to buy. Only A class and B+ class have enough purchasing power to become a regular costumer of a Nestle product.
The target of this brand is the urban areas of the country and along with the use in offices and business class as well.
Price of Nestle is not very economical and income level of Pakistan and most of the people lies in lower middle class so they cannot afford most of the Nestle products. Nestle products due to its premium price compare to other companies like Shezan etc.
It can be considered as the major weakness in a country like Pakistan where most of the people are living below average life.
Nestle Milkpak
Milk Pak was the first to introduce the packaged milk category, processing the milk through UHT (Ultra-High Temperature Processing) treatment and offer quality milk. Olper's however, came up with aggressive marketing strategies and appealing packaging and became a well-known brand in the market.
Strong perception has been built for customers of Olper's via beautiful and emotional ads. Use of lively colors in ads has helps the brand create a positive perception in customers' minds. the economic recession and financial crises in the country,
Olper's is not ready to compromise on advertisement budgets and consumer needs. Olpers by Engro foods sidelined Nestle's Milkpak to become the market leader of that category.
It's the main weakness of Nestle Milkpak that there are different companies of milk but the name of the nestle Milkpak always stands in the last because of low advertising and marketing.
Lack of nutrition
A number of Nestlé's products have faced criticism as a result of their nutritional value. Increased emphasis has been placed on healthy eating through government initiatives and Nestlé would benefit from reviewing a number of their products to support their mission of 'good food and good life' in a changing social environment i.e. rising levels of child obesity.
Nestle Baby Milk
The past of Nestlé is tainted in parts by negative public relations as a result of what is referred to as the baby milk scandal.
It is one of the major weaknesses of Nestle is Nestle Baby Milk because those babies who fed on baby milk are become sick. And so many babies were died because of nestle baby milk and then people boycott to buy nestle.
Noted in a recent article by Muller it was stated that the scandal had 'grown up but not gone away.
Nestle Pure water
Though 57.3% people prefer Nestle over other brands 43% prefer others. Nestle hasn't benchmark with other brands to compete in the industry.
Promotional activities on television regarding pure water of Nestle Pakistan is low than competitors.
Nestle pure water have condense consumer equity.
Nestle pure water is so expensive as compared to big competitors like Aquafina. Aquafina beats nestle in almost every country except Pakistan. So, nestle should defense their position.
Complex supply chain management
Nestle has to recognize the need for stability and consistency in the processes found within the company's global supply chain. International standards demand a need for standard, yet this has to be balanced with the firm's strategic need for adaptation to different cultural environments.
Less Proactive
Nestle being a huge company is very less proactive to the demands. Unless competitors initiate a campaign or come up with new strategy, nestle does not bring changes.
Nestle hasn't come up with new packaging of its juices since a long time. Maybe in some markets it is, but juice market really is competitive in Pakistan. Nestle hasn't changed its juice formula when it changed its packaging (which is not so innovative either) which is worth doing just for the sake of being the "brand leader".
Limited Distribution Channel
Nestle's major & bad factor is the limited distribution channel because they distribute 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.
Stock outs
Due to its in-efficient distribution channels, nestle has experienced stock outs on regular basis. This had adverse effect on company's image and consumer base. It also gives opportunity for competitor to penetrate into market and capture large market share.
No direct outlets
They don't 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.
Packaging
Nestle is dependent on Tetra Pak for packaging of its entire dairy products. It is the only option for them as Tetra pack has monopoly in packaging sector. This cause higher production costs.
Distribution cost
The company has always reported higher distribution cost. The distribution cost is high as compared to the competition in the local market.
Less consumer research in some areas
One of the major weaknesses that Nestle is facing is the mature market they are operating in. When the market is mature it can give stronger competition to the new entrants. As well the company should focus on consumer research on different target markets for different products. Not every product is right for every market and Nestle should focus on consumer research in order to avoid that weakness.
Entering mature markets
Entering into markets that are already mature and can give a tough competition to new entrants.
Premium Brand
Common men generally perceive Nestle as a premium brand and have perception that all Nestle products would be highly expensive.
OPPORTUNITIES
Intangible capabilities
Development of intangible capabilities to aid competitive advantage.
Intangible capabilities like leadership qualities, tacit knowledge and skills, teamwork, organization cultures, business processes, partnership, etc. can help Nestle in building competitive edge over its competitors.
Competitive advantage is achieved through inimitability and this should be a focus of the firm.
Backwards integration
To gain more control over the supply chain of the firm. Now companies are improving their production by adopting different strategies in which backward integration is one of them.
In backward Integration, a company gets control over its suppliers to improve the efficiency and save the cost which improves its profit margins and make the firm more competitive.
Nestle can do backward integration through acquiring input suppliers, establishing long-term contracts with existing suppliers or investing in new input production capacity through internal corporate growth. For example, nestle can own its own dairy form.
It can help the company in
decreased marketing expenses,
the stability of operations,
the certainty of supplies of materials,
much control on the distribution of products,
tighter quality control,
the on-time review of fabrication and allocation policies,
more control over inventory,
and additional profit margins or the ability to charge lower prices on final products.
And the company must be weighed these advantages against the disadvantages which normally are disparities among productive capacities at a range of stages of manufacturing, governmental pressure, lack in interest of specialty, the firmness of operations, the extension of the management team and lack of direct competitive influence on the costs of transitional products.
Enhance distribution channels
Vast distribution
Innovative development of distribution channels.
Nestle should work on its distribution channel to make it efficient in order to maintain supply of their products. This will not allow consumer to shift to competitor's brand in case of stock outs.
Awareness
Extensive awareness programs for health and hygiene has created awareness among consumers for the benefits of processed milk. More and more consumers are shifting from loose milk to processed milk. This will create higher demands and consumption of processed milk. This is a great opportunity for growth and to gain more market.
Eliminating retailers
Company can open separate stores for eliminating retailers.
Rather than paying sales representatives to promote products to resellers, company can promote products on their own websites, take orders and send goods directly to the final customer.
Skipping steps in the distribution channel will help company to reduce the amount of logistics and transportation required in the movement of goods to consumer. This increases efficiency significantly.
Eliminating the middleman can create a win-win for the seller and buyer from a money perspective. Each step in a traditional distribution process involves a trade buyer adding a markup to his costs. This ultimately makes the final customer's price higher.
Company is trying to open stores in universities.
If this not, company can provide incentives to retailers to increase sales volume. Credit policy can be adopted to increase sales.
Coffee Market
Nestle is having continuous growth in the Pakistan coffee market. Nestle continued to remain the dominant player within coffee in Pakistan in 2017 with over half of off-trade value sales. The company is the leading player in coffee mainly due to its strong presence within instant coffee through its Nescafé brand.
Coffee in Pakistan presents opportunities for new entrants.
Coffee in Pakistan is still in its nascent stage compared to tea which is significantly mature. Pakistan is traditionally a tea-drinking country and the concept of consuming coffee has picked up over the review period. Nestle can expand its product line in this category.
Fifth Largest producer of milk
Pakistan is the 5th largest milk production country in the world, the country is blessed four seasons and high-quality crop, good species of buffaloes and cows and largest canal system. However, it is only obtaining 2500ltr of milk per annum from an animal in comparison with 18000ltr per animal in developed countries.
This is a good opportunity to increase production significantly by adopting best practices and modern techniques.
Government Funding
Government has provided increased funds to farmers. This has allowed farmers to invest in better storage facilities to save milk for longer period of time and to cope bad weather conditions.
Health based products
Transition to a "Nutrition and well-being" company
In today's health conscious societies, they can introduce more health-based products, and because they are a market leader, they would likely be more successful.
Expanding Product lines
Nestle has already a broad category of products lines but still it has a lot of opportunities to expand its products more and more.
The coffee market offers many opportunities for the company to expand by tuning the taste of the masses towards coffee.
Nestle have opportunity to expand their product line like tea etc.
Moreover, Nescafe can plan on biscuits or cookies which can be sold with the coffee or which goes very well with the coffee flavor.
They can also make these biscuits as premium biscuits in the market.
It should regularly indulge with candy and chocolates.
Can Capture market of home appliances.
Can enter ice cream products. People love to enjoy eating ice cream
They have the opportunity to offer snacks.
Recently, they have created an opportunity for themselves by introducing chillers in the market.
Dairy products
It has potential to attract many customers in dairy products. To expand the cold dairy products range, nestle fruit yogurt is the latest addition to this group.
The cold dairy market offers many opportunities for the company which can capitalize these products by banking on its superior quality milk.
Growth in Public income
The income of people is constantly on a rise and they tend to move towards premium taste which is coffee in the beverage category. So, they have a potential customer base who might want to move towards this drink.
Integration of new acquisitions
Nestle Pakistan can do integration of new acquisitions in growth markets.
Or it can tie-up with different corporates, educational institutes and other public enterprises to gain market share and drive profits.
Support from Foreign Investors
Government is supporting overseas outlay in Pakistan which is a great opportunity for Nestle to expand its business in Pakistan and to cater large markets.
Best Practices and Assistance
Nestle should invest in educating the farmers for best practices and providing them resources and assistance to create greater value and to ensure high capitalization and quality.
Changing Social Trend
Consumers, especially younger generation are hugely influenced by western societies. This has changed the trends for packed ready to use products. This changing social trend has created large demand and opportunity to increase market share.
International market
Growth in international & emerging markets.
Expansion of product folio
Further development of global brand
Emerging market penetration
Social company
Nestlé is active in building awareness of water as a scarce resource. They sponsor 'Water Education for Teachers' (Project WET) an education program for children about the importance of water. Similarly, many other social projects have been started by Nestle. So, nestle can make itself as social company.
Favorable weather conditions
Pakistan is having favorable conditions for company to expand or have more growth. Most of the time summer which is favorable to its most of the products.
THREATS
Lower loyalty
Higher levels of buyer power within the industry is fueled by greater choice and lower loyalty.
The days of customers staying loyal to companies for long periods are numbered. The amount of trust consumers put in brands is decreasing all the time, and a typical consumer will now switch brands without hesitation if they get a better offer. Decrease and freedom of loyal customers has become a key threat for long-term success of Nestle Pakistan.
The globalization of competition
saturation of markets
and development of information technology have enhanced customer awareness and created a situation where long-term success is no longer achieved through optimized product price and qualities.
In Pakistan, the number of reducers and leavers is greater than the loyal customers. Customer loyalty is influenced by factors like trustworthiness, product image, customer relationship and customer satisfaction. In emerging markets like Pakistan, these factors are affecting customer loyalty more due to the continuous influx of new players in potential industries.
Long-term customer relationship by competitors is becoming threat to Nestle. For company, it can cost as much as 6 times more to win a new customer than it does to keep an existing one. Not only the retention of existing ones but winning new customers is also contributing in this. Creating loyal customers has become more troubling due to significant increase in competition and concentrated markets. Competitors like Olper's by Engro Foods are trying to attract and satisfy customers, building long-term relationship thorough loyalty among customers and siding the Nestle Milk Pak and becoming the market leader of the category. Developing a network of loyal and satisfied customers is critical for the survival of many corporations.
Economic condition of Pakistan
Pakistan's economy is another major threat to the company. Pakistan savings and investment levels are woefully low. Since 1990, the GDP growth has declined considerably and has averaged less than 4pc per annum over 2007-17, with per capita income growing less than 2pc per annum. The ratio of gross investment to GDP has averaged 15pc since 2010 and is actually somewhat lower than it was in the previous four decades. The much lower level of investment in Pakistan reflects, in large part, a poor economic condition for business. Pakistan is, and has been, a highly consumption-oriented society.
Despite the occasional bursts of GDP growth in the economy, private investors are not convinced that the underlying fundamentals are strong enough to justify making long term investments.
Pakistan right now is not able to revive its annual growth to a sustained 6pc to 7pc per annum that can cause trouble to the private firms. This imbalance economic situation constrains the government to impose heavy taxes on businesses and income that results in the lower return on investments for the firms like Nestle. It affects the purchasing power of individuals too. Economic slowdown can reduce demand.
There are three areas in need of attention and strong policy action such as
the security situation
its neglect of the export sector
the persistent lags in human development that are collectively warning the business sector of Pakistan.
Increase defense spending and the higher level of outflow of savings abroad is also pushing private sector apart.
Dynamism
Business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over.
Increased dynamism in the external macro environment fueling short-term decision making and heightened competition.
The macro environment in Pakistan is changing drastically, leading to an increase in avenues, competition and complexity. Efficient financial management calls for better financial decisions.
Macro environment is one of the most important factors which can affect the decision in any way and this has made financial management more critical and sensitive for any business.
Nestle would have to make various decisions related to finance; broadly such decisions include capital budgeting, capital structure & working capital decisions.
Firms is facing a major challenge in adapting environmental change to remain successful. When the environment is dynamic or unpredictable, firms are especially challenged to revise their routines.
Nestle has got a challenge to create organizational capabilities allowing to create new products and processes and respond to changing market circumstances. Organizational capability is the ability of a firm to perform a coordinated task, utilizing organizational resources, for the purpose of achieving a particular end result.
New Technology
Everyday there is something invented in the world. Pakistan is not far behind in case of latest technologies. For Nestle, there are many technological threats because if the firm is using new technology one day, a competitor might come with a latest one other day.
Technology is constantly evolving and changing to adapt to better suit our needs. And while this might sound great, as a business owner, keeping up can be problematic.
Technological change driving both innovation and associated challenges.
Keeping track of the latest business tech trends, apps and software programs is a job in itself.
Adopting a technology can be just a beginning of the journey. Identifying and attracting the right talent is becoming a major challenge.
Given the rapid changes in technology, the experienced or trained talent pool in the market is diminishing and will continue to do so.
Technology continues to change at an exponential pace making it nearly impossible for those outside of direct interaction to fully understand and vet real technology and services provider capabilities.
Security hardware adds huge costs and configuring security infrastructure takes skilled IT labor or partner personnel.
Moreover, technology can be really expensive and keeping up with the larger players in your space can become increasingly difficult without comparable resources. Coming up with latest technology can cost a lot to the Nestle as the cost associated with buying and maintaining new tools can be very expensive.
Prices of raw materials
Variability in raw material prices influence the firm's ability to sustain prices considering a commitment to wider responsibilities aside from profit i.e. CSR initiatives.
When price increases forced beyond the long-term strategic plan, it becomes a curse to brands. Managers must choose between one of the following possible scenarios:
Reflect cost increase on end-consumers
Sacrifice quality using cheaper raw material
Reduce pack size
Raw material costs are having a significant impact on the success of a businesses.
Raise in prices is becoming a curse, and the increase may eventually fire back, if not short term, then long term. Either profitability drops, or consumers will switch to substitutes.
Population growth, natural disasters and shifts in the balance of political power are causing a systematic shortage of raw materials and supply 'bottlenecks'. Company will feel powerless to control the effects. Increase in raw material price can have a negative impact on overall company results.
The effect of rising costs has led to increases in its own prices. But with not all being able to do this, the result is that operating margins are shrinking.
Nestle must have to put in strong defenses against increases in raw material prices if they want to
Rupees devaluation
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.
According to a recent Bloomberg report, home to one of the world's top five stock markets last year, Pakistan is headed for currency devaluation.
The possibility of currency devaluation is giving investors another reason to stay away from the world's newest emerging market.
The currency pressure comes as Prime Minister Nawaz Sharif and his family are at the center of an investigation into alleged corruption. The next election and the makeup of the country's borrowing nearly 31 percent of outstanding government debt was in foreign currency in the 2016 financial year, according to Moody's are adding to the stakes.
The persistent double-digit inflation plagued the businesses making the cost of doing business highest in the region.
Economy of the world
The present economic crisis in the world, led to the withdrawal of foreign management from the company and the investment has come to a halt. The uncertainty of economic conditions poses a great threat as the major funds invested in the country come from outside Pakistan. The present economic crisis in the world, led to the withdrawal of foreign management from the company and the investment has come to a halt.
Competitors
Main competitors Shezan, Olfrut, Maza and Haleeb are main threat for Nestle juices especially the Shezan is growing very fast.
Nestle biggest competitors like Engro Foods has been in market since very long. For its brands it might be difficult to penetrate in the market where these brands have created loyalties and presence in mind of consumers.
Existing companies are increasing their product lines that can prove to be a threat in the coming years. Company like Cadbury is giving more discounts to retailers as compared to distributors due to which retailers prefer its products for sale.
As compared to the local competitors, Nestle's distribution cost is very high. As Nestlé confectionary Products has to maintain and obey the Nestlé standards. Some companies are competing on the basis of cost.
Inflation
Inflation is getting higher and higher, so the purchasing power of the people is decreasing day by day. People will try to get rid of cash before it is devalued, by hoarding food and other commodities creating shortages of the hoarded objects. When there is a high inflation, saving money would mean watching your cash decrease in value day after day, so people tend to spend the cash on something else.
Company will have to invest for long-term capital gains, because short term investments tend to give deceptive results or sense of making profits while in reality they're not making profits.
Perceptions and Price Differentials
Consumer preferences and perceptions plays very important role in success of a brand. It is very important for Nestle to understand and come up with ways to meet consumer expectations and provide quality that a brand promises. Price factor is also a very important factor, as still consumers prefer loose milk as it is cheaper than processed milk. Moreover, taste of consumer is difficult to change when developed once.
Differentiated products
Consumers are indifferent to buying Engro products or Nestle. It is a threat to Nestle that consumers can easily shift to Engro products in case of any unfavorable condition.
Population growth
Ageing population shifting the demographics of the workforce.
The SWOT analysis above reveals that Nestlé have a number of strengths, which translate into the development of core resources and capabilities, which aids their competitive position. Notably, one of the core strengths of Nestlé is the strong brand image they have which inspires trust in consumers.
Nestlé can build on this reputation to extend their brand categories. Further, recent efforts to follow corporate social responsibility strategies have heightened the firms approach to sustainability, which is aligned to current expectations from the consumer market for firms to take a greater responsibility towards the wider macro environment.
Moving on to a critical analysis of the weaknesses of the company, one of the core weaknesses of Nestlé is the content of some of their products, which marks a move away from healthy eating initiatives. For example, Nestlé produce a number of confectionary goods including sweets and chocolate bars. Nestlé will in the future have to work with the government to ensure that a clear marketing message is put across for such treats to only be enjoyed alongside a balanced diet.
Overall, however, Nestlé's strengths overshadow their weaknesses and many of the weaknesses are being tackled by strategic actions. Recognition of the firm's opportunities and threats leads to a discussion of the value of internationalization and in particular the opportunities present within emerging economies. Further, the development of capabilities and thus the translation of strengths into intangible and inimitable capabilities is an area, which could see the firm, further develop their sustainable competitive advantage.
Developing from the opportunities of the firm, it is also necessary to consider the threats, which face Nestlé. The SWOT analysis revealed one of the core threats is the increasingly competitive nature of the industry and the challenges, which arise from this level of competition. As a result, a great threat facing the firm is the level of dynamism and turbulence to contend with which influences the nature and direction of strategic choices.
PESTLE ANALYSIS
A PESTLE analysis is used as a strategic tool to measure industry dynamics through recognition of the core political, economic, social, technological, legal and environmental forces/changes having influence on the industry. The PESTLE analysis below identifies a number of forces, which have an influence on industry dynamics. Of these forces, perhaps the most prominent are social forces, which relate to differences in consumer behavior. Nestlé have to be able to ensure a level of adaptation, which is appropriate to different markets driven by different cultures and consumer preferences.
The main theme of PEST analysis is to measure market potential and situation, by indicating growth or decline. PEST analysis can be used for marketing and business development assessment and decision-making, and the PEST analysis encourages proactive thinking, rather than relying on habitual or instinctive reactions.
POLITICAL
This refers to the involvement and intervention of the government within the economy. Nestle has to operate within the framework of laws set by Parliament, and that's why it depends on political considerations. Government plays vital role by imposing the law and regulation on the companies. Government set standard laws for companies that has to meet otherwise they have to pay fines. The rules of government of Pakistan do affect the company and its brand. The company policies are affected, and its budget is also affected. Nestle is trying to meet all the standard laws which are set by the government
Following are some of the political factors which affect the company.
Changing regulation surrounding food standards and marketing actions.
Health and Safety Act, Disability Act
low trade restrictions and low barriers of market entry
Government laws and regulation in accounting standards
Positive tax policy
Taxation requirements, including tax rate changes, new tax laws and revised tax law interpretations are highly influenced on Nestle business. 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.
If the governmental tax increases this will cause the Nestle selling price to increase too. This will lead to a decrease in sales and the number of customers while the stock quantity will stay the same.
Nestle also paid 15% sales tax and 18% excise duty when they direct import chiller from the other country but mostly they purchase chillers inside the country.
Labor Laws
Labor is being privileged here having all the laws. Nestle company also follow these law like government announce minimum salaries of an employee Rs.6000. But if any labor laws change it will affect the Nestlé's management all to gather because it's difficult to get potential labor now a day. 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 an 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 affects when the condition gets so worst. But as the last two years whole the world is suffering from great depression so any economy of the world.
Political instability
Government stability in new emerging economies; question of risk as part of the internationalization process. 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. Changing policies of Government effects overall industry.
ECONOMIC
Nestle needs to have enough information about the country inflation rate, economic growth rate, and national per person capital income, in which they are willing to start their business. Economic condition varies from country to country. Following are the factors that Nestle has to consider before setting corporate objectives:
Inflation Rate
Awareness and knowledge of changing inflation, economic growth rates and income levels. Now in Pakistan inflation rate is almost 22.3%, which decreases the purchasing power of consumers. So, if any increase in inflation rate then increase in prices of Nestle products which eventually affects the Nestle Pakistan. So, inflation rate affects 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.
But high inflation also creates higher impact on those products which transform from another product like packed milk & powder milk because these is already sell on high prices in market because of high quality so this whole scenario directly create impact on those organization whole deals or manufacture these products like Nestle, it has two options in this situation either to sustain prices or to decrease prices.
Increases the prices of light and petrol effect transportation and other costs also affect business.
Economic structure of the country
Economic structure of the country directly effects business. Government regulation related to taxes become more contracting day by day and government is not given any compensation in current budget policy. Government expenditures also include is this category. It also influences consumer budgets and lead to rise of the cost-conscious consumer.
Rising price of raw material goods in relation to the need to source from sustainable suppliers.
By having their own local productions, Nestlé would no longer need to import any raw materials from other countries. This is will help in cutting their overall costs and will help them save more money. This will also benefit the consumers as now the customers would be able to get fresh local products at a lower cost. Overall this would help in increasing customers, sales and would help Nestlé gain a profit.
Interest rates
Interest rates and Income distribution can majorly affect the bottom line of a company like Nestle. For an instance, if the income of the customer increases then the demand of the product of may also increase.
Economic growth rate
Economy growth rate accelerate is 7% and plus which eventually affect the Nestle productivity & sales.
SOCIAL
Social or cultural environment had great impact on Nestle. Social change involves changing attitudes and lifestyles. The social and cultural environment is constantly changing. Different regions of country had different culture (language, beliefs, food, family, clothing and their lifestyle). These are cultural demographic variables and aspects which are closely linked to the market and customers need. Nestle has to develop effective strategies in order to meet different lifestyle consumer behavior. Nestle has to take some following social and cultural factors under consideration in order to achieve their strategic objectives:
Changing consumer attitudes
Changing lifestyle – Product or services cannot be successful until company has enough information about the consumer lifestyle. The need to adapt to different cultural settings i.e. language, religious beliefs and family settings. Understanding of consumer behavior is crucial to ensuring a personal approach to marketing.
Health Consciousness
Today, people move towards healthier products in line with government initiatives supporting balanced diets and the dangers of sugar. Nestle by identifying this need of the people t 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.
Generalized products
Nestle would make a marketing strategy according age distribution or gender role before producing a new product. Nestlé tries to make their products generalized so that it suites everyone e.g. people from any area, any culture, any age, and income will drink water. It is not any luxury item which is used by a specific people. Nestle creates products that can suit almost all ages. For example, Nestlé segment their products into different of age groups i.e., for infants, they have Nestlé baby foods while young people can drink Milo, Nescafe, chocolate and cookies. Nestle have the Maggi brand with many kinds of Spicy sauces. The product can vary in tastes, depending on the demand and requirements of the consumers.
Breaking down of old traditions
The least important one perhaps is tradition as still urbanized consumers have the perception that the arrival of the doodhwala at their home on his trusty bicycle has the fresh and natural milk which is coming straight away from the cow and still it is this perception that only loose milk is fresh.
Over the years, all companies of this sector especially the older players like Nestle in order to convert loose milk consumer in to processed milk consumer have been making dynamic efforts by various development program in interior Sindh. Regardless these campaigns will not change perception of loose milk consumer overnight, but it is not impossible, it takes time and continuous investment to create awareness of the processed milk to the consumer of loose milk. Every product's whole period consists of a starting phase, expansion phase and maturity phase.
TECHNOLOGICAL
Technological change has the most rapid, persistent and profound effect. It creates opportunities for new products and product improvements and of course new marketing techniques- the Internet, e-commerce. Nestle uses technology by taking orders via telephone and online by internet. Moreover, nestle uses technology in various business activities such as record of their customers and employees. Rise of social media, consumers interacting with firms and being able to do so across a range of platforms. Following factors affect the company:
New Products
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. E-commerce is a platform for development for Nestle. But the risks and costs attached with such developments are high.
Product innovation
Innovation is fueled by technological developments. 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
There is increase in 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 million. 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 indifferent 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.
By Nestle shifting to a more advance technology they would be able to reach a wider community of people. The customers would be able to get any information they want from the Nestle website. Nestle employees could also use these services to find out what are the current trends in the market and implement those changes to better Nestlé's sales. They would be able to adjust the products being produced to better suit the local taste and cultural flavors in each region of country. New products could be created according to the customer's needs and popularity within the country. Technological factors can affect Nestle massively and can help in gaining a better understanding of their customers in different regions.
LEGAL
The legal factors are related to the legal environment of the organization and the impact on the demand and cost. For an instance, nestle created and provided a health and safety covers for their employees. Nestle would pay the fee for their employees via their free legal help scheme with personal medical/ legal cover. Some of these legal factors affect the company:
Changing nature of regulation.
Need to adhere to global regulations and changes across different international markets
technological and industry concentration
increasing automation
government regulations
technological capacity
development risks
increase in development costs
By being briefed with the country's' laws and regulations, Nestlé would be able to create a good relationship with the country's government for the future of their corporation. Nestle could use these relations to be able to test out and market new products, gaining an overall competitive edge against rivals and creating a bond between Nestle and a country.
ENVIRONMENTAL
There are many environmental factors that Nestlé needs to abide by since it is working in the food industry. Nestle takes care for the raw materials sustainability, infrastructure, climate change. The company has already pledged its support to:
Environmental concerns
Nestle consider a lot about the environmental factors because they are very much socially responsible towards nature & humans. For example, nestle respects the environment and is committed to environmentally sound business practices throughout the world, thus taking into account the need to preserve natural resources and save energy. Increased attention directed towards corporate social responsibility
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 change. Moreover, the different agricultural and livestock methods that preserve soil and protect water supply, they use the least amount of energy and only safe chemicals.
Recycling
Environmental concerns from consumers including concerns over packaging/recycling. The research and development team has also been seeking a new kind of packaging which is environmentally friendly hence transforming those harmful materials into eco – friendly recyclable materials that would be suitable for both the customers and the environment.
GENERAL STRATEGIES ADOPTED BY NESTLE
Marketing Environment
Internal Environment
Nestle has a rich working culture which motivates its employees to serve best to its customers with the help of the variety present in their product range.
Nestle has included the benefits of the employees in the goal statement of the organization as the management of the company strongly believe that the productivity, quality and the dependability will reflect on the product only if the employees will take care of all these factors.
Different departments of the company work to contribute in the growth of the organization and these departments not only keep the customer's needs and demand in mind but also keep the same type of attention for the internal customers of Nestle.
The company believes if the internal market of the company is fully satisfied than only the internal market will be able to serve to its customers and able to understand their needs and able to manufacture the products which can fulfill these needs.
Nestle has a strong top management team which runs on strong values and principles of the company. The values of the company give strong focus to integrity, loyalty and team work. The efficient top management of the company is able to run finance, operation, marketing, logistics, sales, and research and development departments with great success which ultimately leads to the fulfillment of the goal of the organization.
Micro-Environment
The micro environment of Nestle includes three divisions:
Suppliers
Suppliers provide the raw material resources, unfinished goods and labors to the company in order to produce goods and services.
The effectiveness of suppliers determines the efficiency of the company in terms of producing the goods.
In addition to that the quality of the finished product has a strong with the suppliers of the firm especially in case of food products. As the presence of the company is in more than hundred companies, it is a challenge for the company to maintain its standard all over the world and provide the consistency to its customers in the taste and quality of the product. Further we can divide the supplier of Nestle into two parts:
Labor suppliers deal with the quantity of labor is required at the optimum level in order to prevent the loss of labor force and prevent the company from the shortage of labor which again can lead building of inventory as a cost for the company. The skills of labor are again maintained by the labor suppliers, wherein the labors of different skills are managed in such a way that the operation of the firm can run smoothly. Labor strikes and labor relations are other factors which we cannot ignore in the current scenario as the efficiency of the business depends largely on the factors like attrition and employee satisfaction.
Material suppliers handle all the material required by the firm to manufacture the finished product for sale. Nestle is in the food and quality markets and the quality of such item plays a major role in its success in the market. Nestle has maintained a high-quality efficiency in handling the quality and quantity of the two different supplies i.e. labor supplies and material supplies and hence the company has been able to run its business smoothly for more than 100 years in spite of the different business trends in the world market.
Marketing Intermediaries
The physical distribution network of the company decides the medium by which the finished product is delivered to the end customer on time and with safety. This department also ensures the proper storage of the firm that prevents the product from getting any king of damage.
The market intermediaries of the company help to advertise, sell and distribute its product to the end customers.
The marketing service department of the firm helps in the promotion of the product and acts as a communication channel between the company and customers. It not only communicates the features of the product to its customers but also get the feedback with the help of survey, which helps the research and development department to develop a product according to the need of the customers.
Banks
The other intermediaries of the company like banks help to provide the funds to the companies and play an important role in the continuity of the business.
Insurance companies
They insure the property and the goods of the company against the risk involved in various operations, buying and selling of the product.
Nestle has the differential advantage of working in a smooth coordination with all its marketing intermediaries which helps in providing the best and pure food products to its valuable customers in the different parts of the world.
Customers
The immediate customers of Nestle are retail and grocery stores which provide the products of the company to the end customers at a reasonable price and a reasonable profit. The end customers of Nestle are the consumers who consume its wide range of product. The company has a bright brand image in its big pool of end customers.
Competitors
Although Nestle is leader in packaged food industry of Pakistan but the other competitors who are giving tough competition to Nestle are:
Unilever
Haleeb foods
Engro Foods
Nestle has a clear advantage over the above-mentioned companies is its presence in Pakistan. Nestle has been able to setup a good and trusted distribution channel and a huge retail network.
The trust worthiness gained by Nestle among the Pakistani people is built in decades on hard work and quality products and varied range of prices, thus even after facing stiff competition with the above-mentioned companies in chocolates, dairy products and other packaged food products the company is able to maintain the bottom lines of its profit and loss statements attractive for its investors and good image in public.
Marketing
The basic marketing strategy of the Nestle was to develop brands for each their product instead of focusing on making brand value for the entire company, thus never allowing cannibalization of products and gaining multiple brand value for the entire company.
The vision of the company could be summarized in following statements:
Be the leading multinational company in food, nutrition and wellness.
Produce and sell world-class products of the highest consistent quality, reliability and convenience based on business excellence principles throughout our operations.
Maximize the use of good quality local raw materials
Be an exemplary employer with a progressive human resource and social policy; with a management style that is based on "Management Commitment and People Involvement"
Be a responsible corporate citizen, fulfilling all obligations to Government, shareholders, customers, communities and consumers.
Protect the environment by being committed to environmentally sound business practices and taking into account the need to preserve natural resources and save energy.
Guarantee that all products manufactured, imported and distributed by Nestlé Pakistan are certified HALAL by authorized Islamic certification bodies.
Deliver shareholder value through the achievement of sustainable and profitable long-term growth.
Adhering to the above vision statements the company has been able to maintain the marketing and branding unique and ahead of the competitors.
Macro Environment
Macro environment include following environment of the country:
Political Environment
Government of Pakistan has never imposed any political pressure in fact they have always supported foreign investment and foreign businesses to grow in Pakistan.
As the company is into food and nutrition business they have to just adhere to the laws of food and nutrition policies of government and constantly provide good quality which is the vision and mission of the company thus Nestle never faces any problems on political front.
Cultural Environment
Pakistani culture is no doubt of having light food at constant intervals and young crowd of Pakistan likes to have good nutritional and taste food thus Nestle has great scope there.
Economic Environment
The disposable income of country and the high living standard of Pakistan always give better bigger business opportunities for Nestle.
Technological Environment
Pakistan is not a technologically rich country both in terms of availability of technology and also the technological work forces the highly skilled and educated manpower is less in Pakistan
In case of Nestle and the product offered by the company these factors do not create much impact in general scenario. However, as we have seen the major events like World War had created a positive impact on the sale of confectionary products of the company.
The culture has some impact in this company as whether the country has most people as vegetarian or non-vegetarian the consumption of milk products is always there.
However, the countries where the people are more dependent on milk products are profitable market for Nestle.
MARKET SEGMENTATION & POSITIONING STRATEGY
Market segmentation:
The marketing concept calls for understanding customers and satisfying their needs better than the competitors do. But different customers have different needs and it rarely is possible to satisfy all customers by treating them alike. Market segmentation is the identification of portions of the market that are different from one another. Segmentation allows the firm to better satisfy the needs of its potential customers.
1. Clearer understanding of the needs and wants of selected customer groups.
2. More effective positioning.
3. Greater precision in selecting promotional vehicles and techniques.
Bases for segmentation:
Consumer markets can be segmented on the basis of following customer characteristics.
Geographic:
Weather: Nestlé Bangladesh Limited segmented its market for Nescafe Ice based on the geographic weather: hot and cold.
Nescafe Ice: A coffee which can be consume with ice. During hot season consumers consume this coffee with normal or cold water with ice cube to bring freshness in their mind.
Demographic:
Age: Nestlé segmented market for its major products based on the age. For the products Cerelac, Lactogen, Koko Krunch, Nido, nestle divided the market segment for baby and children of different ages.
Nido: It is nutritious milk specially formulated for children 2 years onwards. It contains 25 minerals and vitamin D which helps child's growth.
Cerelac: Nestle also offers Cerelac for new born baby. It contains milk and rice mixed for under one year's baby. It fulfills baby's proper nutrition.
Nesquick Koko Krunch: Both are chocolate milk for children. Nesquick and Koko krunch maintain child's proper growth. It's very delicious and also contains vitamin protein, mineral.
Lactogen: Nestle Pakistan brings full cream milk powder in our country. It gives baby proper nutrition. Lactogen 1 is for babies whose age less than 7 months and lactogen 3 is for babies whose age is below 12 months.
Income: Nestle segmented their market based on customer's income in an effective way.
Lectogen: Nestle charge tk 800 for per 900 gm Lectogen 12 milk powder. They also charge tk 1000 for 900 gm Lectogen 3 milk powder pack. Middle income and low income people are not able to buy these products for their babies.
Occupation: Nestle segmented the market based on their customer's occupation.
Nescafe classic: This product is for those who work hard and needs more freshness. Both the male and female who need more caffeine Nescafe classic is for them.
Psychographic:
Life style and personality: Nestle Pakistan provides KIT KAT these people who really want to enjoy chocolate. Nescafe 3 in 1 is for exclusively those customers who are really busy and do not have enough time. They can save their time by taking Nescafe 3 in 1. All the things sugar, milk and coffee remain mixed.
Behavioral:
Benefits: Based on benefits Nestle Pakistan segmented their market in an effective way. So, they provide Cerelac for those customers who want more benefits from the products. Cerelac contain a high nutrition for baby's whose age below 1 year. Two most important elements rice and milk remain mixed in Cerelac. On the other hand, Cerelac contains vitamin, mineral and all nutritious elements for babies.
Target marketing
Market segmentation reveals the firm's market opportunities. Then the firm sort market targeting by evaluating the various market segments and deciding which and how many segments it will target.
Nestle Pakistan Ltd evaluated the various market segments on the basis of segment size and growth, segments, structural attractiveness, and company objectives and resources and decided to launch their operation all over the country. Nestle separate their target market because of having unique need and wants.
Nestle Pakistan Ltd selected their target market into two market coverage strategies:
Undifferentiated:
Nestlé has offered several products such as Nescafe 3 in 1, Maggi noodles, and Kit Kat to the people of the whole Pakistan without differentiating the market segment.
Differentiated:
Nestle also selects the differentiated marketing. It offers different product for different segments based on different age, occupation, season and climate.
Nescafe 3 in 1: Coffee for people who are busy.
Koko Krunch, Nesquick: Chocolate milk who want to get taste of chocolate.
Nescafe Ice: Cold coffee for the people in hot weather.
Concentrated: Through concentrated marketing, Nestlé achieves a strong market position because of its greater knowledge of consumer needs. In the niches it serves and special reputation it acquires. Nestlé specializes in producing baby foods. It offers nutritious milk powder Lectogen 1 for babies whose age is less than 7 months and lectogen 3 for babies whose is under 12 month. It also offers baby nutrition cerelac for baby less than 1 year.
POSITIONING STRATEGY
By creating product, service, channel, people and image differentiation Nestle reach the consumer touch point more effectively & efficiently in comparing with their competitors in the highly competitive food processing sector.
Product Differentiation:
Nestle brings a lot of product for target customers. They provide 25 types of minerals in Nido for children. It also provides Cerelac and Lactogen1 &3 for newly born baby exclusively. Now the doctors prescribe these products for babies to their parents for high nutrition Nescafe is a product which contains 4 types of categories. They offer Nescafe ice for hot weather, classic for all 3 in 1 for those who are busy. They provide Maggi including Maggi instant; Maggi 2 minutes which contain various minerals, vitamins and nutrition. Maggi also provide magi healthy soup and Maggi corn soup but charge the same price.
Channel Differentiation:
Nestle reach their products to the customers through their expert market salesman and transportation. So that their products are much available to their respective customers.
Image differentiation:
Nestlé's logo is totally different from its competitors that are greatly accepted by its customers. For that reason, customer easily identify them in the market which is another effective advantage for Nestle.
People differentiation:
For example, nestle has a large number of employees that are highly educated and trained. In Bangladesh, 400 employees are working in market Company chairman; Peter Brakeck- Letmathe and CEO Paul Bulcke are highly educated, wise and experienced people. They are running this business successfully for a long time.
Service differentiation:
Another advantage for this company is better service for its respective customers from its competitors. They provide 24 hours hot line service. High quality checking is maintaining for its customers. Its marketing dept. and PR (public relation) dept. are working for finding out customer's new demands and response toward their products.
SELECTING AN OVERALL POSITIONING STRATEGY:
The full positioning of a brand is called the brands value proposition-The full mix of benefits upon which the brand is differentiated and positioned.
The value proposition table shows the product position of Nestle in the following:
PriceMore Same LessPriceMore Same Less
Price
More Same Less
Price
More Same Less
More for More
More for same
More for less
Same for less
Less for much less
Benefit Less Same More Benefit Less Same More
Benefit
Less Same More
Benefit
Less Same More
More for more:
More for more positioning involves providing the most upscale product or service and charging a higher price to cover the higher cost. Exactly Nestle is doing that. Nestlé's products provide more benefit and for that Nestle charge higher price than other competitors. Nido ensure nutrition and charge 250 to for 400 gm. But Fresh, Marks do not ensure nutrition and charge less than that of Nido. Respectively Nescafe, Maggi noodles ensure quality for high price, rather than competitors.
Positioning Statement:
Baby Products: To babies who are deprived of proper nutrition, Nido, Cerelac, Lactogen are the nutritious milk Product that give you more nutrition than any other brand because these contain different types of vitamin, mineral etc.
Nescafe: To busy people who drink coffee and have little time for taking rest, Nescafe is the coffee that gives you more energy than any other brand because it has the highest level of caffeine.
Maggi: To people, noodles and soup consumer who seek better quality, Maggi noodles and healthy soup that gives you proper nutrition than any other brand because it has the best quality.
MARKETING MIX OF NESTLE
The Marketing mix of Nestle discusses the 4P's of one of the strong FMCG companies of the world. The Nestle marketing mix shows Nestle has a strong product line which boosts its marketing mix. Below are the products, price, placement and promotions of Nestle.
ProductProductPricePricePromotionPromotionPlacePlaceMarketing MixMarketing Mix
Product
Product
Price
Price
Promotion
Promotion
Place
Place
Marketing Mix
Marketing Mix
Products
There are 4 different strategic business units within Nestle which are used to manage various food products.
Beverages: One of the most known coffee brands Nescafe, belongs to the house of Nestle and is one of the cash cows for Nestle. However, it is not the biggest cash cow. Nestle has a worldwide distribution and has many different variants. Looking at India, nestle has also launched Nestea.
Milk and Milk products: Nestle everyday, nestle slim and Nestle Milk maid are some of the milk and milk-based products from the house of Nestle.
Prepared dishes and cooking aides: Nestle has a third category of products which comes into prepared dishes and cooking aides. The major cash cow of Nestle lies in this segment, which is Maggi Noodles. Probably one of the most widely sold ready to cook noodle brands is Maggi. Maggi has a fantastic taste and quality. Thus, it was not a surprise, that Nestle expanded the Maggi brand to create an umbrella of different products like Maggi pasta, Maggi sauce, Maggi cubes etc. The Maggi range contributes vastly to the bottom line of Nestle.
Chocolates: Nestle has some popular chocolate products, most popular being Nestle KitKat, Munch, Milky bar, Eclairs and Polo. The newly introduced Alpino is targeting the gifting segment in response to various chocolates like Dairy milk and Bourneville by Cadbury. The chocolates segment of Nestle is a star, where the competition is high, and the expense is high but at the same time the market size is huge as well.
As we can see, two major brands of Nestle are a very high contributor to its Brand equity – Nescafe and Maggi. These are two brands sold across India in small as well as big shops and super markets. There have been many competitors for these products, like Bru for Nescafe and Top ramen and Sunfeast Yippie against Maggi.
The appreciable factor in Nestle is that quality maintenance of products is up to mark and there are hardly any complaints about Nestles products in the market. This is a major achievement for a company which relies majorly on food products.
Price
The price is dependent on the market of each individual products.
Nescafe and Maggi being the clear leaders are priced with higher margins for the company as compared to competition. This is because the product quality is good enough and a bit of skimming price will not cause the customer to switch brands.
The strength of pricing for Nestle comes from its packaging or consumption-based pricing. For Nescafe as well as Maggi, nestle offers a lot of sizes and package options. In supermarkets, you can even find a 16 packet Maggi whereas in small retail shops, you can find Rs.15 Maggi. Thus, with the variety available, customer can make his own choice based on his consumption.
In other products like KitKat and Munch, due to tough competition from other companies, nestle offers competitive pricing. You will find that nestle will be similar priced to many of Cadbury's Products in the chocolate segment.
Placement
Nestle follows the FMCG strategy of distribution which involves breaking the bulk. The typical distribution strategy of Nestle is as follows:
Manufacturing >> C&F agent >> Distributors >> Retailers >> Consumer
Manufacturing >> Bulk buyers >> Consumer
These are the two different forms of distribution which Nestle has. It is typical of any FMCG company. However, the Nestle channel is known to be strong with a good marketing and sales network for channel distribution.
On top of it, nestle regularly introduces trade discounts and various tactics to keep the channel motivated.
The major challenge is in the distribution of Maggi which is the most in-demand product along with Nescafe. Due to these two products, nestle is able to drive other products in the market as well. Thus, on purchase of one weak product, the distributor might get a discount on the stronger product or vice versa.
The challenge for Nestle is in the chocolate segment where it faces stiff competition from Cadbury and hence selling the chocolates becomes difficult. KitKat might have its own brand positioning, but it is not better than Dairy milk.
Thus, converting retailers to sell Nestle instead of Cadbury is the toughest task for Nestle. This is converted mainly through promotions.
Promotions
One of the most widely known tunes is the Nescafe tune. It was one of the best advertising campaigns and was launched at least 2 decades back. However, that campaign brought Nescafe strongly in the market.
On the other hand, Nestle s brand was pushed by the excellent product quality of Maggi and the witty and innovative campaigns of Maggi. Where Nescafe focuses on value and the good things in life, Maggi focuses on moments you had with your Maggi. The recent campaign was completely focused on your Maggi story, where people had to come out with various innovative ways that they had their Maggi.
Promotions for other products too are done smartly. KitKat focuses on "Take a break" and has done some good marketing for the same. KitKat website too is very innovative and shows nothing but asks the visitor to take a break and have a KitKat.
The major push expected of a FMCG company is in sales promotions at the ground level. This is where Nestle really rocks. Nestle focuses on its strength which is Maggi, Nescafe and KitKat which are the most promoted brands in the market on ground level.
Besides this, nestle regularly uses TVC's and ATL marketing. It is also present online through some smart creative. Overall, nestle is a brand which has strong products as well as strong marketing, and hence the brand has a very high brand recall value.
ADVERTISING STRATEGY
Advertising:
It is non-personal communication paid for by a clearly identified sponsor promoting ideas, organizations, or products. The most familiar outlets for ads used for the advertisement of the NPL by Nestlé are the broadcast (TV and Radio) and print media (newspapers and magazines). The Nestlé also uses other advertising vehicles like billboards, T-shirts and, more recently the Internet. Nestlé has its own website which is giving the information about the different brand of the company.
Nestlé is doing the selective demand advertising that is intended to stimulate demand for individual brands. In the advertisement the message is given that,
There is one water, which gives you, hope, happiness and trust and that water is Nestlé Pure Life. It is pure, safe, and healthy water.
And in recent advertising campaign, their slogan is,
JIYO! Kay yehi hay zindagi
On billboards the pictures of NPL advertisement seems so attractive, especially in summer season across the roads that it motivates the customer to purchase it immediately.
Nestlé has the internal advertising department as well as hire the services of the external. Media manager assisted by its assistant to devise all campaigns.
Sales Promotion:
It is demand-stimulating activity designed to supplement advertising.
It is paid for by the sponsor and frequently involved a temporary incentive to encourage a sale or purchase.
Many sales promotions are directed at consumer.
Nestlé has designed it in a way to encourage the company's sales force or other members of the distribution channel to sell products more aggressively.
Nestlé Pakistan limited arranges concerts, trade shows, event sponsorship, in-store displays, and discounts.
In Nestlé, a separate sales department is working. The function of this department is to take the sales orders, visiting the market, collecting the customer's complaints and transferring to the concerned department.
They also make sure the availability of the NPL to the consumer at right time and at right place.
Public Relations:
It encompasses a wide variety of communication efforts to contribute to generally favorable attitudes and opinions toward an organization and its products. Unlike most advertising and personal selling, it does not include specific sales message. The targets may be customers, stockholders, a government agency, or a special-interest group. Public relations can take many forms, including newsletters, annual reports, lobbying, and support of charitable and civic events.
Nestlé is following all above mentioned public relations forms:
The company assists through donations such hospitals and organizations that provide services to the poor and responds to distress calls by the government and NGOs for assistance to victims of flood, earthquake, drought and other natural calamities.
The company arrange mil program for undernourished and sick children and mothers through several NGOs and charitable organizations.
The company has initiated a tube well and hand pump installation scheme in selected rural areas.
It donates computers to schools for disadvantaged children run by NGOs and charitable organizations.
To support the spread of education in rural areas, it undertakes Refurbishment Program of Govt. operated primary and middle schools.
The Company regularly sponsors sports and cultural events, such as the International Polo Tournament and SAF Games in the recent past.
The company gives the extra gifts, calendars and diaries to the employees and customers for public relations.
Publicity:
Publicity is also a promotional method used by the Nestlé. Publicity is specific form of public relations that involves news stories about organization or its products. Like advertising, it consists of an impersonal message that reaches a mass audience through the media. But several features distinguish publicity from advertising.
The company does not pay for it and it has little or no control over this and it appears as news and therefore has grater credibility than advertising.
The company seeks for good publicity and frequently provides the material for it in the form of news releases, press conferences, and photographs.
When a picture of a company's CEO appears on the cover of business publication and it accompanied by a flattering article in the magazine, it is often attributable to the efforts of the firm's public relations department.
STRATEGIES REQUIRED AND EXPECTED IN FUTURE
Competitive profile matrix
External factor evaluation matrix
Internal factor evaluation matrix
SWOT matrix
Space matrix
BCG matrix
STRATEGIES AFTER ANALYSIS OF ALL THESE MATRIXES
Increase sales by allowing retailers to pay a large portion of purchases on credit
Capitalize on logistics and distribution channels to help counter the intense competition from Engro Foods and Haleeb foods
Related diversification to increase product variety and hedge against heavy fluctuations in due to climate and seasonal changes
Build a strong advertisement campaign to communicate the values of nestle products to target consumer, to strength advantage over competitors.
Increase promotional activities, specially e-promotion, to further strengthen brand image and market position
Implementing strategies
Allow retailer to acquire 20% of stock on credit and negotiation similar credit terms from own suppliers to prevent liquidity issues
Develop logistic network in rural areas by building secondary collection centres in strategic towns, focusing on one province at a time
Retain 30% of net income and invest in R&D to develop heat resistant FMCG products,
Focus advertising to communicate the nutritional aspects of Nestles products, increase advertising frequency in summer holidays to boost demand for dairy products and beverages
Develop joint venture with, or outsource e-marketing to local leading e-marketing firm that would assist in developing, implementing, monitoring, and evaluating e-marketing initiatives
Rumelt's Criteria for evaluation of Strategies
Consistency:
Strategies must be consistent with goals and policies
Consonance:
Strategies should be responsive to existing and expected changes in the external environment trend and should match the firm's internal strength and weaknesses to the external opportunities and threats
Feasibility:
Strategies should be practical and achievable with the given physical, human and financial resources of the company
Advantage:
Strategies should lead to the development and sustenance of the competitive advantage for company by helping achieve superiority in resources, skills and position
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