Bsc. 5749d

INTRODUCTION

Balanced scorecard was designed by Kaplan and Norton as a framework to measure the performance of an organization by using a more balanced set of performance measures. The balanced scorecard is a strategic planning and management systems that organization use to communicate what they are trying to achieve, align the day-to-day work that everyone is doing with strategy, prioritize projects, products, and services and also measure and monitor progress toward strategic targets. The balanced scorecard is divided into four perspectives which include financial, customers, internal business process and learning and growth perspectives. Each perspective must have two to three measurements and must link the strategy within overall performance measures. Below is the balanced scorecard our group created for Nestle:

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Nestle’s Balance Scorecard

Perspective Financial



Objectives/Goals Limiting expenses.

Measures  Cost per unit



Increasing revenues.

 All expenses included

(packaging) 

per unit.

Expand revenue opportunities.

Customer



Providing nutritious products that deliver real health benefits to consumers.



Making the products more

 Percentage of revenue new products.  Key Performance Indicators  Percentage of customer satisfaction.

affordable and accessible. 

Reducing complaint about the product.

Internal process



Increase productivity to



improve efficiency. 

Improve the quality of

materials quality. 

production processes. 

Expand product diversity



Percentage of capacity utilization.



(Milo) Learning & Growth

Supplier’s raw

Equipment reliability and availability.

Improve or maintain high-



Percentage of

caliber and talented

employees with

employees.

capabilities and skills.



Improve farmer development.



Develop customer data.



Program. 

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Supplier Management Customer database.

The Strategy Map of Nestlé’s Objectives

Increase shareholders value

Increasing revenues

Expand revenue opportunities

Financial

Reduce expenses

Customer

Reducing complaint about the product

Providing nutritious products

Products more affordable & accessible

Internal Process

Increase productivity to improve efficiency

Improve the quality of production process

Expand the product diversity

Learning & Growth

Maintain high-caliber & talented employees

Improve farmer development

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Develop customer database

LINKAGES 1 An employee is a key to the nestle to being a success. It is because their commitment to the company to make the company achieve the goal. Maintain highcaliber and talented employees will help the company in show or give the true picture of their performance and important to maintain a good attitude of employees. Nestle is a one of the successful organisation is having highly skilled and motivated employees. Other than that, to face new challenges nowadays, we need the attracting, retaining and engaging the best talent to drive higher productivity to compete in global market. Therefore, it is necessary to seek high caliber employees, develop, and nurture the right talent to address the organization’s global needs. In addition, talented and caliber employee is a precious asset for the company. Employees also can we clarified as investments that will give benefit in the long term reward to the organization to link with the greater productivity and improve the efficiency in term their works whether to manage and developed that will effect to sale, especially for milo product. The employees that have experience and qualification we should give priority to them such as reward in term of benefit and retirement based on their best performance. According to the Nestle Total Rewards programmes, which is the manager should propose the remuneration of their employees within the framework of company policy. Other than that, employee which has qualification and experience that means talented employees will help the management of the company to increase productivity that will improve the efficiency of the workers in of handle the machine, expertise to repair the machine that will cut the cost of the production. Therefore, it will effect the whole operation of the company. Furthermore, with the ideal employee which is talented and high-caliber will increase the productivity in of sales, because of good attitude that employees have shown to attract more client and investor to invest in the nestle company. It shows that nestle was provide training and care for their employees to increase the sales.

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When a worker wants to improve their efficiency when handling a problem, customer, machine their will reducing a complaint about the product. The customer is an important consumer that all the product nestle dependent on. The complaint regarding the fake product of milo, it shows the role of the employee and management of the nestle company to handle it. They have image of milo on its official Facebook page which is Nestlé’s Facebook page to help their customer differentiate between the original and fake product. The action indicates that the employees know their responsibilities to avoid the negative complaint regards to product nestle. According to the nestle Philippines was stated that they have received the complaint regarding to the milo product which is ready to drink milo product that had fungi. Efficiency of their employees in laboratory tests by quality assurance show that the fungi were coagulated milk, it happens when air and heat enter to the inside of the box, with the expertise the employees have get reduce and solve the complaint regarding to the product and can gain back the trust of the product to the customers and will link to increasing the revenues. Revenue is an important indicator that shows the benchmark for any company whether success or not then it relates to the attitude of the employees that also provide a contribution to the company. According to the nestle financial report, the revenue for the main product is powdered and liquid beverages in 2016 were RM 19 792 million compare in the year 2015 the revenue get was RM 19 245 million. It shows that the increment of the revenues because of the customer believe and loyal with the powdered and liquid beverage products such as Milo, Nescafe, Coffe Mate, Bliss, Omega Milk powder, Everyday Milk, Nespray and many more that contribute to the revenue.It is also because of the staff well doing their work when reducing the negative complaint about the products. When the company can increase the revenue it will link to the increase shareholders value. It is because of the employee's caliber and talented to change the perception of the customer to the product and can maintain the performance of the 5

company. Other than that, the duty as good employees will improve the business performance in term of product development to enhance more revenues and also to attract more shareholder to invest in the company. Hence, the expertise of their employees will gain benefit to the company and sales itself. Develop a good culture between management and employees will lead to the employee’s engagement to the business planning in the future that can be effected to the revenue company and increase the shareholders’ value.

Linkages 2

Next, Nestle should improve farmer development to produce agricultural raw materials for their product on a high quality food and beverages because it is rely on more than 5 million farmers. Nestle should avoid lack of investment in social and agricultural infrastructure because it affect the quality and quantity of the raw materials that Nestle rely on. The largest quantities that most important raw materials sourcing by farmers are cereals, cocoa, coffee, dairy, fish and seafood, hazelnuts, meat, poultry and eggs, palm oil, pulp and paper, soya, sugar and vanilla. The measures will be on Rural Development Framework (RDF). With this program, Nestle will be supervise the farmers in the rural development and enable to gain what farmers’ need and challenges faced by them. For example if they faced poor infrastructure, Nestle will provide technicians or facilities to help farmers enhance their efficiency. Besides, Nestle also provides suppliers by tree plantation help. The linkages from the improve farmer development, with this improvement Nestle will have huge opportunities or automatically have improvement in the quality of raw materials provided by suppliers or farmers. Quality raw materials due from good farmers’ development of facilities even though Nestle have to incurred costs. The measures will be on how many rejected product because of defects after the farmers supply the raw materials to use for manufacturing process. If the products have defects more than

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percentage of Nestle, then Nestle may be failed to lead the way on improve supplier’s development. Human nowadays really choosy to buy the products and of courses they will choose the nutritious one for their family. One of the Nestle’s products, which are Milo, is the choice of household and consumer believed that Milo can give energy for them. Due to customer trust, Nestle should maintain with the nutrition included in the Milo itself. The linkage from quality of raw material provides nutritious products produced by Nestle. Nestle believed that consumer choice is based on nutritional awareness and the desire by them to improved health and wellness. That is why Nestle want to maintain high quality products to produce healthy food and drinks to consumer. In addition, linkage from the quality of raw materials also can reduce complaint about the product because when there is no defect product that handed to consumer, the complaint will be does not arises. The bad complaint from consumer will give negative effects to the brand’s name. Nestle have to avoid the complaints from early stages, that is why from the learning and growth Nestle should have core objectives to achieved. Lastly, from the financial perspectives all of above customer perspective may increase revenues due from variety of products sold by Nestle because of high quality raw materials and produced nutritious products. It will increase the customer’s satisfaction and trust and the linkages are finally contributes to revenues for the company. Automatically, the increased revenues will increase shareholders value.

Linkages 3 Learning and growth perspectives is about identifies the objectives for the people, information technology, and organizational alignment that will drive improvement in the various process objectives. For Nestle, our group think develop customer database is important in the learning and group perspective. Customer is the most important asset for a company because they purchase the product or service offered by the company. 7

Customer care is a crucial element for the company to success. Therefore, customer database plays an important role in marketing strategies and business sales in all the organization. An organization must have customer database to handle customer relationships and increase sales and also customer satisfaction. It is also easier to examine and identify the most gainful customers and their characteristics through a database. Nestle should develop their own customer database to make sure they have up to date details of their customer, retain existing customers and build loyalty through provide personalized services, generate referrals from satisfied customers and also to follow and track potential customers easily. Customer database refers to the collection of information collected from each person. In the database ,Nestle can include information for the customers such as customer’s name, address, age, telephone number and email address. Besides, the database can include past purchases and future needs of the customer. From the customer database, Nestle can know how many customers purchased their product and also get about their products. Linkages from develop the customers database, Nestle company can improve their product by increase the quality of raw material supply. It is important for Nestle to avoid the quality and safety problem of product that may affect consumer confident to Nestle product especially for Milo. It’s also help management to control and protect the internal process from wastage. Customer relationship through complaint, or any recommendation could assist company make proper decisions due to customer’s necessities. Linkages to improve the quality of the raw material directly can reduce a complaint from customers about the product. Customer’s complaints are part in doing a business. It helps company to discover customers need and taste. So that, it will attract customer attention to the product and will not divert to other competitors' products also help company maintain in the market. Other than that, when the complaint from customers reduces it

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shows that customers satisfied with company product and also will increase a customer loyalty. Based on review from customer demand has increase, indirectly will increasing the revenues and reduces expenses in company financial. The company also can generate more revenue and income from existing customers. Refer to Nestle annual report, its shows that the comparison total sale for milo product between two years which is 3.7% in 2015 has increase to 4.6% in 2016. It shows the positive changes of 0.9% in that year.

Linkages 4

Nestle can obtain the information to be included in the customer database from receipts, forms and other resources representing customer choice or a tendency to buy a product. For instance, Milo held redemption programme through collect Milo’s packaging and redeem it when enough 30 points to get limited jacket or flask. Therefore, Nestle can get the customer information from the redemption form and can use that information to be included in the customer database. Product diversification is the process for a company to expand their business opportunities through additional market potential of existing product. Diversify can be achieved by entering additional markets or pricing strategies. The product can be improved, altered or changed, or new marketing activities are developed. Product diversification also provides opportunities to grow the business by increasing sales to existing customers or entering new markets. As we know, Nestle is responsible for manufacturing brands such as Milo, Nescafe, Maggi, Kit Kat and Nespray. Our group focused on Milo product. When Nestle already develops their own customer database, Nestle can expand their product diversity in the internal process perspectives. It is because Nestle already has their customer data and the data can be use during making their product. For example, Nestle can look at the most preferred Milo purchased by the customer and Nestle should be produced the

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product in a large quantity to fulfill the demand from customer. In Malaysia, Milo comes in various forms which are in powder (common and 3 in 1), liquid (bottles, cans, packs), cereals and ice cream. In addition, Nestle diversity the product based on the age of their customer to make sure that the product is suitable for all customer. There are several types of Milo sold in the market. For example, Mydin sold variety types of Milo such as for Milo Breakfast, there are Milo Breakfast Cereal 500g, and 330g; Milo Activ-Go in 400g, 200g, 1kg and 1.5kg; Milo Energy Cube;Milo Nuggets 90g; for drinking are nutritious Chocolate Milk Drink in 8 x 33g and 30x33g, Milo Active Go Chocolate Malt Drink; for ice-cream, Mydin have Milo Chocolate Malt Ice Cream 750ml and Milo Chocolate Malt flavoured Frozen confection 4x 105 ml. However, only a certain product that sold in the small shop. For instance, Milo Nuggets, not all shop sold that product. It is important for Nestle to develop customer database to make sure that their product expands diversely in every place. In the internal process, Nestle should deliver goods responsively to customers. Therefore, Nestle should maintain a good relationship with their distributor or retailer to make sure that all types of Milo available at every place. In addition, Nestle should make sure that they always improve their innovation process to produce product diversify. Through innovation process, Nestle can develop new products to penetrate new markets and customer segments. When Nestle success in the innovation, it can drive customer acquisition, loyalty and lead to enhanced operating margin. In the year 2016, Nestle makes innovation on Milo product such as for a new Milo to Go ready-to-drink, as well as the Milo Champions pack to help families inspire health and fitness throughout their child’s life. According to Peter R. Vogt, Nestle Malaysia managing director, in the year 2011, Nestle already spent a substantial amount of research and development (R&D) through its 29 R&D centers around the world. He also said that innovation is a continuous effort and he mentions that Nestle has around 50 ongoing innovation projects in different area and categories. It is also on-going process because each category has different plans. 10

Besides, he said with the continuous innovation efforts, the company can be sustaining its brand name in the market and remain profitable in the long term. Nestle need to always improve and maintain their innovation process to make sure that they can expand the product diversity based on the customer database. In the customer perspectives, linkage from expanding the product diversity, Nestle providing nutritious products to the customer. Customer perspective should describe how a company intends to attract, retain and deepen relationships with targeted customers by differentiating itself from competitors. For Nestle, it has their own attractiveness which is by providing nutritious products to the customer. In addition, Nestle aim is to provide their customers with food and beverages that not only taste delicious but are also healthy and nutritious. To achieve that aim, Nestle uses science-based solutions to improve quality of life through food and diet, contributing to health and wellbeing of consumers. Nestle also invest in better consuming understanding, product innovation and renovation to create nutritiously, superior tasting food products. The nutritional status and health of consumers vary widely because of several factors including geography, socioeconomic status and age. As we know, there are various types of Milo sold and each of the types have the different function of nutritious products. It is due to the Nestle have their product diversity in producing Milo. Milo was introduced in Malaysia as a Tonik Food Drink. In the year 1999, Vitamin B was introduced at Milo for energy release and improve in the year 2002 with the Actigen-E, a unique combination of 8 vitamins and 4 minerals, which assisted in optimum energy release from food. Milo is an action full of natural malt benefits, skimmed milk and cocoa for a great chocolate flavor. Milo with protomalt contains malt extract which is a mixture of different types of carbohydrates that provide the energy and nutrients needed by the body. Not only for adult, Milo also suitable for children. Milo helps kids get essential vitamin and nutrients they need to take on the day. As we know, kids always like to play and easy to tired, but, with drinking Milo, they can be more energy.

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Milo products have its essential vitamin and minerals include calcium for strong teeth and bones, iron to carry oxygen to the body’s cells, vitamin A for healthy eye sight,vitamins B1 and B2 to help release energy from foods,vitamin C to keep skin and gums in good shape. Therefore, in the customer perspective, Nestle can fulfill the satisfaction of their customer by providing nutritious products in several types of Milo. The customer can choose what types of Milo that they want to drink suitable for the different nutrition. In the financial perspectives, Nestle can expand revenue opportunity due to they have trust and satisfaction of customer through providing nutritious products. Nestle can generate more revenue and income from existing customer. It is because the existing customer already believes with the nutritious of Milo’s product because they usually drink it. Besides, Nestle can generate additional revenues by introducing new products, selling to new customers and expanding the operation into new markets. In addition, Nestle brand especially product Milo is well known around the world and if Nestle introduces new products and sell the current products, the existing customer will easily purchase it due to the trust of Milo’s product. For example, Nestle introduces new product of Milo ice cream name Milo Frozen Confection in the year 2006 and it gets high demand from their existing customer and also the new customer. Nestle introduce the product to continue its mission of being the trusted brand in households nationwide. Even though it is a new product, it has a high demand in the market because the ice cream has its quality and not only ionate about nutrition but is also an ice cream treat that makes life a little sweeter and refreshing. When the demand from the customer is high, Nestle can get more revenue. Therefore, Nestle can expand more revenue opportunities because Nestle providing nutritious products.

Linkages 5

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Based on the learning and growth perspective Nestle should developing customer database then it can be linkage with internal process perspective to expand more various product especially for Milo. So that, it can expand their product diversity for their customer needs. Example of product Milo that was diversity by Nestle which are milo powder and liquid, milo cereal, milo snack bar and ice cream. Milo powder it’s was available from the small packet with the weight start from 90g until 2kg in soft packs and it also provide in tin for 500g and 1.5kg. Instead of milo liquid it’s provide in various exciting flavours such as original, mocha and hi-cal to keep customer energized. Milo liquids also available in three types of packing which is milo HT, milo bottle and milo can with different quantity. Hence, for milo cereal, milo snack bar and ice cream also available in small and large packet. Milo makes evaluation in the product to make it suitable for every gender and aged. Due to the internal process perspective which is expand the product diversity it will linkages with customer perspective because milo product can be more affordable and accessible for the specific customer that may be the average of their income is low. Product more affordable and accessible means every milo products easy to customer find and get it with reasonable price according to packaging size either in village or town. For example for small packaging the price is lower than the biggest one, that’s why milo make it in many size of packaging to give opportunities for all level age and income of their customer. So that, the customer can make a right decision to buy the product based on their affordability. Hence, if customer cannot find in the mini market or supermarket for certain product of milo, customer can buy it from milo website or another online shop such as Lazada. Milo products can be consume in many way whether with hot or cool water and in many situation either breakfast, hi-tea or etc. In addition milo also available in fast food restaurants. Hence, it can make customer be more loyalty and satisfied to milo products because it is availability. Related to customer perspective it can be linkages to the financial perspective for milo to expand revenue opportunities, increasing revenue and reducing expenses. From that, milo can generate additional revenues by introducing new product, selling the 13

product for the new potential customer and expanding their operations into new market. For example milo introduce milo snack bar, milo cereal duo and milo kosong, this product customer easy to get because it was focus for all customer either new or potential customer. Milo makes this new product that is suitable for the whole family. Nestle may can increase sale as compared before. Hence for increasing revenue, milo can generate more revenue and income from existing customers by selling additional products. Due to diversity of products, automatically Nestle has a lot of production, so that Nestle can reduced their expenses by creates products that more affordable and accessible by lowering direct and indirect expenses. Such cost reductions enable a company to produce the same quality outputs while spending less on people, materials, and supplies. Therefore, Nestle can make reduce their expenses by manufacture the packaging by itself rather than purchase the packaging from suppliers for all product made. So, the reduction may cut the packaging cost instead buy it. Nestle can analyze this cost through make or buy formula by costing method.

Conclusion 14

As a conclusion, Nestle should implement all of the objectives listed in the Balance Scorecard and that have translated in the strategy maps to ensure maintain or increase the shareholders value. When Nestle have properly organized the structure of strategy maps, the management will decisive to make better allocation of time, manpower, financial, technology, assets and have better initiative that help to meet goals as well as enable organization allocating more efficiently their precious resources across their day to day activities. Simple example, learning and growth suggests that to maintain talented employees (manpower allocation resource) that can lead to high productivity to improve employees efficiency (time allocation resource), then can linkage to customer perspective which is reduce compaint about the products, next company can link to financial as a stable resources which reduce complaint may increase revenue because customer start loyal with Nestle products and likely to buy the products when they starts to trust that Nestle produced quality products as compared others brand. Finally, shareholders gained value from good reputation, high profitability, strong brand’s name and many more benefits if these goals are achieved. All the perspectives which are learning and growth, internal process, customer and financial are met or linkages and finally benefits the shareholders. Simply develop a balance scorecard does not help the company execute the strategy, all stakeholders have put an effort to make it successful. They may see the great outcome if integrate the strategy throughout the entire organization, hold every report owner able for being timely and accurate, report regularly, and make adjustments as needed. All the objectives listed in the explanation above are definitely linkage each other and important to implement it if the business want to increase shareholders value.

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REFERENCE(S)

Annual report nestle 2016 http://www.nestle.com/assetlibrary/documents/library/documents/financial_statements/2016-financial-statementsen.pdf 8 Simple Ways To Increase Shareholder Value. (2015). Jan 23 https://www.linkedin.com/pulse/8-simple-ways-increase-shareholder-value-damienpound The Nestlé Sustainability Review. (2002) https://www.nestle.com/assetlibrary/documents/reports/csv%20reports/environmental%20sustainability/sustainability _review_english.pdf Nestle: Milo product in viral post has ‘coagulated milk,’ not fungi. (2015) August 4. http://lifestyle.inquirer.net/202300/nestle-milo-product-in-viral-post-has-coagulatedmilk-not-fungi/ Milo Malaysia educates customers how to spot fake products. (2015) March 16. http://english.astroawani.com/malaysia-news/milo-malaysia-educates-customers-howspot-fake-products-55725 Innovation drives Nestlé as leader in food and beverage. (2011, May 22). Retrieved November 13, 2017, from http://www.theborneopost.com/2011/05/23/innovationdrives-nestle-as-leader-in-food-and-beverage/ Mydin website. From

https://www.mydin.com.my/products/?keyword=milo&orderby=&size=&no=1#/close Redemption Programme. (2017). From https://www.milo.com.my/flaskjuara/FlaskJuara_FAQ_EN.pdf The Importance of having a Customer Database. (2011, June 17). Retrieved November 13, 2017, from https://edenenterprises.wordpress.com/2011/06/17/the-importance-ofhaving-a-customer-database/ What is the Balanced Scorecard?. Retrieved November 13, 2017, from http://www.balancedscorecard.org/BSC-Basics/About-the-Balanced-Scorecard William Gervase Rutledge

Clarence-Smith

(2000)

Cocoa/and

chocolate,1765-1954.London

https://myassignmenthelp.com/free-samples/milo-a-chocolate-and-malt-powder http://www.milo.com.my