Final Project For Nestle Pakistan 126l13

Contents 1. INTRODUCTION...................................................................................................... 1.1. Brief History........................................................................................................ 1.2. Location of Offices & Factories............................................................................ ed & Corporate offices............................................................................... Factories................................................................................................................. Regional Sales Offices............................................................................................ 1.3. Number of Total employees................................................................................ 1.4. Nature of the Business........................................................................................ 1.5. Key Players or Corporate Governess................................................................... 2. MISSION & VISION STATEMENT............................................................................... 2.1. Mission Statement.............................................................................................. 2.2. Vision Statement................................................................................................. 3. GOALS & OBJECTIVES............................................................................................. 4. EXTERNAL (PESTLE) & INTERNAL ASSESSMENT..................................................... 4.1. PESTLE Analysis.................................................................................................. 4.1.1. Political & Legal Forces....................................................................................  Taxation Law....................................................................................................  Labor Laws.......................................................................................................  Laws on hiring & promotions...........................................................................  Environmental Protection Laws........................................................................  Foreign trade Regulations................................................................................  Attitudes towards foreign companies...............................................................  Political instability............................................................................................ 4.1.2. Economic Forces..............................................................................................  Inflation Rate...................................................................................................  Economic growth rate...................................................................................... 4.1.3. Social Forces & Cultural...................................................................................  Health Consciousness......................................................................................  Demographic Trend..........................................................................................  Environmental concerns..................................................................................  Work life quality...............................................................................................  Lifestyle Changes............................................................................................. 4.1.4. Technological forces.........................................................................................  New Products...................................................................................................  Product innovation...........................................................................................  Productivity improvement through automation...............................................  Total spending on R&D.....................................................................................  New communication technology...................................................................... 4.2. SWOT Analysis.................................................................................................... 4.2.1. STRENGTHS.....................................................................................................  Parent .................................................................................................  Company Image...............................................................................................  High Quality Products......................................................................................  Well-developed strategy..................................................................................

 Market Share....................................................................................................  Good marketing skills and services..................................................................  Brand strength.................................................................................................  Research & Development Team.......................................................................  Product innovation...........................................................................................  HR department................................................................................................ 4.2.2. WEAKNESSES...................................................................................................  Less Proactive..................................................................................................  Limited Distribution Channel............................................................................  No outlets in Pakistan......................................................................................  More concerned about profit............................................................................ 4.2.3. OPPORTUNITES................................................................................................  from Foreign Investors........................................................................  Enhance Distribution Channel..........................................................................  Changing Social Trend......................................................................................  Health conscious..............................................................................................  Market growth.................................................................................................. 4.2.4. THREATS..........................................................................................................  Government Regulation...................................................................................  Increase in Competition among Competitor.....................................................  No Entry Barrier...............................................................................................  Inflation rate....................................................................................................  Unfavorable Changes in Consumer Demand...................................................  Loss of Market Share........................................................................................ 4.3. Porter’s five forces Analysis................................................................................ 4.3.1. Threat of New Entrants.................................................................................... 4.3.2. Bargaining Power of Suppliers......................................................................... 4.3.3. Bargaining Power of Buyers............................................................................. 4.3.4. Threats from Substitutes.................................................................................. 4.3.5. Competitive Rivalry.......................................................................................... 5. Competitive Analysis or Competitors Analysis......................................................... 6. PROBLEM SECTION FOR NESTLE............................................................................ 7. STRATEGIC SOLUTION TO PROBLEMS..................................................................... 8. FUTURE PREDICTION & IMPLEMENTATION PLAN..................................................... 9. CONCLUSION & RECOMMENDATIONS.....................................................................

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GROUP

Khalique Ahmad Ansari Shehroze Ali Muhammad Umer Dogar Shehzad Shafique Samraan Bukhari

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“ACKNOWLEDGEMENT” “In the Name of Allah most Merciful and most Beneficent ’’

We are very thankful to Almighty Allah who gave us the opportunity, courage and insight to explore more knowledge to complete this whole and for his blessings that have brightened in all parts of our lives and our parents whose prayers always ed us in every task. In scripting this project, we were guided by our experience, knowledge and interest in the subject “Introduction to Ideas”. Beyond of all the material available we are thankful to our respected resource person “Sir.Tariq Jasim’’ for giving us such a deep knowledge about the subject, which made “Business Policy” very interesting subject. That is possible due to his unique and natural style of teaching we ever experienced during our academics and through his motivational behavior we’re able to complete this difficult task.

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NESTLE PAKISTAN INTRODUCTION Nestle is the world's leading nutrition, health and wellness company today and was founded in 1866 by Henri Nestlé. It has employed around 250,000 people and has factories or operations in almost every country in the world. Nestle is the world's leading nutrition, health and wellness company today. Being the world's leading bottled water company is based on a firm economic model: strong brands, global presence, innovation capacity, environmental stewardship and ionate people.

Brief History Henri Nestlé, a pharmacist, developed a food for babies who were unable to breastfeed. His first success was a premature infant who could not tolerate his mother's milk or any of the usual substitutes which eventually became the first Nestle’s customer. After Nestlé's new formula saved the child's life and soon, Farine Lactée was being sold in much of Europe. After the major invention in 1874, Jules Monnerat purchased Nestle and collectively they launched the condensed milk. In 1905 Nestle merged with Anglo-Swiss which was an condensed milk company. Soon after Nestle established its roots all over Europe to cater the need of the customers of Europe, as Nestle fame was on the top so Nestle thought to start the 3

production function all over the world to increase the customer demand and meet or capture more markets. Decision to go multinational was a fruitful idea, so as now nestle has operations in America, India, England, Brazil, Australia, Pakistan, Hungary, , Belgium, Italy, Spain and various other countries around the globe. Nestle are now in all seven continents & having more than 522 factories in 83 countries.

Location of Offices & Factories ed & Corporate offices Nestle Pakistan Ltd. 308 – Upper Mall, Lahore 54000, Pakistan Factories Sheikupura 29th kilometer, Lahore-sheikupura Road, Sheikupura Punjab. Kabirwala 10th kilometer, Khanewal-kabirwala Road, Khanewal Pakistan. 2

Islamabad Plot No. 32, sector (1-10/3), Industrial Area, Islamabad Karachi Plot No. A-23, Northwestern, Industrial Zone, Port Qasim, Karachi

Regional Sales Offices North Zone: Islamabad, Jehlum & Peshawar Central Zone: Lahore, Gujrawala, Faisalabad & Multan South Zone: Karachi, Quetta & Hyderabad

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Number of Total employees Nestle have more than 231,000 employees worldwide but however have more than 2500 employees in Nestle Pakistan. Nestle’s Pakistan is the best in its HR systems and which has approximately 2435 employees. Nestle’s

performance

is

the

result

of

professionally

integrated

management, investment & technology & mostly the commitment of our workforce & employees, bonded together with trust & integrity.

Nature of the Business Nestle Pakistan is the FMCG company which has major industry to cater food & beverages. Which has sub industry of Diversified goods for food and its major industry is FMCG industry. Major Industry: Food & Beverages Sub Industry:

Diversified food

Key Players or Corporate Governess Success of Nestle Pakistan is due to the key people running the organization, the organization works in team structure so that they can achieve the desired results. They form a team every year to achieve the yearly milestones. Top Management: Syed Yawar Ali

(Chairman)

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Ian J. Donald

(Managing director)

Syed Babr Ali

(Director)

Syed Hyder Ali

(Director)

Management Committee: Khurram Zia

(Business Executive Manager “Ambient Dairy”)

Uzma Qaiser Butt

(Head of Human Resource)

Khurram Javed Maqbool Zafar Hussain

(Business Manager “Chilled Dairy”)

(Head of Sales)

Due to this highly committed management personnel Nestle Pakistan achieved high standards of quality & wellness.

MISSION & VISION STATEMENT

Mission Statement “Nestlé is dedicated to providing the best foods to people throughout their day, throughout their lives, throughout the world. With our unique experience of anticipating consumers’ needs and creating solutions, Nestlé contributes to your well-being and enhances your quality of life.”

Vision Statement 3

“The Nestlé global vision is to be the leading health, wellness, and Nutrition Company in the world. Nestlé Pakistan subscribes fully to this vision. In particular, we envision to: Lead a dynamic motivated and professional workforce – proud of its heritage and bullish about the future. Deliver shareholder value through profitable long-term growth, while continuing to play a significant and responsible role in the social, economic and environmental sectors of the country.”

GOALS & OBJECTIVES Goals & Objective of Nestle Pakistan is Simple & well designed with the core strategy to meet the demand of the consumers & to fulfill the needs of the customers. The goals & objectives are; To be the best & quality brand in Pakistan To meet the needs & requirements of the consumers To capture the desired market share To dwell in to the life of people & consumers To be the number one nutritious company of Pakistan To be the leading FMCG company around the world as well as in Pakistan 1

To be the socially responsible company & be helpful in bad times. Nestle aims to be proactive innovation and renovation culture, which is the key to Nestle’s success in the marketplace. Nestle aims to have fully integrated systems with suppliers & retailers so that every single market can be tapped & focused.

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EXTERNAL (PESTLE) & INTERNAL ASSESSMENT

PESTLE Analysis

PESTLE analysis is a powerful tools to visualize your external surroundings, which enables you to understand the external factors such as Political, Economical, Social, technological, Legal & environmental affecting

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your business. So for understanding Nestle’s position in the market & to visualize the Nestle’s position among its competitor Pestle analysis is the best technique to understand the external forces.

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

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

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

Environmental Protection Laws They do concern for environment and contribute more and more for the betterment of environment. Nestle’s considers a lot about CSR, Nestle is worldwide a environmental company so as Nestle Pakistan, Nestle care for poor & urban areas, in the start Nestle gave the concept about friendly environment & to care for your environment. Foreign trade Regulations Foreign trade regulation does not affect the overall policy and the working of the Nestle because they operate nationally not internationally. However it affect when the condition get so worst. But as the last two years whole the world is suffering from great depression so any economy of the world.

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Political instability The government stability also plays a great role for any industry. In Pakistan government face lot of difficulty from the side of terrorism and also its activity that badly effect environment of the country which is totally very upset. Recently in Punjab instability of government creates lot of problem for the industry like shortage of electricity that badly affects the industry operational process. Nestle have not much affect this condition but in future it may be face some difficulty for operating.

Economic Forces Inflation Rate Now in Pakistan inflation rate is almost 22.3%, so if any increase in inflation rate then increase in prices of Nestle products which eventually affects the Nestle Pakistan. So inflation rate affect mostly everyone in the industry so as nestle but nestle by the great decision making able to retain 55% of market share in Milk & Nestle Pure life. Economic growth rate Economy growth rate accelerate is 7% and plus which eventually affect the Nestle productivity & sales.

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Social Forces & Cultural Health Consciousness Today people are more health conscious so Nestle products by identifying this need of the people they are also producing health conscious products with more elements of pure & quality, which create the market for Nestle & trend of its products in the market. However when launches it Milk in 1988 back then it was not so much popular but now a day’s people are more health conscious.

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

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

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Technological forces

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

Product innovation Product innovation is becoming more necessary for the organization because of globalization people are becoming aware about the changes being taken place around them so in order tackle the situation nestle is focusing on product innovation by introducing new products with help of technological factors. Productivity improvement through automation Automation doesn’t matter a lot but to some extent it contributes towards productivity and improvement. Now by the help of technology Nestle

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maintain the efficient scale of production which normally called economies of scale.

Total spending on R&D Spending on R&D is long term investment for any organization. Nestle has R&D department and Nestle total spending on R&D 70 millions. Because with true technological changes this research & development cannot takes place. So with the help of technological changes Nestle can enhance its products & diversify its portfolio of products. New communication technology All the modern as well as traditional ways of communication are being adopted by Nestle including own emails, letters, faxes and monthly visit in different offices of Nestle for better communication among customers. Nestle has also established own web site which can be visited any one for most recent news innovation and activities being taken in the organization. With the technological change adoption the whole organization can be increased.

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4.2.

SWOT Analysis

4.2.1.

STRENGTHS

 Parent Nestle Pakistan has a strong 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.  Company Image Nestle company has a great image in the mind of people. Nestle company has worldwide reputation which helps them to retain the market even in bad situations & unfavorable conditions.

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High Quality Products Nestle produce a good quality products. Nestle cannot compromise on quality because people are more quality conscious now a days, with the best quality they can attain customer loyalty. Nestle being the worldwide renowned brand creates qualitative product to retain that image. Well-developed strategy Nestle has recognizes there is a right time and place for their product; therefore, their strategy makes room for adjustments, Nestle captured a market with great sweep with the developed strategy. 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. Good marketing skills and services Nestle is now a days 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. 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 1

categories. So when a brand becomes generic then it creates the feel of strong brand in the eyes of customers. Such as Google.com etc. Research & Development Team 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. Product innovation The Company has been continuously introducing new products, thus expanding its product offerings. With the extra ordinary technology adoption nestle able to produce innovated products. HR department Nestle company has a strong HR department which depicts nestle’s strong committed management of the company.

WEAKNESSES Less Proactive Nestle being a company is less proactive they create changes but usually unless competitor doesn’t change they doesn’t adopt a change.

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Limited Distribution Channel Nestle’s major & bad factor is the limited distribution channel because they distributes 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. No outlets in Pakistan 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. More concerned about profit As being less proactive they are more concerned about profits, & their market share the main objective of every company is to gain profits but as compare to competitors it’s a drawback.

OPPORTUNITES from Foreign Investors Government foreign investors to invest in Pakistan which eventually is the opportunity for Nestle.

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Enhance Distribution Channel Nestle should be working on the distribution network to enhance the company’s network against its competitor. Changing Social Trend Consumers in urban areas now adopt Western lifestyles, especially the younger generation which is hugely influenced by the Western media. Younger consumers tend to follow Western life style. There was an increase in demand for Nestle products over the review period. Health conscious Increasing health and hygiene awareness among Pakistanis has greatly increased sales of nestle products. Both the government and the media have started health awareness campaigns to make Pakistanis realizes that consumption of Nestle’s hygienic products is as essential as eating food. Fruit/ juices & eatable products are doing very well in both urban and rural areas. Market growth Nestle market expands very fast. A new research proves that in future (2012) every person use 85.5 liters juices per years & uses more hygienic products because of the low hygienic conditions of the environment.

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THREATS Government Regulation They face problem if government employ taxes on them which force them to raise the price of their product. Increase in Competition among Competitor Competition among competitors is major threat to Nestle which can be controlled by the help to retaining more customers & making more loyal ones. No Entry Barrier There are no many entry barriers so a large numbers of local companies enter in various Nestle’s product market. Inflation rate Increase inflation rate very fast .In 2008 expected inflation rate 23.3% so with the increasing inflation rate the prices will go down which creates the market slump, so inflation is very true bad factor which can affect Nestle. Unfavorable Changes in Consumer Demand With the increase in the competitors there will be a increase in the number of related products which eventually harm the Nestle’s market. Due to which the consumers demand pattern fluctuate. Loss of Market Share When the market saturates the loss of the market share of Nestle’s products is there major threat to Nestle. 1

In a conclusion we can say that whether the company is international or local both of the organizations have strengths & weaknesses which lead them to avail opportunities & remove threats. So for nestle it important or recommended that they should pay more attention to their weaknesses & threats in order to compete for a long time & maintain the sustainable competitive advantage. Nestle is doing so far in a good way they compete with their competitor with full & strong response. They are proactive but less reactive which is not good for the firms or organizations that are reactive. Porter’s five forces Analysis Michael Potter's five forces framework can be used to determine whether the industry is attractive enough to sustain a small or medium size enterprise. The five forces of Entry, Rivalry, Substitutes, Buyers and Suppliers tly determine the intensity of competition and profit potential for a small and medium size firm in a given industry or market sector. In analyzing each market force, the question is whether it is sufficiently strong to reduce or eliminate industry profits. The focus at this stage is at the industry level because industry dynamics and profits of necessity dictate profits of other firms that enter the industry.

Threat of New Entrants The threat of new entrance means when any other company that is not operate in that product category but operate in the other product market or the company that start it new venture see a opportunity in this field like 3

juices and they decided to enter in this market. So the current company that is operating in the market has a Low threat for the new entrance. New entry can raise the threat of competition. But however the Nestle is big organization being it competitor is not an easy task. There is some barrier for stop the new entrance Economies of Scale Product Differentiation Capital Requirements Switching Costs Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy If all these things present in the market then no company want to enter in that market because they know there is no any opportunity for it.

Bargaining Power of Suppliers The company needs raw material, labors, component and other supplies. These requirement leads to buyers-suppliers relationships between industry and the suppliers. Suppliers, if powerful can exert an influence on the producing industry, such as selling raw materials at high price to capture 2

some of the industry profits. Suppliers have great bargaining power if the company cannot produce its raw materials or other ingredients. Suppliers have weak bargaining powers, if in the market many suppliers and demand of raw material is low. The bargaining power is low because Nestle doesn’t rely on any supplier they produce there on raw material or import it from parent company, even they have no reliance on the distributors they have their own factory trucks to supply the material.

Bargaining Power of Buyers Buyer power is the most important factor of porter’s fiver forces model, because buyer are the consumers of the product, for nestle it’s a major impact factor because the competition is intense & competitors have the same products may differs in quality but providing the same needs. For that particular reason we can say that Nestle have high bargaining power from buyers. They can lose the customer if the prices & quality form the competitor meet their products. So if Nestle can control the factor of their competitors may be they eliminate this buyer power all to gather. After all switching cost not as much high to engage in using another brand however nestle with the time & quality became a Generic brand in Pakistan.

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Threats from Substitutes Substitute products refer to products in other industries. To the economist, a threat of substitutes exists when a product demand is affected by the price change of a substitute product. A products price elasticity is effected by substitute product – as more substitute become available, demand becomes more elastic since customer

have more alternative . A close substitute

products constrains the ability of firms in an industry to raise prices. Nestle have a major threat from it substitute products from other competitor due to which there product can lost the market share, there are many competitors so the threat from substitutes product are high.

Competitive Rivalry The big factors determining the strength of rivalry is how actively and aggressively are rivals employing the various weapons of competition in jockeying for a stronger market position and seeking bigger sales. In the market rival create a great threat. Many companies introduce same products such as milk, water, cereals & many more items to hamper the nestle’s impact in market and increase threat. Many local company enter in market, there is also great threat for establish company. Nestle also face lot of HIGH competitor rivalry.

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In a nutshell now we can conclude whether the company is MNC or local it will face the tough competition from its competitors because competitive edge is the most volatile thing in business world now-a-days companies are reactive & they react to the change. We can conclude that the FMCG industry is unfavorable for the new entrant to enter in the market. However existing firms can control these five forces & attain the edge over their competitors as nestle is following a sound strategy.

Competitive Analysis or Competitors Analysis Nestle Pakistan have many competitors in market to cut their market & capture the market they have. These competitors are; Haleeb Ltd. Engro food Ltd. Shezan Ltd. Others They have to face many hurdles in order to be the best & deliver because they cutthroat competition with all of the competitors. “Do not Compete with your Rivals just make them Irrelevant”

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Haleeb Ltd Strengths 1.The thickest milk 2.Taste 3.Nutritious 4.Hygienic 5.Packaging Weaknesses 1.Focus Shifted form Main Product to other products 2.Lack of Research & Development 3.Weak distribution 4.Low spending on ment

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Engro Foods LTD Strenghts 1.PR with farmers 2.Positive response form customers 3.Strong consumer &products research 4.Third generation plant 5.Haing a good reputation in the market by strong brand name Weaknesses 1.Packaging 2.Milk collection & distribution costs 3.Narrow brand portfolio 4.Under utilization of the capacity 5.Not yet ISO certified

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PROBLEM SECTION FOR NESTLE According to the analysis we did nestle only have few problem otherwise company is doing their best in the industry so far. They have attained the highest market share for their brands. The only problem they can face is from “pressure groups” & “limited Distribution Channel”. Pressure groups or religious groups are the major threats to the Nestle’s management & their targets. So to control the threats from the pressure groups good marketing strategy can be adopt to eliminate the threat. Nestle should work on the distribution channel & expands the distribution channel to control the market & untapped areas, which eventually give them an edge to increase the market share of Nestle.

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STRATEGIC SOLUTION TO PROBLEMS Nestle’s

problem

can

be

eliminated

by

strategically

thinking

&

implementing some strategies which can be effective in of both profit & growth. Solutions to the problems which have been discussed before is that ; for eliminating the pressure groups threat they should include a strong religious person for advertising their products which can easily arose the demand for the product & people have less question to ask. This will eventually increase the market share & profit of the company through extensive

sales.

Taking

an

example

same

strategic

strategy

was

implemented in Pepsi Co. for Lays. Strategically speaking as nestle falls in aggressive strategy, so they should go t ventures with their distributors cut short their own tensions & make others to their job as Pepsi co. have Riaz bottlers for their distribution which eventually gave them an edge. So if they go forward integration then they might be able to have more market share & demand for the product can be increased & more market can be taped. These are two extensive solutions for the problem faced by the management of Nestle, & this should be taken in to for the more market share.

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FUTURE PREDICTION & IMPLEMENTATION PLAN Nestle is planning to enhance its investments in Pakistan and by the year 2014, its total stakes would reach an aggregate of $374 million. The company has chalked out long-term investment plan. Nestle is setting up a most modern and latest milk plant with the cost of $ 70 million which will be operative within next couple of months. Company would invest to the tune of $209 million in five years period ending 2010. Nestle is investing $70 million in milk production by increasing capacity of milk powder by 40,000 tons annually; $44 million would be injected in Sheikhupura factory, $12 has been allocated for expanding milk collection, and $31 million in bottled water plants. Nestle can enhance the production capacity to control the demand & increase the more demand with help of pull strategy. Going on Globe strategy can help them to increase the market share & profits for the company.

CONCLUSION & RECOMMENDATIONS Nestle is international organization, being an multinational is always great because it is always backed up by the parent company but however Nestle Pakistan is doing best in this region because of the static demand & less portfolio. Nestle management is key success factor of the company they are 1

highly committed & they do not compromise on their tasks. Quality & sustainability is another factor that is giving nestle an edge against its competitors & Nestle Pakistan is at top because of high demand & promising quality they provide. Recommendations are these, that NPL should diversify its product portfolio & introduce ice cream & some other products which can cut the competition of the major players in Pakistan. Dog items should be back up by the cash generated by cash cows & renovate them. Nestle should increase the distribution Network & diversified their portfolio.

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