Nestle Pakistan

Strategic Management Final Project Report

Submitted by:
Muhammad Asif
01-222192-011
Shabahat Ali
01-222192-015
Muhammad Nouman
01-222192-14

Submitted To: Syed Haider Ali

1
Table of Contents
1 Industry Profile.........................................................................................................................................5
2 Company profile.......................................................................................................................................5
2.1 Brief History.......................................................................................................................................6
2.1.1 War time.........................................................................................................................................7
2.1.1 Transformation into global market.................................................................................................7
2.2 Organizational Hierarchy...................................................................................................................8
2.2.1 Product Lines..............................................................................................................................8
2.3 Location of factories........................................................................................................................10
2.4 Number of total employees.............................................................................................................10
2.5 Nature of business...........................................................................................................................10
2.6 Type of Ownership...........................................................................................................................11
2.7 Key Players.......................................................................................................................................11
3 Mission/Goals/Objectives.......................................................................................................................11
3.1 Mission............................................................................................................................................11
3.2 Vision...............................................................................................................................................11
3.3 Objectives........................................................................................................................................12
3.4 Our Values.......................................................................................................................................12
4 Strategic External Audit..........................................................................................................................12
4.1 STEPLE Analysis................................................................................................................................12
4.1.1 Political.....................................................................................................................................12
4.1.2 Economic..................................................................................................................................13
4.1.3 Social.........................................................................................................................................14
4.1.4 Technological............................................................................................................................15
4.1.5 Environmental..........................................................................................................................16
4.1.5 Legal..........................................................................................................................................16
4.2 Porter’s 5 forces Model...................................................................................................................17
4.2.1 Threats of new Entrants...............................................................................................................17
4.2.2 Threat of substitutes goods..........................................................................................................18
4.2.4 Bargaining power of customers....................................................................................................18
4.2.5 Competitive rivalry within industry...............................................................................................19
4.3 SWOT Analysis.................................................................................................................................19
5 Strategies Undertaken........................................................................................................................21

2
5.1 Corporate level Strategies...............................................................................................................21
5.1.1 Growth strategy............................................................................................................................21
5.1.2 Stability.........................................................................................................................................21
5.2 Business level strategies..................................................................................................................21
5.2.1 Low Coast leadership....................................................................................................................22
5.2.2 Differentiation strategy................................................................................................................22
5.3 Functional Strategy..........................................................................................................................22
5.3.1 Marketing strategy.......................................................................................................................22
5.3.2 Financial........................................................................................................................................25
5.3.3 Research & Development.............................................................................................................28
5.3.4 Human Resource..........................................................................................................................29
6 Management Strategies:....................................................................................................................29
6.1 Human Resource Management.......................................................................................................29
6.2 Administration:................................................................................................................................30
6.3 Decision Making (centralizes & decentralized):...............................................................................30
6.4 Total Quality Management (TQM):..................................................................................................31
6.5 Motivation:......................................................................................................................................32
6.5.1 Incentives:....................................................................................................................................33
7 Market Analysis..................................................................................................................................33
7.1 Segments & Target Market..............................................................................................................33
7.1.1 Segmentation...............................................................................................................................34
7.2 Geographic......................................................................................................................................34
7.3 Demographic...................................................................................................................................35
7.4 Psycho-graphic.................................................................................................................................35
7.5 Behavioral........................................................................................................................................36
7.6 Market share...................................................................................................................................38
7.7 Competitive Analysis........................................................................................................................39
7.7.1 Primary Competitors:....................................................................................................................39
7.7.2 Indirect Competitors:....................................................................................................................40
7.8 Main Marketing Strategies:.............................................................................................................40
7.8.1 Market Positioning.......................................................................................................................40
Financial Strategies:...............................................................................................................................41
8 Other strategies nestle.......................................................................................................................41

3
 8.1 procurement....................................................................................................................................41
8.1.1 Procurement Vision......................................................................................................................41
8.1.2 Procurement Mission...................................................................................................................41
8.2 Production strategies.......................................................................................................................42
8.2.1 Capacity of plant...........................................................................................................................42
8.2.2 Quality and safety.........................................................................................................................42
8.2.2.1 Nestlé Quality Management System.........................................................................................42
8.2.3 Production Staff............................................................................................................................43
8.2.4 Laboratory....................................................................................................................................43
8.2.5 Product line of nestle....................................................................................................................43
9 Control procedures.............................................................................................................................44
9.1 Quality control of nestle..................................................................................................................44
9.2 HR control of nestle.........................................................................................................................45
9.3 Finance Control................................................................................................................................45
9.4 Marketing control............................................................................................................................46
9.4.1 Market Leadership Strategy..........................................................................................................46
9.4.2 Market Challenger Strategy..........................................................................................................46
9.4.3 Market Follower Strategy.............................................................................................................46
9.4.4 Market Niche Strategy..................................................................................................................47
9.4.5 Alliance Strategy...........................................................................................................................47
9.4.6Component Parts of a Marketing Plan...........................................................................................47
9.4.7 Situation Analysis..........................................................................................................................47
9.5 Taxation...........................................................................................................................................48
10 Problem identification......................................................................................................................48
10.1 Management issues of nestle........................................................................................................48
11 Strategic Alternative.........................................................................................................................52
12 Nestlé 5 year future plan..................................................................................................................54
13 CONCLUSION....................................................................................................................................56
13.1 Suggestions and recommendations...............................................................................................56
14 References............................................................................................................................................57

4
1 Industry Profile
Nestlé Pakistan Ltd is a subsidiary of Nestlé S.A, - a company of Swiss origin headquartered in
Vevey, Switzerland. It is a food processing company, registered on the Karachi and Lahore stock
exchanges and operating in Pakistan since 1988 under a joint venture with Milk Pak ltd and took
over management in 1992. For ten years in a row, the company has won a place among the top
25 companies of the Karachi Stock Exchange. Headquartered in Lahore, the Company operates
four production facilities. Two of its factories in Sheikhupura and Kabirwala are multi product
factories. One factory in Islamabad and one in Karachi produce bottled water. The factory in
Kabirwala is the largest milk intake plant in the Nestlé world. Through its effective marketing
and a vast sales and distribution network throughout the country, it ensures that its products are
made available to consumers whenever, wherever and however. Nestlé Pakistan operates in
many ways but people, products and brands are the main flag bearers of the Company’s image.
Nestlé Pakistan now operates the biggest milk collection system in Pakistan, Currently; Nestlé
Pakistan collects milk from an estimated 190,000 farmers spread over 146,000 sq Km’s in the
province of Punjab and Sindh. Nestlé believes in creating shared value and is committed to the
communities it works and lives with. In Pakistan, the company is working closely with the
communities in areas related to Nutrition, Water and Rural Development and continues to
enhance the quality of life of people throughout its value chain.

2 Company profile
Nestle Pakistan Limited operates within the Fluid milk sector. In addition to historical
fundamental analyses, the complete report available to purchase compares Nestle Pakistan
Limited with three other dairy companies in Asia: Hatsun Agro Products Limited of INDIA
(2019 sales of 47.60 billion Indian Rupees [US$644.54 million] of which 94% was Milk and
Milk Products), Bing-Grae Company Limited of KOREA (SOUTH) (878.33 billion Korean Won
[US$791.38 million] of which 100% was Milk Processing), and Wei-Chuan Foods Corporation
which is based in TAIWAN (20.23 billion Taiwanese Dollars [US$718.50 million] of which
96% was Food).

Sales Analysis. During the year ended December of 2019, sales at Nestle Pakistan Limited were
115.96 billion Pakistan Rupees (US$721.29 million). This is a decrease of 6.9% versus 2018,
when the company's sales were 124.61 billion Pakistan Rupees. Contributing to the drop in
overall sales was the 82.3% decline in Other Products, from 830.56 million Pakistan Rupees to
146.77 million Pakistan Rupees. There were also decreases in sales in Dairy and Nutrition
Products (down 7.1% to 89.55 billion Pakistan Rupees) and Powdered and Liquid Beverages
(down 4.0% to 26.26 billion Pakistan Rupees).

5
2.1 Brief History
Founded in 1866, Nestlé is the largest food and beverage company in the world. Initially, the
company sold only infant’s cereal but they quickly diversified to include a variety of products
including chocolate, coffee, soup, yogurt, water and frozen foods in their portfolio
The organization employs nearly a quarter of a million people from 70 different countries around
the world. Nestlé operates in almost every part of the world. They have reached an impressive
global audience both through their own efforts and through joint ventures with companies like
Coca-Cola. Nestlé‘s success has been driven by a combination of product innovation and
business acquisition. It is their motivation for growth and diversity that has allowed Nestlé to
become the key player in nutrition that it is today.
In 1866, the first condensed milk factory in Europe opened in Cham, Switzerland. The company
was called the Anglo-Swiss Condensed Milk Company. The factory was owned by two
American men, brothers Charles and George Page. They had seen the growth of condensed milk
in the United States and wanted to manufacture milk near to a large, quality source. Switzerland
produced a large amount of high-quality fresh milk and had been the center of production for
many milk based products since the early 19th century. The business owners created their milk
products in Switzerland, but it was always intended for the English market. They opened a
British factory in England in 1873.
Henri Nestlé, the company’s founder, worked as an assistant to a local pharmacist early in his
career. He was trained in science and chemistry. Henri was an innovator by nature, and he
experimented with everything from food to cement. In 1867, Henri Nestlé produced a nutritious
combination of milk, wheat, and sugar. This cereal was so nutritious that it saved the life of a
child. He called it Farine lactee. The product took off, and he began producing his baby food on
a large scale. He started out buying the milk he needed to make the Farine lactee fresh each
morning. By 1869, this method was no longer practical, and he began to purchase his milk
supply from a collection center to have it delivered to his factory. Nestlé ‘s business acumen
combined with his quality products resulted in an impressive growth of his business. By 1875,
only 8 years after his initial launch, Nestlé products could be found across the globe in countries
like Indonesia, Argentina, Egypt and even the United States.
The first Nestlé logo was created in 1868 and Henri Nestlé based it upon his family’s coat of
arms. Henri had immigrated to Switzerland from Germany. The first logo was a play on his
family name, Nestlé, which means ‘nest’ in the German language. The first logo included his
familial origins by incorporating a nest and adding young birds being fed to link the logo to his
baby food products. The logo has been reimagined and simplified over the years, but it has
retained the same basic structure that Henri Nestlé developed in 1868.
Throughout the last decades of the 19th century, the two Swiss companies, Nestlé and the Anglo-
Swiss Condensed Milk Company had become incredibly competitive. In 1905, Nestlé merged
with Anglo-Swiss Condensed Milk Company.

6
2.1.1 War time
The First World War brought serious disruption to economies and businesses all across Europe.
Switzerland remained neutral, though armed, during the First World War
Many industries in Europe were severely disrupted between 1914 and 1918. Even though
Switzerland was not involved in the hostilities, it was difficult for Nestlé to find the goods
needed to continue manufacturing as they had before. Distribution was also difficult because the
entire continent was at war. Nestlé depended on fresh milk for many of its early products, and
there were shortages of milk and almost every other fresh product during this period. Like many
manufacturers, Nestlé sold most of their supplies in order to help support the needs of the
surrounding towns and villages.
Some companies, including Nestlé, were able to survive this period of economic hardship
because of the large scale fighting. Nestlé acquired several government contracts that required
them to expand rapidly. When the war came to an end in 1918, Nestlé had 40 factories across the
globe.

2.1.1 Transformation into global market

After the fall of the Berlin Wall in 1989, a huge amount of Europe once again became an
accessible market. Poland, Hungary, and the Czech Republic would soon be known as emerging
European markets. China became more accessible during this period, as well. For a company
with international ambitions, like Nestlé, this was the ideal trade situation. With new diverse
markets to serve, Nestlé was presented with a unique opportunity to become an even more
diverse organization.
The first major acquisition during this period was in 2001 when Nestlé acquired and merged with
the Ralston Purina Company. A new company in comparison, Purina created products like
Friskies, which was a wildly popular brand of pet food in the United States. After the merger, a
new pet food company called Nestlé Purina PetCare Company was established.
Nestlé picked up the pace in 2002 when they took on two more of North America’s most
successful companies. This time, the theme was frozen products, and Nestlé picked up Dreyer’s
ice cream in July. The next month, Nestlé bought Chef America Inc, a frozen food manufacturer,
for a cool $2.6 billion. The plan to take on the freezer aisle continued in 2003 when Nestlé
acquired Movenpick Ice Cream, a luxury Swiss ice cream company. The decade came to a head
in a spectacular fashion when Nestlé took over both Jenny Craig and Uncle Toby’s in 2006.
Towards the end of the decade, Nestlé made one of its biggest-ever acquisitions when it
purchased Gerber. This move was a return to Nestlé ‘s historic roots as Gerber continues to be
one of the key baby food manufacturers in the United States and Canada. Nestlé purchased the
business for $5.5 billion in 2007.
Nestlé has come a long way from its 19th-century Swiss-German origins in nutritious gruel to
become one of the biggest production conglomerates in the world. Nestlé has carried with them
their spirit of innovation and nutrition from the 19th century into the 21st century. Today, Nestlé

7
owns more than 2,000 brands that are sold in more than 197 countries around the world. They
have a clear objective to be the leader in health and wellness. The company has not limited itself
to nutrition but moved into the beauty and health categories in order to create a truly diverse
company

2.2 Organizational Hierarchy

Organizational structure is the formal framework by which jobs tasks are divided, grouped, and
coordinated. Nestlé is a function-based organization. The tasks are divided into separate jobs and
then these jobs are grouped together under different departments i.e. functional
departmentalization is found in organization. Each major area is kept under the manager who is
specialist in that concerned field and is responsible for all activities, which that department
performs.

2.2.1 Product Lines

Quality and nutritional value are the essential ingredients in all brands of Nestlé. Millions of

people prefer Nestlé products every day, happy with the addition to their wellness that they

bring. Nestlé is giving its products in 10 different categories of food with 75 brands. These food

8
categories with Product Lines are:

Baby food (Cerelac), Beverages (Necscafe liquid, MILO, Buddy, Orange juice, Nestea),

Breakfast cereals, Chocolate and confectionery (KitKat), Dairy Products (Milkpak, NIDO,

EveryDay,), Prepared food (Maggi noodles), Bottled Water (Nestlé Pure Life)

Nestlé is offering following Product lines in Pakistan:

Products with Years of Launch:
1981 Nestlé Milkpak

1983 Nestlé Butter

1986 Pakistan UHT Cream, Pakistan Desighee, Frost

1990 NIDO, CERELAC

1991 Nestlé Rice, LACTOGEN 1, LACTOGEN 2

1992 Nestle EveryDay, Gloria, Maggi noodles

1994 MILO powder, NESLAC

1995 MILO RTD

1996 Nestlé juices, POLO Mint, NESCAFE Classic

1997 Nestlé KitKat

1998 Nestlé TOFFO, Nestlé Soothers, Nestlé Pure Life

2000 Nestlé Plain Yogurt

2001 Nestlé Fruit Yogurt, Nestlé NAN 1, NAN 2

2002 EveryDay liquid,

2003 BUDDY juices, Nestlé Hi-Calcium Low Fat Yogurt, Nestlé Hi-Calcium Low Fat MILK

2004 Nestlé Raita, NESCAFE (3 in 1)

9
2.3 Location of factories
Nestle has 403 factories in 84 countries.

In Pakistan nestle has 3 factories

Address: Street 3, I-10/3 I 10/3 I-10, Islamabad, Islamabad Capital Territor

Address: Lahore - Sheikhupura - Faisalabad Rd, Sheikhupura, Punjab

Address: Khanewal-Kabir Wala Rd, Nestle Colony, Allahabad, Kabirwala, Khanewal, Punjab

The factory in Kabir Wala is the largest milk intake plant in the Nestlé world.

2.4 Number of total employees

Total number of employees in nestle worldwide are 352,000
The number of employees in nestle in Pakistan are 4000

2.5 Nature of business

Nestlé Pakistan Limited (“the Company”) is a public limited Company incorporated in Pakistan
and its shares are quoted on Pakistan Stock Exchange. Principally the Company is engaged in
manufacturing, processing and sale of dairy, nutrition, beverages and food products including
imported products. Registered office (which is also the Head Office) of the Company is situated
at Babar Ali Foundation Building, 308-Upper Mall, Lahore. The Company has four
manufacturing facilities located at Sheikhupura, Kabirwala, Port Qasim Karachi and Islamabad.

10
2.6 Type of Ownership
Nestle has a corporation type of ownership

2.7 Key Players

Franchise Directors
Board of Directors

Name Designation Adress

Syed Yawar Ali Chairman 308-upper mall Lahore
Pakistan
Syed Babar Ali Director Packages Limited, Shahrah-e-
Roomi, Lahore, Pakistan.
Syed Hyder Ali Director Packages Limited, Shahrah-e-
Roomi, Lahore, Pakistan.
Osman Khalid Waheed Director Ferozsons Laboratories
Limited, 5 km, Sunder
Raiwind Road, Raiwind,
Lahore, Pakistan

Marketing Director Fahad Yousaf

Chief Finance Officer Syed Saiful Islam

3 Mission/Goals/Objectives
3.1 Mission
Nestlé's purpose is enhancing quality of life and contributing to a healthier future. We want to
help shape a better and healthier world. We also want to inspire people to live healthier lives.
This is how we contribute to society while ensuring the long-term success of our company.

3.2 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.

11
3.3 Objectives
Nestlé's purpose is enhancing quality of life and contributing to a healthier future. We want to
help shape a better and healthier world. We also want to inspire people to live healthier lives.
This is how we contribute to society while ensuring the long-term success of our company.

3.4 Our Values

For over two decades, we at Nestlé Pakistan, have strived to bring high quality products that
have won the hearts of all Pakistanis. Our bedrock values of
respect, trust, integrity and teamwork have helped us become the premier Nutrition, Health and
Wellness Company.

4 Strategic External Audit

4.1 STEPLE Analysis
4.1.1 Political
Pakistan is a democratic parliamentary federal republic where the Prime Minister is the head of
government and the President is the ceremonial head of state. It has a multi-party parliamentary
system where the key political players are Pakistan Muslim League-N, PPP, and PTI. However,
the influential role of the Pakistani military establishment in the country’s politics has been
questioned by many political analysts.

Pakistan has excellent diplomatic and trade relations with the neighbouring superpower, China.
The Chinese Premier sees the relationship between the two countries as ‘unbreakable and rock-
solid’ (The Economic Times, 2019). Pakistan also has good relationship with the USA, though
the relationship has witnessed some ups and downs in the last few years.

It is worth noting that one of the biggest challenges for Pakistan is to maintain a workable and
unhindered bilateral relationship with India as both countries have been at odds with each other
for a long time, particularly over the issue of Kashmir. This is an extremely important issue as
both countries are nuclear powers, and any serious breakdown of relationship will not only
jeopardise the security of South Asia, but also of the whole world.

Corruption is a massive problem in Pakistan, though the government claims to have put
substantial efforts to eradicate it. Likewise, political instability, wildcat strikes, demonstrations,
assassinations, and frequent disagreements between the government and the opposition have
badly affected the political environment of country over the years.

12
Antitrust law: The Competition Act, 2010 (CA '10) governed by competition commission of
pakistan

Taxation law: it include corporate tax in pakistan is 29%

Taxation laws are as follow

Tax ordinance 2001
Sale tax rule 2006

Deregulation philosophies: privatization commission 2007 monitored by commission of

privatization

Labour law training: pakistan follows the rule of ILO

The factory ACT 1934

The payment wage ACT 1936

Educational philosophies and policies:

National educational plan 2016

The educational policies 2016-2020
Standard education quality in pakistan 2017
Monitored by gvt of pk

4.1.2 Economic
According to the World Bank, cited in Trading Economics (2020), the GDP of Pakistan in 2019
was worth 320 billion US dollars. Pakistan eyes on becoming the world’s one of the top 25
economies by 2025 and one of the top 10 high income economies by 2047. Though it must walk
a long way to achieve the aims, it is worth mentioning that Pakistan has made significant
economic growths over the years.

FDI inflow has been an important aspect of the economy of Pakistan. China is the largest
investor in the country, while countries such as the USA, the UK, Japan, South Korea, and Hong
Kong have also stepped up their investments. Attracting more FDI inflows and keeping domestic
investors spending more in the country should help Pakistan make further economic progress. 
However, a selective justice system, lack of friendly business environment, and poor law and
order conditions often discourage domestic investors from investing in the country (Raza, 2018).

House linens, non-knit men’s suits, rice, non-retail pure cotton yarn and non-knit women’s suits
are the top exports of Pakistan which mostly go to countries such as the USA, Germany, China,
the UK, and Afghanistan. Refined petroleum, crude petroleum, palm oil, petroleum gas and cars
are the top imports of Pakistan which mostly come from countries such as China, the United

13
Arab Emirates, Saudi Arabia, Indonesia, and Japan (OEC, 2020). More trade and bilateral
opportunities are out there, particularly with India if the border tensions and other political
disagreements can be kept at bay.

Inflation Rate: Now in Pakistan inflation rate is almost 22.3%, which decreases the purchasing
power of consumers.

Interest rates :Interest rate is 7% in 2020

Trade deficit or surplus: Pakistan recoded a trade deficit equal to 397.4 billion in sep 2020 .

Budget deficit or surplus: : Pakistan recoded a government budget deficit equal to 8.09% of
the country’s GDP 3.376 trillion

Personal saving rate : 8.5 %

Business saving rate: 21.06% of GDP

4.1.3 Social
Pakistan is the 5th most populous country in the world. As of March 2020, the total population is
approximately 219 million. The major religion is Islam and a small percentage of population
follows Christianity and Hinduism. The major languages are English, Urdu, Punjabi, Sindhi,
Pashto, and Balochi (BBC, 2019).

The life expectancy for men is 66 years and while 68 years for women in Pakistan. Families are
quite large by Western standards which had contributed to making Pakistan one of the largest
domestic markets in the world. Level of poverty is declining, and a stronger middle class is
steadily emerging. The country also has an affordable and abundant workforce. Family loyalty is
very crucial, and nepotism is often viewed positively in workplace as this guarantees the hiring
of people who can be trusted.

However, there are some social challenges facing Pakistan today. For instance, poor literacy,
terrorism, food and water crisis, poor housing quality and affordability, poor transportation, poor
health care system, and gender discrimination to name but a few

Women in work force: Promote gender equality in private sector organizations through
developing affirmative action and strategies at the industrial level.

14
Workforce diversity: diversity of work force is practiced in Pakistan and also in NESTLE

Attitude about work life quality:  provide market competitive benefits and salaries

Workplace practice are fair

Shifts in work and career preference: shift work 9-5 (Monday-Friday)

In Pakistan medical and management professions are mostly proffered

Shifts in preference regarding product and services characteristics: yes every customer
wants good quality product of known brand in minimum price. The shift mainly depend on
buying power of an individual

4.1.4 Technological
Technological environment is the next element to discuss in the PESTEL analysis of Pakistan.
Pakistan has made significant progress in science and technology over the years. It is a nuclear
power to the astonishment of many great global powers. A good number of online retailers are
trading very well, and Alibaba’s entry into the country has also been hailed as a great boost for
digital economy. Vast majority of people have cellular phone subscriptions and the Internet
usage has increased significantly as well.

Top social networking sites in Pakistan are Facebook, Twitter, Pinterest, Instagram, YouTube,
and LinkedIn (StatCounter, 2020). The number of social media users is growing rapidly;
however, unavailability of the Internet in many places has been hindering the digital progress. To
realise the full potential of the digital revolution, Pakistan must enhance Internet connectivity,
and improve digital infrastructure. Likewise, it also needs to invest in digital skills and literacy,
and promote innovation and entrepreneurship (Jahangir, 2020).

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 change

Application of knowledge: 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.

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

Pakistan focus on product innovation pakistan spent 0.246% of its total GDP

15
New communication technology: digital marketing fax, letter, email, monthly visits and own
website

4.1.5 Environmental

Pakistan is famous for its natural beauty, cultural richness, mountains, archaeological ruins and
unparalleled hospitality; however, its tourism industry has not much benefited from these
features due to poor law and order conditions, and negative perception of potential tourists.
Pakistan also faces some serious environment challenges e.g. climate change, water scarcity, lack
of clean drinking water, deforestation, air pollution, waste management, and the use of plastic
bags (Huma, 2018). Likewise, the real impact of Covid-19 is expected to be devastating as well.

Contribution of nestle

Being a food and beverage company, water is critical at each stage of our value chain. For more
than 10 years, water has been a key focus of our CSV strategy. Following Nestlé’s global
commitment to SDG-6 on Water and Sanitation, Nestlé Pakistan aims to be a responsible
steward of water by working hard to improve water efficiency in our direct operations as well
as throughout our value chain. Since water is a collective resource, it demands collective action.
Pakistan has the world’s fourth highest rate of water use and also one of the highest water
intensity rate, which is why we decided to volunteer as the pilot market for our global Caring
for Water (C4W) initiative. Unveiled on October 4th 2017, the C4W is a blueprint that has
brought under together different actors working on water to share knowledge, discuss what
everyone is working on, invite feedback on how to improve and to brainstorm about what more
to work on. Our activities range from improving internal efficiencies to ensuring efficient water
usage across our value chain and from coming up with technological solutions that help save
water to ensuring that communities have access to safe and clean drinking water.

4.1.5 Legal

Legal environment is the last element to discuss in the PESTEL analysis of Pakistan. The
Constitution of Pakistan provides for a federal democratic State, and guarantees citizens’
protection against discrimination on the basis of gender, religion, caste, race etc. The normal
working hours per day are 8-9 hours and should not be more that 48 hours a week. The
maximum overtime a week is restricted to 12 hours.

16
Nestle contribution

Knowing the contribution of rural women to the well-being of the family and communities,
Nestlé Pakistan has been extending support in the lives of women associated with the rural
dairy sector in Pakistan. In 2018, approximately 3000 rural women were trained on Best Farm
Practices through village meetings. Moreover, the program builds capacity to better support
women entrepreneurs to start and grow their businesses. Some eleven women entrepreneurs
were developed through this program. Moreover, 300 female milk suppliers were also made a
part of Nestlé’s milk collection value chain. Along with agriculture activities they were also
engaged in rural sales initiative to strengthen the network of entrepreneurship at village level.
Our cellular network based SMS advisory service continued providing information like weather
changes, disease outbreak with additional farming related messages to farmers. Thousands of
farmers, enrolled in our system, are getting dairy knowledge to advance their farming skills and
techniques that help them improve productivity, reduce costs, and increase income while also
getting maximum benefits from mobile phone usage.

4.2 Porter’s 5 forces Model

Porter’s Five Forces Model is a very important tool to analyze the industrial parameters and to
develop business strategy. Here five different factors would be discussed to highlight the
attractiveness and productivity of a market. Now we will discuss it for Nestle

4.2.1 Threats of new Entrants

If the market is attractive the new entrants would always be a threat for the company but if the
market has been restricted to a limited resource and it has very few areas of improvement so it
becomes difficult for new entrants to get into the market and hence monopolies exist. Although
Nestle has accomplished a strong name in the market but as the food processing industry is very
huge and viable; so there are a lot of companies who already entered in this market and somehow
achieved a place in the market even though they could not cross Nestle in terms of market share. 
Every year number of companies attempt to enter the market and strive for their share of profit
and productivity in the market but very few survive. Nestle has been the leader of market for a
century almost so now it has become a very big challenge for the new entrants to not only work
over their quality but they also have to cut the share of Nestle to survive which is quite equal to

17
impossible. Fundamentally, Nestlé is persistently on the board, and therefore the threat of new
entrants is temperate.

4.2.2 Threat of substitutes goods

Substitutes have always been in line whenever we talk about products market, every kind of
product has a substitute present which leads it to the heights of competition when taken
seriously. As the product is very common and daily use product so the threat of substitutes is
very high here. Like if we take the example of bottled water so the substitute of this is lean
pockets that serve as a competition. So Nestle has to innovate its products tremendously to stay
in the market and to work efficiently for removing the threat of substitutes. We can take the
example of recent innovation which is health consciousness and wellness factor that has been
introduced in all products of Nestle. Such initiatives would make it easier for Nestle to go
beyond the substitutes.

4.2.3 Bargaining power of suppliers

Bargaining power of suppliers is very important factor to be considered in any industry as they
are the main strength of the company. Nestle is known for strong relations with the suppliers
around the globe due to its immense buying power and also because of the fact that in such dairy
and agricultural products quality is always important. Nestle as always focused over strong and
sturdy business relations to make the ongoing quality stronger. Additionally, Nestlé also presents
helpful guidance to its suppliers on how to work more proficiently to decrease redundant
expenses. And thus it cares of its suppliers which I return pays them off in the form of quality
products.

4.2.4 Bargaining power of customers

The bargaining power of customers has always been an important factor in terms of company’s
performance so this should be given reasonable value while accessing the company’s position.
Customers carry huge quantity of bargaining power concerning their utilization of different
Nestlé products. Although a lot of substitute products and competitors Nestle customers have
very influential choices but still the quality that has been maintained by Nestle has made it very

18
successful among the users. It is very important to understand the power of the customers and
also their needs so that they can be better satisfied. This is what Nestle always cares about and
that is reflected in Nestle health and wellness programs that ar being used wile creation of new
products as society has in progress of becoming more health conscious. 

4.2.5 Competitive rivalry within industry

Competition if healthy would bring huge success but if negative would destroy the whole
industry so it should be critically analyzed for better future of the company. Nestle has a very
strong position in the food processing industry but few major rivals do exist in the industry like
Kraft Foods and Groupe Danone. Above mentioned companies are fighting continuously to get
on to each other and avoid any sort of competition but I is still there. If we talk about marketing
and advertising these companies have spent hell of their expenditures for the purpose of effective
marketing and advertising and in competition they have always ut performed each other.
Competition is violent in the food processing industry, and this is a plus point for consumers.
Provided that these companies carry on in competing with each other, consumers will
persistently enjoy improving product qualities.

4.3 SWOT Analysis

Strengths

 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 ever being sacrificed for short-term performance.

 Diversified and varied brand portfolio.

 Global recognition driven by the number of strong brands within the firm’s portfolio.

 The reputation of Nestlé’s brand is estimated to be valued at $7billion.

19
  Nestlé has a place in the heart of consumers due to its longstanding history.

 Development of trust and loyalty highlighting the capability development of the firm.

 Strong teamwork within the firm promoting good levels of job satisfaction and employee
commitment

Weakness

 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.

 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. Noted in a recent article by Muller (2013, p.1) it was
stated that the scandal had ‘grown up but not gone away’.

 Recognising the need for stability and consistency in the processes found within the
company’s global supply chain. International standards demand a need for
standardisation yet this has to be balanced with the firm’s strategic need for adaptation to
different cultural environments

Opportunities
1. Ability to reach new consumer markets and in particular new international markets i.e.
Nestlé’s work in emergingneconomies.

2. Further internationalisations with a particular focus on the BRICS economies (Brazil,

Russia, India, China and South Africa)– these economies are noted as being current
growth spots.

3. Development of intangible capabilities to aid competitive advantage. Barney (1991,

p.100) argues that competitive advantage is achieved through inimitability and this
should be a focus of the firm.

4. Backwards integration to gain more control over the supply chain of the firm.

5. Innovative development of distribution channels.

Threats

20
 1. Higher levels of buyer power within the industry fuelled by greater choice and lower
loyalty.

2. Variability in raw material prices influencing the firm’s ability to sustain prices in light of
a commitment to wider responsibilities aside from profit i.e. CSR initiatives.

3. Increased dynamism in the external macro environment fuelling short-term decision

making and heightened competition.

4. Technological change driving both innovation and associated challenges.

5. Ageing population shifting the demographics of the workforce.

5 Strategies Undertaken
The corporate level strategies of Nestle includes growth stability and retrenchment strategies
which it adopts according to changing business needs and different market solutions

5.1 Corporate level Strategies

Corporate level strategies includes

5.1.1 Growth strategy

Nestle is one of the world largest food and beverages manufacturers. It has expended its business
operation in 130 countries with more than 500 production units and strategic relationship with
thousands of business associates partners and investors. All these achievements are outcomes of
its growth strategies. Nestle has made tremendous growth over the years in all its business units
and segment. Current growth rate strategies divided into horizontal and vertical growth strategy.

Horizontal growth strategies enable it to expend its business operation across new targets
markets geographical locations product categories and brand extensions

Vertical growth strategies include strengthens its business network and operational position by
making it more self-sufficient in supply chain distribution and business promotion

21
5.1.2 Stability
Growth strategies are not only preferred in all types of market condition nestle also has suspended its
growth when there are unfavorable economic conditions, poor industrial growth, or high market
saturation. In order to survive and more forward cautiously, nestle waits for the condition to turn
favorable for its business conditions. Under stability strategies Nestle does not undertake any type of
business expansion, brand extensions .

5.2 Business level strategies

There are three core business level strategies of Nestle include Coast leadership, differentiation
and focus strategies

5.2.1 Low Coast leadership

Nestle is top quality foods and beverage products manufacturer. It purchases high quality of raw
material from large scale suppliers from the market. There for its cost of production is
comparatively higher than those other small scale and low quality manufacturers. Due to high
cost of leadership Nestle is unable to achieve low cost leadership in its industry. However its
business level strategies largely focused on achieving this goal through cost coefficient
operation, quality assurance.
Company management emphasizing on the controlling unnecessary cost in all the major
functional areas including inventory management, manufacturing, marketing, research and
development and customer services. Current strategy of the company is to achieve the
operational efficiency by purchasing the best quality ingredients and raw materials from the most
reliable supplier

5.2.2 Differentiation strategy

The second core business level strategy of Nestle is to differentiate its products from their
competitor products. The purpose behind this strategy is to build unique brand image in the mind
of potential consumers. Currently Nestle manufacturers 10,000 products under 8,500 different
brands names. Most of the products can be easily differentiated from their competitor products
and brands on the basis quality, features, ingredients, pricing, packaging, and labeling. The
strongest role in making differentiation strategy is successful is played by the quality of the
products. Nestle never compromise on the quality of its products in order to achieve economy or
scale or low cost leadership strategy

5.3 Functional Strategy

Functional strategy is the approach a functional area takes to achieve corporate and business unit
objectives and strategies by maximizing resource productivity. It is concerned with developing

22
and nurturing a distinctive competence to provide a company or business unit with a competitive
advantage

5.3.1 Marketing strategy

Nestle is one of the largest company in food processing industry in terms of revenue
& profitability. It is fortune 500 company which is serving different customer segment all over
the world and have the market capitalization of the US $250 billion (may 2015 data).The leading
health, Nutrition & wellness company is taking care of the needs & wants of their consumers and
their families all around the world so as to help them to live a healthier lifestyle.

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.

Products:
One of the most known coffee brands Nescafe, belongs to the house of Nestle and is one of the
cash cows for Nestle. Nestle Every day, Nestle slim and Nestle Milk maid are some of the milk
and milk based products from the house of Nestle. 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. 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 Bournville
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.
Price:
The price is dependent on the market of each individual products. For example, 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 5 rs maggi.
Placement:
Nestle follows the FMCG strategy of distribution which involves breaking the bulk. The typical
distribution strategy of Nestle is as follows.

23
Manufacturing >> C & F agent >> Distributors >> Retailers >> Consumer
Manufacturing >> Bulk buyers >> Consumer
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.
Promotions for other products too are done smartly. Kitkat focuses on “Take a break” and has
done some good marketing for the same. Kitkats website too is very innoative 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.

Product Mix has four dimensions,

 Width (Product Line)

 Length(number of items)

 Depth(Offered models)

 Consistency(Relationship of product)

Product Mix of Nestle are

 Beverages

 Baby Food

 Coffee

 Maggi

 Milk Products

24
  Bottled Water

1. Market Position

The positioning has many number of its physical elements but more perceptual ones, it’s all
about the identity and where the position of company in the market and in the customers eyes,
once if know where we are we can determine where our company wants to be. This has many
market responsibilities. It involves all the marketing mix.

2. Distribution channel

First arrived raw material, secondly RM is being Manufactured, thirdly finished product
distributed to agencies and finally in the hands of customers.

3. Sales Promotion

Our Sales team drives that forward. We have a very varied brief. We handle category and
shopper management, customer relationships, route to market strategies, field sales activities and
our customer-facing supply chains. All of these areas are focused on delighting our consumers
and making sure our products are available wherever and whenever they want them.

4. Pricing Issues

A major problem for Nestle is in pricing strategy. The company is finding it difficult to raise
prices amid increasing competition and economies either slowing or going into recession. Low
commodity costs, while beneficial for driving profits, also makes it more difficult to raise
prices. Pricing contributed to a 2 percentage points increase for last year's sales, which fell short
of 2.2 percentage points in 2014. However, CFO Francois-Xavier Roger said on the call that
inflation in emerging markets could increase the company's pricing power in the second half of
2016.

5. Public Policy

Companies are increasingly playing an active role in society, including in the development of laws, rules
and policy documents. Today, businesses are often expected and asked to participate in such activities.
Providing our expertise to assist informed decision-making, working in collaboration with governments,
authorities and other relevant bodies, is therefore an important responsibility. We have procedures in
place that support consistent transparent interaction, and ensure that engagement is carried out
professionally and with high standards. All of our policies are available to the public

25
5.3.2 Financial
The finance team drives our growth platforms, supports our operational pillars, leverages our
competitive advantage and always delivers. We support sound business decision-making and
innovation planning. Of course, they also help optimise our growth, cash flow and return to
shareholders. We’re true change agents – aiming for long-term value creation.
The function has specialists in areas ranging from Tax to Pensions, Risk Management to
Treasury, Audit to Acquisitions & Business Development, and Internal Controls. There’s even a
Decision Support Department specifically to help businesses with management reporting. And
the roles range from business partners to factory controllers, to controllers of functions such as
Supply Chain or Sales
The financial performance for the three months period is summarized below:
Jan – Mar 2020 Jan – Mar 2019 change
PKR Million PKR Million
Sale 29,883 29,136 +2.6%
Gross profit 8,840 8,870 +0.8%
% of sale 29.6% 30.1%
Operating profit 4,054 4,027 +0.7%
% of sales 13.6% 13.8%
Net profit of sale 1,939 2,274 -14.7%
% of sales 6.5% 7.8%
Earnings per share 42.76 50.15 -14.7%

Future Outlook:
In view of the very exceptional situation caused by COVID-19, we will continue to prioritize
health and wellbeing of our employees, business continuity and supporting communities with our
relief efforts. The management remains fully committed to manage the ongoing challenges and
will make all out efforts to deliver promise of providing nutrition, health and wellness to
consumers in these testing times and ensure sustainable business growth.
1. Debt Policies

Nestlé Pakistan Limited (“the Company”) is a public limited Company incorporated in

Pakistan and its shares are quoted on Pakistan Stock Exchange. Principally the Company is
engaged in manufacturing, processing and sale of dairy, nutrition, beverages and food
products including imported products. Registered office (which is also the Head Office) of
the Company is situated at Babar Ali Foundation Building, 308-Upper Mall, Lahore. The
Company has four manufacturing facilities located at Sheikhupura, Kabirwala, Port Qasim
Karachi and Islamabad.

2. Dividend Policies

The Board of Directors of the Company (“the Board”) has approved the Dividend
Distribution Policy of the Company (‘the Policy”) which endeavors for fairness, consistency
and sustainability while distributing profits to the shareholders. The factors considered while

26
 arriving at the quantum of dividend(s) are:  Current year profits and outlook in line with the
development of internal and external environment.  Operating cash flows and treasury
position keeping in view the total debt to equity ratio.  Possibilities of alternate usage of
cash, e.g. capital expenditure etc., with potential to create greater value for shareholders. 
Providing for unforeseen events and contingencies with financial implications. The Board
may declare interim dividend(s) as and when they consider it fit, and recommend final
dividend to the shareholders for their approval in the general meeting of the Company.

3. Asset Management

Working capital management is a critical component tool for the growth and profitability of
all business entities. If the levels of working capital are not adequate, it may impose
vulnerabilities and challenges in meeting day to day obligations. This is the lifeblood of any
business entity and must be monitored to maintain the survival of the company. If it becomes
weak, businesses can hardly survive and achieve growth prospects. This expansive growth
over the years shows how the Neste Pakistan top management and executive’s dedication
towards analyzing every component of their working capital management profile. Also, they
have taken into account the essence of working capital, to assess vulnerabilities and threats
that the business may be exposed to.

Capitalization Structure

Rupees in millions

Assets Rs. Liabilities Rs.

Current assets Current liabilities
Cash and cash 7469 Financial debt 14032
equivalents
Short term 2794 Trade and other payable 18803
investment
Inventories 9343 Accruals and differed income 4492
Trade and other 11766 Provisions 802
receivables
Accrued income 498 Derivative liabilities 420
Derivative assets 254 Current income tax liabilities 2673
Current income tax 768 Liabilities directly associated 393
assets with assets held for sales
Assets held for sales 2771

Total current assets 35663 Total current liabilities 41615

Non-current assets Non-current liabilities

27
 Property, plant, 28762 Financial debt 23132
equipment
Goodwill 28896 Employee benefit liabilities 6151
Intangible assets 17824 Provisions 1162
Investment in 11505 Deferred tax liabilities 2589
associate
Financial assets 2611 Other payables 429
Employee benefit 510 Total non-current liabilities 33463
assets
Current income 55 Equity
assets
Deferred tax assets 21114 Share capital 298

Total non-current 92277 Treasury shares (9752)

assets
Translation reserve (21526)
Other reserves (45)
Retained earnings 83061
Non-controlling interest 827
Total equity 52862

Total assets 127940 Total equity and liabilities 127940

Production

1. Productivity Improvement

 Nestle continues to make progress toward improving the nutritional value of its food and
beverage products that do not meet its Nutritional Foundation criteria, according to the
company’s 2015 Creating Shared Value Report. The N.F. criteria are based on international
health authorities, such as the World Health Organization as well as local authorities.

2. Production Planning

Currently planning a product that is requiring similar tangible and intangible resources. As a
result they are exchanging production equipment and workers between factories. So we can
easily say that nestle are also achieving an economy of scope. In addition to this, capacity is
being utilized by the department.

3. Plant Location

Sheikhupura and Kabirwala

5.3.3 Research & Development

Product Development

28
Innovation has been at the heart of our company since its beginning. Whether it’s about
convenience, health or pleasure, our R&D team creates trustworthy products, systems and
services that contribute to improving the quality of peoples’ lives.

Our R&D network is the largest in the food industry with 23 R&D Centres, 3,900 scientists and
researchers working across the world.

1. Technological forecasting

The Product Technology Centres (PTCs) provide technical development expertise for our
product, manufacturing and packaging processes. Each is aligned with a particular business and
certain product categories – as such, it acts as a global hub. For instance, the Switzerland PTC
offers worldwide know-how on coffee, beverages, and cereals, dairy and nutritional products.

2. Patent & Licenses

Patent rights make it illegal for anyone except the owner or someone with the owner’s
permission to make, use, import or sell the invention in the country where the patent was
granted.

The licence document should set out the terms and conditions that apply to using the patent,
including any payment or royalties to be made by the person using the patent (‘the licensee’).
The licence should also show the geographical area and field of use in which a licensee may sell
your product and how long the licence will last

5.3.4 Human Resource

1. Personal Policies

At Nestlé, we recognize that our employees are the key to our success and nothing can be
achieved without their engagement.

The Nestlé Management and Leadership Principles include the guidelines inspiring all the Nestlé
employees in their action and in their dealings with others. The Corporate Business Principles
refer to all the basic principles which Nestlé endorses and subscribes to on a worldwide basis.
Both these documents are the pillars on which the present policy has been built.

2. Labour Relations

At Nestlé, we have established a culture based on the values of trust, mutual respect and
dialogue.

29
They also aim to empower women to fully take part in society and the economy across the value
chain – in the workplace, marketplace and community. While improving people’s lives through
community and societal activities, and increasing their access to employment, education and
skills training, all of which are essential. 

3. Executive Department

The day-to-day management of the Nestlé business is taken care of by our Executive Board. The
designated Board Members manage diverse parts of the global business.

4. Government Regulation

We want to be the trusted leader in our sector. Building our business on clear principles and sound
governance helps us maintain trust in the Nestlé brand and reduce risk throughout our value chain

6 Management Strategies:
6.1 Human Resource Management
Nestle aims to increase the business, list of customers, profits and sales ant improve standard of
living at the same time, it is active and the quality of life for everyone. Nestle also convinced that
their employees is the strength of the company and it is impossible to achieve their goals and
objectives without their energy and their commitment, which makes people their most important
assets. Involvement of people and also showing their interest at all levels starts with the basic
and appropriate information on the company’s activities and also on the specific aspects of their
work. Through shared their views, ideas and communication and focused vision, everyone is
invited to share and contribute their opinions and views to improvements enhancing company
personal development and results.
Nestle is the people inspired company, currently there are around 328000 employees working,
who are selling their different products (quality product) and providing services in 191 countries
over the globe.
Nestlé’s HR offers opportunity in three key areas.
1. You can join career in HR business partnership.
2. You can join the devoted specialist team.
3. You can also join the centre of scales.

HR also do recruitment practices, which refers to attempt of getting interested applicants and
creating a pool of prospective employees so that the management can select the right person for
the right job at the right time.

30
HR strategy also focuses on three areas:
a. People: people with qualities like loyalty, hard work, devoted, and punctual.
b. Performance: Achieving a full potential of our business and our people.
c. Culture: Match between company’s culture and applicant values.

6.2 Administration:
Nestle is a diverse company where you meet people from different ethnicity, age group and
also vast experience, the environment feels homey, the option of flexible hours is an advantage
for everyone. In short they are thinking ahead of everyone needs.
So working with Nestle team you will feel like you are surrounded by those people who are
born for some purpose, for some garden, for some specific tasks and benefits. They are leaning
on your expertise and for those details that make immeasurable differences in every area.

6.3 Decision Making (centralizes & decentralized):

Nestle the food and beverages major are decentralizing its decision making. The aim is better
consumer insight, more focused offerings to different sets of consumers and to revamp market
penetration. It has set up virtual team for each geographical and culturally different cluster and
these could also come up with local variants of established brands. Apart from more targeted
communication and distribution.
The Geneva-headquartered entity’s recent focus has been on offering value added, premium
and semi-premium products that do not also require compromising on profit margin. Its eyes
are set on the top 100 cities and adjoining regions as its key market in Pakistan.
“Consumer profiles in Pakistan are changing fast. If we don’t prepare to reach more towns, we
will miss out future growth opportunities.
Nestles value creation model:

31
 So Nestle is creating shared value at a scale that makes a difference, Together with our partners
we are enabling people to live and lead healthy and happier lives, building strong communities
and supply chains and also maximizing long term value by accelerating growth, improving
margins and allocating capital prudently.

6.4 Total Quality Management (TQM):

TQM is a quality management process that change the whole organization based on customer
oriented quality, continuous improvement, organizational involvement in processes and solving a
problem in a team. This will fulfilled the customer requirement by producing the product and
service, which exceeds the customer needs.

In total quality management, the customer determines the quality of output. The output with the
high quality will meet the requirement and expectation of customer. From managing outcomes to
managing and improving processes there are shifting in focus from what to do to how to do the
processes better. Quality performance expands to include how well the relationship of each part
to the process and each part of the process works. Also, process improvement focuses on
continuously achieving the greatest potential benefit for our customers.

Nestlé’s top priority is quality for their consumers. Their actions to ensure quality and food
safety are guided by the Nestle quality policy (company), which also conclude their
commitments.

1. Build trust by offering products and services that much consumer expectations and
preferences.

2. Gain a zero defect no waste attitude by everyone in our company.

3. Comply with all internal & external food safety, quality and regulatory requirements.

4. Group wide objective is making the quality.

So Nestlé strives to create value that can be sustained over the long term by meeting consumer
needs for nutrition, enjoyment and Quality they can trust. Every day, millions of people all over
the world show their confidence in us by choosing Nestlé products. This confidence is based on
our Quality image and a reputation for high standards that has been built up over many years.
Every product on the shelf, every service and every customer helps to shape this image. A Nestlé
brand name on a product is a promise to the customer that it is safe to consume, that it complies
with all relevant laws and regulations and that it constantly meets high standards of Quality.
Each and every Nestlé employee is involved in and dedicated to achieving high Quality
standards for our customers and consumers.

Nestle quality management system is the platform that they use globally to guarantee quality and
food safety regarding their quality standards and to create value for customers. Quality is build
during product development according to the requirements of the consumers. Nestlé’s research

32
and development network implies in “quality by design” to the all of their products. Nestle is
also following internationally recognized Good Manufacturing Practices to ensure quality and
food safety, which covers everything including manufacturing, standard operating procedures,
people management and training, maintenance and material requirement planning. Furthermore
they are also responding quickly to complaints regarding quality.

So TQM that used for continuous improvement in organizational performance. TQM strengthens
the competitive strength of enterprises, Nestle maintains their quality from production to
packaging in each and every step of process to maintain quality and standards it helps them to
gain more potential customer and helpful them to win trust and confidence of customers.

6.5 Motivation:
Motivation is the set of forces that initiates, directs and makes people persist in their efforts to
achieve their goals and objectives.

We should know that Motivation is very important for not only a team but also for an
organization. Nestle empowering and encouraging staff members to do the best job they are
capable of helps and job satisfaction, lowering turnover in industry that has a reputation for
energizing its employees.

A culture that emphasizes employee wellness, and also helps staffers minimize stress, will also
reap benefits.

Nestle always takes five best approaches to motivate:

1. Saying thanks with meaningful gifts.

2. They put everything in writing.

3. Giving them career development opportunities.

4. Endorse a healthy life style.

5. Using their foodservice reward as incentives.

6.5.1 Incentives:
Nestlé pay their staff based only on their performance, not on hierarchy. Pay rises are based on
performance evaluation and an annual salary review. The department manager determines the
percentage pay rise and if the business is not doing as well as hoped then the pay increase will
be low. Nestle ensure their salaries are competitive by employing an outside research firm to
keep track of competitor pay rates.

Nestlé has a bonus scheme for the employees and will pay a bonus to all its staff members. The
level of bonus depends on whether the overall business achieves its profit goals, if the employee
achieves their individual targets and lastly what job role the employee has. Nestlé sets targets

33
and goals for their staff that are aligned to business objectives. Having a bonus scheme can
encourage staff to achieve certain goals. If the staff members achieve their targets they receive a
bonus payment and the company will have achieved its goal. For a bonus scheme to be
effective, the targets and goals for the staff must be outlined clearly at the beginning, making
sure staff is motivated to achieve the goals that the company has set. It is important targets are
achievable otherwise staff may become disillusioned.

7 Market Analysis
7.1 Segments & Target Market
Nestle is one of the biggest companies when it gets to food processing. Therefore Nestle
has a huge investment in the marketing and advertisement. Here we will analyse both the
marketing strategy and marketing mix.

Nestlé has 7 business verticals offering health, nutrition and wellness products. Its dairy
products, powdered and liquid beverages, bakeries and cookies, and confectionary
business verticals are stars due to Nestlé having a strong hold in these businesses with
large product length.

Now coming to the marketing mix, we understand marketing mix as a combination of

factors that can be controlled by a company to influence costumers to purchase its
products.

The marketing mix of Nestlé discusses the 4P’s of one of the strongest FMCG
companies in the world. Nestlé’s marketing mix shows that Nestlé has a strong product
line which boosts its marketing mix.

7.1.1 Segmentation
The world’s leading FMCG Company is using different strategy in different markets. It uses
demographic, geographic and behavioural segmentation strategies to cater to the changing needs
of the most competitive industry. Different targeting strategy is what helping the company in
targeting the homogeneous set of customers. It also uses a mix of value based and product based
positioning strategies depending upon the kind of product they are branding and the market they
are selling their products.

Segmentation strategy is important because it encourages them to learn about their customers,
their needs and their preferences, to achieve their higher turnover, goals and objectives.

7.2 Geographic
Geographic segmentation divides the market based on the units of geography. Such as location,
languages and other basic elements which separate one geography from other. I.e. Pakistan and
Iran both having different markets and environment so the segmentation for both countries need
to be different.

34
FMCG companies also use the advantage of geography for their sales effort. For any FMCG
product the territories are clearly marked, on the basis of pin code, area, region or even the
complete town. Thus, the marketing is done specifically keeping the sales point in mind. On the
other hand, managing inventory, as well as liquidation of products also happens based on the
preference of that geography.

Geography can affect any sort of product being sold in a particular region. Take water purifiers
as an example, purifiers with ultra violet technology (light purification) are used for areas which
have clean water. But purifiers with RO technology (heavy purification) are used for areas which
have unclean water. Thus, products can also be decided on the basis of geography.

Thus overall geographic segmentation can help the company in following manner listed below.

o Useful form of segmentation but it becomes very basic.

o It helps us to penetrate the market in a better way and makes you to be

aware of Geographical gaps in the market.

o It makes distribution channels very better for middle level managers.

o Makes marketing strategies very focused.

It helps the sales team in keeping clear targets on the basis of geographical potential of the market.

Continent Asia
Country region Pakistan
City or metro size Twin Cities (30,00,000) Population
Climate Urban Area

7.3 Demographic
Nestlé segmented market area for its main products based on the generation. For the products
Cerelac, Lactogen, Koko Krunch, Nido, Nestle divided the market area segment for new born
baby and children of different ages.

 Nido: It is nutritious milk specially makes for children 2 years onwards. It

includes 25 minerals and vitamin D which helps child’s growth.

 Cerelac: Nestle also provide cerelac for new aged baby. It contains milk
and rice mixture for less than one year’s baby. It fulfills baby’s proper
nutrition in foods.

 Koko Krunch: Koko krunch contain child’s required growth. It’s very
sweet and delicious and also includes vitamin protein, mineral.

35
  Lactogen:  Nestle Pakistan brings full cream milk powder in the country.
It gives baby required nutrition. Lactogen one is for Childs whose age not
more than 6months and lactogen 3 is for babies whose age is below 1
year.

 Income: Nestle produces the products that save money even an ordinary
man can buy nestle products, they produce the products in small
quantities so that everyone can buy.

 Occupation: Nestle also manufactures its products based on consumers

occupations.

 Age:  Nestle never offers same product for different age groups. For
example it offers milo for children and coffee for adults.

7.4 Psycho-graphic
Life style and personality: Nestle Singapore provides KIT KAT these people who really want to
taste and enjoy chocolate. Nestle Nescafe 3 in 1 is for specially those users and customers who
are really engaged in activity and do not have more time. They can use by taking Nescafe 3 in 1.
All the things are mixed sugar, milk and coffee.

Social Class i. Nestle Pakistan is supporting the

communities they operate in by
providing water and sanitation to
over 60000 people every day.

ii. Nestle also make a positive

contribution to society, for the
farmers who grow their
ingredients, the communities
where they live and work.

Lifestyle Healthier lives, Nestle empowering

individuals and families to make
healthier food, hydration and active
lifestyle.
Class Enhancing quality of life & contributing

36
 to a healthier future.

7.5 Behavioral
Product Mix (4P’s)

The marketing mix of Nestlé discusses the 4P’s of one of the strongest FMCG
companies in the world. Nestlé’s marketing mix shows that Nestlé has a strong
product line which boosts its marketing mix. Below are the products, price,
placement and promotions of Nestlé. (4P’s)

i. Product:

There are 4 different strategic business units within Nestlé which are used
to manage various food products.

o 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. Nestlé has a worldwide distribution
and has many different variants.

o Milk & Milk Products:

Nestle everyday (milk pack), Nestlé Cerelac and Nestlé Milk

Bunyad are some of the milk and milk-based products from the
house of Nestle.

o Prepared Dishes:

Probably one of the most widely sold ready to cook ready to cook
noodle brand is Maggi. Nestle has expanded Maggi due to its
success.

o Chocolates:

Nestle has some popular chocolate products, most popular being

Nestle KitKat, Munch and Milky bar.

As we can see two major brands of Nestle are very high contributor to its brand
equity. (Nescafe & Maggi)

ii. Price:

37
 The price is dependent on the market of each individual product. For
example, 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 costumer to switch brands.

The strength of pricing for Nestle comes from its packaging or

consumption-based pricing. For Nescafé as well as Maggi, Nestle offers a
lot of sizes and package options.

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.

iii. Place:

These are two different forms of distribution which Nestle has typical of
any FMCG company. However, Nestlé’s channel is known to be strong
with good marketing and sales network for channel distribution.

Nestle regularly introduces trade discounts and various tactics to keep the
channel motivated. The major challenge is the distribution of Maggi
which is the most in-demand product along with Nescafe. Due to these
two products, Nestlé 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.

iv. Promotion:

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.

On the other hand, Nestle’s brand was pushed by the excellent product
quality of Maggi and the witty and innovative campaigns of Maggi.

Promotions for other products are also done smartly. The major push
expected of a FMCG company is in sales promotions at the ground level.
This is where Nestlé really rocks. Nestle focuses on its strength which is
Maggi, Nescafe and KitKat which are the most promoted brands in the
market at ground level.

7.6 Market share

2019 was another year of strong progress. Key operating and financial metrics improved significantly for
a second consecutive year. Our organic growth reached to 3.5%. Real internal growth accelerated to 2.9%
for the entire year, which is the highest level in the last six years. Profitability improved again to reach

38
our guided range one year ahead of plan. Cash flow was strong, while underlying earnings per share and
returns to shareholders reached record levels. Here is a summary of the results achieved during the last
year.

Group sales Organic Growth (%) Real Internal Growth (%)

92.6 Billion 3.25% 2.9%

Underlying Trading Underlying Trading Underlying Trading

Operating Profit Operating Profit Margin Operating Profit
Margin(Basic)
16.3 Billion 17.6%
+60 (Basic points)
Trading Operating Profit Trading Operating Profit Trading Operating Profit
Margin Margin (Basic)
13.7 Billion
14.8% -40 (Basic Points)
Earnings Per Share Earnings Per Share (%) Underlying Earnings Per
Share
4.3 +28%
+11.1%
Operating Cash Flow Proposed Dividend Proposed Dividend
Increased
15.8 Billion (58.4% of 2.7
net financial debt) 10.2%

No of countries we sell 187

Number of Employees 291000
Total Group salaries & Social welfare 16 Billion
Expenses
Corporate Taxes Paid in 2019 2.9 Billion

7.7 Competitive Analysis

Nestle is an eminent food and drink company located in Switzerland.  The company is one of the
largest food companies in the world. The business operations include producing about 2000
brands where their main products fall into categories of tea, coffee, bottled water, medical and
baby food, breakfast cereals, confectionery products, and lots more.
39
The company is seen in about 187 countries worldwide. One of the famous products of Nestle is
the Nestle milk chocolate which is a chocolate bar. It is liked by many people and also sold in
many countries. The company focuses on the fact to produce and supply great quality and
healthy food products. Nestle has a huge portfolio of products and sees an enormous competitor
across the food industries.

7.7.1 Primary Competitors

Being the world’s largest food manufacturer, Nestlé faces a tight competition from its close rival
Unilever. Unilever has a workforce of about 230,000 employees and operates in about 160
countries with its headquarters being in London for food and Rotterdam for home and personal
care. The company is edging Nestlé in terms of the quality of its products which has made it the
second player in the Western European ready meals market having a market share of 8,6%, 0.3
points behind leading Nestle.

As the private retailers push the label of their products into the market, they are gaining the
ability to achieve shelf space at groceries and maintain it. Nestle, however, has a large portfolio
of prominent consumer brands and this increases its shelf space even as the private brands grow.
Market Roast & Soluble Roast & Soluble
Position Ground Ground

1 Kraft/Philip Nestle Kraft/Philip Nestle

Morris Morris

2 Kraft/Philip Kraft/Philip Sara Lee / Kraft/Philip

Morris Morris Douwe Egberts Morris

3 Nestle Kraft/Philip Nestle Others

Morris

1 Keurig Dr Pepper

2 Uniliver

3 Mondelez International

4 Hershey

5 Mars

6 PepsiCo

40
7 Danone

8 Kraft Heinz

7.7.2 Indirect Competitors

Following are the indirect competitors of Nestle.

i. Engro Food Limited

ii. Murree Brewery company Limited
iii. Mitchells

7.8 Main Marketing Strategies

An effective marketing strategy combines the 4Ps of the marketing mix. It is designed to meet
the company’s marketing objectives by providing value to their customers. The 4Ps of the
marketing mix are related and combine to establish the product’s position within the target
market.

4Ps (Product, Price, Place & Promotion) are discussed briefly in marketing mix (above).

7.8.1 Market Positioning

The positioning has many number of its physical elements but more perceptual ones, it’s all
about the identity and where the position of company in the market and in the customers eyes,
once if know where we are we can determine where our company wants to be. This has many
market responsibilities. It involves all the marketing mix (which discussed above).

Nestle also choose the differentiated marketing. They provide different products for many
segments based on different ages, occupation, season and environment of that particular region.

Financial Strategies
The finance team drives Nestle’s growth platforms, supports operational pillars, and leverages
their competitive advantage and ready to deliver anytime.

The function has specialists in areas ranging from Tax to Pensions, Risk Management to
Treasury, Audit to Acquisitions, Business development and internal controls.

41
8 Other strategies nestle
8.1 procurement
The Nestlé Procurement Policy outlines the fundamental principles applicable to any
procurement activity in Nestlé. This document does not try to answer the question “how to buy?”
but rather establishes a set of principles to enable all who perform a Procurement activity to
better understand the fundamentals of Procurement in Nestlé. It also enables all people who
interface with Procurement to appreciate the parameters and requirements of any procurement
activity within Nestlé as it contributes to the success of our Business.

Nestlé Corporate Business Principles, The Nestlé Management and Leadership Principles,
Nestlé Code of Business Conduct , Nestlé Supplier Code, The Nestlé Leadership Framework and
Human Resources Policy, Operational Excellence – Cost Improvements Tracking standard, GI-
31.104-3 Vendor Approval Process, GI-01.003-3 Co-Manufacturing and Co-Filling, Nestlé
Procurement Best Practices Handbook Each Nestlé Market or Business is responsible for
reviewing and developing their Procurement policy and procedures to ensure consistency with
this policy

8.1.1 Procurement Vision

Procurement will be a strategic Business partner delivering a competitive advantage and
sustainable value to all Nestlé spends; working with the Business for the Business.

8.1.2 Procurement Mission

Procurement will deliver sustainable value to the Business through a focus on, service, total cost
advantage and innovation. This value will be delivered through the right people working and
behaving as ONE team, applying the Procurement best practices in line with the 7 Nestlé
Procurement Best Practices Handbook and leveraging spend at the appropriate level.

42
8.2 Production strategies
8.2.1 Capacity of plant
The manufacturing facility is spread over 1m ft² and the building covers an area of 515,000ft².
The facility currently employs 555 people. The production capacity of the plant is expected to be
more than 100,000t a year.

The facility accommodates Nestlé’s Regional Microbiological Laboratory which specialises in

analysing of salmonella. The laboratory began operations in 2009 and serves the Nestle factories
in the Middle East region. It is also used as a training facility for various government bodies of
the UAE.

8.2.2 Quality and safety

Our commitment to consumers

Quality and Safety for our consumers is Nestlé’s top priority. This applies to our entire portfolio,
from foods and beverages to all our systems and services.

Nestlé Quality Policy

 Build trust by offering products and services that match consumer expectation and
preference
 Comply with all internal and external food safety, regulatory and quality requirements
 Gain a zero-defect, no-waste attitude by everyone in our company
 Make quality a group-wide objective

8.2.2.1 Nestlé Quality Management System

Our Quality Management System is the platform that we use globally to guarantee food safety,
compliance with quality standards and to create value for consumers. Our internal Quality
Management System is audited and verified by independent certification bodies to prove
conformity to internal standards, ISO norms, laws and regulatory requirements.

43
8.2.3 Production Staff
This statistic depicts the total number of Nestlé employees worldwide from 2008 to 2019. In
2019, Nestlé employed approximately 291,000 people around the world. Nestlé is a
multinational consumer goods company, headquartered in Vevey, Switzerland.

8.2.4 Laboratory
The laboratories perform analyses on raw and packaging materials, intermediate and finished
products to support product release and monitoring as well as R&D projects. All laboratories are
accredited to ISO 17025 ad have systems in place to ensure data confidentially requirements are
adhered to.

8.2.5 Product line of nestle

Beverages

Coffee

Water

Cereals

Chilled

Chocolate, confectionery and baked goods

Foodservice products

Frozen food

Frozen Dessert

Healthcare nutrition

Instant foods

Performance nutrition

Petcare

Nestlé Purina petcare products

44
Refrigerated products

Seasonings

Shelf stable

Yogurt

As shareholder

Former brands

Beverages

Bottled water

Confectionery

Eyecare

Frozen food

Health and nutrition

Petcare

9 Control procedures
9.1 Quality control of nestle
In Nestlé group, they prioritized quality. There are over ten million people throughout the world
enjoying Nestlé’s products each and every day. Nestlé conducts business on a global scale;
everyone pays careful attention to the cultural bias and personal tastes of each country, because
each food culture is based on the distinct characteristics of that particular region. However, it
will not going to be too far in the pursuit of food safety and quality management. Nestlé has
attained a world-class level by applying “Nestlé Quality Management System” to all their
products. Nestlé respects to all relevant laws and regulations of each country, but also
implements their own independent high standards of total quality management throughout every

45
aspect of the manufacturing process, from raw materials to end products, in order to consistently
bring safe and quality products to consumers around the globe.

Furthermore, they are continuously “improving” their products (KAIZEN) in the global network,
which the headquarters of the quality management department in Switzerland, and through the
performance of regular inspections that ensure their quality management system is functioning at
the highest level.

9.2 HR control of nestle

Line managers have the prime responsibility for building and sustaining an environment where
people have a sense of personal commitment to their work and give their best to ensure our
Company’s success. They care for and develop the leaders of tomorrow. Line managers decide
on all people matters under their influence, within the boundaries set by the policies and
principles, acting as the final decision makers. The Human Resources (HR) structure enables and
empowers them in establishing business needs and their corresponding people requirements.
Therefore, the mission of HR managers and their teams is to provide professional guidance to
line managers aiming to deliver superior business results by optimising the performance of our
people, while ensuring exemplary working conditions. With a ‘Nestlé in the Market’ (NiM)
approach, HR has adopted a streamlined approach to ensuring functional leadership and the
highest level of focus, clarity, and efficiency. Our structure is based on three dedicated areas
which provide specialized services (Centres of Expertise), deploy HR strategies within a specific
business (Business Partners) and perform transactional activities (Employee Services).

9.3 Finance Control

The finance team drives our growth platforms, supports our operational pillars, leverages our
competitive advantage and always delivers.

We support sound business decision-making and innovation planning. Of course, they also help
optimise our growth, cash flow and return to shareholders. We’re true change agents – aiming
for long-term value creation.

The function has specialists in areas ranging from Tax to Pensions, Risk Management to
Treasury, Audit to Acquisitions & Business Development, and Internal Controls. There’s even a
Decision Support Department specifically to help businesses with management reporting. And

46
the roles range from business partners to factory controllers, to controllers of functions such as
Supply Chain or Sales.

Make our Finance team your next career destination and you’ll monitor and report the
performance of our business, analyse strategic issues and complete specific projects. Whatever
your particular focus, you’ll never be short of challenges and can be sure that your ideas and
expertise will sharpen our competiveness.

9.4 Marketing control

9.4.1 Market Leadership Strategy
If an organization has to maintain the position of market leadership then the marketing plan will
be focused towards two main factors. First is to increase the market share and second is to keep
intact the existing customers by providing them value to their money they are spending to buy
the company’s products of services (Kathryn, 2010). Market share can be increased by finding
the new markets in other demographics or expanding in to the new locations. Another way to
increase the market share is to attach the competitor’s market share through variety of strategies.
Offering several value added services helps to keep the customers intact with the organization. In
this case the marketing plan will focus towards the augmented features of the product or service.

9.4.2 Market Challenger Strategy

If the organization’s strategy is to be a market challenger then the marketing plan will be focused
towards the small unmet needs of the customers. The marketing plan will be very aggressive and
the focus will be to increase the market share in small chunks and to target the customers by
promoting those features which are fulfilling their unmet needs (Kathryn, 2010).

9.4.3 Market Follower Strategy

If an organization is following market follower strategy then the marketing plan will not be very
aggressive (Dibb, 2001). The markets are already identified and researched by the competitors
and the market plan will target those weak points which are left by the competitors and the better
solutions will be provided to the customers.

47
9.4.4 Market Niche Strategy
Organizations can also divide the market in to small segments/chunks and prepare the marketing
plan for each segment. This allows the organization to influence the customers more deeply with
the marketing campaign as the focus is on a particular segment. For instance the marketing plan
of a cosmetic can target the women between the age limit of 20-25 years.

9.4.5 Alliance Strategy

The organization can also form strategic alliances to increase the impact of the marketing plan.
The strategic alliances enables the organization to offer new products or value added services to
the customers and the marketing plan focuses on promoting the benefits of the alliance of the
organization to the customers.

9.4.6Component Parts of a Marketing Plan

Marketing plan refers to that document which outlines the actions and details that are required to
be undertaken in order to achieve one or more marketing objectives. Marketing plan can either
be for a brand, or for a product or service or even for a whole product line. Marketing plans can
cover the marketing objectives of up to five years and the marketing objectives are aligned with
the organizational objectives. Following are the main components of a marketing plan.

9.4.7 Situation Analysis

Situation analysis is very important and initial part for developing a marketing plan. It explains
and clarifies the current position of the organization in the market. This analysis should be done
fairly by the organization as exaggerating the current market position in front of the management
will ultimately give a failure at the end of marketing campaign. Situation Analysis involves
external, internal and customer’s analysis 

9.5 Taxation
Taxation is an important and material topic for Nestlé and for our stakeholders, in terms of
compliance, and our Nestlé Creating Shared Value, and therefore we actively manage, monitor
and control our Group tax affairs.

We believe it is good practice to voluntarily disclose information about our tax management and
our tax contributions, as provided in the following sections

48
 Principles of Responsible & Sustainable Tax Management & Strategy

Over the last years, we have developed 10 Principles of Responsible & Sustainable Tax
Management and five Foundations of our long-term Group Tax Strategy.

These principles and foundations are based on the recognition that tax is an integral element of
our overall corporate social responsibility, as well as on the fundamental objective of tax
compliance and of responsible and sustainable planning.

Those Principles and Foundations are in line with The Nestlé Corporate Business Principles and
are cascaded down to, and monitored across, our Tax Organization, both at Group and Market
levels.

10 Problem identification
10.1 Management issues of nestle
1914- 1918 – onset of the World War I bring a new revolution to the company.1905 - The first
merger. The Nestlé Company merged with the Anglo-Swiss Condensed Milk Company, large
production and manages to penetrate the European Market. 1866 - Founder , Henri Nestle
created one of the first baby formulae.

Nestlé model with group model Nestlé snow with snow brand Milk products, Dairy Partners
Americas (DPA) with Fonterra. Nestlé Indofood Citarasa Indonesia with Indo food Nestlé
Colgate-Palmolive with Colgate-Palmolive, Lactalis Nestlé products Frais with Lactalis.
Beverage Partners worldwide with the Coca-Cola Company, Cereal Partners worldwide with
General Mills 1980’s – 2003 – More acquisitions. 1945 – 1975 – End of the World War II and
the beginning of new phase.

A worldwide leader known for manufacturing products as diverse as chocolates and diaries,
Nestle has clearly been through many changes over the years. More than 500 factories operating
in 80 countries employing more than 224, 000 people with annual income of USD 4.7 billion
under Peter Brabeck- Letmathe as a Chairman of Board Director. By now, Nestle company had
become the world’s largest food company.

CHILD LABOUR ISSUE PROBLEM

49
 1. The use of child labor in cocoa production Because of the poverty and a lack of schools
Violation of child labor law Enslaved children and child trafficking
2. Introduces the nestle supplier code Monitoring all participants in its supply chain and set
clearer labor standards Give special training on how to address child labor problem
3. The manager had created Nestle Supplier Code to guide and maintain the relationship
between supplier and company. The manager control is severely impeded by a variety of
internal and external forces beyond their. Working with government image of change
(CARETAKER). Monitoring all of process for recruitment of child labor
1. RAW MATERIALSPROBLEM
2. Unexpected demand by customers
3. Bad weather and natural disaster
4. Inaccuracy of orders receives in inventory or stocks in hands

SOLUTIONS

1. Manager builds multiple relationships with other raw materials suppliers

2. The surplus products will be sell with promotion to clear the stock
3. Build the Dealer Management Systems (DMS) - Dms is a software for solutions that
provide tools for managing sales, services, parts and inventory management, business
management, integration, and core architecture - Dms was build to maintain the
relationship between dealer and consumers
4. This can prevent the poor the relationship from happens among the Nestle dealers and
consumers. The manager had built Dms software to guide and maintain the relationship
between dealer and consumers. The manager control is severely impeded by a variety of
internal and external forces beyond their. Not all region has similar demographic factor
such as race.IMAGE OF CHANGE (CARETAKER). Import inventories from other
region RECOMMANDATION

Unexpected demand by customers

Free sampling, Advertisement, Supporting WHO campaign in introducing complementary

foods, Coordinated by the International Nestlé Boycott Committee.

50
SOLUTION
1. Nestle unethical marketing of infant formula., in late 1970s, there is a boycott of Nestle
products in the United States and several European countries. ETHICAL AND
BOYCOTT ISSUEPROBLEM
2. Small changes make a large impact, Only necessary change at the company. CEO of
Nestle, Brabeck Letmathe using the NURTURER image. Compliance with international
codeIMAGE OF CHANGE, Improve the marketing strategies, Increase product quality,
RECOMMENDATION
3. Develop The Nestlé Leadership Program and the Develop People initiative. Change the
way managers led their people. Nestlé had to change the way managers seek out
contributions from their staff. Nestlé identified significant problems with the pyramidal
model and developed the “Nestlé on the Move” program

Inaccuracy of orders receives in inventory or stocks in hands

1. Top-down approach may serve an organization well but not suitable for uneducated and
uninformed employees who need supervisors to manage them carefully. to what extent
the traditional, hierarchical, pyramidal organizational structure facilitates or hinders these
types of employee contributions.
2. Nestle had use image of manager as coach. Coaching works best for developmental
purposes, especially in a team of competent professionals already performing at a
reasonably high level. Focus on “on the job” training given by Nestlé people.
3. Promote a common set of values that engender a Nestlé culture and spirit. Promote
opportunities to develop skills that will enable people to move to different areas of the
business. Encourage employees to work with people from many different countries and
cultures in the course of their career.

Bad weather and natural disaster

Every company have its own problem whether small orbig company. This also including Nestle
company either internal or external problems. You can have slow and steady change, and that is
nothing to be ashamed of”, - CEO Brebeck Lemathe

51
Future strategies

One of the future strategies of Nestlé is to grow internally instead of growing through mergers
and acquisition. Implementing this strategy could be catastrophic for the company as its growth
has been largely relying on acquisitions and joint ventures. Nestlé would also lose the benefits of
using joint ventures, strategic alliances and acquisitions. This would then imply that Nestlé
would have to use its own resources and core competencies to expand thus placing a greater risk
on the business. It can also have a negative impact on the liquidity position of the company.

A way in which this issue could be overcome is by applying both strategies. By applying both
strategies, the company would be able to spread its corporate risk and share its costs as its return
on capital employed still continues to generate profits for the company. Additionally, Nestlé has
managed to build strong foundations through mergers and acquisitions which has led it to
improve its financial position. The acquisition of businesses has increased from 447 million in
2006 to 456 million in 2007 which have improved its cash flow. Therefore, in order to maintain a
strong position, Nestlé should carry on with mergers and acquisitions as well as growing
internally.

Another of the future strategies initiated by Bulcke is to shift the structure of Nestlé from an
“organization by country” to an “organization by business” through sharing best practices using
GLOBE (Bell and Shelman 2009, p.10). He argues that this would enable Nestlé to start
managing its operations globally instead of adapting to every market. However, using the
McKinsey 7s framework, many issues can be foreseen as seen on the table below.

11 Strategic Alternative
Produce variety of quality products, wide variety of brands.

Focus on nutrition, health and wellness.

“ strategic pillars” (“low cost, efficient operations, renovation and innovation of the Nestle
product line, universal availability and improved communication with consumers through better
branding”) (Bell and Shelman, 2009, p. 3)

52
Structure

Decentralized and relatively flat organizational structure which helps to cater for local needs
thus increasing flexibility.

organized by country/ every country is like “a small kingdom”

It has operations worldwide through strategic business units.

System

Comprehensive information system:  the GLOBE

Employees move from the bottom up in the organization.

Style

Democratic leadership style: managers are given autonomy to take decisions.  As such, they feel
a sense of belonging in the organization

Staff

Nestlé maintains local companies with regional staff in local markets as they better understand
the needs of customers. Regional organizations had more than 275,000 employees. It has a pool
of experts- its staff consists of scientists, technologists from top universities (Bell and Shelman,
2009, p. 6)

Skills

Nestlé’s competitive advantage is its R&D. It has a high level of technology (23 Product
Technology Centres), and a network of experts around the world. (Bell and Shelman, 2009, p. 9).

Shared Values

Deliver long term value to shareholders.

Focus on long term results.

53
Unwritten culture – Strong personal culture (Bell and Shelman, 2009, p. 8).

Although the change in the structure and the strategy was supported with a change in systems by
adapting the GLOBE, other elements of the framework have not been adapted. For instance, the
style used by Nestlé was a democratic leadership style where management in the different
countries are given a great deal of autonomy. By changing to a more centralized and global
management style some internal resistance from the people can emerge.  The different markets
are used to operating as “small kingdoms” (Bell and Shelman 2009, p.10). Therefore, given that
country managers in the different countries were used to be given a great deal of freedom
especially when dealing with issues related directly to the customer, this new strategy can
produce some internal problems for Nestlé.

To overcome this issue, other elements of the 7s framework have to be adapted. The main
element that links everything together is shared values. Nestlé has to work on making changes to
its internal culture by introducing new shared values between its people. Implementing the
GLOBE is not enough to implement the new strategy, a culture of sharing information and best
practices should also be introduced and reinforced. Nestlé should teach its people to move from a
management style of taking control and matters into their own hands to a style of sharing control
and producing decisions globally and collectively.

The implementation of this approach may differ across countries due to the cross-cultural
differences between countries. According to Lasserre (2012), country specific cultural values
influence managerial values and assumptions in an organisation. As an example, Lasserre (2012)
illustrates that western countries are more individualistic while Asian countries are collectivists
which heavily impacts how business is done in these countries. In terms of implementing a
culture of sharing, it can be assumed that Asian countries would respond more positively to the
change than western countries.   

Nestlé intends to achieve its future growth by implementing four platforms for growth which are
‘health, nutrition and wellness’ (to be the centrepiece), ’emerging markets’, ‘out of home
consumption’ and ‘premiumisation of existing products’. (Bell and Shelman, 2009).The
aforementioned strategy for growth is expected to double Nestlé’s sales in the next 10 years.
(Bell and Shelman, 2009)

54
Bulcke emphasized that the priority should be on ‘health, nutrition and wellness’ to implement
the vision into every product segment and every country. This vision is in line with Brabeck’s
strategies of going beyond food to Nutrition, Health and Wellness (Bell and Shelman, 2009). The
total sales for Nestlé Nutrition segment has significantly increased from 5,964 million in 2006 to
8,434 in 2007, which represents an improvement of 41%

Although total sales have increased, most products that have led to this increase in sales were
unhealthy. So, in order to maintain its vision as a Health, Nutrition and Wellness, Nestlé should
give up its unhealthy products in the long term. However, this would negatively impact on the
financial position of the company as these are its core products. Moreover, making the same
products available in every market might not be adapted to the needs of every customer in terms
of tastes, preferences and nutritional value so Nestlé should make sure at least every different
product are tailored to the needs of every different market.

Regarding emerging markets, Bulcke found out that these markets are growing at a faster pace
and therefore Nestlé should integrate further into it as there is a high potential for growth. The
implementation of ‘popularly position products’ (PPP), a strategy designed for low income
earners so they can afford good nutrition products on a daily basis.

12 Nestlé 5 year future plan

Nestlé, the food group, is focusing on innovation, local production and improving the health
Speaking to the Daily Telegraph, Paul Bulcke, Nestlé's chief executive, reported that
approximately 95% of the products it sells around the world are now manufactured locally.
"We don't build structures for weak or strong currencies," he said. "We set ourselves up to work
with local materials, which is why we have 470 factories around the world. We are in for the
long term. Other core priorities for the Swiss multinational include creating a "worldwide
competency of products". Innovation is central to this process, especially in Europe, where
organic growth is muted. "We are definitely strong believers in true R&D, that we can grow, and
has been the base of our growth in Europe," said Bulcke. Creating healthy new products and
modifying existing parts of its portfolio to improve their credentials in this area is also important
for Nestlé, even in categories like confectionery. Chocolate is an interesting business. It has all
sorts of qualities you can mould. Air is a key one - you could build air into chocolate,"

55
Similarly, the company's Munch chocolate line in Pakistan provides an example of the "light
snacks" which are selling especially well. Reformulating its Kit Kat chocolate bar has also
achieved this objective. "The Kit Kat that we have in Brazil is not the Kit Kat we had 20 or 40
years ago," Bulcke added. "It is lighter. It is more 'portion able. They further suggested that the
company's decision to purchase the pizza business of Kraft Foods in North America can enhance
the "lifestyle" of customers, by making food they enjoy healthier than in the past.
"I don't see a contradiction between being a company that wants to be proud of people's healthy
lifestyle and having pizza as part of the business."

Nestlé also believes that categories like bottled water - long the source of criticism by
environmentalists - are able to play a constructive role in the lives of consumers.

"The insights of how nutrients interact with the human body and how we can bring nutritional
arguments into the whole portfolio in all of its forms is important.

13 CONCLUSION
Nestlé’s overarching principle is that each employee should have the opportunity to develop to
the maximum of his or her potential. Nestlé do this because they believe it pays off in the long
run in their business results, and that sustainable long-term relationships with highly competent
people and with the communities where they operate enhance their ability to make consistent
profits. It is important to give people the opportunities for life-long learning as at Nestle that all
employees are called upon to upgrade their skills in a fast-changing world. By offering
56
opportunities to develop, they not only enrich themselves as a company, they also make
themselves individually more autonomous, confident, and, in turn, more employable and open to
new positions within the company. Enhancing this virtuous circle is the ultimate goal of their
training efforts at many different levels through the thousands of training programs they run each
year.

13.1 Suggestions and recommendations

As Nestle is the best company all over the world but there is some recommendations and suggestions.

1. Their prices are little bit higher so they should low their prices to increase their
Customers.
2. About 70 % people use their products why the rest don’t use them they should conduct
survey and concentrate on those facts why they are not using their products.
3. They should also improve their advertising. Their advertising doesn’t pay long term
effect in the mind of customers.
4. About 17% people are not satisfied from the taste of Nestle so nestle has to improve its
taste.
5. Due to a great demand of nestle Milk now a days there is a shortage of nestle milk in
shops sometimes they have to consider this aspect too.

14 References
https://www.ukessays.com/essays/marketing/introduction-and-company-profile-of-nestle-marketing-
essay.php

https://www.google.com/search?
q=nestle+organizational+hierarchy&rlz=1C1CHBD_enPK896PK896&sxsrf=ALeKk02IvNC1gMjN5Hs3iBf8xL
gHlnDwqQ:1609777232134&tbm=isch&source=iu&ictx=1&fir=4YxzDWE7txZFrM
%252CtADIfKmAddahKM%252C_&vet=1&usg=AI4_-
kQvKrGwwuzkEEI7hZ16N46FCOfnqg&sa=X&ved=2ahUKEwi21NrA14LuAhUKi1wKHYhsCGUQ9QF6BAgOE
AE&biw=1366&bih=657#imgrc=4YxzDWE7txZFrM

https://www.google.com/search?
q=nestle+location+of+factories&rlz=1C1CHBD_enPK896PK896&oq=nestle+location+of+factories&aqs=c
hrome..69i57.20718j0j9&sourceid=chrome&ie=UTF-8

https://www.nestle.com/sites/default/files/2020-02/2019-financial-statements-en.pdf

57
https://www.nestle.pk/aboutus/nestleinpakistan/missionandvision#:~:text=Nestl%C3%A9's%20purpose
%20is%20enhancing%20quality,term%20success%20of%20our%20company.

https://howandwhat.net/pestel-analysis-pakistan/

https://www.ukessays.com/essays/business/strategic-hrm-at-nestle-business-essay.php
https://www.nestle.com.au/en/creating-shared-value/our-people/human-resources-management
https://www.nestle.pk/jobs/career-area/administrative
https://www.nestle.com/aboutus/management
https://www.business-standard.com/article/companies/nestle-decentralises-decision-making-sets-
up-local-teams-to-aid-sales-push-118022601160_1.html
https://www.nestle.com/sites/default/files/asset-
library/documents/library/documents/corporate_governance/corporate-business-principles-en.pdf
https://www.ipl.org/essay/Nestle-Total-Quality-Management-Analysis-P3D4JLNFC48R
https://nestleanalysis2019.wordpress.com/2019/01/20/marketing-analysis-of-nestle/
https://www.nestle.pk/investors/stockexchangeinformation
https://www.ukessays.com/essays/business/competitor-analysis-global-strategy-3564.php
https://www.ukessays.com/essays/marketing/market-and-company-analysis-of-nestle-marketing-
essay.php
https://www.ukessays.com/essays/business/nestle-company-analysis-competition-growth-
4241.php
https://www.coursehero.com/file/p6sl0t4/Demographical-Segmentation-Nestle-segments-their-
customer-into-the-different-of/
https://mpk732t22016clusterb.wordpress.com/category/topic-4-segmentation-targeting-and-
positioning/page/2/
https://www.ukessays.com/essays/marketing/political-environment-and-social-environment-
marketing-essay.php
https://www.nestle.com/csv/impact/healthier-lives
https://www.nestle.pk/nhw/nutrition-and-lifestyle
https://www.nestle.pk/jobs/career-area/finance
https://phdessay.com/new-product-development-and-nestle/
https://www.nestle.com/csv/what-is-csv/taxation

https://www.nestle.pk/jobs/career-area/supply-chain

58
https://ivypanda.com/essays/nestle-management-analysis/

https://www.nestle.com/aboutus/quality-and-safety

https://www.foodprocessing-technology.com/projects/nestlefactorydubaiua/

https://www.ukessays.com/essays/marketing/product-analysis-of-nestle-marketing-essay.php

59