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Copy of Strategic Analysis: Nestlé Pakistan Limited

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Shaikh Noman

on 5 October 2014

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Transcript of Copy of Strategic Analysis: Nestlé Pakistan Limited

Products
COMPREHENSIVE ANALYSIS:
NESTLÉ PAKISTAN LIMITED

BUSINESS STRATEGY & POLICY
STEP 6 – BCG MATRIX
OUTLINE
The most critical areas for improvement that we have identified are:
The need to offer credit terms to retailers in order to increase sales

The need to leverage Nestlé extensive distribution network to increase its prowess in Pakistan’s rural areas

The need to develop new products that are resistant to climatic and seasonal changes, in order to hedge against the fluctuations in demand due to seasonality

The need to initiate a stronger advertising campaign in Pakistan that highlights the nutritional aspects of Nestlé’s foods as a major advantage over its competitors

The need to leverage e-marketing and e-promotion to further strengthen brand awareness
CONCLUSION
POLICIES:

Nestlé Pakistan will allow retailers to purchase 20% of their stock requirements on credit
Beginning at end of FY 2013, milk collection from and products distribution to rural areas in the Punjab province will commence, followed by Sindh one year later, and NWFP one year after that
Each member of the R&D department will submit at least 10 workable product ideas by the end of FY 2013
Beginning July 2013, Nestlé Pakistan will run 5 ads per day on local cable television, which will be increased to 10 ads per day during public holidays and summer holidays
Beginning July 2013, Nestlé Pakistan will run 500 ads on a variety of websites, which will be increased to approximately 10,000 ads by the end of FY 2015
STEP 11 – ANNUAL OBJECTIVES
& POLICIES
ANNUAL OBJECTIVES:

Develop, announce, and circulate new policy by end of the financial year on 30 June 2013. New credit policy to take effect after said date:
Increase credit sales by 10% by end of FY 2014
Increase credit sales by 20% by end of FY 2015

Staggered implementation: Begin construction of secondary collection centers in:
Rural Sindh by end of FY 2013; to be completed by end of FY 2015
Rural Punjab by end of FY 2014; to be completed by end of FY 2016
Rural NWFP by end of FY 2015; to be completed by end of FY 2017
STEP 11 – ANNUAL OBJECTIVES
& POLICIES
IMPLEMENTATION STEPS:

Allow retailers to acquire 20% of stock on credit and negotiate similar credit terms from own suppliers to prevent liquidity issues

Develop logistics networks in rural areas by building secondary collection centers in strategic towns, focusing on one province at a time

Retain 30% of net income and invest in R&D to develop heat-resistant FMCG product(s)

Develop a joint venture with, or outsource e-marketing to, a leading local e-marketing firm that would assist in developing, implementing, monitoring, and evaluating e-marketing initiatives
STEP 9 – IMPLEMENTATION OF STRATEGIES
EXPECTED COSTS:

Selling on credit would likely yield some bad debts. Assuming bad debts at 2% of expected sales, the expected cost is 41,156 million * 0.02 = Rs. 823 million per year

Assuming that the cost of expanding distribution networks is 20% of operating profit margin, the expected cost is 5,720 million * 0.20 = Rs. 1,144 million per year

Assuming that the R&D budget is 30% of net income, the expected cost is 3,005 million * 0.30 = Rs. 901.5 million per year

Assuming that the advertising budget is 10% of net income, the expected cost is 3,005 * 0.10 = Rs. 300.5 million per year

Assuming that the cost of developing and implementing e-promotional activities is 5% of sales, the expected cost is 41,156 million * 0.05 = Rs. 2,058 million per year
STEP 8 – STRATEGIES &
LONG-TERM OBJECTIVES
LONG-TERM OBJECTIVES:

Increase credit sales by 20% by year-end 2015
Achieve a distribution coverage of 85% in Pakistan by year-end 2017

Engage R&D to develop heat-resistant product(s) with a shelf-life of 4 months or more by year-end 2017

Achieve market leadership in “share of mind” of customers by year-end 2015

Migrate at least 30% of promotional activities to an online platform by year-end 2015
STEP 8 – STRATEGIES &
LONG-TERM OBJECTIVES
STRATEGIES:

Increase sales by allowing retailers to pay a larger proportion of purchases on credit

Capitalize on logistics and distribution channels to help counter the intense competition from Engro Foods and Haleeb Foods

Related diversification to increase product variety and hedge against heavy fluctuations due to climatic and seasonal changes

Increase promotional activities, especially e-promotion, to further strengthen brand image and market position
STEP 8 – STRATEGIES &
LONG-TERM OBJECTIVES
STEP 8 – QSPM MATRIX
STEP 8 – QSPM MATRIX
STEP 8 – GRAND STRATEGY MATRIX
STEP 6 – BCG MATRIX
STEP 8 – SPACE MATRIX
STEP 5 – SPACE MATRIX
STEP 2: INTERNAL FACTOR EVALUATION (IFE) MATRIX
WEAKNESSES:

Lack of awareness among target market
Weak advertising campaign in Pakistan
Revenue from confectionery decreased by 14%
Low credit sales and profit margins to retailers
Weak e-promotion activities
Difficulty in launching expensive brands due to weak income of consumer base
STEP 6: STRENGTHS
& WEAKNESSES
STRENGTHS:

Socially responsible company
Nestlé’s products have a strong brand image in Pakistan
Strong sales force is a major resource for the company
Quality product distribution networks in Pakistan
Net profits increased by 94%
Price to earnings ratio decreased from 38.9 to 18.8
Export sales increased by 48% to PKR 3.3 billion
N.B. Data from Pakistan Bureau of Statistics (2012)
STEP 6: STRENGTHS
& WEAKNESSES
STEP 3: EXTERNAL FACTOR EVALUATION (EFE) MATRIX
STEP 1: COMPETITIVE PROFILE
MATRIX (CPM)
1900+
Nestle Scenario from 1866 to 2014
Nestle Scenario from 1866 to 2014
HISTORY
HISTORY
HISTORY
QUESTIONS?
Business Recorder (2013). Nestlé Pakistan Limited. Retrieved May 01, 2013 from http://www.brecorder.com/brief-recordings/0/1153629/

David, F. R. (2010). Strategic Management: Concepts and Cases. 13th edn. Prentice Hall, New Jersey.

Naeem, U. (2008). A new packaged milk brand flows into Pakistan. Retrieved May 08, 2013 from http://www.brandchannel.com/features_effect.asp?pf_id=445

Nestlé Pakistan (2012). Annual Report 2012. Retrieved May 18, 2013 from http://www.nestle.pk/asset-library/Documents/Financial_Reports/Nestle_AR_2012.pdf

Nestlé Pakistan (2013). About us. Retrieved May 04, 2013 from http://www.nestle.pk/aboutus/nestlepakistan

Pakistan Bureau of Statistics (PBS) (2013). Demographic and research. Retrieved May 14, 2013 from http://www.pbs.gov.pk/content/demographic-and-research

Rasheed, H. (2009). Strategic Model of Nestlé Pakistan. Retrieved May 10, 2013 from http://www.slideshare.net/hammadrasheed7/nestle-strategic-model
REFERENCES
Strategy-Evaluation Assessment Matrix
STEP 12 – STRATEGY REVIEW & EVALUATION
RUMELT’S CRITERIA:

Consistency – strategies should be consistent with goals and policies

Consonance – strategies should be responsive to existing and expected changes in the external environment (trends), and should match the firm’s internal strengths and weaknesses to the external opportunities and threats

Feasibility – strategies should be practical and achievable with the given physical, human, and financial resources of the company

Advantage – strategies should lead to the development and/or sustenance of a competitive advantage for the company by helping it achieve superiority in resources, skills, and/or position
STEP 12 – STRATEGY REVIEW & EVALUATION
ANNUAL OBJECTIVES:

The following tentative schedule is to be provided to the R&D department:
Idea Generation &Idea Screening by end of FY 2014
Feature Specification & Prototype Development by end of FY 2015
Test Marketing by end of FY 2016
Commercial Launch by end of FY 2017
Pulse advertising: increases in intensity periodically, specifically during summer holidays:
Achieve 35% share of mind by end of FY 2014
Achieve 45% share of mind by end of FY 2015
Migration of promotional activities to an online platform:
Migrate 20% by end of FY 2014
Migrate 30% by end of FY 2015
STEP 7 – ANNUAL OBJECTIVES
& POLICIES
STEP 4 – SWOT MATRIX
The confectionery company Rowntree Mackintosh was acquired in 1988 for $4.5 billion, which brought brands such as Kit Kat, Smartie and Aero.

The first half of the 1990s proved to be favorable for Nestlé. Trade barriers crumbled, and world markets developed into more or less integrated trading areas.

HISTORY
DETAILS
THE END
THANK YOU

COMPREHENSIVE CASE ANALYSIS: NESTLÉ PAKISTAN LIMITED
BUSINESS POLICY & STRATEGY
COMPREHENSIVE ANALYSIS:
NESTLÉ PAKISTAN LIMITED

BUSINESS POLICY & STRATEGY
Students:

Hafiz M. Noman
MBA-IV, 1303016
Mehreen Nauman
MBA-IV, 1303018
Darakhshan Ali
MBA-IV, 1303010

Lecturer:

Mr. Shahood Alam

Department of :
Karachi University Business School (KUBS)

University of Karachi
Darakhshan Ali
Introduction
History
Company Scenario from 1866 to 2014
Products
Mehreen Nauman
Marketing & Sales Strategy
SWOT Analysis
Hafiz Muhammad Noman
Internal & External Factors Evaluations
Conclusion
Henri Nestle
Founder
1866
2014


1866
2014
1860 +

In September 1866, in Vevey, Henri Nestlé developed a milk-based baby food, and soon began marketing it.

In 1877 the Nestlé Company added condensed milk, such that the firms became direct and fierce rivals.

1900+

In 1905, the companies merged to become the Nestlé and Anglo-Swiss Condensed Milk Company, retaining that name until 1947
In1900s, the company was operating factories in the United States, the United Kingdom, Germany, and Spain.

The First World War created demand for dairy products in the form of government contracts, and, by the end of the war, Nestlé’s production had more than doubled.

The 1920s saw Nestlé’s first expansion into new products, with chocolate-manufacture becoming the company’s second most important activity. Louis Dapples was CEO till 1937, In 1947 Nestlé merged with Maggi, a manufacturer of seasonings and soups.

In 1977, Nestlé made its second venture outside the food industry, by acquiring Alcon Laboratories Inc.
2000+
In 2005, Nestlé bought the Greek company Delta Ice Cream for €240 million.

In 2007, Nestlé entered into a strategic partnership with a Belgian chocolate maker, Pierre Marcolini.

In 2010, Nestlé concluded the purchase of Kraft Foods' North American frozen pizza business for $3.7 billion.

In 2013, Nestlé has announced that it will expand R&D in its research center in Singapore
PRODUCTS
BCG-MATRIX
PRODUCTS
PRODUCTS
PRODUCTS
Nestle Marketing and Sales Strategy
Presented By
Mehreen Nauman
Roll# 1303018
Products
Milk Collection & Dairy Development
Direct impact on rural community creating betterment and opportunity for them.

Encouragement of investment in farms to ensure continue supply to match demand

Supply Chain
To confirm Nestle's strategy of substantial growth, cutting transporation, handling and other costs by effectively managing resources and source strategy.

DISTRIBUTOR DEVELOPMENT PROGRAM
In 2012, in collaboration with sales this program was developed.

Nestle's distribution network ensures daily 100,000 tonnes of products are transported to customers from factories and other distribution centres.
PROCUREMENT
Nestle remains committed to responsible sourcing to ensure wider vendor base availability.

Source also provides base for quality differentiation in finished products by providing supply of raw materials at specified quantity & quality,in time and at lowest possible price
DIVERSIFICATION
According to Ansoff's matrix, it is a point where a company moves away from existing markets and existing products.

This is what has been and will be Nestle's strategy while conducting nutrition business.However this strategy does not drive Nestle's business in blue ocean. Competition still exists in red ocean.
SWOT ANALYSIS
STRENGTHS
Unmatched product and brand portfolio
R&D capabilities
Distribution channels and geographic presence
Competency in mergers and acquisitions
Brand reputation valued at $7 billion
WEAKNESS
Inability to provide consistent quality in food products
Weak implementation of CSR
OPPORTUNITY
Increasing demand for healthier food products
Acquiring startups specializing in producing well-being products
Establishing new joint ventures
THREATS
Food contamination
Trend towards healthy eating
Growth of private labels
Rising raw food prices
NESTLE COMPETITIVE EDGE
Nestle has competitive edge on the basis of following 2 strategies,
1) Product differentaion
2) Customer oriented
PRODUCT DIFFERENTIATION STRATEGY
Nestle is using this strategy by providing supeior quality products, they buy space shelves in different departmental stores to attract customers.
CUSTOMER ORIENTED STRATEGY
It is focal point of company. they attract health conscious customers as their products are verified by Health and Safety mesures & International Quality Standards.
MARKETING STRATEGY
Strategy is based on the concept of mass percentage.

Product tailored to individual needs but promotion to all customers.

Nestle adopts pull strategy &approach its end users via various promotional activities.

Distribution is direct as no wholeseller involved.
TARGET MARKET
Nestle targets males and females of middle class, with age group 18-30 being offered by an uncompareble quality and hygiene standard products.
MARKET SEGMENTATION
Nestle has divided market into geographic, demographic , pscychographic and behavioral segments.
MARKET SEGMENTATION
Geographic Segment is based upon the weather conditions.

Demographis Segment consists of age and gender.

Psychographic is based upon the status /class.

Behavorial is further didvided into
(a)Those who are interested & enjoy to buy
(b)Those who are interested but lack acceessibilty
(c)Those who are not interested in concept at all

INTERNATIONALIZATION STRATEGY
Companies like Nestle whose parent company's market is too small & face fierce competition must adopt this strategy to remain profitable.
Internal & External Factors Evaluation
Presented By
Hafiz Muhammad Noman
Roll# 1303016
Full transcript