History

1866-1905 In the 1860s Henri Nestl, a pharmacist, developed a food for babies who were unable to breastfeed. His first success was a premature infant who could not tolerate his mother's milk or any of the usual substitutes. sold in much of Europe. 1905-1918 In 1905 Nestl merged with the Anglo-Swiss Condensed Milk Company. By the early 1900s, the company was operating factories in the United States, Britain, Germany and Spain. 1918-1938 After the war Government contracts dried up and consumers switched back to fresh milk. However, Nestl's management responded quickly, streamlining operations and reducing debt. The 1920s saw Nestl's first expansion into new products, with chocolate the Company's second most important activity 1938-1944 Nestl felt the effects of World War II immediately. Profits dropped from $20 million in 1938 to $6 million in 1939. Factories were established in developing countries, particularly Latin America. Ironically, the war helped with the introduction of the Company's newest product, Nescaf, which was a staple drink of the US military. Nestl's production and sales rose in the wartime economy.

1944-1981 Nestl's growth in the developing world partially offset a slowdown in the Company's traditional markets. Nestl made its second venture outside the food industry by acquiring Alcon Laboratories Inc.. 1981-1995 Nestl divested a number of businesses1980 / 1984. In 1984, Nestl's improved bottom line allowed the Company to launch a new round of acquisitions, the most important being American food giant Carnation. 1996-2002 The first half of the 1990s proved to be favorable for Nestl: trade barriers crumbled and world markets developed into more or less integrated trading areas. Since 1996 there have been acquisitions including San Pellegrino (1997), Spillers Petfoods (1998) and Ralston Purina (2002). There were two major acquisitions in North America, both in 2002: in July, Nestl merged its U.S. ice cream business into Dreyer's, and in August, a USD 2.6bn acquisition was announced of Chef America, Inc. 2003 + The year 2003 started well with the acquisition of Mvenpick Ice Cream, enhancing Nestl's position as one of the world market leaders in this product category. In 2006, Jenny Craig and Uncle Toby's were added to the Nestl portfolio and 2007 saw Novartis Medical Nutrition, Gerber and Henniez join the Company.

Our Brands
We believe that food plays a key role in achieving a well-balanced person. And so our philosophy is Good Food for a Good Life! At Nestl, our products are developed keeping our consumers, their preferences and health in mind. Millions of consumers the world over trust Nestl products for good reason: when they choose a Nestl product they have the satisfaction of choosing quality, taste, variety, convenience and the good nutrition.

Brand Names
Milk, Dairy and Chilled Dairy Beverages Bottled Water Baby Food Food Breakfast Cereals Chocolate and Confectionary

Vision

The Nestl global vision is to be the leading health, wellness, and Nutrition Company in the world

Mission Statement
Good Food is the primary source of Good Health throughout life. We strive to bring consumers foods that are safe, of high quality and provide optimal nutrition to meet physiological needs. In addition to Nutrition, Health and Wellness, Nestl products bring consumers the vital ingredients of taste and pleasure

Management

IFE Internal Factor Evaluation Matrix

Key Internal Factors Strengths Socially Responsible Company Nestle products enjoy strong brand image Sales force as a major physical resource strength Quality product distribution networks in country Net Profit increased by 94% in 2009. Price earning ratio decreased from 38.9 to 18.8 Export Sales increased by 48% to PKR 3.3 billion Weaknesses Lack of awareness among target market Nestle milk always stands at last because of low advertisement. Revenue from confectionary decreased by 14% Low credit sales and profit margin to retailers Weak promotional activities through websites Cant launch expensive brand due to low income groups Total 0.04 0.09 0.08 0.05 0.05 0.03 1.00 2 2 2 2 3 1 0.08 0.18 0.16 0.10 0.15 0.03 2.99 0.03 0.07 0.05 0.08 0.20 0.05 0.18 3 3 3 2 4 3 4 0.09 0.21 0.15 0.16 0.80 0.15 0.72 Weight Rating Weighted Score

EFE External Factor Evaluation Matrix

Key External Factors Opportunities Few and weak competitors in the market Disposable income increased by 3.6% Consumer expenditure on food has increased by 3.6% Population density increased by 2.18% (per sq.km) Credit policy can be adopted to increase sales Potential in cold dairy market All companies contribute only 2% to processed milk market Pakistan as 7th largest milk producing country with milk output of 200 billion liters Increase in consumer food industry by 14% Threats Engro and Shakarganj as major competitors Market segment growth could attract new entrants Taste of the consumer has already developed Legal & ethical issues Economic slow down can reduce demand Effect of seasonality upon sales Strong advertisement by major competitors Total Weight 0.12 0.07 0.09 0.05 0.03 0.02 0.12 0.12 0.05 0.14 0.04 0.02 0.01 0.01 0.05 0.08 1.00 Rating 2 3 4 3 3 3 4 3 4 3 2 2 2 2 3 3 Weighted Score 0.24 0.21 0.36 0.15 0.09 0.06 0.48 0.36 0.20 0.42 0.08 0.04 0.02 0.02 0.15 0.24 3.02

CPM
Critical Success factors

Competitive Profile Matrix

Weights Nestle Pakistan Rating Weighted Score Engro Foods Rating Weighted Score Shakarkanj Foods Rating Weighted Score 0.0 to 1.0 1 to 4 3 3 4 4 3 3 3 3 3 2 3 0.36 0.15 0.80 0.60 0.21 0.09 0.18 0.06 0.15 0.30 0.15 1 to 4 2 2 2 3 2 3 1 2 2 4 3 0.24 0.10 0.40 0.45 0.14 0.09 0.06 0.04 0.10 0.60 0.30 1 to 4 1 2 3 3 1 2 1 1 2 3 2 0.12 0.10 0.60 0.45 0.07 0.06 0.06 0.02 0.10 0.45 0.20

Market Share Inventory System Financial Position Product Quality Consumer Loyalty Relationship with Suppliers Global Expansion Organization Structure Production Capacity Advertising Efficient cost Management

0.12 0.05 0.20 0.15 0.07 0.03 0.06 0.02 0.05 0.15 0.05

Product R&D Totals

.05 1

0.15 3.20

.04 2.56

.04 2.27

FINANCIAL STRENGTH
Nestle s net sales increased by 20% in 2009 as compared to 2008 Net profit increased by 94% in 2009 as compared to 2008 Debt equity ratio changes from 63:37 to 66:34 Price earnings ratio in 2009 was 18.8 as compared to 2008 38.9 Return on capital employed increases by 40% Average financial strength 3 5 3 5 4 4

INDUSTRY STRENGTH
Increase in consumer food industry by 14% All companies contribute only 6% to processed milk market Market segment growth has attracted new entrants to increase profit potential Due to ease of entry in market, Engro foods Shezand foods and Shakarganj are properly utilizing their resources. Average industrial strength 5 4 5

4 4.5

COMPETATIVE STRENGTH
Nestle enjoys strong customer loyalty Quality product distribution networks in country Nestle extended product life cycle is being ensured due to quality brand extension strategy. Nestle product are market leaders in many product categories. Average competitive advantage. -2 -1 -2

-2 -1.75

ENVIRONMENTAL STABILITY
Economic slowdown can reduce the demand Fluctuating rate of inflation in the country Price range of competing products Average Environmental Stability -2 -2 -1 -1.75

BCG
Brands
Milk and Dairy Beverages Bottled Water Confectionary and Chocolate Baby Food Foods and Cereals Total

Sales
13993 7820 9054 1646 5350 3293 41156

% Sales
34 19 22 4 13 8 100

Profit
1082 661 511 150 331 270 3005

% Profit
38 20 17 5 11 9 100

% Market Share
100 85 100 31 60 40 100

% Growth Rate
+15 +10 +3 -15 -5 8

GSM
QUADRANT 1 QUADRANT 2

QUADRANT 3

QUADRANT 4

QSPM
Acquisitions Shangrilla & Young s food No Aquisitions

Key factors
OPPERTUNITIES
Few and weak competitors in the market Disposable income increased by 3.6% Consumer expenditure on food has increased by 3.6% Population density increased by 2.18% (per sq.km) Credit policy can be adopted to increase sales Potential in cold dairy market All companies contribute only 2% to processed milk market Pakistan as 7th largest milk producing country with milk output of 200 billion liters

Weights

AS

TAS

AS

TAS

0.12 0.07 0.09 0.05 0.03 0.02 0.12 0.12 0.05

4 3 3 4

0.48

2 -

0.24

0.27 0.15

1 2 -

0.09 0.10

Increase in consumer food industry by 14%

0.20

0.10

THREATS Engro and Shakarganj as major competitors Market segment growth could attract new entrants Taste of the consumer has already developed Legal & ethical issues Economic slowdown can reduce demand Effect of seasonality upon sales Strong advertisement by major competitors

0.14 0.04 0.02 0.01 0.01 0.05 0.08 1.00 3 1 2 0.02 0.12 0.02 4 4 3 .03 0.48 .08

QSPM(Cont)
Acquisitions Shangrilla & Young s food No Aquisitions

Key factors
STRENGHTS Socially Responsible Company Nestle products enjoy strong brand image Sales force as a major physical resource strength Quality product distribution networks in country Net Profit increased by 94% in 2009. Price earnings ratio decreased from 38.9 to 18.8 Export Sales increased by 48% to PKR 3.3 billion

Weights

AS

TAS

AS

TAS

0.03 0.07 0.05 0.08 0.20 0.05 0.18

2 3 2 3 0.60 0.10 0.54 0.14

1 1 1 1 0.20 0.05 0.18 0.07

WEAKNESSES Lack of awareness among target market Nestle milk always stands at last because of low Advertisement. Revenue from confectionary decreased by 14% Low credit sales and profit margin to retailers Weak promotional activities through websites Cant launch expensive brand due to low income groups Total 0.04 0.09 0.08 0.05 0.05 0.03 1.00 1 2 0.06 2.75 0.05 3 4 0.12 1.89 0.15

Annual Objectives of Nestle

Marketing objectives are compatible with the overall corporate objectives of nestle. Company s objective is to be the world s largest and best branded food manufacturer while insuring that nestle name is synonymous with the products of the highest quality. Its chief objectives are: To achieve compatibility with international voluntary standards on environmental management systems. To build mutual trust with consumers, governmental authorities and business partners. To ensure continuous improvement of nestles environmental performance. Conservation of natural resources and minimization of waste. Total compliance with the laws. To establish the benchmark for good business practice. Employing new technologies and processing. By committing to resources, both human and financial. Measuring the cost and benefits to business of its activities

Nestle policies
Nestle basic foundation is unchanged. The time of origin of our company, and reflects the basic ideas of fairness, honesty and general concern for people. Nestl is committed to the following business policies in all countries, taking into account local legislation, cultural and religious practices. Nestls business objective is to manufacture and market the companys product in such away as to create value that can be sustained over the long term for shareholders, employees,consumers, and business partners. Nestls does not favor short-term profit at the expense of successful long-term businessdevelopment. Nestls recognize that its consumers have a sincere and legitimate interest in the behavior, beliefs and actions of the company behind brands in which they place their trust, and that without itsconsumers of the company would not exist. Nestls believes that, as a general rule, legislation is the most effective safeguard of responsible conduct, although in certain areas, additional guidance to staff in the form of voluntary business policies is beneficial in order to ensure that the highest standards are met throughout theorganization. Nestls is conscious of the fact that the success of a corporation is a reflection of the professionalism, conduct and the responsible attitude of its managements and employees. Therefore recruitment of the right people and ongoing training and development are crucial nestls continues to maintain its commitment to follow and respect all applicable local lawsin each of its markets. The policies formed by the Nestl are for every employee of Nestl around the world. The Nestl brands follow these above mentioned policies and does not make there own policies. Members of Nestl are strongly committed to the company, its development, its culture and its policies. Apart from professional skills and insight, the capacity and willingness to apply these policiesare the main criteria for progressing in the organization, regardless of origin, nationality, religion,race, gender or age.

Matrix Analysis
Alternative strategy
Back ward integration Forward integration Horizontal integration Product Development Market Penetration Market Development Related Diversification Unrelated diversification Retrenchment Divestiture Liquidation

space Yes Yes Yes Yes Yes Yes

BCG

Grand matrix Yes Yes

count 2 2 3 3 2 2

Yes Yes

Yes Yes Yes yes

Nestle organizational structure

Moving from Localization strategy to Transnational strategy Includes first mover advantage, local economies, global web, economies of scale Strong local responsiveness, but production, training, and R&D becoming centralized Management practices spread knowledge, create learning effects, and transfer core competencies Glocal philosophy and creating value Seven global strategic business units classified by food type (worldwide production divisional structure) Five regional units by geography (worldwide area structure) Has created a global matrix structure Example of a global matrix structure:

Functional structure

Advanatages and Disadvantages

Advantages :
Ability to react quickly to market structure; Nestle quickly reintroduce old formula for maggi noodles. Ability to tailor product; Nestle product are certified halal in middleast countries. Standardization of product&practices

Nestle management and leadership principles documents are issued by Head offices.

Disadvantages :
High administrative cost; Nestle is tryind to cut off 250 job by 2009 in two of their french plants due to high administrative cost. Potential conflict of interest due to role ambiguity; Nestle have mangers dealing with samething in zones,head quarters.

Divisional structure

Advanatages and Disadvantages

Advantages :
Increased accountability and result oriented. More flexible to market condition. Easily analysis performance

Disadvantages:
Lack of unity creates unhealthy interdivisional competition. Product standardization is difficult to achieve. Loss of resources & efficiency due to lack of coordination.

SBU

Matrix structure

Advantages and Disadvantages

Advantages:
  Quality of decision making where interests conflict. Increases managerial motivation. Development of managers through increased involvement in decisions.

Disadvantages:
    Unclear cost and profit responsibilities . High degrees of conflict. Dilution of priorities. 'Creeping bureaucracy.

Horizontal Matrix
Nestle SA expands globally either through its own brand or the acquisitions of National brands, considering this fact it seems a critical time for Nestle SA to expand through a National brand.