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Turnitin Originality Report newEngroNestle.doc by Anonymous From MS(MS) reports (MS(MS) self check Reports) Processed on 06-Dec-2013 18:55 PKT ID: 380880555 Word Count: 7272 Similarity Index 4% Similarity by Source Internet Sources: 2% Publications: 0% Student Papers: 3%

sources: 1
< 1% match (Internet from 03-Mar-2013) http://www.nestle.com/investors/strategy < 1% match (Internet from 30-Sep-2013) http://news.data-sync.biz/tag/fmcg/ < 1% match (student papers from 16-Dec-2011) Submitted to Higher Education Commission Pakistan on 2011-12-16 < 1% match (student papers from 07-Oct-2012) Submitted to Trident Technical College on 2012-10-07 < 1% match (student papers from 05-Nov-2012) Submitted to University of Newcastle on 2012-11-05 < 1% match (student papers from 05-Sep-2013) Submitted to University of Queensland on 2013-09-05 < 1% match (student papers from 17-Aug-2009) Submitted to Sim University on 2009-08-17 < 1% match (student papers from 11-Apr-2006) Submitted to University of Arizona on 2006-04-11

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< 1% match (student papers from 18-Oct-2013) Submitted to University of Queensland on 2013-10-18 < 1% match (student papers from 14-Jul-2013) Submitted to American Intercontinental University Online on 2013-07-14 < 1% match (Internet from 30-Jul-2012) http://dawoodhercules.com/about_bod.php < 1% match (Internet from 31-Mar-2012) http://www.slideshare.net/abidabbas1978/olpers < 1% match (Internet from 05-Dec-2013) http://www.slideshare.net/mutahirbilal47/bcg-matrix-of-engro-foods

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PROJECT REPORT Engro Foods & Nestl Ltd EMBA 3 Submitted by Abid Ali Khan 1258101 Ahmed Waqas 1258118 SZABIST Islamabad Executive Summary The report makes a comparison between Engro Foods Ltd and Nestl. Though Nestl is a multinational company, the report covers their Pakistan operations and draws a clear and concise evaluation of its strengths and weaknesses as against local giant Engro Foods Ltd. Nestl has a long and illustrious past cannot be compared to Engro Foods in literal sense but it becomes clearly evident in the report that Engro has gained a lot in short span of time in Pakistan specially in UHT dairy segment. The external and internal analysis in the report throw light upon various issue that these two companies are facing in Pakistan. It also elaborates how these companies are competing with each other and at same time they are collaborating with each other in some fields too. Both companies have their strengths and weaknesses upon which they play in the local market. During the research work it became very clear that Engro Foods on back of their strong marketing team has covered a lot of distance once it comes to local dairy market. While Nestl has been unfazed by EFLs entry in market, EFL has been successful in its approach in Dairy sector; however this cannot be said about its Juices and Ice Cream segment. Even though EFL has made a brand name for itself but Nestl continues to grow thanks to its diverse product portfolio. The report is based on data gathered from web, field trips and reference journals. The research is done on basis of focusing on one aspect of business and then discussing it keeping in view how these two companies are doing in that particular field. Tried to focus on all aspects of operations be it the human resource, marketing or the financial aspect. In the end there are appendices to further explain our point of view. Nestl Pakistan Ltd Introduction Nestl Pakistan Ltd is an international brand of, It is registered in Karachi and Lahore stock exchanges. Initially it was operating in. Brief History. Henri Nestl developed a baby food formula for babies which became a substitute for breast milk for those babies who could not tolerate their mothers milk. After Henri Nestl s invention the baby food formula was bought by Jules Monnerat .He along with Henri Nestl launched the baby food under the brand name of Nestl . Nestl established its roots all over Europe to cater the need of the customers of Europe, as Nestl fame was on the top so Nestl thought to start the production all over the world to increase the customer demand and ,meet or capture more markets. . Nestl has its operations in all seven continents with more than 522 factories functioning in 83 countries. Factories and Offices. Nestl Pakistan Ltd has its headquarters situated in Lahore. It has four production facilities, two factories are in Sheikhupura and Kabirwala while the other two are in Islamabad and one is in Karachi. North Zone: Islamabad, Jehlum Peshawar Central Zone:

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Lahore, Gujranwala, Faisalabad and Multan. South Zone: Karachi, Quetta and Hyderabad. Number of Total Employees. Nestl Pakistan has more than 2500 employees, Nestl is considered best in its HR systems. Nestl s performance is the result of professionally integrated, management, investment in technology and mostly the commitment of its workforce & employees bounded together with trust & integrity. Engro Foods Ltd Engro Foods is a subsidiary Of Engro Corporation as a part of diversification drive done by the parent company in 2004. Since its inception it has become on e of the biggest growth story in consumer goods space in Pakistan in recent years. The company has done heavy investment in its production facilities in Sukkur (South Plant) and Sahiwal (North Plant). The company entered ice cream segment with a production facility in Sahiwal. Engro initially entered the FMCG sector making dairy as a stepping stone. However the company ventured into ice cream , nectar and Halal meat sector to diversify its portfolio. Though the company has a strong regional presence it still has to step out of Pakistan in dairy sector. Brief History. Engro Corporation was working in Pakistan in fertilizer sector since 1964 under the banner of Esso/Mobil. The company ventured jointly to work in the energy sector. Esso installed a fertilizer plant in Daharki. In 1978 Esso Fertilizer Ltd changed its name to Exxon Chemicals Ltd. Exxon divested its 75% shares and sold them to its employees in 1991. Exxon was again renamed to Engro Chemicals. The company never looked back and diversified into many ventures which include Food, Power generation, Fertilizer, Chemicals and Agri Product business. . The company used first stepped into dairy sector and has become a real success story till date. The company did not limit itself to Dairy sector only and expanded its self in icecream, nectar and halal meat segments as well. The company is looking forward to further expand its portfolio in grain and fruit sector. Engro has invested heavily in its cold chain infrastructure and has helped enhance The company has two main plants located in Suukur and Kabirwalaa. This also enables the company to work closely with the rural community thus playing an important role in uplifting their lives. Offices and Factories: Engro Foods Ltd has its head office setup in Karachi. It has its regional offices in Karachi, Multan, Lahore, Rawalpindi and Peshawar. Engro Foods Ltd has two dairy processing factories located in Sukkur and Sahiwal. Total Number of Employees: Engro Foods Ltd has total number of 12,000 employees who are employed directly or indirectly. Engro Foods Ltd has one of the most comprehensive HR policy compared to other corporate sector firms. The company takes its recruitment process very seriously thus ensuring that only the best end up being selected. The company works with 700 milk collectors nationwide covering almost 2400 villages. The milk collection activities effect lives of 51,000 farmers. Companies Products Nestl Engro Foods Successful Products: NESTL MILKPAK PURE LIFE Every Day ENGRO FOODS OLPERS TARANG Critical Issues. Slow Economic Growth. Paki stans consumers may be besieged by a flailing economy, rising inflation and security issues, but their appetite for fast moving consumer goods (FMCG) products is unabated. Pakistans consumer story is being written by a growing population of 180m and an emerging middle- class. Nestl Pakistan and Engro Foods have been the leading performer in Karachi Stock Exchange and their sales have been on the rise in recent years. Nestl is facing growing competition from Engro foods in the dairy segment and Coca Cola and PespsiCo inc. in the bottled water and fruit juices businesses. Nestl and Engro Foods are pushing products for lower income consumers into more rural regions of. Nestl is planning to invest aggressively in its production capabilities in coming years to maintain its market share for this it has invested $347 Million to enhance its production capacity in near future. Rising inflationary rates have inflicted immense pressure on buying power specially of middle and lower middle class the average inflation rate for the this year till date remained 7.55 %. FMCG sector did not see any increase in sales no significant increase in income of urban and middle class. Nestl saw its revenues grow by a meager 3% in first half of 2013. Engro Foods reported nine months 2013 net earnings of Rs 1.24 billion, showing a 23 percent yearly decline against earnings of Rs 1.6 billion in same period 2012.Agriculture income has reduced mainly due to increase in crops prices, fertilizers, oil and electricity etc resulting in slowdown of growth in FMCG sector. The inflation rate has not changed much over the last 12 months, the consumer goods analyst said; that is one major reason why revenue growth in the FMCG industry has slowed down. Effect of Rise in Prices of Raw Material. Engro Foods was unable to pass on the

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increase in prices of raw materials to consumers due to its low volumetric sales, and that it had to in fact offer a discount on its popular milk brand Olpers, due to competition. Law and Order Situation. The security situation in Karachi has deeply affected the FMCG sector. Infrastructure Development. As major segment of its packaged food are chilled products so installation costs of refrigerators has been a major factor in reducing the margins and the full impact of these expenses has eroded 27% of total revenues. Distribution Networks. Nestl

2and Engro Foods Ltd both had problems with their distribution networks

in past year. These problems mainly arose due to higher fuel prices, law & order situation and other issues. The expenses incurred were mainly due Distribution costs incurred in Engro Foods Ltd were Rs 3.8 billion (6%) while the administration costs were around Rs 748 million thus reducing the bottom line profits. Nestl suffered similar problems as its distribution costs increased by 27% in first half of 2013 which eroded off its profitability. These costs increased mainly due company expanding its distribution network into areas where transportation infrastructure is poor. Pressure Groups. Due to loose state control and poor law and order situation in country. Many pressure groups have risen to black mail multi national companies and profitable industries just to create operational hitches and hurdles in companies day to day working. Nestl faces greater threat of these groups as it is a foreign company and people on name religion blackmail company by manipulating local sentiments just to extort money from the companies bosses. The company has to walk a fine line once it comes to the legitimacy of its products or the selling of water and consuming of local resources. Another issue which has plagued multinationals like Nestl is of Blasphemous caricatures made by some irresponsible newspapers in west, resulting in riots and demonstrations in muslim countries like Pakistan. A company like Nestl which has global presence in almost every country of the world cannot afford to aloof it self from the issue. Thus the company has to use effective media campaign to pacify local sentiments and create a people friendly image in country. For that it can also hire local prominent religious figures to certify the legitimacy of its products specially among the conservative populace. External Analysis. General Environment Analysis . Demographic Segment Nestl . Nestls products are for everyone be it young or old, the company has a wide range of products which have become a need in daily lives of people. For example Nestl pure life is a product which is need for everyone, no one can deny the fact that water is the base of healthy life. Nestl ensures quality of water and markets it as pure. Company makes bay food, milk products, sweets, snackers etc.segments which lure almost people from every walk of life. Engro Foods. . The company positions its brands for all walks of life. However the high price tag of its products has created an image that they are on the higher end and not for common man. However with launch of Tarand and Dairy Omung the company has gained significant share in the dairy sector and has grabbed almost entire share of Nestl recently. However the initial positioning of its milk Olpers was a healthy milk alternative though a bit expensive. Economic Segment Nestl . Nestl is a leading processed food company in Pakistan. The company collaborates with small/medium level companies to enhance their knowledge due its vast experience in this field. This helps the industry to grow which results in more economic activity. Nestl helps local farmer to farm and harvest their crops which creates a win-win situation for both as Nestl is getting the raw material and farmers will get the return on their product. Engro Foods. Engro foods since its inception have been generating a lot of activity in the form of giving jobs to local people and developing their skills and expertise especially in dairy sector. Since Engro Foods is a local company it produces/collects raw material locally thus creating lot of economic activity. The lower cost of raw material results in more profits resulting in tougher competition with its rivals. The company has been helping farmers during the floods in Sindh in 2010 to relocate / rehabilitate them so as to bring them back to their pre flood productivity level. Political/Legal Segment. Nestl . Pakistan is an unstable country in terms of the political environment. The economic policies of governments vary with the level of governance and accountability at

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the helm of affairs. In this kind of volatile environment Nestl walks a fine line as it has to survive and profit from the current resources. Nestl markets its products as fully home grown made under the strickest of quality controls. Nestl ensures that its products are not copied by putting a seal on them. The company ensures that all its products are made of the same standards as per the present international requirements. Engro Foods. Pakistan suffers from deteriorating law and order condition. Karachi is a large market for Engro Foods and for FMCG sector as a whole. For past few years it has been hit by continuing violence resulting in blockages in distribution and artificial hoarding. Engro has been in growth phase, but its dairy sector has faced considerable decline in FY13 mainly due to power outages . Nestl , which is the main competitor of Engro, has diverted Milk Pak supply to Afghanistan where ongoing war on terror has created an opportunity for the international brand. This new market has maintained Nestl s revenues in past few years. However, Engro is unable to access Afghan market due its lack of international access. Engro has also invested heavily in improving the tetra pack milks image in local market mainly due to medias disinformation of using harmful chemicals in preserving packaged milk. However, by launching media ad campaigns FMCG sector dairy companies have been able to turn around the image of packaged milk. Dairy Omung was recently banned by Punjab government for not meeting the standards of PFA nutritional standards recently, however EFL has come up with explanation that Dairy Omung is an innovative and economical substitute for loose milk, however, Punjab ourced from pure milk base, Dairy Omung is an innovative and economical substitute for loose milk, the statement said. However, Punjab Pure Foods Rules 2011 do not have any classification and defined standards for dairy liquid. The company is in discussion with the PFA to present Dairy Omung to the Scientific Committee of PFA for review and subsequent formation of regulations and standards. Socio-cultural Segment Due to information boom people tend to be well informed about their life style these days. Awareness about processed/junk food has become quite common these days thus it becomes more important that company creates a better image of its products in its tech savvy customers. Nestl markets its products as more healthy as compared to junk food. Thus Generation Y cohorts are attracted more to its products and have a brand following incomparable to others. Technological Segment Nestl . Technology factor is very important to Nestl , these days internet and mobile technology has greatly enhanced the communication between different countries. People in Asia can easily browse and find out about products offered in west, thus creating a demand differential resulting in the launching of same product locally. This calls for launching of easy to use websites which give better clarity to customers and build up the brand image as a whole. Engro Foods. Reason for research is that there are many risk associated with a product when it is being launched and a company cannot risk so much money in a lost cause. So R& D is being done by a company just to get to know the feasibility report of a product before it is being launched. The amount spent in R & D is much lesser as compared to one that is at stake in launch of new product. This research can either be done by a specialized department or any other firm. Engro Foods hired a firm A.C Nielson to do the arose. The name Olpers was selected out of 1200 names for a milk brand. Olpers was promoted s an all purpose milk. The R&D firm found that people want a milk which is good for drinking, making tea etc. The firm continued to do research to find out about success of Olpers, once the launch of Olpers was considered successful the top management went on to launch more products. So Olwell diet milk and Olpers cream were launched in the market. Modern technology is a corner stone of EFL once it comes to research or production. Its state of the art plants in Suukur and Kabirwala are having the latest technology to UHT treat the milk and store it in hygienic conditions. Company has n MIS department which automates all the accounting data so the entire financial data remains error free. Global Segment Nestl . Nestl has a long history of food processing. The company has a strong global presence and a brand name. The company has a strong R&D department in almost every country of the world which researches to know about the local market data so as to give a feed back to top management about the prospects of new product launch. The company has more than 300,000 employee worldwide with about 5000 employees who work in R& D of products. The companys brand has a global recognition which makes it easier to market its new products. Engro Foods. Engro is a regional brand with only notable presence in

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Pkistan once it comes to Dairy business. The company has still not established strong roots within the country as it is still fcing many challenges and difficulties marketing its products. However, it has managed to gain the lions share of UHT milk market on the back of strong advertising campaigns. The compny has cautiously ventured into Hala Food market in 6 cities of North America with Al Safa brand. Al Safa dealed in halal meat market in North America and was bought by EFL. (Graphical representation given in Appendix A) The Industry Environment Analysis

9The industry environment analysis has a more direct effect on the firms

strategic competitiveness and to earn above average returns..

This model is also known as Porters five forces model in the industry; it is also directly influencing the attractiveness and profitability of a firm. Now we will apply the Porters five forces model on both the firms and they are faring in the industry. (Five Porters Forces model shown in Appendix B) Threat of New Entrants Nestl. Any new company entering the field has to strive hard to gain market share as there are already many competitors present within the industry. Nestl who has almost a 100 year old history in food processing has to face threats from new entrants every other day however sue countrys strong brand image it has a huge market share in the industry. Every new entrant which enters the market has to take some part out of Nestl s share to gain revenues. Nestl is a target of almost every other food processing company but the threat remains moderate keeping in view the magnitude of operations of the company. Engro foods. Engro has been around for last 8 years. It has spent a lot of its budget in marketing and has successfully established itself as a household name. Its main competitor in dairy sector remains Nestl Milk Pak. However, with the launch of new entrants like NurPur and Anhar it faces a significant threat in terms of competition but keeping in view its supply and distribution network along with its vast infrastructure it can safely survive any competition given by local brands. Bargaining Power of Supplier Nestl . . Nestl has a history of maintaining long term relationship with its suppliers, thus ensuring good quality of material supplied. Due its vast R & D setup it offers valuable advice to the suppliers on how to cut down the costs and perform more efficiently. Engro Foods. Engro being a strong name locally has maintained a strong relationship with the farmers as it had a fertilizer industry background. This helped it to establish its relationship with local famers once it came to milk collection. The company has an automated network under the name .Engro has established an advisory service which helps farmers increase their milk production. Engro has smartly changed the paradigm once it comes to paying its supplier i.e. farmer.there are two ways to increase revenue, one is two increase price of milk from Rs 40 to Rs 41. In this way rise is by Rs 1 but if the company helps the farmer produce 1 liter of more milk then its a win-win situation for both. Engros farm in Sukkur has grown 10 times thanks to advance veterinary care given by the company. dairy industry has bright prospects in near future. Bargaining Power of Buyer Nestl . As lot other products have entered the markets which are very close to Nestl s products thus the buyer has a lot to choose from. This giver buyer a lot of power once it comes to food processing industry. Nestl is aware of this aspect and has taken many steps to market its products better than others particularly they are marketing their products as more healthy and safe than others. Engro Foods. Engro also faces a stiff challenge as there are many products in market which are similar to its products in the market. The company has a problem of rising costs thus the price has to be transferred to the buyer, there are many other products who offer dairy products in same regime...thus Engro has to adopt many other ways just to rope in buyers...mainly by marketing hard. Threat of Substitute Products Due to the nature of the industry, Nestl and Engro Foods are Intensity of Rivalry Among Competitors Nestl . Nestl is a force to reckon with once it comes to food processing industry but it has other rivals to compete with i.e. Kraft, Unilever, Kellogs etc internationally while within Pakistan it has Mitchells, Engro, Halla etc as its main competitors. These companies are in continuous struggle with each

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other to gain more market than the other. Nestl is facing stiff competition as many other companies internationally as well as locally are gaining same proficiency as it is having once it comes to manufacturing processed food. However, rivalry is good for customers both in terms of pricing and quality. Once Porters five forces model is applied to food processing industry it places Nestl in a. The company has a strong background once it comes to processed food. However as food processing is a lucrative market Nestl faces ever rising competition in the face of ever increasing list of entrants. However, due high quality of its products and its massive operational capability the company has been able to ward of the threats. Engro Foods. In food industry there is lot of competition. In terms of products there is not much difference. Engro tries to differentiate itself on basis of its taste and quality. It spends lot of its budget on marketing and promoting it on local electronic media. Company associates its brand with famous actresses resulting in increase its brand equity. (The detailed data are given in Appendix E) Competitive Environment In Pakistan Nestl and Engro are in stiff competition with each other both in Dairy and Nectar segment. While Nestl has a diverse portfolio of products Engro Ha a very narrow line of products as it plays only on its strengths which is a good strategy once it comes to a country like Pakistan. However Engro has hardly been able to dent Nestls Nectar market as Olfrute was unable to differentiate itself mainly because its taste and packaging is similar to Nestls Fruita Vitals. While in Dairy market Engro Foods Olpers and Dairy Omung (low-priced version dairy liquid brand) have eroded off share of Nestl Milk Pak. Nestl Milk Pak conspicuous absence in local market has been mainly due to Afghanistan operations and diversion of major portion of the dairy supply to war torn country. The extraordinary large scope of However, Engro has nullified this advantage as it is having a strong background in local corporate sector. Opportunities and Threats Nestl. Opportunities ? High credibility ? Potential to expand further to rural areas ? Improving trends ? Market leadership ? Scope for partnerships ? Diverse product line Threats ? Stiff market competition ? Ever Increasing prices of raw materials ? Strong rivals like Engro Food, Pepsi and Unilever ? Threat of substitutes ? Bargaining power of buyers Engro Foods. Opportunity ? Govt . helping farmers to store milk for longer periods of time ? Number of people using tetra Pack increasing everyday ? Growing population ? People migrating in numbers to urban areas ? Govt. making flexible policies for food processing industry ? Improving literacy rate in Pakistan ? Olpers have enough funds to expand their operations in Pakistan ? Global operations in future Threats ? Rising inflation in Pakistan ? Low purchasing power of the people ? Increasing discount rate ? Poor law and order Situation in country ? Low GDP growth rate in the country ? Tough competitors in the market INTERNAL ANALYSIS In Internal Analysis the internal environment of both the companies is compared with a focus on their strengths and weaknesses. The focus would be on the resources and capabilities which these two have and how they use them to develop their core competencies. Another aspect of the analysis would be the Resources Tangible / Intangible Products. Resources are the main basis of a firms capabilities. Resources determine the organizational capabilities. Resources may be tangible or intangible;. Tangible resources are easy to imitate but intangibles are really hard to get.

7There are four types of tangible resources namely Financial,

Organizational, Physical and Technological. While three type of intangible resources include Human, Innovation and Reputational. Tangible Resources
of Nestl

6Financial Resources ? Total Revenue : CHF 79 billion (2012) ? Operating

income : CHF 160 million (2012) ? Profit : CHF 5.84 billion (2012) ? Total Equity : CHF 50.8 billion (2012) ? Total Assets : CHF 50.8 billion (2012)

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Organisational Resources ? Nestl

created Product Technology Centres, Local Application Centres and Clusters. Physical Resources ? ? Baby Food ? Confectionary ? Pharmaceuticals ? Healthcare nutrition ? Coffee ? Ice Cream ? Water Technological Resources ? Nestle is a company which changed its status as a baby food producing company to a multinational food processing company. ? The company invests heavily in technological canges requied tomaintain pace with rapidly changing industrial environment. Tangible Resources of Engro Foods. Financial Resources Organisational Resources Physical Resources Fruits ? Milk ? Ice Cream ? Meat Technological Resources Engro Foods has invested heavily in enhancing its output and quality by introducing state of the art technology. One such example is of the installation of third-generation Intangible Resources of Nestl Nestl . Human Resources world wide while in Pakistan it has more than 10,000 employees. Innovation Resources Nestl uses science and technology to build nutritionally health and beneficial products for its customers. Reputational Resources ? Nestl scientists communicate the health and wellness benefits of their products to customers. ? Consumer needs are considered as research priorities ? Latest developments in science are used for consumer benefits and services. Engro Foods. Human Resources Approximately 12,000 people have been employed by EFL. Innovation Resources Thinking out of the box may be the cutting edge EFL enjoys in Pakistans local market. Company puts great emphasis in new marketing techniques and approaches to increase its brand awareness and product quality. Reputational Resources EFL aggressively markets its products as nutritionally healthy and easy to use. Capability Analysis Capabilities are the capacity of a firm to utilize its resources to achieve a desired result. Capabilities are often used by the Human capital based on developing, carrying and exchanging information. Nestl . Distribution Human Resources ? Nestl has maintained international standards to train ther human resource all over the world...in this way company can deploy any of their worker in any country around the globe. Management Information System ? Automated system to control all aspects of operations more efficiently. Marketing ? Company uses its famous brand name to attract customers. It also caters for varying tastes and likes of majority of population. ? Nestl uses electronic media very effectively in marketing its products. Sponsoring youth programs and celebratory events is another way of improving its brand image. Management Manufacturing R&D ? Milk sterilising technology was pioneered by Nestl. Engro Foods. Distribution EFL distribution network ensures that every day more than 10,000-35,000 litres of milk is distributed in more than 20 cities of Pakistan. However lately EFL has been facing hiccups in its distribution network resulting in drop in revenues. Due to this recurring problem company is unable to launch a new product. Marketing EFL uses its distinct brand image it has created by spending hefty amount into advertising in electronic media. It has been sponsoring TV drama serials for its image promotion. Its flagship brand Olpers has associated itself with famous TV actresses who are in their mid 30s, thus targeting housewives who control the grocery budget in household. Apart from that its Tea whitener Tarang was used as a major sponsor for remake of old Pakistani films in Tarang Houseful. Management .The board is led by Hussain Dawood. He heads Dawood Hercules

11Corporation Limited, Pakistan Poverty Alleviation Fund and The

Dawood Foundation
apart from EFL. Manufacturing EFL has now gained great expertise in manufacturing dairy products namely milk, tea whitener, cream etc. R&D EFL uses innovative and latest technology to improve its product line. Core Competencies Analysis Nestl . Nestls products portfolio has a range of products that are global icons as well as local favorites. The company has a strong R&D infrastructure, which focuses on innovation and renovation that is also close to customers heart. Nestl has an unmatched global presence. This

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presence is not only spanned out on vast geographical area but it has deep roots within those countries as the company operates there for long time. The time spent by the company in these countries has led to a strong brand following. The company has embedded itself deeply in the cultres and societies of these countries, which has greatly helped it to understand their needs and wants.. From farm to fork the company believes in a very strong supply chain which can deliver the best raw materials and is based on best processes resulting in the freshest products in shelves. Nestl is continuously in touch with its customers just to know what they want and also learn new ways of improving its products. The company puts strong emphasis in its supply network so as to place its product where ever it is able to promote it. Engro Foods. Leadership plays a central role once it comes to core competencies in EFL. Identifying and nurturing young managers to take up the leadership roles plays a vital role in the organization. The company takes lead in the market once it comes to innovating new and different ways to market its products. Be it nectar juices or Halal foods the company has diversified its product line with excess to new international markets. The company has invested heavily in improving the quality of its products, thus ensuring a loyal brand following. EFL gives a lot of importance to its human resource; employees have great opportunities to climb up the hierarchy ladder. The company pursues ambitious targets once it comes to revenues however, the leadership believes in doing business with an inherent consciousness that goes beyond the need to fixate on profits and incorporates the pillars of good corporate governance. As the company continues to deliver exciting possibilities for its stakeholders, creating value at each step of the chain, the emphasis on incorporating the highest standards in health, safety and environment (HSE) ensure the well-being of its employees. As a Company that prides itself in its roots as a Pakistani entity it takes pride in preserving and protecting the environment and surroundings. Value Chain Analysis. Nestl . Inbound Logistics. Nestl Pure Life purchases plastic bottles of different sizes fro its suppliers. They have warehouses in different countries and setup of water filling plants get their product ready for distribution. Operations. Nestl operations include water filling, UHT treatment of milk, processing of coffee , packaging and account maintenance etc. Nestl has state of art plants which conver the raw material to processed final form. The company handles their account for sales in regional offices. Outbound Logistics. The products like bottled water, dairy milk , coffee etc all are delivered to the regional offices according to customer demand. Marketing and Sales. Nestl charges value price fro its customer. The products are promoted through personal marketing, TVC, sales promotion and public relation. Services. Nestl provides the service home office delivery. The company distributes its bottles for shops, restaurants, hotel, etc. Their service is very efficient as compared to others. (Graphical representation attached as Appendix C) Engro Foods. Inbound Logistics. supply chain. A fully fledged milk department manages milk gathering through direct resources in insulated tanker which maintain 4Celsius temperature during transportation to keep the milk from getting sour. Operations. EFL operations include chilling, storage, pasteurization, UHT treatment and packaging. Outbound Logistics. Outbound logistics is handled by distributors to minimize risk factors and the cost associated with transportation. Currently EFLs products are available in 80 cities of Pakistan. Marketing and Sales. . Services. EFL provides good services to shops and vendors. The cold chain strategy involved installing refrigerators and deep freezers at the stores for keeping its products chilled i.e. Omore etc. Support Activities Nestl . Technological Development. Nestl is strengthening its technological base by enlarging its global product technological centre for confectionary based in UK. Basic roles of Nestl Product Technology Centres are to develop breakthrough technologies that help in development of new products. The second role is application of these technologies in factories. Human Resource Management. Human resource management is the bedrock of the organization. The management has a responsibility of selecting the right people for the job and then training them for the job. Their responsibility also include skill enhancement and also . Firm Infrastructure. Nestl has a huge infrastructure of plants and factories worldwide which has really developed the areas around them resulting in development of road network but also basic necessities facilities around them. (The detailed basic value chain diagram are given in Appendix 4) Engro Foods. Technological Development. Technological advancements play an important role in keeping EFL at the forefront of product

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development in dairy sector. . The

3MIS department at Engro Foods ensures that all automation is running

error-free at all times. Regularly modifying and updating the Company's accounting software is also the MIS team's responsibility.

12Human Resource Management. The Human Resource department at

Engro Foods
plays an important role in getting the right people for the right job. The department leads the recruitment process to ensure that finest intake of workers takes place. Firm Infrastructure. EFL has installed two plants in interior Sindh and Punjab apart from Nara farm in Sukkur. It has a vast network of milk collection centres which has made company direct stake holder in well being of its supplier and their animals. EFL has heavily invested in developing the infrastructure and surroundings of its installations all over Pakistan. SWOT Analysis Nestl . Strengths Weaknesses Opportunities Engro Foods. Strengths Long relationship with farmers due fertilizer background of company

13Its taste, quality proposition and world-class quality assurance system.

It is the only company in Pakistan which is having a Third Generation Milk processing plant with Bactofuge technology. Weaknesses EFL is not able to ensure quality of its milk mainly because initially it did not have it own farm, resulting in low quality of milk. plant was located in Sukkur in initial years resulting in poor quality of milk. EFL has been facing difficulties in expanding its product portfolio. Since its inception in 2004 it has launched 8 products which is quite low once compared to Nestl. Opportunities Government funding to farmers has increased thus enabling them to store raw material for longer periods of time. This indirectly helps EFL to maintain a steady supply of raw material. Due growing advertisement campaign by the media consumption of processed milk has increased in Pakistan in last few years. This has created opportunity for EFL to increase its market share. Growing dissatisfaction about loose milk and health hazards associated with it have led to increased consumption of processed milk. Threats ? Competition for the company exists from Nestl and brands like Anhaar. Nestl has strong brand following and it might be difficult for Engro Foods to penetrate into its market. ? Due changing trends and perceptions the wants and needs also change. It is important that EFL continuously stays in touch with its customers and gets feedback and guidance on its products. Otherwise it may face a loss in market share sooner or later. Current Strategy Nestl. Nestl as an organization believes in delivering on their promises consistently over long periods of time. This can be

1encapsulated in simple phrase, Good Food, Good Life, a phrase that

sums up their corporate ambition. Nestl s objective is to to be To create alignment for their people behind a cohesive set of strategic priorities that will fast track the achievements of their objectives.

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In Pakistan only 3% of population consumes packaged milk which points to the fact that it has lot of potential as far as packaged milk is concerned. Pakistan always proves to be a profitable market that has large untapped potential and a population of 180 million. This may be the reason why Nestl is continuing to invest heavily in the expanding its operations within the country, despite the adverse effects of current power crisis and deteriorating law and order situation. Last year Nestl has made an investment of $104 million in Egron Project a milk powder facility at Sheikhupura dairy, juice and water fatory. Despite losses in distribution network the compny has launched four new products in 2011 MilkPak milk powder and Nesvita milk powder. These products have shown considerable success and encouraged the top managed to enhance the powderd milk capacity as the liquid milk market within Pakistan is saturated by the competitors. Nestl has found an alternative solution to liquid milk segment by diverting its product to untapped Afghanistan market. The company also exports powdered milk to Afghanistan and nearly 8% of its revenues come from this market. Though the exports to Afghanistan are profitable but company doesnt plan to enhance the exports further, unlike India from where Nestl exports to Sri Lanka and Nepal. The Company sowed growth by 22% with turnover of $800m in 2012 worldwide.

2Nestl Pakistans profits increased by a fifth on the back of higher

margins that helped the company absorb distribution costs and selling expenses.
The expenses which also include advertising and marketing cost in 2013 increased by 27% thus eroding profitability. The company has been able to stand its ground despite slow economic growth in 2013. Even very less growth in a large company like Nestl is a positive sign, however this is a sign of sluggish growth as compared to growth rate in 2012. Companys revenue in 2013 Nestls current pricing strategy has been competitive, thus ensuring its investors in these tough economic times. The company has seen slight pick up across markets in 3rd quarter and its top management expects this trend to continue in future as well. The company is investing heavily in its strong brands i.e. Everyday and Pure Life in Pakistan while divesting away from its underperforming segments i.e. Milk Pak. This would help in improving the capital allocation and structural efficiency while it would drive growth and preserve margins. Engro Foods. Engro Foods has become a major player in food industry in very short span of time. It has become a cash cow for Engro Corporation as the fertilizer operations were not so profitable. The company takes pride in its local roots with a slogan Local flavor with global vision. Keeping in view the short time span company has done very well. The company has ventured into profitable segments and stepped into areas where it felt that it can get good margins. The revenue fell by 4.3% due to (Graphical data of EFL and Nestl is attached as Appendix D ) Balance Sheet Analysis of NESTL and ENGRO FOODS The asset side of balance sheet shows the size of the firm so by comparing balance sheet of both companies we analyzed that the fixed asset of the Nestl company is almost three times the size of Engro foods which means that Nestl has invested more in the fixed assets than Engro foods whether by starting new project or by any other source. Due to high investment in fixed assets long term loan and advances of Nestl are also greater than Engro foods and total assets of Nestl are also greater than Engro foods which shows that the size of Nestl is greater than Engro. Nestl has more cash and bank balance than Engro foods and has more reserves which shows that Nestl hold more than dividing whereas Engro divides more than holding with it means Nestl pays less dividend as compared to Engro foods. The theory based frameworks and models are useful but application of knowledge is difficult to achieve. It also depends on the leadership of a company how it is able to steer its team in difficult times. The organisational culture prevailing in a company plays vital role in generating strong values associated with it, which in turn govern the corporate philosophy of that company. Nestl and Engro Foods are two very strong companies who have very clear and concise sense of direction. Though there is

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no comparison between the two once it comes to comparing them as a whole but within Pakistan they are competing each other in almost every aspect of business, be it marketing, operations or human resource. Both have their own strengths and weaknesses and they always play upon their strengths, however in Pakistan there are many external factors effecting the business environment as well. Be it power crisis or the law and order situation both these companies are fighting it out and trying to maintain their profit margin, a task difficult but not impossible. It is still not clear as to who among the two will fare better in future but who ever perceives the external threats well and caters well for them will definitely become leader in local market for times to come. Appendices Appendix A The

5external environment Economic Demographic Industry Environment

Threat of new entrants Power of supplier Power of buyers Product substitutes Intensity of rivalry Socio- Cultural Competitor environment Political/Legal Global Technological
Appendix B The five forces model of competition The basic value chain Appendix D Business Level Strategy Market data analysis of Nestle and Engro Foods Appendix E (Contd) Market data analysis of Nestle and Engro Foods

10Financial Statements of Nestls 2012 Financial Statements of Nestl s 2012 Financial Statements of Nestl

s 2012 Appendix F (contd.)

4Financial Statements of Nestls 2012 Financial Statements of Nestls 2013HY Financial Statements of Nestls 2013 HY Financial Statements of

Nestls
2013 HY

4Financial Statements of Nestls 2013 HY Financial Statements of

Engro Foods 2012 Financial Statements of Engro Foods 2012 Financial Statements of Engro Foods 2012 Financial Statements of Engro Foods 2013HY Financial Statements of Engro Foods 2013HY Financial Statements of Engro Foods 2013HY ? ?

8Appendix C Appendix E Appendix F Appendix F (contd.) Appendix F (contd.)

Appendix G Appendix G (contd.) Appendix G (contd.) Appendix G (contd.) Appendix H Appendix H (contd.) Appendix H (contd.) Appendix J Appendix J
(contd.) Appendix

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J (contd.) Project Report Nestle & Engro Foods| Appendices 1 Project Report Nestle & Engro Foods| Appendices 2 Project Report Nestle & Engro Foods| Appendices 3 Project Report Nestle & Engro Foods| Appendices 4 Project Report Nestle & Engro Foods| Appendices 5 Project Report Nestle & Engro Foods| Appendices 6 Project Report Nestle & Engro Foods| Appendices 7 Project Report Nestle & Engro Foods| Appendices 8 Project Report Nestle & Engro Foods| Appendices 9 Project Report Nestle & Engro Foods| Appendices 10 Project Report Nestle & Engro Foods| Appendices 11 Project Report Nestle & Engro Foods| Appendices 12 Project Report Nestle & Engro Foods| Appendices 13 Project Report Nestle & Engro Foods| Appendices 14 Project Report Nestle & Engro Foods| Appendices 15 Project Report Nestle & Engro Foods| Appendices 16 Project Report Nestle & Engro Foods| Appendices 17 Project Report Nestle & Engro Foods| Appendices 18 Project Report Nestle & Engro Foods| Appendices 19 Project Report Nestle & Engro Foods| Appendices 20 Project Report Nestle & Engro Foods| Appendices 21 Project Report Nestle & Engro Foods| Appendices 22 Project Report Nestle & Engro Foods| Appendices 23 Project Report Nestle & Engro Foods| Appendices 24 Project Report Nestle & Engro Foods| Appendices 25 Project Report Nestle & Engro Foods| Appendices 26 Project Report Nestle & Engro Foods| Appendices 27 Project Report Nestle & Engro Foods| Appendices 28 Project Report Nestle & Engro Foods| Appendices 29 Project Report Nestle & Engro Foods| Appendices 30 Project Report Nestle & Engro Foods| Appendices 31 Project Report Nestle & Engro Foods| Appendices 32 Project Report Nestle & Engro Foods| Appendices 33 Project Report Nestle & Engro Foods| Appendices 34 Project Report Nestle & Engro Foods| Appendices 35 Project Report Nestle & Engro Foods| Appendices 36 Project Report Nestle & Engro Foods| Appendices 37 Project Report Nestle & Engro Foods| Appendices 38 Project Report Nestle & Engro Foods| Appendices 39 Project Report Nestle & Engro Foods| Appendices 40 Project Report Nestle & Engro Foods| Appendices 41 Project Report Nestle & Engro Foods| Appendices 42 Project Report Nestle & Engro Foods| Appendices 43 Project Report Nestle & Engro Foods| Appendices 44 Project Report Nestle & Engro Foods| Appendices 45 Project Report Nestle & Engro Foods| Appendices 46 Project Report Nestle & Engro Foods| Appendices 47 Project Report Nestle & Engro Foods| Appendices 48 Project Report Nestle & Engro Foods| Appendices 49 Project Report Nestle & Engro Foods| Appendices 50 Project Report Nestle & Engro Foods| Appendices 51 Project Report Nestle & Engro Foods| Appendices 52 Project Report Nestle & Engro Foods| Appendices 53 Project Report Nestle & Engro Foods| Appendices 54 Project Report Nestle & Engro Foods| Appendices 55 Project Report Nestle & Engro Foods| Appendices 56 Project Report Nestle & Engro Foods| Appendices 57 Project Report Nestle & Engro Foods| Appendices 58 Project Report Nestle & Engro Foods| Appendices 59 Project Report Nestle & Engro Foods| Appendices 60 Project Report Nestle & Engro Foods| Appendices 61

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