Strategic Management Report on

Nestle Pakistan
2018

Submitted by:
[Type the company name]
1/1/2018
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ASSIGNMENT
On
STRATEGIC MANAGEMENT REPORT ON NESTLE PAKISTAN

Submitted to:
Sir Owais
Submitted by:
Mahnoor Shah Jhan
BPA-15-28
Strategic Management

INSTITUTE OF SOCIAL SCIENCES

BAHAUDDIN ZAKARIYA UNIVERSITY MULTAN
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EXECUTIVE SUMMARY
Nestle is one of the best food companies not only in Pakistan but all over the world. It has
been serving this world for over one hundred and thirty years. It has differentiated itself through
its high-quality product mix and positioned itself as health and Nutrition Company while targeting
the health-conscious people throughout the world. Nestle started its operations in Pakistan back
in1988, by acquiring a diary company Milkpak ltd. when people of Pakistan actually needed it.
The Members working in the Organization are concern about developing the high standards in the
Market. They basically focus on making sure that their products are best to use.
Since Pakistan is the fifth world’s largest milk producing country therefore Nestle deals mainly in
dairy products. Moreover, it also sells juices, chocolates, prepared food like noodles, baby food,
infant formula milk and breakfast cereals in Pakistan.
Nestle is a low-cost leader with its efficient operations hence it provides its customers with high
quality products and sells them at a premium price. Therefore, it is earning good profits. Nestle
has set its manufacturing plants at in Karachi, Lahore, Islamabad and Kabirwala. The milk
processing plant at Kabirwala district is the Nestlé’s world largest milk processing plant.
When nestle introduced its products in Pakistan people were neither aware nor accustomed to
them. Therefore, nestle ran an extensive marketing campaign to educate people and create a need
for its products. Pakistan is a land where fresh eatables are readily available. Nestle should sell the
same quality of products in Pakistan as it sells abroad. It should also introduce more brands in
Pakistani market which it offers in other markets of the world since consumers in Pakistan are
becoming more demanding day by day.
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Table of Contents

S.No. Topic Name Page No.

1. Organization’s Introduction 4

2. Vision, Mission and Core Values 4-6

3. Role of management 7

4. Competitive Advantage 8

5. Products and services analysis 9 - 13

6. Competitors 14 -15

7. Annual objectives 15

8. SWOT Analysis 16 - 37

9. PESTLE Analysis 38 - 43

10. General strategies adopted by Nestle 44 - 47

11. Market segmentation and positioning strategy 48 - 56

12. Strategies required for next five years 57 - 60

13. References 61 - 62
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INTRODUCTION
Nestle Pakistan Limited is a Pakistan- based food and
beverages company. The Company is engaged in
manufacturing, processing and sale of food products.
Nestle has been serving Pakistani consumers since
1988, when their parent company, the Swiveled- based
Nestle SA first acquired a share in Milkpak Ltd. Nestle
Pakistan Limited is registered on the Karachi and
Lahore stock exchanges for the past ten years.
Company has been declared one of the top 25 companies on the Karachi Stock Exchange by 2014.
Nestle Pakistan aims to be a Rs.100 billion company. Nestle, as a social company, offers
tremendous opportunities for career growth and learning at domestic and international levels. With
over 8000 brands preferred for their good quality, taste and health benefits. Nestle is the number
one food company in the world.
Nestle is leading the change in the food industry as it is also the leading food company in terms of
having the largest set up of research and development in food science and nutrition. They are
uniquely positioned to provide products that help consumers live a good life. Many Nestle brands
have benefited from the active ingredients developed by Nestle research and with over 130 years
of expertise, consumers know they are getting the best in quality when they choose a Nestle brand.
Happy and healthy consumers are at the heart of what they do. Their philosophy is summed up in
the phrase "Good Food, Good Life: and they remain committed to help consumers choose better
tasting and healthier products to help them enjoy happier, healthier lives.
CORE VALUES
The Company Core values are as follows:
 They focus on to develop a workforce which is highly motivated and can perform well in
the workplace.
 They focus to meet the requirements and needs of their consumer which comprises of all
age groups. They can be from small infant to older age. They focus on creating high quality
products and provide services which are helpful in capturing great customer value.
 They also focus on maintaining the shareholder’s wealth but keeping in mind that to
perform their operations well with environmental and social responsibilities.
 Their brands are preferred in comparison of High quality food and Beverage products.
 They Communicate with their customer and provide them with the relevant information
they need.
 They promote their employees and motivate them to compete and to become specialized
in their work.
 They also have milk collection services which help to develop dairy sector in the rural areas
of Pakistan.
 The organization follows proactive approach which helps them to compete in the market.
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VISION & MISSION

As the company continued its growth so they also develop new plans and strategies focusing on
their Mission Statement which is “Good Food, Good Life”. These are not just Simple words there
is a meaning of Existence of the Nestle Company which describes the purpose of company’s
existence. That is, they focus on making an influence to the social environment and operate
responsibly and making food which is good for health and utilizing the resources carefully keeping
the environment safe produces good healthy food.
Nestle wants to become a company which is preferred always, like among its competitors the
customer should choose their company. So, keeping their vision and mission in mind they focus
their products and its availability in the market and which is easily accessed by their valuable
consumer.

Existing vision statement

“Nestles global vision is to be the recognized leading nutrition, health and wellness company.
Nestle Pakistan subscribes fully to this vision of being the number one nutrition, health and
wellness company in Pakistan. Envision to:
 Lead a dynamic, passionate and professional work force – proud of our heritage and
positive about the future.
 Meet the nutrition needs of consumers of all ages - from infancy to old age, from beverage
products of the highest quality.
 Deliver shareholder value through profitable long – turn growth, while continuing to play
a significant and responsible role in the social, economic, and environmental sectors of
Pakistan.”
Existing mission statement
“To positively enhance the quality of life of the people of Pakistan by all that we do through our
problem, our brands and products and our CSV activities.”
At Nestlé, we believe that research can help us make better food so that people live a better life.
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, Nestlé products bring consumers the vital ingredients of
taste and pleasure. As consumers continue to make choices regarding foods and beverages they
consume, Nestlé helps provide selections for all individual taste and lifestyle preferences.
Nestlé is dedicated to providing the best foods to people throughout their day, throughout their
lives, throughout the country. With our unique experience of anticipating consumers’ needs and
creating solutions, Nestlé contributes to your well-being and enhances your quality of life.
“Research is a key part of our heritage at Nestlé and an essential element of our future. We know
there is still much to discover about health, wellness and the role of food in our lives, and we
continue to search for answers to bring consumers Good Food for Good Life.”
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Proposed vision statement

“To be the number one nutrition, health, and wellness company in Pakistan.”

Proposed mission statement

“To positively enhance the quality of life of the people of Pakistan by all that we do through our
world-renowned people, brands, technology, products, and creating shared value (CSV) activities;
in a manner that is consistent with long- term growth.”

Analysis of existing Mission statement

# Component Y/N
1. Customers Y
2. Concern for employees Y
3. Concern for Public image Y
4. Self-concept N
5. Philosophy Y
6. Concern for survival, growth and profit N
7. Technology N
8. Markets Y
9. Product services Y

The statement includes products and services, markets and self-concept concepts but lacks other 6
essential components. The company doesn’t mention any values, which guides its actions, in the
statement but provides them in addition to their 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.”
Nestle’s vision and values address more stakeholders than the original mission and should be
combined into it to provide more information about the business. The vision and values statement
additionally include concern for survival, public image and employees’ components that the
official statement lacks. The combined statement would better communicate Nestle’s ‘reason for
being’ in the business to its stakeholders.
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Role of Management
Top Level of Management
It contains of board of directors, chief executive or managing director. The top management is the
final source of authority and it manages aims and policies for an initiative. It dedicates more time
on planning and coordinating functions.
 The role of the top management can be summarized as follows:
 Top management broad policies of the enterprise and lays down the objectives.
 It issues necessary instructions for preparation of subdivision procedures, schedules,
budgets, etc.
 It prepares strategic policies & plans for the initiative.
 It appoints the executive for middle level for instance departmental managers.
 It coordinates & controls the activities of all the departments.
 It is also responsible for maintaining a contact with the outside world.
 It provides direction and guidance.
 The top management is also responsible towards the stockholders for the performance of
the initiative.

Middle Level of Management

The branch managers and departmental managers constitute middle level. They are responsible to
the top management for the operative of their department. They devote more time to directional
and organizational functions. Their role can be highlighted as:
 They execute the plans of the organization in accordance with the policies and directives
of the top management.
 They make plans for the sub-units of the organization.
 They participate in training & employment of lower level management.
 They understand and explain policies from top-level management to lower level.
 They are also responsible for inspiring lower level managers towards better performance.

Lower Level of Management

Lower level is also known as operative/supervisory level of management. It contains of
supervisors, superintendent section, officers etc. Their activities include:
 Assigning of jobs and tasks to various workers.
 They instruct and guide workers for day-to-day activities.
 They are responsible for the quality as well as quantity of production.
 They are also entrusted with the responsibility of maintaining good relation in the
organization.
 They communicate workers problems, suggestions, and recommendatory appeals etc to
the higher level and higher-level goals and objectives to the workers.
 They help to solve the complaints of the workers.
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COMPETITIVE ADVANTAGE
For a company to survive the company must maintain and sustain its competitive advantage. So,
these are the major 10 reasons why Nestle Pakistan is still competing and is successful.
Nutrition, Health and Wellness: Nestlé’s core aim is to enhance the quality of consumer’s
lives every day, everywhere by offering tastier and healthier food and beverage choices and
encouraging a healthy lifestyle. Nestle express this via their corporate proposition ‘Good Food,
Good Life’. Nestlé Nutritional Profiling System
Quality Assurance and product safety: Everywhere in the world, the Nestlé name represents
a promise to the consumer that the product is safe and of high standard. Nestlé Quality Policy
Consumer Communication: Nestle Pakistan is committed to responsible, reliable consumer
communication that empowers consumers to exercise their right to informed choice and promotes
healthier diets. Nestle respect consumer privacy. Nestlé Consumer Communications Principles
Nestlé Policy and Instructions for Implementation of the WHO International Code of Marketing
of Breast-milk Substitutes.
Human rights in Nestlé’s business activities: Nestle fully support the United Nations Global
Compact’s (UNGC) guiding principles on human rights and labor and aim to provide an example
of good human rights’ and labor practices throughout our business activities. International Labor
Organization
Nestlé’s success is based on Nestlé’s people: Nestlé’s treat each other with respect and dignity
and expect everyone to promote a sense of personal responsibility. The Company recruit
competent and motivated people who respect their values, provide equal opportunities for their
development and advancement, protect their privacy and do not tolerate any form of harassment
or discrimination.
Safety and health at work: Company is committed to prevent accidents, injuries and illness
related to work, and to protect employees, contractors and others involved along the value chain.
Supplier and customer relations: The Company require their suppliers, agents, subcontractors
and their employees to demonstrate honesty, integrity and fairness, and to adhere to their non-
negotiable standards. In the same way, they are committed towards their own customers.
Agriculture and rural development: The Company is contributed towards improvements in
agricultural production, the social and economic status of farmers, rural communities and in
production systems to make them more environmentally sustainable.
Environmental sustainability: The Company is committed to environmental sustainability. At
all stages of the product life cycle they strive to use natural resources efficiently, favor the use of
sustainably-managed renewable resources, and target zero waste.
Continuous improvement in water management: The Company recognize that the world
faces a growing water challenge and that responsible management of the world’s resources by all
water users is an absolute necessity. Nestlé Water report Nestlé continues to maintain its
commitment to follow and respect all applicable local laws in each of its markets.
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PRODUCTS AND SERVICES

Most people know Nestle through their brands. Their portfolio covers practically all food and
beverage categories. Nestle has a wide range of products across a number of markets. With over
140 years of experience and expertise they take great pride in bringing us the best products because
happy, healthy consumers are important to them. They develop their products keeping our
preferences, tastes and needs in mind. Their products are carefully aligned to Pakistani tastes and
needs. They always try hard to develop new products and improve existing ones and serve their
consumers in a better way.

List of Products:
 Milk, dairy and chilled diary
Nestle Milkpak
Nestle Nido
Nestle Neslac
Nestle Everyday
Nestle Yogurt,
Nestle Raita & Nestle Desi Ghee
Nesvita
 Beverages & bottled water
Nescafe
Milo & Juices
Pure Life
 Breakfast & cereals
Cornflakes
Honey stars
Koko crunch
 Chocolate, confectionary & baby food
Kit Kat
Cerelac
 Prepared meals
Maggi
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TARGET MARKET OF NESTLE PRODUCTS

Milk, dairy and Chilled dairy

wide variety of dairy products is available to cater almost every segment of customer. Liquid Milk
especially Nesvita is produced especially for the females as it contains high content of iron,
beneficial for them.
Beverages
It includes Nescafe, Milo, Nesquik, and Nestle Friuta Vitals. Their main target market includes
people of all ages.
Bottled water
Businesses, students, for the people who do not have access to clean drinking water.
Baby food
Target market of baby food is all the parents
Food
It includes Maggie noodles which mostly caters children and teenagers.
Breakfast cereals
Children, teens and adults benefits from it
Chocolates and confectionary
People of all ages.
Sports nutrition
It specifically targets sports persons for a nutritive protein diet

LIST OF SERVICES BY NESTLE PAKISTAN

 Feed improvement
 Livestock breeding and health
 Equipment provision
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PRODUCT ANALYSIS
Boston Consulting Group Matrix
 Star Category

 Nestle Milkpak
 Pure life
 Nido
 Cerelac
 Nestle Fruita Vitals (Nestle Juices)
These products are widely used by peoples in Pakistan. So, they help company to increase market
share. Nestle should decrease the price of these products.

 Question Mark Category

 Everyday
 Milkpak Cream
There is some minor default in above mentioned products like there taste and expiry dates. These
products can become star product if these defaults be removed.

 Cash Cow Category

 Nestle Dahi
 Maggi
 KitKat
 Polo
These products can made star products of nestle if nestle add new flavors and do penetration
instead of skimming.

 Dog Category

 Nestle Koko Crunch

 Nestle Cornflakes
 Milo
 Nestle Raita
These products are not sold as much due to following factors.
1. Targeting specific economic class.
2. Not according to taste of peoples.
3. Rare peoples like these products.
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MARKETING MIX OF PRODUCTS

 Product
Three Nestlé’s Products of Milk Category are
selected for the marketing mix.
1. Nestle Milk (Liquid)
2. Nestle Condensed Milk (Dense Liquid)
3. Nestle Everyday (Powdered Milk)

Nestle Launched First Powder milk in 2003 and then they came into Liquid powder. The Nestle
Powder milk because of its good quality helps Nestle to capture a great customer value.
Milk Powder introduced by Nestle has good taste, more stable, ready to drink, and less volume.
The Production of Nestle Everyday is carried out in Sheikhupura and Kabirwala. They improved
the quality of milk by the UHT process.
The target markets for these products are the consumers who drink Tea in their daily routine.
Industrial consumers of Nestle Everyday instant milk are PIA, Mc-Donald’s and pearl continental
Pakistan.

 Price
Nestle basically sets prices by keeping in mind that they have to capture a greater customer value
and that their products are in the reach of their consumer i.e., the consumer has the Pocket to pay
for their product. So, in this way the Nestlé’s product demand increases in:
 Profit margin of the product
The Company has set its profit margin high because of their products good quality.
 Price Fluctuation
The product is related to dairy farms. So, there are chances of price fluctuation.
 Scale of prices
There is a price scale which is set to a specific level. So, the consumer can pay for the product.
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 Promotion

 Channels adopted for promotion

They basically promote their products through Media, New papers, magazines, Boarding’s.
 Advertisement Cost
As every company planned their financial year. So, nestle also has a Specific budget for advertising
 Nature of marketing
The product is marketed aggressively in the market.
 Online promotion methods
Nestle does not have yet adopted online promotion methods in Pakistan but in future it may
be possible.

 Placement

 Outlets of product located

Nestlé’s products are located all over in Pakistan regardless of big and small cities.
 Directly sales to the consumers or via distributors
Nestlé’s products are not sold directly to the customers because of the extensive consumer groups.
It’s the reason they use the sale the products through distributors for easiness of company.
 Insurance policies of companies
Nestlé’s insurance policies are maintained but they are highly confidential.
 Warehousing facilitation of company
Nestle has its own warehouses for the storage of products as well as it has also hired some
warehouses.
 Transportation modes of the product
Usually Nestlé’s mode of transportation is road.
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COMPETITORS
Nestlé is the market leader in the water industry. It is the first company which launched bottled
water for first time in Pakistan and that’s why it has maximum market share than others because
of being pioneer in this industry. Nestle Pure Life introduce the bottled water culture. No doubt
Nestle pure life is currently a dominant leader in Pakistan market in Mineral Water Industry. Nestle
Pure Life is currently dominating more than 80% of bottled water market share. It is also leading
the other firms in new product introductions, distribution coverage, and promotional intensity.
Competition typically is defined as among forms within an industry producing products
that are substitutes for one another. Therefore, the identification and evaluation of
marketplace competitors is a key element of strategic marketing and a vital element of the
corporate survival.
For different product categories there are different competitors of Nestlé. Nestle pure life (NPL)
major competitors at this time who are also offering their water product in market are following:
 Pepsi is offering Aqua Fina
 Askari water
There are also other small competitors as well e.g. Classic, Nova etc., which have very low market
segments.
According to market view, competition is defined as:
The competition between the firms, which are satisfying the same customer, needs.
So according to concept the competitors of NPL are all those companies, which are satisfying the
need of thrust of the customers are the competitors of the Nestle.

Main Competitors:
Engro foods and Haleeb foods are the main competitors of Nestle in Pakistan
& the main strong competitor is Shezan.
 Engro Foods Pakistan Major product lines: Olpers milk, Olwell, Olper Cream, Tarang
Tea whitener, Tarkka Ghee
 Haleeb Foods Major product lines: Bread, snacks, desserts and meals.
 Shezan Foods Pakistan Major product lines: Food Products, Jams Jellies & Marmalades,
Tomato Ketchup, Sauces & Pickles, Fruit Juices Syrups & Squashes
The other main competitors of Nestle Pakistan are:
 Unilever
 Proctor and Gamble
 Tapal danedar
 Pepsi
 Coca cola
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 Gourmet is also giving a very tough competition to Nestle pure life as their price is less than
Nestle pure life. Moreover, gourmet is approaching the other cities and rural areas of the
country and possibly will emerge as a strong competitor of Nestle pure life in near future.
 There are also other competitors found within a local market which include Sparklet, Acqacare,
Pure, Aafi, Oura, Aabshar and many other local brands, but their market share is very low as
compare to the Nestle Pure Life.

ANNUAL OBJECTIVES
Annual objectives of Nestle Pakistan are simple & well designed with the core strategy to meet
the demand of the consumers & to fulfill the needs of the customers. Annual objectives are
compatible with the overall corporate objectives of nestle. Company’s biggest objective is to be
the country’s largest and best branded food manufacturer while insuring that nestle name is
synonymous with the products of the highest quality.
The other annual objectives are:
 To be the best & quality brand in Pakistan
 To meet the needs & requirements of the consumers
 To capture the desired market share
 To dwell in to the life of people & consumers
 To be the number one nutritious company of Pakistan
 To be the leading FMCG company around the world as well as in Pakistan
 To be the socially responsible company & be helpful in bad times.
 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.
 To establish the benchmark for good business practice.
 Employing new technologies and processing.
 Nestle aims to be proactive innovation and renovation culture, which is the key to Nestle’s
success in the marketplace.
 Nestle aims to have fully integrated systems with suppliers & retailers so that every single
market can be tapped & focused
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SWOT ANALYSIS
This section presents a SWOT analysis to review the micro environment of the frim reflecting
specifically upon the strengths and weaknesses of Nestle Pakistan and the opportunities and threats
the firm must respond to through an alignment of firm strengths to such forces. A SWOT analysis
is often used, as a strategic tool to allow a presentation of the firm’s resources and capabilities,
which can be further, developed to aid competitive advantage. A SWOT analysis therefore
underpins the development of future strategic options. A desirable competitive advantage is one
obtained through a minimization of threats aligned with the seizing of opportunities.

 STRENGTHS

1. Brand Image
Making a good first impression is important, especially in business. Consumers create an
impression of the business and brand based on a variety of factors, such as the way employees are
dressed, their website, business cards, the cleanliness of store and more. Call it superficial, but
these small details are points of contact.
Brand image (describes the consumer’s belief and thoughts towards a specific product)
enhances the consumer’s trust and enables the company to differentiate its services from
other enterprises in the industry and to satisfy the consumers.
In this case, presentation is everything.
 Over the years, Nestle Pakistan with positive brand image have attracted the clients and
built associations which have ultimately cultivated better profits.
 Nestle Pakistan has witnessed a steady growth on the back of the strong brand image. The
company reported overall earnings of 4.10 billion for the three months ended on March
31, 2017 as compared to 3.44 billion in the corresponding period in 2016.
 For over two decades, Nestlé Pakistan, have strived to bring high quality products that
have won the hearts of all Pakistanis. Their bedrock values of respect, trust, integrity and
teamwork have helped them become the premier Nutrition, Health and Wellness Company
and earn a positive brand images in the minds of the customers.
 Brand name has helped the Nestle Pakistan to differentiate the products of its companies.
 Nestlé Pakistan today is the leading Food & Beverages Company in Pakistan with key
focus on nutrition, health and wellness and reaching the remotest of locations throughout
Pakistan to serve the consumers.
 Today more and more consumers mirror their emphasis on nutrition, as they realize that
food choices affect their health and quality of life.
 Development of trust and loyalty highlight the capability development of the firm.
 So, brand image in either perspective, directly or indirectly, more or less, early or late
whatsoever the case may be, it has affected the company’s profitability.
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2. Market strategies
Marketing strategy focuses on what you want to achieve for your business and marketing efforts.
Marketing strategy is a section of the business plan that outlines the overall game plan for
how to find and attract clients or customers to business.
 Marketing strategies established by the Nestle Pakistan are innovative.
 Marketing strategies of Nestle Pakistan are fluid, changing as needed to improve the
results. They assess and adjust their marketing strategy from time to time to account for
changing market conditions, shifts in demand, and other factors that impact their sales, as
a result of their market research activities and performance of their business.
 Nestle Pakistan has a good marketing strategy that incorporates with the 5 Ps of
marketing to develop techniques and tactics that help them to achieve marketing
objectives.
 Marketing strategies just like financial and sales strategies are formulated by gauging the
periodic research carried out to judge market trends.
 They set prices of their own because Nestle is the trendsetter in the market. Competitors,
not really, bother price policy of the company.
 The profit margin of company is usually high because of the high quality of the product.
Its prices generally tend to fluctuate. The prices are fixed on a reasonable scale so that
majority of public can afford. They don’t give price discounts to the final consumers, but it
is considered for the organizational consumers like Nestle has given discounts to PIA. They
never return the paid money back but if the claim is valid they replace the products.
 Company has adopted channels for promotion such as TV, newspapers, magazines and
doctors. The advertisement budget of the company is preplanned by the start of financial
year. It is kept secret b the company.
 The product is marketed aggressively in the market. Nestle is working on this concept
because they want to increase their market share. They are providing quality products to
the customers that include their service and product.
 Their outlets are located all over in Pakistan regardless of big and small cities that are easy
to approach.

3. Quality Products
The common element of the business definitions is that the quality of a product or service refers
to the perception of the degree to which the product or service meets the customer's expectations.
Quality has no specific meaning unless related to a specific function and/or object.
 The Company’s priority is to bring the best and most relevant products to people,
wherever they are, whatever their needs are, and for all age groups.
 Nestlé Pakistan has its commitment to excellence in product safety and quality.
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 Nestle has the products with specific features that make them different
from other similar products present in the market i.e., Nestle has
introduced the milk powder which outshined others because of its great
taste, refrigeration, ready to drink, less volume, more stable shelf life.
The entire production of this product is carried out in Pakistan at
Sheikhupura and Kabirwala.
 Nestlé’s existing products grow through innovation and renovation
while maintaining a balance in geographic activities and product lines.
 The technology for the manufacturing of products is imported and is
latest. Nestle continuously make changes in the product or its
manufacturing process such as the factory mil powders spray drying
capacity was doubled in 1999 with commissioning of new evaporator.
 Long-term potential is never sacrificed for short-term performance.

4. Growing Sales and profits

Making your business more profitable involves looking at ways to increase sales revenue as well
as decreasing your costs and benchmarking your business to see where you can save money.
 Nestle Pakistan has the major shareholder in the food industry of Pakistan.
 Nestlé Pakistan mentioned in its financial statement for the nine months period ended
September 30, 2017 that the sales revenue increased by Rs8.0 billion, yielded a growth of
9.5 percent largely driven by volume. The company’s export sales during the period
reached at Rs3.7 billion recording a growth of 3.6 percent.
 The company delivered an operating profit of 19.6 percent. The rise is mainly owing to
enhanced gross margin, operational savings and effective cost management.
 Furthermore, Nestlé Pakistan’s net profit-after-tax (PAT) reached at Rs11.3 billion,
recording a strong growth of 15.4 percent.
 It has a firm foot on the ground. Over the years, the Company has invested quite
significantly in its product development and enhancing its market share. The Company has
the potential to continue its growth on account of an unprecedented hike in consumption
of packaged food and drinks by a middle class that is rapidly expanding in numbers, the
food producing giants like Nestle have been faring remarkably well over the course of the
last five years.

5. Market Share
Nestle juices has a highest market share almost in every SBU’s line, such as in Milk pack & Nestle
pure life.
High market share always depicts the quality of the firm & its strong management
decisions.
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Although the competition is growing

around Nestle, however, it has a firm foot
on the ground. Over the years, the Company
has invested quite significantly in its
product development and enhancing its
market share. The Company has the
potential to continue its growth on account
of an unprecedented hike in consumption of
packaged food and drinks by a middle class
that is rapidly expanding in numbers, the
food producing giants the likes of Engro
and Nestle have been faring remarkably
well over the course of the last five years.

6. Skilled labor
Skilled labor is a segment of the work force with a high skill level that creates significant economic
value through the work performed (human capital).
Skilled labor is generally characterized by high education or expertise levels and high
wages.
 Skilled labor in an increasingly global competitive world is essential and Nestle is creating
competitive edge by its high skilled labors.
 With rapid changes in the economy with respect to the growth of knowledge-based jobs,
skilled labor of the future may be different from the skilled labor of the past and present
and Nestle Pakistan provides training to its labors to meet the requirements of the present
and future.
 The "rise of the machine" is engendering great debate and a certain level of anxiety among
skilled workers. Labors in Nestle does not have to wonder if they will eventually be
replaced on the job by a robot or a computer algorithm.
 Reduced costs because of skilled labors.
 Reduced downtime.

7. Strong supply chain network

Businesses are often part of a larger network of organizations, a supply chain network can be used
to highlight interactions between organizations; they can also be used to show the flow of
information and materials across organizations.
 Supply chains and supply networks both describe the flow and movement of materials &
information, by linking organizations together to serve the end-customer.
 To create value among suppliers, technical training is provided to farmers level which in
return will improve quality.
 20
factory

Carrying and forwarding agent

Distributor Super-Stockiest

Wholesaler Distributor

Retailer Retailer

Consumer

 The Nestlé Supplier Code establishes non-negotiable minimum standards. They ask their
suppliers, their employees, agents and subcontractors to respect and to adhere to always
when conducting business. The Nestlé Supplier Code helps to implement commitment. To
ensure both responsible sourcing and supplier relationships that deliver a competitive
advantage
 Replicable and consistent quality and food safety
 Predictable timing and volume
 Increased price stability
 Sustainable production
 Farmer loyalty

8. Efficient Distribution networks

A distribution network is an interconnected group of storage facilities and transportation
systems that receive inventories of goods and then deliver them to customers.
 Efficient Distribution networks throughout the country
 Nestle employs different distributers for different areas
 Increasingly considered a critical asset in this new age
 21

9. Parent support
Nestle Pakistan has a strong support from its parent company, which is the world’s largest
processed food and beverage company, with a presence in almost every country.
 The company has access to the parent’s hugely successful global folio of products and
brands
 Good background of the company
 Nestlé has a place in the heart of consumers due to its longstanding history.
 Global recognition driven by the number of strong brands within the firm’s portfolio.
 Diversified and varied brand portfolio.

10. Environment Friendly

Nestle Pakistan understands the sense of well-being requires that its products are made in a caring
and responsible way that preserves the environment for future generations.
Company is focusing on three areas and is supported by these commitments:
Caring for water
 Work to achieve water efficiency and sustainability across their operations
 Advocate for effective water policies and stewardship
 Treat the water that is discharged effectively
 Engage with suppliers, especially those in agriculture
 Raise awareness on water conservation, and improve access to water and sanitation
across our value chain
Acting on climate change
 Provide climate change leadership
 Promote transparency and proactive, long-term engagement in climate policy
Safeguarding the environment
 Reduce food loss and waste
 Improve the environmental performance of their packaging
 Assess and optimize the environmental impact of their products
 Provide meaningful and accurate environmental information and dialogue
 Preserve natural capital, including forests
Packaging Achievements
Company is opposed to labelling with a single indicator, such as water footprint, because it is
misleading to consumers and neglects other important factors such as the product's impact on CO2
emissions and non-renewable energy resources.
 22

Communication with customers

Nestlé is committed to using a range of communication methods to engage consumers on
environmental issues. For example, Nestlé has launched the world’s first free, mobile application
for iPhone and Android devices to help people recycle waste packaging correctly.
Bio-Gas Plant
After a pilot project for Bio-Gas plant of capacity 200 m3 at Sukheki Farm, Nestlé Pakistan
installed another Bio-Gas plant with a capacity of 400 m3 at Sarsabz Farm in 2014. Most of the
Bio-Gas produced is used in power generation where it saves 50% of diesel fuel (60 Liter/Diesel
per day) equivalent to reduction of 58,000 kg CO2. Green energy has therefore resulted in reduced
carbon footprint.
Solar Energy
The success story of the pilot project encouraged the Company to install two more solar energy
projects for its 1,000-litre chiller in the Collection Center at Pull Mangni sub-center and the Dallan
area in 2013. Nestlé Pakistan installed 8 solar energy systems at its Milk Collection centers in 2014
and foresees hopes to install 15 to 20 solar energy units of 5-6 KW each. The continuing effort of
Nestlé Pakistan in solar energy would set an example in the dairy industry to make use of a
renewable energy solution for sustainable business.
Paper and Board
22 tons of paper and board was saved by the optimization of corrugated cases. It was achieved
through re-designing the cases for dimensions and material combination without any compromise
on the functionality of packaging or the quality of product.
Plastic Laminates
As much as 231 tons of plastics, mainly polyethylene, was saved by optimizing the structure of
laminates for milk powders and cereals. The biggest initiative in this regard was the optimization
of the sealing layer of the laminates. Many trials and studies were conducted to ensure that this
optimization should not have any negative impact on the final quality of our products.
Green Supply Chain
Nestle Pakistan is delivering more volume with less kilometers travelled and have taken the
following steps to ensure environment friendly operations throughout Pakistan.
 Optimizing vehicle capacity
 Utilization by increasing dispatch of North zone through cross dock model
 Induction of new heavy capacity vehicles
 By introducing HUB model in South, having positive impact on vehicles utilization and
less diesel consumption
 By increasing road safety/ vehicle management awareness in Pakistani drivers through
NH&MP training sessions.
 Highest ever density: 16 Liter of milk collected / KM of vehicle travelled
 23

11. Organization Culture

The biggest strength of nestle is it includes team focused and good policy. Nestle Pakistan looks
on collective and oriented employees to work hard. And second thing is Nestle has a big brand
name mostly because of exceptional capabilities of its employees.
 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 never being sacrificed for short-term performance.
 Strong teamwork within the firm promoting good levels of job satisfaction and employee
commitment.

12. Large number of offerings

Company is offering a large number of products within the category of chocolate and
confectionary, baby food, prepared meals, breakfast cereals, etc. The strength of Nestlé’s brands
has given the company an unparalleled position on a global basis across a wide range of product
categories. These brands are the first choice of consumers around the world. brands enable
consumers to express their individuality and to respect their traditions whilst still enjoying the
quality of a Nestlé product and, as such, are key elements of the Nestlé portfolio.
 Products of
Nestle are its brand
strength.
 In Pakistan
Nestle has some very
strong brands like
Nescafe, Maggie,
Cereals, nestle water
and these brands are
almost generic to their
product categories. So,
when a brand becomes
generic then it creates
the feel of strong brand
in the eyes of
customers.
 Nestlé’s brands and products are the focus of continual innovation and renovation so that
they will be relevant and appealing to today’s and tomorrow’s consumers. As important as
ensuring that our brands meet and beat our consumers’ expectations is ensuring that they
are available whenever, wherever and however our consumers want them.
 24

13. Strong research and development department

Research and development is a continuous process at Nestle. It gives updated info on consumer
behaviors, changing trends and consumer demands; this helps Nestle to adapt to changing trends.
Research and development department keeps Nestle in continuous knowledge about itself and
competitors. It has a competitor advantage because many local companies have no research &
development department. Research and development department is developing new technology
and improving existing technology for the company to uncover cost-effective manufacturing
methods. New ways to manufacture existing popular products can allow the company to realize
the revenue associated with the sales of the product but reduce the costs of getting the product out
to the public.

14. Acquisition
It is a large-scale organization, with abundant funds and has the capability of acquiring weaker
firms by throwing them out of competition.
For example, nestle had submitted the pre-merger application for acquisition of the nutrition
business of Pfizer Inc. Both parties operate in the same relevant geographic market, i.e., in the
nutrition business in Pakistan. The market comprises of two relevant products: Infant and Follow-
On Milk (IFFO Milk) for babies aged 0-12 months; Growing-Up Milk (GUM) for children aged
12 months and above. Nestlé is already a dominant player in the relevant product markets in
Pakistan. With the proposed acquisition, Nestlé was able to strengthen its already dominant
position, which might result in lessening of competition in the IFFO Milk and GUM markets of
Pakistan by the removal of a competitor in the relevant markets.

15. Goodwill
The value of a company's brand name, solid customer base, good customer relations, good
employee relations and any patents or proprietary technology represent goodwill. The goodwill
account can be found in the assets portion of a company's balance sheet. it contributes significantly
to a company's value and success. The reputation of Nestlé’s brand is estimated to be valued at
$7billions.

16. Huge amount of capital

Year on year Nestle Pakistan Ltd grew revenues 8.74% from 112.39bn to 122.21bn while net
income improved 23.59% from 11.85bn to 14.64bn. Huge amount of capital is contributing a larger
profit to the firm.

17. New technology

Company always adopt new technology. For example, the Milk Powder Plant has been modified
with new technology and has an additional yearly capacity of 30,000 tons. The power generation
capacity and waste water management system have also been upgraded and additional filling lines
have been set up.
 25

 WEAKNESSES

1. Target market
Target market of any company should be well defined and match with the economic circumstances
of the country. Price should be like that customers are motivated to buy more.
 Target market of Nestle products is upper middle and high class because lower middle and
poor class cannot afford to buy. Only A class and B+ class have enough purchasing power
to become a regular costumer of a Nestle product.
 The target of this brand is the urban areas of the country and along with the use in offices
and business class as well.
 Price of Nestle is not very economical and income level of Pakistan and most of the people
lies in lower middle class so they cannot afford most of the Nestle products. Nestle products
due to its premium price compare to other companies like Shezan etc.
 It can be considered as the major weakness in a country like Pakistan where most of the
people are living below average life.

2. Nestle Milkpak
Milk Pak was the first to introduce the packaged milk category, processing the milk through UHT
(Ultra-High Temperature Processing) treatment and offer quality milk. Olper's however, came up
with aggressive marketing strategies and appealing packaging and became a well-known brand in
the market.
 Strong perception has been
built for customers of Olper’s
via beautiful and emotional
ads. Use of lively colors in ads
has helps the brand create a
positive perception in
customers’ minds. the
economic recession and
financial crises in the country,
 Olper’s is not ready to
compromise on advertisement
budgets and consumer
needs. Olpers by Engro foods
sidelined Nestle’s Milkpak to
become the market leader of that category.
 It’s the main weakness of Nestle Milkpak that there are different companies of milk but
the name of the nestle Milkpak always stands in the last because of low advertising and
marketing.
 26

3. Lack of nutrition
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.

4. Nestle Baby Milk

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.
It is one of the major weaknesses of Nestle is Nestle Baby
Milk because those babies who fed on baby milk are
become sick. And so many babies were died because of
nestle baby milk and then people boycott to buy nestle.
Noted in a recent article by Muller it was stated that the
scandal had ‘grown up but not gone away.

5. Nestle Pure water

 Though 57.3% people prefer Nestle over other brands 43%

prefer others. Nestle hasn’t benchmark with other brands to
compete in the industry.
 Promotional activities on television regarding pure water of
Nestle Pakistan is low than competitors.
 Nestle pure water have condense consumer equity.
 Nestle pure water is so expensive as compared to big
competitors like Aquafina. Aquafina beats nestle in almost
every country except Pakistan. So, nestle should defense their
position.

6. Complex supply chain management

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

7. Less Proactive
Nestle being a huge company is very less proactive to the demands. Unless competitors initiate a
campaign or come up with new strategy, nestle does not bring changes.
 27

Nestle hasn’t come up with new packaging of its juices since a long time. Maybe in some markets
it is, but juice market really is competitive in Pakistan. Nestle hasn’t changed its juice formula
when it changed its packaging (which is not so innovative either) which is worth doing just for the
sake of being the “brand leader”.

8. Limited Distribution Channel

Nestle’s major & bad factor is the limited distribution channel because they distribute their
products to whole seller in their own factory vehicles. As compare to their major competitor they
have limited distribution channel, but they are maintaining to penetrate the market as far.

8. Stock outs
Due to its in-efficient distribution channels, nestle has experienced stock outs on regular basis.
This had adverse effect on company's image and consumer base. It also gives opportunity for
competitor to penetrate into market and capture large market share.

9. No direct outlets
They don’t have direct outlets to whole sellers to create less burden on
the factory distribution channels however their competitors give them a major threat by this.

10. Packaging
Nestle is dependent on Tetra Pak for packaging of its entire dairy products. It is the only option
for them as Tetra pack has monopoly in packaging sector. This cause higher production costs.

11. Distribution cost

The company has always reported higher distribution cost. The distribution cost is high as
compared to the competition in the local market.

12. Less consumer research in some areas

One of the major weaknesses that Nestle is facing is the mature market they are operating in. When
the market is mature it can give stronger competition to the new entrants. As well the company
should focus on consumer research on different target markets for different products. Not every
product is right for every market and Nestle should focus on consumer research in order to avoid
that weakness.

13. Entering mature markets

Entering into markets that are already mature and can give a tough competition to new entrants.

14. Premium Brand

Common men generally perceive Nestle as a premium brand and have perception that all Nestle
products would be highly expensive.
 28

 OPPORTUNITIES

1. Intangible capabilities
Development of intangible capabilities to aid competitive advantage.
Intangible capabilities like leadership qualities, tacit knowledge and skills, teamwork, organization
cultures, business processes, partnership, etc. can help Nestle in building competitive edge over its
competitors.
Competitive advantage is achieved through inimitability and this should be a focus of the firm.

2. Backwards integration
To gain more control over the supply chain of the firm. Now companies are improving their
production by adopting different strategies in which backward integration is one of them.
In backward Integration, a company gets control over its suppliers to improve the efficiency
and save the cost which improves its profit margins and make the firm more competitive.
Nestle can do backward integration through acquiring input suppliers, establishing long-term
contracts with existing suppliers or investing in new input production capacity through internal
corporate growth. For example, nestle can own its own dairy form.
 It can help the company in
 decreased marketing expenses,
 the stability of operations,
 the certainty of supplies of materials,
 much control on the distribution of products,
 tighter quality control,
 the on-time review of fabrication and allocation policies,
 more control over inventory,
 and additional profit margins or the ability to charge lower prices on final products.
And the company must be weighed these advantages against the disadvantages which normally
are disparities among productive capacities at a range of stages of manufacturing, governmental
pressure, lack in interest of specialty, the firmness of operations, the extension of the management
team and lack of direct competitive influence on the costs of transitional products.

3. Enhance distribution channels

 Vast distribution
 Innovative development of distribution channels.
Nestle should work on its distribution channel to make it efficient in order to maintain supply of
their products. This will not allow consumer to shift to competitor’s brand in case of stock outs.
 29

4. Awareness
Extensive awareness programs for health and hygiene has created awareness among consumers
for the benefits of processed milk. More and more consumers are shifting from loose milk to
processed milk. This will create higher demands and consumption of processed milk. This is a
great opportunity for growth and to gain more market.

5. Eliminating retailers
Company can open separate stores for eliminating retailers.
 Rather than paying sales representatives to promote products to resellers, company can
promote products on their own websites, take orders and send goods directly to the final
customer.
 Skipping steps in the distribution channel will help company to reduce the amount of
logistics and transportation required in the movement of goods to consumer. This increases
efficiency significantly.
 Eliminating the middleman can create a win-win for the seller and buyer from a money
perspective. Each step in a traditional distribution process involves a trade buyer adding a
markup to his costs. This ultimately makes the final customer's price higher.
 Company is trying to open stores in universities.
 If this not, company can provide incentives to retailers to increase sales volume. Credit
policy can be adopted to increase sales.

6. Coffee Market
Nestle is having continuous growth in the Pakistan
coffee market. Nestle continued to remain the
dominant player within coffee in Pakistan in 2017
with over half of off-trade value sales. The
company is the leading player in coffee mainly due
to its strong presence within instant coffee through
its Nescafé brand.
Coffee in Pakistan presents opportunities for new
entrants.
Coffee in Pakistan is still in its nascent stage
compared to tea which is significantly mature.
Pakistan is traditionally a tea-drinking country and
the concept of consuming coffee has picked up over
the review period. Nestle can expand its product
line in this category.
 30

7. Fifth Largest producer of milk

Pakistan is the 5th largest milk production country in the world, the country is blessed four seasons
and high-quality crop, good species of buffaloes and cows and largest canal system. However, it
is only obtaining 2500ltr of milk per annum from an animal in comparison with 18000ltr per animal
in developed countries.
This is a good opportunity to increase production significantly by adopting best practices and
modern techniques.
8. Government Funding
Government has provided increased funds to farmers. This has allowed farmers to invest in better
storage facilities to save milk for longer period of time and to cope bad weather conditions.
9. Health based products
Transition to a "Nutrition and well-being" company
In today's health conscious societies, they can introduce more health-based products, and because
they are a market leader, they would likely be more successful.

10. Expanding Product lines

Nestle has already a broad category of products lines but still it has a lot of opportunities to expand
its products more and more.
 The coffee market offers many opportunities for the company to expand by tuning the taste
of the masses towards coffee.
 Nestle have opportunity to expand their product line like tea etc.
 Moreover, Nescafe can plan on biscuits or cookies which can be sold with the coffee or
which goes very well with the coffee flavor.
 They can also make these biscuits as premium biscuits in the market.
 It should regularly indulge with candy and chocolates.
 Can Capture market of home appliances.
 Can enter ice cream products. People love to enjoy eating ice cream
 They have the opportunity to offer snacks.
 Recently, they have created an opportunity for themselves by introducing chillers in the
market.

11. Dairy products

It has potential to attract many customers in dairy products. To expand the cold dairy products
range, nestle fruit yogurt is the latest addition to this group.
The cold dairy market offers many opportunities for the company which can capitalize these
products by banking on its superior quality milk.
 31

12. Growth in Public income

The income of people is constantly on a rise and they tend to move towards premium taste which
is coffee in the beverage category. So, they have a potential customer base who might want to
move towards this drink.
13. Integration of new acquisitions
Nestle Pakistan can do integration of new acquisitions in growth markets.
Or it can tie-up with different corporates, educational institutes and other public enterprises to gain
market share and drive profits.

14. Support from Foreign Investors

Government is supporting overseas outlay in Pakistan which is a great opportunity for Nestle to
expand its business in Pakistan and to cater large markets.

15. Best Practices and Assistance

Nestle should invest in educating the farmers for best practices and providing them resources and
assistance to create greater value and to ensure high capitalization and quality.

16. Changing Social Trend

Consumers, especially younger generation are hugely influenced by western societies. This has
changed the trends for packed ready to use products. This changing social trend has created large
demand and opportunity to increase market share.

17. International market

 Growth in international & emerging markets.
 Expansion of product folio
 Further development of global brand
 Emerging market penetration
18. Social company
Nestlé is active in building awareness of water as a scarce resource. They sponsor 'Water Education
for Teachers' (Project WET) an education program for children about the importance of water.
Similarly, many other social projects have been started by Nestle. So, nestle can make itself
as social company.
19. Favorable weather conditions
Pakistan is having favorable conditions for company to expand or have more growth. Most of the
time summer which is favorable to its most of the products.
 32

 THREATS

1. Lower loyalty
Higher levels of buyer power within the industry is fueled by greater choice and lower
loyalty.
The days of customers staying loyal to companies for long periods are numbered. The amount of
trust consumers put in brands is decreasing all the time, and a typical consumer will now switch
brands without hesitation if they get a better offer. Decrease and freedom of loyal customers has
become a key threat for long-term success of Nestle Pakistan.
 The globalization of competition
 saturation of markets
 and development of information technology have enhanced customer awareness and
created a situation where long-term success is no longer achieved through optimized
product price and qualities.

In Pakistan, the number of reducers and leavers is greater than the loyal customers. Customer
loyalty is influenced by factors like trustworthiness, product image, customer relationship and
customer satisfaction. In emerging markets like Pakistan, these factors are affecting customer
loyalty more due to the continuous influx of new players in potential industries.
Long-term customer relationship by competitors is becoming threat to Nestle. For company, it can
cost as much as 6 times more to win a new customer than it does to keep an existing one. Not only
the retention of existing ones but winning new customers is also contributing in this. Creating loyal
customers has become more troubling due to significant increase in competition and concentrated
markets. Competitors like Olper’s by Engro Foods are trying to attract and satisfy customers,
building long-term relationship thorough loyalty among customers and siding the Nestle Milk Pak
and becoming the market leader of the category. Developing a network of loyal and satisfied
customers is critical for the survival of many corporations.
 33

2. Economic condition of Pakistan

Pakistan’s economy is another major threat to the company. Pakistan savings and investment levels
are woefully low. Since 1990, the GDP growth has declined considerably and has averaged less
than 4pc per annum over 2007-17, with per capita income growing less than 2pc per annum. The
ratio of gross investment to GDP has averaged 15pc since 2010 and is actually somewhat lower
than it was in the previous four decades. The much lower level of investment in Pakistan reflects,
in large part, a poor economic condition for business. Pakistan is, and has been, a highly
consumption-oriented society.

Despite the occasional bursts of GDP growth in the economy, private investors are not convinced
that the underlying fundamentals are strong enough to justify making long term investments.
Pakistan right now is not able to revive its annual growth to a sustained 6pc to 7pc per annum that
can cause trouble to the private firms. This imbalance economic situation constrains the
government to impose heavy taxes on businesses and income that results in the lower return on
investments for the firms like Nestle. It affects the purchasing power of individuals too. Economic
slowdown can reduce demand.
There are three areas in need of attention and strong policy action such as
 the security situation
 its neglect of the export sector
 the persistent lags in human development that are collectively warning the business sector
of Pakistan.
Increase defense spending and the higher level of outflow of savings abroad is also pushing private
sector apart.

3. Dynamism
Business dynamism is the process by which firms continually are born, fail, expand, and contract,
as some jobs are created, others are destroyed, and others still are turned over.
 34

Increased dynamism in the external macro environment fueling short-term decision

making and heightened competition.
 The macro environment in Pakistan is changing drastically, leading to an increase in
avenues, competition and complexity. Efficient financial management calls for better
financial decisions.
 Macro environment is one of the most important factors which can affect the decision in
any way and this has made financial management more critical and sensitive for any
business.
 Nestle would have to make various decisions related to finance; broadly such decisions
include capital budgeting, capital structure & working capital decisions.
 Firms is facing a major challenge in adapting environmental change to remain successful.
When the environment is dynamic or unpredictable, firms are especially challenged to
revise their routines.
 Nestle has got a challenge to create organizational capabilities allowing to create new
products and processes and respond to changing market circumstances. Organizational
capability is the ability of a firm to perform a coordinated task, utilizing organizational
resources, for the purpose of achieving a particular end result.

4. New Technology
Everyday there is something invented in the world. Pakistan is not far behind in case of latest
technologies. For Nestle, there are many technological threats because if the firm is using new
technology one day, a competitor might come with a latest one other day.
Technology is constantly evolving and changing to adapt to better suit our needs. And
while this might sound great, as a business owner, keeping up can be problematic.
Technological change driving both innovation and associated challenges.
 Keeping track of the latest business tech trends, apps and software programs is a job in
itself.
 Adopting a technology can be just a beginning of the journey. Identifying and attracting
the right talent is becoming a major challenge.
 Given the rapid changes in technology, the experienced or trained talent pool in the market
is diminishing and will continue to do so.
 Technology continues to change at an exponential pace making it nearly impossible for
those outside of direct interaction to fully understand and vet real technology and services
provider capabilities.
 Security hardware adds huge costs and configuring security infrastructure takes skilled IT
labor or partner personnel.
Moreover, technology can be really expensive and keeping up with the larger players in your space
can become increasingly difficult without comparable resources. Coming up with latest technology
can cost a lot to the Nestle as the cost associated with buying and maintaining new tools can be
very expensive.
 35

5. Prices of raw materials

Variability in raw material prices influence the firm’s ability to sustain prices considering a
commitment to wider responsibilities aside from profit i.e. CSR initiatives.
When price increases forced beyond the long-term strategic plan, it becomes a curse to brands.
Managers must choose between one of the following possible scenarios:
 Reflect cost increase on end-consumers
 Sacrifice quality using cheaper raw material
 Reduce pack size
Raw material costs are having a significant impact on the success of a businesses.
Raise in prices is becoming a curse, and the increase may eventually fire back, if not short term,
then long term. Either profitability drops, or consumers will switch to substitutes.
Population growth, natural disasters and shifts in the balance of political power are causing a
systematic shortage of raw materials and supply ‘bottlenecks’. Company will feel powerless to
control the effects. Increase in raw material price can have a negative impact on overall company
results.
The effect of rising costs has led to increases in its own prices. But with not all being able to do
this, the result is that operating margins are shrinking.
Nestle must have to put in strong defenses against increases in raw material prices if they want to

6. Rupees devaluation
Price fluctuations due to rupee devaluation as raw material are imported. The uncertainty of
economic conditions poses a great threat as the major funds invested in the country come from
outside Pakistan.
According to a recent
Bloomberg report, home
to one of the world’s top
five stock markets last
year, Pakistan is headed
for currency devaluation.
The possibility of
currency devaluation is
giving investors another
reason to stay away from
the world’s newest
emerging market.
The currency pressure comes as Prime Minister Nawaz Sharif and his family are at the center of
an investigation into alleged corruption. The next election and the makeup of the country’s
 36

borrowing nearly 31 percent of outstanding government debt was in foreign currency in the 2016
financial year, according to Moody’s are adding to the stakes.
The persistent double-digit inflation plagued the businesses making the cost of doing business
highest in the region.
7. Economy of the world
The present economic crisis in the world, led to the withdrawal of foreign management from the
company and the investment has come to a halt. The uncertainty of economic conditions poses a
great threat as the major funds invested in the country come from outside Pakistan. The present
economic crisis in the world, led to the withdrawal of foreign management from the company and
the investment has come to a halt.

8. Competitors
Main competitors Shezan, Olfrut, Maza and Haleeb are main threat for Nestle juices especially the
Shezan is growing very fast.
 Nestle biggest competitors like Engro Foods has been in market since very long. For its
brands it might be difficult to penetrate in the market where these brands have created
loyalties and presence in mind of consumers.
 Existing companies are increasing their product lines that can prove to be a threat in the
coming years. Company like Cadbury is giving more discounts to retailers as compared to
distributors due to which retailers prefer its products for sale.
 As compared to the local competitors, Nestle’s distribution cost is very high. As Nestlé
confectionary Products has to maintain and obey the Nestlé standards. Some companies
are competing on the basis of cost.

9. Inflation
Inflation is getting higher and higher, so the purchasing power of the people is decreasing day by
day. People will try to get rid of cash before it is devalued, by hoarding food and other commodities
creating shortages of the hoarded objects. When there is a high inflation, saving money would
mean watching your cash decrease in value day after day, so people tend to spend the cash on
something else.
Company will have to invest for long-term capital gains, because short term investments tend to
give deceptive results or sense of making profits while in reality they're not making profits.
10. Perceptions and Price Differentials
Consumer preferences and perceptions plays very important role in success of a brand. It is very
important for Nestle to understand and come up with ways to meet consumer expectations and
provide quality that a brand promises. Price factor is also a very important factor, as still consumers
prefer loose milk as it is cheaper than processed milk. Moreover, taste of consumer is difficult to
change when developed once.
 37

11. Differentiated products

Consumers are indifferent to buying Engro products or Nestle. It is a threat to Nestle that
consumers can easily shift to Engro products in case of any unfavorable condition.
12. Population growth
Ageing population shifting the demographics of the workforce.

The SWOT analysis above reveals that Nestlé have a number of strengths, which translate into the
development of core resources and capabilities, which aids their competitive position. Notably,
one of the core strengths of Nestlé is the strong brand image they have which inspires trust in
consumers.
Nestlé can build on this reputation to extend their brand categories. Further, recent efforts to follow
corporate social responsibility strategies have heightened the firms approach to sustainability,
which is aligned to current expectations from the consumer market for firms to take a greater
responsibility towards the wider macro environment.
Moving on to a critical analysis of the weaknesses of the company, one of the core weaknesses of
Nestlé is the content of some of their products, which marks a move away from healthy eating
initiatives. For example, Nestlé produce a number of confectionary goods including sweets and
chocolate bars. Nestlé will in the future have to work with the government to ensure that a clear
marketing message is put across for such treats to only be enjoyed alongside a balanced diet.
Overall, however, Nestlé’s strengths overshadow their weaknesses and many of the weaknesses
are being tackled by strategic actions. Recognition of the firm’s opportunities and threats leads to
a discussion of the value of internationalization and in particular the opportunities present within
emerging economies. Further, the development of capabilities and thus the translation of strengths
into intangible and inimitable capabilities is an area, which could see the firm, further develop
their sustainable competitive advantage.
Developing from the opportunities of the firm, it is also necessary to consider the threats, which
face Nestlé. The SWOT analysis revealed one of the core threats is the increasingly competitive
nature of the industry and the challenges, which arise from this level of competition. As a result, a
great threat facing the firm is the level of dynamism and turbulence to contend with which
influences the nature and direction of strategic choices.
 38

PESTLE ANALYSIS
A PESTLE analysis is used as a strategic
tool to measure industry dynamics through
recognition of the core political, economic,
social, technological, legal and
environmental forces/changes having
influence on the industry. The PESTLE
analysis below identifies a number of
forces, which have an influence on industry
dynamics. Of these forces, perhaps the most
prominent are social forces, which relate to
differences in consumer behavior. Nestlé
have to be able to ensure a level of
adaptation, which is appropriate to different
markets driven by different cultures and
consumer preferences.
The main theme of PEST analysis is to measure market potential and situation, by indicating
growth or decline. PEST analysis can be used for marketing and business development assessment
and decision-making, and the PEST analysis encourages proactive thinking, rather than relying on
habitual or instinctive reactions.

 POLITICAL
This refers to the involvement and intervention of the government within the economy. Nestle has
to operate within the framework of laws set by Parliament, and that’s why it depends on political
considerations. Government plays vital role by imposing the law and regulation on the companies.
Government set standard laws for companies that has to meet otherwise they have to pay fines.
The rules of government of Pakistan do affect the company and its brand. The company policies
are affected, and its budget is also affected. Nestle is trying to meet all the standard laws which are
set by the government
Following are some of the political factors which affect the company.
 Changing regulation surrounding food standards and marketing actions.
 Health and Safety Act, Disability Act
 low trade restrictions and low barriers of market entry
 Government laws and regulation in accounting standards

 Positive tax policy

Taxation requirements, including tax rate changes, new tax laws and revised tax law interpretations
are highly influenced on Nestle business. If government imposes heavy taxes on the industry, then
it badly effects the industry growth. The taxes impose is from government side and it varies from
 39

industry to industry. FMCG’s have to pay heavy taxation, changes in any taxation system can
badly effect Nestle’s productivity & sales(profits). Nestle’s some product has like butter and cream
which has more taxes.
If the governmental tax increases this will cause the Nestle selling price to increase too. This will
lead to a decrease in sales and the number of customers while the stock quantity will stay the same.
Nestle also paid 15% sales tax and 18% excise duty when they direct import chiller from the other
country but mostly they purchase chillers inside the country.

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

 Laws on hiring & promotions

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

 Environmental Protection Laws

They do concern for environment and contribute more and more for the betterment of environment.
Nestle’s considers a lot about CSR, nestle is worldwide an environmental company so as Nestle
Pakistan, nestle care for poor & urban areas, in the start Nestle gave the concept about friendly
environment & to care for your environment.

 Foreign trade Regulations

Foreign trade regulation does not affect the overall policy and the working of the Nestle because
they operate nationally not internationally. However, it affects when the condition gets so worst.
But as the last two years whole the world is suffering from great depression so any economy of
the world.

 Political instability
Government stability in new emerging economies; question of risk as part of the
internationalization process. The government stability also plays a great role for any industry. In
Pakistan government face lot of difficulty from the side of terrorism and also its activity that badly
effect environment of the country which is totally very upset. Recently in Punjab instability of
government creates lot of problem for the industry like shortage of electricity that badly affects the
industry operational process. Nestle have not much affect this condition but in future it may be
face some difficulty for operating. Changing policies of Government effects overall industry.
 40

 ECONOMIC
Nestle needs to have enough information about the country inflation rate, economic growth rate,
and national per person capital income, in which they are willing to start their business. Economic
condition varies from country to country. Following are the factors that Nestle has to consider
before setting corporate objectives:
 Inflation Rate
Awareness and knowledge of changing inflation, economic growth rates and income levels. Now
in Pakistan inflation rate is almost 22.3%, which decreases the purchasing power of consumers.
So, if any increase in inflation rate then increase in prices of Nestle products which eventually
affects the Nestle Pakistan. So, inflation rate affects mostly everyone in the industry so as nestle
but nestle by the great decision making able to retain 55% of market share in Milk & Nestle Pure
life.
But high inflation also creates higher impact on those products which transform from another
product like packed milk & powder milk because these is already sell on high prices in market
because of high quality so this whole scenario directly create impact on those organization whole
deals or manufacture these products like Nestle, it has two options in this situation either to sustain
prices or to decrease prices.
Increases the prices of light and petrol effect transportation and other costs also affect business.
 Economic structure of the country
Economic structure of the country directly effects business. Government regulation related to taxes
become more contracting day by day and government is not given any compensation in current
budget policy. Government expenditures also include is this category. It also influences consumer
budgets and lead to rise of the cost-conscious consumer.
Rising price of raw material goods in relation to the need to source from sustainable suppliers.
By having their own local productions, Nestlé would no longer need to import any raw materials
from other countries. This is will help in cutting their overall costs and will help them save more
money. This will also benefit the consumers as now the customers would be able to get fresh local
products at a lower cost. Overall this would help in increasing customers, sales and would help
Nestlé gain a profit.
 Interest rates
Interest rates and Income distribution can majorly affect the bottom line of a company like Nestle.
For an instance, if the income of the customer increases then the demand of the product of may
also increase.
 Economic growth rate
Economy growth rate accelerate is 7% and plus which eventually affect the Nestle productivity &
sales.
 41

 SOCIAL
Social or cultural environment had great impact on Nestle. Social change involves changing
attitudes and lifestyles. The social and cultural environment is constantly changing. Different
regions of country had different culture (language, beliefs, food, family, clothing and their
lifestyle). These are cultural demographic variables and aspects which are closely linked to the
market and customers need. Nestle has to develop effective strategies in order to meet different
lifestyle consumer behavior. Nestle has to take some following social and cultural factors under
consideration in order to achieve their strategic objectives:
 Changing consumer attitudes
Changing lifestyle – Product or services cannot be successful until company has enough
information about the consumer lifestyle. The need to adapt to different cultural settings i.e.
language, religious beliefs and family settings. Understanding of consumer behavior is crucial to
ensuring a personal approach to marketing.
 Health Consciousness
Today, people move towards healthier products in line with government initiatives supporting
balanced diets and the dangers of sugar. Nestle by identifying this need of the people t also
producing health conscious products with more elements of pure & quality, which create the
market for Nestle & trend of its products in the market. However, when launches it Milk in 1988
back then it was not so much popular but now a day’s people are more health conscious.
 Generalized products
Nestle would make a marketing strategy according age distribution or gender role before producing
a new product. Nestlé tries to make their products generalized so that it suites everyone e.g. people
from any area, any culture, any age, and income will drink water. It is not any luxury item which
is used by a specific people. Nestle creates products that can suit almost all ages. For example,
Nestlé segment their products into different of age groups i.e., for infants, they have Nestlé baby
foods while young people can drink Milo, Nescafe, chocolate and cookies. Nestle have the Maggi
brand with many kinds of Spicy sauces. The product can vary in tastes, depending on the demand
and requirements of the consumers.
 Breaking down of old traditions
The least important one perhaps is tradition as still urbanized consumers have the perception that
the arrival of the doodhwala at their home on his trusty bicycle has the fresh and natural milk which
is coming straight away from the cow and still it is this perception that only loose milk is fresh.
Over the years, all companies of this sector especially the older players like Nestle in order to
convert loose milk consumer in to processed milk consumer have been making dynamic efforts by
various development program in interior Sindh. Regardless these campaigns will not change
perception of loose milk consumer overnight, but it is not impossible, it takes time and continuous
investment to create awareness of the processed milk to the consumer of loose milk. Every
product's whole period consists of a starting phase, expansion phase and maturity phase.
 42

 TECHNOLOGICAL
Technological change has the most rapid, persistent and profound effect. It creates opportunities
for new products and product improvements and of course new marketing techniques- the Internet,
e-commerce. Nestle uses technology by taking orders via telephone and online by internet.
Moreover, nestle uses technology in various business activities such as record of their customers
and employees. Rise of social media, consumers interacting with firms and being able to do so
across a range of platforms. Following factors affect the company:
 New Products
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. E-commerce is a platform for
development for Nestle. But the risks and costs attached with such developments are high.
 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
changes being taken place around them so in order tackle the situation nestle is focusing on product
innovation by introducing new products with help of technological factors.
 Productivity improvement through automation
There is increase in automation. Automation doesn’t matter a lot but to some extent it contributes
towards productivity and improvement. Now by the help of technology Nestle maintain the
efficient scale of production which normally called economies of scale.
 Total spending on R&D
Spending on R&D is long term investment for any organization. Nestle has R&D department and
Nestle total spending on R&D 70 million. Because with true technological changes this research
& development cannot takes place. So, with the help of technological changes Nestle can enhance
its products & diversify its portfolio of products.
 New communication technology
All the modern as well as traditional ways of communication are being adopted by Nestle including
own emails, letters, faxes and monthly visit indifferent offices of Nestle for better communication
among customers. Nestle has also established own web site which can be visited any one for most
recent news innovation and activities being taken in the organization. With the technological
change adoption, the whole organization can be increased.
By Nestle shifting to a more advance technology they would be able to reach a wider community
of people. The customers would be able to get any information they want from the Nestle website.
Nestle employees could also use these services to find out what are the current trends in the market
and implement those changes to better Nestlé's sales. They would be able to adjust the products
being produced to better suit the local taste and cultural flavors in each region of country. New
products could be created according to the customer's needs and popularity within the country.
Technological factors can affect Nestle massively and can help in gaining a better understanding
of their customers in different regions.
 43

 LEGAL
The legal factors are related to the legal environment of the organization and the impact on the
demand and cost. For an instance, nestle created and provided a health and safety covers for their
employees. Nestle would pay the fee for their employees via their free legal help scheme with
personal medical/ legal cover. Some of these legal factors affect the company:
 Changing nature of regulation.
 Need to adhere to global regulations and changes across different international markets
 technological and industry concentration
 increasing automation
 government regulations
 technological capacity
 development risks
 increase in development costs
By being briefed with the country’s' laws and regulations, Nestlé would be able to create a good
relationship with the country's government for the future of their corporation. Nestle could use
these relations to be able to test out and market new products, gaining an overall competitive edge
against rivals and creating a bond between Nestle and a country.

 ENVIRONMENTAL
There are many environmental factors that Nestlé needs to abide by since it is working in the food
industry. Nestle takes care for the raw materials sustainability, infrastructure, climate change. The
company has already pledged its support to:
 Environmental concerns
Nestle consider a lot about the environmental factors because they are very much socially
responsible towards nature & humans. For example, nestle respects the environment and is
committed to environmentally sound business practices throughout the world, thus taking into
account the need to preserve natural resources and save energy. Increased attention directed
towards corporate social responsibility
 Work life quality
Quality of work life is very safer & environment friendly company of the world as every MNC is
maintaining the same standards abroad with a slight cultural change. Moreover, the different
agricultural and livestock methods that preserve soil and protect water supply, they use the least
amount of energy and only safe chemicals.
 Recycling
Environmental concerns from consumers including concerns over packaging/recycling. The
research and development team has also been seeking a new kind of packaging which is
environmentally friendly hence transforming those harmful materials into eco – friendly recyclable
materials that would be suitable for both the customers and the environment.
 44

GENERAL STRATEGIES ADOPTED BY NESTLE

Marketing Environment

 Internal Environment
Nestle has a rich working culture which motivates its employees to serve best to its customers with
the help of the variety present in their product range.
Nestle has included the benefits of the employees in the goal statement of the organization as the
management of the company strongly believe that the productivity, quality and the dependability
will reflect on the product only if the employees will take care of all these factors.
Different departments of the company work to contribute in the growth of the organization and
these departments not only keep the customer’s needs and demand in mind but also keep the same
type of attention for the internal customers of Nestle.
The company believes if the internal market of the company is fully satisfied than only the internal
market will be able to serve to its customers and able to understand their needs and able to
manufacture the products which can fulfill these needs.
Nestle has a strong top management team which runs on strong values and principles of the
company. The values of the company give strong focus to integrity, loyalty and team work. The
efficient top management of the company is able to run finance, operation, marketing, logistics,
sales, and research and development departments with great success which ultimately leads to the
fulfillment of the goal of the organization.

 Micro-Environment
The micro environment of Nestle includes three divisions:

a) Suppliers
Suppliers provide the raw material resources, unfinished goods and labors to the company in order
to produce goods and services.
The effectiveness of suppliers determines the efficiency of the company in terms of
producing the goods.
In addition to that the quality of the finished product has a strong with the suppliers of the firm
especially in case of food products. As the presence of the company is in more than hundred
companies, it is a challenge for the company to maintain its standard all over the world and provide
the consistency to its customers in the taste and quality of the product. Further we can divide the
supplier of Nestle into two parts:
1. Labor suppliers deal with the quantity of labor is required at the optimum level in order to
prevent the loss of labor force and prevent the company from the shortage of labor which again
can lead building of inventory as a cost for the company. The skills of labor are again
 45

maintained by the labor suppliers, wherein the labors of different skills are managed in such a
way that the operation of the firm can run smoothly. Labor strikes and labor relations are other
factors which we cannot ignore in the current scenario as the efficiency of the business depends
largely on the factors like attrition and employee satisfaction.
2. Material suppliers handle all the material required by the firm to manufacture the finished
product for sale. Nestle is in the food and quality markets and the quality of such item plays a
major role in its success in the market. Nestle has maintained a high-quality efficiency in
handling the quality and quantity of the two different supplies i.e. labor supplies and material
supplies and hence the company has been able to run its business smoothly for more than 100
years in spite of the different business trends in the world market.

b) Marketing Intermediaries
The physical distribution network of the company decides the medium by which the finished
product is delivered to the end customer on time and with safety. This department also ensures the
proper storage of the firm that prevents the product from getting any king of damage.
The market intermediaries of the company help to advertise, sell and distribute its product
to the end customers.
The marketing service department of the firm helps in the promotion of the product and acts as a
communication channel between the company and customers. It not only communicates the
features of the product to its customers but also get the feedback with the help of survey, which
helps the research and development department to develop a product according to the need of the
customers.
1. Banks
The other intermediaries of the company like banks help to provide the funds to the companies
and play an important role in the continuity of the business.
2. Insurance companies
They insure the property and the goods of the company against the risk involved in various
operations, buying and selling of the product.
Nestle has the differential advantage of working in a smooth coordination with all its marketing
intermediaries which helps in providing the best and pure food products to its valuable customers
in the different parts of the world.

c) Customers
The immediate customers of Nestle are retail and grocery stores which provide the products of the
company to the end customers at a reasonable price and a reasonable profit. The end customers of
Nestle are the consumers who consume its wide range of product. The company has a bright brand
image in its big pool of end customers.
 46

d) Competitors
Although Nestle is leader in packaged food industry of Pakistan but the other competitors who are
giving tough competition to Nestle are:
 Unilever
 Haleeb foods
 Engro Foods
Nestle has a clear advantage over the above-mentioned companies is its presence in Pakistan.
Nestle has been able to setup a good and trusted distribution channel and a huge retail network.
The trust worthiness gained by Nestle among the Pakistani people is built in decades on hard work
and quality products and varied range of prices, thus even after facing stiff competition with
the above-mentioned companies in chocolates, dairy products and other packaged food products
the company is able to maintain the bottom lines of its profit and loss statements attractive for its
investors and good image in public.

e) Marketing
The basic marketing strategy of the Nestle was to develop brands for each their product instead of
focusing on making brand value for the entire company, thus never allowing cannibalization of
products and gaining multiple brand value for the entire company.
The vision of the company could be summarized in following statements:
1. Be the leading multinational company in food, nutrition and wellness.
2. Produce and sell world-class products of the highest consistent quality, reliability and
convenience based on business excellence principles throughout our operations.
3. Maximize the use of good quality local raw materials
4. Be an exemplary employer with a progressive human resource and social policy; with a
management style that is based on “Management Commitment and People Involvement”
5. Be a responsible corporate citizen, fulfilling all obligations to Government, shareholders,
customers, communities and consumers.
6. Protect the environment by being committed to environmentally sound business practices and
taking into account the need to preserve natural resources and save energy.
7. Guarantee that all products manufactured, imported and distributed by Nestlé Pakistan are
certified HALAL by authorized Islamic certification bodies.
8. Deliver shareholder value through the achievement of sustainable and profitable long-term
growth.
9. Adhering to the above vision statements the company has been able to maintain the marketing
and branding unique and ahead of the competitors.
 47

 Macro Environment
Macro environment include following environment of the country:

1. Political Environment

Government of Pakistan has never imposed any political pressure in fact they have always
supported foreign investment and foreign businesses to grow in Pakistan.
As the company is into food and nutrition business they have to just adhere to the laws of food and
nutrition policies of government and constantly provide good quality which is the vision and
mission of the company thus Nestle never faces any problems on political front.

2. Cultural Environment

Pakistani culture is no doubt of having light food at constant intervals and young crowd of Pakistan
likes to have good nutritional and taste food thus Nestle has great scope there.

3. Economic Environment

The disposable income of country and the high living standard of Pakistan always give better
bigger business opportunities for Nestle.

4. Technological Environment

Pakistan is not a technologically rich country both in terms of availability of technology and also
the technological work forces the highly skilled and educated manpower is less in Pakistan
In case of Nestle and the product offered by the company these factors do not create much impact
in general scenario. However, as we have seen the major events like World War had created a
positive impact on the sale of confectionary products of the company.
The culture has some impact in this company as whether the country has most people as vegetarian
or non-vegetarian the consumption of milk products is always there.
However, the countries where the people are more dependent on milk products are profitable
market for Nestle.
 48

MARKET SEGMENTATION & POSITIONING STRATEGY

Market segmentation:
The marketing concept calls for understanding customers and satisfying their needs better than the
competitors do. But different customers have different needs and it rarely is possible to satisfy all
customers by treating them alike. Market segmentation is the identification of portions of the
market that are different from one another. Segmentation allows the firm to better satisfy the needs
of its potential customers.
1. Clearer understanding of the needs and wants of selected customer groups.
2. More effective positioning.
3. Greater precision in selecting promotional vehicles and techniques.

Bases for segmentation:

Consumer markets can be segmented on the basis of following customer characteristics.
1. Geographic:

 Weather: Nestlé Bangladesh Limited segmented its market for Nescafe Ice based on the
geographic weather: hot and cold.
 Nescafe Ice: A coffee which can be consume with ice. During hot season consumers consume
this coffee with normal or cold water with ice cube to bring freshness in their mind.

2. Demographic:
 Age: Nestlé segmented market for its major products based on the age. For the products
Cerelac, Lactogen, Koko Krunch, Nido, nestle divided the market segment for baby and
children of different ages.
 Nido: It is nutritious milk specially formulated for children 2 years onwards. It contains 25
minerals and vitamin D which helps child’s growth.
 Cerelac: Nestle also offers Cerelac for new born baby. It contains milk and rice mixed for
under one year’s baby. It fulfills baby’s proper nutrition.
 Nesquick Koko Krunch: Both are chocolate milk for children. Nesquick and Koko krunch
maintain child’s proper growth. It’s very delicious and also contains vitamin protein, mineral.
 Lactogen: Nestle Pakistan brings full cream milk powder in our country. It gives baby proper
nutrition. Lactogen 1 is for babies whose age less than 7 months and lactogen 3 is for babies
whose age is below 12 months.
 Income: Nestle segmented their market based on customer’s income in an effective way.
 Lectogen: Nestle charge tk 800 for per 900 gm Lectogen 12 milk powder. They also charge tk
1000 for 900 gm Lectogen 3 milk powder pack. Middle income and low income people are not
able to buy these products for their babies.
 Occupation: Nestle segmented the market based on their customer’s occupation.
 49

 Nescafe classic: This product is for those who work hard and needs more freshness. Both the
male and female who need more caffeine Nescafe classic is for them.

3. Psychographic:

Life style and personality: Nestle Pakistan provides KIT KAT these people who really want to
enjoy chocolate. Nescafe 3 in 1 is for exclusively those customers who are really busy and do not
have enough time. They can save their time by taking Nescafe 3 in 1. All the things sugar, milk
and coffee remain mixed.

4. Behavioral:

Benefits: Based on benefits Nestle Pakistan segmented their market in an effective way. So, they
provide Cerelac for those customers who want more benefits from the products. Cerelac contain a
high nutrition for baby’s whose age below 1 year. Two most important elements rice and milk
remain mixed in Cerelac. On the other hand, Cerelac contains vitamin, mineral and all nutritious
elements for babies.

Target marketing
Market segmentation reveals the firm’s market opportunities. Then the firm sort market targeting
by evaluating the various market segments and deciding which and how many segments it will
target.
Nestle Pakistan Ltd evaluated the various market segments on the basis of segment size and
growth, segments, structural attractiveness, and company objectives and resources and decided to
launch their operation all over the country. Nestle separate their target market because of having
unique need and wants.
Nestle Pakistan Ltd selected their target market into two market coverage strategies:
1. Undifferentiated:

Nestlé has offered several products such as Nescafe 3 in 1, Maggi noodles, and Kit Kat to the
people of the whole Pakistan without differentiating the market segment.

2. Differentiated:

Nestle also selects the differentiated marketing. It offers different product for different segments
based on different age, occupation, season and climate.

 Nescafe 3 in 1: Coffee for people who are busy.

 Koko Krunch, Nesquick: Chocolate milk who want to get taste of chocolate.
 Nescafe Ice: Cold coffee for the people in hot weather.
 50

3. Concentrated: Through concentrated marketing, Nestlé achieves a strong market position

because of its greater knowledge of consumer needs. In the niches it serves and special
reputation it acquires. Nestlé specializes in producing baby foods. It offers nutritious milk
powder Lectogen 1 for babies whose age is less than 7 months and lectogen 3 for babies
whose is under 12 month. It also offers baby nutrition cerelac for baby less than 1 year.

POSITIONING STRATEGY
By creating product, service, channel, people and image differentiation Nestle reach the consumer
touch point more effectively & efficiently in comparing with their competitors in the highly
competitive food processing sector.
1. Product Differentiation:

Nestle brings a lot of product for target customers. They provide 25 types of minerals in Nido for
children. It also provides Cerelac and Lactogen1 &3 for newly born baby exclusively. Now the
doctors prescribe these products for babies to their parents for high nutrition Nescafe is a product
which contains 4 types of categories. They offer Nescafe ice for hot weather, classic for all 3 in 1
for those who are busy. They provide Maggi including Maggi instant; Maggi 2 minutes which
contain various minerals, vitamins and nutrition. Maggi also provide magi healthy soup and Maggi
corn soup but charge the same price.
2. Channel Differentiation:

Nestle reach their products to the customers through their expert market salesman and
transportation. So that their products are much available to their respective customers.
3. Image differentiation:

Nestlé’s logo is totally different from its competitors that are greatly accepted by its customers.
For that reason, customer easily identify them in the market which is another effective advantage
for Nestle.
4. People differentiation:

For example, nestle has a large number of employees that are highly educated and trained. In
Bangladesh, 400 employees are working in market Company chairman; Peter Brakeck- Letmathe
and CEO Paul Bulcke are highly educated, wise and experienced people. They are running this
business successfully for a long time.
5. Service differentiation:

Another advantage for this company is better service for its respective customers from its
competitors. They provide 24 hours hot line service. High quality checking is maintaining for its
customers. Its marketing dept. and PR (public relation) dept. are working for finding out
customer’s new demands and response toward their products.
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SELECTING AN OVERALL POSITIONING STRATEGY:

The full positioning of a brand is called the brands value proposition-The full mix of benefits
upon which the brand is differentiated and positioned.
The value proposition table shows the product position of Nestle in the following:

Price
More Same Less
Same More

More for More More for same More for less

Benefit

Same for less

Less

Less for much less

More for more:

More for more positioning involves providing the most upscale product or service and charging a
higher price to cover the higher cost. Exactly Nestle is doing that. Nestlé’s products provide more
benefit and for that Nestle charge higher price than other competitors. Nido ensure nutrition and
charge 250 to for 400 gm. But Fresh, Marks do not ensure nutrition and charge less than that of
Nido. Respectively Nescafe, Maggi noodles ensure quality for high price, rather than competitors.

Positioning Statement:
 Baby Products: To babies who are deprived of proper nutrition, Nido, Cerelac, Lactogen
are the nutritious milk Product that give you more nutrition than any other brand because
these contain different types of vitamin, mineral etc.
 Nescafe: To busy people who drink coffee and have little time for taking rest, Nescafe is
the coffee that gives you more energy than any other brand because it has the highest level
of caffeine.
 Maggi: To people, noodles and soup consumer who seek better quality, Maggi noodles
and healthy soup that gives you proper nutrition than any other brand because it has the
best quality.
 52

MARKETING MIX OF NESTLE

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.

P roduct P rice
Marketing
Mix

P lace P romotion

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

 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. Nestle has a
worldwide distribution and has many different variants. Looking at India, nestle has
also launched Nestea.

 Milk and Milk products: Nestle everyday, nestle slim and Nestle Milk maid are some of the
milk and milk-based products from the house of Nestle.

 Prepared dishes and cooking aides: 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. Thus, it was not a surprise, that Nestle expanded the
 53

Maggi brand to create an umbrella of different products like Maggi pasta, Maggi sauce, Maggi
cubes etc. The Maggi range contributes vastly to the bottom line of Nestle.

 Chocolates: 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 Bourneville 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.

As we can see, two major brands of Nestle are a very high contributor to its Brand equity – Nescafe
and Maggi. These are two brands sold across India in small as well as big shops and super markets.
There have been many competitors for these products, like Bru for Nescafe and Top ramen and
Sunfeast Yippie against Maggi.
The appreciable factor in Nestle is that quality maintenance of products is up to mark and there
are hardly any complaints about Nestles products in the market. This is a major achievement for a
company which relies majorly on food products.

Price
The price is dependent on the market of each individual products.
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 Rs.15 Maggi. 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. You will find that nestle will be similar priced to many of Cadbury’s
Products in the chocolate segment.

Placement

Nestle follows the FMCG strategy of distribution which involves breaking the bulk. The typical
distribution strategy of Nestle is as follows:
Manufacturing >> C&F agent >> Distributors >> Retailers >> Consumer
Manufacturing >> Bulk buyers >> Consumer
 54

These are the two different forms of distribution which Nestle has. It is typical of any FMCG
company. However, the Nestle channel is known to be strong with a good marketing and sales
network for channel distribution.
On top of it, nestle regularly introduces trade discounts and various tactics to keep the channel
motivated.
The major challenge is in the distribution of Maggi which is the most in-demand product along
with Nescafe. Due to these two products, nestle 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.
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.
On the other hand, Nestle’s brand was pushed by the excellent product quality of Maggi and the
witty and innovative campaigns of Maggi. Where Nescafe focuses on value and the good things
in life, Maggi focuses on moments you had with your Maggi. The recent campaign was completely
focused on your Maggi story, where people had to come out with various innovative ways that
they had their Maggi.
Promotions for other products too are done smartly. KitKat focuses on “Take a break” and has
done some good marketing for the same. KitKat website too is very innovative 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.
Besides this, nestle regularly uses TVC’s and ATL marketing. It is also present online through
some smart creative. Overall, nestle is a brand which has strong products as well as strong
marketing, and hence the brand has a very high brand recall value.
 55

ADVERTISING STRATEGY

Advertising:

It is non-personal communication paid for by a clearly identified sponsor promoting ideas,

organizations, or products. The most familiar outlets for ads used for the advertisement of the NPL
by Nestlé are the broadcast (TV and Radio) and print media (newspapers and magazines). The
Nestlé also uses other advertising vehicles like billboards, T-shirts and, more recently the Internet.
Nestlé has its own website which is giving the information about the different brand of the
company.

Nestlé is doing the selective demand advertising that is intended to stimulate demand for individual
brands. In the advertisement the message is given that,

There is one water, which gives you, hope, happiness and trust and that water is Nestlé Pure
Life. It is pure, safe, and healthy water.

And in recent advertising campaign, their slogan is,

JIYO! Kay yehi hay zindagi

On billboards the pictures of NPL advertisement seems so attractive, especially in summer season
across the roads that it motivates the customer to purchase it immediately.
Nestlé has the internal advertising department as well as hire the services of the external. Media
manager assisted by its assistant to devise all campaigns.

Sales Promotion:
 It is demand-stimulating activity designed to supplement advertising.
 It is paid for by the sponsor and frequently involved a temporary incentive to encourage a
sale or purchase.
 Many sales promotions are directed at consumer.
 Nestlé has designed it in a way to encourage the company’s sales force or other members
of the distribution channel to sell products more aggressively.
 Nestlé Pakistan limited arranges concerts, trade shows, event sponsorship, in-store
displays, and discounts.
 In Nestlé, a separate sales department is working. The function of this department is to take
the sales orders, visiting the market, collecting the customer’s complaints and transferring
to the concerned department.
 They also make sure the availability of the NPL to the consumer at right time and at right
place.
 56

Public Relations:

It encompasses a wide variety of communication efforts to contribute to generally favorable

attitudes and opinions toward an organization and its products. Unlike most advertising and
personal selling, it does not include specific sales message. The targets may be customers,
stockholders, a government agency, or a special-interest group. Public relations can take many
forms, including newsletters, annual reports, lobbying, and support of charitable and civic events.
Nestlé is following all above mentioned public relations forms:
 The company assists through donations such hospitals and organizations that provide
services to the poor and responds to distress calls by the government and NGOs for
assistance to victims of flood, earthquake, drought and other natural calamities.
 The company arrange mil program for undernourished and sick children and mothers
through several NGOs and charitable organizations.
 The company has initiated a tube well and hand pump installation scheme in selected rural
areas.
 It donates computers to schools for disadvantaged children run by NGOs and charitable
organizations.
 To support the spread of education in rural areas, it undertakes Refurbishment Program of
Govt. operated primary and middle schools.
 The Company regularly sponsors sports and cultural events, such as the International Polo
Tournament and SAF Games in the recent past.
 The company gives the extra gifts, calendars and diaries to the employees and customers
for public relations.

Publicity:

Publicity is also a promotional method used by the Nestlé. Publicity is specific form of public
relations that involves news stories about organization or its products. Like advertising, it consists
of an impersonal message that reaches a mass audience through the media. But several features
distinguish publicity from advertising.

The company does not pay for it and it has little or no control over this and it appears as news and
therefore has grater credibility than advertising.

The company seeks for good publicity and frequently provides the material for it in the form of
news releases, press conferences, and photographs.

When a picture of a company’s CEO appears on the cover of business publication and it
accompanied by a flattering article in the magazine, it is often attributable to the efforts of the
firm’s public relations department.
 57

STRATEGIES REQUIRED AND EXPECTED IN FUTURE

Competitive profile matrix

External factor evaluation matrix

 58

Internal factor evaluation matrix

SWOT matrix
 59

Space matrix

BCG matrix
 60

STRATEGIES AFTER ANALYSIS OF ALL THESE MATRIXES

1. Increase sales by allowing retailers to pay a large portion of purchases on credit

2. Capitalize on logistics and distribution channels to help counter the intense competition from
Engro Foods and Haleeb foods
3. Related diversification to increase product variety and hedge against heavy fluctuations in due
to climate and seasonal changes
4. Build a strong advertisement campaign to communicate the values of nestle products to target
consumer, to strength advantage over competitors.
5. Increase promotional activities, specially e-promotion, to further strengthen brand image and
market position

Implementing strategies
1. Allow retailer to acquire 20% of stock on credit and negotiation similar credit terms from own
suppliers to prevent liquidity issues
2. Develop logistic network in rural areas by building secondary collection centres in strategic
towns, focusing on one province at a time
3. Retain 30% of net income and invest in R&D to develop heat resistant FMCG products,
4. Focus advertising to communicate the nutritional aspects of Nestles products, increase
advertising frequency in summer holidays to boost demand for dairy products and beverages
5. Develop joint venture with, or outsource e-marketing to local leading e-marketing firm that
would assist in developing, implementing, monitoring, and evaluating e-marketing initiatives

Rumelt’s Criteria for evaluation of Strategies

Consistency:
Strategies must be consistent with goals and policies
Consonance:
Strategies should be responsive to existing and expected changes in the external environment trend
and should match the firm’s internal strength 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 sustenance of the competitive advantage for
company by helping achieve superiority in resources, skills and position
 61

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