SWOT Analysis of Nestle

Pakistan
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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.
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 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.

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.
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 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.

 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
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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.

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.
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 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.

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

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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

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
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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.

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 
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 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 
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.
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 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.
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
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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.

 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
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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.
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

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 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.
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.
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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.

 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.
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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.

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.
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 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.

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.
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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.

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

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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.

 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.
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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.

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.
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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.
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.
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 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.

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 
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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
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
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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.

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.
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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.