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Case-Study Overview
Internal:
External:
Analysis
SWOT Matrix
SPACE
BCG
IE matrix
Grand Strategy Matrix
QSPM
Evaluation Procedure
Current Update
History of Nestle
History
1866-1905
In the 1860s Henri Nestl, a pharmacist, developed a food for babies who were
unable to breastfeed. His first success was a premature infant who could not
tolerate his mother's milk or any of the usual substitutes. sold in much of Europe.
1905-1918
In 1905 Nestl merged with the Anglo-Swiss Condensed Milk Company. By the early
1900s, the company was operating factories in the United States, Britain, Germany
and Spain.
1918-1938
After the war Government contracts dried up and consumers switched back to fresh
milk. However, Nestl's management responded quickly, streamlining operations
and reducing debt. The 1920s saw Nestl's first expansion into new products, with
chocolate the Company's second most important activity
1938-1944
Nestl felt the effects of World War II immediately. Profits dropped from $20 million
in 1938 to $6 million in 1939. Factories were established in developing countries,
particularly Latin America. Ironically, the war helped with the introduction of the
Company's newest product, Nescaf, which was a staple drink of the US military.
Nestl's production and sales rose in the wartime economy.
1944-1981
Nestl's growth in the developing world partially offset a slowdown in the Company's
traditional markets. Nestl made its second venture outside the food industry by
acquiring Alcon Laboratories Inc..
1981-1995
Nestl divested a number of businesses1980 / 1984. In 1984, Nestl's improved bottom
line allowed the Company to launch a new round of acquisitions, the most important
being American food giant Carnation.
1996-2002
The first half of the 1990s proved to be favorable for Nestl: trade barriers crumbled and
world markets developed into more or less integrated trading areas. Since 1996 there
have been acquisitions including San Pellegrino (1997), Spillers Petfoods (1998) and
Ralston Purina (2002). There were two major acquisitions in North America, both in 2002:
in July, Nestl merged its U.S. ice cream business into Dreyer's, and in August, a USD 2.6bn
acquisition was announced of Chef America, Inc.
2003 +
The year 2003 started well with the acquisition of Mvenpick Ice Cream,
enhancing Nestl's position as one of the world market leaders in this product
category. In 2006, Jenny Craig and Uncle Toby's were added to the Nestl portfolio and
2007 saw Novartis Medical Nutrition, Gerber and Henniez join the Company.
Overview
OUR BRANDS
Our Brands
We believe that food plays a key role in achieving a well-balanced person. And so our
philosophy is Good Food for a Good Life!
At Nestl, our products are developed keeping our consumers, their preferences and
health in mind.
Millions of consumers the world over trust Nestl products for good reason: when
they choose a Nestl product they have the satisfaction of choosing quality, taste,
variety, convenience and the good nutrition.
Brand Names
Vision
Mission Statement
Good Food is the primary source of Good Health throughout life. We strive
to bring consumers foods that are safe, of high quality and provide
optimal nutrition to meet physiological needs. In addition to Nutrition,
Health and Wellness, Nestl products bring consumers the vital
ingredients of taste and pleasure
1. Customers
Yes
2. Products or services
Yes
3. Markets
No
4. Technology
No
No
6. Philosophy
No
7. Self-concept
Yes
No
No
Mission Statement
(Proposed)
Management
Financial Performance
Investment Projects
Total capital expenditure for the year reached P KR 2.3 billion, with the
most significant projects listed below:
Investments in 2010 of approximately P KR 2.6 billion are planned for milk
collection field development, and upgrading of existing production
facilities as part of our long-term infrastructure plan.
Weight
Rating
Weighted Score
Strengths
Socially Responsible Company
0.03
0.09
0.07
0.21
0.05
0.15
0.08
0.16
0.20
0.80
0.05
0.15
0.18
0.72
0.04
0.08
0.09
0.18
0.08
0.16
0.05
0.10
0.05
0.15
0.03
0.03
Total
1.00
Weaknesses
2.99
2009
Industry
Liquidity Ratios:
Current Ratio
1.11
1.19
Quick Ratio
0.37
.42
Solvency Ratios:
Long Term Debt to Equity
1.94
.47
0.89
.126
Debt-to-Equity Ratio
1.37
1.1
Times-Interest-Earned Ratio
10.49
7.2
9.2
4.56
40
102
2.3
1.23
119.5
67.74
Activity Ratios:
3.51
1.23
29%
30.86
7%
5.8
Return on Assets
44%
41.41
Profitability:
Return on Equity
40%
48.9
66.27
91.62
Price-Earning Ratio
18.8
25.45
Growth Ratios
Sales
+20%
Net Income
+94%
+94%
Weight
Rating
Weighted Score
0.12
0.24
0.07
0.21
0.09
0.36
0.05
0.15
0.03
0.09
0.02
0.06
0.12
0.48
Pakistan as 7th largest milk producing country with milk output of 200 billion liters
0.12
0.36
0.05
0.20
0.14
0.42
0.04
0.08
0.02
0.04
0.01
0.02
0.01
0.02
0.05
0.15
0.08
0.24
Total
1.00
Opportunities
Threats
3.02
CPM
Engro Foods
Weights
Rating
Rating
0.0 to 1.0
1 to 4
Market Share
Inventory System
Financial Position
Product Quality
Consumer Loyalty
Relationship with Suppliers
0.12
0.05
0.20
0.15
0.07
0.03
3
3
4
4
3
3
0.36
0.15
0.80
0.60
0.21
0.09
2
2
2
3
2
3
0.24
0.10
0.40
0.45
0.14
0.09
1
2
3
3
1
2
0.12
0.10
0.60
0.45
0.07
0.06
Global Expansion
Organization Structure
0.06
0.02
3
3
0.18
0.06
1
2
0.06
0.04
1
1
0.06
0.02
Production Capacity
Advertising
Efficient cost Management
0.05
0.15
0.05
3
2
3
0.15
0.30
0.15
2
4
3
0.10
0.60
0.30
2
3
2
0.10
0.45
0.20
Product R&D
.05
0.15
.04
.04
Totals
Weighted
Score
Shakarkanj Foods
Weighted
Score
1 to 4
3.20
Rating
Weighted
Score
1 to 4
2.56
2.27
3
5
3
5
4
4
Industry Strength
Increase in consumer food industry by 14%
All companies contribute only 6% to processed milk market
Market segment growth has attracted new entrants to increase profit potential
Due to ease of entry in market, Engro foods, Shezand foods and Shakarganj are properly
utilizing their resources
Average Industry Strength
5
4
5
4
4.5
Competitive Advantage
Nestle enjoys strong customer loyalty
Quality product distribution networks in country
Nestle extended product life cycle is being ensured due to quality brand extension strategy
Nestle product are market leaders in many product categories
Average competitive advantage
-2
-1
-2
-2
-1.75
Environmental Stability
Economic slowdown can reduce the demand
Fluctuating rate of inflation in the country
Price range of competing products
Average Environmental Stability
-2
-2
-1
-1.75
BCG
Sales
% Sales
Profit
% Profit
% Market
Share
% Growth
Rate
13993
34
1082
38
100
+15
Beverages
7820
19
661
20
85
+10
Bottled Water
9054
22
511
17
100
+3
Confectionary and
Chocolate
1646
150
31
-15
Baby Food
5350
13
331
11
60
-5
3293
270
40
Total
41156
100
3005
100
100
Brands
BCG
GSM
QSPM
Acquisitions
Shangrilla &
Youngs food
No Aquisitions
Weights
AS
TAS
AS
TAS
0.12
0.48
0.24
0.07
0.09
0.27
0.09
0.05
0.15
0.10
0.03
0.02
0.12
0.12
0.05
0.20
0.10
THREATS
Engro and Shakarganj as major competitors
0.14
0.04
0.12
0.48
0.02
0.02
.08
0.01
0.01
0.02
0.05
0.08
Key factors
OPPERTUNITIES
Pakistan as 7th largest milk producing country with milk output of 200 billion liters
1.00
.03
QSPM(Continued)
Acquisitions
Shangrilla &
Youngs food
Weights
AS
0.03
0.07
0.05
0.08
0.20
0.60
0.20
0.05
0.10
0.05
0.18
0.54
0.18
0.04
0.09
0.08
0.05
0.05
0.03
Total
1.00
Key factors
TAS
No Aquisitions
AS
TAS
STRENGHTS
0.14
0.07
WEAKNESSES
Lack of awareness among target market
Nestle milk always stands at last because of low Advertisement.
0.05
0.15
0.06
2.75
0.12
1.89
Matrix Analysis
Alternative Strategies
Space
Count
Forward integration
Horizontal integration
Product Development
Market Penetration
Market Development
Related Diversification
Unrelated diversification
Retrenchment
Divestiture
Liquidation
BCG
IMPLEMENTATION STAGE
Decision
This seemed to an important step where we had to choose
either to go for a horizontal integration or more product
development. The interesting fact was that from 2008-2009
Nestle Pakistan introduced three new products into the
market
The major new product launches the year 2009
Included: NESQUIK milk enhancer, NIDO BUN YAD,
LACTOGEN GOLD, and CERELAC fruit cereals.
Our Recommendation:
Considering this fact now we recommended Nestle Pakistan
to Acquire Shangrila foods and youngs food to excel as a
market leader for the year 2010.
Evaluations
NESTLE annual financial reports
Sales and profits reports (on-line and off-line)
based on sales of newly acquired companies.
Frequent management meetings between the
Top Management at the cooperate levels
through Evaluation reports
Thank You