Nestle India Strategy Management
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Transcript of Nestle India Strategy Management
Nestle IndiaSUBMITTED TOPROF. SHRIPAD KULKARNI
Submitted ByAdwait DwivediKhushal solankiRuchika AgarwalSomanath singh
Introduction
• Most crucial aspect of the business for Survival is LPG• Analysis of internal and external factors• Industry competitive analysis• SWOT Analysis
About the company
• It has started in 1912 by entering into dairy business.• In 1961 Nestlé set up its first factory in Moga, Punjab. • Nestlé India today has 8 factories across the country. Quality is
the core value that unites them.• It took Nestlé almost three decades to build a beloved noodle
brand in India.
Vision
to be a leading, competitive, nutrition, health and wellness company delivering improved shareholder value by being a preferred corporate citizen, preferred employer, and preferred supplier selling preferred products.
Mission "Nestlé is...the world's leading nutrition, health and wellness company. Our mission
of 'Good Food, Good Life' is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night."
These statements mirror the organization's long haul business strategy. With regards to its guaranteed commitment to nutrition to improve health and well-being of its consumers, Nestlé has also invested into scientific research on the nutritional value of the products it offers. For instance, it has concentrated the impacts of chocolate on digestion and gut microscopic organisms. The focus of the company is to meet needs and desires of today’s and tomorrow’s consumers.
Objective
Our objective is to be the leader in Nutrition, Health and Wellness, and the industry reference for financial performance, trusted by stakeholders.
External Analysis
Political/Legal Segment
Nestlé's products are accompanied with the seal of assurance. Strict quality control plays important part in political variable as
well. It gives the guarantee that customer does not purchase any fake
item.
Economic Segment
It imparts its knowledge and expertise to local small and medium organizations.
Nestle works along with the local government to help the farmers in planting and reaping crops.
It will benefit the customers whereby they will be getting the products at low prices.
Social Factors
Decent eating regimen Satisfactory food supply Maintaining health and hygiene forcefulness of utilizing innovation.
Technological Factors
Web and Mobile Technology By analysing data to identify the need of the customer.
Environmental Factors
Conscious to have clean environment Attention towards the social contribution Recycling and the issues pertaining to the packing
Porter’s Five Forces Model
Threat of New Entrants
Economies of Scale Switching Cost Government Policies Capital Requirement Industry Profitability
Bargaining Power of Supplier
Differentiation of inputs Switching costs Substitute Products Supplier concentration relative to industry concentration Treat of forward integration
Bargaining Power of Buyers
Differentiation of outputs Presence of substitute Industry concentration relative to buyer Threat of backward integration
Threat of Substitute Products
The relative price performance of substitutes Switching cost Buyer propensity to substitute
Intensity of Rivalry among Competitors
Industry growth rate High fixed cost Intermitted over capacity Switching costs Brand Identity
Competitive Environment
Taste Vs. Nutrition Need high level R&D capability Price of the products
Competitive advantage
People culture values and attitude Unmatched geographic presence Unmatched research and development capability Unmatched product and brand portfolio
Internal Analysis: Core Competencies Analysis
Innovation and renovation Whenever, wherever and however Operational Efficiency Consumer Engagement
Value Chain Analysis
Primary Activities: Inbound Logistics
Raw materials Warehouses Training to the farmers
Operations
Processing Packaging: The Design lab |QR code 11 Internal and external laboratories to ensure food
safety Adopted 3R methodology (For Water) – Reduce, Recycle,
Reuse
Outbound Logistics
Inventory management On time delivery Transaction management Order fulfilment Invoice accuracy
Marketing and Sales
Price Brand loyalty Habitual to taste Public Relation
Services
2 Minutes Cooking time strategy Maggi masala Cuppa Maggi Noodles
Supporting Activities: Procurement
It provides sustainable and profitable development for the company
Supply of raw material at specified quality, quantity and low cost
Technological Development
Focuses more on Research and development Continuously improving their technology to increase the
efficiency
Human Resources Management
Right people with right skill Almost zero percentage attrition rate of the employees Trust factor among the employees Single objective Management training program to develop young employees
Firm Infrastructure
Nestlé India today has 8 factories across the country. Quality is the core value that unites them.
Manufacturing plants have helped to create large skilled labor forces in rural areas.
Its infrastructure strives to identify external opportunities and threats.
SWOT Analysis: Strengths
Unmatched research and development capability- Nestlé’s key competitive advantage is its R&D. It has the largest R&D centres’
with one of the best geographically diversified revenue sources- Nestlé operates and sells its products in 189 countries, reaching almost the entire world.
Maggi. Brand awareness helps the company to introduce new products and sell the current products more easily.
Nestlé’s product portfolio is wider than any of its rivals in the industry.
Environmental sustainability efforts- Nestle pride itself on company’s sustainability efforts.
Ownership of some of the most recognizable brands in the world- Nestle owns and markets a few well recognized brands, such as Nestlé, Nescafé
Weakness
Criticism over high water usage, selling contaminated food, anti-unionism, forced child labour and using other unethical practices
Contaminated food recalls- In 2015, Nestle recalled and destroyed 35,000 tons of contaminated Maggi noodles in India. This resulted in hundreds of millions in lost sales and damaged brand reputation
Complex supply chain configuration.
Opportunities
Nestle, which has a history of providing misleading nutritional information on its labels should improve its practices and clearly label the products.
Nestlé could start sourcing all of its materials from sustainably grown plantations and farms.
where the established brands are losing sales and the capital is still very cheap, Nestlé could increase its investments in start-ups that will help the company to meet the future challenges and increase the sales.
Threats
In the future, water scarcity will likely become a more significant problem that will negatively impact company’s operations.
Food and beverage markets are growing very slowly and with so many new start-ups, Nestle will find it hard to compete in the future.
Nestlé’s profit margins are dependent, to some extent, on the price of coffee beans, which over the past several years has been very volatile
BCG Matrix
Ratio Analysis
Profitability Ratios 2015 2014 2013 2012 2011PBDIT Margin (%) 20.36 21.5 22.31 22.27 20.57PBIT Margin (%) 16.11 18.07 18.68 18.94 18.53PBT Margin (%) 9.95 18 18.43 18.62 18.46Net Profit Margin (%) 6.88 12.02 12.27 12.81 12.79Return on Net worth / Equity (%) 19.98 41.75 47.16 59.38 75.47Return on Capital Employed (%) 12.23 26.53 22.49 26.53 32.76
Return on Assets (%) 9.26 20.35 17.69 20.68 21.84Total Debt/Equity (X) 0.01 0.01 0.5 0.58 0.76Asset Turnover Ratio (%) 134.45 169.34 144.13 161.39 170.71Liquidity Ratios Current Ratio (X) 1.68 1.45 1.71 1.31 0.88Quick Ratio (X) 1.12 0.83 1.16 0.65 0.38
Inventory Turnover Ratio (X)9.96 11.67 12.37 11.18 10.24
Basic EPS (Rs.) 58.42 122.87 115.87 110.76 99.73
Dividend Payout Ratio (%) 83.01 51.27 41.85 43.78 48.63
Net Profit Margin has significantly decreased in 2015 by almost half proportion. This is because of the huge losses Nestle Maggi has incurred due to its ban in June, 2015. Almost 35000 tonnes of Maggi was called back and destroyed.
This has also reduced return on equity for shareholders. Inventory turnover ratio has also decreased in 2015 due to
reduction in inventories. Earnings per share has also decreased substantially in 2015
Strategy
Your Company’s objective is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions and help consumers maintain optimum Nutrition, Health and Wellness. Your Company has access to the extensive global network of Nestlé R&D. This is a competitive advantage in the rapidly emerging areas of technology and scientific research and enables your Company to provide safe and nutritious products of very high quality.
The ‘Chocolate and Confectionery’ business worked on improving consumer insights and has been working with Nestlé R&D to innovate and renovate products that will strengthen its portfolio. The focus was also on portfolio optimization for long term benefit, though it impacted short term growth.
Towards the end of the year it launched MUNCH NUTS, a new extension of the ever popular MUNCH.
Nestlé ‘Start Healthy Stay Healthy’ reached out to the supporting eco system of mothers to emphasize the importance of their role in continued breastfeeding with the objective to build greater awareness and advocacy.
The key message was‘Breastfeeding is not just a mother’s responsibility’. The campaign received 9.1 million views out performing industry benchmarks.
During the year your Company enhanced labelling of products with QR codes. This enables consumers to use their mobile phones to scan the QR code on the label for information on Nutrition, Environment and Community as relevant to the product.
During the year your Company also created ‘The Design Lab’ to inspire a strategic shift in packaging design keeping the consumer experience in mind and to achieve operational excellence.
During the year, 54 Energy reduction projects and 40 water reduction projects were completed in factories.
During 2015 your Company consolidated and further accelerated the current improvement programs. It continued to upgrade its warehousing infrastructure with key distribution centers ready to operate in the future with proper infrastructures, systems, processes and a sound safety
During the year your Company has successfully piloted a new demand forecasting system based on analytics and also automated the replenishment to the distribution centres in all factories, improving accuracy and people productivity.
The roll out of the ware house management systems (WMS) with Radio Frequency (RF) technology has been extended to additional factories. During the year your Company focused on further improving freshness of products ‘on shelf’ for consumers and reduce waste.
Nestlé’s approach to business is Creating Shared Value or ‘Saanjhapan’ as used by your Company and it is about the impact of the business and engagement through it. Your Company has been conducting business in a way that both deliver longterm shareholder value and benefit society under approach of “Creating Shared Value” (hereinafter ‘CSV).
Strategy
2013 focused on Nutrition, product development2014 Renovation and innovation, market development, product development2015 Renovation and innovation, market development, product developmentContinually development in supply chain
Thank You