Note: Case analysis is required for this exam. Requirements are given at the end. History of Nestle 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. 3 Nestl is the world's leading Nutrition, Health and Wellness Company. It is committed to increasing the nutritional value of our products while improving the taste. The Nestl Company has aimed to build a business as the world's leading nutrition, health and wellness company based on sound human values and principles While Nestl Corporate Business Principles will continue to evolve and adapt to a changing world, basic foundation is unchanged from the time of the origins of their Company, and the basic ideas of fairness, honesty, and a general concern for people. In the 140 years since then, we have expanded around the world and developed a range of products designed to suit every taste, need and cultural preference. Our distinctive seal is recognised everywhere as a guarantee of quality and healthfulness 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 Milk, Dairy and Chilled Dairy Beverages Bottled Water Baby Food Food Breakfast Cereals Chocolate and Confectionary Vision The Nestl global vision is to be the leading health, wellness, and Nutrition Company in the world Mission 4 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. Key Internal Factors Weight Rating Weighted Score Strengths Socially Responsible Company 0.03 3 0.09 Nestle products enjoy strong brand image 0.07 3 0.21 Sales force as a major physical resource strength 0.05 3 0.15 Quality product distribution networks in country 0.08 2 0.16 Net Profit increased by 94% in 2009. 0.20 4 0.80 Price earning ratio decreased from 38.9 to 18.8 0.05 3 0.15 Export Sales increased by 48% to PKR 3.3 billion 0.18 4 0.72 Weaknesses Lack of awareness among target market 0.04 2 0.08 Nestle milk always stands at last because of low advertisement. 0.09 2 0.18 Revenue from confectionary decreased by 14% 0.08 2 0.16 Low credit sales and profit margin to retailers 0.05 2 0.10 Weak promotional activities through websites 0.05 3 0.15 Cant launch expensive brand due to low income groups 0.03 1 0.03 Total 1.00 2.99 5 Key External Factors Weight Rating Weighted Score Opportunities Few and weak competitors in the market 0.12 2 0.24 Disposable income increased by 3.6% 0.07 3 0.21 Consumer expenditure on food has increased by 3.6% 0.09 4 0.36 Population density increased by 2.18% (per sq.km) 0.05 3 0.15 Credit policy can be adopted to increase sales 0.03 3 0.09 Potential in cold dairy market 0.02 3 0.06 All companies contribute only 2% to processed milk market 0.12 4 0.48 Pakistan as 7th largest milk producing country with milk output of 200 billion liters 0.12 3 0.36 Increase in consumer food industry by 14% 0.05 4 0.20 Threats Engro and Shakarganj as major competitors 0.14 3 0.42 Market segment growth could attract new entrants 0.04 2 0.08 Taste of the consumer has already developed 0.02 2 0.04 Legal & ethical issues 0.01 2 0.02 Economic slowdown can reduce demand 0.01 2 0.02 Effect of seasonality upon sales 0.05 3 0.15 Strong advertisement by major competitors 0.08 3 0.24 Total 1.00 3.02 6 For BCG Brands Sales % Sales Profit % Profit % Market Share % Growth Rate Milk and Dairy 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 4 150 5 31 -15 Baby Food 5350 13 331 11 60 -5 Foods and Cereals 3293 8 270 9 40 +8 Total 41156 100 3005 100 100 Requirements: 1) Just Interpret the score of IFE and EFE matrix. Comment on the rating assigned in IFE matrix; is it assigned correctly? Marks=04 2) Develop an internal Transformation type vision statement for the company. Marks=02 3) Develop SWOT matric and BCG growth share matrix, for Nestl to identify different strategies. Marks=12 4) Develop QSPM for selecting the appropriate strategy (ies). Marks=08 5) How would you implement the selected strategy? What management issues will you consider while implementing the strategy? Furthermore, what would be the role of different 7 departments like finance, Marketing and R&D in implementing the strategy? Marks=08 6) How would you evaluate the strategy quantitatively? Draw and explain the evaluation framework. Marks=6