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Nestlé in


PAGE LIST………………………………………………………………………………..2
HISTORY……………………………………………..…………………………………..4 * TIMELINE……………………………………………….………………………..7
QUESTION AND ANSWER………………………………………………..……………9 * QUESTION 1……………………………………………………………………...9 * QUESTION 2………………………………………………………….…………14 * QUESTION 3………………………………….…………………………………17 * QUESTION 4……………………………………………….……………………19 * QUESTION 5…………………………………………………………….………20
* SWOT……………………………………………………………………………23 * PORTER’S 5 FORCES……………….…………………………………………30 * PORTER’S VALUE CHAIN……………………………………………………36 * BCG MATRIX…………………………………………..………………………39 * PORTER’S GENERIC STRATEGIES……………………….…………………41
FINANCIAL STATEMENT……………………………………………….……………44


Nestlé is the largest food and beverage company in the world. It is also well on its way to becoming world leader in nutrition, health and wellness. Nestlé is a Swiss company, founded in 1866 by Henri Nestle. Henri Nestlé, the founder of Nestlé, was a life-saving chemist but also an innovative marketer. He used scientific knowledge to develop products that met consumer needs. He used his name to brand his products in a distinctive way. And he set up systems to distribute his products quickly and effectively. From the start, nutrition has been at the core of Nestlé business. However, today they place far greater emphasis on it – and on health and wellness. Their Corporate Wellness Unit and the individual business units are driving forces in bringing Good Food, Good Life to all of their consumers
Nestlé markets its products in 130 countries across the world and manufactures around 10,000 different products and employs some 250,000 people. Nestlé sells over a billion products every day. From this fact, Nestlé is more than just the largest food and beverage company in the world. Increasingly, Nestlé is becoming the world’s leader in nutrition, health and wellness. On April 2008, a new CEO of Nestlé being selected. Paul Bulcke the new role head of the world’s largest food and beverage company’s that been leading almost for 150 years. His challenge is to deliver the organic growth and improved margins necessary to meet Nestlé’s target. Nestlé’s historic success was built on deep agricultural supply chain, strong local market teams and strategic acquisitions. Sales in 2007 had the first time exceed CHF100 Billion a figure previous CEO and now chairman Peter Brabeck referred to in Nestlé 2007 annual report as an “almost mystical barrier”. Looking from it past Buckle’s challenge is to keep Nestlé moving toward.


“Nestlé” brand was originally taken from its founder named Henri Nestlé. He was a pharmacist that lived in Vevey, Switzerland. The word Nestlé itself in German meant “little nest” that later on becoming Nestlé’s trademark. This logo gives a clean, healthy, and caring image.
Back in 1866, Anglo-Swiss Condensed Milk Company opened the first European condensed milk. The year after, the business was followed by Henri Nestlé who made one of the first baby formula. His brand, Nestlé, developed a new breakthrough in in the nutrition world, especially for mothers who unable to give breastfeed. The unique drying process that naturally keep the nutrient was his new secret weapon. Then in 1900 Nestlé begun to expand their teritory by starting to operate in USA, Britain, Germany and Spain. Both Nestlé and Anglo-Swiss Milk Company used to have a fierce competition, but, this competition did not last long until in 1905 both companies having a merger. Nestlé was kept on growing even until in 1914-1918 which was a World War I period. During this time, there was a scarcity for milk troughout Europe. As a result, Nestlé had to buy some factories in USA to meet the customer’s demand via government’s contract. In 1920 Nestlé begun their innovation and started to produce some new products such as chocolate and powdered beverage product.
In the World War II period (1938-1945), Nestlé suffered a huge loss. During those days, its profit was plummeted. At that time, many of Nestlé’s excecutives was being moved to USA. Because of the difficulties to distribute the products, Nestlé decided to expand their territory to many developing countries that resulted in a significantly increased of production. During the World War II period, Nestlé also made some new products. Nescafé that was made in 1937 even became the staple beverage in Europe, Asia and also become a revolutionized coffee drinking all around the world. Following behind by using the same drying process, Nestea that was made in 1940s also gaining a huge success of demand. By the end of World War II Nestlé’s production were increasing significantly with an accelerated growth and many other cooperations were also acquired.
After the World War II the dynamic phase of Nestlé was begun. It started in the year 1947 when it merged with Alimentana S.A that manufactured soups and seasoning. This merger made Nestlé to start their diversition. In the year after, 1948, Nestlé introduced their very first chocolate powder “Nesquik”. Nesquik is an instant chocolate drink that originally developed in United States. Quik have a similar meaning with speed that best express the speed and simplicity of the preparation. Nescafé’s sales in 1960-1974 were quadrupled by the new invention of technology that allowed Nestlé to have a new kind of instant coffee. Expanding its diversification, in 1974 Nestlé purchase a major shares of L’oreal. This is the stepping stone of Nestlé’s diversity. Soon after Nestlé was experiencing the high price of oil that resulted in the rose of raw material price, they decided to having a venture with a pharmaceutical industry by acquiring Alcon Laboratories, inc in 1977. During its shining and sinking period, a boycott by the U.S.-based organization Infant Formula Action Coalition againts Nestlé occured. This organization concerned about formula that sold in developing country. This problems rose when many mothers in developing country used less formula than recommended. They said that it lead to malnutrition in many countries. This huge problem even brought Nestlé to have a consultation with WHO and UNICEF. At last, Nestlé ended the boycot in 1984 by signing a statement of understanding between Nestlé and the Internantional Nestlé Boycott Comitee. On the year 1980 Helmut Maucher became the CEO. At that point of time Nestlé was in a critical condition, tax profit has been declining over time. But because of him Nestlé can slowly manage to stand again. He manages all section of Nestlé, the efficiency etc. Then finally on the year 1993 Nestlé expanding their wings again. This time they expand their teritorry to China, Central and Eastern Europe. It was good for them back then as a company who has diversed interest. Nestlé has becoming a huge company that produced not only food but also many other thing. After having a cooperation with Alcon and L’oreal, on 2001 Nestlé step further again to reach into another segment. On 2001 Nestlé merged with the Ralston Purina Company. This company have been found seen 1983. On this sacred time they are forming a pet food company called Nestlé Purina PetCare Company. The first produc t line that they produced is “Friskies”. Until now it still really famous and a lot of pet lover still trust to buy it for their pet. Then in the year 2002 Nestlé was having 2 major acquisition in North America. They are finally having a cooperation in ice cream and frozen food industry. What Nestlé done is really great at that time. Nestlé make an acquisition with Dreyer’s (ice cream) and Chef America Inc,. (the leader of frozen food industry). At that time Nestlé was really close on purchasing a great company in America and also Nestlé’s huge competitor, Hersey. But that deal was fell through. In 2006 Nestlé also acquired Jenny Craig and Uncle Toby. Jenny Craig is a weight loss program that is really famous until now. Nestlé not only care about money but also about health and nutrition. America has a huge population of people who suffer obesity. By this period Nestlé was having a chance to help them to have a better life by offering so many programs for them.
A huge history was made by Nestlé in 2006. Nestlé with Michael Porter (Harvard University) and Mark Kramer for the first time found the concept of Creating Shared Value. This concept is showing the real identity of Nestlé. They said that they can only be successful over time if they not only care about the shareholders but also society. Usually many big company that produce goods for customers doesn’t care at all about society. All they care about are how to make shareholders happy and how to gain as much profit as possible. Nestlé is different from any other company. They care about the society personally, especially on their health.
After their great story of creating a new concept for society, on 2007 they also created another merger. They now were stepping into a baby food industry by having a merger with Gerber who back then was a really huge baby food industry in America. Besides having that merger, Nestlé also had another merger with Novartis Medical Nutrition and Henniez. Then in 2009 Nestlé held the first Creating Shared Value Forum in New York. Nestlé and some other experts in the areas of nutrition, water and rural development are coming together to talk about the really serious global change in that 3 main part area. They also try to find a way to solve it by business role. Since 2009, the Creating Shared Value Forum was held annually.
Until now, Nestlé has becoming the leader not only on food industry but also in nutrition and wellness.

1866 Anglo Swiss Milk Company
1867 Nestlé formed
1900 Expand to US, Britain Germany, and Spain
1905 The merger (Anglo-Swiss Milk Company & Nestlé)
1914-1918 World War I, shortages of fresh milk
1920 First expansion of new product
1937 Nescafé
1938-1945 Worl War II, increased in production
1940 Nestea
1947 Merger with Alimentana S.A. (Meggi)
1948 Nesquik
1960-1974 The quadrupled sales
1974 Major shareholders of L’oreal
1977 Alcon Laboratory inc
1980 Helmut Maucher’s period
1984 The end of boycot
1993 Expand to China, Central & Eastern Europe
2001 Merged with Ralston Purina Company
2002 Aquisition with Dreyer’sand & Chef America Inc.
2006 acquired Jenny Craig and Uncle Toby’s
2006 Harvard’s Michael Porter and Mark Kramer, Creating Shared Value
2007 Acquired Novartis Medical Nutrition, Gerber and Henniez
2009 Creating Shared Value Forum in New York


In the business concept, Nestle is one of the biggest food manufacturing company in the world with the vision of becoming the “world’s recognized leader in nutrition, health and wellness,” a very strong vision which made it stands out from its competitors, we can see the reality of that vision from their choice of products, and also from the fact that Nestle focused its products, business merger, etc. in developing healthy foods for the community, starting from healthy diaries, cereals, bottled water, prepared foods, confectionary, pet care, pharmaceutical, etc.
As time goes by, Nestle tries to kept on developing healthier foods for the community, they start to make everything using natural ingredients to make it healthier, they reformulate the old products, reducing its trans fat, sugar, etc. and adding more nutrition to make it healthier, apart from that they also merge with another healthy food manufacturing companies all around the world and also buy some of their shares which strengthen their standing as the world’s renowned healthy food manufacturer.
In service concept Nestle leaders believed that services increasingly could complement a science-based product portfolio. For an example is Nestle’s Jenny Craig Centre which provides its members (Who paid an annual fee) with weekly personal nutrition counseling sessions and an individualized food plan, members who can not come to the Jenny Craig Centre could receive nutritional and lifestyle advice on the Jenny Craig official website or by phone, apart from that the service also conclude the delivery for its products to customers to their homes including special foods for those who were ill or lacked mobility. Apart from that the service also made a broader offering by providing patients with a full services at home which include training by a dietician and access to a 24-hour hot line.
In financial concept Nestle had grown so big over the last 10 years, from 1997 to 2008 during Brabeck’s tenure as CEO, sales grown 78% from CHF60.5Billion to CHF107.6Billion in 2007, EBIT grew 142% from CHF6.2Billion to CHF15Billion, Nestlé’s share price share increased 323% from CHF122.90 to CHF520 and shareholdings returns during that period were 408%.

1. What are the most important reason of Nestlé’s Success over years?

There are so many reasons that made Nestle success over years, here we will introduce you to the secret of Nestlé’s Success over years one by one. First of all as we all knew Nestle is the world’s leader in manufacturing healthy foods, but do you all know that being healthy is not the only thing that made Nestlé’s product stand on the top? In fact the content of nutritions in Nestlé’s food is not the only reason which made it the number one of people’s choice nowadays, Nestle always used the term, “Good Food, Good Life,” in their products, what does it really mean? The meaning behind “Good Food, Good Life,” is that a good food is not only rich in nutritions, but also good for your life, which means that not only it is rich in nutritions but also rich in tastes, have a good value of money (it won’t be good if it’s too expensive), and it also had to have a consistent level of quality and safety, the fact that Nestle always considered this in their products made some kind of security to their customers, which then made them come back again and again to buy Nestlé’s products. Apart from being a healthy food manufacturer, Nestle also spent some of it’s income for Research and Development programs which is created to help the food manufacturing program itself to make the manufactured foods more nutritious without sacrificing any taste. Nestle invests around CHF 1.5 billion in Research and Development every year. It’s more than any other food company in the world. For this department, Nestle employed around 3,500 people from over 50 countries to work in Nestlé’s worldwide network of 17 research, development and product testing centers. The Nestle Research Center in Switzerland is the primary idea creator for every kind of products it produce all around the world, which means that it’s the source of new ideas and scientific knowledge that gives the life-breathing air for all of Nestlé’s products all around the world. In this case, the Research and Development program covers over 100 different professional areas, including nutritional science, the life sciences, raw materials, ingredients and production processes. These Researches can be beneficial not only for Nestle itself but also for the community as to increase the knowledge about food and nutrition, etc.
Consistency is also one of the key secret to Nestlé’s Success, a consistent vision of an organization gives people and its customers a glimpse of the aim that the organization is trying to achieve. As for Nestle, Nutrition has always been at the core of their business. Starting from the moment the Company was founded, back in 1866, when Henry Nestle first launched an innovative, nutritious baby food, and now, around 150 years later, where we lived in a much different life, where people are living longer, living standards have improved and life styles have changed.
These, and some other factors, have considerable influences on Nestle, both in terms of the products we make and the way we run our business, but apart from making some changes, Nestle still is the leader in providing consumers with healthy food and beverage solutions that generate a long, healthy life, which still showed the world its clear vision as the leader of world’s healthy food manufacturing company. Earning customers’ trust is also one of Nestlé’s secret for their success over years, of course it is never was easy to earn one’s trust, Nestle try to overcome this by giving them consistent level of quality and safety in their products and also by giving their customers important, factual and true information about the products’ contents and nutritions, apart from that Nestle also gives their customers some kind of indirect services by buying their products, they put on some information about how to make their product tastier, how to eat it, how to mix it with another product, etc. they also put the contact information details on their products so that the customers who wanted to know more about the products can call Nestlé’s Consumer Service teams or log on to Nestlé’s website, Nestle describe this function as; * Good to know, which gives factual information on nutritional content and also gives the customers a little bit knowledge about the nutrition itself.
 * Good to remember, which gives tips for healthy lifestyle, cooking and diet. * 
Good to talk, which invites the consumer to call Nestlé’s Consumer Service Centre or log on to Nestlé’s websites for more detailed information.
For Nestle, customers are number one, they are the priority over others, because without their supports and trusts, the gears moving Nestle corporation will not move itself, people did, not just outside (customers), but also inside (workers), everyday all across the globe, people bought Nestlé’s products giving the company an annual sales of more than 90 Billion CHF. Today, Nestlé’s customers believed in Nestle more than ever, because of the amount of dedication Nestle corporation and workers had showed for over than 100 years, customers believed that Nestle will give them the best of the best out there for them and their family, by giving them solutions to healthy yet delicious food. Nestle is said to be a company that worked on people, its said that people is their fuel, their gears, their engine, and they are their most valuable assets, which then make Nestle a very human company. They care about their people, both workers and customers. They encourage and bring out the best in them. They work hard to ensure that they benefit as much as they can from their work at Nestle. For Nestle, people are number one, they’ve always been their priority, as they believed that without the trusts and supports from their customers, they will never be succeed as it is today, so giving their best for the customers always have came first in everything in Nestle. Knowing this fact more and more people are coming to believed in Nestle and in the end becoming their loyal customers, which is why earning customers’ trusts is one of the most important aspect for success in Nestle.
Nestle also believed that “food is a local matter,“ which means that although their products are available everywhere on the globe, they don’t believe in a standard worldwide taste, because people all around the world will have different opinions, even though they are just living next door to you, and so Nestle always have tried to adapt their products to local consumers’ tastes in order to fit in and become the customers’ favorite in that area. These can vary widely, not only from country to country, but even inside a country, as I said before, even people living next to your home could have some differences with you. To meet local needs, there are more than 10,000 Nestle products (some of them are regional, which means it is only produced to satisfy certain customers at certain area) with hundreds of factories in over 80 countries produce them. Which make it so necessary and important that Nestle have the local knowledge and local experience in certain countries or area.
The 150 years brand Nestle is also one of the reason of Nestlé’s success over years, wherever you go all around the world, Nestle is there to accompany each one of you, Nestle truly is the leader in healthy food manufacturing company. Long-life brands is advantageous to an organization since it gives people securities over the product, even if it’s a new released product, people will buy it, to try it for some sort, they will buy it because they already believe in Nestle, believed that it is safe, healthy, and of course tasty.
And so, if one of those brands were to release a new product, customers won’t be afraid to buy it and some will just buy it to try it, because they trusts Nestle. The huge variety of products Nestle offers is also one of its key successes over years, with more than 10.000 varieties of products all around the globe. By having huge variety of products, Nestle covers most of people’s needs just under one brand, Nestle. The Nestle brand covers practically all food and beverage categories from milk and dairy products, nutritious foods (like lose-weight cereals, milks for growing children, etc.), ice cream, breakfast cereals, coffee and beverages, culinary products, chocolate and confectionery, pet care, bottled water, etc. Making it something like a one-brand supermarket it, which preferred and believed by the market. Over times things changes, and it will all change our habits, starting from our eating habits, our needs, living standards, lifestyles and of course people’s taste for food. Knowing these, Nestle continues to put their priorities on nutrition and health for their customers, and so they applied the results of their research and development program to develop food and beverage products that follows up their customers’ demand without taking out the important nutritions, the result is an improved quality of food and beverage products which have better taste and of course better nutritions for human beings of every living stage of life, starting from when a human was born to the moment it became old which they will need more vitamins and nutrition to have a good life.
It’s just never enough to meet the existing consumer needs, since human are never satisfied, and so, to stay with the development of human nature, especially its customers, Nestle always have tried to be ahead of its competitors, in order to know what the customers’ demand, Nestle will sometimes send out some of its officers to the market, to make some analysis on the market’s demand, and then they will make assumptions and predictions for the close future of customers’ demand. Knowing this fact Nestle always tries to adapt itself to the changing circumstances of the world, they tried to follow their customers’ lead, so that they won’t lose track of their demands and needs. That’s why people in Nestle kept on reformulating the old products, so that they can still sell it in the market, so that people will kept buying their products, so that they will never lose their customers to the other competitors.

2. Warner Bauer suggest that Nestlé‘s R&D efforts are moving towards to “pharmaceutical model”. What are the implications of this for their organizations?

“The more we know about human genetics and nutrition, and how they interact, the more we are able to help people make decisions about what they should eat, how much they should eat, when they should eat”
-Werner Bauer, Nestlé

Nestlé well-deserved reputation for operational excellence, and ever since Henri Nestlé developed the first milk food for infants in 1867 – saving the life of a neighbor’s child in the process – the company has steadily grown to become the world’s largest food firm, employing a business model based around delivering innovative solutions for human health and nutrition.
Much of this success can be put down to the company’s decision a few years ago to refocus its activities on health and concentrate on the nutrition and wellness sector. It’s a transformation that has been heavily reliant on R&D, and as such Bauer has been a key figure in integrating a culture of innovation into the very fabric of Nestlé’s operations – a task made easier by the high-regard in which R&D has always been held at the food giant.
Yet, there still significant hurdles to be overcome for the company to realize its vision. According to Bauer the greatest challenge in moving from a classical agro converter company into nutrition and wellness company was realigning Nestlé competency areas. Nestlé had to transform the organization into one where Nestlé could developed high added value products, which meant had to build up the R&D capabilities, transforming to the most basic research facilities into nutrition and health research institutions. Many of the areas in which the company had previously been strong such as the processing of agricultural bulk work for the development of foodstuffs such as French fries and tomato sauces were sold off, and investment switched to building out more added-value environments.
It was a major shift, involving knowledge acquisition around a whole host of cutting-edge areas, including new technology platforms and evolving research into areas such as enzymatic processes, metabolism and bioavailability. Nestlé needed to find out all about how the body metabolisms, and find out how those processes influence the health status. This was a new category and it put quite a stress on the R&D organization. Expertise in all these new areas had to be established before anything could drive forwards, so it was quite a heavy change over time.
With an increased understanding of how nutrition and lifestyle choices impact upon body composition and metabolic health proving to be a valuable tool in new product development. It’s a key area for Nestlé, informing all of the company’s decisions around the launch of new products. Internally, the firm is guided by what Bauer refers to as “the 60/40 plus” formula, an internal process that requires all R&D, marketing and product development staff worldwide to judge products based on two criteria. First, in a blind taste test between Nestlé product and the competition, Nestlé product has to have 60% superiority. Ideally, Nestlé want to be higher than that, but with minimum 60% superiority the product can launched. Secondly, Nestlé aim to achieve nutritional superiority this means that once all the basic criteria have been met (low salt content, sugar adequacy, low-to-nonexistent trans-fatty acids) then the product must be nutritionally superior to competing brands – the ‘plus’ element. Nestlé have over 360 various nutritionists in center’s looking at the continuous nutritional improvement of our products, and the 60/40 plus process provides an internal quality management tool for this.
For Bauer, the key challenge is in translating scientific advances into defined consumer benefits. A further area of interest is the company’s Healthy Recovery program, which helps patients undergoing treatment for various conditions to improve their diet as a means to combat the negative health effects of therapy. Bauer sees the industry moving closer to the model used by the big pharmaceuticals companies in terms of the way it uses scientific research for product improvement. Clinical research has to have significant control mechanisms. Yet, with a growing body of scientific research behind it that attests to the health benefits of nutritionally improved food products, Nestlé has no need for such gimmicks. Bauer cites probiotics as a development where the advantages of the product speak for themselves. 10 years ago when Nestlé launched the first probiotic products, it was unbelievably difficult to communicate the benefits, today the understanding has progressed so far that the benefits are generally accepted because the scientific literature behind it has come such a long way.
Indeed, Bauer believes the way that food has become an integral part of disease prevention as opposed to just being thought of as sustenance provides a huge area of opportunity for Nestlé. Another example of the way food industry R&D is moving down a similar path to that of the pharmaceuticals sector. Today, scientists understand much more about genomics and the reasons why some people are more predisposed to certain illnesses than others, and much of this research is being transposed across to the food industry. For Bauer, this means the dawning of a new age of personalized nutrition. With the idea of personalized nutrition mirroring conceptually, at least – pharma’s advances in personalized medicine and targeted treatments, Bauer is excited by the possibilities it offers.
Nowadays (2010), Nestlé Health Science S.A. and the Nestlé Institute of Health Sciences created to pioneer a new industry between food and pharmaceutical becoming operational. According to a recent Wall Street Journal report, Nestlé is investing $509 million over 10 years in the institute, which will carry out deeper scientific research into such areas as genetics and DNA. Nestlé Health Science S.A. will incorporate the existing global Nestlé HealthCare Nutrition business, which had a turnover of $1.6 billion in 2009. Nestlé Health Science S.A. also will have access to external scientific and technological know-how through Nestlé’s innovation network, as well as a number of venture capital funds in which the group has interests.

3. Jose Lopez says that farmers are now “vibrating with the rest of the world” What are the implications?

In the past year, farmers used to have a big struggle to compete in the world. Nowadays farmers are different. What different today is their volatility. Farmers used to follow the seasonal clock. When it was winter they will plant A, when it was summer they will plant B, etc. They will plant different type of crops each season. They have a crop cycle that is the same every year. Sometimes their decision to plan crop is based on subsidies that are slow to change. But now farmers are different. They are now the same as a business man who are looking for their shares. When you went into a farm, you will not see traditional equipment anymore. You will see farmers holding PC and watching the changing price of the crops. Right now farmers will plant crops not based on the season or what is the best crop for the season. They will plant based on the highest price on the market. Farmers no longer are conservative. Farmers are now changing from a seasonal clock to Wall Street clock. It is a whole new world with more joy. The ability to plant is more demanding. That is why farmers are now said as “vibrating with the rest of the world”. What farmers will plant used to be predictable. But now, it is really hard to predict what they will plant each month. Nestle is a company who is depend on agricultural resources. They have a direct cooperation with local farmers all over the world. Price of crops keeps increasing but it is not a problem for Nestle. The problem is sometimes farmers not consistent on planting the crops. To produce a line of product, Nestle keep using the same raw materials from the same farmers that are reliable. But now Nestle have to find more and more farmers who plant the things that they need. Farmers now love money more than they love nature. They keep seeing the increase on price of crops and keep on planting the crops that give most benefit. It is hard for Nestle to keep on finding farmers who are willing to plant crops that are not beneficial for them. The second implication is farmers no longer focus on the quality of the crops. The most important thing in their mind is how to produce a large amount of crops in even the smallest place. For example, back in 1960s farmers can produce 20 corns in 1 hectare of land. Nowadays they can produce even 100 corns in that small area. Of course the quality will not be the same. Farmers only see on how to gain much money in the small period of time. It is hard for Nestle to find a really good quality of raw materials that can accomplish their “health” vision. From 10 farmers there is only 1 who still cares about nature. The rest are just looking for money. By doing this act, they make the price market unstable. All farmers tend to produce the same crops at a period a time that lead to the increasing of the price. Maybe at that time so many customers are looking for the same crops. What they don’t think is customers may find the substitute products with the lower selling price that are beneficial for them. It is just a wheel that have no end.

4. What are the implications of GLOBE?

GLOBE is the short form of Global Business Excellence. Its objective is to improve the efficiency of performance of the businesses on a global scale. Facilitate better cross functional communication and knowledge management and help in standardizing products. This programme is based on three main principles which is Good practice, Standardization of data and management, Information systems and Common Technologies. Over the last years, Nestlé has successfully implemented its GLOBE Business Solution throughout the world. The GLOBE Solution combines a set of business best practices with a standard systems template running on SAP. GLOBE enables Nestlé to take advantage of its worldwide scale whilst retaining the ability to act locally. Externally, GLOBE enables the company as a whole to bargain harder with supplies and to serve customers better. Internally, different plants can be compared and best practices identified. To support the Nestlé businesses in implementing GLOBE, Nestlé created three GLOBE Centers located in Europe, The Americas and Australia. With the implementation almost complete, the focus of the GLOBE Centers now moves to supporting the business units to continually enhance the business performance by leveraging the GLOBE Solution to the full. So the consequences might be a top down push to standardize elements such as a brand names, packaging, ingredients, formulations, etc in order to drive down costs which could be at odds with Nestle’s local efforts.

5. What should Paul Bulcke do with the $50 Billion in his disposal?

Where do those $50b come from ? Three days before Bulcke’s first day as CEO of Nestlé, the company sold 25% of its shares in Alcon, the world leading company in eye-care to Novartis for $10.6 billion. At the same time, Novartis took a position on a call option on Nestlé’s remaining shares, which would amount to an additional $24.8 billion (or more) in either 2010 or 2011. Finally, after April 2009, when its share lockup agreement with L'Oreal expires, Nestlé would be able to sell its position on L’Oreal, which represented a 30% stake in it. This position could generate an estimated gain of at least $22 billion. In a nutshell, Nestlé may have a potential amount of $57.4 billion in 2010. As an immediate result, Nestlé should substantially reduce its net debt position, which stood at SFr29.6 billion ($28.7 billion) at the end of June 2010, mainly in Southern Europe. Also, Nestlé would continue to seek opportunities to accelerate its development in core areas and, through responsible capital management, maintain its AA rating – the gold standard credit quality in the industry – while providing a competitive return to its shareholders.
Another possibility would be to invest in emerging markets. Nestlé, expects fast-growing emerging markets to drive future growth, helped by new products aimed at ageing populations in mature markets. Nestlé said, despite debt problems in southern Europe (as mentioned before) and budget cutbacks across the continent, it remains optimistic on growth.
“The developed world has a few things to iron out but the worldwide growth is there thanks to the developing markets” said Paul Bulcke in an interview for Reuters.
Thirdly, Nestlé, as mentioned in an interview for “Economic Times” could use the money from the disposal of the shares to launch a new 10 billion Swiss franc ($9.64 billion) share buyback programme for two years once its existing 25 billion programme is completed this year. A share buyback programme is the repurchase of outstanding shares by a company in order to reduce the number of shares on the market. Nestlé would buy back shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake. In other words, a buyback allows companies to invest in themselves.
Though Nestlé’s primary concern is to focus on organic growth, it could also use some of the Alcon proceeds for acquisitions (inorganic growth), possibly entering the fray for target British chocolatier Cadbury amid a hostile bid from Kraft Foods in 2010.
Another potential acquisition for Nestlé would be the one of U.S. babyfood group Mead Johnson Nutrition Co (value at $9 billion), which is more likely to happen than the one of Cadbury, according to analysts.

ANALYSIS We classified all these analysis under five broad categories, they are: 1. SWOT Analysis (Strength, Weakness, Opportunity, and Threat) 2. Porter’s 5 Forces Analysis 3. Porter’s Value Chain 4. BCG Matrix 5. Porter’s generic strategies



* Capacity to generate strong sales via a strong brand name leveraging
Nestle owns some of the best-known brands in the world across diverse product categories. For example, Nescafe, one of its key brands is also one of the most recognized brands of the world, ranked 25th amongst top 100 best global brands in 2009 and valued at $13,317 million, according to the Interbrand, a brand management company. Apart from the Nestle brand, the company also nurtures other strong brands across diverse product categories. The company’s top 30 brands earn around CHF80,713.5 million ($74,548.6 million) in annual sales contributing approximately 75% of its total sales. This indicates the company's ability to leverage its brand popularity to generate sale.

* Capacity to adapt/customize products to the local market conditions
One of Nestle's key strengths is its ability to customize global products according to consumer preferences in the local market. This is achieved by ensuring that its subsidiaries understand consumer preferences in the local market and develop products that match them. For instance, its confectionery range sold in the UK is called Rolo, while it is known as Rossyia in Russia. Furthermore, the company’s coffee brand Nescafe, comes in many variations, vadapted to local tastes and preferences. Customized products with the same underlying international quality standards ensure continued customer loyalty towards the brand and the company.

* Strong focus on research and development abilities
Nestle has strong research and development (R&D) abilities. $1,847.2 million are invested in R&D by the company annually. No less than 5,200 people work in food and beverage development and product testing centers. The company’s research and development activities are focused on three core functions which include Product Technology Centres (PTCs), Research and Development Centres (R&D Centres), and Application Groups. The Product Technology Centres are linked with particular Nestle businesses to provide expertise for specific product categories, and together forming a hub for global product and process development. The Research and Development Centres collaborate with the Product Technology Centres to meet regional R&D requirements and provide input to localize products as per consumer preferences. The Application Groups are located in Nestle factories and ensure that products comply with local taste preferences. They also work closely with the R&D centres and the Product Technology Centres to test scientific applications as close to the end consumer as possible. Nestle’s continued focus on R&D initiatives enables the company to increase its profitability. For example, powdered and liquid beverages products category achieved an organic growth of 9.5% in 2009 over 2008 since the segment benefited from the continued roll-out of renovated Nescafe brands such as Alta Rica, innovations such as Nescafe Green Blend. Strong R&D capabilities allow Nestle to renew its product line at regular intervals, while boosting revenue growth.


* Increasing cases of product recalls slows success of the trademark
Nestle has a history of recalling a number of products from the market. For instance, in 2009, the company recalled refrigerated and frozen Nestle Toll House cookie dough products when Nestle USA, a subsidiary of Nestle, was notified by the United States Food and Drug Administration (FDA) and the Centers for Disease Control (CDC) of a possible link between reported illnesses caused by E.coli 0157:H7 and the consumption of uncooked cookie dough. Moreover, in 2008, Nestle USA, recalled Nestle Nesquik Strawberry Powder, fearing that it may contain small fragments of aluminum. During the same period, reports of small chunks of blue plastic in Lean Cuisine brand frozen chicken dinners have led Nestle Prepared Foods Co. a subsidiary of the company, to recall around 900,000 pounds worth of meals. Earlier, in 2008, Nestle recalled a UHT pure milk product in Hong Kong after samples containing a tiny amount of the chemical melamine were discovered in the product. Several product recalls like these indicate inadequate quality assurance and quality control systems for Nestle. Also, recurrent product recalls affect the brand image of the company, which would lead to low customer loyalty and brand equity.

* Slow recovery of product volume due to the economic downturn in 2009.
Nestle’s volume trends, like many of its peers, dipped in the economic downturn. Although, the industry has been on course of recovery since 2009 but it has not been led by due to the company’s diversified profile, relative higher pricing and a smaller relative contribution from emerging markets. This signifies that Nestle, which is a market leader in few of its products category, has found it difficult to manage the growth of its product volume since coming out of the 2009 recession. Price growth at Nestle has especially been pushed higher by confectionery, petcare and its beverages operations. Also, the more limited volatility in the company’s growth metrics is attributed by Nestle’s more diversified products profile. Such factors, coupled with reduced and cautioned consumer spending would lead to slow growth in volumes sales of the company and profitability.

* Relative less sales exposure in emerging markets
A key point where Nestle trails its large European competitors is in emerging markets presence. The company owns 220 factories in emerging markets and its sales in emerging markets reached almost 32,326.7 million in 2009. However, in the geographic mix, emerging markets represent about a third of sales for Nestle compared to about 40% for Groupe Danone and 50% for Unilever. Following the economic downturn of 2008-09, the emerging economies are set to grow at a faster pace as compared to the matured markets such as the US, Japan, and certain European countries. As per the estimates provided by the International Monetary Fund (IMF), the US economy would grow at 2.7% in 2010 whereas the Indian and Chinese economies would grow at 7.7% and 10% respectively in 2010. As a consequence, Nestle would benefit less from the economic upturn seen in these markets in 2010.


* Shift to a 'nutrition and well-being' company
Nestle is primarily focusing on nutrition and well being product offerings. The company is combining taste and nutrition to create a proposition for consumers and ensure accelerated profitable growth. The company is doing this across its portfolio by reducing trans fatty acids, salt and sugar or increasing micronutrients such as vitamins and minerals. The company is also improving nutritional density of its products by adding whole grains, calcium, Omega-3s and antioxidants. As a result in 2009, Nestle renovated 7,252 products for nutrition or health considerations. Furthermore, during the same year the company’s brands, Milo enhanced its position with consumers in Zone AOA, whilst Nesquik enjoyed a resurgence in Europe following a renovated recipe with an improved nutritional profile. Additionally, Nestle is also efficiently utilizing its R&D capabilities to position itself in the health and wellness market. Nestle's strategy to strengthen its position as a nutrition and well-being company comes at a time when consumers are increasingly become health conscious. This is evident from the fact that the global organic food market grew by 9.7% in 2009 to reach a value of $60,000 million. In 2014, the global organic food market is forecast to have a value of $96,500 million, an increase of 60.7% since 2009. Also, the global functional drinks market grew by 6.4% in 2009 to reach a value of $40,240.7 million and is forecast to have a value of $53,478.3 million in 2014, an increase of 32.9% since 2009. Rising health awareness among consumers is leading to higher demand for low carbohydrate and low calorie foods worldwide. Consumers are increasingly aware of the risks associated with obesity and poor dietary habits. Hence, by enhancing its focus on developing healthy food products and by positioning itself in health and wellness market, Nestle would be able to capitalize on the health conscious trend.

* Focus on enhancing business opportunities in developing and emerging economies
One of the most significant growth opportunities for Nestle is in the developing and emerging economies (D&E) economies, notably China and India. Population of D&E economies is expected to increase by 3,300 million between 2000 and 2050, and this is expected to drive demand for food and beverage products. Nestle has been active in D&E economies through its subsidiaries in Asia-Pacific, Africa, the Middle East, Turkey, and Latin America region. Sales in emerging countries accounted for almost 32.5% of total revenue and reached $32,326.7 million in 2009. The company expects to double its sales in emerging markets in by the year 2020. As per the economic growth estimates provided by the IMF, the advanced economies are set to grow at 2.1% and 2.4% respectively in 2010 and 2011 respectively. In comparison, the developing and emerging economies are forecasted to grow at 6% and 6.3% in 2010 and 2011 respectively. Therefore in the future, Nestle's growth would be driven by high growth D&E economies, as its mature markets become saturated and their growth continues to remain stagnant in the near future.

* Booming out-of-home eating market
The out-of-home eating market is growing significantly. Although, the global restaurants sector shrank by 2.9% in 2009 to reach a value of $1,443.4 billion, it is forecasted to have a value of $1,792.2 billion in 2014, an increase of 24.2% since 2009. Also, as per, National Restaurant Association (NRA) 2008 Restaurant Industry Forecast, consumers in North America will spend $580.1 billion at restaurants in 2010. Presently almost 40% of the consumer food and beverages spend is out-of-home in North America, Brazil, Russia. India and China are also showcasing similar trends, and many Western European countries are not far behind. With sales of $5,357 million and 10,000 employees in 97 countries, Nestle Professional is the world's leading manufacturer in this highly fragmented out-of-home market. A fragmented nature of the out-of-home market offers Nestle with the opportunity to position itself as a market leader given its economies of scale. The company intends to double Nestle Professional's sales in the next ten years. Nestle can leverage this opportunity to boost its top line in long run.


* Compliance issue causing penalty payments
Nestle has been obliged to pay fines amounting to thousands of US dollars recently. For instance, in early 2009, Nestle and The Coca Cola Company (TCCC) was asked to pay a $650,000 fine as part of a pact with 27 states to resolve a marketing dispute over claims that their Enviga-brand green tea beverage, product joint developed by TCCC and Nestle will burn extra calories resulting in weight loss. During the same period, The Hellenic Competition Commission fined Nestle $38.5 million for 'abusing' its dominant position in the instant coffee market. The state competition commission accused Nestle of taking steps to shoulder out other coffee providers in its deals with supermarkets, restaurants and distributors. Nestle's reputation is based on consumers' trust. Any further major event triggered by a serious compliance issue could impact Nestle's reputation.

* Adverse publicity because of allegations of unethical business activities
Nestle has been criticized by various social organizations for alleged unethical business activities. For example, the company has faced warnings over the past several years as it sourced cocoa from farms in the Ivory Coast, which employed child labor. The charges against the company include trafficking, torture, and forced labor of children who cultivate and harvest cocoa beans, which the company imports from Africa. Furthermore, public criticism Nestle has faced revolves around artificial infant milk substitute. Most of the major allegations against Nestle involve a breach of the World Health Organization (WHO) International Code of Marketing of Breast milk substitutes. These are not legally enforceable regulations, but health guidelines generally accepted by governments around the world. Nestle was further criticized for advertising and marketing its products in ways that undermine breastfeeding, giving away free samples and promoting the use of its infant milk substitutes. Such criticisms lead to negative publicity and may have a significant impact on customer loyalty and attitudes towards the company.

* Risk of strategically unviable reinvestments and acquisitions
Nestle currently has a large amount of cash on its balance sheet after the disposal of its remaining shares in Alcon. Nestle have realized in excess of $ 40,000 million in cash from the company. However, such a scenario would not be optimal as the cash on the balance sheet yields a lower return than the company earns on its food and beverage operations and it also increases the company’s average cost of capital. Also, in January 2010, the company acquired Kraft Foods' frozen pizza business. The business includes leading pizza brands such as DiGiorno, Tombstone, California Pizza Kitchen, Jack’s and Delissio. The US is the largest pizza market in the world with consumer sales of about $37,000 million. With estimated sales of $2,100 million in 2009, Kraft Foods is the leader in the frozen pizza category and has enjoyed double-digit growth in the US and Canada over the last four years. However, such an acquisition raises questions the company’ strategy on health issues as more consumers are shifting away from high calorie products towards healthier alternatives such as salads and home cooked meals. Also, the target consumers for such products are only limited to mature markets which bore the maximum brunt of the economic slowdown of 2008-09. Hence to be dependent on few markets with reduced consumer spending for revenues returns at the cost of expensive acquisitions raise questions on the company’s reinvestment policies.


Porter’s forces analysis help us to see Nestlé’s competitive environment. Porter’s methods of analyzing the case will be focused on 5 main things that later will be discussed. The 5 forces will be determining the competitive intensity and therefore will express the attractiveness of a market. 3 of Porter’s forces refer to competition from external sources (E) and the rest are the internal threats (I). These are the 5 Porter’s forces that will locate Nestlé’s competitive environment:

1. Bargaining Power of Suppliers (I)

Most major firms in food and beverage industry have a medium to medium high bargaining power level. Bargaining power of supplier is a really important matter for Nestlé as they are the main strength of a company. The fact is a dairy and agricultural products’ qualities are so important. Nestlé is a growing company who has branches all over the world. From Europe to Asia it has a factory and sells their products right away. Nestlé use raw materials originally from the country that it going to be sold. For example Nestlé will buy raw materials from the local farmers in China and almost 90% of the raw materials will be used to make product that will also be sold in China. They’re not looking for an expensive raw material from a well known company. Nestlé tend to find local farmers that produce a high quality of products and make cooperation out of it. Nestlé never take an advantage on their suppliers (local farmers, etc), they will somehow teach them something that will give benefit for both sides. For example Nestlé will present a helpful guidance to their supplier so they will not make a waste of expense and in the future the suppliers will use their resource efficiently to produce high quality raw materials for them.
Nestlé always focus on their business relation with the supplier. It is a really good thing because when they treat the supplier well, the supplier will also give a good feedback that result in a better raw materials quality. Many companies not really focus on making a good relation with the supplier, but Nestlé use it as a secret weapon so they will get the best quality of all. They are not trying to find the cheapest price of raw material and make their entire product in 1 country and sell it in many other countries. Nestlé try to carry out the best product with the best ingredients that mainly produce in the specific country. As Nestlé is not using a rare raw material, they have a lot of other substitute material for it. So, they will never find it hard to find other suppliers that sell the same or almost the same products. It is easier for them to keep finding the best raw material for their product.

2. Bargaining Power of Customers (I)

The bargaining power of customer is an important factor of determining company’s performance. It is well shown that Nestlé target is for people who want to experience a good food or beverage with a high nutrition and for those people who want to eat a healthy food. It is one of many Nestlé’s concern on making products, which are health and nutrition. Nestlé sell many varieties of products to many different targets. So, customers carry a huge quantity of bargaining power looking on their needs on many different products that Nestlé sold. Nestlé’s line of products are so many. Nestlé give the customers a promising product that consist of healthy ingridients. The biggest advantage for Nestlé is that they are the only company with both a big nutrition business and a big food business. It is no doubt that Nestlé has so many competitors that offer similar products or even their substitute. The fact is so many customers still trust Nestlé because Nestlé keeping their quality and keep maintain it.
In the business world, it is really important to keep the customers satisfied and fulfill their needs. Nestlé is an old company but they still keep on getting more and more customers compare to the new establish company. Nestlé really understand what people nowadays need and want. One of them is by creating “Nestlé health and welness program”. Nestlé realize that society are getting more concern on health other than taste. Nestlé is on their right track on managing both taste and health. Once, Nestlé’s excecutive vice president for operation said, “Our goal for food has always been local, affordable and fresh”. It is good to know that because many company is only focusing on searching the cheapest raw material without concerning of its quality. Nestlé have a really good strategic which is keep it local and affordable. By buying a local raw material, using and sell it locally, Nestlé is having a good insight. Customers really like something fresh, health, good quality and affordable. Nestlé give them all. The best bargaining power of customer is to set a good brand image to the customer. Overall, Nestlé have a really good image on selling a good quality and healthy product.

3. Threats of New Entrants (E)

Nestlé now is in an attractive market which mean many other people are trying to be in the market. The thing is when a market is attractive it will be a big threat for the company. On the other hand, when the market has been restricted to a limited resource the company are having less thread. When a market offering a high profitability, for sure so many other new entrants will likely to be attracted and later on they will try to step into the business. For Nestlé actually they are having a huge threat. Eventhough they already lead the business for years, but food processing industry are really huge and many other company already in it. Nestlé already have a strong name in the industry but the fact is there are so many other companies that are already in the market and now are in a pretty good position. But still Nestlé still holding a good position in the term market shares.
Every year the number of company who trying to enter the market are increasing but sadly very few are survive. Nestlé was already in the business for more then century. Right now it is a big challenge for the new entrants to try to beat Nestlé. Besides not only they should work out on making a better quality, they also have to find a way to cut Nestlé’s shares to survive in industry, but it is quiet impossible for the new entrants to do that. Basically, Nestlé has already successfully leaded the business for years and it can be said that it has a low and almost no threat of new entrants. There are actually so many barriers for new entrants to enter the market. The existence of barrier to enter the market are seems too hard. Many companies are already making patent of their product and there is no way for them to let it go. And it makes the new entrants to suffer even more. Because Nestlé has already been in the business for so many years, of course they also already have so many loyal customers. Nowadays, I think Nestlé is only focusing on making a better product and try to be better that their huge enemies. So, Nestlé have no time to see the small entrants that just are in the business. They have zero experience and they still don’t know anything to be even better than Nestlé.
If one day there will be new entrants that offer a huge threat to Nestlé, I think they will still not going to make it through. It is because Nestlé have already been in the business for years and they are the first one to combine health and food. Nestlé have a promising R&D section in the management that focusing on finding something new. Those new entrants don’t have something like this. Therefore, it is hard for them to try to compete with Nestlé.

4. Threat of Substitute Products (E)

Every product has substitute. Substitutes are always in line when we are talking about a specific product in a market. Even Nestlé can’t prevent the existence of their substitutes. Nestlé produce products that are really common and can be used in daily life activities. So, it is impossible if they have no substitute products. By seeing from this perspective, Nestlé have a high threat of substitute product. Substitutes have a huge range and sometimes an impossible thing can also substitute something. Nestlé can’t go away from substitutes but they can do something to cover it. For example Nestlé is making pure life water. There are so many substitutes waiting in line. From Pepsi, Sprite or even coffee products, all of them might be Nestlé’s mineral water substitute. The only way to keep Nestlé still in the business is to innovate and make a dependent product. A very recent thing that Nestlé do is their innovation. They are making a health consciousness and wellness factor in their products and publish it to public. Such innovation can make it easier for Nestlé to continue their path in this emerging world. Substitute product will keep on coming but Nestlé up until now can still do more innovation and keep their loyal customer in hand.
Another example is in the cereal segment. Nestlé produce so many cereal brands that are really famous. But, nowadays business people finding time become more valuable than before. Even just to sit for a while to eat breakfast is also difficult. So sometimes they change their breakfast into a simple snacks bar that can be eaten while they are walking. Actually this is a pretty huge threat. I think Nestlé have already cover it a bit by making some cereals product that contain a huge amount of fiber and really healthy. Besides finding time valuable, we also find health valuable. They find it not a wasting of time to eat a healthy cereal with a big amount of fiber that can make them feel healthy and not hungry for a period of time. It is one of many ways Nestlé have done to confront with the substitute products. Every substitute will be becoming a big competitor when Nestlé treat them seriously. The only way is to try to confront the substitutes and make products that customers find no substitutes can replace.

5. Competitive Rivalry Within an Industry (E)

Every company has their own fierce competitor. Their competitors usually are those who are equal in size and power. Nestlé for years has been in food processing industry. This segment of business experienced a slow growth. It is hard to keep on making innovation each day or month in this segment of industry. That is why Nestlé sometimes facing a slow growth. Thus, the intensity of rivalry is pretty intense. A competition can be classified as a healthy competition and an unhealthy competition. Healthy competition can make a huge benefit and success for a company because they are trying to bring in the best they have. In contrast, unhealthy competition will destroy both of the companies. In this case, although Nestlé has already set a good position in the industry, it still has a few major rivals, such as Craft, Unilever and Danone.
Those particular companies that have been mentioned above are fiercely competing with Nestlé. In fact, they are fighting continuously to get on to each other. They have spent billion dollars to do marketing stuff and a lot of advertisements. They do a lot of expenditures to create an effective advertisement and marketing strategy. Competitions are really harsh in food processing industry. Nestlé and other food processing companies are having a healthy competition that results in giving a benefit for the customers. As the competition getting more and more, customers will also receive a better and better product. Each company will keep on producing better products to take away customers attention.
To keeping on track or getting ahead of those rivalries, Nestlé making an “innovative acceleration team”. This team is really useful for Nestlé. Composed of R&D and supply chain experts, they execute nicely to coordinate products launch in multiple segment. This is making Nestlé always one step ahead. Thanks to this team, new products always produce locally whenever a country manager decided to add them to the portfolios. Not only that, to keep it up with the high rivalry within the industry, Nestlé increasing their standard into 60/40++ benchmarking standard. They will keep on making on healthier products that also taste good. So overall those rivalries are good because it keeps on making Nestlé motivated to do something even better for society.


“Twelve years ago, Nestlé was organized like a heavy oil-tanker... Today, we are a fleet of speedboats!”
-Peter Brabeck, CEO and President-

To analyze the specific activities through which firms can create a competitive advantage, it is useful to model the firm as a chain of value-creating activities. Michael Porter identified a set of interrelated generic activities common to a wide range of firms. The resulting model is known as the value chain and is depicted below:

The goal of these activities is to create value that exceeds the cost of providing the product or service, thus generating a profit margin. Inbound logistics include the receiving, warehousing, and inventory control of input materials. Source of their agricultural raw materials – principally milk, coffee, cocoa, cereals, vegetables, fruit, herbs, sugar and spices – either through trade channels or directly from farmers. Although Nestle don’t have control over the farms, they support sustainability in the supply of agricultural raw materials and agricultural best practices. They have over 800 of their own agronomists, technical advisers and field technicians. Their job is to provide technical assistance to more than 400,000 farmers throughout the world to improve their production quality, as well as their output and efficiency. They do this on a daily basis in as many as 40 countries including Inner Mongolia, China, Pakistan, Ethiopia and Colombia. Hundreds of thousands of milk farmers are benefiting from Nestlé animal husbandry assistance and milk collection initiatives in countries as far afield as Chile, India, Mexico and Pakistan. Operations are the value-creating activities that transform the inputs into the final product. Around 3,500 people from over 50 countries work in Nestlé’s worldwide network of 17 research, development and product testing centres. The Nestlé Research Center in Switzerland is the major think-tank. It’s a constant source of new ideas and scientific knowledge that feeds the pipeline for all Nestlé products. It covers over 100 different professional areas – including nutritional science, the life sciences, raw materials, ingredients and production processes.
Outbound logistics are the activities required to get the finished product to the customer, including warehousing, order fulfillment, etc. They choose Ryder System, Inc. a global leader in transportation and supply chain management solutions selected to consolidate our distribution network into a more centralized operation with improved technology and visibility. Nestle selected Ryder to consolidate their distribution network into a more centralized operation with improved technology and visibility. Ryder's proven track record in transportation and warehouse management will help Nestle bring new products to market faster and improve customer service.
Marketing & Sales are those activities associated with getting buyers to purchase the product, including channel selection, advertising, pricing, etc. Nestlé is fully committed to contributing to good nutrition and a healthy lifestyle, share concerns about rising obesity, specifically among children, throughout the world including in developing countries. Where the double burden of over- and under-nutrition occurs. Advertising is a minor element in the context of the many factors that determine individual food preferences, consumption and behavior.
Service activities are those that maintain and enhance the product's value including customer support, repair services, etc. This includes a socially-responsible and environmentally-sustainable approach to how Nestle source, manufacture, package and transport their products, and how their products impact the quality of life for everyone including farmers who supply Nestle, suppliers, trade partners, and consumers. In Nestlé it call 'Creating Shared Value'. 
Until now Nestlé working with food service operators across 97 countries.
Any or all of these primary activities may be vital in developing a competitive advantage. For example, logistics activities are critical for a provider of distribution services, and service activities may be the key focus for a firm offering on-site maintenance contracts for office equipment.


BCG Analysis consists of primarily two data, which is market shares and market growth. Market shares are the percentage of dominion of a product in a market, like for an example; The product Nestle Kit-Kat has market shares of 50% in the international market, it means that over its competitors (all other brands of chocolates) Kit-Kat has the market leadership of 50% from the total of chocolate brands sales in the world from every kind of chocolate brands all over the world. While market growth is the growth of demand of certain kind of product, let’s say for an example; the market growth of milk have increased by 15%, it means that the demand for milk in that certain area is increasing by 15%, not only a demand for milk under one brand, but for every brands of milk in that market.
After getting the data we will have to classify each of the products under certain titles according to the data, the first one is called the Cash Cows, cash cows are the kind of products a firm wanted to have as much as possible, as they are a kind of products that already proved its maturity and usually have a great level of market shares, while it has low market growth because of its maturity, most firms wanted this kind of products since they are easy to handle and cheap, it needs a little by little improvement over times, but it doesn’t need as much money as the other titles for research and development. The ones with high market shares and high market growth is called stars, they are the products that are expected to be Cash Cows in the coming future. The one with low market shares but high market growth are called Question Marks, as the future for these products is still uncertain, as it might get better or worse, this title can also be divided into two, one are the products which are predicted to get better, and the other one are the products which are predicted to get worse. Most firms will of course terminate the ones which are predicted to get worse, and keep the research and development cost as low as possible as for the Question Marks which still had some hope. The last one are the worst, which are called the Dogs, these products has low market growth and low market shares, usually firms will sell the research development of these products or just terminate them. Due to the huge variety of products Nestle have, the BCG analysis too will be divided into several food brands, below are the market shares and market growth data of some famous Nestle products in India market. | Market Shares | Market Growth | Nescafe | 60% | 6% | Maggi Noodles | 80% | 20% | Ceralac | 85% | 0% |

From this data we can see that Nescafe has the market shares of 60%, which means that it has it has a dominion of 60% in India market for coffee, and it also has a market growth of 6% which is significantly high, from the data above we classified Nescafe into Stars. Maggi which also one of the famous brand of Nestle has a market shares of 80% and a market growth of 20% which is rather high, Maggi Noodles are classified under Stars since the market for this product is still growing. Ceralac is one of Nestle’s oldest product and also one of its leading products, in India market Cerelac has the market shares of 85% which is very high, leaving the other competitors with only 15%, the market growth is around 0% since the market for this product is already matured, from the data above Ceralac are classified as Cash Cows.


According to Porter the author of porter generic strategies, if a company wants to increase its effort in an increasingly tight competition, the company have to choose a business principle, which is a product with a high cost or product with low cost, not both of them. When people did a review over a company, it should be understood that these strategies should be differ between industries, companies, and situations. Porter classify these strategies into a generic strategy, which is a company strategy in order to take advantages over their competitors in the same industries. Based on his principle, Porter declared that there are 3 Generic strategy which is Differentiation, Overall cost leadership, and Focus or Niche strategy. These three generic strategies are defined along two aspects of competitive environment : scope and strength. Scope is a demand-side dimension and looks like at the size and composition of the market you intend to target. Strength is a supply-side dimension and looks at the strength or core competency of the firm.

Starting point from Porter’s strategy process is Market, competition, and customer. Michael Porter’s concept about generic strategy is being categorized most of the time into market-based strategy, some strategy experts that makes generic strategy into a different kind of concept:

a. Differentiation strategy
The characteristics of this strategy is a company decide to build a potential market perception towards a superior product/service so as it will look different with the product of their competitors. Hopefully the customer will purchase a product with a high price tag because of that differences. This is also one of the benefits of this strategy. Singapore Airlines is an example of company that differentiates in their services.

b. Overall Cost Leadership strategy
The characteristics of this strategy is that the company will want to concentrate their attention towards a lower selling price so that they can save some cost from production cost, promotion(advertising), and research. If necessary, company that use this strategy tend to copy product from their competitor to save cost from their research. However, there are some company that produce a high quality product but with a low cost such as Toyota for example. Toyota also have the brand and marketing skills to use a premium pricing policy.

c. Focus strategy or “niche” strategy
In this strategy, an organization cannot afford both wide scope cost leadership nor a wide scope differentiation strategy, Niche strategy in this case will be better used for company. With this strategy, company focuses their effort on a narrow, defined segment of market. Niche strategy is often used by a smaller company. They can either use a cost focus or differentiation focus. Although there are some drawbacks with small companies using niche strategy, some of them could disappear in the long term. Soutwest airlines is the example of company using this strategy.

In this case, Nestle use the differentiation strategy. As many people know, Nestle have a wide broad range of product all over the world. Nestle differentiate their products with their competitors by giving them better customer satisfaction and quality but with an acceptable price range so that all kind of customer could purchase their product.
They reduce the risk of complexity of supply chain and lower attractiveness for discounters to follow this differentiation strategy. They also try to grow their products through innovation and renovation and target at long term performance.

(1 CHF= 1.0948 US$)

| | | | | In millions of CHF | 2005 | | 2008 | 2011 | | | | | | | | Profit Ratio | | | | | | Gross Profit Margin | 58.3% | | 56.9% | 47.2% | | Net Profit Margin | 9.35% | | 16.41% | 11.34% | | Return on Total Assets | 8.94% | | 16.33% | 8.41% | | Net income | 8,518m CHF | | 18,039 m CHF | 9,487m CHF | | Return on Stockholders’ Equity | 19.13% | | 35.08% | 15.99% | | Liquidity Ratio | | | | | | Current Ratio | 1.17 | | 0.99 | 0.95 | | Quick Ratio | 0.55 | | 0.69 | 0.66 | | Activity Ratio | | | | | | Inventory Turnover | 5.00 | | 5.09 | 5.14 | | Cost of goods sold | 41.66% | | 43.07% | 52.76% | | Accounts Receivable | 13.82% | | 13.49% | 12.65% | | Leverage Ratio | | | | | | Total Debt | 18.19% | | 14.48% | 19.55% | | Shareholder-Return ratio | | | | | | Dividend Yield | 0.80 CHF | | 0.78 CHF | 1.80 CHF | |

Profit ratios measure the efficiency of the company over its uses of their resources. The more effcicient the company is, the greater the profitability. There are 5 profit ratios that we used so far for our financial analysis over Nestle which is Gross profit Margin, Net Profit Margin, Return on Total Assets, Net income, and Return on Stockholders Equity. 1. Gross profit margin: Here are the formula for calculating gross profit margin Gross Profit Margin | = | Sales Revenue - Cost of Goods Sold | | | | | | Sales Revenue | Although Nestlé’s gross profit margin decrease, it’s not a bad thing to happen because this ratio represent the percentage of sale available to cover general and administrative expenses and other operating costs. 2. Net profit margin: This one used to find the percentage of profit earned on sales. One of the most important parts for a company to survive for a long term. Net Profit Margin | = | Net Income | | | | | | Sales Revenue |

In 2008, Nestle have a dramatic increase in terms of net profit due to the change of a new CEO Paul bulcke with his new system that change Nestle and also the sale of their stake of their brand Alcon to other company took part on this dramatic increase in 2008. 3. Return on total assets: It measures the profit earned on the employment of assets. Return on
Total Assets | = | Net Income Available to
Common Stockholders | | | | | | Total Assets |

It is basically almost the same with Net profit margin, in 2008 gained a large increase due to the sale of one of their assets Alcon. 4. Net income: This is the profit after preferred dividends have been paid. Again this figure on the data table had been largely affected by Alcon sales in 2008 but outside that sale nestle’s income keep increasing every year which is a good thing. 5. Return on stockholders’ equity: It measures the percentage of profit earned on common stockholder’ investment in the company. Return on
Stockholders' Equity | = | Net Income Available to
Common Stockholders | | | | | | Stockholders' Equity | | | |

Liquidity Ratio expresses a company's ability to repay short-term creditors out of its total cash. The liquidity ratio is the result of dividing the total cash by short-term borrowings. It shows the number of times short-term liabilities are covered by cash. If the value is greater than 1.00, it means fully covered. The two ratios that we use here is current ratio and quick ratio.

1. Current ratio: The current ratio is an indication of a firm's market liquidity and ability to meet creditor's demands. Acceptable current ratios vary from industry to industry and are generally between 1.5 and 3 for healthy businesses. Current Ratio | = | Current Assets | | | | | | Current Liabilities |

In this case, Nestle have a problem meeting their short term obligations because their ratio is below 1 which is means that their current liabilities exceed their assets. 2. Quick ratio: measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. Quick Ratio | = | Current Assets - Inventory | | | | | | Current Liabilities |

In this case Nestle also have a problem because they currently pay back their current liabilities because it is below 1.
Activity Ratio indicate how effectively a company is managing its assets. Inventory turnover is particularly useful. 1. Inventory turnover: measure of the number of times inventory is sold or used in a time period such as a year. Inventory Turnover | = | Cost of Goods Sold | | | | | | Inventory |

In this case, Nestle is quite stable and balance with the uses of their inventory. 2. Cost of goods sold: refer to the inventory costs of those goods a business has sold during a particular period 3. Accounts Receivable: It is money owed to a business by its clients (customers) and shown on its balance sheet as an asset.

Leverage Ratios is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives. There are a couple number of ratio in leverage ratios but only one that we have study yet. 1. Total Debt is the sum of a company's current liabilities and its long-term debt, and total assets are the sum of fixed assets and current assets.
We calculated that the leverage ratio of Nestle is quite balance and stable between this three years. They use equal amount of money in terms of debt and shareholder equity.

Shareholder-return Ratios is the returns earned by shareholders from holding stock in a company can be measured and analyzed by shareholder return ratios. Investors use this category of ratios to compare the returns of similar companies. 1. Dividend yield is the company's total annual dividend payments divided by its market capitalization, or the dividend per share, divided by the price per share. Dividend Yield | = | Dividend per Share | | | | | | Market Price per Share |


In conclusion, when Paul took over the position of CEO on 2008, shareholders and stakeholders of Nestle had a very high expectation of him. Mainly, because what the former CEO accomplish and Nestle’s successful past. Even though 2008 mark the beginning one of the toughest economic crisis the world had dealt with. Nestle thanks to its strong experience, quality of management, and a shinning success had all the tools and capacities to maintain it position number one and even overtake some of their competitors in particular market. Here are some Nestlé’s successful tools: * A specialist nutrition business
Nestlé Nutrition develops science-based nutrition products and services that enhance the quality of life for people with specific nutritional needs. With its focus on core nutrition, it is closer to pharmaceuticals than mainstream Nestlé food and beverage products. While taste is important, the key driver for Nestlé Nutrition‘s more specialist products is to provide appropriate nutrition to address specific problems at all stages of life. * Focusing on R&D Through continuous innovation of new products and renovation of existing products, Nestlé is creating and enhancing hundreds of Nestlé products, especially in terms of their nutritional benefits. The Nestlé Group invests around1.2 billion US$ in R&D every year. It’s more than any other food company * Very human company Although less than 2% of our sales are generated in Switzerland, Nestlé is a Swiss company. Several Swiss characteristics are noticeable in the way we run our business. Our organisation is effective, reliable, hard working and pragmatic. But Nestlé is also a very human company. Above all, Nestle care about the people. Nestle are committed to creating value – over the long term – not only for their shareholders, but also for all those communities around the world where they market their products. * Multicultural business Nestlé embraces cultural and social diversity and does not discriminate on the basis of origin, nationality, religion, race, gender or age. Nor does Nestlé have any political involvement. Nestlé operates in many countries and in many cultures throughout the world. This rich diversity is a valuable source for their leadership, and also for broadening their employees’ experiences.


Nestle has almost tried all of the strategies there can be. Nestle company has expanded internationally, helped countries’ economies grow, be environmentally conscious and create joint ventures with other companies in which enhanced Nestlé’s and these companies’ performance positively. Followed are a couple of recommendations in which might enhance their performance which are:1) Nestlé should be sure that its quality assurance and control systems are always applied, wherever in the world. If not, Nestlé will keep losing money on products recalling. * Make the most of emerging markets
Nestlé should strengthen its position in emerging markets, in order to be able to compete against firms like Danone and Unilever which have higher market shares In emerging markets. * Invest on R&D
Nestle should concentrate on that in order to come up with new products. Since the company started out to serve infants in need for nutrition, Nestle should enhance and find way to enrich their product with substances and vitamins that will provide children their daily needs of calcium and even mothers. Because they should start from mothers’ health in order to provide infants’ health. Especially now when children suffer diabetes amongst other things, they need more care than before. * Break into the Block chocolate market
Nestles market share of the chocolate/confectionary is currently at 20.0% compared to that of Cadbury at 34.1%. Based on this it is clear that Cadbury is ahead of Nestle in the Chocolate/confectionary department. A big reason for this is chocolate blocks. All this being said it Nestles has not got a block Chocolate on the market. One of the key recommendations or aims for Nestles should be to break into the Block chocolate market and compete with Cadburys 60% share of the block chocolate market worth US$174million.


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