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NESTLE OPERATIONAL COMPETIVE
STRATEGIES
AUTHORS:
AAIMAN KHALIL
KAINAT ARSHAD
IQRA ABBAS
UROOJ HANIF
NATASHA KHEEMANI DATE: 14/07/2020
[COMPANY NAME]
NESTLE OPERATION MANAGEMENT
TABLE OF CONTENTS
INTRODUCTION..............................................................................................2
EVOLUTION OF NESTLE..............................................................................2
VISION.............................................................................................................3
MISSION..........................................................................................................3
CORE VALUES..................................................................................................3
MAIN GLOBAL BRANDS OF NESTLE........................................................4
LOCALLY PRODUCED PRODUCTS............................................................5
COMPETITORS OF NESTLE DAIRY PRODUCTS......................................5
REGIONAL SALES OFFICES........................................................................6
MAJOR OM DECISIONS.................................................................................6
PROCESS DESIGN..........................................................................................6
SUPPLY CHAIN..............................................................................................7
PLANNING & CONTROL..............................................................................7
INNOVATION AND IMPROVEMENT..........................................................7
COMPETITIVE STRATEGIES OF NESTLE.....................................................7
NESTLE’S COST-LEADERSHIP STRATEGY.............................................8
NESTLÉ’S OPERATIONS MANAGEMENT TO ACHIEVE COST
LEADERSHIP..................................................................................................8
NESTLÉ’S DIFFERENTIATION STRATEGY.............................................8
NESTLÉ’S OPERATIONS MANAGEMENT TO ACHIEVE
DIFFERENTIATION........................................................................................9
NESTLE RESPONSE STRATEGY.................................................................9
FLEXIBILITY IN TERMS OF INTRODUCING NEW PRODUCTS WITH
CHANGING MARKET TRENDS.......................................................................9
QUICK AND RELIABLE DELIEVERY..........................................................10
GLOBAL BUSINESS STRATEGIES............................................................11
NESTLE GLOBAL STRATEGY...................................................................11
MULTIDOMESTIC STRATEGY..................................................................12
TRANSNATIONAL APPROACH.................................................................12
SWOT ANALYSIS OF NESTLE’S OPERATIONS.....................................13
STRENGTHS..................................................................................................13
WEAKNESS...................................................................................................14
OPPORTUNITIES.........................................................................................14
THREATS......................................................................................................14
CONCLUSION.................................................................................................14
REFERENCES.................................................................................................14
NESTLE OPERATION MANAGEMENT
EXECUTIVE SUMMARY
Nestle is one of the best food companies not only in Pakistan but all over the world. It has
been serving this world for over one hundred and thirty years. It has differentiated itself
through its high-quality product mix and positioned itself as health and Nutrition Company
while targeting the health-conscious people throughout the world. Nestle started its
operations in Pakistan back in1988, by acquiring a diary company Milk Pak ltd. when people
of Pakistan actually needed it. The Members working in the Organization are concern about
developing the high standards in the Market. They basically focus on making sure that their
products are best to use.
Since Pakistan is the fifth world’s largest milk producing country therefore Nestle deals
mainly in dairy products. Moreover, it also sells juices, chocolates, prepared food like
noodles, baby food, infant formula milk and breakfast cereals in Pakistan.
Nestle is a low-cost leader with its efficient operations hence it provides its customers with
high quality products and sells them at a premium price. Therefore, it is earning good profits.
Nestle has set its manufacturing plants at in Karachi, Lahore, Islamabad and Kabirwala. The
milk processing plant at Kabirwala district is the Nestlé’s world largest milk processing plant.
Nestlé Pakistan has invested over 50 Billion PKR and had an annual turnover of Rs 51
Billion PKR in 2010.According to the annual report published Nestlé Pakistan posted a
revenue of PKR 116 billion for 2019.
NESTLE OPERATION MANAGEMENT
INTRODUCTION
Nestle was founded in 1866 by Henri Nestle and is today the world's biggest food and
beverage company. The history of nestle began in Switzerland in 1867 when the Henri
Nestle, the pharmacist, launched his product Farina Lactee Nestle, the nutritional gruel for
children. Since it began over 130 years ago, nestle success with their product innovations and
business acquisitions has turned into the largest Food Company in the world. Henri used his
surname, which means 'little nest', in both the company name and the logotype. The logo
which symbolize security, family, and nourishment, still plays a central role in Nestlé’s
profile.
Nestle in Pakistan is operating since 1988 under a joint venture with Milk Pak ltd and took
over management in 1992. Nestle Pakistan also prides itself in being the leaders in Nutrition,
Health & Wellness. Ever since 1867, when
Henri Nestle invented the first infant food,
nutrition has been in our DNA. Nestle is a
type of public company which belongs to
the dairy industry in Pakistan.
Headquartered in Lahore, the Company
operates four production facilities. Two of
its factories in Sheikhupura and Kabirwala
are multi product factories. One factory in
Islamabad and one in Karachi produce
bottled water. The factory in Kabirwala is
the largest milk intake plant in the Nestlé
world. Through its effective marketing and a vast sales and distribution network throughout
the country, it ensures that its products are made available to consumers whenever, wherever
and, however. Nestlé Pakistan operates in many ways, but people, products and brands are
the main flag bearers of the Company’s image. Nestlé Pakistan now operates the biggest milk
collection system in Pakistan, currently; Nestlé Pakistan collects milk from an estimated
190,000 farmers spread over 146,000 sq. Km’s in the province of Punjab and Sindh. Nestlé
believes in creating shared value and is committed to the communities it works and lives
with. In Pakistan, the company is working closely with the communities in areas related to
Nutrition, Water and Rural Development and continues to enhance the quality of life of
people throughout its value chain. Till date (in 22 years) Nestlé Pakistan has invested over 50
Billion PKR and had an annual turnover of Rs 51 Billion PKR in 2010.According to the
annual report published Nestlé Pakistan posted a revenue of PKR 116 billion for 2019.
EVOLUTION OF NESTLE
1867 Henri Nestle founded the company in Vevey, Switzerland.
1898 Nestle purchases its first factory outside of Switzerland - Viking Milk factory in
Norway.
1905 Nestle merges with Anglo-Swiss Condenses Milk Company.
1929 Nestle merges with Peter-Cailler-Kohler Chocolates Suisse’s S.A.
1938 Nestles launches nest café- the world's first instant coffee.
NESTLE OPERATION MANAGEMENT
1947 Nestle merges with Alimentana S.A. with brand Maggi.
1962 Nestle purchases the Findus.
1974 Nestle becomes a significant shareholder in the cosmetics Company Oreal.
1977 Nestle purchases Alcon, manufacturers of eye care products and kits.
1985 Nestlé purchases the Food Company Carnation.
1988 Nestle purchases the confectionery company Rowntree Mackintosh and the
pasta company Buitoni-Perugina.
1992 Nestle purchases the mineral water bottle Company Perrier.
1998 Nestle purchases Spillers pet foods business.
2000 Nestle sells the Findus brand on all countries except Switzerland.
2001 Nestle merges with Ralston Purina, the premier pet food company in North
America, and with unique expertise in the dry dog food area.
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
To positively influence the social environment in which we operate as responsible
corporate citizens, with regard for those environmental standards which improve the
society.
CORE VALUES
The Company Core values are as follows:
They focus on to develop a workforce which is highly motivated and can perform
well in the workplace.
They focus to meet the requirements and needs of their consumer which comprises of
all age groups. They can be from small infant to older age. They focus on creating
high quality products and provide services which are helpful in capturing great
customer value.
They also focus on maintaining the shareholder’s wealth but keeping in mind that to
perform their operations well with environmental and social responsibilities.
Their brands are preferred in comparison of High-quality food and Beverage products.
They Communicate with their customer and provide them with the relevant
information they need.
They promote their employees and motivate them to compete and to become
specialized in their work.
They also have milk collection services which help to develop dairy sector in the rural
areas of Pakistan.
The organization follows proactive approach which helps them to compete in the
market.
NESTLE OPERATION MANAGEMENT
MAIN GLOBAL BRANDS OF NESTLE
Today Nestlé is present in different markets with the following main brands.
Coffee such as Nescafe, Nespresso etc.
Water such as Nestle pure life, Nestlé
aquarel, ice mountain etc.
Beverages such as Milo, nestomelt etc
Shelf stable such as Nestle omega plus,
milk pack, yogurt, bear brand etc.
Ice creams such as mega, move pick etc.
Infant nutrition such as good start,
cerelac, lactogen etc.
Performance nutrition power bar, Pria
etc.
Health care nutrition such as Peptamen,
modulen etc.
Soups pasta such as Maggi, thomy etc.
Frozen foods such as hot pockets, Buitoni
etc.
Refrigerator products such as herta, tall
house etc.
Chocolates and biscuits such as Nestle
crunch, Milky bar, Kit Kat, butter finger,
butter scotch, polo etc.
Cosmetics such as Body shop, Garnier,
Maybelline, L’Oréal etc.
Pet food such as Go dog, pro plant, Purina
etc.
Cereals such as golden nuggets, Coco and
frosted, Honey nut, Nesquik cereal etc.
NESTLE OPERATION MANAGEMENT
LOCALLY PRODUCED PRODUCTS
MILK, DAIRY AND CHILLED
DIARY
Nestle Milkpak
Nestle Nido
Nestle Neslac
Nestle Everyday
Nestle Yogurt,
Nestle Raita & Nestle Desi Ghee
Nesvita
BEVERAGES & BOTTLED WATER
Nescafe
Milo & Juices
Pure Life
BREAKFAST & CEREALS
Cornflakes
Honey stars
Koko crunch
CHOCOLATE, CONFECTIONARY
& BABY FOOD
Kit Kat
Cerelac
PREPARED MEALS
Maggi
COMPETITORS OF NESTLE DAIRY PRODUCTS
It is a leading company on overall globe so in dairy industry it has some competitors in
Pakistan as well
MILKPAK COMPETITORS
Haleeb, Nurpur and Olpers are the main competitors of Milkpak. Consumer prefer
Milkpak because of its good taste, quality, packing and reasonable price.
NESTLE BUTTER
Blue band and Haleeb butter are the main competitors.
NESTLE PURE LIFE: Aquaphena is the main competitor.
YOGURT
Prime and Haleeb is the main competitors but consumer prefer nestle yogurt because
of the quality and taste.
KITKAT
Mars, sneaker and Cadbury are the main competitors in this category.
Cereals, Nido and Everyday have no as such competitor in Pakistan.
NESTLE OPERATION MANAGEMENT
REGIONAL SALES OFFICES
Nestle Milkpak Ltd. has sales offices throughout Pakistan. The ten including the capital city
of Pakistan in which sale offices are located are.
Karachi, Sindh
Hyderabad, Sindh
Quetta, Baluchistan
Peshawar, KPK
Gujranwala, Punjab
Faisalabad, Punjab
Multan, Punjab
Lahore, Punjab
Islamabad, Federal capital
North outstation
MAJOR OM DECISIONS
The operations strategy of Nestle is highly contributed by the application of nutrition, health
and wellness strategy. The particular strategy is designed to support the people desiring to
have a healthy lifestyle. The operations are designed by the practical contributions from
innovation, which is continuously driven by the company through the industry-leading
research and development. Hence, the operations strategy of Nestle is largely based on
striving to deliver a positive impact on the numerous societies across the world regarding
their activities. In order to achieve the specific aim, Nestle persistently shares various insights
regarding the global nutrition, health and wellness challenges, builds superior partnerships
with other major companies, and engages with the policymakers, key leaders, and
stakeholders from the particular geographical location of company operations.
Let’s just now have a deep insight of each of the major operations management decisions of
Nestle.
PROCESS DESIGN
Nestle is one of the first enterprises in the food and beverage industry to adopt the individual
approach in its product packaging department following the understanding related to the
challenges faced by the environment. From the overall understanding, it can be suggested that
the process designing stage of Nestle is defined by the complete composition of products, the
involving packaging, and the nutritional values they consist of their customers. With the help
of a diagram, the process design of the identified company can be further categorized.
NESTLE OPERATION MANAGEMENT
SUPPLY CHAIN
The supply chain aspect of Nestle is highly
driven to establish the great platform
supporting the involvement of collaborative
supply chain professionals. The company
achieves the original competitive edge through
the effective contributions from the supply
chain of the company.
Supply Chain Management of Nestle is the
combination of art and science assisting the
company to achieve its corporate objectives in
superiorly. With the help of the process, the
company identifies the particular need of raw
components for producing the products or
services. The key supply chain management
activities of Nestle is developed by the useful
contributions of the important parties like
suppliers, manufacturers, distributors, retailers,
consumers, and producers.
PLANNING & CONTROL
Considering the definition of an organization, it is identified as an entity that utilizes various
inputs like capital and resources to process them and develop the outputs in the form of
products and services. From the overall information, it can be proposed that the selection of
appropriate planning and control process influences the achievement of short or long-term
goals requires the company analyses and determine the consequences of the activities.
INNOVATION AND IMPROVEMENT
Continuous improvement is necessary for a company to hold the leading position within the
identified market and thrive to respond according to the needs of the market consumers.
Improving the products of the company through maintaining innovation within the processes
NESTLE OPERATION MANAGEMENT
is the vital objective for Nestle, as the practices are the heart of the company’s operation for
over 150 years.
COMPETITIVE STRATEGIES OF NESTLE
As business strategies leads to the competitive advantages which helps the business flourish
with long term prosperity and that is only possible when the company is able to serve its
customers more effectively as compared to its competitors and thus Nestle being a
multinational company and a business leader in this highly competitive food industry in most
of the regions, works intelligently with its strategies to maintain and enhance its position all
around the globe. For this Nestle is mainly working on the cost-leadership and differentiation
strategies effectively. Let’s look into each of them separately.
NESTLE’S COST-LEADERSHIP STRATEGY
As reported by the company sources in many studies related to Nestle, it has been stated that
Nestle is working on the Cost-Leadership Strategy which makes the company to provide its
best quality products in low reasonable prices in many of the developing countries to capture
high market share and strengthen customer loyalty to the Company. And of course, Nestle is
doing so with its smart operations management. Now, it’s interesting to know how Nestle is
using its operations to achieve this competitive advantage.
NESTLÉ’S OPERATIONS MANAGEMENT TO ACHIEVE
COST LEADERSHIP
To work with the cost-leadership strategy Nestle is following on the principle of economies
of scale in production, raw material and marketing by making its operations cost efficient and
effective inventory management along with the priority of quality assurance. Furthermore,
Nestlé’s major focus is foreign direct investment like Nestle has invested 450 million in its
Indian Factories for dairy production because the extremely huge demand. Similarly, the
enormous demand of Kitkat Choccolate in India caused Nestle to invest 200 million in
capacity planning. Same as, millions have been invested by Nestle in the capacities in China
for the massive demand of Coffee which helps to attain economies of scale and meet
effectively with such huge product demands.
Moreover, Nestle is following the approach of Lean and Just in time production which
mean to produce efficiently and add value
for the customer at every step of
production. Nestle does so to minimize the
over production, to make the inventory
management easy and cost effective and to
reduce the cost of operation cycle which
ultimately helps nestle in achieving cost
leadership by making the production cost
as low as possible to reflect it in the prices
of the products. Lean and just in time
production works as huge operating
advantage that Nestle holds against its
NESTLE OPERATION MANAGEMENT
competitors. This is how Nestle integrates its operations management with the business
strategy.
NESTLÉ’S DIFFERENTIATION STRATEGY
Another prominent strategy that Nestle is mainly focusing on is Differentiation which guides
to market or produce in a way that the products become distinguishable from others and
though attract customers. Nestle has a vast product portfolio under various brands and
scattered geographical presence which again differentiate it from its competitors. Nestlé also
distinguishes its products from others in the industry by taking benefit of its talented
employees, advertising campaigns, distinguishing product features, captivating packaging,
quality services and latest smart technology. This differentiation strategy of Nestle can be
attributed as the major competitive reason for its success. As it always prioritizes health and
nutrition while making quality products which again makes it prominent and distinct in others
and captures Customers’ loyalty and trust.
NESTLÉ’S OPERATIONS MANAGEMENT TO ACHIEVE
DIFFERENTIATION
Nestle has established a power packed Research
and Development department which helps
Nestle know the customer requirements and
make innovations timely to differentiate them
from others. This renovation, innovation and
efficiency in operations as discussed above
helps Nestle to achieve differentiation within its
competitors. For example, when Nestle Brazil it
knew that shopping is very common there but
people don’t mostly go for buying food items in
super markets due to high prices, so Nestle
hired 8000 women to distribute the food items
locally so people may attract to them, this is
how their Research and Development helps
them to move their operations efficiently and
effectively.
NESTLE RESPONSE STRATEGY
Nestle’s one of the most important strategy is response which includes the entire range of
values related to timely product development and delivery and after sell service. For timely
response reliable scheduling and flexible performance is required and Nestle with its
operations making sure to achieve it efficiently. With changing market trends and needs the
company keep launching new products that fulfill the needs of their customers. They also
have introduced the concept of modular factories that help them with their flexibility in terms
of design and volume of product and also with their reliable delivery of quality products they
still maintaining their position of market leader in many countries.
NESTLE OPERATION MANAGEMENT
FLEXIBILITY IN TERMS OF INTRODUCING NEW
PRODUCTS WITH CHANGING MARKET TRENDS
Nestle believes that having great ideas is important, but the real opportunity lies in how fast a
company translate these into attractive
and relevant products. Nestlé’s brands
and products are the focus of continual
innovation and renovation so that they
will be relevant and appealing to today’s
and tomorrow’s consumer. Nestle
strategy to win in the marketplace is by
creating more new and impactful
products, services, and experiences. To
launch new products quickly Nestle use
fast prototyping and leverage their size
and scale for quick in-market testing.
Their R&D and commercial functions
join forces from the start to determine
what is desirable to the consumer,
feasible for the business and creates
value for the company. They combine
this with a pragmatic approach to market
entry. moreover, they are leveraging
their existing industrial footprint, R&D
facilities, and co-manufacturing partners to support faster launches. This allows them to
lower or defer capital expenditure commitments until they have evidence from the
marketplace that an innovation can gain traction.
Globally, Nestlé has created a blueprint for a new type of factory that can be built in half the
time of a more traditional one for about 50 to 60 percent of the cost. The modular factory will
be made of multiple, easy-to assemble component sections designed to offer a highly flexible,
simple, and cost-effective solution for creating production sites in the developing world. The
modular factory gives Nestlé a huge amount of flexibility, meaning it can expand or relocate,
as local demand requires.
NESTLE OPERATION MANAGEMENT
QUICK AND RELIABLE DELIEVERY
Nestle products placed by different channels to hit the target consumers in Pakistan. Nestle
coverage has been quite flexible for intended positioning. Nestle Pakistan has taken
numerous steps to ensure the freshest product availability on shelf at all times. SAS, which is
an advanced statistical forecasting tool, is one such initiative. The tool has been successfully
piloted and is already adding great value to the business. The scope of this tool is being
extended to the entire product range going forward. Similarly, working on the principles of
optimized stock holding at all levels, replenishment-based ordering has been launched and
25% of the total turnover. This means that Nestlé takes ownership of ensuring the presence of
its entire product range at distributors and lets the distribution partner focus on its core
responsibility which is sales. The consequence of all these initiatives has been a
rationalization in the inventory throughout the value chain and availability of fresher products
on the shelf for the consumers.
GLOBAL BUSINESS STRATEGIES
A major concern for managers deciding on a global business strategy is the tradeoff between
global integration and local responsiveness. Global integration is the degree to which the
company is able to use the same products and methods in other countries. Local
responsiveness is the degree to which the company must customize their products and
methods to meet conditions in other countries. The two dimensions result in four basic global
business strategies: export, standardization, multidomestic, and transnational.
NESTLE OPERATION MANAGEMENT
NESTLE GLOBAL STRATEGY
Before, Nestlé was characterized as a multi-
domestic company by its pronounced local
responsiveness and relatively weak global
integration but with the increased
competition they have strengthen their
global integration and now its operation as
a market leader of food industries in many
countries including Pakistan.
MULTIDOMESTIC STRATEGY
Regarding Nestlé’s strategic posture, before 2009, the company traditionally operated on a
decentralized structure as a way to customize its product offerings to local needs, a key
characteristic of a multi-domestic company. With the multi-domestic strategy, an
organization focuses on national differences and customizes its products by responding to the
needs of the local preferences. This is in contrast to the global strategy where the company is
able to improve its profits and development through lower costs that are derived from
location economies and economies of scale.
TRANSNATIONAL APPROACH
A transnational strategy combines a standardization strategy and a multidomestic strategy. It
is used when a company faces significant cost pressure from international competitors but
must also offer products that meet local customer needs.
Due to the highly competitive conditions that Nestlé faced along with the need to obtain cost
reductions, the company moved one step ahead by adopting a transnational strategy Such a
strategy involves elements of global and multi-domestic strategies through which the
company seeks to achieve both cost efficiencies and local customization. Child-Villiers, Head
of Investor Relations, noted that Nestlé is now integrated in a proactive and efficient way
within the markets. He also supported that the company goes one step ahead as it links the
globe with Nestlé’s Continuous Excellence program. Within Nestlé, its national units are
characterized as semiautonomous as they are able to involve decisions such as pricing and
marketing in order to customize the products to local needs. Localization rather than
globalization is the key characteristic of the company’s idea which is also supported by the
belief that there is not a single product for everyone.
NESTLE OPERATION MANAGEMENT
SWOT ANALYSIS OF NESTLE’S OPERATIONS
This section presents a SWOT analysis to review the operations of the frim reflecting
specifically upon the strengths and weaknesses of Nestle Pakistan and the opportunities and
threats the firm must respond to through an alignment of firm strengths to such forces.
STRENGTHS
Unmatched research and development capability in its operations.
Strong geographic presence, with one of the best geographically diversified revenue
sources.
NESTLE OPERATION MANAGEMENT
Unrivaled production processes and brand portfolio
Environmental sustainability efforts.
Ownership of some of the most recognizable brands in the world.
WEAKNESS
Criticism over high water usage, selling contaminated food, anti-unionism, forced
child labor and using other unethical practices in its operations
Contaminated food recalls
OPPORTUNITIES
Clear and accurate labelling indicating of any harmful products
Transparency in material sourcing
Growing number of small Silicon Valley based food start-ups
Growing ready-to-drink (RTD) tea and RTD coffee markets
THREATS
Poor quality water and its scarcity.
Increased competition in the beverage and food industries.
The price of coffee beans could significantly rise due to major weather disasters.
CONCLUSION
The above description about Nestle and its effective operations management concludes that
Nestle being a strong historical company could have taken it easy to survive in the
competitive market but Nestle didn’t just wanted to survive, the company wanted to lead the
healthy food global market for which it continuously worked and is still working through the
competitive advantages of innovations, quality, differentiation, cost management and
responsiveness. Above all, the company has been able to do so by making its operations
management system effective and efficient. Currently, Nestle is majorly focusing on foreign
direct investment to make the products availability and distributions easy and achieving
economies of scale, wherever there is a massive demand of its particular products which is
consequently resulting in Nestlé’s cost leadership. And, all this has been possible through
intelligently formulated Operations of the company. In the end, it would not be wrong to say
that Nestlé’s highly effective operations management is playing a key role in the Company’s
Leading position globally.
NESTLE OPERATION MANAGEMENT
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https://www.dawn.com/news/1083000
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Report-2019.pdf
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