ABCDE MODEL IN NESTL’E INDIA LTD.

KETKI SHINDE PRN: 11040141043

ASSESMENTBACKGROUND – WORLD OF NESTLE Nestle India is a subsidiary of Nestle S.A. Nestle India Ltd, one the biggest players in FMCG

segment, has a presence in milk & nutrition, beverages, prepared dishes & cooking aids & chocolate & confectionery segments. The company is engaged in the food business.

Nestle India Ltd was incorporated in the year 1956. The company set up their first production facility in the year 1961 at Moga in Punjab.

7 manufacturing facilities and four branch offices - Delhi, Mumbai, Chennai and Kolkata. The company's head office is located in Gurgaon, Haryana.

ENVIRONMENTAL SCANS

EXTERNAL ENVIRON MENTPOLITICAL ENVIRONMENT

•Political restraints and the objections•Quotas on the amount of products that it can supply•Specific tax – leads to higher prices

ECONOMIC ENVIRONMENT•Nestle India undertook capital expenditure of Rs 450 crore in 2010•Received $450 million in debt funding from the parent company for the expansion•Nestle reported a YoY domestic sales growth of 23%

SOCIAL FACTORSKeeps the cultural and traditional values of the geographic area

TECHNOLOGICAL FACTORSSpends a lot in searching new technologies so as to beat their rivals

TASK ENVIRONMENTCUSTOMERS COMPETITORS SUPPLIERS

•Marketing network to figure out the target customers•Spends a lot to figure out the customer’s preferences•Extensive market share - its customers are brand loyal •Produce differentiated products for each age group

•Rival firms in the same market which provides the same product

•Provide resources required by a company to conduct and maintain its operations•Packaging suppliers, labour supplier, vendors

INTERNAL ENVIRONMENTThe employees, management and the

corporate culture, that defines employee behaviour

Manager's philosophical or leadership style directly impacts employees

Traditional managers give explicit instructions to employees, while progressive managers empower employees to make many of their own decisions

SITUATION ANALYSISCOMPANY Very strong globally with many different brands that competes

in several markets like Chocolate, dairy products, food, water, baby food and pet food.

COMPETITORS Amul India Ltd., Britannia Industries Ltd, Kwality Dairy, Cadbury, HUL - Brooke bond and Lipton Tea, Tata Tea, Godrej Tea, Smith and Jones, Nissin Foods, ITC , Heinz.

CUSTOMERS Nestle India generally targets higher income of people with slightly higher prices than its competitors in beverages and milk products.However the chocolates, confectioneries and noodles are priced at a lower price to target the general population.

COLLABORATORS

In the year 1991- BM Khaitan group -range of Soya based products.

CLIMATE 3,500 people from over 50 countries work in Nestlé’s worldwide network of 17 research, development and product testing centres.Covers over 100 different professional areas

SWOT ANALYSISSTRENGTH

•PARENT SUPPORT•BRAND STRENGTH•GLOBAL FOOD NUTRITION SECTOR – INNOVATION LEADER•LOW COST OPERATORS•THOUSANDS OF LOCAL PRODUCTS.

WEAKNESS•EXPORTS•SUPPLY CHAIN•COMPETION IN MANY MARKETS•PRODUCT POSITIONING

OPPORTUNITY•EXPANSION•PRODUCT OFFERINGS•GLOBAL HUB•HEALTHY FOOD MARKET•ASIAN MARKET

THREAT•COMPETITION•CHANGING CONSUMER TRENDS•SECTORAL WOES•DECREASING CHOCOLATE INTEREST•BOTTLED WATER

BASELINE - SITUATIONPAST PRESENT FUTURE

•Nestlé’s first sales agents in India began work in Chennai and Kolkata in 1912. •Nestlé India has SINCE 1961,built strong brands like MAGGI, NESCAFE, CERELAC, LACTOGEN, KITKAT and POLO.• International products like Nescafe and Lactogen, and culinary products to meet the demand of the ethnic Indian population living abroad. For three years in succession [from 1999-2000 to 2001-2002]

•Company directly employs 6,000 people in India and more than half a million indirectly.•Its products are sold in more than 3.5 million outlets across the country.•Introduced value-added product variants in competitive categories like Prepared Dishes and Confectionary.•Low-Unit Packs (LUP) and Low Price Points strategy by launching products SKUs in small packs.•Coffee Corners across metros and mini-metros

•long term for consumers, shareholders, employees and business partners.•a wide variety of high quality, safe food products at affordable prices.•efforts to better understand the changing lifestyles to provide convenience, taste, nutrition and wellness through its product offerings.

COMPONENTSMISSIONNestlé is dedicated to providing the best foods to people throughout their day, throughout their lives, throughout the world. With our unique experience of anticipating consumers’ needs and creating solutions, Nestlé contributes to your well-being and enhances your quality of life.

VISIONTo be a leading, competitive, Nutrition, Health and Wellness Company delivering improved shareholder value by being a preferred corporate citizen, preferred employer, preferred supplier selling preferred products.

VALUES/ GUIDING PRINCIPLESNestle, the employees share some values

which have set some standards for other employees and are known as heroes that sets a benchmark.

It is understood that the performance of any organization is depended on the overall performances of its employees and believes in team work.

Along with nestle providing food products to its customers and generating revenues and commitment to safety and quality, it is also committed to a number of cultural values.

SPECIFIC OBJECTIVES Nestlé’s business objective is to manufacture and market the

Company’s products in such a way as to create value that can be sustained over the long term for shareholders, employees, consumers, and business partners.

Nestlé does not favour short-term profit at the expense of successful long-term business development.

Nestlé recognizes that its consumers have a sincere and legitimate interest in the behavior, beliefs and actions of the Company behind brands in which they place their trust and that without its consumers the Company would not exist.

Nestlé believes that, as a general rule, legislation is the most effective safeguard of responsible conduct, although in certain areas, additional guidance to staff in the form of voluntary business principles is beneficial in order to ensure that the highest standards are met throughout the organization.

Nestlé is conscious of the fact that the success of a corporation is a reflection of the professionalism, conduct and the responsible attitude of its management and employees. Therefore recruitment of the right people and ongoing training and development are crucial.

DOWN TO SPECIFICS

PERFORMANCE MEASUREMENTDomestic sales up 21%; Margins expand 120bp due to

lower costs; gross margin expansionGross margins expanded 90b YoY to 51.8% (up 130b

QoQ), enabled by an improved channel mix and benefits of gradual price increases over the past two quarters.

Net sales for the quarter stood at Rs 1,986.6 crore, up 12.7 per cent over the same period of 2011.

Rupee depreciation has favourably impacted total export growth by 13.1 per cent.

TARGETSMoreover they have also introduced health

conscious products in the Maggi segment like Maggi Vegetable Atta noodles, Dal Atta noodles, Rice noodles, healthy soups, pazzta made from suji.

Nestle focuses a lot on the brand of Maggi.The category of Prepared Dishes and Cooking Aids

under the brand of Maggi.Trying to lower the prices for general public.

ACTION PLANSSales growthProfit marginWorking capital intensityFixed capital intensityIncome tax rateCost of capitalValue growth duration

EVALUATEPERFORMANCE MANAGEMENT

The company had posted a net profit of Rs 213.8 crore for the corresponding quarter last fiscal.

Formal assessment by Line Managers and HR once in a year with feedback.

Subordinate can question an unfair evaluation. Specific Key Performance Indicators have been enlisted by

the HR department. One of the important key performance indicators is

achievement following the Nestle management and leadership principles.

Remuneration structure and promotion criteria take into account individual performance.

Emphasis on individual achievement.

NESTLE’S CORPORATE LEVEL STRATEGIES Product’s growth through innovation and renovation

(while maintaining a balance in geographic activities and product lines).

Long-term potential Build business based on sound human values and

principles. Long-term commitment to the health and well being

of people in every country in the scope of their operations.

Business should be conducted by adhering to the values and management principles of the organization.

BUSINESS LEVEL STRATEGIES Low cost - less price transparency is followed. Differentiation - to reduce the risk of complexity of

supply chain and lower attractiveness for discounters.

COMPETITIVE ADVANTAGEResearch and development (R&D),Its product rangeGlobal reach and280,000-strong workforce

FOUR GROWTH PLATFORMSNutritionEmerging consumersPremium goods and“Out-of-home” goods.

RECOMMENDATIONS Constructive partnerships between industry and Government. Limits should be set for trans-fats and encouragement given to

the use of omega 3 fatty acids. Consumer education is vital. This is the responsibility of both

the Government and industry that acts as advertisement for the company.

Enter new health foods like functional foods, nutraceuticals, pre and pro-biotics, etc. have great health as also market potential.

Use of radiation technologies should be more widespread which will also extend shelf life of products.

Packaging protects food from contamination and increases the shelf life of foods.

A futuristic technology with wide ranging applications for designer food is nanotechnology.

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