You are on page 1of 23

BUSNINESS POLICY AND STRATEGY

1 | Page

BUSNINESS POLICY AND STRATEGY

Subject:
Business Policy and Strategy

Project
Final Project Report

Submitted to:
AmjadHussain

Submitted by:
Qasim Ali Pracha

L1S16MBAM0160

Muhammad Saqib Riaz

L1S16MBAM0020

Tauqeer Ahmed

L1S16MBAM0030

Muhammad Ali Shahzad

L1S16MBAM0034

MBA (Semester-1)
University of Central Punjab

2 | Page

BUSNINESS POLICY AND STRATEGY


Contents
Final Project Report...................................................................................................... 2
Nestle Pakistan (Mission and Vision).................................................................................... 4
Vision:....................................................................................................................... 4
Mission:..................................................................................................................... 4
Nestls mission (Rephrased):.......................................................................................... 4
SWOT Analysis of Nestle Pakistan....................................................................................... 5
Strengths.................................................................................................................... 5
Weaknesses................................................................................................................. 6
Opportunities............................................................................................................... 7
Threats....................................................................................................................... 8
Internal Factors Evaluation (IFE)......................................................................................... 9
External Factors Evaluation (EFE)...................................................................................... 10
Competitive Profit Matrix (CPM)....................................................................................... 11
BCG Matrix................................................................................................................. 12
SPACE MATRIX........................................................................................................... 14
IE Matrix..................................................................................................................... 16
I/E Matrix (Graphical Presentation).................................................................................... 19
GRAND STRATEGY MATRIX........................................................................................ 20
QSPM Matrix............................................................................................................... 21
References:.................................................................................................................. 23

3 | Page

BUSNINESS POLICY AND STRATEGY

Nestle Pakistan (Mission and Vision)


Vision:
To 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.
Nestl Pakistan subscribes fully to this vision of being the number one Nutrition, Health,
and Wellness Company in Pakistan. In particular, we envision to;
Mission:
Lead a dynamic, passionate and professional workforce proud of our heritage and
positive about the future.
Meet the nutrition needs of consumers of all ages from infancy to old age, from
nutrition to pleasure, through an innovative portfolio of branded food and beverage
products of the highest quality.
Deliver shareholder value through profitable long-term growth, while continuing to play
a significant and responsible role in the social, economic, and environmental sectors of
Pakistan
Nestls mission (Rephrased):
Striving to sustain market leadership in food & beverages industry to meet needs of our
customers of all ages by providing quality products enriched with nutrition and pleasure
produced at highly sophisticated production system, employing vibrant and zealous
workforce with a strong concern for shareholders values through long term profitable
growth while ensuring significant role in promoting the prosperity of social economic and
environmental sectors of Pakistan.

4 | Page

BUSNINESS POLICY AND STRATEGY


SWOT Analysis of Nestle Pakistan.
Strengths
1. Nestle is a highly-diversified company operating in many different markets and sectors of
those markets.
2. Nestle owns some of the worlds most recognized and trusted brands. Some families have
used its products for generations.
3. It has strong research and development capabilities that are growing with time.
4. Nestle has strong relationships with farmers and retailers.
5. It has well-established brands of Food & Beverages industry with a large amount of
market share.
6. Nestle Pakistan operates the largest milk collection system, the basic unit of which is the
village milk collection center (VMC) where farmers from over 3,000 villages deliver
milk.
7. Its Brand Image.
8. It is a large scale organization, with abundant funds and has the capability of acquiring
weaker firms by throwing them out of competition.
9. Growing Sales and profits.
10. Strong Management.

5 | Page

BUSNINESS POLICY AND STRATEGY


Weaknesses
1. Much of its sales depend upon a few well-recognized brands (narrow market). This
makes the company vulnerable to any sudden changes in consumer behavior (e.g., only
foods & drinks).
2. Grocery sales in some major markets are increasingly concentrated in the hands of a few
giant retailers. These companies have the ability to force sharp reductions in price
(bargaining power). Some of these retailers are intent on supplementing name brand
products with more-profitable house brands.
3. Some of its brands, such as Milo, are not tailored to modern lifestyles and are seen as oldfashioned by some customers.
4. Bear high cost in distribution of products.
5. The target market of Nestle products is upper middle and high class because lower
middle and poor class cannot afford to buy Nestle products due to its premium
price compared to other companies like Shezan, Gourmet and Haleeb foods etc.
6. Lack of quality assurance in distribution channels.
7. Less coordination between country specific cities and Headquarter.
8. There are different companies which provide substitutes of Nestle products but some of
the Nestle products are not as preferred as others like Olpers Milk and Cream are
preferred over Nestle Milk-Pak and Nestle Cream.
9. Highly dependent upon Tetra Pack for packaging of its products especially Milk and
cream etc.
10. Higher Inventory levels.

6 | Page

BUSNINESS POLICY AND STRATEGY


Opportunities
1. Increase in trend of online retail can open up new distribution channels that can bypass
traditional retailers (E-Commerce).
2. Growing middle class in Pakistan can increase disposable income which may create
larger and broader demands for Nestl's products.
3. Changes in lifestyle, such as longer work hours, more women in the workforce, and more
single-person households, increase the demand for prepackaged foods.
4. Pakistan is the 2nd largest importer of tea which creates an opportunity for Nestle to
expand its product line by introducing tea.
5. Increased interest in health and nutrition from consumers side can increase demand for
some Nestle products.
6. Reduced interest rates by SBP over last 3 years enables Nestle to get benefit from the
credit policies offered by banks for expansion of business.
7. Urbanization is increasing in Pakistan.
8. Economic conditions are getting better in Pakistan.
9. There are substantial growth opportunities considering the average yield of Pakistani
animals at only 1,100 liters/annum as compared to 6,000 liters/annum for animals
in Europe and USA. There are nearly 20 million milk producing animals in the country,
mostly in Punjab (80%).
10. The overall milk market in Pakistan is 20 billion liters, out of which processed milk
contributes only 3 million liters. Nestl MilkPak along with other processed milk
businesses contribute only 2% to this large market. Nestl MilkPak has expanded its
product range by entering the cold dairy market recently by launching Nestl plain yogurt
and now fruit yogurt is also added to it.

7 | Page

BUSNINESS POLICY AND STRATEGY

Threats
1. Consumers increased interest in restaurant meals may reduce demand for some Nestle
products.
2. A growing suspicion of prepackaged foods as unnatural and unhealthy in the world is
becoming common. This increases the demand for fresh and natural foods in some
markets. It also increases the demand for organic and other alternatives.
3. There is a possibility of increased government oversight and regulations in the market,
like Indias government ordered billions of dollars of Maggi instant noodles be pulled
from the shelves in the summer of 2015 because of allegations of excessive levels of lead
in the product.
4. Price fluctuations due to devaluation of money can increase the cost of production as raw
materials are imported from abroad.
5. The uncertainty of economic conditions poses a great threat as the major funds invested
in the country come from outside Pakistan.
6. The present economic crisis in the world, led to the withdrawal of foreign management
from the company and the investment has come to a halt.
7. Competition with Nestls own smuggled brands.
8. Market segment growth may attract new entrants which will increase competition.
9. Inflation is getting higher and higher which is causing economic slowdown and hence
reduced demand for the Nestle Products.
10. Growth of private labels. The growing number of supermarkets and other retailers are
introducing their own label products that cost less and can easily compete with Nestls
product portfolio.

8 | Page

BUSNINESS POLICY AND STRATEGY

Internal Factors Evaluation (IFE)


Sr.
No.

Key Internal Factors

Weightage Rates WS
Strengths:

1
2
3
4
5
6
7
8
9
10
1
2
3
4
5
6
7
8
9
10

9 | Page

Highly Diversified Company


Customer Loyalty
Research & Development
Relations with Farmers & Retailers
Market Share
Self-Milk Collection System
Brand Image
Potential for Acquisition & Merger
Sales & Profit volume
Management
Weaknesses:
Narrow Market
Bargaining Power of Suppliers & Retailers
Old Fashioned Products
Distribution Costs
Affordability of customers for products
Quality Assurance in distribution Channels
Communication b/w HO & ROs
Preferability of products
Packaging of Products
Higher Inventory Level
Total

0.07
0.02
0.06
0.06
0.1
0.09
0.09
0.02
0.07
0.05

4
4
4
4
4
4
4
3
4
4

0.28
0.08
0.24
0.24
0.4
0.36
0.36
0.06
0.28
0.2

0.01
0.06
0.01
0.08
0.04
0.03
0.04
0.03
0.04
0.03
1

2
2
2
1
2
2
2
1
1
2

0.02
0.12
0.02
0.08
0.08
0.06
0.08
0.03
0.04
0.06
3.09

BUSNINESS POLICY AND STRATEGY

External Factors Evaluation (EFE)


Sr.
No.
1
2
3
4
5
6
7
8
9
10
1
2
3
4
5
6
7
8
9
10

10 | P a g e

Key External Factors


Opportunities:
High Trend for E-Commerce
Growing Middle Class in Pakistan
Changing Life Styles
Higher Demand for Tea related products
Increased interest in Health & Nutrition
Reduced Interest Rates by SBP
Increasing Urbanization in Pakistan
Improved Economic Conditions in country
Productivity of Milk Producing Animals PA
Market penetration of Milk related products
Threats:
Increased interest in Restaurant Meals
Suspicion of Pre-packed Foods
Increased Govt. Oversight & Regulations
Devaluation of money
Uncertainty of economic conditions
Global Economic crises
Competition with Smuggled brands
Entry Barrier
Higher Inflation
Private labeling
Total

Rate
Weightage s

WS

0.02
0.05
0.06
0.05
0.07
0.05
0.08
0.05
0.04
0.03

3
4
4
2
4
2
3
4
3
3

0.06
0.2
0.24
0.1
0.28
0.1
0.24
0.2
0.12
0.09

0.03
0.05
0.05
0.03
0.08
0.05
0.02
0.1
0.08
0.01
1

4
4
2
2
2
2
4
3
3
4

0.12
0.2
0.1
0.06
0.16
0.1
0.08
0.3
0.24
0.04
3.03

BUSNINESS POLICY AND STRATEGY

Competitive Profile Matrix (CPM)

Critical Success Factors


Market Share
Quality Standard
Profit Margin
Costs of Production
Growth Potential
Corporate Environment
Sales & Distribution
Human Resource
Advertisement
Technology
Research & Development
Total

11 | P a g e

Weight
0.1
0.15
0.05
0.1
0.1
0.05
0.1
0.1
0.1
0.1
0.05
1

Nestle
Rate
4
4
4
2
4
4
4
3
3
3
4

Score
0.4
0.6
0.2
0.2
0.4
0.2
0.4
0.3
0.3
0.3
0.2
3.5

Engro Foods

Shakarganj

Rate
2
3
3
3
2
3
3
4
4
4
2

Rate
1
2
2
4
1
2
2
3
2
2
1

Score
0.2
0.45
0.15
0.3
0.2
0.15
0.3
0.4
0.4
0.4
0.1
3.05

Score
0.1
0.3
0.1
0.4
0.1
0.1
0.2
0.3
0.2
0.2
0.05
2.05

BUSNINESS POLICY AND STRATEGY

BCG Matrix

Milk Div.
Engro
(Olpers)
Shakarganj
(Goodmilk)
Nestle
Milkpak
Total

2015

2014

49,834,000

43,027,377

6,578,986

11,356,340

81,686,079

77,432,902
131,816,619

138,099,065

RMS = Own Share / Leader's Share


IG = [(Current Year Sales - Last Year Sales)/Last Year Sales]x100
RMS

81686079/81686079

IG

(138099065-131816619)/131816619x100

Beverages

1
5%

2015

2014

Sheezan

6,817,635

6,760,527

Coka Cola

11,073,500

9,199,600

Nestle
Total

20,729,151
38,620,286

18,251,270
34,211,397

RMS = Own Share / Leader's Share


IG = [(Current Year Sales - Last Year Sales)/Last Year Sales]x100
RMS

20729151/20729151

IG

(38620286-34211397)/34211397x100

13%

1.
12 | P a g e

BUSNINESS POLICY AND STRATEGY


Others

2015

2014
6
61,569
5
70,686

Mitchels
Nestle
Total

486,2
82
773,5
71
1,259,853

1,232,255

RMS = Own Share / Leader's Share


IG = [(Current Year Sales - Last Year Sales)/Last Year
Sales]x100
Other
(Confectionary)
RMS

570686/661569

0.86

IG

(1232255-1259853)/1259853x100

-2%

Products
Milk & Nutrition
Beverages
Others
(Confectionery)

RMS
1
1

IG
5%
13%

Revenues
81,686,079
20,729,151

0.86

-2%

570,686

Question
Marks

BCG Matrix
15%
10%
5%

RMS

1.2

0.8

0.6

0%

0.4

-5%
-10%
-15%

Industry Growth

13 | P a g e

0.2

BUSNINESS POLICY AND STRATEGY

SPACE MATRIX
Financial Position
Liquidity (Current ratio): +6
Return on Investment (ROA & ROE): +5
Leverage (Debt to Equity Ratio): +4
Profitability (Earnings Per Share): +6
Efficiency (Inventory Turnover): +5
FP = +26/5 = +5.2
Economic Position:
Inflation: -5
Gov. Policies (Taxation): -4
Demand Variability: -1
Price Elasticity of Demand: -4
Risk Factor: -4
EP = -18/5 = -3.6
Industry Position:
Growth Potential: +6
Capacity utilization: +5
Profit Potential: +6
Ease of Entry in Industry: +4
Financial Stability: +4
I.P = +25/5 = +5
Competitive Position:
Market Share: -1
Product Life Cycle: -2
Customer loyalty: -3
Product Quality: -4
Technology: -2
CP= 12/5 = -2.4

14 | P a g e

BUSNINESS POLICY AND STRATEGY


Net Scores
X-axis
FP = +5.2
EP = -3.6
Total = +1.6

Y-axis
IP = +5.0
CP = -2.4
Total = +2.6

Space Matrix
6
4
2

CP

-6

-4

-2

-2
-4
-6

SP/EP

15 | P a g e

BUSNINESS POLICY AND STRATEGY

IE Matrix

IE Matrix for Milk Division


EFE
Opportunities
1
2
3
4
5

Key Factors
Increased Demand for Packed Milk due to
urbanization
More demand for hygienic food items like milk
Growth in Middle Class population in Pakistan
Productivity of Milk producing animals
Market penetration of processed milk

Weightage

Rates

WS

0.15
0.09
0.1
0.15
0.12

4
4
4
4
4

0.6
0.36
0.4
0.6
0.48

1 Increased interest in Restaurant meals


2 Suspicion in prepacked milk
3 Market growth is attracting new competitors
Inflation is affecting consumers purchasing
4 power
5 Increased Govt. oversight and regulations
TOTAL
IFE

0.04
0.09
0.1

3
2
3

0.12
0.18
0.3

0.1
0.06
1

4
3

0.4
0.18
3.62

1
2
3
4
5

Strong Brand Name of Nestle MilkPak & Cream


Strong Management
Self-Milk collection system
Research & Development factor
Largest market share of Milk related products

0.12
0.09
0.14
0.1
0.11

4
4
4
4
4

0.48
0.36
0.56
0.4
0.44

1
2
3
4
5

Loosing market leadership (MilkPak)


Higher distribution costs
Affordability of costumers
Lack of Quality assurance while collecting milk
Old fashioned products (Milo)
TOTAL

0.15
0.08
0.07
0.05
0.09
1

1
2
2
2
2

0.15
0.16
0.14
0.1
0.18
2.97

Threats

Strengths

Weaknesses

16 | P a g e

BUSNINESS POLICY AND STRATEGY


IE Matrix for Beverages Division
EFE
Opportunities
1

Key Factors
Changing lifestyles pull up demand for branded
beverages
Increased interest in Restaurant meals triggering
higher demands for bottled water
Growth in Middle Class population in Pakistan
Attractive weather conditions in Pakistan
Lack of pure drinking water in country

Weightage

Rate
s

WS

0.12

4 0.48

0.07
0.08
0.11
0.15

3 0.21
3 0.24
3 0.33
4 0.6

0.08
0.11
0.12
0.09
0.07
1

3
4
4
2
2

Strong Brand Name of Nestle Pure Life


Strong Management
High customer satisfaction
Research & Development factor
Largest market share among Water and Juices
5 brands

0.13
0.15
0.12
0.1

4 0.52
4 0.6
3 0.36
4 0.4

0.14

4 0.56

1
2
3
4

0.05
0.06
0.1
0.08

2 0.1
1 0.06
2 0.2
2 0.16

0.07
1

2 0.14
3.1

2
3
4
5
Threats
1
2
3
4
5

Private labeling
Market growth is attracting new competitors
Inflation is affecting consumers purchasing power
Increased Govt. oversight and regulations
Increasing cost of plant
TOTAL
IFE

0.24
0.44
0.48
0.18
0.14
3.34

Strengths
1
2
3
4
Weaknesses
Expiry Product scandals
Higher distribution costs
Lack of awareness and Poverty in rural areas
Lack of Availability in remote areas
Products are relatively expensive than other
5 brands
TOTAL

17 | P a g e

BUSNINESS POLICY AND STRATEGY

EFE
Opportunitie
s

IE Matrix for Other Division (Confectionery)


Weightag
Key Factors
e

Changing lifestyles pull up demand for branded


1 products
More innovative products can be launched, such as
2 low fat or for diabetic patients.
3 Growth in Middle Class population in Pakistan
More than 1.6 Million population is below the age of
4 15 in Pakistan.
Better marketing campaigns like animated series can
5 increase their sales volume.

Rate
s

WS

0.06

2 0.12

0.12
0.08

3 0.36
3 0.24

0.1

0.4

0.15

3 0.45

1
2
3
4
5

Rumors about chocolates containing Haram


ingredients
Some competitors are gaining more market share
Inflation is affecting consumers purchasing power
Increased Govt. oversight and regulations
Negative growth of the industry
TOTAL

0.1
0.15
0.08
0.06
0.1
1

1 0.1
2 0.3
2 0.16
2 0.12
3 0.3
2.55

1
2
3
4
5

Strong Management
Globally recognized multinational brand
Diversified Workforce
High growth potential
Strong Brand Name of Nestle products

0.15
0.12
0.09
0.12
0.12

4
4
3
3
4

0.6
0.48
0.27
0.36
0.48

0.1

0.1

Threats

IFE
Strengths

Weaknesses
1 Higher distribution costs
Lack of awareness of Nestle Products and Poverty in
2 rural areas
3 Lack of Availability in remote areas
4 Products are relatively expensive than other brands
Less focus on marketing of products other than milk
5 & beverages
TOTAL

18 | P a g e

0.14
0.07
0.12

1 0.14
2 0.14
2 0.24

0.15

1 0.15
2.96

BUSNINESS POLICY AND STRATEGY

I/E Matrix (Graphical Presentation)


IFE Total Weighted Scores
Strong (3-4)
Beverages

Average (2-2.99)

Milk & Nutrition

Others (Confectionery)

Weak (1-1.99)

High
(3-4)

Medium
(2-2.99)

Low
(1-1.99)

Divisions
Milk & Nutritions
Beverages
Other (Confectionery)

19 | P a g e

IFE Weighted Scores


2.97
3.1
2.96

EFE Weighted Scores


3.62
3.34
2.55

BUSNINESS POLICY AND STRATEGY

GRAND STRATEGY MATRIX

Particulars

2015

2014

Total Sales

177,951,60
6

167,287,86
9

Industry Growth

6.37%

Competitive Position

-2.40

Grand Strategy Matrix

Weak Competitive Position

Slow Market Growth

20 | P a g e

BUSNINESS POLICY AND STRATEGY

QSPM Matrix

IFE
Sr.
No
.
1
2
3
4
5
6
7
8
9
10
1
2
3
4
5
6
7
8
9
10

Key Internal Factors


Weightage
Strengths:
0.07
Highly Diversified Company
0.02
Customer Loyalty
0.06
Research & Development
Relations with Farmers &
0.06
Retailers
0.1
Market Share
0.09
Self-Milk Collection System
0.09
Brand Image
Potential for Acquisition &
0.02
Merger
0.07
Sales & Profit volume
0.05
Management
Weaknesses:
0.01
Narrow Market
Bargaining Power of
Suppliers & Retailers
0.06
0.01
Old Fashioned Products
0.08
Distribution Costs
Affordability of customers
0.04
for products
Quality Assurance in
0.03
distribution Channels
Communication b/w HO &
0.04
ROs
Preferability of products of
0.03
competitors
Packaging of Products
0.04
Higher Inventory Level
0.03
Total
1

21 | P a g e

Forward
Integratio
n (Opening
Retail
Outlets)

Product
Developmen
t (Lassi &
Icecream)
AS

TAS

Unrelated
Diversificatio
n (Tea
Products)

AS

TAS

AS

TAS

2
4
2

0.14
0.08
0.12

3
3
3

0.21
0.06
0.18

4
2
4

0.28
0.04
0.24

1
3
2
4

0.06
0.3
0.18
0.36

3
2
4
3

0.18
0.2
0.36
0.27

2
1
1
2

0.12
0.1
0.09
0.18

-4
2

-0.28
0.1

-2
3

-0.14
0.15

-1
4

-0.07
0.2

0.02

0.04

0.04

4
1
4

0.24
0.01
0.32

3
4
2

0.18
0.04
0.16

2
3
3

0.12
0.03
0.24

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

4
-4

0.12
-0.12
2.45

2
-2

0.06
-0.06
2.29

3
-1

0.09
-0.03
1.87

BUSNINESS POLICY AND STRATEGY

Opportunities:
1 High Trend for E-Commerce
Growing Middle Class in
2 Pakistan
3 Changing Life Styles
Higher Demand for Tea related
4 products
Increased interest in Health &
5 Nutrition
6 Reduced Interest Rates by SBP
Increasing Urbanization in
7 Pakistan
Improved Economic Conditions
8 in country
Productivity of Milk Producing
9 Animals PA
Market penetration of Milk
10 related products
Threats:
Increased interest in Restaurant
1 Meals
2 Suspicion of Prepacked Foods
Increased Govt. Oversight &
3 Regulations
4 Devaluation of money
Uncertainty of economic
5 conditions
6 Global Economic crises
Competition with Smuggled
7 brands
8 Entry Barrier
9 Higher Inflation
10 Private labeling
Total
Grand Total

22 | P a g e

0.02
0.05
0.06
0.05
0.07
0.05
0.08
0.05
0.04
0.03

0.03
0.05
0.05
0.03
0.08
0.05
0.02
0.1
0.08
0.01
1

0.08

0.04

0.02

4
4

0.2
0.24

2
3

0.1
0.18

3
2

0.15
0.12

0.15

0.05

0.2

4
4

0.28
0.2

2
2

0.14
0.1

3
3

0.21
0.15

0.24

0.16

0.08

0.15

0.05

0.1

0.08

0.16

0.04

0.12

0.06

0.03

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

4
--4

0.08
--0.04
1.86
4.31

2
--3

0.04
--0.03
1.11
3.4

1
--2

0.02
--0.02
1.14
3.01

BUSNINESS POLICY AND STRATEGY

REFERENCES:
http://sml.com.pk/reports.php?year=2014%20-%202015
http://engro.com/wp-content/uploads/2015/04/02-ECorp-AR-2014-Full.pdf
http://www.sbp.org.pk/ecodata/Productselect.pdf
http://www.nestle.pk/asset-library/documents/financial_reports/nestle_financial_ar_2014.pdf
library/documents/financial_reports/nestle_financial_ar_2015.pdf
https://www.scribd.com/doc/55470472/Compettive-Analysis-of-Sufi-Water

23 | P a g e

You might also like