A Project on Nestle BD

LOCAL BUSINESS POLICIES OF NESTLÉ BANGLADESH LTD.

INDEPENDENT UNIVERSITY, BANGLADESH DEPARTMENT OF BUSINESS ADMINISTRATION

REPORT ON LOCAL BUSINESS POLICIES OF NESTLÉ BANGLADESH LTD

PREPARED FOR: Dr. Shibli Noman Khan Lecturer Department of Business Administration Independent University, Bangladesh

PREPARED BY: Alif Al Mohammed Shalahuddin ID: 1221557 MBA 509 Department of Business Administration Independent University, Bangladesh

Date: 30 July 2012

Letter of Transmittal 30th July, 2012 Dr. Shibli Noman Khan Asst. Professor Department of Business Administration Independent University Bangladesh,

Subject: Submission of Term paper

Dear Sir, It’s our great pleasure to submit the Report on Nestle Bangladesh Ltd. A study was making on a company that you have asked to prepare to study. I have tried our best to follow the instruction that was given by you. Throughout this study I tried to identify how Nestle operating their local business being a multinational company in Bangladesh.

I sincerely hope that you will enjoy this report as I enjoyed while writing it. If you need any further clarification or quarry in interpreting this analysis, we will be glad to oblige you.

Thank you,

Alif Al Mohammed Shalahuddin ID: 1221557 MBA-509

Table of Contents Particulars ABSTRACT PART ONE: INTRODUCTION TO REPORT Origin of the Report Objective of the Report Scope and Limitation PART TWO: NESTLÉ BANGLADESH LTD. 2.1 Introduction 2.2 History of Nestlé 2.3 Global Brand of Nestlé 2.4 Nestlé in Bangladesh Customers of Nestlé Bangladesh Limited Functions of Nestlé Bangladesh Products of Nestlé Bangladesh PART THREE: ORGANIZATION STRUCTURE OF NESTLÉ 3.1 Global Organization Structure of Nestlé 3.2 Organization Structure of Nestlé’s in Bangladesh PART FOUR: STRATEGY OF NESTLÉ 4.1 Key Success Factors External factors Internal factors 4.2 Marketing Strategy Market Segmentation Target market Positioning strategy Advertising and Promotional activities Medium Responses 4.3 Competition Structure 4.4 Nestlé’s Consumer Communication and Relationship 4.5 Retaining Old Customer or Attracting New Ones? Customer Satisfaction Level 4.6 Market Audit External Audit Internal Audit 4.7 Nestlé’s Commitment to Environmentally Sound Business Practices 4.8 The Supply Chain Raw Materials Manufacturing Distribution Marketing 4.9 What Makes Nestlé to Become Nestlé? Medical support Food support Sports Development Programme 4.10 Conclusion PART FIVE: APPENDICES References

Page

02-03 03 03 03 04-13 03 04 09 10 11 12 13 14-16 15 16 17-35 18 18 18 20 20 20 20 21 22 23 24 26 26 27 27 27 30 31 31 31 33 34 34 34 34 35 36 37

Table of Figures Particulars Figure 01: Sales Regions Figure 02: Sales Process Figure 03: Organizational Functions Figure 04: Nestlé Brands in Bangladesh Figure 05: Global Organizational Structure Figure 06: Organizational Structure in Bangladesh

Page 11 11 12 13 15 16

Abstract The study seeks to identify the local business policies of Nestle Bangladesh Ltd. as a multinational company. How they operate their business in Bangladesh being a multinational company to compete with their local competitors. To operate their business how they develop their strategy to gain the competitive advantage. In details the study aimed to identify the business policy and their strategy in Bangladesh. What is there key success factors, marketing strategy, competition structure, market audit as well as how they develop their market segmentation, target market, positioning strategy, advertising and

Page

1

promotional activities and what is the output.

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Page

2

Part One: Introduction to Report

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Origin of the Report During the summer’2012 semester of MBA program of Independent University, I was required to do a term project in the course International Marketing (MBA 509). This course is designed to give the business students an understanding international marketing that is necessary tounderstand the in department of international marketing concepts applied by companies. Out of several options of the term project topics, I have chosen a company ‘Nestlé Bangladesh Ltd.’ for the term project.

Objective of the Report To prepare and submit the term project within specified time. To have a very practical idea and over viewing the marketing sector focusing on a specific company and their performance in Bangladesh. Present company’s current mission, vision, objectives, and goals. Find out their strength, weakness, opportunities, threats. Defining their market segmentation, target market and product positioning and key marketing areas. Source of information the report is originated from both primary and secondary data source. 

Primary data: Face to face conversations with employees. By arranging appointment with top officials of the company.



Secondary data: Company’s reports and other published materials various marketing books, personal interview with a Nestlé professional.

Scope and Limitation There was great difficulty of finding appointment of the top officials of Nestle although talking to the officials interviewing few personnel of top management and talking to personal references was helpful, still we could not cover in depth analysis on the above mentioned topic. Getting relevant papers, documents, information were strictly prohibited. The officers were hesitant to reveal the information in regard of confidentiality Unavailability of financial data as Nestlé does not publish financial report to the public.

Bangladesh Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Page

 Restriction on time and resources of data due to absence of corporate website in

3

 For the confidentiality concern, access to some information was not available.

Page

4

Part Two: Nestlé Bangladesh Ltd.

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

2.1 Introduction Today’s Nestlé, the world's largest food and nutrition company, founded by the Henri Nestlé (10 August 1814 – 7 July 1890); a German confectioner in Vevey, Switzerland in 1866. In the food industry Nestlé is the most trusted name with high quality products. ―Good food Good Life‖ is the mission of Nestlé, which drives the company to provide consumers with the best tasting and most nutritious choices in a wide range of food and beverage categories and eating occasions. The vision of ―creating shared value‖ and the very own ―Corporate Business Principles‖ shaped the company culture and made them a reliable investor over 86 countries of the world. Today Nestlé employs around 280000 people and have factories or operations in almost every

Page

5

country of the world with a total equity of CHF 62.60 billion.

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

2.2 History of Nestlé 1866-1905: Henri Nestlé's quest for a healthy, economical alternative to breastfeeding is the important factor that drives the history of Nestlé Company. Henri Nestlé, pharmacist, began experimenting with various combinations of cow milk. His ultimate goal was to help combat the problem of infant mortality due to malnutrition. People quickly recognized the value of the new product, as Nestlé's new formula saved the life of children within a few years. In August, 1867 Charles and George Page, two brothers from Lee County, Illinois, USA, established the AngloSwiss Condensed Milk Company in Cham. In 1877 Anglo-Swiss added milk-based baby foods to their products and in the following year the Nestlé Company added condensed milk so the firms became direct and fierce rivals. Henri Nestlé retired in 1875 but the company under new ownership retained his name as FarineLactée Henri Nestlé. Their headquarters in Glendale, California, USA.

1905-1918: The Company formed by the 1905 merger was called the Nestlé and Anglo-Swiss Milk Company. Most production facilities remained in Europe, however, and the onset of World War I brought severe disruptions, as a result acquiring raw materials and distributing products became increasingly difficult. At the same time the war created tremendous new demand for dairy products, largely in the form of government contracts. By war's end, the Company had 40 factories, and its world production had more than doubled since 1914. Moreover in this period Nestlé added chocolate to its range of food products and also the Condensed-milk exports increased rapidly as the Company replaced sales agents with local subsidiary companies. In 1907, the Company began full-scale manufacturing in Australia.

1918-1938: The end of World War I brought with it a crisis for Nestlé. Rising prices for raw materials, the worldwide postwar economic slowdown, and declining exchange rates made the situation worst. In 1921, the Company recorded its first loss. Nestlé's management brings Louis Dapples as an expert to deal with the situation; his rationalized operations and reduction of the company's outstanding debt improve the financial condition. On the other hand Nestlé's first expansion beyond its traditional product line came in 1920s by producing chocolates. In the

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Page

coffee surplus, after eight years of research Nestlé came with Nescafé became an instant success.

6

meantime Brazilian Coffee Institute first approached to Nestlé in 1930 to reduce Brazil's large

1938-1944: in this period World War II were felt immediately upset the business once again and Profits dropped from $20 million in 1938 to $6 million in 1939. To overcome distribution problems in Europe and Asia, factories were established in developing countries; particularly in Latin America. As the end of the war approached, Nestlé executives found themselves unexpectedly heading up a worldwide coffee concern, as well a company built upon Nestlé's more traditional businesses.

1944-1975: The graph of growth sets its trends little higher between 1944 and 1975. As a result many new products were added as and outside companies were acquired. In Nestlé merged with Alimentana S.A in 1947, purchase of Findus frozen foods occurred in 1960, Libby's fruit juices joined the group in 1971 and Stouffer's frozen foods in 1973and finally in 1974 the Company became a major shareholder in L'Oréal, one of the world's leading makers of cosmetics. The Company's total sales doubled in the 15 years after World War II.

1975-1981: In 1920s the economic situation was in challenge due to price of oil rose, growth in the industrialized countries slowed down and worldwide unstable political situation. In 1975 and 1977 price of coffee bean and the price of cocoa tripled. In this situation to maintain a balance, Nestlé went to second venture outside the food industry by acquiring the pharmaceutical and ophthalmic product producer Alcon Laboratories Inc. of U.S; as a result it increased competition and shrink the profit margins.

1981-1995: Improvement of financial situation through internal adjustments and strategic acquisitions are the two important moves in this period. As a result between 1980 and 1984, diversification of several non-strategic or unprofitable businesses occurred. On the other hand Nestlé managed to put an end in the third World to about a serious controversy over its marketing of infant formula in this period. In 1984 Nestlé acquire American food giant Carnation and became one of the largest company in the history of the food industry.

hand in July 2000 Nestlé launched a Group-wide initiative called GLOBE (Global Business Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Page

towards liberalization of direct foreign investment was good news for the company. On the other

7

1996-2002: The opening of Central and Eastern Europe, along with China and a general trend

8 Excellence) aimed to simplifying business process. Two more acquisitions took place in this period-U.S. ice cream business was to be merged into Dreyer's and the acquisition of Chef America, Inc. a leading U.S.-based hand-held frozen food product business.

2003-2009: Within this area the acquisition of Mövenpick Ice Cream, Jenny Craigand Uncle Toby's enhanced Nestlé's position as one of the world market leaders in the super premium category. On the other hand Novartis Medical Nutrition, Gerber and Henniez join the Company in 2007. Meanwhile Nestlé entered into a strategic alliance with the Belgian chocolatierPierreMarcolini at the end of 2009.

2010 to onward: In mid-2010 Nestlé finalized the sale of Alcon to Novartis; at the same time Nestlé bought Kraft’s frozen pizza business. Another important move in this period is launch of

Page

8

Special. Tea machine system and the completion of the CHF 25 billion share buyback program

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

2.3 Global Brand ofNestlé The brand portfolio delivers the message once again how big Nestlé in the food industry. It is the trust and effort of the Nestlé professionals which created the win wining scenario. Today Nestlé covers almost every food and beverage category – giving consumers tastier and healthier products. 1. Baby foods: Cerelac, Gerber, Gerber Graduates, NaturNes, Nestum 2. Bottled water: Nestlé Pure Life, Perrier, Poland Spring, S.Pellegrino 3. Cereals: Chocapic, Cini Minis, Cookie Crisp, Estrelitas, Fitness, Nesquik Cereal 4. Chocolate & confectionery: Aero, Butterfinger, Cailler, Crunch, Kit Kat, Orion, Smarties, Wonka 5. Coffee: Nescafé, Nescafé 3 in 1, Nescafé Cappuccino, Nescafé Classic,NescaféDecaff, Nescafé Dolce Gusto, Nescafé Gold, Nespresso 6. Culinary, chilled and frozen food: Buitoni, Herta, Hot Pockets, Lean Cuisine, Maggi, Stouffer's, Thomy 7. Dairy: Carnation, Coffee-Mate, La Laitière, Nido 8. Drinks: Juicy Juice, Milo, Nesquik, Nestea 9. Food service: Chef, Chef-Mate, Maggi, Milo, Minor’s, Nescafé, Nestea, Sjora,Lean Cuisine, Stouffer's 10. Healthcare nutrition: Boost, Nutren Junior, Peptamen, Resource 11. Ice cream: Dreyer’s, Extrême, Häagen-Dazs, Mövenpick, Nestlé Ice Cream 12. Petcare: Alpo, Bakers Complete, Beneful, Cat Chow, Chef Michael’s Canine Creations, Dog Chow, Fancy Feast, Felix, Friskies, Gourmet,Purina, Purina ONE, Pro Plan 13. Sports nutrition: PowerBar

Page

9

14. Weight management: Jenny Craig

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

2.4 Nestlé in Bangladesh Popular Nestlé brands started entering this part of the sub-continent during the British rule and the trend continued during the pre-independence days of Bangladesh. After the independence in 1971, Nestlé World Trade Corporation, the trading wing of Nestlé S.A, sent regular dispatch of Nestlé brands to Bangladesh through an array of indentures and agents and some of the brands such as NESPRAY, CERELAC, LACTOGEN, and BLUE CROSS etc. became some very common products.

Nestlé Bangladesh Limited started its commercial operation in Bangladesh in 1994. Its total authorized capital is TK1.5 billion and total paid up capital is TK 1.1 billion. The only factory of the company in Bangladesh is situated at Sreepur, 55 km north of Dhaka. The factory produces the instant noodles and cereals and repacks milks, soups, beverages and infant nutrition products. Today Nestlé Bangladesh Ltd. is a strongly positioned organization. The Company is continuously growing through the policy of constant innovation, concentrating on its core competencies and its commitment to high quality food to the people of Bangladesh.

Since the beginning of Nestlé’s operation in Bangladesh, the chairman of the company has been Mr. LatifurRahman, one of the top industrialists of the country, his firm Transcom used to import the products of Nestlé. His business house Transcom is still involved in wide range of business like beverage, pharmaceutical, electronics, newspaper, tea export, fast food franchises etc. Still he remains as an honorary chairman of the company although his group Transcom does not capture any share today as Nestlé S.A. holds 100% share of this company.

In Bangladesh Nestlé’s vision is-to be recognized as the most successful food and drink Company in Bangladesh, generating sustainable, profitable growth and continuously improving

Page

10

results to the benefit of shareholders and employees.

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Customers of Nestlé Bangladesh Limited Nestlé Bangladesh Limited markets its products throughout the country with the help of the distributors. A part from that, Nestlé Professional is a separate function which is responsible for the institutional sale. There are currently 80 distributors of Nestlé Bangladesh products of which 76 are retail distributors and remaining 4 are Nestlé Professional’s distributors providing products for the out of home consumptions. The whole country is divided into six regions:

Dhaka North

Dhaka South

Chittagong

Khulna

Sylhet

Bogra

Figure1: Sales regions

The retail distributors supply Nestlé products to four types of outlet, while Nestlé Professional Distributors supply products to different institutions.

Vending Site

Tea Bunk Retail Distributor Mordern Trade Nestlé Bangladesh Ltd.

Figure2: Sales Process Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Institutional Sale

Page

Nestlé Professional

11

Retail/Wholesale

Functions of Nestlé Bangladesh Day by day demand and trust on the Nestlé products are growing. Focusing on the substantial growth and the other business perspective, the company developed its own functional areas. Currently the existing fictional areas are:

General Management

Finance and Control

Human Resource

Supply Chain

Marketing

Nutrition

Nestlé Professionals

Sales

Figure3: Organizational Functions

No matter how many functions are running, their main aim is to gain ultimate excellence. Every function contributes from their end to meet the corporate goal. The General Management take cares of the overall operation of the company and makes the key decisions. Human Resource focuses the management of employees and organizational culture; moreover HR professionals are also responsible for retaining the people who are making the difference with their competitors at the end of the day. Supply Chain ensures the stable supply of the products according to the demand of the customers. Marketing looks after the existing brands, market share and product development of the products. Nestlé is the world’s largest Nutrition Company that is why the importance of the Nutrition products is much more in compared to the other food companies; as a result they created a totally separate team to look after the Nutrition products, such as, CERELAC, LACTOGEN. Finance and control deals with the financial transactions and most importantly they also apply the control mechanism to remain the company complaint

revenue for the company, but sales goes for the retail distributors and Nestlé Professionals looks

Page

after the institutional sales.

12

financially and procedurally. Finally Sales and Nestlé Professionals are responsible for earning

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Products of Nestlé Bangladesh Globally the product line of Nestlé is very large but in Bangladesh currently there are only 12 products. Nestlé believes all foods and beverages can be enjoyable and play an important role in a balanced and healthy diet and lifestyle; as a result no matter how short the product line may be but it ensures the same quality in compare to the other countries.

Beverage

Nescafe

Culinary Maggi, Shade-Magic

Nestea

Dairy

Breakfast Cereal

Nutrition

Nido

Comflex

HunyGold

Coffeemate

Kokocranch

Lectozen

Nesfuta

NAN

Cerelac

Page

13

Figure 04: Nestlé Brands in Bangladesh

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Part Three: Organization Structure of

Page

14

Nestlé

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

3.1Global Organization Structure of Nestlé

Page

15

Table 2: Global Organizational Structure

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

3.2 Organization Structure of Nestlé’s in Bangladesh

Page

16

Figure 06: Organizational Structure in Bangladesh

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Page

17

Part Four: Strategy of Nestlé

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

4.1 Key Success Factors 

Strong brands / relationships with consumers-



Research and development-



Innovation and renovation-



Product availability-

Building relations with medical and scientific community in light of Nestlé Bangladesh Ltd., this report tried to analyze the following components of marketing strategy through different theories and applications: External factors 

Social: Nestlé makes an effort to integrate itself as much as possible into the cultural and social values of the different countries. During operation in Bangladesh Nestlé has launched products with integration of social & cultural factors. This has been done to match the taste buds of Bangladeshi consumers.



Ethical: Although Nestlé faces ethical dilemmas in commercialization of its products, it does not consider its high price to be an ethical crisis. This is because they are not ready to compromise their quality in order to make their product widely available to all.

Internal factors 

Marketing structure: Nestlé is more people, product and brand oriented than system oriented. Nestlé favors long-term successful business development and even to greater extent, customer life-time value. At the same time Nestlé does not lose sight of the necessity to improve in terms of quality, price and distribution. However, Nestlé remain conscious of satisfying the wants needs and demands of its consumers. It is also aware of the need to generate a sound profit annually. Nestlé seeks to earn consumer’s confidence, loyalty and preference and anticipate their demands through innovation and renovations. Therefore Nestlé is driven by an acute sense of performance adhering to quality and customer satisfaction Nestlé is as decentralized as possible within its marketing strategic definitions requiring increasing flexibility. Nestlé is always committed to the concept of continuous improvement of its

Page

marketing.

18

activities and customer satisfaction through market segmentation, positioning and target

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

The effective formulation of their marketing strategy depends on the proper match between the three key elements: o Consumer o Quality o Competition One thing to be mentioned is that the match between consumer and quality is most important for Nestlé. Besides there are some other concerns that effect the marketing strategy. This concerns

Page

19

are where to compete, how to compete and when to compete

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

4.2 Marketing Strategy The current marketing strategy of the company is based on the foundation of the four pillar strategy which has the following factors:

Market Segmentation Nestlé is targeted towards the consumer market. So Nestlé food products can be treated as consumer products. The major factors which play key role in the process of consumer segmentation are:  Demographic (age, income, etc.)  Consumption pattern  Social economic factors  Brand loyalty patters  Perceptual factors  Cultural factors Proper consideration of the given factors results in effective consumer segmentation for Nestlé. Since the product range is expensive in Bangladesh; FoysalAlam, the Marketing Officer, says, “………………………we have to concentrate strongly on income of consumers.

Target market Nestlé’s main focus is the socio-economic class, which is the company wide target. Nestlé’s potential consumers are those who acknowledge that Nestlé is all about quality and most importantly those who can afford the products. The strategy for selecting their target market is the following:  Income level (>10000 Tk)  Education  Quality realization

Positioning strategy Nestlé’s positioning strategy comprises of the three steps:  Identifying the right competitive advantage  Choosing the right competitive advantage

Page

20

 Selecting the right completive advantage

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

The company then effectively communicates and delivers the chosen position to the market. Nestlé strongly believes that their products are specific and so are the product benefits. This, Foysal Alam, the marketing officer, termed as “Benefit Positioning” Regarding new upcoming products, Nestlé is looking forward to renovation and innovation for Maggi noodles and soups. This might be in terms of new flavors or improvising the quality and the quantity of the products.

Advertising and Promotional activities The company focuses on its corporate image that “Nestlé is all about quality”. It hardly emphasizes on promotion and publicity because consumers in Bangladesh already know that ensuring product quality is what Nestlé focuses, not price. Nestlé mainly focuses the two possible advertising objectives: 

Informative advertising



Persuasive advertising

Since Nestlé is already an acknowledged and quality food product company in Bangladesh, it does not emphasize much on publicity and promotion. Here are a few points to ponder about advertising done by Nestlé Bangladesh Ltd.: 

Nestlé cannot advertise for infant milk.



Mass advertising is done for new products only



Advertising and promotion is done by product wise



15% of marketing communication budget is spend for publicity



More indulged into product sampling and test marketing Nestlé had performed test sampling in the year 2003 on Nescafé.

Nestlé Bangladesh Ltd. has specialized agencies for their promotional purposes. They

Nescafé -Unitrend



Milo - (25%) Unitrend



Maggi - Protishobdo



Polo – Protishobdo

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Page



21

are:Product name advertising agencies:

Nestlé is associated with the following profiles of major media types:

Medium Responses 

Newspapers (e.g. ProthomAlo) Small Pass along audience, approx. 1 lakh. High cost per exposure.



TV Reach up to 20 lakh audience



Billboards Very few



Local Magazines Negligible



Outdoor –

The given table suggests that Cost per Contact is better in television advertisement than in newspapers and other media for Nestlé. Nestlé also believes that television receives better clutter, fleeting, exposure and a mass audience for promotion, which is only to be considered for Nestlé Bangladesh Ltd. The main advertising is done on television and to a very little extent, newspapers. The emphasis is on building a corporate image about maintaining their high quality. There are also considerations underway to promote upcoming brands and products to extend their promotional activities by putting up more billboards, posters, flyers, and banners. They will start internet as their medium from year 2005. These decisions are carried out by the marketing department. Hence, Nestlé Bangladesh is trying to integrate their promotional activities and have an

Page

22

integrated marketing approach

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

4.3 Competition Structure Nestlé supports free enterprise and therefore competes fairly and ethically and expects other company’s right to do so. The competition structure for Nestlé in Bangladesh is very limited whereas it faces bigger challenges in other countries such as India, china,etc. Still Nestlé tends to face competition in the food market. In terms of quality and product square is the biggest challenge and threat. Pran is the strong contender in terms of turnover. When it comes to beverage and drinks Nestlé consider Ispahani and Cocola to be strong players. Although 7080% consumers prefer Maggi noodles, Cocola seems to be catching up fast. In terms of competitive advantage, quality seems to be the foremost tool for Nestlé. Although Nestlé tends to face criticisms in terms of price and number of products sold, in comparisons to local competitors, Nestlé intends to abide by their policy which never attempts to compromise

Page

23

quality.

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

4.4 Nestlé’s Consumer Communication and Relationship Nestlé is committed to offering consumers high-quality food products that are safe, tasty and affordable. The Nestlé Seal of Guarantee is a symbol of this commitment. It also believes in maintaining regular contact with the consumers. This applies both to how they present their products and to how they address their consumers’ questions and concerns. When Henri Nestlé prepared his first boxes of infant formula for sale, he put his address on the packages so people would know where to go if they had questions. Today, the Consumer Relationship Panel with the words “Talk to Nestlé” expresses the same commitment. This is why they have a worldwide Nestlé Consumer Services network devoted to caring for their consumers. Nestlé’s people have expertise in a wide range of areas such as nutrition, food science, food safety and culinary expertise. They provide the prompt, efficient and high quality service that consumers expect from Nestlé. In addition, the expertise teaches them talk with consumers and above all, to listen. Listening helps them to understand what people want. Nestlé uses the insights gained from relationships with consumers to drive product development. Nestlé care for Nestlé’s consumers because its success depends on meeting their needs and expectations. Through listening and understanding, it can make products that they will want to use all through their lives. Although Nestlé is very conscious of its role in communicating responsibility to consumers, Nestlé in Bangladesh does not really perform much consumer communication. As noted their marketing officer, “For Nestlé, our consumers are our distributors”. Nestlé has a separate department designated as “Consumer Relation Department” where the purpose is served. A P.O.Box had been assigned where consumers can send complaints, mails or any enquiries directly in order to reach Nestlé. This can also be termed as “Post Purchase Service”. Consumer communication is not much practiced in Bangladesh because at the moment, Nestlé does not

Page

takes any initiatives in case of consumer communication.

24

have any organized internal database of its consumers. Hence, it can be said that Nestlé hardly

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

However, for specific brands, such as Milo, Nestlé Bangladesh has an organized database of 1000 consumers who are the core that is final consumers of Nestlé. Whenever, there are any upcoming new products, Nestlé sends these loyal consumers newsletters, leaflets, free samples and even feedback questionnaires. This is the only consumer communication that Nestlé does in Bangladesh; also consider to be Direct Marketing. For any other products Nestlé never performs

Page

25

consumer communication.

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

4.5 Retaining Old Customer or Attracting New Ones? For Nestlé, it is a 60-40 ratio. They believe whoever is loyal, Nestlé should do their best to retain their loyalty because if this loyal consumers become disloyal their word-of-mouth may contaminate other eager consumers. So, Nestlé emphasizes more on retaining loyalty rather than attracting new consumers.

Customer Satisfaction Level Nestlé regards its consumers as its most valuable asset involvement at all levels start with open communication whether it deals with customer satisfaction or their needs and wants. Nestlé recognizes that its consumers have a sincere and loyal interest in the behavior, beliefs, and actions of the company behind brands in which they place their trust. With it consumers the company would not exist. Nestlé satisfies consumers in many countries and cultures throughout the world. According to the Marketing officer Nestlé Bangladesh Ltd, customer satisfaction varies from one aspect to another. In terms of product delivery consumers do not give similar responses. He explained with the simple example, Nescafé for some is refreshment, for others it is relief. At the end of the day, Nestlé consumer are 100% satisfied with the high quality of

Page

26

Nestlé products.

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

4.6 Market Audit The marketing audit is divided in 1. External Audit

2. Internal Audit

o Opportunities o

Threats

o Strength o Weakness

External Audit: Scanning the external environment of Nestlé, we tried to find out the opportunities and threats that are pointed out here: 

Opportunities: The ability to expand their product line that requires an approach that is compatible with Nestlé’s strengths and that compensates for its weaknesses, e.g. to make certain products available in the market at a relatively lower price so that a larger number of consumers can buy it………products such as Cerelac. Enhance distribution of their Infant Nutrition Products in a country like Bangladesh where malnutrition already exists, increasing the distribution channels and channel outlets.



Threats: Few local manufacturers who tend to sale their products at a relatively lower price through various unethical means. For instant, many do not value expiry dates since not much restrictions are practiced in Bangladesh.High degree of bargaining power of suppliers.

Internal Audit: Then we tried to analyze the internal situation of Nestlé and we figured out the following strengths and weaknesses: 

Strengths: o A portfolio of products which responds to the consumer trend for lighter yet indulgent snacking o A unique strategic position which combines powerful local brands with strong global

targets o Centralized organization that helps in easier coordination of business activities Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Page

o Dedicated core staff who are willing to provide significant labor hours to accomplish

27

product brands



Nestlé Weaknesses: o Far fewer staff than actually required in terms of tasks to be completed. o Significantly less customer support services than is required in terms of the number of customers and the complexity of the services offered. o Except form Milo, they have no post purchase service for other products in Bangladesh.

Another Approach toward Strengths; Weaknesses Apart from conducting the SWOT analysis, under marketing assessment, a different approach is taken to make an in depth analysis about Nestlé. In this approach, first, some core factors are identified against which the performance or relative strength or weakness of Nestlé can be measured. These factors include: a. Marketing Factors b. Manufacturing Factors c. Organizational Factors But these factors are too broad. So, further some criteria were developed for each factor to be evaluated. Then the relative weaknesses or strengths are measured against each criterion that is

Marginal

Strength

Strength

Neutral

Marginal

Fundamental

Weakness

Weakness

Page

28

Fundamental

Weaknesses

Strengths

summarized here in a tabular format:

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Performance Measurement Criterion Marketing Factors:

Manufacturing actors:

Organizational Factors:

•Relative Market

•Production facilities

•Culture

•Reputation

•Flexibility

•Leadership

•Previous Performance

•Workforce

•Managerial capabilities

•Competitive Stance

•Technical skill

•Workforce

•Customer Loyalty

•Delivery capabilities

•Flexibility

•Depth of product range

•Adaptability

•Product quality •New product program •Distribution cost •Dealer network •Geographical coverage •Sales force •After sales service •Manufacturing cost •Pricing •Advertising

Page

29

•Structure of competition

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

4.7 Nestlé’s Commitment to Environmentally Sound Business Practices Nestlé respects the environment, supports sustainable development and is committed to environmentally sound business practices throughout the world. To fulfill this commitment, Nestlé: 

integrates environmental principles, programmes and practices into each business;



strives for the continuous improvement of its environmental performance through application of the Nestlé Environmental Management System (NEMS);



Complies with applicable environmental legislation. Where none exist, Nestlé’s own internal rules are applied; and



Provides appropriate information, communication and training to build internal and

Page

30

external understanding concerning the Company’s environmental commitment.

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

4.8 The Supply Chain Bringing a food product to the consumer involves a continuous process from farm to table. Integrated measures for preserving the environment, and consequently for optimizing global environmental benefits, are put in place along the supply chain. Nestlé endeavors to apply the following practices to meet its environmental commitment.

Raw Materials: In general, Nestlé is not directly involved in the production of raw materials. Wherever possible, locally available raw materials are used. They are either obtained directly from producers or purchased through trade channels. Nestlé applies the following principles when sourcing raw materials: all raw materials must meet both legal and internal quality criteria, including limits on possible environmental contaminants; whenever possible, preference is given to raw materials that are produced by environmentally sound farming methods (e.g. integrated crop management); and farmers are encouraged to apply sustainable farming methods and, where appropriate, are provided with assistance in crop production and dairy farming. Such assistance includes the provision of recommendations for the conservation of natural resources (soil, water, air, energy, and biodiversity) and techniques for reducing environmental impact.

Manufacturing: Manufacturing comprises all processes that are necessary to transform perishable raw materials into safe and convenient food products for consumers. Nestlé strives to achieve optimal performance in its manufacturing activities, including the environmental aspects. As such, the manufacturing practices of the Group: 

Respect natural resources by emphasizing the efficient use of raw materials, water and



Minimize the use of environmentally critical substances;



Continuously seek improvement in the efficiency of production facilities; and



Reduce waste generation and emissions as much as possible; consider recycling of waste as a

Page

priority and dispose of non-recyclable waste in an environmentally sound manner.

31

energy;

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Regular environmental assessments of Nestlé’s manufacturing practices are conducted to: 

Evaluate factory performance;



Review factory compliance with applicable legislation and Nestlé’s own standards;



Packaging fully investigate incidents that could affect the environment and take relevant measures; and



Compare results with previous targets and set new improvement objectives.

In addition, Nestlé exchanges information on environmental protection technology and practices in order to ensure a wide use of best practices. Nestlé encourages its contract manufacturers to use environmentally sound manufacturing practices. Packaging serves a major role in our daily lives. It protects food products from spoilage and ensures safety from manufacture through storage, distribution and consumption. Packaging may also provide tamper-evidence features. It communicates information, including nutritional information and serving instructions, and provides the convenience demanded by today’s consumers. Nestlé is committed to reducing the environmental impact of packaging, without jeopardizing the safety, quality or consumer acceptance of its products. It is Nestlé’s objective to develop safe and wholesome packaged foods using the most efficient and appropriate packaging materials available, while, at the same time, satisfying consumer requirements and expectations. Nestlé seeks packaging solutions that: 

result in the lowest possible weight and volume of packages;



take into account new packaging materials and processes that reduce the impact on the environment;



avoid the use of substances that can adversely impact the environment during packaging production and disposal;



decrease packaging waste at all stages, including package manufacturing, utilization and



increase the use of recycled materials wherever possible; and



Increase the recyclables and compatibility of its packages with existing waste management

Page

schemes.

32

disposal;

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Regular assessments of Nestlé’s packaging are carried out and action plans are implemented. Nestlé supports industrial and governmental efforts to promote integrated waste management that takes into consideration matters such as source reduction, reuse, recycling, composting, energy recovery and landfill. Nestlé encourages suppliers of its packaging materials to adopt sound environmental practices

Distribution Marketing Distribution of products from the factory to the customer involves transport and storage. Efficient management of the distribution system is essential to preserve the safety and quality of Nestlé’s products, to ensure a high level of customer service, and to meet its commitment to environmentally sound business practices. To this end, Nestlé: 

selects appropriate transportation modes, with particular attention given to optimum unit loads (pallets), vehicle capacity utilization, route planning and consolidation with outside partners, scheduling and fuel conservation;



optimizes warehouse and distribution center locations and environmentally efficient operational systems; and



Identifies and implements measures to reduce energy consumption and waste.

Nestlé encourages its distribution service providers to use environmentally sound practices. Marketing is based on the principle of satisfying consumers’ needs. The overall trust of consumers in Nestlé’s brands and products comes from a quality image that has been

Continuously strengthened for over 130 years. Nestlé strives to increase this trust through its commitment to environmentally sound business practices. For this reason, Nestlé:

bases environmental claims in advertising, promotional material, labeling and corporate communications on solid scientific evidence; and selects materials and printing methods for merchandising materials such as consumer offers, in-store promotions, display materials, leaflets

Page

33

and printed materials in light of environmental considerations.

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

4.9 What Makes Nestlé to Become Nestlé? •

Inherited attitude

•

Appreciation of the individual

•

Understanding, knowledge and ideas

•

The pull of its brands

•

People and relationship driven

Flood relief Nestlé Bangladesh donates products to support the Prime Minister’s Relief Fund of Bangladesh which helps victims of floods and other natural disasters. The Company also assists with fund-raising efforts for the Flood Relief fund. Medical support The Company contributes to the Floating Hospital Project which provides medical assistance for the poorest of the poor people. Food support The Company also runs a feeding programme for a school, established for the under- privileged children of Dhaka city slums. Under this programme, food is supplied twice a week for the students. Sports Development Programme Cricket is the most popular sport in Bangladesh. Nestlé Bangladesh has stepped forward together with the Bangladesh Cricket Board (BCB) to develop cricket talent for the future under a special sponsorship programme. Milo will sponsor a series of local cricket development camps and tournaments, to be organized by BCB for the under 13 and under 15 age groups. Through this specific programme, a pool of young talented cricketers will be identified to ultimately represent

Page

34

Bangladesh internationally.

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

4.10 Conclusion Finally it can be said that that Nestlé Bangladesh Limited is using and developing their strategy perfectly. By using valuable marketing tools they are creating competitive advantage for themselves which ultimately helping them to reach their market as well as organizational objectives. Again their continuous renovation are making them leader into the market which

Page

35

leads to profit as well as customer base for their company.

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

Page

36

Part Five: Appendices

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

References Corporate Governance report 2011 The Nestlé Corporate Business Principles 2010 Annual Report 2011 Quick Facts 2011 Nestlé Management report 2011 Nestlé Sustainability Review Nestlé People Development Review Corporate Business Principles Million Years of the Food Industry The Nestle Management and Leadership Principles Nestle Policy on the Environment

Page

37

          

Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh