Marketing strategy of nestle

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 th

30 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

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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

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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,

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

6Page 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. 1996-2002: The opening of Central and Eastern Europe, along with China and a general trend towards liberalization of direct foreign investment was good news for the company. On the other hand in July 2000 Nestlé launched a Group-wide initiative called GLOBE (Global Business Local Business Policies of Nestlé Bangladesh Ltd.

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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

Bogra

Khulna Sylhet

Figure1: Sales regions The retail distributors supply Nestlé products to four types of outlet, while Nestlé Professional Distributors supply products to different institutions. Vendin g Site

Tea Bunk

Retail Distributor Ne pendent University, stl Bangladesh Nestlé Figure2:é Sales Process Ba Bangladesh Ltd. Lo ng cal la Bu de sin sh ess Lt Pol d. icie In s de of

Morder n Trade

Functions of Nestlé Bangladesh

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Day by day demand and trust on the Nestlé products are growing.

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Focusing on the substantial growth and the other business

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perspective, the company developed its own functional areas.

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Currently the existing fictional areas are:

po rta ntl y th ey als o ap ply th e

Figure3: Organizational Functions

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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

ol m ec ha nis m to re m ai n th e co

mpany complaint financially and procedurally. Finally Sales and Nestlé Professionals are responsible for earning revenue for the company, but sales goes for the retail distributors and Nestlé Professionals looks after the institutional sales.

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Beverage Nescafe

Nestea

Nesfuta

Culinary

Dairy

Maggi, Shade-Magic

Nido

Coffeemate

Breakfast Cereal

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Comflex

HunyGol d

Kokocranch

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Cerelac

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4.1

Key Success Factors Strong

brands

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consumers-Research and developmentInnovation and renovationProduct 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 marketing.

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activities and customer satisfaction through market segmentation, positioning and target

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The company then effectively communicates and delivers the chosen position to the

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market. Nestlé strongly believes that their products are specific and so are the product

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benefits. This, Foysal Alam, the marketing officer, termed as “Benefit Positioning”

Regarding new upcoming products, Nestlé is looking forward to renovation and

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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 are:Product name advertising agencies: Nescafé -Unitrend Milo - (25%) Unitrend Maggi - Protishobdo Polo – Protishobdo Local Business Policies of Nestlé Bangladesh Ltd. Independent University, Bangladesh

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4.4 Nestlé’s Consumer Communication and Relationship

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T 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

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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 have any organized internal database of its consumers. Hence, it can be said that Nestlé hardly takes any initiatives in case of consumer communication.

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

2. Internal Audit

o Opportunities

o Strength

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o Weakness

Threats

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:

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A portfolio of products which responds to the consumer trend for lighter yet indulgent snacking

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A unique strategic position which combines powerful local brands with strong global product brands

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

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Centralized organization that helps in easier coordination of business activities

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Strengths:

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:

1. Marketing Factors 2. Manufacturing Factors 3. 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 Strengths

against each criterion that is summarized here in a tabular format:

Fundamental Strength

Weaknesses

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

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

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•Structure of competition

•Adaptability

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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 energy; Minimize the use of environmentally critical substances; Continuously seek improvement in the efficiency of production facilities; and

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

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

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 disposal; increase the use of recycled materials wherever possible; and

schemes.

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

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