Date: July 28, 2020

Assignment

Subject: Strategic Management

Topic: Strategic Management, Internal & External Factors Analysis of Nestle Pakistan

Submitted to: Dr. Waris Ali

Submitted by: Adeel Sajid(EMBA-01)

Talal Bin Shafiq (EMBA-03)
Muhammad Asif Mukhtar(EMBA-07)
Attiq-Ur-Rehman (EMBA-10)
Muhammad Sajid (EMBA-13)

Session: 2018-2020

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 EXECUTIVE SUMMARY
Nestle is one of the best food companies not only in Pakistan but all over the
world. It has been serving this world for over one hundred and thirty years. It has
differentiated itself through its high-quality product mix and positioned itself as health
and Nutrition Company while targeting the health-conscious people throughout the
world. Nestle started its operations in Pakistan back in1988, by acquiring a diary
company Milkpak ltd. when people of Pakistan actually needed it. The Members
working in the Organization are concern about developing the high standards in the
Market. They basically focus on making sure that their products are best to use.
Since Pakistan is the fifth world‟s largest milk producing country therefore Nestle deals
mainly in dairy products. Moreover, it also sells juices, chocolates, prepared food like
noodles, baby food, infant formula milk and breakfast cereals in Pakistan.
Nestle is a low-cost leader with its efficient operations hence it provides its customers
with high quality products and sells them at a premium price. Therefore, it is earning
good profits. Nestle has set its manufacturing plants at in Karachi, Lahore, Islamabad
and Kabirwala. The milk processing plant at Kabirwala district is the Nestlé‟s world
largest milk processing plant.
When nestle introduced its products in Pakistan people were neither aware nor
accustomed to them. Therefore, nestle ran an extensive marketing campaign to educate
people and create a need for its products. Pakistan is a land where fresh eatables are
readily available. Nestle should sell the same quality of products in Pakistan as it sells
abroad. It should also introduce more brands in Pakistani market which it offers in other
markets of the world since consumers in Pakistan are becoming more demanding day
by day.

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 Table of Contents

S.No. Topic Name Page No.

1. Organization’s Introduction 4

2. Vision & Mission 4

3. Evaluation of Mission Statement 5

4. PESTLE Analysis 5-9

5. SWOT Analysis 10-13

6. Strategies required for next five years 14

7. External & Internal Factors Analysis 15

8. SWOT metrics & BCG metrics 16

9. Space Metrics & Strategies Analysis 17

10. References 18

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INTRODUCTION
Nestle Pakistan Limited is a Pakistan- based food and beverages company. The
Company is engaged in manufacturing, processing and sale of food products. Nestle
has been serving Pakistani consumers since 1988, when their parent company, the
Swiveled- based Nestle SA first acquired a share in Milkpak Ltd. Nestle Pakistan
Limited is registered on the Karachi and Lahore stock exchanges for the past ten years.
Company has been declared one of the top 25 companies on the Karachi Stock
Exchange by 2014. Nestle Pakistan aims to be a Rs.100 billion company. Nestle, as a
social company, offers tremendous opportunities for career growth and learning at
domestic and international levels. With over 8000 brands preferred for their good
quality, taste and health benefits. Nestle is the number one food company in the world.
Nestle is leading the change in the food industry as it is also the leading food company
in terms of having the largest set up of research and development in food science and
nutrition. They are uniquely positioned to provide products that help consumers live a
good life. Many Nestle brands have benefited from the active ingredients developed by
Nestle research and with over 130 years of expertise, consumers know they are getting
the best in quality when they choose a Nestle brand. Happy and healthy consumers are
at the heart of what they do. Their philosophy is summed up in the phrase "Good Food,
Good Life: and they remain committed to help consumers choose better tasting and
healthier products to help them enjoy happier, healthier lives.

VISION & MISSION

As the company continued its growth so they also develop new plans and strategies
focusing on their Mission Statement which is “Good Food, Good Life”. These are not
just Simple words there is a meaning of Existence of the Nestle Company which
describes the purpose of company‟s existence. That is, they focus on making an
influence to the social environment and operate responsibly and making food which is
good for health and utilizing the resources carefully keeping the environment safe
produces good healthy food.
Nestle wants to become a company which is preferred always, like among its
competitors the customer should choose their company. So, keeping their vision and
mission in mind they focus their products and its availability in the market and which is
easily accessed by their valuable consumer

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 Evaluation of Mission statement
# Component Y/N
1. Customers Y
2. Concern for employees Y
3. Concern for Public image Y
4. Self-concept N
5. Philosophy Y
6. Concern for survival, growth and profit N
7. Technology N
8. Markets Y
9. Product services Y

The statement includes products and services, markets and self-concept but lacks other
6 essential components. The company doesn‟t mention any values, which guides its
actions, in the statement but provides them in addition to their 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.”
Nestlé‟s vision and values address more stakeholders than the original mission and
should be combined into it to provide more information about the business. The vision
and values statement additionally include concern for survival, public image and
employees‟ components that the official statement lacks. The combined statement
would better communicate Nestlé‟s „reason for being‟ in the business to its
stakeholders.
Evaluation of External Factors
PESTLE ANALYSIS
A PESTLE analysis is used as a strategic tool to measure industry dynamics through
recognition of the core political, economic, social, technological, legal and
environmental forces/changes having influence on the industry. The PESTLE analysis
below identifies a number of forces, which have an influence on industry dynamics. Of
these forces, perhaps the most prominent are social forces, which relate to differences
in consumer behavior. Nestlé have to be able to ensure a level of adaptation, which is
appropriate to different markets driven by different cultures and consumer preferences.

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The main theme of PEST analysis is to
measure market potential and situation, by
indicating growth or decline. PEST
analysis can be used for marketing and
business development assessment and
decision-making, and the PEST analysis
encourages proactive thinking, rather than
relying on habitual or instinctive reactions.

1. Political Factors
This refers to the involvement and intervention of the government within the economy.
Nestle has to operate within the framework of laws set by Parliament, and that‟s why it
depends on political considerations. Government plays vital role by imposing the law
and regulation on the companies. Government set standard laws for companies that
has to meet otherwise they have to pay fines. The rules of government of Pakistan do
affect the company and its brand. The company policies are affected, and its budget is
also affected. Nestle is trying to meet all the standard laws which are set by the
government
Sr No Items
1 Positive tax policy
Tax rate Change, New Tax Laws and revised tax plans, FMCG‟s have to pay heavy
taxation, changes in any taxation system can badly effect Nestlé‟s productivity & sales
(profits). Nestlé‟s some product has like butter and cream which has more taxes.
If the governmental tax increases this will cause the Nestle selling price to increase too.
This will lead to a decrease in sales and the number of customers while the stock quantity
will stay the same.
Nestle also paid 15% sales tax and 18% excise duty when they direct import chiller from the
other country but mostly they purchase chillers inside the country.
In 2016 Govt impose duties on powdered milk imports and take strict action for the
implementation.
2 Labor Laws
Labor is being privileged here having all the laws. Nestle company also follow these law like
government announce minimum salaries of an employee Rs.12000. But if any labor laws
change it will affect the Nestlé‟s management all to gather because it‟s difficult to get
potential labor now a day. Nestlé‟s main aim to or key potential factor is to keep their
employees happy & contended because as one said happy employees happy management
& it leads to prosperity.
3 Laws on Hiring & Promotions
Hiring & promotion is followed by law. People with better capabilities are privileged because
they deserve it, for the betterment of the organization. As well as a well-educated & skilled
experienced person is a precious asset for the company suit should be hired on better term
&conditions and be promoted on the basis of it capabilities.
4 Environmental Protection Laws

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 They do concern for environment and contribute more and more for the betterment of
environment. Nestle‟s considers a lot about CSR, nestle is worldwide an environmental
company so as Nestle Pakistan, nestle care for poor & urban areas, in the start Nestle gave
the concept about friendly environment & to care for your environment.

5 Foreign trade Regulations

Foreign trade regulation does not affect the overall policy and the working of the Nestle
because they operate nationally not internationally. However, it affects when the condition
gets so worst. But as the last two years whole the world is suffering from great depression
so any economy of the world
6 Political instability
Government stability in new emerging economies; question of risk as part of the
internationalization process. The government stability also plays a great role for any
industry. In Pakistan government face lot of difficulty from the side of terrorism and also its
activity that badly effect environment of the country which is totally very upset. Recently in
Punjab instability of government creates lot of problem for the industry like shortage of
electricity that badly affects the industry operational process. Nestle have not much affect
this condition but in future it may be face some difficulty for operating. Changing policies of
Government effects overall industry.

2. Economic Factors
1 Inflation Rate
Now in Pakistan inflation rate is almost 22.3%, which decreases the purchasing power of
consumers. So, if any increase in inflation rate then increase in prices of Nestle products
which eventually affects the Nestle Pakistan. So, inflation rate affects mostly everyone in the
industry so as nestle but nestle by the great decision making able to retain 55% of market
share in Milk & Nestle Pure life.
But high inflation also creates higher impact on those products which transform from another
product like packed milk & powder milk because these is already sell on high prices in market
because of high quality so this whole scenario directly create impact on those organization
whole deals or manufacture these products like Nestle, it has two options in this situation
either to sustain prices or to decrease prices.
Increases the prices of light and petrol effect transportation and other costs also affect
business.
2 Interest Rate

3 Economic Growth Rate

Economy growth rate accelerate is 7% and plus which eventually affect the Nestle
productivity & sales. In 2020 the GDP growth declines to -1.55% which ultimately affect the
business industry.
4 Exchange rate
increase in dollar value and devaluation of PKR also have negative impact on Business as in
last six months dollar prices jumps 100% in Pakistan so the prices for raw materials and
logistic cost also increases.
5 Unemployment
In Pakistan unemployment increased in past years which is approximately 4.45% so this also
affect the buying power of consumer and ultimately affect the nestle sales.

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6 Rupee Devaluation
Price fluctuations due to rupee devaluation as raw material are imported. The uncertainty of
economic conditions poses a great threat as the major funds invested in the country come
from outside Pakistan. According to a recent Bloomberg report, home to one of the world‟s
top five stock markets last year, Pakistan is headed for currency devaluation. The possibility
of currency devaluation is giving investors another reason to stay away from the world‟s
newest emerging market. The currency pressure comes as Prime Minister Nawaz Sharif and
his family is at the center of an investigation into alleged corruption. The next election and the
makeup of the country‟s borrowing nearly 31 percent of outstanding government debt was in
foreign currency in the 2016 financial year, according to Moody‟s are adding to the stakes.
The persistent double-digit inflation plagued the businesses making the cost of doing
business highest in the region.
As the dollar crosses the PKR 150 it costs high for the raw materials and that leads to
increase the prices of products.

3. Social
Social or cultural environment had great impact on Nestle. Social change involves
changing attitudes and lifestyles. The social and cultural environment is constantly
changing. Different regions of country had different culture (language, beliefs, food,
family, clothing and their lifestyle). These are cultural demographic variables and
aspects which are closely linked to the market and customers need. Nestle has to
develop effective strategies in order to meet different lifestyle consumer behavior.
Nestle has to take some following social and cultural factors under consideration in
order to achieve their strategic objectives:

1 Changing consumer attitudes

Changing lifestyle – Product or services cannot be successful until company has enough
information about the consumer lifestyle. The need to adapt to different cultural settings i.e.
language, religious beliefs and family settings. Understanding of consumer behavior is crucial to
ensuring a personal approach to marketing.

2 Health Consciousness
Today, people move towards healthier products in line with government initiatives supporting
balanced diets and the dangers of sugar. Nestle by identifying this need of the people t also
producing health conscious products with more elements of pure & quality, which create the
market for Nestle & trend of its products in the market. However, when launches it Milk in 1988
back then it was not so much popular but now a day‟s people are more health conscious.
3 Generalized products
Nestle would make a marketing strategy according age distribution or gender role before
producing a new product. Nestlé tries to make their products generalized so that it suites
everyone e.g. people from any area, any culture, any age, and income will drink water. It is not
any luxury item which is used by a specific people. Nestle creates products that can suit almost
all ages. For example, Nestlé segment their products into different of age groups i.e., for infants,
they have Nestlé baby foods while young people can drink Milo, Nescafe, chocolate and
cookies. Nestle have the Maggi brand with many kinds of Spicy sauces. The product can vary in
tastes, depending on the demand and requirements of the consumers.
4 Breaking down of old traditions
The least important one perhaps is tradition as still urbanized consumers have the perception
that the arrival of the doodhwala at their home on his trusty bicycle has the fresh and natural
milk which is coming straight away from the cow and still it is this perception that only loose milk
is fresh.

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 Over the years, all companies of this sector especially the older players like Nestle in order to
convert loose milk consumer in to processed milk consumer have been making dynamic efforts
by various development program in interior Sindh. Regardless these campaigns will not change
perception of loose milk consumer overnight, but it is not impossible, it takes time and
continuous investment to create awareness of the processed milk to the consumer of loose milk.
Every product's whole period consists of a starting phase, expansion phase and maturity phase

4. Technological
Technological change has the most rapid, persistent and profound effect. It creates
opportunities for new products and product improvements and of course new marketing
techniques- the Internet, e-commerce. Nestle uses technology by taking orders via
telephone and online by internet. Moreover, nestle uses technology in various business
activities such as record of their customers and employees. Rise of social media,
consumers interacting with firms and being able to do so across a range of platforms.
Following factors affect the company.
1 New Products
Nestle are diversifying according to changing demand of customers and trends. Nestle wants to
diversify its portfolio with the change or need of market needs. E-commerce is a platform for
development for Nestle. But the risks and costs attached with such developments are high .
2 Product Innovation
Innovation is fueled by technological developments. Product innovation is becoming more
necessary for the organization because of globalization people are becoming aware about the
changes being taken place around them so in order tackle the situation nestle is focusing on
product innovation by introducing new products with help of technological factors.
3 Productivity Improvement Through Automation
There is increase in automation. Automation doesn‟t matter a lot but to some extent it contributes
towards productivity and improvement. Now by the help of technology Nestle maintain the
efficient scale of production which normally called economies of scale.
4 Total Spending on R & D
Spending on R&D is long term investment for any organization. Nestle has R&D department and
Nestle total spending on R&D 70 million. Because with true technological changes this research
& development cannot takes place. So, with the help of technological changes Nestle can
enhance its products & diversify its portfolio of products.
5 New Communication Technology
All the modern as well as traditional ways of communication are being adopted by Nestle
including own emails, letters, faxes and monthly visit indifferent offices of Nestle for better
communication among customers. Nestle has also established own web site which can be visited
any one for most recent news innovation and activities being taken in the organization. With the
technological change adoption, the whole organization can be increased.
By Nestle shifting to a more advance technology they would be able to reach a wider community
of people. The customers would be able to get any information they want from the Nestle
website. Nestle employees could also use these services to find out what are the current trends
in the market and implement those changes to better Nestlé's sales. They would be able to adjust
the products being produced to better suit the local taste and cultural flavors in each region of
country. New products could be created according to the customer's needs and popularity within
the country. Technological factors can affect Nestle massively and can help in gaining a better
understanding of their customers in different regions

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 5. Legal
The legal factors are related to the legal environment of the organization and the impact
on the demand and cost. For an instance, nestle created and provided a health and
safety covers for their employees. Nestle would pay the fee for their employees via their
free legal help scheme with personal medical/ legal cover. Some of these legal factors
affect the company:
 Changing nature of regulation.
 Need to adhere to global regulations and changes across different international
markets
 technological and industry concentration
 increasing automation
 government regulations
 technological capacity
 development risks
 increase in development costs
6. Environmental
There are many environmental factors that Nestlé needs to abide by since it is working
in the food industry. Nestle takes care for the raw materials sustainability,
infrastructure, and climate change. The company has already pledged its support to.
1 Environmental Concerns
Nestle consider a lot about the environmental factors because they are very much socially
responsible towards nature & humans. For example, nestle respects the environment and is
committed to environmentally sound business practices throughout the world, thus taking into
account the need to preserve natural resources and save energy. Increased attention directed
towards corporate social responsibility
2 Work Life Quality
Quality of work life is very safer & environment friendly company of the world as every MNC is
maintaining the same standards abroad with a slight cultural change. Moreover, the different
agricultural and livestock methods that preserve soil and protect water supply, they use the least
amount of energy and only safe chemicals.
3 Recycling
Environmental concerns from consumers including concerns over packaging/recycling. The
research and development team has also been seeking a new kind of packaging which is
environmentally friendly hence transforming those harmful materials into eco – friendly recyclable
materials that would be suitable for both the customers and the environment.

SWOT Analysis
This section presents a SWOT analysis to review the micro environment of the firm
reflecting specifically upon the strengths and weaknesses of Nestle Pakistan and the
opportunities and threats the firm must respond to through an alignment of firm
strengths to such forces. A SWOT analysis is often used, as a strategic tool to allow a

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presentation of the firm‟s resources and capabilities, which can be further, developed to
aid competitive advantage. A SWOT analysis therefore underpins the development of
future strategic options. A desirable competitive advantage is one obtained through a
minimization of threats aligned with the seizing of opportunities.
Strengths:
1 Brand Image
Making a good first impression is important, especially in business. Consumers
create an impression of the business and brand based on a variety of factors, such
as the way employees are dressed, their website, business cards, the cleanliness
of store and more. Call it superficial, but these small details are points of contact.
For over two decades, Nestlé Pakistan, have strived to bring high quality
products that have won the hearts of all Pakistanis. Their bedrock values of
respect, trust, integrity and teamwork have helped them become the premier
Nutrition, Health and Wellness Company and earn a positive brand images in the
minds of the customers.
2 Market Strategies
Marketing strategies established by the Nestle Pakistan are innovative.
Marketing strategies just like financial and sales strategies are formulated
by gauging the periodic research carried out to judge market trends.
They set prices of their own because Nestle is the trendsetter in the market.
Competitors, not really, bother price policy of the company.
Company has adopted channels for promotion such as TV, newspapers,
magazines and doctors. The advertisement budget of the company is preplanned
by the start of financial year. It is kept secret b the company.
The product is marketed aggressively in the market. Nestle is working on this
concept because they want to increase their market share. They are providing
quality products to the customers that include their service and product.
Their outlets are located all over in Pakistan regardless of big and small cities that
are easy to approach.
3 Quality Products
4 Growing Sales & Promotion
Nestle Pakistan has the major shareholder in the food industry of Pakistan.
Furthermore, Nestlé Pakistan‟s net profit-after-tax (PAT) reached at Rs11.3 billion,
recording a strong growth of 15.4 percent.
5 Market Share
6 Skilled Labor
7 Strong Supply Chain Network
8 Efficient Distribution Network

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9 Parent Support
10 Environment Friendly
Caring for water
Active on Climate Change
Safeguarding the Environment
Communication with Customer
Bio Gas Plant
Solar Energy
Paper & Board
Green Supply Chain
11 Organizational Culture
12 Large Number of offering
13 Strong Research & Development
14 Acquisition
15 Good will
16 Huge amount of Capital
17 New Technology

Weakness:
1 Target Market
2 Nestle Milk pak
3 Lack of Nutrition
4 Nestle Baby Milk
5 Nestle Pure Water
6 Complex Supply Chain Management
7 Less Proactive
8 Limited Distribution Channel
9 Stock Outs
10 No Direct Outlets
11 Packaging

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12 Distribution Cost
13 Less consumer research in some areas
14 Entering Mature Markets
15 Premium Brands

Opportunities:
1 Intangible Capabilities
2 Backward integration
3 Enhance Distribution Channels
4 Awareness
5 Eliminating Retailers
6 Coffee Market
7 4th Largest Producer of Milk
8 Govt. funding
9 Health Based Products
10 Expanding Product Lines
11 Dairy Products
12 Growth in Public income
13 Integration of new acquisition
14 Support from Foreign Investors
15 Best Practices & assistance
16 Changing Social Trends
17 International Market
18 Social Company
19 Favorable Weather Condition

Threats:

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1 Lower Loyalty
2 Economic Condition of Pakistan
3 Dynamism
4 New Technology
5 Prices of Raw Material
6 Rupee Devaluation
7 Economy of the World
8 Competitors
9 Inflation
10 Perception & price Differentials
11 Population Growth
12 Differentiated Products

STRATEGIES REQUIRED AND EXPECTED IN FUTURE

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External factor evaluation matrix

Internal factor evaluation matrix

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SWOT matrix

BCG matrix

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Space matrix

STRATEGIES AFTER ANALYSIS

1. Increase sales by allowing retailers to pay a large portion of purchases on credit
2. Capitalize on logistics and distribution channels to help counter the intense
competition from Engro Foods and Haleeb foods
3. Related diversification to increase product variety and hedge against heavy
fluctuations in due to climate and seasonal changes
4. Build a strong advertisement campaign to communicate the values of nestle
products to target consumer, to strength advantage over competitors.
5. Increase promotional activities, specially e-promotion, to further strengthen brand
image and market position

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Implementing strategies
1. Allow retailer to acquire 20% of stock on credit and negotiation similar credit terms
from own suppliers to prevent liquidity issues
2. Develop logistic network in rural areas by building secondary collection centres in
strategic towns, focusing on one province at a time
3. Retain 30% of net income and invest in R&D to develop heat resistant FMCG
products,
4. Focus advertising to communicate the nutritional aspects of Nestles products,
increase advertising frequency in summer holidays to boost demand for dairy
products and beverages
5. Develop joint venture with, or outsource e-marketing to local leading e-marketing
firm that would assist in developing, implementing, monitoring, and evaluating e-
marketing initiatives

References:
 http://www.marketing91.com/
 https://en.wikipedia.org/
 www.slideshare.net/
 http://www.nestle.com/
 http://www.strategicmanagementinsight.com/
 https://www.researchgate.net/publication/313316232_Milk_Supplies_in_Pakistan_Issues
_and_Challenges_Facing_the_Dairy_Economy
 https://www.dawn.com/news/1318665
 https://www.dawn.com/news/1321371
 https://www.nestle.pk/aboutus/quality-and-safety
 https://www.nestle.pk/aboutus/nestleinpakistan/nestle-in-pakistan

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