Nestle's internal factors were analyzed using an IFE matrix. Key strengths included its strong brand image, socially responsible reputation, and increased profits and export sales in 2009. Weaknesses included a lack of awareness among target markets and low promotional activities. The IFE matrix score was 2.99 out of 4, indicating Nestle has more internal strengths than weaknesses. The financial ratios for Nestle in 2009 were also compared to industry averages. Nestle had higher liquidity, activity, and profitability ratios but also higher solvency and debt ratios compared to industry averages.

2. HUMAN RESOURCES
MANAGEMENT
NUML LAHORE
SURFRAZ AHMED
ALI SHAIR
SAAD ISMAIL
OBAID ULLAH
MUHAMMAD IQBAL

3. Case-Study Overview
• Internal: • Analysis
– History, Nike overview, Key Facts, – SWOT Matrix
Our Brands and Stock Information – SPACE
– Nike Actual & Proposed Vision and – BCG
Mission – IE matrix
– Economic Performance – Grand Strategy Matrix
– Evolution of Financial Ratios – QSPM
– Strengths and weaknesses
• Analysis: IFE
• Possible strategies: Matrix
Analysis
• External: • Decisions
– Industry overview and comparison – Why our decision?
of financial ratios
– Manufacturing – Strategic implementation
– Opportunities and threats – Actions
• Analysis: EFE • Evaluation Procedure
– Competitors • Current Update
• Market Share
• Analysis: CPM

4. History of Nestle

5. History
• 1866-1905
• In the 1860s Henri Nestlé, a pharmacist, developed a food for babies who were
unable to breastfeed. His first success was a premature infant who could not
tolerate his mother's milk or any of the usual substitutes. sold in much of Europe.
• 1905-1918
• In 1905 Nestlé merged with the Anglo-Swiss Condensed Milk Company. By the early
1900s, the company was operating factories in the United States, Britain, Germany
and Spain.
• 1918-1938
• After the war Government contracts dried up and consumers switched back to fresh
milk. However, Nestlé's management responded quickly, streamlining operations
and reducing debt. The 1920s saw Nestlé's first expansion into new products, with
chocolate the Company's second most important activity
• 1938-1944
• Nestlé felt the effects of World War II immediately. Profits dropped from $20 million
in 1938 to $6 million in 1939. Factories were established in developing
countries, particularly Latin America. Ironically, the war helped with the introduction
of the Company's newest product, Nescafé, which was a staple drink of the US
military. Nestlé's production and sales rose in the wartime economy.

6. • 1944-1981
• Nestlé's growth in the developing world partially offset a slowdown in the Company's
traditional markets. Nestlé made its second venture outside the food industry by
acquiring Alcon Laboratories Inc..
• 1981-1995
• Nestlé divested a number of businesses1980 / 1984. In 1984, Nestlé's improved bottom
line allowed the Company to launch a new round of acquisitions, the most important
being American food giant Carnation.
• 1996-2002
• The first half of the 1990s proved to be favorable for Nestlé: trade barriers crumbled and
world markets developed into more or less integrated trading areas. Since 1996 there
have been acquisitions including San Pellegrino (1997), Spillers Petfoods (1998) and
Ralston Purina (2002). There were two major acquisitions in North America, both in 2002:
in July, Nestlé merged its U.S. ice cream business into Dreyer's, and in August, a USD 2.6bn
acquisition was announced of Chef America, Inc.
• 2003 +
• The year 2003 started well with the acquisition of Mövenpick Ice Cream,
enhancing Nestlé's position as one of the world market leaders in this product
category. In 2006, Jenny Craig and Uncle Toby's were added to the Nestlé portfolio and
2007 saw Novartis Medical Nutrition, Gerber and Henniez join the Company.

7. Overview
• Nestlé is the world's leading Nutrition, Health and Wellness Company. It is
committed to increasing the nutritional value of our products while improving the
taste. The Nestlé Company has aimed to build a business as the world's leading
nutrition, health and wellness company based on sound human values and
principles
• While Nestlé Corporate Business Principles will continue to evolve and adapt to a
changing world, basic foundation is unchanged from the time of the origins of
their Company, and the basic ideas of fairness, honesty, and a general concern for
people.
• In the 140 years since then, we have expanded around the world and developed a
range of products designed to suit every taste, need and cultural preference. Our
distinctive seal is recognised everywhere as a guarantee of quality and
healthfulness

8. OUR BRANDS

9. Our Brands
• We believe that food plays a key role in achieving a well-balanced person. And so our
philosophy is Good Food for a Good Life!
• At Nestlé, our products are developed keeping our consumers, their preferences and
health in mind.
• Millions of consumers the world over trust Nestlé products for good reason: when
they choose a Nestlé product they have the satisfaction of choosing quality, taste,
variety, convenience and the good nutrition.
• Brand Names
• Milk, Dairy and Chilled Dairy
• Beverages
• Bottled Water
• Baby Food
• Food
• Breakfast Cereals
• Chocolate and Confectionary

11. Vision
“The Nestlé global vision is to be the leading health,
wellness, and Nutrition Company in the world”

12. Mission Statement
“Good Food is the primary source of Good Health throughout life. We strive
to bring consumers foods that are safe, of high quality and provide
optimal nutrition to meet physiological needs. In addition to Nutrition,
Health and Wellness, Nestlé products bring consumers the vital
ingredients of taste and pleasure”
1. Customers Yes
2. Products or services Yes
3. Markets No
4. Technology No
5. Concern for survival, growth, and profitability No
6. Philosophy No
7. Self-concept Yes
8. Concern for public image No
9. Concern for employees No

13. Mission Statement (Proposed)
“Good Food is the primary source of Good Health throughout life.
We strive to bring consumers foods that are safe, of high
quality and provide optimal nutrition to meet physiological
needs with the best technology around the globe. In addition
to Nutrition, Health and Wellness, Nestlé products bring
consumers the vital ingredients of taste and pleasure that is
matched by none. We want to excel as market leader in the
industry with an ethical culture and care for its employees.”

14. Management

15. Financial Performance

16. Investment Projects
• Total capital expenditure for the year reached P KR 2.3 billion, with the
most significant projects listed below:
• Investments in 2010 of approximately P KR 2.6 billion are planned for milk
collection field development, and upgrading of existing production
facilities as part of our long-term infrastructure plan.

17. THE INPUT STAGE

18. IFE Internal Factor Evaluation Matrix
Key Internal Factors Weight Rating Weighted Score
Strengths
Socially Responsible Company 0.03 3 0.09
Nestle products enjoy strong brand image 0.07 3 0.21
Sales force as a major physical resource strength 0.05 3 0.15
Quality product distribution networks in country 0.08 2 0.16
Net Profit increased by 94% in 2009. 0.20 4 0.80
Price earning ratio decreased from 38.9 to 18.8 0.05 3 0.15
Export Sales increased by 48% to PKR 3.3 billion 0.18 4 0.72
Weaknesses
Lack of awareness among target market 0.04 2 0.08
Nestle milk always stands at last because of low advertisement. 0.09 2 0.18
Revenue from confectionary decreased by 14% 0.08 2 0.16
Low credit sales and profit margin to retailers 0.05 2 0.10
Weak promotional activities through websites 0.05 3 0.15
Cant launch expensive brand due to low income groups 0.03 1 0.03
Total 1.00 2.99

19. Key Ratios: Overall Comparison (2009)
Ratios 2009 Industry
Liquidity Ratios:
Current Ratio 1.11 1.19
Quick Ratio 0.37 .42
Solvency Ratios:
Long Term Debt to Equity 1.94 .47
Long Term Debt to Assets 0.89 .126
Debt-to-Equity Ratio 1.37 1.1
Times-Interest-Earned Ratio 10.49 7.2
Activity Ratios:
Inventory Turnover Ratio 9.2 4.56
Average Age of Inventory (Days) 40 102
Total Assets Turnover Ratio 2.3 1.23
Receivable Turnover Ratio 119.5 67.74
Average Collection Period (Days) 4 5
Fixed Assets Turnover 3.51 1.23
Profitability:
Gross Profit Margin 29% 30.86
Net Profit Margin 7% 5.8
Return on Assets 44% 41.41
Return on Equity 40% 48.9
Earning per Share 66.27 91.62
Price-Earning Ratio 18.8 25.45
Growth Ratios
Sales +20%
Net Income +94%
Earning Per Share +94%

20. EFE External Factor Evaluation Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Few and weak competitors in the market 0.12 2 0.24
Disposable income increased by 3.6% 0.07 3 0.21
Consumer expenditure on food has increased by 3.6% 0.09 4 0.36
Population density increased by 2.18% (per sq.km) 0.05 3 0.15
Credit policy can be adopted to increase sales 0.03 3 0.09
Potential in cold dairy market 0.02 3 0.06
All companies contribute only 2% to processed milk market 0.12 4 0.48
Pakistan as 7th largest milk producing country with milk output of 200 billion liters 0.12 3 0.36
Increase in consumer food industry by 14% 0.05 4 0.20
Threats
Engro and Shakarganj as major competitors 0.14 3 0.42
Market segment growth could attract new entrants 0.04 2 0.08
Taste of the consumer has already developed 0.02 2 0.04
Legal & ethical issues 0.01 2 0.02
Economic slow down can reduce demand 0.01 2 0.02
Effect of seasonality upon sales 0.05 3 0.15
Strong advertisement by major competitors 0.08 3 0.24
Total 1.00 3.02

21. CPM Competitive Profile Matrix
Nestle Pakistan Engro Foods Shakarkanj Foods
Critical Success factors Weights Rating Weighted Rating Weighted Rating Weighted
Score Score Score
0.0 to 1.0 1 to 4 1 to 4 1 to 4
Market Share 0.12 3 0.36 2 0.24 1 0.12
Inventory System 0.05 3 0.15 2 0.10 2 0.10
Financial Position 0.20 4 0.80 2 0.40 3 0.60
Product Quality 0.15 4 0.60 3 0.45 3 0.45
Consumer Loyalty 0.07 3 0.21 2 0.14 1 0.07
Relationship with Suppliers 0.03 3 0.09 3 0.09 2 0.06
Global Expansion 0.06 3 0.18 1 0.06 1 0.06
Organization Structure 0.02 3 0.06 2 0.04 1 0.02
Production Capacity 0.05 3 0.15 2 0.10 2 0.10
Advertising 0.15 2 0.30 4 0.60 3 0.45
Efficient cost Management 0.05 3 0.15 3 0.30 2 0.20
Product R&D .05 3 0.15 2 .04 2 .04
Totals 1 3.20 2.56 2.27

22. THE MATCHING STAGE

24. SPACE SPACE MATRIX
Financial Strength
Nestle’s net sales increased by 20% in 2009 as compared to 2008 3
Net profit increased by 94% in 2009 as compared to 2008 5
Debt equity ratio changes from 63:37 to 66:34 3
Price earnings ratio in 2009 was 18.8 as compared to 2008 38.9 5
Return on capital employed increases by 40% 4
Average financial strength 4
Industry Strength
Increase in consumer food industry by 14% 5
All companies contribute only 6% to processed milk market 4
Market segment growth has attracted new entrants to increase profit potential 5
Due to ease of entry in market, Engro foods, Shezand foods and Shakarganj are properly
utilizing their resources 4
Average Industry Strength 4.5
Competitive Advantage
Nestle enjoys strong customer loyalty -2
Quality product distribution networks in country -1
Nestle extended product life cycle is being ensured due to quality brand extension strategy -2
Nestle product are market leaders in many product categories -2
Average competitive advantage -1.75
Environmental Stability
Economic slowdown can reduce the demand -2
Fluctuating rate of inflation in the country -2
Price range of competing products -1
Average Environmental Stability -1.75

26. BCG
% Market % Growth
Brands Sales % Sales Profit % Profit
Share Rate
Milk and Dairy 13993 34 1082 38 100 +15
Beverages 7820 19 661 20 85 +10
Bottled Water 9054 22 511 17 100 +3
Confectionary and
Chocolate 1646 4 150 5 31 -15
Baby Food 5350 13 331 11 60 -5
Foods and Cereals 3293 8 270 9 40 8
Total 41156 100 3005 100 100

27. BCG…

28. GSM

29. THE DECISION STAGE

30. QSPM
Acquisitions No Aquisitions
Shangrilla &
Young’s food
Key factors Weights AS TAS AS TAS
OPPERTUNITIES
Few and weak competitors in the market 0.12 4 0.48 2 0.24
Disposable income increased by 3.6% 0.07 - -
Consumer expenditure on food has increased by 3.6% 0.09 3 0.27 1 0.09
Population density increased by 2.18% (per sq.km) 0.05 3 0.15 2 0.10
Credit policy can be adopted to increase sales 0.03 - -
Potential in cold dairy market 0.02 - -
All companies contribute only 2% to processed milk market 0.12 - -
Pakistan as 7th largest milk producing country with milk output of 200 billion liters
0.12 - -
Increase in consumer food industry by 14% 0.05 4 0.20 2 0.10
THREATS
Engro and Shakarganj as major competitors 0.14
Market segment growth could attract new entrants 0.04 3 0.12 4 0.48
Taste of the consumer has already developed 0.02 1 0.02 4 .08
Legal & ethical issues 0.01 - -
Economic slowdown can reduce demand 0.01 2 0.02 3 .03
Effect of seasonality upon sales 0.05 - -
Strong advertisement by major competitors 0.08
1.00

31. QSPM(Continued)
Acquisitions No Aquisitions
Shangrilla &
Young’s food
Weights AS TAS AS TAS
Key factors
STRENGHTS
Socially Responsible Company 0.03 - -
Nestle products enjoy strong brand image 0.07 2 0.14 1 0.07
Sales force as a major physical resource strength 0.05 - -
Quality product distribution networks in country 0.08 - -
Net Profit increased by 94% in 2009. 0.20 3 0.60 1 0.20
Price earnings ratio decreased from 38.9 to 18.8 0.05 2 0.10 1 0.05
Export Sales increased by 48% to PKR 3.3 billion 0.18 3 0.54 1 0.18
WEAKNESSES
Lack of awareness among target market 0.04 - -
Nestle milk always stands at last because of low Advertisement.
0.09 - -
Revenue from confectionary decreased by 14% 0.08 - -
Low credit sales and profit margin to retailers 0.05 1 0.05 3 0.15
Weak promotional activities through websites 0.05 - -
Cant launch expensive brand due to low income groups 0.03 2 0.06 4 0.12
Total 1.00 2.75 1.89

32. Matrix Analysis
Alternative Strategies Space BCG Grand Strategy Matrix Count
Back ward integration X X 2
Forward integration X X 2
Horizontal integration X X X 3
Product Development X X X 3
Market Penetration X X 2
Market Development X X 2
Related Diversification
Unrelated diversification
Retrenchment
Divestiture
Liquidation

33. IMPLEMENTATION STAGE

34. Decision
• This seemed to an important step where we had to choose
either to go for a horizontal integration or more product
development. The interesting fact was that from 2008-2009
Nestle Pakistan introduced three new products into the
market
• The major new product launches the year 2009
• Included: NESQUIK milk enhancer, NIDO BUN YAD,
LACTOGEN GOLD, and CERELAC fruit cereals.
Our Recommendation:
• Considering this fact now we recommended Nestle Pakistan
to Acquire Shangrila foods and young’s food to excel as a
market leader for the year 2010.

35. Why Horizontal strategy
Reason Behind
• Nestle SA expands globally either through its
own brand or the acquisitions of National
brands, considering this fact it seems a critical
time for Nestle SA to expand through a
National brand.

36. Evaluations
• NESTLE annual financial reports
• Sales and profits reports (on-line and off-line)
based on sales of newly acquired companies.
• Frequent management meetings between the
Top Management at the cooperate levels
through Evaluation reports