Business Strategy (SLIDE)

The company's products are sold in 194 countries around the world • Products: is divided into 7 groups including Powdered and Liquid beverages, Waters, Milk products and Ice Cream, Nut

Business Strategy

Nestle Strategic Plan

Lecturer: PhD Pham Quoc Khanh

Student: Nguyen Thi Kieu Anh – Snow

ID number: F05-014 Class: F05A

Nestlé Profile

• Foundation: Nestlé was found in 1866 by

Henri Nestlé – a German pharmacist

• Headquarters: Vevey, Switzerland

• Chief Executive Officer: Paul Bulcke

• Industry served: Food processing industry

• Slogan: Good food, good life

Nestlé Profile

Nowadays, Nestlé S.A becomes one of the largest food and beveragecompany in the world

• Nestle operates a network of 468 factories located in 86

countries The company's products are sold in 194 countries

around the world

• Products: is divided into 7 groups including Powdered and

Liquid beverages, Waters, Milk products and Ice Cream, Nutrition and HealthCare, Prepared dishes and cooking aids, Confectionery, PetCare with more than 1 billion products are sold per day

• Services: Weight management services, food and beverage

(Nestle, 2014)

Nestlé’s operating segment

Nestlé's primary operating segments are divided into three geographic zones and three globally managed businesses

Full-Year 2013

Key Figures

(Nestle, 2014)

Role of strategy in Nestlé

• Draw the clear direction, set framework for Nestlé to follow

and implement in order to bring more benefits for customers meanwhile increasing their profits

• Prioritizes and aligns activities: All the Nestlé’s activities

will be arranged clearly and specifically Which one will be undertaken first and which one later to help company move from plan to action effectively

• Enhance unity: When the decisions are unified by managers

and Nestlé employee know exactly their responsibility and how to perform, Nestlé can reduce unnecessary conflicts among managers, employees, create friendly atmosphere and close relationship to have better performance, bring high work efficiency

1.1.1 Vision statement

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 (Nestle, 2014)

1.1 Explain strategic contexts and terminology

Nestlé Provides future

direction

Expresses a consumer benefit Is realistic

Is motivating

Must be fully communi cated

Consistently followed and measured

Improvement

Time measurable: until 2020

Evaluate vision statement

New vision statement

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,

by 2020.

1.1.2 Mission statement

“Good food, good life” is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night (Nestle, 2014)

Nestlé omer Cust

s

Pro duct

s Ser vice s

Mar kets

Concer

n for Surviva

l, Growth , Profita bility

Tech nolog y

Philos ophy

Conce pt

Self-Concern for Public Image

Concer

n for Emplo yees

Evaluation Yes Yes No No No No Yes No No

Improvement

Thro ugho

ut the worl

d

Excel as market leader

in the industry

Best techn ology

Ethical culture

Commitm ent to environme ntal sustainabil ity

Care for employ ees

Evaluate mission statement

“Good food, good life” is to provide throughout the world

with the best tasting, most nutritious choices in a wide range

of food and beverage categories and eating occasions, from

morning to night through the best technology We want to

excel as market leader in industry by establishing a

commitment to environmental sustainability based on

ethical culture as well as care for the employees

New mission statement

1.1 Explain strategic contexts and terminology

1.1.3 Nestlé objectives/Goals

• Goal: To be the leader in Nutrition Health and Wellness, and

the industry reference for financial performance, trusted by all

stakeholders

1 Financial objective: Increase one billion consumers in

emerging markets and achieve about 45% of group sales in those countries, by 2020

2 Social objective: Provide 200 billion servings of

micronutrient fortified products worldwide by 2016, with a special focus on children and women of childbearing age

3 Environmental objective: Reduce direct greenhouse gas

emissions per tonne of product by 35% compared to 2005,

by 2015

• Objectives

1.1 Explain strategic contexts and terminology

Objectives Specific Measurable Achievable Relevant Time bound

Evaluation of objectives

Nestlé’s new objectives

1 Financial objective: Increase one billion consumers in

emerging markets and achieve about 45% of group sales in those countries, by 2020 This is to be achieved through

available resources and experience in term of customer orientation and intensive marketing

2 Social objective: Provide 200 billion servings of

micronutrient fortified products worldwide with a special focus on children and women of childbearing age by 2016 by

a combination of new technology and the relentless efforts

of talent and passion of researchers

3 Environmental objective: Reduce direct greenhouse gas

emissions per tonne of product by 35% compared to 2005, by

2015 by continuing to improve energy efficiency, to switch

to cleaner fuels and to invest in renewable sources

Strategic intent

“To become The World Food Company”

A truly successful strategy is one that matches what the organization is able to achieve within its environment.

For Nestle, it is able to meet the increasing demands from global consumer because their profit and capital base enable ongoing expansion  Nestle has good strategic intent (Dransfield, 2001)1.1 Explain strategic contexts and terminology

1.1.4 Strategic intent

Core competences

• Unmatched product and brand portfolio: ranges from

global icons to local favorites

• Unmatched research and development capability: focus on

driving innovation and renovation  Successful program to increase efficiency

• Unmatched geographic presences: global market share

• People, culture, value, attitude: combines a long-term

mindset with short-term action It encompasses a passion for quality – in products(Transforming raw materials into high quality, safe food and beverage products) , in relationships (communicate with our consumers in a dynamic way), in everything we do (Nestlé, 2014)

1.1 Explain strategic contexts and terminology

1.1.5 Core competencies

1.1 Explain strategic contexts and terminology

1.2 Review the issues involved in strategic planning

1.2.1 Impact on manager

Strategic planning Impact on managers

Pricing strategy Increasing in price of milk, coffee lead to increase

products’ price Customers might go for a cheaper brand  It requires managers to be creative, flexible such as increase its price in fairness of consumer demand and lots of sales promotion.

Increasing new

product lines Develop and innovate food processing system to increase their product category  It requires

senior management to control expenses for achieving proposed plan

1.2 Review the issues involved in strategic planning

1.2.2 How to set targets

In order to set target about development and expansion of the company operations scope in emerging market or doing good things for society, Nestlé need to consider few things:

1 Revenues: Determine what revenues are required for the

business to succeed

2 Measurement of available resources: assets, human resource,

existing customers…

3 Be realistic about timelines: Based on proposed plan, Nestlé

identify time the company need to achieve the targets

 Nestlé should set up target which they can do within proposed time to ensure that it will bring benefits for company instead of financial damages, losing company image beneath customers’ eyes

1.2 Review the issues involved in strategic planning

1.2.3 When to plan and Who should be involved

Develop and innovate their strong productTrain and improve specialized skills for employees

2014 - 2018 R&D and HR

department

Advertising by mass media

Launching sales promotion

2018 - 2020 Marketing Sale and

department

governments and about specific dietary gaps in the developing world

2014 department R&D

Produce sample of micronutrient fortified products

2014 - 2016 department Production

Evaluate quality of sample regularly before

Quality control department

January 2014 – May 2014 department R&D

Hire professionals to assist some important parts in technology system

June 2014 – September 2014

HR department

Continue adopt new power-efficient

ecological technologies and take measures to reduce the production

of GHG

Oct 2014 -

2015 Engineering department

Strategic intent

1.3 Explain different planning techniques

1.3.1 BCG growth-share matrix (in millions of CHF)

RELATIVE MARKET SHARE

DOGS CASH COWS

Based on BCG Matrix above, it is easy to recognize that brands such as milk and dairy, beverage have many potential to develop Therefore, the company should invest more on these brands to maximize profitability.

0

50

100

Strategic intent 1.3 Explain different planning techniques

1.3.2 Directional Policy Matrices

Competitive Strengths

Custodial growth

Phrased withdrawal

Cash generation

Phrased

Beverages is in the position as Leader Therefore, Nestlé should focus its resources in this brand

Competitive Advantages (CA) Industry Strength (IS)

-2 Nestlé enjoys strong customer loyalty

-1 Quality product distribution network

-2 Nestlé extended product life cycle is being

ensured due to quality brand extension strategy

-2 Nestlé product are market leaders in many

+4 Resources utilization Average +4.75

Total axis X score: 3.00

A

xi

s

Y

Financial Strength (FS) Environmental Stability (ES)

+3 Net sales of 2013 was 92 billion CHF

increased by 3% as compared to 2012

+5 Net profit of 2013 was 14 billion CHF

increased by 4.3% as compared to 2012

+4 Cash flow remained very strong at CHF 15.0

billion, down slightly compared to 2012, of

Average -1.5 Total axis Y score: 1.75

-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6

-6 -5 -4 -3 -2 -1 0 1 2 3 4 5

Those planning techniques show that Nestlé has strong competitive advantage position in the market with rapid growth in some brands.This techniques helps company evaluate internal strengths of company compared with its competitors More than ever, it find out opportunities for developing strategy in the right time such as:

- Services development

- Sale promotion

- Expand market

- Acquisition of competitors

Nestlé, 2014 Nestlé Annual Report 2012

Nestlé, 2014 Nestlé Annual Report 2013

Nestlé, 2014 Nestlé in society

Riley, J., 2012 What is Strategy [Online] Available at:

http://tutor2u.net/business/strategy/what_is_strategy.htm

[Accessed 16 March 2014]