Nestle Malaysia analysis

Table of Content

Nestle was founded in 1886 by Henri Nestle. It started off with one man’s initiatives to produce infant formula (for infants who are intolerant to their mother’s milk) and grew into a multi-national cooperation worldwide. Nestle has more than 250,000 employees worldwide and factories all around globally. Nestle is more than just the largest food and beverage Company in the world. It is now evolving as the world’s leader in nutrition, health and wellness. From the start, nutrition has been at the core of their business.

However, today Nestle place far greater emphasis on it and on health and wellness. Food and beverage play an increasingly important role in people’s lives not only because of the enjoyment and social pleasure of eating together, but more and more in terms of personal health and nutrition. Although this is an important aspect, consistent quality and safety, as well as value-for-money and convenience, all play a part. Above all, great taste is fundamental to Nestle’s products and consumers’ appreciation of good food.

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For continued success and growth, Nestle is committed to the consumer and focused on meeting their needs, hence building consumer trust in the Company as well as in Nestle brands and products. The Company will go on offering high quality, safe and trusted food and beverage products, providing nutrition, health and wellness, delighting Nestle consumers day after day. 1. 1 NESTLE IN MALAYSIA Nestle’s commitment to providing quality products to Malaysians dates back almost 100 years ago.

Nestle began in Malaysia in 1912 as the Anglo-Swiss Condensed Milk Company (Susu Cap Junjung) in Penang and later, growth and expansion made a move to Kuala Lumpur in 1939. Since 1962, with its first factory in Petaling Jaya, Nestle Malaysia now manufactures its products in 7 factories and operates from its head office in Mutiara Damansara. The Company was publicly listed on the KLSE now known as Bursa Malaysia Berhad on 13 December, 1989. Today, the Company employs more than 5000 people and manufactures as well as markets more than 300 Halal products in Malaysia.

Its brand name such has MILO®, NESCAFE®, MAGGI®, NESPRAY® and KIT KAT® have become trusted household names and enjoyed for generations. As part of Nestle’s journey towards Nutrition, Health and Wellness, Nestle, through its vision of Nourishing Malaysia, continues to invest in research and development, innovate further and renovate existing products to ensure they are more nutritious and healthier by reducing salt, sugar, and fats content to complement the Government’s efforts via the 10-Year National Plan of Action for Nutrition to create a healthier and more informed Malaysian society.

Nestle reaches out to the community everyday and in multitude ways. From helping single mothers to underprivileged children, nourishing budding athletes to mentoring programmes, and bringing nutrition awareness through various activities – Nestle is firmly committed to its promise of Nourishing Malaysia. Today, as it continues growing with the nation, Nestle actively seeks avenues in which it can promote healthy lifestyles and wellness in Malaysia as part of its promise of Good Food, Good Life.

At Nestle, they define sustainable development as the process of improving the world’s access to better quality food, while contributing to long-term social and economic development, and preserving the environment for future generations. As the world’s leading food company and with over 100 years of doing business in Malaysia, Nestle has contributed towards the well-being of Malaysians not only through its high quality products, but has also played a role in social development and environment conservation.

In line with the Nestle position as “a trusted food, nutrition and wellness company”, they are focused on nourishing Malaysians to achieve overall wellness and deliver their promise to bring “Good Food, Good Life” to all members of society. The core of their business is based on the Nestle Corporate Business Principles, which set out clear guidelines to every Nestle employee on how to conduct business in an ethical and transparent manner.

Just as their founder Henri Nestle dedicated his life to the community by reducing the infant mortality rate through the development of his life-saving nourishing formula nearly 140 years ago, Nestle will continue to earn the trust and serve the needs of their consumers, employees, shareholders and society as a whole. As the interest in corporate social responsibility grows, the public is interested to know about the companies behind the products they buy. This more coming essay will provide an insight into how Nestle’s practise and implement the

corporate business principles based on integrity, sound values and a long-term approach to contribute towards sustainable development where they have direct influence on the economy, community and the environment. 2. 0 MANAGEMENT PLAN 2. 1 NESTLE MALAYSIA’S ORGANISATION STRUCTURE Chart 1: Nestle Malaysia Organisation Structure 2. 2 NESTLE MALAYSIA’S ORGANISATION CHART Chart 2: Nestle Malaysia Organisation Chart 2. 2. 1 Brief Description on Nestle Malaysia’s Board of Directors Mr. Alois Hofbauer is the Managing Director of Nestle Malaysia effective 1st February 2013.

He assumed his position on the Company’s Board of Directors on 22 February 2013 and is also responsible for the Singapore Region. Mr. Hofbauer was previously the Managing Director of Nestle Lanka Plc. , Sri Lanka. Under his leadership, the Company ended the year as one of the top 5 best performing companies on the Colombo Stock Exchange in terms of market capitalization. Nestle Lanka has also seen a 20% growth and been awarded a number of prestigious accolades for the Company’s contribution to the economic and social development of the Country.

Tan Sri Dato’ Seri Syed Zainol Anwar Ibni Syed Putra Jamalullail was appointed as a Non-Independent, Non-Executive Director of the Company on 25 February 2002, and subsequently reclassified as an Independent, Non-Executive Director on 5 November 2004. He is also a member of the Audit Committee. He commenced his career in 1975, with Malaysian Airlines Systems Berhad as the Financial Accountant, before moving on to hold senior positions in various companies such as Price Waterhouse Australia, D & C Nomura Merchant Bank Berhad, Amanah Merchant Bank Berhad, Mega SPJ Sdn. Bhd. , Coral Land Sdn. Bhd.

, Amanah Capital Partners Berhad and he was also the Investment Panel Chairman of Lembaga Tabung Haji. Tan Sri Datuk (Dr. ) Rafiah Binti Salim is also a member of the Audit Committee and the Compensation Committee. She has excellent service records in the public and private sectors, and at international level, having served as a Lecturer, Deputy Dean and Dean at the Law Faculty of University Malaya, as the Assistant Secretary General for the United Nations [“UN”] Human Resource Management in New York, as the Assistant Governor of the Central Bank of Malaysia, and as a Human Resource General Manager with Malayan Banking Berhad.

She was also previously the Executive Director of the International Centre for Leadership in Finance and in 2006, she was appointed as the first female Vice-Chancellor in Malaysia, attached to the University of Malaya Dato’ Mohd. Rafik bin Shah Mohamad was appointed as a Non-Indepenent, Non-Executive Director of the Company on 1 June 2007 and subsequently, he was re-classified as an Independent, Non-Executive Director on 7 August 2008. He is also a member of the Audit Committee and the Chairman of the Compensation Committee.

Dato’ Mohd. Rafik bin Shah Mohamad is a qualified Chartered Accountant from the Malaysian Institute of Accountants and is a member of the Association of Chartered Certified Accountants [“ACCA”], United Kingdom. He commenced his career as an Analyst with Esso Malaysia Berhad in 1973 and before joining Nestle in 1981, he held senior finance positions in several local companies. Dato’ Frits van Dijk was appointed as a Non-Independent, Non- Executive Director of the Company on 26 April 2006.

He graduated with a Bachelor’s Degree in Economics from the HES [School of Economics] at the University of Rotterdam, the Netherlands, and has also attended the Executive Development Program at the International Institute for Management Development [IMD], in Lausanne, Switzerland. Dato’ Frits van Dijk has served the Nestle group of companies for the last 40 years, starting from 1970 as a Sales Representative of Nestle UK and presently, he is the Executive Vice President and Head of Zone Asia, Oceania, Africa and Middle East of Nestle S. A.

Prior to his current position, he has held various senior positions within the Nestle group of companies in various countries, such as India, Philippines, Sri Lanka and Japan. Tan Sri Datuk Yong Poh Kon was appointed as a director of the Company on 21 April 2011. He is also a member of the Nomination Committee. He is currently the Managing Director of Royal Selangor International Sdn. Bhd. , manufacturer and exporter of pewter products. He graduated from the University of Adelaide with First Class Honours in Mechanical Engineering in 1968.

For over three decades, Tan Sri Datuk Yong Poh Kon has been associated closely with the Federation of Malaysian Manufacturers [FMM], and is currently its Immediate Past President after completing his 3-year tenure as FMM’s President from 2006-2008. He was recently elected Chairman of ICC Malaysia. Tan Sri Datuk Yong Poh Kon has served as a Board member of the Malaysian Productivity Corporation, Malaysian Industrial Development Authority and Bank Negara Malaysia.

He was also a Member of the National Economic Consultative Council [MAPEN I and II] and as a founding Commissioner of the Malaysian Communications and Multimedia Commission. 2. 3 BUSINESS PARTNERS 1. Malaysian International Chamber of Commerce and Industry – MICCI is the oldest chamber of commerce in Malaysia. Its history dates back to 1837. Today, the MICCI serves businesses which have an international shareholding, international employees or where international interests are involved.

The MICCI attracts a wide cross section of Malaysian business areas with members representation approximately 30% manufacturing, 15% trading, 15% banking and financial services and 40% other services. More than 30 nationalities are represented amongst the membership. It has a current membership of over 1000 organisations. The combined net worth of Chamber members exceed RM110 billion. Chamber members employ more than 500,000 employees. The MICCI coordinates the experience and expertise of members to maintain an influential voice in Malaysian business and government affairs.

2. The Federation of Malaysian Manufacturers – The Federation of Malaysian Manufacturers (FMM) is Malaysia’s premier economic organisation. Since its establishment in 1968, the FMM has consistently led Malaysian manufacturers in spearheading the nation’s growth and modernisation. Today, as the largest private sector economic organisation in Malaysia representing over 2,000 manufacturing and industrial service companies of varying sizes, the FMM is the officially recognised and acknowledged voice of the industry. 3.

Business Council for Sustainable & Responsibility Malaysia – Business Council for Sustainability & Responsibility Malaysia (BCSRM) is a national organisation comprising business leaders from various industries in responsible and sustainable practices in-line with the global sustainability agenda. BCSRM’s core activities are Capacity Development, Awareness Building, Advocacy and Thought Leadership. BCSRM acts as a regional network partner of the World Business Council for Sustainable Development (WBCSD) 2. 4 VISION OF NESTLE

To be the leader in Nutrition, Health and Wellness Company by delivering world-class products of the highest consistent quality, reliability and convenience based on business excellence principles throughout the operation. 2. 5 MISSION OF NESTLE To enhance the quality of life with good food and beverages, everywhere, so people could live a healthier life. In order to achieve their vision and mission, Nestle Nutrition Research Centre (R&D) pays great attention to understand the consumers’ nutritional and emotional needs and utilise today’s world superior science and technology to produce high quality products to the world 2.

6 BUSINESS PRINCIPLE 2. 6. 1 Nestle Malaysia’s Corporate Business Principles The Nestle Corporate Business Principles are at the basis of Nestle’s company’s culture, which has developed over the span of 140 years. Since Henri Nestle first developed his successful infant cereal “Farine Lactee”, Nestle has built business on the conviction that to has long-term success for their shareholders, not only have to comply with all applicable legal requirements and ensure that all activities are sustainable, but additionally they have to create significant value for society. At Nestle they call this Creating Shared Value.

Since 2011, a systematic and comprehensive modular training programme is being rolled out on the various components of the Corporate Business Principles. The depth and focus of the trainings is established in accordance with the materiality for the different functions within the company. For example, in 2011 the first step of the training on the human rights components focused on managers and employees in countries of higher human rights risks as a priority. In 2012, major efforts will be on training programs related to Management and Leadership, Conditions of Work and Employment and Compliance.

Nestle’s Corporate Business Principles will continue to evolve and adapt to a changing world, Nestle’s basic foundation is unchanged from the time of the origins of the Company, and reflects the basic ideas of fairness, honesty, and a general concern for people. Nestle’s Business Principles are taking into account local legislation, cultural and religious practices: 1. Nutrition, Health and Wellness – Nestle’s core aim is to enhance the quality of consumer’s lives every day, everywhere by offering tastier and healthier food and beverage choices and encouraging a healthy lifestyle.

Nestle express this via their corporate proposition ‘Good Food, Good Life’. The meaning of ‘Good Food, Good Life’ – Insufficient access to good food could result in nutritional deficiencies, malnutrition and other complex issues, which is why Nestle believes that Good Food is the foundation of Good Life 2. Quality Assurance and product safety – Everywhere in the world, the Nestle’s name represents a promise to the consumer that the product is safe and of high standard. 3.

Consumer Communication – Nestle’s are committed to responsible, reliable consumer communication that empowers consumers to exercise their right to informed choice and promotes healthier diets. They respect consumer privacy. 4. Human rights in Nestle’s business activities – Nestle’s fully support the United Nations Global Compact’s (UNGC) guiding principles on human rights and labour and aim to provide an example of good human rights’ and labour practices throughout their business activities. International Labour Organisation 5. Leadership and personal responsibility – Nestle’s success is based on their people.

They treat each other with respect and dignity and expect everyone to promote a sense of personal responsibility. Nestle recruit competent and motivated people who respect their values, provide equal opportunities for their development and advancement, protect their privacy and do not tolerate any form of harassment or discrimination. 6. Safety and health at work – Nestle are committed to preventing accidents, injuries and illness related to work, and to protect employees, contractors and others involved along the value chain. 7.

Supplier and customer relations – Nestle require their suppliers, agents, subcontractors and their employees to demonstrate honesty, integrity and fairness, and to adhere to their non-negotiable standards. In the same way, Nestle are committed towards their customers. 8. Agriculture and rural development – Nestle contribute to improvements in agricultural production, the social and economic status of farmers, rural communities and in production systems to make them more environmentally sustainable. 9. Environmental sustainability – Nestle commit themselves to environmentally sustainable business practices.

At all stages of the product life cycle they strive to use natural resources efficiently, favour the use of sustainably-managed renewable resources, and target zero waste. 10. Water – Nestle are committed to the sustainable use of water and continuous improvement in water management. They recognise that the world faces a growing water challenge and that responsible management of the world’s resources by all water users is an absolute necessity. Nestle’s commitment to Water through Creating Shared Value. 2. 7 NESTLE FUNDAMENTAL IN DOING BUSINESS – CREATING SHARED VALUE 2.

7. 1 Creating Shared Value Concept’s Model in Nestle Chart 3: Creating Shared Value Model Concept – Creating Shared Value (CSV) is a fundamental part of Nestle’s way of doing business that focuses on specific areas of the Company’s core business activities where value can best be created both for society and shareholders. Creating Shared Value says that for business to be successful in the long run, it must consider the needs of two primary stakeholders at the same time: the people in the countries where we operate and Nestle’s shareholders.

Any business that thinks long? term and follows sound business principles creates value for society and shareholders through its activities, e. g. in terms of jobs for workers, taxes to support public services, and economic activity in general. But Creating Shared Value goes one step further. A company consciously identifies areas of focus, where shareholders’ interest and society’s interest strongly intersect, and where value creation can be optimised for both.

As a result, the company invests resources, both in terms of talent and capital, in those areas where the potential for joint value creation is the greatest, and seeks collaborative action with relevant stakeholders in society. 2. 8 HUMAN RESOURCES People are an organisation’s most important asset, as without them, strategies could not be executed effectively. Their contribution helps companies fulfil their corporate responsibility obligations towards other stakeholders and the environment.

Since 1912 Nestle was established in Malaysia, they employed more than 5,000 people, has 7 factories and 1 national distribution centre. 2. 8. 1 Benefit Offered Continuous Learning – In line of its culture of excellence, Nestle employees are valued for behaviours which reflect:- Performance – consistently achieve their deliverables and add value to the organization. Unlocking of Potential – demonstrate capability beyond their current scope of function and show high performance deliverables.

Positive Values – demonstrate the courage and ability to handle stress, being open minded and able to create a climate of innovation. Corporate Values – The Nestle Group has always maintained a set of values and principles on how they should treat each other, the company and how they should do business. They believe that the values chosen for them to focus on – Trust, Respect, Involvement, and Pride will help them run a successful business and provide an attractive place for all of them to work in. Rewarding Career – Nestle is committed to providing its employees with an attractive career in which they can flourish.

Nestle’s employees are given the opportunity to grow and advance in their careers whilst enjoying a competitive remuneration package in an engaging work environment. Nestle also developing their people to achieve their maximum potential. In a learning organization such as ours, the opportunities are endless for you to learn and develop. Nestle will provide many avenues to develop talents. Under Performance Management System, an array of Learning and Development Programs and opportunities for Overseas Assignments, will help to groom and prepare their people to become a wholesome part of Nestle’s Global pool of talents.

Balanced Quality Work life – Nestle being a Nutrition, Health and Wellness Company, they recognize the importance of finding the right balance between being at work and home. The Nestle Recreational Club, Reaching Out to Community & Kids (ROCKs) Program and The Management team often encourage Work Life Balance by giving the opportunity to employees to participate in community activities, employee gathering’s, sports activities, Family Day and many more.

These fun and exciting activities are carried out throughout with the participation of all levels of employees. At Nestle, they believe a happy and well-rounded employee helps make Nestle, a GREAT place to Work. Some of the recent activities happenings at Nestle; Nestle HOU Gathering, NRC Treasure Hunt and Tele-match, Nestle Futsal Tournament Nestle Management Trainee Programme – Pursue greater progress at the world’s largest food and Beverage Company with a 2-year fast-track programme. Designed to speed up

the mastery of management techniques and real-world skills in a specific area of expertise and across functions, this fast-track programme will swiftly propel high-performing young talents to key positions and impactful roles within the global food giant. Nestle is voted Malaysia’s 100 Leading Graduate Employers of 2012. Nestle Internship Programme – Gain valuable hands-on exposure and mentoring at the world’s largest food and Beverage Company. Nestle is voted Malaysia’s 100 Leading Graduate Employers of 2012. 2. 9 NESTLE MALAYSIA OPERATION PLAN

Creating Shared Value (CSV) is an integral part of how Nestle Malaysia conducts their business and is embedded in their operations. It is Nestle’s business strategy, which states that they must not only create value for their shareholders but for society as well. The goal is to create shared value as a company such that our activities and initiatives will, directly or indirectly, have a value preposition for the company and society in general. 2. 9. 1 Development of CSV Strategy Globally and How It Is Rolled Out In Malaysia Chart 4: Development of CSV Strategy Globally and How It Is Rolled Out In Malaysia

Stage 1 – Global Development of CSV At the global level, there is the Nestle CSV Advisory Board that provides the company with a diversity of informed ideas, recommendations and feedback, which will help to ensure sound development, sustainability and positive social and economic impact of the CSV business strategy. The advisory board is composed of world leading experts in the areas of corporate strategy, Nutrition, Water and Rural Development. These experts also analyse the Nestle’s value chain, suggest potential actions and participates in the annual CSV forum.

Ideas and recommendations are then cascades them down to the various Nestle markets for implementation. Stage 2 – Local Implementation of CSV In Nestle Malaysia CSV Council is formed to ensure that CSV is present across all categories and operations. The council consist of representatives from all the Business Unit and Support Function and is headed by the Group Corporate Affairs Department (GCAD). The representatives are responsible for ensuring that all activities carried out are in line with the Company’s policies on sustainable and CSV. They are expected to take the lead in mapping out their Unit’s CSV initiatives.

They also serve as Global Reporting Initiatives (GRI) Champions, and are responsible for monitoring the activities and the measurements required, as well as ensuring that proper reporting procedures are followed based on the GRI reporting standards and guidelines. 2. 9. 2 How CSV embedded in the business and shared with the top management in Nestle Malaysia Chart 5: How CSV embedded in the business and shared with the top management in Nestle Malaysia Based on Chart 5, Marketing Business Strategy is developed once every three years by each Business Unit.

Once these plans are finalised by each business unit, they are executed by the Business Unit and monitored by the Business Executive Managers (BEMs) 2. 9. 3 Creating Shared Value at Each Stage of the Value Chain Chart 6: Creating Shared Value at Each Stage of the Value Chain Step 1 – Starting from agriculture and rural development. Nestle get value from supply of high quality raw materials is secured through research and development and expertise from suppliers. Product quality will improved from community relationships. Example feedback from community.

Through R&D, consumption of natural resources can be reducing. Also for society, Nestle get support from farmers and improved yields and increase income among farmers. Step 2 – Environment, Manufacturing and People. Value for Nestle is they could lower manufacturing and distribution costs by investing in local manufacturing plants. Moreover, through this investing they create job opportunity in local communities. Step 3 – Products and Consumers. Through product in market, Nestle is building the brand through responsible marketing.

Through introduction of products Nestle entering new and emerging markets. Society get benefit through widening access to nutritional products that consumers prefer. As a result, increasing value and incomes sales will generate local investments and economic growth and achieving competitive shareholder returns. 2. 10 NESTLE MALAYSIA’S FACILITIES 2. 10. 1 Headquarters Nestle Malaysia’s head office is located in Mutiara Damansara. Their manufacturing facilities are based in Petaling Jaya and Shah Alam in Selangor, Chembong in Negeri Sembilan as well as in Kuching, Sarawak.

The state-of-the-art National Distribution Centre is located in Bukit Raja, Klang, Selangor. Meanwhile, other office(s) is in Kuantan, Pahang. 2. 10. 2 Factories 2. 10. 2. 1 Nestle Manufacturing (Malaysia) Sdn Bhd 1. Selangor Petaling Jaya, Shah Alam Complex, Batu Tiga 2. Negeri Sembilan – Rembau 3. Sarawak – Kuching 4. Perak – Batu Gajah 2. 10. 2. 2 Nestle Ice Cream 1. Negeri Sembilan – Rembau 2. Sarawak – Kuching 3. 0 MARKET FEASIBILITY PESTLE ANALYSIS 3. 1 TARGET MARKET FOCUSING ON CLIENT’S STRATEGIC ISSUE

Nestle Malaysia, currently the biggest Halal producer in the world, markets more than 300 Halal products in market, and is warranting its appointment as the Halal Centre of Excellence for Nestle worldwide. Exports its products to more than 40 countries worldwide with export sales of over RM470 million. Import Halal products from the 66 Nestle factories worldwide that are certified Halal (Nestle, 2010). According to Philip Kotler and Gary Armstrong (2010), differentiated marketing means a firm decides to target several market segments and design separate offer for each. 3. 1.

1 Nestle Malaysia’s Strategy of Good Food Good Life Chart 7: Nestle Malaysia’s Strategy of Good Food Good Life Strategy – Nestle Roadmap to Good Food, Good Life Nestle’s objectives are to be recognised as the world leader in Nutrition, Health and Wellness, trusted by all its stakeholders, and to be the reference for financial performance in its industry. Nestle believe that leadership is not just about size; it is also about behaviour. Trusts are about behaviour; and recognise that trust is earned only over a long period of time by consistently delivering on their promises.

These objectives and behaviours are encapsulated in the simple phrase, “Good Food, Good Life”, a phrase that sums up on Nestle corporate ambition. The Nestle Roadmap is intended to create alignment for their people behind a cohesive set of strategic priorities that will accelerate the achievement of their objectives. These objectives demand from their people a blend of long-term inspiration needed to build for the future and short-term entrepreneurial actions, delivering the necessary level of performance. The objectives are; 1. Competitive Advantages 2. Growth drivers to ‘Good Food, Good Life’ are;

Nutrition, Health and Wellness Emerging markets and Popularly Positioned Products Out-of-home Premiumisation These four areas provide particularly exciting prospects for growth. They are applicable across all categories and around the world. Everything is driven by Nutrition, Health and Wellness agenda, Good Food, Good Life, which seeks to offer consumers products with the best nutritional profile in their categories. 3. Operational pillars Innovation & Renovation Wherever, whenever, however Consumer engagement Operational efficiency Nestle must excel at each of these four inter-related core competences.

They drive product development, renewal and quality, operational performance, interactive relationships with consumers and other stakeholders and differentiation from their competitors. If Nestle excel in these areas they will be consumer-centric, they will accelerate their performance in all key areas and will achieve excellence in execution. Nestle is seeking to achieve leadership and earn that trust by satisfying the expectations of consumers, whose daily choices drive their performance, of shareholders, of the communities in which they operate and of society as a whole.

Nestle believe that it is only possible to create long- term sustainable value for their shareholders if their behaviour, strategies and operations are also creating value for the communities where they operate, for their business partners and, of course, for consumers. Nestle call this “Creating Shared Value”. Nestle are investing for the future to ensure the financial and environmental sustainability of their actions and operations: in capacity, in technologies, in capabilities, in people, in brands, in research and development.

Their aim is to meet today’s needs without compromising the ability of future generations to meet their needs, and to do so in a way which will ensure profitable growth year after year and a high level of returns for their shareholders and society at large over the long-term. 4. Halal Commitment Nestle Malaysia manufactures imports and distributes only Halal products which have been certified by the Department of Islamic Development Malaysia (JAKIM) and the relevant recognised Islamic authorities. They are firmly committed to ensure the peace of mind of all our consumers.

Providing the Halal Assurance-Nestle Malaysia has adopted Halal practices since the early 1970s when it first started its manufacturing sites in Malaysia. It was the first multinational to voluntarily request for Halal Certification of all its food products when it was first introduced in 1994. The certified Halal status for all Nestle Malaysia products provides assurance that Nestle products are manufactured, imported and distributed under the strictest hygienic and sanitary condition in accordance to the Islamic faith. Halal Benefits everyone- All products manufactured, imported and distributed by Nestle Malaysia are certified Halal.

Products and premises for manufacturing in Malaysia have been inspected and have earned Halal certification by JAKIM and imported products from manufacturing sites outside Malaysia are certified and supervised by Islamic authorities approved by JAKIM. The Halal logo included in all our packaging indicates that the products are prepared according to stringent Islamic requirements, whilst assuring that our production adheres to the strictest hygiene, quality and safety standards that are appreciated by all consumers. Business Benefit – Halal products exported to more than 50 countries globally.

Demonstrates social responsibility and respect for Muslim employees and consumers. In line with Government’s vision of Malaysia as a Halal hub Societal Benefit – Meets growing needs of Muslim consumers, creates peace of mind and assurance for Muslim consumers also creates assurance that products meet the highest quality, safety and hygiene standard 3. 2 TARGET MARKET Nestle Malaysia utilizing differentiated marketing (segmented marketing) strategy by having several categories of product that means to target different customer.

Nestle Malaysia produces over 300 halal products in categories such as coffee and beverages, prepared food, milks, liquid drinks, breakfast cereals, chilled dairy, ice cream, chocolate and confectionary. Brand names under the Nestle umbrella include Milo, Nescafe, Maggi, Nespray, Kit Kat, Nestiva, Nestum, Bliss, Nutren, Cerelac, Power Bar and many more. 3. 2. 1 Nestle categories of product and Segmentation for Consumer Market in Malaysia 1. Coffee and beverage- All range of people MILO Malaysia’s product target market is parents which have children in school.

MILO Malaysia also introduced a new range of MILO mixes range which target to young working adults who are health conscious and looking for healthy options in their daily diet. The products such as MILO Cereal (packed with cereal flakes), MILO Hi-Fibre (with a dietary fibre to help maintain the digestive system) and MILO Less Sweet (with all the goodness of MILO and 47% less sucrose compared to other chocolate malt mixes) Nescafe product targeted to a coffee lovers. Moreover, Nescafe Brown and Creamy products with brown sugar which gives it a creamy and caramel-like taste that appeals to young adults who are new to coffee.

Nescafe also launches a new product for the coffee shop specialty segment such as Nescafe Ipoh White Coffee Hazelnut and Nescafe Ipoh White Coffee Brown Sugar 2. Liquid Drinks – All range of people MILO UHT and Nescafe UHT is target to attract more young consumers. With an improved recipe, MILO UHT is now tastier, creamier and chocolatier to delight 7-12 years old children. Meanwhile, Nescafe UHT in 200ml packs aim to delight new coffee drinkers who prefer the comforting goodness of milk with a light touch of coffee. 3.

Food Business – Household, working people, teenager and university student Noodles, stocks, seasoning and sauces focus to every consumers. Like Maggi Cukup Rasa target for home cooking among women. Maggi Cup, Maggi Goreng, Maggi Kari Letop are focus to working people with no enough time to cook. 4. Chilled Dairy – Parents with children, working people Yogurt and yogurt drinks. These products target to consumer with health conscious. Example of products such as Nestle Bliss. 5. Confectionery and ice cream – All range of people Example Kit Kat and ice cream product like La Cremeria, Mat Kool, and Drumstick.

Targeted to young adult, working people and house wife. 6. Milk and Cereals – Parents with baby and children, household, working people Example Nestum 3 in 1 and Omega plus. Targeted to working people with healthy conscious and old people. 7. Healthcare Nutrition – People under medical treatment Product such as Nutren untuk Diabetik and Peptamen are the first choice nutritional formula for Intensive Care Unit patients. 3. 3 NESTLE SWOT ANALYSIS 1. Strength/Competitive advantages Wide range of products – The business offers one of the widest portfolios of food and brewery products in its sector.

It also operates 29 brands that earn more than $1 billion in annual revenues. With more than 8,000 products it is hard for any other corporate to compete against Nestle. Strong research and development – Nestle invested more than $2 billion in R&D in 2011. It’s introducing new and redesigned products every year, strengthening firm’s competitive advantage. Ability to customize global product and brand to local preferences – For example, in Malaysia Nestle market about 300 Halal products in market, to more than 40 countries Size, operational

efficiency and financial power – In Malaysia, Nestle owns 7 factory and 6 sale office with one distribution centre that involve exportation Halal product to more than 40 countries. Brand reputation – Nestle is known almost everywhere and has a reputable brand for its products that are used by many Malaysian every day Halal policy – Helps in targeting Muslim by assuring them with all products is Halal and also attract non-Muslim customer at the same time. True competitive advantage comes from a combination of hard-to-copy advantages throughout the value chain, built up over decades.

There are inherent links between great products and strong R&D, between the broadest geographic presence and an entrepreneurial spirit, between great people and strong values. 2. Weaknesses Narrow product line for beverages – Nestle only promotes MILO products, Nescafe products and milk beverages. However, the launch of New Nescafe Menu is a good example whereby it also helps to expand the range of coffee under the Nescafe brand. In the future, they maybe will produce coffee candy in different flavour Changing of consumer needs or taste – From time to time, consumer need and taste keep changing depending on life style and economy impact.

For instant, consumers have more awareness towards their health care and wish to have product that come with low sugar contain thus Nestle can introduces their products with low sugar contain to fulfil customer’s needs. New Technology – Nestle needs new technology to improve the product’s quality by implementing the new technology and maintain their market share in the industry. Weak implementation of CSV – The company has announced and is involved in many programs that aim to make company more eco-friendly and improving the working conditions of its suppliers.

Still, Nestle receives a lot criticism over the effectiveness of its programs. 3. Opportunities Increasing demand for healthier food products – The trend of buying and consuming only healthy food products is a major shift in consumer tastes and opens up an immense market for companies. Currently, Nestle tries to introduce more healthy food products in response to the trend. Acquiring start-ups specializing in producing well-being products – Many new start-ups are forming and introducing new products for well-being or revolutionizing the ways those products are made.

Start-ups are cheap and can easily be acquired. Nestle is focusing on providing more well-being products and this is a great opportunity to expand its portfolio. Establishing new joint ventures – Nestle is already involved in many successful partnerships with major world companies like The Coca-Cola Company and Colgate-Palmolive. 4. Threats Food contamination – Although it is Nestle’s responsibility to run thorough quality checks of its products, the company had been reportedly providing contaminated food or other products to the market. Such actions hurt company’s reputation and result in losses.

Trend towards healthy eating – Nestle is a major supplier of chocolate and chocolate drinks that have high level of calories and due to changing customer habits, will experience decline in demand. Growth of private labels – The growing number of supermarkets and other retailers are introducing their own label products that cost less and can easily compete with Nestle’s product portfolio. Brand such as Old Town White Coffee and Oligo Cereal (6 in 1) by Power Roots Rising raw food prices – With an overall growth of world economy and population, the demand for raw food will rise.

The result of that will be higher material costs and squeezed margin for Nestle. 3. 4 COMPETITORS Some of existing and new entry competitor will decrease market share of Nestle in Malaysia’s food industry. 1. Coffee Market Starbucks Malaysia – Starbucks has introduced their instant coffee to serve their regular customer and new customer who start to consume coffee. Starbucks VIA® instant and micro ground coffee provides the expertly roasted, uniquely delicious cup of coffee in an instant and smell freshly brewed coffee.

Power Root – Premix Coffee Drink with Oligofructose & Ginseng (5 in 1) – A combination of freeze-dried coffee granules and coffee bean extract that retains the original quality and aroma of the coffee, with Oligofructose and Ginseng to enhance its taste and provide nutritional value. 2. Milk and Cereal Power Root – Cereal drink mixed with Oligofructose 3. Liquid Drink Dutch Lady – UHT Milk for children 4. Junior Food Dutch Lady – Dutch Lady Growing Up Milk with 5X DHA 3. 5 PRODUCT /SERVICE CHARACTERISTICS Most people know Nestle through their brands.

Nestle covers almost every food and beverage category – giving consumers tastier and healthier products to enjoy at every eating occasion and throughout life’s stages including times of special nutritional need. Here is a sample of some of Nestle brands. 1. Coffee and beverage- MILO, MILO Cereal, Milo High Fibre, Nescafe Classic, Nescafe Gold and Nescafe Brown and Creamy. 2. Liquid Drinks – MILO UHT, Nescafe UHT, Justea, Nestea 3. Food Business – Maggi Cukup Rasa, Maggi Cup, Maggi Goreng, Maggi Kari Letop. 4. Chilled Dairy – Nestle Yogurt, Nestle Bliss. 5. Confectionery and ice cream – Kit Kat, La Cremeria, Mat Kool, and Drumstick.

6. Milk and Cereals – Omega Plus, Nestle Fitness cereal, Coco crunch, Nestum 3 in 1, Nespray 7. Healthcare Nutrition – Nutren untuk Diabetik and Peptamen 8. Junior Foods – Nestlay Serelac with BL Bifidus 3. 6 PRICING STRATEGY 1. Value-based pricing (Everyday low pricing (EDLP) – For instant, Nestle (M) re-launched the everyday low price Nestle branded range of Take-Home Tubs with Hi calcium, in line with the Nestle corporate wellness initiatives, to further strengthen the leadership position in the affordable segment 2. Competitive Matching – Set pricing by comparing with competitor.

Nestle set the Nescafe Menu according to the ‘going rate’ whereby market the 15-pack bags the recommended retail prices of RM12. 90 which is almost the same with the Old Town’s white coffee (RM12. 90) 3. Promotion discounting – Nestle uses this strategy to attract new and old customer and increase their sales during promotion 4. Reference pricing – A pack of 15 pack-bags coffee cost above and at the average price of RM11. 50 to RM13. 50 thus customer expectation price also will be around that ‘reference price’. 3. 7 PRODUCT STRATEGIES 1. Branding strategy – Example; the launched of new Nescafe menu is using

product line extensions strategy by adding new flavours of coffee to Nescafe brand. These product supplement an existing product line with new styles, models, features of flavour and it allow the firm to keep its product fresh and exciting with minimal development cost and risk of market failure. In this scenario, Nescafe introduce the new Nescafe menu by proving three new flavour of coffee to meet consumer variety. 2. Packing and labelling – Example; Nescafe menu used a simple design by implements the photo of beverages in the packing picks the colour to suit the beverages.

Such as a big and clear brand name is spot in the top of the packing, set price for 15-pack bags at the recommended retail prices of RM12. 90. 3. Customer Support Service – Nestle provides the toll-free customer service line (1800 88 3433) in order to help them to know more about consumer’s needs and strengthen the current position 4. Product life cycle – Attracting customer by raising awareness of and interest in the product offering through advertising, public relation and publicity efforts that connect key product benefits to customers’ needs and wants.

First, Nestle make the official launch for new product included press conference then advertising their product through newspaper, radio and television. Inducing customer to try and buy the product through the use of various sale tools and pricing activities. Nestle conducts free testing section, gives free samples to customer at hypermarket and offers their product in cheaper price during the promotion of new launched product. Nescafe has a strong branding, high quality with reasonable price to secure their market position. They are maintained and control over product quality to ensure customer satisfaction.

For example, Nestle collect the customers’ feedback through their customer service line and email. Hence, Nestle contact with key channel especially retailers to get a better shelf space that easily catch customers’ eyes 5. Maturity Stage – Nescafe manage to hold the 70% market share of the Malaysian market share with its soluble coffee ranges. Nestle also able to create cash flow and invest it for new products or technology to improve their company’s portfolio. At this stage, Nestle also develop a new product image and apply the new technology to their products 6.

Distribution strategy – Nestle uses the indirect marketing channel with intensive distribution that makes a product available in the maximum number of merchants or outlets in each area to gain as much exposure and as many sales opportunity as possible. 3. 8 PROMOTIONAL STRATEGY Nestle applied the promotion mix as the promotion strategies. Nestle use products advertising to promote the image, features, uses, benefits and distribution of products. They present their advertising through television, radio, magazines, newspaper, outdoor display and the internet.

Thus, consumers can have a look of the physical evidence of the product. Public relations can be referring to the process in the 7Ps of the marketing mix. It used to promote the firms, its people, its idea and its image and even to create an internal shared understanding among employees and can create specific images such as quality, innovativeness, value or concern for social issue. Nestle uses different methods such as press conference, press releases and event sponsorship. Sales promotion direct towards consumers and trade is applied.

Nestle give sale promotion by giving out samples, point-of-purchase promotion and contests. For example, Nestle promotes different contests for their product seasonally to create excitement for consumers and increase the sales. INDUSTRIAL ANALYSIS – PORTER’S 5 FORCES 4. 0 FINANCIAL PLAN Financial analysis use and transformation of financial data into a form that can be used to monitor and evaluate the firm’s financial position, to plan future financing, and to designate the size of the firm and its rate of growth (allbusiness. com, 2010). 4.

1 Nestle Malaysia’s 5 Years Financial Statistics Table 1: Nestle Malaysia’s 5 Years Financial Statistics (Resource: Nestle Annual Report 2012) Based on the 5 year’s statistics annual income statement, it proved that Nestle Malaysia has been able to grow revenues from the year 2008 to 2012. In 2012, Nestle Malaysia post a turnover of RM4, 556,423,000. 00 billion for the year ending 31 December 2012, which represent 17. 53% growth over 2008. Profit before tax is increasing from year 2008 to 2012. Moreover, the percentage of turnover which rated as 11. 4% in 2008 increase to 14. 0% in 2012.

From the balance sheet, we can see that the Nestle Malaysia are growing stronger and having a very positive view about their assets with the increments. Overall the company have 632,640,000. 00 of total assets. Furthermore, it achieved a balance with their equity and liability that shows the company is healthy with strong financial. This company’s debt to total ratio, at 11. 68%, is in-line the Food Products industry’s norm. Additionally, even though there are not enough liquid assets to satisfy current obligations, Operating Profits are more than adequate to service the debt.

Account receivable is typical for the industry, with 26. 72 days’ worth of sales outstanding. Last, inventories seem to be well managed as the Inventory Processing Period is typical for the industry, at 56. 59 days. 4. 2 Nestle Malaysia’s Financial Position/Balance Sheet Table 2: Nestle Malaysia’s Financial Position/Balance Sheet (Resource: Nestle Annual Report 2012) By observing the income statement, Nestle Malaysia is making more profit (compare to 2012 and 2011). Nestle Malaysia hits RM4, 556,423,000. 00 of revenue for 2012 which is higher than year 2011 by increase of RM309.

7 million. The basic earnings per ordinary share (cent) for year 2012 are 216 while year 2011 is 182 (Group). It shows that currently the company is doing well. 4. 3 Nestle Malaysia’s Income Statement Table 3: Nestle Malaysia’s Income Statement (Resource: Nestle Annual Report 2012) Based on the cash flow statement, the available cash of the group and company is decreasing. It is because the cash is used for heavy financing activities. 4. 4 Nestle Malaysia’s Statement of Cash flow Table 2: Nestle Malaysia’s Statement of Cash flow (Resource: Nestle Annual Report 2012)

BOSTON CONSULTANT GROUP MATRIX/BCG MATRIX INVOLVING CASH COW, DOG, STAR, PROBLEM CHILD (Micro Analysis on market share and growth) IDENTIFICATION OF PROBLEMATIC AREAS 5. 0 RECOMMENDATION 1. Short Term Objectives Nestle hoping to reach 70 per cent of the total market of the speciality coffee market by next year Catering to Malaysians tastes by offering a mix of drinks across different ranges and the new products add to the company’s product portfolio of these ranges 2. Long Term Objective Maximise the use of good quality local raw materials

Improving current portfolio to ensure the products has more nutritious without affecting the taste. For example, less sugar, salt and fats. Creating ad increasing consumer’s awareness on nutritional labelling, food safety and consumer rights to safe and quality food. Guarantee that all products manufactured, imported and distributed by Nestle Malaysia are certified Halal by authorised Islamic certification bodies. Produce and sell world-class products of the highest consistent quality, reliability and convenience based on business excellence principle throughout our operations.

5. 1 PROBLEM AND SOLUTION It is difficult to participate and respond in this rapidly changing in market demand condition. When forecasting a market demand, Nestle will need information’s to detect shifts in demand early so they could adjust for trends before they are flood with unwanted or defectives goods or shortages. Example, as the awareness of health issues is rising rapidly in Malaysia; Nestle should provide their product with low sugar range or replace it with sugar cane which is healthier compare to fine sugar.

Inaccuracy of orders received in inventory. Usually happened during festive season. To overcome inaccuracy problem, Nestle may need to acquire the inventories from other region. Because some regions may have different demographics. Moreover, surplus in inventory. Nestle may need to plan a promotion to clear inventories. Sudden and unexpected increase in demand which will cause extreme supply shortages for commodities that will result in major price increase.

For instance, bad weather and natural disaster have always been an issue affecting incoming raw materials. New entry of competitor. Nestle should re-design their logo, label and packing to become more attractive to compete with new competitor. As the fast-development of multimedia, Nestle should fully utilize it in their packing and advertisement to suit the new generation. 6. 0 CONCLUSION Nestle exert great effort to achieve its vision to be the leader in Nutrition, Health and Wellness Company by producing better quality of products to the consumers.

Nestle also study about the consumer’s needs from time to time and satisfy the customers as much as possible. Nestle’s strength such as high financial capability, effective strategy marketing capability, strong research and development, as well as great leaderships has helped them through the obstacles. Above all, nestle focuses on its mission and ensures consistency by making the right decisions to manage and build its business to deliver the promise of Good Food, Good Life in Malaysia and all over the world.

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