Table of content

Content Page

Content Page 2

Introduction 3

SWOT Analysis 5

Grand Strategies 9

Porter’s 5 Competitive Forces 11

Porter’s 4 Competitive Strategies 14

Conclusion 17

References and Appendices 18

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 Introduction

Nestlé is the world’s largest food and beverage manufacturer. Its purpose is to enhance the

quality of life and to contribute to a healthier future. Nestlé want to shape a better, healthier world

and inspire people to live a healthier life. This is how Nestlé has been contributing to society while

ensuring the long-term success of the company. Nestlé’s headquarter is located in Switzerland,

and is present in 191 countries around the world.

Organic sales growth of Nestle in year 2017 was within the guided range but below the

expectations, in particular due to weak sales development towards the end of the year. Sales

growth in Europe and Asia was encouraging while North America and Brazil continued to see a

challenging environment.

Cost reduction initiatives delivered margin improvement ahead of 2017 expectations, in

spite of considerable commodity price increases. During the past months, Nestlé have completed

initial portfolio adjustments with very favourable results and will continue this active portfolio

management approach in a disciplined manner.

Nestlé’s Board of Directors has decided to explore strategic options, including a potential

sale, for its Gerber Life Insurance business. This business was part of the Gerber acquisition from

Novartis in 2007. Nestlé remains fully committed to retain and develop the Gerber baby food

business, which is an integral part of our infant nutrition growth platform.

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 Nestlé's commitment to provide quality products to Malaysians dates back more than 100

years ago. Nestlé began in Malaysia in year 1912 at the Anglo-Swiss Condensed Milk Company

in Penang. Growth and expansion made a move to Kuala Lumpur necessary in 1939. Nestlé

Malaysia manufactures its products in 8 factories and operates from its head office in Mutiara

Damansara.

The Nestlé Company was publicly listed on the Kuala Lumpur Stock Exchange (KLSE)

now known as Bursa Malaysia Berhad on 13 December 1989. Today, the Company employs more

than 5,300 people and manufactures as well as markets more than 500 Halal products in Malaysia.

Its brand name such has MILO®, MAGGI®, NESCAFÉ® and KIT KAT® have become trusted

household names and enjoyed for generations.

In conclusion, Nestlé have been nourishing Malaysians through quality brands and

products while maintaining Halal excellence and integrity. This is in line with Nestlé’s promise of

delivering GOOD FOOD, GOOD LIFE to all.

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 SWOT Analysis

In order to develop grand strategy, Nestlé need to gather data and make projections using SWOT

analysis. SWOT analysis is the analysis of internal Strengths and Weaknesses with external

Opportunities and Threats in a firm.

Strengths

1. Wide product and brand portfolio

The strength of Nestlé is the company offers a wider product range compared to other

brands in the industry. The company offers over 500 products in Malaysia which range from

powdered and liquid beverages, yogurt, instant noodles, confectioneries and dairy products. The

variety of brands allows Nestlé to target wider customer segment and better satisfy various

customers’ needs. Hence, the company less influenced by the changing of consumer tastes or

backlash against one of its brand because it serves many different segments of markets.

2. Ownership of some of the most recognizable brands in the world

Besides, Nestlé owns some of the world’s most recognized and trusted brands in Malaysia,

such as Nescafé, Maggi, KitKat and Haagen-Dazs. Some families have used its products for

generations. According to PwC Building Trust Awards 2017, Nestlé Malaysia was recognised

with the Special Mention award. Out of 20 finalists, the company topped the charts in the Trust

Business Poll, having received the highest scores in the “Experience & Value” categories. The

brand awareness helps Nestlé to introduce new products and sell the current products more easily.

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Weaknesses

1. Criticism over Nestlé Milo’s nutritional value

As the largest food company in the world, Nestlé needs to face many criticism over

different issues. The latest criticism is the Malaysian entrepreneur, Vishen Lakhiani criticised

Nestlé in his YouTube video for marketing its Milo brand product as healthy one, while disputing

its benefits and nutritional value. He also claimed that Nestlé Milo is made up of 40% sugar.

Nestlé’s inability to address the nutritional value of its product results in loss of consumer

confidence and has dropped Milo’s 4.5 Health Star Rating (HSR) to 1.5 out of a maximum of 5

stars.

2. Complex supply chain management

Other than that, Nestlé has a complex supply chain management. This is a weakness of

Nestlé because it can stall the company’s ability to deliver the products in case one part of chain

breaks down. It can delay the arrival of products to Nestlé Malaysia’s customers and affect the

company over the long run as customer will cancel their orders at any time. This in turn will

destroy its brand image in the market.

Opportunities

1. Growth in ready-to-drink (RTD) beverages markets

Nestlé can expands its market by growing ready-to-drink (RTD) beverages especially RTD

coffee and RTD tea markets in Malaysia. According to Euromonitor data (2018), RTD drinks offer

good potential for growth in Malaysia. RTD coffees grew by 55.75% while RTD teas were also

growing over 27.03% from 2015 until 2017. The company doesn’t has much brands in RTD

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beverages markets even though the company has been selling RTD products in Malaysia more

than 20 years. Powders still hold the lion’s share of Nestlé business but RTD is a fast-growing key

category, especially in Malaysia. (Hofbauer A., 2015) Hence, the company could push more its

own RTD brands to the Malaysia market to take the advantage of the growing RTD sectors.

2. Clear and accurate labelling indicating of any harmful products

Besides, Nestlé should label clearly and accurately in indicating of any harmful products.

Almost 51% consumers said that their decisions will be influenced by clear and accurate labelling

and 47% would like to see clearly displayed information. (Deloitte, 2015) Nestlé, which has a

history of providing misleading nutritional information on its labels should improve its practices

by including all the necessary information in the labelling of products.

Threats

1. Increasing in prices of raw materials

The threat will be faced by Nestlé is the increasing in prices of raw materials. With the

growth of economy of the world, prices of raw foods produced in developing countries will

increase. This will be a problem that Nestlé has to consider in the long term as their cost of

production will increase. Nestlé will be forced to consider either increasing the prices of their

products as well, or keeping them the same. Increasing their prices may lead to a lower demand

while maintaining it will reduce their profit margins.

2. Increased competition in beverage and food industries

Other than that, Nestlé also will faced the increased competition in beverage and food

industries. For instance, Mondelez International is one of Nestlé’s competitors. Mondelez

produces various products like chocolate, beverages, cookies, and confectionary which almost

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same with the market range of Nestlé. Due to their great and attractive categories, Mondelez is

considered as one of the top Nestlé’s competitors. With increasing number of local and national

companies, it’s becoming very hard to differentiate themselves from others. Nestlé will find it

hard to compete in the future as food and beverages markets are growing very fast and with many

new start-ups.

In conclusion, the strength of Nestlé is wide product and brand portfolio and ownership of

some of the most recognizable brands in the world while the weakness is criticism over Nestlé

Milo’s nutritional value and complex supply chain management. Moreover, the opportunities of

the company is expanding the growth in ready-to-drink (RTD) beverages markets and labelling

indicating of any harmful products clearly while the threats faced by Nestlé is increasing in prices

of raw materials and increased competition in beverage and food industries.

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 Grand Strategies

Growth Strategic

Nestle (M) Bhd have built a successful business through understanding and anticipating

consumer needs, and adapting to succeed in an evolving marketplace.

By identifying consumer trends early and acting quickly to capture them, the company remain at

the forefront of the fast‑moving consumer goods industry.

People today know the importance of good nutrition and of managing their health more

proactively. They want products with simple, understandable ingredients, natural or organic, and

ideally locally produced. Likewise, many people do not have the time to prepare and cook meals,

so they are looking for food and beverages that are convenient too.

Defensive Strategic

Nestlé, which is also the maker of KitKat candy bars and Nescafé instant coffee, has also

been cutting costs by focusing on internal saving initiatives to offset higher input costs. To ensure

stable margins, Nestlé factories last year had increased their productivity and reduced energy

consumption by 7.6% in terms of energy usage per tonne product, from 3.82 GJ per tonne in 2013

to 3.53 GJ per tonne in 2014, surpassing the annual 4% target.

Despite the tough market conditions, Nestlé remains positive on the middle- to long-term

prospects for the Malaysian market. Nestle's market share is actually increasing, right now it stands

at 15%. Last year it was 14%.

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Stability Strategic

Nestlé has to suspend its growth when there are unfavourable economic conditions, poor

industrial growth, or high market saturation. In order to survive and move forward cautiously, they

wait for the conditions to turn favourable for its business expansion, brand extension, or

operational growth projects.

Nestlé has a strong portfolio, with profitable growth platforms and leading market

positions in many categories. They take a prudent and focused approach to capital allocation to

ensure solid long‑term growth.

Nestlé constantly review the brand portfolio and are selective in evaluating merger and

acquisition opportunities and will make acquisitions in fast‑growing categories only if those are

complementary to Nestlé’s existing portfolio, deliver the attractive returns Nestlé’s shareholders

expect and are in line with our Nutrition, Health and Wellness strategy.

Nestlé regularly revisits its capital structure to reflect changing market conditions and

strategic priorities. Their financial strategy aims at striking the right balance between growth in

earnings per share, competitive shareholder returns, flexibility for external growth and access to

financial markets.

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 Porter’s 5 Competitive Forces

To formulate the strategic plans, Nestle Company need to understand Porter’s Five

Competitive Forces of it. The purpose of Porter’s Five Competitive Forces is to understand the

business environment whether in a good or bad condition and to analyse the company’s

attractiveness and its profitability (Manktelow, et al., n.d, para.2). There are five factors which

known as threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat

of substitute products or services, and rivalry among competitors.

Threat of new entrants

Firstly, the threat of new entrants in Nestle Berhad is low. Although the barriers to entry

this market is low which will attract many people into this market, but Nestle Berhad is holding a

huge market shares, acting well in understanding customers need and want and it is an experienced

company compared to those who wants to start up a new business in this market. For example,

Mondelēz Malaysia has launched its Cadbury 5 Star in Malaysia, a new entrant under the Cadbury

umbrella in the market (Pandey, 2016, para.1).

Bargaining power of suppliers

Secondly, the bargaining power of suppliers is low. This is because Nestle Berhad is

holding more bargaining power than the suppliers, and it wants to maintain a good relation

between suppliers which ensures quality of the products. For example, Nestle Berhad has a Nestle

Supplier Code which defined as the non-negotiable minimum standard price expected by Nestle

Berhad to its suppliers and the other sub-tier suppliers.

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Bargaining power of buyers

Thirdly, the bargaining power of buyers is high. This is due to there are many competitors

in the market against Nestle Berhad, buyers can switch to other brands with similar products.

Nestle Berhad understands how important is the power of buyers, and they provided many

methods for customer to send their feedback back to Nestle Berhad for improvement. For example,

Nestle Berhad has Business Ethics and Fraud Committee (BEFC) to review all complaints via the

phone (1800 88 3433), letter and e-mail.

Threat of substitute products

Fourthly, the threat of substitute products for Nestle Berhad is high. This is because there

are many substitute goods toward Nestle Berhad. For example, OldTown White Coffee is a

substitute goods for Nestle’s Nescafe 3 in 1 and so on. To tackle this problem, Nestle Berhad

strives to highlight the healthy aspect of its products.

Rivalry among competitors

Fifthly, the rivalry among competitors is low in Malaysia. Nestle Berhad is having a very

strong position in the Malaysia market and holding a large number of market share in Malaysia

market, so there is very low rate of rivalry among competitors. However, there are a few rivals do

exist in the market like Yeo Hiap Seng Berhad also known as Yeo’s. For example, Yeo’s Company

has sold instant noodles, sauces and so on.

In conclusion, the treat of new entrants is high, bargaining power of suppliers is low,

bargaining power of buyers is high, the threat of substitute products is high, and rivalry among

competitors is high.

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 Porter’s 4 Competitive Strategies

The company that we are doing is NESTLE (MALAYSIA) BERHAD. The Porter’s 4

competitive strategies used by the company is wide market. A wide market is a market with

impressive net revenues or a wide spread. In the realm of ventures, a wide market is one where

there is a generally expansive spread among offer and offer costs on some speculation items. These

sorts of markets are all the more usually found where there is a lower measure of business action.

It is the inverse of a 'thin', 'restricted', or 'close' market. In a thin market there is a little spread

among offer and offer costs. In thin markets there is a lot of exchanging movement going on. A

wide market may create when there is a shortage of focused offer and offer costs. In some cases it

might happen when exchanging has been suspended.

One of the strategies of wide market is cost leadership. Cost leadership is a term utilized

when an organization ventures itself as the least expensive producer or supplier of a specific item

or product in an opposition. It is hard to send the procedure on the grounds that the administration

should continually deal with diminishing cost at each level to stay focused. Cost leadership is a

piece of promoting procedure. In spite of the fact that, it is exceptionally powerful in picking up

piece of the overall industry and additionally drawing the clients' consideration, it is hard to convey.

The administration group of the organization needs to always move in the direction of lessening

the cost of one item as well as the whole scope of items in the organization's portfolio. Cost

leadership does not imply that an organization produces products which are of second rate quality

at similarly shabby rates. That technique will eventually prompt disappointment. To convey this

technique, an organization needs to create merchandise which are of worthy quality and particular

to an arrangement of clients at a value which is much lower or focused than different organizations

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delivering a similar item. We can know that Nestle have many product in the market such as dairy

product, beverages, baby food, breakfast cereals and chocolate and confectionary. The reason

Nestle is in cost leadership strategy is because the product of Nestle keep the costs and prices low

to create cheap products for a wider customer base such as Nestle have a chocolate malt beverage

drinks called Milo , it’s a tonic food drink for kids and its price and the cost is low and is affordable

for everyone.

Besides, differentiation is also one of the strategy in the wide market. It is received by

business associations to upgrade the apparent estimation of their image or items, to be viewed as

unique in relation to those offered by the competitors. It is planned to grab the eye of clients, help

deals and better the brand picture. Separation can be accomplished through aggressive valuing,

improvements to practical structure or highlights, dissemination timing, extended circulation

channels, merchant area, mark notoriety, item customization, and upgraded client bolster.

Differentiation, in business system, is an aggressive procedure taken up by firms to increase

considerable and economical upper hand over their rivals, by expanding the apparent estimation

of their items and administrations contrasted with the apparent estimation of those offered in the

market. It very well may be considered a specialty of planning an arrangement of significant

contrasts to recognize the organization's putting forth from others and set up its solid character. A

superior item or administration, after all, will not be fruitful in the market if planned clients are

ignorant about its predominance. Differentiation will be best just if the thing that matters is

imparted successfully to the potential client, and he sees the advantages of the offering to be

unrivalled. Since Nestle is a product that produce many types of thing, it also offers a unique and

superior value product for the wide market such as Nescafe. Since nowadays more than 3000 cups

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of coffee is drink every seconds, offers of Nescafé have been developing as far back as 1938 when

Nestlé propelled the first financially fruitful solvent espresso. Nescafé, which today incorporates

prepared to-drink assortments, is by a wide margin the world's most mainstream brand of coffee.

Therefore, Nestle produce product that spend more money but a better quality for wide market.

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 Conclusion

Nestlé’s achievement is because of the planning and strategic management. According to

SWOT analysis, the company’s strength are wide product and brand portfolio which better

satisfies various customers’ needs, and ownership of some of the most recognizable brands in the

world that helps Nestlé to introduce new products and sell the current products easily. There are

also opportunity like the growth in ready-to-drink (RTD) beverages markets so Nestlé can take

the advantage of the growing RTD sectors.

Next, Nestlé’s growth strategy by identifying consumer trends early and acting quickly to

capture them make it remain at the forefront of the fast‑moving consumer goods industry. Nestlé

also have carried out defensive strategy which is cutting costs by focusing on internal saving

initiatives to offset higher input costs. When there are unfavourable economic conditions, poor

industrial growth, or high market saturation, Nestlé suspends its growth and wait for better

condition.

Nestlé understands the Porter’s 5 Competitive Forces to formulate strategic plans, which

are the high treat of new entrants, low bargaining power of suppliers, high bargaining power of

buyers, high threat of substitute products, and high rivalry among competitors.

To face the Porter’s 5 Competitive Forces, the Porter’s 4 Competitive Strategies is used.

Nestlé’s strategies are cost-leadership and differentiation, which target the wide market. Nestlé

produce products that are cost-friendly, and products that spend more money but a better quality

as well for wide market.

By formulating the strategies above, Nestlé reached its current achievement level. As the

world’s largest food and beverage manufacturer, Nestlé’s achievement is achieved through its

planning and strategic management processes.

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 References

Nestlé, (2017). Nestlé in Malaysia. Retrieved from

https://www.nestle.com.my/aboutus/nestle_in_malaysia/index

Nestlé, (2017). Nestlé’s Strategy. Retrieved from

https://www.nestle.com/aboutus/strategy

Vevey, (2018). Nestlé reports full-year results for 2017. Retrieved from

https://www.nestle.com/asset-library/documents/library/events/2017-full-year-

results/press-release-en.pdf

Arthur, R. (2015). Nestlé boosts RTD Milo and Nescafé with Malaysia Factory. Retrieved from

https://www.beveragedaily.com/Article/2015/10/27/RTD-is-a-fast-growing-key-

category-Nestle-boosts-RTD-Milo-and-Nescafe-with-Malaysia-factory

Asean, (2016). Asia Food & Beverages. Retrieved from

http://www.asiafoodbeverages.com/admin/pubs/showpg.asp?pg=3183

Bhasin, H. (2018). Top Nestle Competitors Across the World. Retrieved from

https://www.marketing91.com/top-nestle-competitors-across-the-world

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Deloitte, (2015). Consumer Food Value Equation. Retrieved from

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/consumer-business/us-

fmi-gma-report.pdf

Jurevicius, O. (2017). SWOT Analysis of Nestlé. Retrieved from

https://www.strategicmanagementinsight.com/swot-analyses/nestle-swot-analysis.html

Nestlé, (2017). Awards and Achievements. Retrieved from

https://www.nestle.com.my/aboutus/nestle_in_malaysia/awards_and_achievements

Phoon, Z. (2018). Nestlé Officially Announces That Milo Isn’t Exactly ‘Healthy’ Following

Criticism. Retrieved from https://www.worldofbuzz.com/nestle-officially-announces-

milo-isnt-exactly-healthy-following-criticism/

Tay, V. (2018). Nestlé Malaysia Defends MILO Product Health Claims in Wake of Viral

Videos. Retrieved from https://www.marketing-interactive.com/nestle-malaysia-defends-

milo-product-health-claims-in-wake-of-viral-videos/

Business-Level and Corporate-Level Strategies Research Paper, (n.d). Retrieverd from

https://www.paperdue.com/essay/business-level-and-corporate-strategies-99164

Manktelow, J., Jackson, K., Swift, C., Edwards, S., Bishop, L., Pearcy, E., … Bruce, E.

(n.d.). Porter’s Five Forces – Understanding Competitive Forces to Maximize

Profitability. Retrieved from https://www.mindtools.com/pages/article/newTMC_08.htm

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Pandey, R. (2016). Mondelēz Malaysia launches 5 Star in Malaysia. Retrieved from

https://www.marketing-interactive.com/mondelez-malaysia-launches-5-star-malaysia/

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Marking Scheme for Group Report Assignment (October 2018 Trimester)

COMPONENTS MARKS Deserved Marks

1. Introduction

Company background 10

2. Planning and Strategic Management

• Analyze the company SWOT factors 20

• Analyze the company grand strategy 10
(strategies)
• Assess Porter’s 5 competitive forces for the 20
company
• Assess Porter’s 4 competitive strategies 20
used by the company

3. Conclusion
Assess the overall achievement of the
company. (How the planning and strategic 5
management processes help the company to
reach its current
achievement levels, etc)

4. References and Appendices 5

5. Grammar/ Presentation of assignment / 10

Language/ Editing/ Formatting

TOTAL 100

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