Nestle Coursework free essay sample

EXECUTIVE SUMMARY This coursework basically is an analysis of the NESTLE MAGGI NOODLES and the various strategic issues associated with it. The analysis is done in five parts which help us in implementing our company’s future strategy. The first part basically briefs us about the external environment of the noodles industry by analysing various models like the porters five forces, pest analysis, product life cycle, Environment basics, competitive analysis key success factors, segmentation target and positioning and the major opportunities and threats facing the company from other companies. The second part talks about the company internal performance which helps us in gaining a competitive advantage in the Noodles Industry. It basically talks about the Nestle’s activities associated with its human resource marketing and sales department, service sector, its R D team, infrastructure set up, procurement policy and also the inbound and out bound logistics. It also analyses the company’s ratio in order to know its growth rate. We will write a custom essay sample on Nestle Coursework or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The third part basically gives recommendation regarding the future strategy which the company should be adopting at SBU and corporate level by analysing the generic strategic option, expansion method matrix and the growth share matrix. The fourth part is basically our suggestions to the various changes needed regarding the implementation of different policies, structures in the company in order to overcome our main strategic issue. The last part basically talks about the advantages and disadvantages of the various models used in the entire coursework. INTRODUCTION Maggi 2 minutes a noodle is a very famous brand of Nestle India was introduced in 1982 and is most popular instant amongst the noodle lovers as it has the highest consumption rate as compared to other noodles brands in the country and also its easy affordability has added to it success in the Indian market. At present it is offered in 6 different flavours which are, Masala, Tricky tomato, romantic capsica, and thrill in curry, chicken and Atta noodles. Besides Maggi noodles other products are also available under the MAGGI brand which have helped in increasing its popularity as well known FMCG food product. EXTERNAL ENVIORNMENT ANALYSIS SUCCESS KEY FACTORS COMPETITOR ANAYSIS PORTERS FIVE FORCES NESTLE MAGGI NOODLES INDUSTRY LIFE CYCLE ZZZZ ENVIORNMENT BASICS PESTLE ANALYSIS PEST ANALYSIS: 1. POLITICAL ANALYSIS: Government has laid down strict restrictions regarding advertisement of junk food for children under the age of 16 as per the foodstuff act in 2007. 2. ECONOMICAL ANALYSIS: Rise in the prices of raw material like salt Maida, manufacturing costs as well as the packaging costs is a major economic crisis facing the food industry due to more demand and less supply of the agricultural commodities. . SOCIAL ANALYSIS: People are becoming health conscious and with the changing lifestyle there is an increase in the demand for quick and easy to cook food products. 4. TECHNOLOGICAL ANALYSIS: NESTLE makes use of leveraging superior technology in order to provide customers with high quality products. Nestle gets technology under the general licence agreement from the nestle group for satisfyi ng innovation and reformation. Nestle makes use of gene technology in manufacturing food products like noodles. KEY SUCCESS FACTORS: 1. Maggi was the first to be introduced in the instant noodle segment in 1982 therefore it has the first mover advantage as compared to the other brands of noodles. 2. It showed continuous changes with regard to its themes and the flavours since 1982 and has also repositioned itself as a healthy snack from 2 minute noodle. 3. Maggi is a much localized brand as it never adopted English tag line unlike its competitors so Indian people prefer it over the other brands. 4. Another key success factor for the Maggi noodles is that it is available in food stores whether urban or local unlike the other brands. ENVIORNMENT BASICS: MARKET SHARE: The brand Maggi has 80% market share in nestle India as per the June 2010 quarter. MARKET GROWTH: The brand is enjoying 20% growth per anum as per the JUNE 2010 quarter. POTENTIAL ENTRANTS THREAT| INDUSTRY RIVARLY| SUPPLIERSBARGAINING POWER| BUYERSBARGAINING POWER| THREA OF SUBSTITUES| (LYNCH, 2003) PORTERS FIVE FORCES MODEL: 1. POWER OF SUPPLIERS: The bargaining power of suppliers is very low in the noodle industry because there are so many suppliers for the raw materials and the inputs used in manufacturing process. The suppliers are spread all over the country. 2. POWER OF BUYERS: The bargaining power is also very low in the noodle industry because there are so many noodle brands and all are of the same price almost with very little difference in the taste. 3. THREAT OF SUBSTITUTES: The threat of substitutes in the noodle industry is very high because of variety of substitutes available in the market like soups with noodles called the soupy noodles, pastas, macaroni and other fast foods like pizzas burgers etc. 4. THREAT OF NEW ENTRANT: The threat of new entrants for Maggi is increasing because more and more FMCG companies are coming up with instant food products and also because there is not much capital requirement required for it. 5. COMPETITIVE RIVALRY: Level of competition is very high because different brands have different flavours and variety, packaging styles and the attractive advertisement COMPETITIVE ANALYSIS: The major competitors of MAGGI are ITS SUN FEAST YIPEE, GSK FOODLES, Nissin’s TOP RAMEN AND WIA WIA by Chaudharys. Top ramen which is the 2nd most top brand in noodle segment is trying to compete with Maggi since 18 years. In the market it was the first to innovate with cup noodles and is a market leader in it with 90% market share. Its strength is its cost effective technique and it weakness was its late entry into the market and non localization unlike maggi. Yippee plus point is that noodles can even be eaten after sometimes after being cooked whereas In case of Maggi they becomes sticky PRODUCT LIFE CYCLE ANAYSIS: D B GROWTH C A 1983 1997 1999 2004 2009 2010 TIME When Maggi Noodles were introduced in 1983 they were at an introduction stage. In 1997 they reached the growth stage and in the year 2000 they experienced a decline in their sales but eventually there sales again started to grow for years since 2001 and reached a maturity stage by 2010. STPD ANALYSIS: Segmentation is done on the basis of changing lifestyle and the habits of the people residing in metro cities. Maggi noodles basically target the working women and the other office going people. However their main targets are the school going kids and the youngsters. It is positioned in the market with its â€Å"2 MINUTE NOODLE† AND â€Å"EASY TO COOK AND GOOD TO EAT† strategy and is differentiated in terms of its flavours, taste and its packaging style. OT ANALYSIS: 1. OPPORTUNITIES: Growing demand of instant noodles in the rural areas, increase in the likeness of the Indians towards Chinese food along with rise in the figure of working youngsters. . THREATS: There are many competitors in the market selling instant noodles with competitive prices for example TOP RAMEN costs Rs 8 in comparison to Maggi which is sold at Rs 10 INTERNAL ENVIORNMENT ANALYSIS VALUE CHAIN ANALYSIS: HUMAN RESOURCE TECHNOLOGICAL DEVEELOPMENT PROCUREMENT INBOUND PRODUCTIVITY OUTBOUND MARKETING S ERVICES LOGISTICS LOGISTICS SALES (LYNCH, 2003) INFRASTRUCTURE: The Company has 7 factories located in different parts of he country like Moga in Punjab, Nanjangud in Karnataka, Choladi in Tamil Nadu samalkha in Haryana, Ponda and Bicholim in Goa and Pantnagar in Uttarakhand. Also it has 4 branch offices which are located at Delhi, Mumbai, Chennai and Kolkata with its head office situated in Gurgaon in Haryana. It has recently opened a new plant in Mysore which is its 8th plant and is planning for its 9th one in Himachal Pradesh. PROCUREMENT: The Company gets its equipments from the suppliers of automatic and instant noodles machine, packing machines, coating plants and food processing machines. RESEARCH AND DEVELOPMENT: Nestle has total of 29 research, development and technology centres all over the world. Nestle is planning to open its 30th research and development centre in India in Manesar, Haryana with an investment plan of 230 crore. It will start operating from July 2012 with a team of 40 scientists who will focus on decreasing nutritional insufficiency in India. HUMAN RESOUCE: The company’s HR policy aims at employing people with professional skills, personal attitude and a sense of commitment who possess values that match with the culture of organization for the long term sustainable growth of the company. The employees are considered as company’s valuable assets and are therefore trained rigorously through empowerment programmes. It has employed 250000 people till now which include farmers, suppliers of raw material, packaging, other goods and services. INBOUND LOGISTICS: The company gets its raw materials from Paras factory in Moga who is a supplier for spices. Maggi gets its other raw materials from manufactures of wheat flour, noodle powder, sugar, onion powder, palm oil and garlic powder, salt, hydrolysed peanut protein and citric acid. It buys all its raw materials in bulk quantity and stores them. PRODUCTIVITY: Maggi noodles are ISO certified and 14001:2004. It is following a lean manufacturing system. OUTBOUND LOGISTICS: From the factories the maggi noodles are straight sent to carry forward agencies which provide warehousing services and are located in different state. The CFA then send its over to wholesalers, exporters of instant noodles and the retailers as per the demand of the product. The main retail outlets are small grocery stores, general stores, big bazaar, spencers, reliance fresh, modern bazaar, Wal-Mart in big cities and Kirana shops in villages. MARKETING AND SALES: Nestle has done a lot of adds in television to promote the sales of maggi noodles firstly with tag lines like MUMMY BHOOK LAGI ‘BAS 2 MINS† and â€Å"FAST TO COOK AND EASY TO EAT†, secondly by making their ads adventurous and funny with famous characters like PANKAJ AND DAVID and then by focusing on â€Å"HEALTH AND NUTRITION† by introducing vegetable Atta noodles, Dal Atta, rice noodles and other flavours. In order to promote their sales they went to various offices and schools and held campaigns. They also came up with the scheme of free giving free packet of noodles to their customers on their return the shopkeepers the empty packet. This is the most important area which ads value to the product. SERVICES: Encase of any complaints regarding the product the consumers can directly visit the nestle consumer service centre in New Delhi or can email the service manger at [emailprotected] nestle. com . Besides that it provides certain services to the society by conducting education and training programs for village children near its factories, helping in public parks preservation and by assisting the provision of clean drinking water and blood donation camps. SW ANALYSIS: 1. STRENGHTS: its major strength is its brand loyalty and its market leader position. Also its new flavours, widely spread distribution channels all over the big cities and its impulsive advertising policy add to its success. 2. WEAKNESS: the major weakness associated with Maggi noodles is that it is considered as junk food due to its unhealthy ingredients. Another problem is that sales of maggi noodles rely only on its Masala flavour. RATIOS CHART: NESTLES YEARLY RATIOS | 2010| 2009| 1. GROSS PROFIT MARGIN| 18. 2%| 17. 58%| 2. RETURN ON CAPITAL EMPLOYED| 135| 160| 3. CURRENT RATIO| O. 63| 0. 0| 4. EARNING PER SHARE| 84. 91| 67. 94| RATIO ANLYSIS: The company’s gross profit margin which is calculated by gross profit/sales*100 is 18. 2% and 17. 58% respectively for the years 2010 and 2010. This means that there is an increase in the profits obtained by the company on selling the products before incurring any expenses in 2010 as compared to 2009. The return on capital employed of N ESTLE is 135 in 2010 and 160 in 2009 which is calculated by profit before interest and tax / total long term liabilities *100 which means that in 2009 the firm generated more return on its investment. The current ratio is 0. 6 in 2009 and 0. 63 in 2010 which means that the company has slightly more cash in hand in 2010. Also there is an increase in the EPS which is calculated by profits after tax and exceptional items/number of share issued, which was 84. 91 in 2010 and 67. 94 in 2009 means there is a greater return for the shareholders in 2010 . PRESENT STRATEGIES AND FUTURE RECOMMENDATIONS Presently NESTLE is earning 44% of its income from milk maid products, 28% from cooking aid and readymade products and 14% from beverages. NESTLE is planning to increase the quality and range of its culinary products like MAGGI BHUNA MASAL. COCONUT MIX POWDER,PIZZA SAUCE,MAGIC CUBES, MAGGI SOUPS and ETC by investing more in them as compared to its other products like the MAGGI NOODLES, NESCAFE which are having a competitive edge over its other competitors in the market. Nestle should also adopt innovative marketing strategy in Oder to increase the sale of its certain products for example it can give its customers a free small maggi noodles packet with a big bottle of MAGGI TOMATOE KETCHUP. It should build up its distribution channels more and more in the rural areas by supplying the retailers and wholesalers with all the NESTLE products and not just specific one like Maggi noodles. The chairman of NESTLE is planning to launch new category of products in the Indian market keeping in mind the rising price of wheat, sugar and milk , the investment in the new products will thus help in decreasing the overall cost of production and in turn help the company in sustaining the operating margin. BUSINESS LEVEL STRATEGY OPTIONS 1. GENERIC STRATEGIC OPTION Competitive advantage COST LEADERSHIP| DIFFERENTIATION| FOCUS | Competitive scope (LYNCH, 2003) Presently maggi noodles is enjoying cost leadership position as it has a competitive edge over others but keeping in mind the growing demand for non vegetarian food in the Indian society and also due to more and more preference being given to the ready made products which are easy cook there is a instant need for variety which is the spice of life therefore our future strategy technique is to bring in DIFFERENTIATION in the maggi noodles by introducing new flavours of maggi for the NON VEGETARIANS like THAI CURRY NOODLES, SHRIMP FLAVOUR, EGG CURRY NOODLES, FISH CURRY NOODLES , TIRYAKI NOODLES and CHICKEN SAUTE NOODLES with small pieces of chicken in them in addition to the simple MAGGI CHICKEN NOODLES which is available in the shops at present. Maggi should also try to bring difference in the style of its packaging by making use of TETRA PACKS or PAPER BAGS which are more eco friendly then the plastic packaging. Also there can be different designs made on different flavours of maggi noodles for example we can have a fish drawn in the noodles on the pack for fish curry noodles and same packaging strategy for the vegetarian flavours. . MARKET OPTIONS MATRIX PRESENT NEW MARKET PENATRATION| PRODUCT DEVELOPMENT| MARKET DEVELOPMENT| DIVERSIFICATION| PRESENT NEW (LYNCH, 2003) According to the above matrix maggi noodles is currently following the market penetration strategy but our future strategy for the noodles will be PRODUCT DEVELOPMENT in order to make use of company’s surplus production capability, to avoid the entry of new competitors, to establish the organizations image as a product modernizer and basically in order to safeguard the market share of Nestle. We can do this by introducing more snacks under this category called maggi for example biscuits, wafers, roasted namkeens, jams and bread and also breakfast cereals like oats, corn flakes, muesli etc. 3. EXPANSION METHOD MATRIX COMPANY INSIDE OUTSIDE INTERNAL DEVELOPMENT| ALLIANCEMERGERFRANCHISEJOINT VENTURE| EXPORTINGGLOBAL OPERATIONSOVERSEAS OFFICE| MERGERACQUSITIONJOINT VENUTRETURKNKEY| HOMECOUNTRY GEOGRAPHICAL LOCATION INTERNATIONAL (LYNCH, 2003) The nestle is planning to export its maggi noodles specially the new non vegetarian flavours to countries like HONGKONG and Thailand ,Korea, Bahrain and Singapore where it is not very popular and plans to ensure its availability in the main supermarkets of these countries and not just the Indian stores . This step will also help to a great extent in increasing the market growth rate and the popularity of the maggi noodles all over the world also it will be available at almost the same price as in INDIA with a very slight margin in order to increase its sales and acquire market share in these Asian countries. . GROWTH SHARE MATRIX HIGH RELATIVE LOW RELATIVE MARKET SHARE MARKET SHARE STAR| PROBLEM CHILD| CASH COW| DOG| HIGH MARKET GROWTH RATE LOW MARKET GROWTH RATE (LYNCH, 2003) Nestle maggi noodles are currently CASH COW as the market growth rate is not very high for maggi at present although it has the highest market share in the noodles industry. The main reason is that it purchased repeatedly by the same consumers; there are no new consumers for the product. However our main focus is to become a star by increasing its nutritional content and replacing Maida with some high fibre content but which taste similar to it in order to increase its sales not only among the children and the youngsters but also among the middle and the old age group. IMPLEMENTATION PROCESS OF NEW STATEGIES Nestle is adopting a selective implementation strategy because it wants to introduce new non vegetarian flavours under its Maggi noodles in Indian market and in some other countries as well. This implementation process is going to be very beneficial for our company because we don’t require separate production plants for this purpose as our main base product which are noodles will remain same but only difference is going to be there in the taste of masala which will be made separately for different flavours. Mainly we plan to have a small demarcation by have new manufacturing blocks in separate corners each of our existing factories where we can keep our non veg stock and also we will have a different assembly lines for veg and non veg Maggis basically this will help our company in achieving economies of scale. Also in order to achieve this aim it needs to ensure a high level of quality check because while manufacturing non vegetarian flavours one has to be very sure about certain factors relating to hygiene of the noodles so that it does not have an adverse impact on the health of the people therefore the company needs to have a new group of managers in all its factories which will only take care of the quality aspect of the product. Also as we plan to export our product to some Asian countries we plan to hire a team of sales managers in those countries who will be marketing our product out there but as we also want to ensure its sales at a less price for that purpose we will have to strong finance department who will manage the costs in an effective manner. For example at present in countries like Hong Kong, Singapore, Thailand etc it is available for 60 RS and is hardly purchased so we would be selling it at 30 RS by giving the consumers a 50% discount in order to increase our sales. Again Inoder to control our costs e will balance it by cutting on our advertising expenditure and instead of showing adds on Television we will have stalls in the malls not only in India but also in countries where we would be exporting our Maggi because in today’s date maximum crowd is found in such places, this will give our company dual advantage by increasing peoples awareness regarding the flavours and balancing our cos t budget, the stalls main function will be basically to make people taste the new and different flavours so that they know their choice which will then become easier for them to pick up from the stores and besides Maggi noodles will also sell some other culinary products of Maggi like the soups, sauces, pickles and other Maggi snacks. Managers of our factories in India will also build tie ups with the distributors in the export countries in order to ensure the availability of our Maggi noodles in the main supermarkets over there besides the few Indian stores where it is currently available. Other important things which our company needs is a new technological base for implementing changes in strategy of our deigns and packaging department for our packets by employing some new creative and technologists and by tying up with the new suppliers and dealers of paper material in place of plastic. ADVANTAGES AND DISADVANTAGES OF THE TOOLS USED FOR ANALYSIS The reason I choose pest analysis is because it helps in estimating the political, social, environmental and technological factors that impacts our decision to choose a strategy as it makes us aware about our overall budget that is the cost of production that will be incurred during its manufacturing, also tells us whether our food product is in demand or not and is consumed by which particular segment of the population. We also get an idea regarding how feasible it is for the firm to export and import the food product and what are the various restriction and regulations imposed on it by the government. It also helps us in deciding our base for RD activities. It gives us an overall knowledge about an FMCG INDUSTRY’S external environment at the same time it very disadvantageneous for the organization due to the instant changes taking place in our society and also a large collection of data makes it a complex situation for the company to do the analysis. The second most important tool is the value chain analysis which defines the company’s core competencies and with the help of these activities the firm can gain competitive advantage by increasing the amount of price charged from the customers over the costs price of its value chain activities basically it helps us in knowing about the firms internal environment. The third tool is the porters five forces tool which helps us in knowing about our competitors who are planning to enter the market and the level of competition among the existing players in the industry, the various substitutes that are available in the market, how much different is the product from its substitutes and at what cost they can switch to other products, concentration of the buyers and suppliers and their dominance in that industry. It also helps in gaining information about other supplier’s methods and cost and is also aims at increasing its incentive and making a direct link with its consumers. Overall this tool helps us in gathering knowledge about the competition prevailing in the industry but again it has a major disadvantage of not being applicable in today dynamic business environment where we have so much variety in terms of our FMCG products. The fourth tool is the swot analysis which talks about the various strengths, weakness, opportunities and threats of our noodles brand. It basically helps us in working towards improving our weakness and the threats facing our noodles and also keep up with our strengths rather make them stronger and grab the upcoming opportunity. Another tool used like the environmental basics which helps us in finding our products market share, market sixe and market growth rate , all these factors help us in building strategies to increase the current market growth rate and the market share. The last tool used is the product life cycle tool which helps in analysing the stage at which our product is in the market presently, whether it is the introduction, growth, maturity or decline and how it has reached at that stage over the past years. It thus gives us an idea as to what stage it will likely be in the coming years. 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