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NESTLE’S COMPETITIVE

ADVANTAGE

AHMAD NIZAMUDDIN BIN

MOHAMAD

2016259514

AIME NURAIN BINTI YUSOF 2016263028

NASRUL FAHMI BIN MOHD PUZI 2016259536

NUR SYAFILZA BINTI ZABUR HAN 2016263126

SITI NUR AFIFAH BINTI JAIDON 2016259548

PREPARED FOR:

ASSOC. PROF. DR TUAN ZAINUN TUAN MAT

COMPANY

BACKGROUND

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It is a Swiss multinational food and drink processing conglomeratecorporation headquartered in Vevey, Vaud, Switzerland. It is the largestfood company in the world, measured by revenues and other metrics,since 2014. It ranked No. 64 on the Fortune Global 500 in 2017 and No.33 on the 2016 edition of the Forbes Global 2000 list of largest publiccompanies.

Nestlé's products include baby food, medical food, bottled water,breakfast cereals, coffee and tea, confectionery, dairy products, icecream, frozen food, pet foods, and snacks. Twenty-nine of Nestlé'sbrands have annual sales of over CHF1 billion (about US$1.1 billion),including Nespresso, Nescafé, Kit Kat, Smarties, Nesquik, Stouffer's,Vittel, and Maggi. Nestlé has 447 factories, operates in 189 countries,and employs around 339,000 people. It is one of the main shareholdersof L'Oreal, the world's largest cosmetics company.

Nestle is one of the most sustainable companies that gain competitiveadvantages throughout the world.

SWOT

ANALYSIS

SWOT Analysis to assess organization's current position.

SWOT refer to Strength, Weakness, Opportunities and Threat.

SWOT Analysis is a technique for assessing these four aspects of your business.

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SWOT Analysis?

Strength

Refer as a things that organization does particularly well

Advantages your organization has over other organizations (competitive advantages)

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Application on Nestle

Globally recognized brand - According to the Fortune Global 500, Nestle ranked

at 76th position in 2019 list.

Highly diversified company - Nestle sells its products in 189 countries Instead of

relying on a few markets.

Extensive product portfolio - Nestle owns more than 2000 brands globally and

renovated over 8000 products for nutrition and health considerations

It refer to organization's weaknesses. Need to be honest for the information are valuable.

Think about what company could improve, and the sorts of practices you should avoid.

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Weaknesses

Application on Nestle

Price fluctuations by retail giants - Any reduction or increase in price by bigretailers such as Walmart or Tesco can affect Nestlé’s sales.

Water controversy - Nestle was accused of illegally pumping millions of liters ofwater in 6 nations where residents are deprived of drinking water.

Maggi Noodles controversy - In 2017, Nestle failed to clear a laboratory test inIndia. This created a publicity hype as people boycotted Nestle, leading to the lossof 80% of market share in the country.

Opportunities are openings or chances for something positive to happen.

Usually arise from situations outside your organization.

Being able to spot and exploit opportunities can make a huge difference to your organization's

ability to compete and take the lead in your market.

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Opportunities

Application on Nestle

Venturing small food start-ups - Nestle has a fantastic opportunity to grow the numberof small food start-ups under its popular brand name.

Online shopping - Nestle has a remarkable opportunity to boost its e-commerce sites andonline shopping platform. Although Nestle has its online stores in a few countries,expanding its online services to more areas will prove a rewarding decision for the company.

Penetration for breakfast cereals - Nestlé’s cereals and oats market have shown fastgrowth in recent years. Thus, penetrating this market more would be highly lucrative for thecompany.

It refer to organization's weaknesses. Need to be honest for the information are valuable.

Think about what company could improve, and the sorts of practices you should avoid.

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Threats

Application on Nestle

Price fluctuations by retail giants - Any reduction or increase in price by big retailerssuch as Walmart or Tesco can affect Nestlé’s sales.

Water controversy - Nestle was accused of illegally pumping millions of liters of waterin 6 nations where residents are deprived of drinking water.

Maggi Noodles controversy - In 2017, Nestle failed to clear a laboratory test in India.This created a publicity hype as people boycotted Nestle, leading to the loss of 80% ofmarket share in the country.

VALUE CHAIN

ANALYSIS

Value chain analysis is a strategy tool used to analyze internal firm activities.

To recognize, which activities are the most valuable to the firm and which ones could

be improved to provide competitive advantages.

Is a template that firms use to understand their:-

1. Cost positions

2. Way to facilitate implementation of a chosen business-level strategy

An organization’s values chain is segmented into primary activities and support

activities

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Value Chain Analysis

Porter’s Value Chain Model

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Primary activities is the physical creation of the product or service and it

consists of 5 elements which is:-

Inbound Logistics

Operations

Outbound Logistics

Marketing and Sales

Services

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Primary Activities

PRIMARY ACTIVITY 1: Inbound Logistics

Related with receiving, storing &

distributing inputs to the

products which incurred the

activities such as material handling,

warehousing, inventory control and

etc..

Elements to consider in inbound

logistics activity include location of

distribution facilities and also

warehouse layout

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NESTLE’s Pure Life purchase plastics

bottles with different size from

supplier. They also establish warehouse

in different countries and setup with

water filling plant and disseminate

inputs to their products.

PRIMARY ACTIVITY 2: Operation

Related with transforming inputs

into the final product form which

incurred activities such as machining,

packaging and assembly, testing or

quality control and etc..

Elements to consider in operations

activity include efficient plant

operations and layout and also

incorporation of appropriate

process technology

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NESTLE operations are water filling

packaging and account maintenance. They

know and have approved the manufacturing for

all their raw materials and packaging materials.

NESTLE Company immediately instituted a

programmed of major improvement to bring

the facility on par with international standards,

introduce more efficient machinery. This

has helped them speed up production. NESTLE

handle their account for exclusive sale in

their regional office.

PRIMARY ACTIVITY 3: Outbound Logistics

Related with collecting, storing and

distributing the product or

service to buyers which incurred

activities such as finished goods and

warehousing, material handling, order

processing and etc..

Elements to consider include

effective shipping processes and

also minimizing shipping costs

by grouping goods into large lot

sizes

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NESTLE Pure Life deliver their

product to their (customers) house.

Operation has been done that deliver to

their regional offices according to their

customer demand, innovations in

bottled packaging and eco-efficient

packaging.

PRIMARY ACTIVITY 4: Marketing and Sales

Related with purchases of products

and services by end users and

includes how to induce buyers to

make those purchases. These

incurred activities such as advertising

and promotion, sales force management,

pricing and etc..

Elements to consider include

innovative approaches to

promotion and advertising and

also proper identification of

customer segments and needs

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NESTLE change value price in

product designing NESTLE which

produce tasty water in plastic bottles.

Their production is placed in major city of

Pakistan. NESTLE promote their

produce by personal marketing,

TVC, sales promotion and public

relation.

PRIMARY ACTIVITY 5: Services

Related with all actions associated

that providing service to enhance

or maintain the value of the

product. These incurred activities

such as installation and repair, training,

parts supply and etc..

Elements to consider include quick

response to customer needs,

quality of service personnel, and

also ongoing training

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NESTLE provides the service to

home and office delivery. They

distribute bottle for exclusive

selective on shops, restaurants,

hotel and etc. Their services is very

efficient as compared to others.

Support Activities

Support Activities is the activities that support the firm as whole by providing

infrastructure or inputs that allow primary activities takes place on an ongoing basis.

The aim to coordinate and support their functions as best as possible with each

other by providing purchased inputs, technology, human resources and various firm

wide managing functions.

The support activities can therefore be divided into:

Procurement

Human Resource Management

Technological Development (R&D)

Firm Infrastructure

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The process of acquisition of inputs, or resources, for the firm.

This is how the organization does to get the resources needed to operate includes finding vendors

and negotiating best prices with suppliers and vendors.

This relates heavily to the inbound logistics primary activity.

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SUPPORT ACTIVITY 1: Procurement

Nestle focusing on 14 key raw materials. Nestle directly connect with more than 716 000 farmers worldwide to source raw materials. Nestle work closely and being partner with expert organization and industry to supply raw materials such as palm oils and hazelnuts.

As for other raw materials such as meat, spices, sugar, seafood are sourced only through the trade. Sourcing contribute to the sustainable and profitable development of Nestle by

providing the base for quality differentiation of finished products to customers or consumer satisfaction. This requires a supply of raw materials at specified quality, in the quantities

and be in the timing needed, at the lowest possible costs.

Related with hiring and retaining employees who will fulfil business strategy, as well as help design,

market, and sell the product.

The strategic approach to the effective management of people in a company and designed to

maximize employee performance

This shows how well a company recruits, hires, trains, motivates, rewards, and retains its employee

Company with good HR practices can create advantage as employees are a significant source of value

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SUPPORT ACTIVITY 2: Human Resource Management

Nestle is a people inspire company where the people, strength and energy are their most important strength. Nestle currently have around 328,000 employees and sell product and services in 191 countries. Nestle is truly focusing on their employee which they understand their employee and enhance

their skill with cutting edge training, ongoing training and provide with world standard facilities. Nestle has Management Trainee Programme which welcome exceptional graduates and will

provide comprehensive training programme that prepares high-performing young talent, for becoming the future leaders of their business. This programme designed to speed up the mastery of management techniques and real-world skills in a specific area of expertise. Nestle also

providing flexible and supportive work environment for the employee

Activities relate to managing and processing information, as well as protecting a company's

knowledge base.

Used during research and development and can include designing and developing manufacturing

techniques and automating processes

Minimizing information technology costs, staying current with technological advances, and

maintaining technical excellence are sources of value creation.

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SUPPORT ACTIVITY 3: Technology Development (R&D)

Nestlé is a world-leader in a large number of different technologies, has its global Confectionery Product Technology Centre (PTC) and have the world's largest private food and nutrition research organisation.

Nestle have engineers working in R&D for variety of fields from packaging and equipment, to food processing technologies and manufacturing new beverage systems such as Nespresso. They also has food scientists which develop

processes and technologies that enable the development of safe, nutritious foods and beverages. Nestlé Research was one of the first to look at the molecular interaction of probiotics with intestinal cells. They

also have developed technologies that allow them to use natural vegetable oils instead of partially hydrogenated fats in Maggi bouillon cubes and seasonings. They also develop foam boaster technology,

new process for malt extraction for Milo and portion dispensing system.

Refers to company's support systems, and the functions that allow it to maintain daily

operations such as accounting, legal, administrative, administrative functions, government

affairs and quality management.

A solid infrastructure is necessary for all primary functions.

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SUPPORT ACTIVITY 4: Firm Infrastructure

Nestle has a very stable infrastructure. It is all planned properly by expertise and high education people who have a lot of experience in the nutrition field. Their Board is composed of highly-qualified leaders in business, technology, nutrition, fast-moving consumer goods and other relevant disciplines. The firm infrastructure denotes a range of activities, such as quality management, legal matters handling, accounting, financing, planning

and strategic management. Nestle can control the infrastructure activities to strengthen the competitive positioning in the market.

RESOURCES &

CAPABILITIES

Resources are the source of firm’s capabilities. It can also be refer as all assets a

company controls and can use to achieve the organizational goals.

Resources are bundled to create those capabilities.

Resources can be divided into two categories:

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Resources of Nestle

Tangible Resources

• Assets that can be seen and quantified. Its consist of four types which include financial

resources, organizational resources, physical resources and technological resources.

Intangible Resources

• Assets that typically are rooted deeply in the firm’s history and

have accumulated over time. This includes human resources, innovation

resources and reputational resources.

Financial resources is a term covering all financial funds of the organization.

From an economic perspective financial resources are the part of the

organization's assets (property).

Its compromised all resources from total revenue, operating income, profit,

total equity and total assets.

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TANGIBLE RESOURCES1. Financial Resources

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Example for Financial Resources

Refer to all assets that available to use in the production process.

It is vital for superior business performance and sustainable competitive

advantage.

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TANGIBLE RESOURCES2. Organizational Resources

It is what a business needs to be able to operate and carry out its work. It is

important in ensuring the smooth operation of the company.

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TANGIBLE RESOURCES3. Physical Resources

Refer to things like the internet, which help businesses in a major way, like

marketing and staying connected.

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TANGIBLE RESOURCES4. Technological Resources

Both the people who work for a company or organization and the department

responsible for managing resources related to employees.

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INTANGIBLE RESOURCES1. Human Resources

The ability in process of translating an idea or invention into a good or service

that creates value or for which customers will pay.

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INTANGIBLE RESOURCES2. Innovation Resources

Derived from combinations of internal investments and external appraisals.

Organizations are more likely to grow and develop higher performance

potential if more resources are invested in image and reputation.

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INTANGIBLE RESOURCES3. Reputational Resources

Capabilities of Nestles

Capabilities are the firm’s capacity to deploy resources that have been

purposely integrated to achieve a desired end state.

Capabilities are often based on developing, carrying and exchanging

information and knowledge through the firm’s human capital.

It is also developed in specific functional area such as R&D, marketing,

manufacturing, management and so on.

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Distribution is the process of making a product or service available for the

consumer or business user who needs it.

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1. Distribution

Distribution teams in Nestle are responsible for the flow of raw materials and finished product, moving it from the factory to their centers and then into stores. Nestle’ distribution network ensures that every day more than 100,000 tonnes of product are transported to customer from their factories and distribution centers. Nestle has well planned, efficient

and optimal distribution chain and on that way costs and pollution are reduced what results in benefit for company and society

Human resources refer to all of the people you employ.

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2. Human Resources

Nestle employs around 330,000 employees from different countries and background.

Nestle has human resources policy. 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 our business activities. They provides training

on the Codes, with staff from the 14 departments that are part of the Code’s compliance system participating in yearly or twice yearly training. Nestle offers them potential for professional development, mentorship programs,

trainings, positive work environment, motivational compensation packages and bonuses and other opportunities.

Marketing refer to the action or business of promoting and selling products or

services, including market research and advertising.

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3. Marketing

Nestle focus three key areas; brand management, communications, customers insight. Famous brand name and efficient strategy to meet the taste

of each type of customers. Nestlé’s company advertise their product in different ways, as for as Nestle pure life is concerned company use television,

radio, newspaper, bill board.

Manufacturing is the process of converting raw materials, components, or

parts into finished goods that meet a customer's expectations or specifications.

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4. Manufacturing

For Nestlé, manufacturing includes all the processes we need to turn raw materials into safe, nutritious products for their

customers. Frontline innovative manufacturing roles of Nestle can be found in a variety of areas, including warehouse/supply chain,

quality, production, safety, maintenance and sanitation.

Management is the process of administering and controlling the affairs of

the organization, irrespective of its nature, type, structure and size.

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5. Management

Nestlé has a Board of Directors, led by our Chairman Paul Bulcke, who was the former Nestlé CEO. The day-to-day management of the Nestlé

business is taken care of by our Executive Board. Nestle has well trained and qualified managers from all around the world and with different level of

experience in diverse industries what helps to manage the huge multinational company well and successful.

A management information system (MIS) is a computer system consisting of

hardware and software that serves as the backbone of an organization’s

operations.

An MIS gathers data from multiple online systems, analyses the information,

and reports data to aid in management decision-making.

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6. Management Information System (MIS)

Nestlé’s global Management Information Systems team, provides all the businesses of Nestlé around the world a single, integrated and standardized system landscape which enable them to operate

efficiently.

Research and development (R&D) is the process by which a company works to

obtain new knowledge that it might use to create new technology, products,

services, or systems that it will either use or sell.

The goal most often is to add to the company’s bottom line.

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7. Research & Development

Nestlé’s R&D network is the largest in the food industry with 23 R&D Centres, 4,800 scientists and researchers working across the world.

Nestlé’s company first acquired the milk sterilizing site to develop milk products and processes.

Nestlé’s R&D team creates : Trustworthy products

Systems and services that contribute to improving the quality of peoples’ lives.Projects that go from developing packaging and equipmentDesigning food and beverages for the pilot of Solar Impulse

A world-first attempt to circumnavigate the globe in a solar powered aircraft

CONCLUSION

“

”

In conclusion, Nestlé is a large and

successful food and beverages

company. The market structure

of Nestle is under monopolistic

competition as it is product

differentiation, it has many sellers and

buyers, easy market entry and exit, it is

price maker and it spends money in the

advertisement.

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Thank You

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