LOCAL BUSINESS POLICIES OF NESTL

BANGLADESH LTD.

INDEPENDENT UNIVERSITY, BANGLADESH

DEPARTMENT OF BUSINESS ADMINISTRATION

REPORT ON
LOCAL BUSINESS POLICIES OF NESTL BANGLADESH LTD

PREPARED FOR:
Dr. Shibli Noman Khan
Lecturer
Department of Business Administration
Independent University, Bangladesh

PREPARED BY:
Alif Al Mohammed Shalahuddin
ID: 1221557
MBA 509
Department of Business Administration
Independent University, Bangladesh

Date: 30 July
2012

Letter of Transmittal
th

30 July, 2012
Dr. Shibli Noman Khan
Asst. Professor
Department of Business Administration
Independent University Bangladesh,

Subject: Submission of Term paper

Dear Sir,
Its our great pleasure to submit the Report on Nestle Bangladesh Ltd. A study was
making on a company that you have asked to prepare to study. I have tried our best to
follow the instruction that was given by you. Throughout this study I tried to identify how
Nestle operating their local business being a multinational company in Bangladesh.
I sincerely hope that you will enjoy this report as I enjoyed while writing it. If you need any
further clarification or quarry in interpreting this analysis, we will be glad to oblige you.

Thank you,
Alif Al Mohammed Shalahuddin
ID: 1221557
MBA-509

Table of Contents
Particulars
ABSTRACT
PART ONE: INTRODUCTION TO REPORT
Origin of the Report
Objective of the Report
Scope and Limitation
PART TWO: NESTL BANGLADESH LTD.
2.1 Introduction
2.2 History of Nestl
2.3 Global Brand of Nestl
2.4 Nestl in Bangladesh
Customers of Nestl Bangladesh Limited
Functions of Nestl Bangladesh
Products of Nestl Bangladesh
PART THREE: ORGANIZATION STRUCTURE OF NESTL
3.1 Global Organization Structure of Nestl
3.2 Organization Structure of Nestls in Bangladesh
PART FOUR: STRATEGY OF NESTL
4.1 Key Success Factors
External factors
Internal factors
4.2 Marketing Strategy
Market Segmentation
Target market
Positioning strategy
Advertising and Promotional activities
Medium Responses
4.3 Competition Structure
4.4 Nestls Consumer Communication and Relationship
4.5 Retaining Old Customer or Attracting New Ones?
Customer Satisfaction Level
4.6 Market Audit
External Audit
Internal Audit
4.7 Nestls Commitment to Environmentally Sound Business Practices
4.8 The Supply Chain
Raw Materials
Manufacturing
Distribution Marketing
4.9 What Makes Nestl to Become Nestl?
Medical support
Food support
Sports Development Programme
4.10 Conclusion
PART FIVE: APPENDICES
References

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Table of Figures
Particulars
Figure 01: Sales Regions
Figure 02: Sales Process
Figure 03: Organizational Functions
Figure 04: Nestl Brands in Bangladesh
Figure 05: Global Organizational Structure
Figure 06: Organizational Structure in Bangladesh

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2.2 History of Nestl

1866-1905: Henri Nestl's quest for a healthy, economical alternative to breastfeeding is
the important factor that drives the history of Nestl Company. Henri Nestl, pharmacist,

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1938-1944: in this period World War II were felt immediately upset the business once
again and Profits dropped from $20 million in 1938 to $6 million in 1939. To overcome
distribution problems in Europe and Asia, factories were established in developing
countries; particularly in Latin America. As the end of the war approached, Nestl
executives found themselves unexpectedly heading up a worldwide coffee concern, as
well a company built upon Nestl's more traditional businesses.
1944-1975: The graph of growth sets its trends little higher between 1944 and 1975. As a
result many new products were added as and outside companies were acquired. In Nestl
merged with Alimentana S.A in 1947, purchase of Findus frozen foods occurred in 1960,
Libby's fruit juices joined the group in 1971 and Stouffer's frozen foods in 1973and finally in
1974 the Company became a major shareholder in L'Oral, one of the world's leading makers
of cosmetics. The Company's total sales doubled in the 15 years after World War II.

1975-1981: In 1920s the economic situation was in challenge due to price of oil rose,
growth in the industrialized countries slowed down and worldwide unstable political
situation. In 1975 and 1977 price of coffee bean and the price of cocoa tripled. In this
situation to maintain a balance, Nestl went to second venture outside the food industry by
acquiring the pharmaceutical and ophthalmic product producer Alcon Laboratories Inc. of
U.S; as a result it increased competition and shrink the profit margins.
1981-1995: Improvement of financial situation through internal adjustments and strategic
acquisitions are the two important moves in this period. As a result between 1980 and 1984,
diversification of several non-strategic or unprofitable businesses occurred. On the other
hand Nestl managed to put an end in the third World to about a serious controversy over
its marketing of infant formula in this period. In 1984 Nestl acquire American food giant
Carnation and became one of the largest company in the history of the food industry.
1996-2002: The opening of Central and Eastern Europe, along with China and a general trend
towards liberalization of direct foreign investment was good news for the company. On the other
hand in July 2000 Nestl launched a Group-wide initiative called GLOBE (Global Business
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Customers of Nestl Bangladesh Limited

Nestl Bangladesh Limited markets its products throughout the country with the help of the
distributors. A part from that, Nestl Professional is a separate function which is responsible for
the institutional sale. There are currently 80 distributors of Nestl Bangladesh products of
which 76 are retail distributors and remaining 4 are Nestl Professionals distributors providing
products for the out of home consumptions. The whole country is divided into six regions:

Dhaka North

Dhaka South Chittagong

Bogra

Khulna Sylhet

Figure1: Sales regions

The retail distributors supply Nestl products to four types of outlet, while Nestl
Professional Distributors supply products to different institutions.
Vendin
g Site

Tea
Bunk

Retail Distributor
Ne pendent University,
stl Bangladesh
Nestl
Figure2: Sales Process
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Bangladesh Ltd.
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Functions of Nestl Bangladesh

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Day by day demand and trust on the Nestl products are growing.

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Focusing on the substantial growth and the other business

perspective, the company developed its own functional areas.

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Currently the existing fictional areas are:

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Figure3: Organizational Functions

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No matter how many functions are running, their main aim is to gain ultimate
excellence. Every function contributes from their end to meet the corporate
goal. The General Management take cares of the overall operation of the
company and makes the key decisions. Human Resource focuses the
management of employees and organizational culture; moreover HR
professionals are also responsible for retaining the people who are making
the difference with their competitors at the end of the day. Supply Chain
ensures the stable supply of the products according to the demand of the
customers. Marketing looks after the existing brands, market share and
product development of the products. Nestl is the worlds largest Nutrition
Company that is why the importance of the Nutrition products is much more
in compared to the other food companies; as a result they created a totally
separate team to look after the Nutrition products, such as, CERELAC,
LACTOGEN. Finance and control deals with the financial transactions and

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mpany complaint financially and procedurally. Finally Sales and Nestl

Professionals are responsible for earning revenue for the company, but
sales goes for the retail distributors and Nestl Professionals looks after the
institutional sales.

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P
G

Beverage
Nescafe

Nestea

Nesfuta

Culinary

Dairy

Maggi, Shade-Magic

Nido

Coffeemate

Breakfast
Cereal

Nutritio
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Comflex

HunyGol
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Kokocranch

Lectoze
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NAN

Cerelac

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4.1

Key Success Factors

Strong

brands

relationships

with

consumers-Research and developmentInnovation and renovationProduct availability-

Building relations with medical and scientific community in light of Nestl Bangladesh
Ltd., this report tried to analyze the following components of marketing strategy through
different theories and applications:
External factors
Social: Nestl makes an effort to integrate itself as much as possible into the
cultural and social values of the different countries. During operation in
Bangladesh Nestl has launched products with integration of social & cultural
factors. This has been done to match the taste buds of Bangladeshi consumers.
Ethical: Although Nestl faces ethical dilemmas in commercialization of its products, it
does not consider its high price to be an ethical crisis. This is because they are not
ready to compromise their quality in order to make their product widely available to all.

Internal factors
Marketing structure: Nestl is more people, product and brand oriented than system
oriented. Nestl favors long-term successful business development and even to greater
extent, customer life-time value. At the same time Nestl does not lose sight of the
necessity to improve in terms of quality, price and distribution. However, Nestl remain
conscious of satisfying the wants needs and demands of its consumers. It is also aware of
the need to generate a sound profit annually.
Nestl seeks to earn consumers confidence, loyalty and preference and anticipate
their demands through innovation and renovations. Therefore Nestl is driven by an acute
sense of performance adhering to quality and customer satisfaction Nestl is as
decentralized as possible within its marketing strategic definitions requiring increasing
flexibility. Nestl is always committed to the concept of continuous improvement of its
marketing.

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activities and customer satisfaction through market segmentation, positioning and target

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The company then effectively communicates and delivers the chosen position to the

market. Nestl strongly believes that their products are specific and so are the product

benefits. This, Foysal Alam, the marketing officer, termed as Benefit Positioning

Regarding new upcoming products, Nestl is looking forward to renovation and

Since Nestl is already an acknowledged and quality food product company in

Bangladesh, it does not emphasize much on publicity and promotion. Here are a few
points to ponder about advertising done by Nestl Bangladesh Ltd.:
Nestl cannot advertise for infant milk.
Mass advertising is done for new products only
Advertising and promotion is done by product wise
15% of marketing communication budget is spend for publicity
More indulged into product sampling and test marketing Nestl had
performed test sampling in the year 2003 on Nescaf.
Nestl Bangladesh Ltd. has specialized agencies for their promotional
purposes. They are:Product name advertising agencies:
Nescaf -Unitrend
Milo - (25%) Unitrend
Maggi - Protishobdo
Polo Protishobdo
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4.4 Nestls Consumer Communication and Relationship

T
Nestl is committed to offering consumers high-quality food products that are safe,
tasty and affordable. The Nestl Seal of Guarantee is a symbol of this commitment.
It also believes in maintaining regular contact with the consumers. This applies both to how

Although Nestl is very conscious of its role in communicating responsibility to consumers,

Nestl in Bangladesh does not really perform much consumer communication. As noted
their marketing officer, For Nestl, our consumers are our distributors. Nestl has a
separate department designated as Consumer Relation Department where the purpose is
served. A P.O.-Box had been assigned where consumers can send complaints, mails or any
enquiries directly in order to reach Nestl. This can also be termed as Post Purchase
Service. Consumer communication is not much practiced in Bangladesh because at the
moment, Nestl does not have any organized internal database of its consumers. Hence, it
can be said that Nestl hardly takes any initiatives in case of consumer communication.

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4.6 Market Audit

The marketing audit is divided in
1. External Audit

2. Internal Audit

o Opportunities

o Strength

o Weakness

Threats

External Audit: Scanning the external environment of Nestl, we tried to find

out the opportunities and threats that are pointed out here:
Opportunities: The ability to expand their product line that requires an approach that is
compatible with Nestls strengths and that compensates for its weaknesses, e.g. to
make certain products available in the market at a relatively lower price so that a larger
number of consumers can buy itproducts such as Cerelac. Enhance distribution
of their Infant Nutrition Products in a country like Bangladesh where malnutrition already
exists, increasing the distribution channels and channel outlets.

Threats: Few local manufacturers who tend to sale their products at a relatively
lower price through various unethical means. For instant, many do not value
expiry dates since not much restrictions are practiced in Bangladesh.High
degree of bargaining power of suppliers.
Internal Audit:
Then we tried to analyze the internal situation of Nestl and we figured out the following
strengths and weaknesses:

A portfolio of products which responds to the consumer trend for lighter yet indulgent
snacking

A unique strategic position which combines powerful local brands with strong global
product brands

Dedicated core staff who are willing to provide significant labor hours to accomplish
targets

Centralized organization that helps in easier coordination of business activities

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Strengths:

Nestl Weaknesses:
o

Far fewer staff than actually required in terms of tasks to be completed.

o Significantly less customer support services than is required in terms of the

number of customers and the complexity of the services offered.
o Except form Milo, they have no post purchase service for other
products in Bangladesh.
Another Approach toward Strengths; Weaknesses Apart from conducting the SWOT analysis,
under marketing assessment, a different approach is taken to make an in depth analysis about
Nestl. In this approach, first, some core factors are identified against which the performance
or relative strength or weakness of Nestl can be measured. These factors include:

1. Marketing Factors
2. Manufacturing Factors
3. Organizational Factors
But these factors are too broad. So, further some criteria were developed for each
factor to be evaluated. Then the relative weaknesses or strengths are measured
Strengths

against each criterion that is summarized here in a tabular format:

Fundamental
Strength

Weaknesses

Local Business Policies of Nestl Bangladesh

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Marketing Factors:

Manufacturing actors:

Organizational Factors:

Relative Market

Production facilities

Culture

Reputation

Flexibility

Leadership

Previous Performance

Workforce

Managerial capabilities

Competitive Stance

Technical skill

Workforce

Customer Loyalty

Delivery capabilities

Flexibility

Depth of product range

Product quality
New product program
Distribution cost
Dealer network
Geographical coverage
Sales force
After sales service
Manufacturing cost
Pricing
Advertising

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Structure of competition

Adaptability

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4.8 The Supply Chain

Bringing a food product to the consumer involves a continuous process from farm to
table. Integrated measures for preserving the environment, and consequently for
optimizing global environmental benefits, are put in place along the supply chain. Nestl
endeavors to apply the following practices to meet its environmental commitment.

Raw Materials:
In general, Nestl is not directly involved in the production of raw materials. Wherever possible,
locally available raw materials are used. They are either obtained directly from producers or
purchased through trade channels. Nestl applies the following principles when sourcing raw
materials: all raw materials must meet both legal and internal quality criteria, including limits on
possible environmental contaminants; whenever possible, preference is given to raw materials
that are produced by environmentally sound farming methods (e.g. integrated crop
management); and farmers are encouraged to apply sustainable farming methods and, where
appropriate, are provided with assistance in crop production and dairy farming. Such assistance
includes the provision of recommendations for the conservation of natural resources (soil,
water, air, energy, and biodiversity) and techniques for reducing environmental impact.

Manufacturing:
Manufacturing comprises all processes that are necessary to transform perishable
raw materials into safe and convenient food products for consumers. Nestl strives to
achieve optimal performance in its manufacturing activities, including the
environmental aspects. As such, the manufacturing practices of the Group:
Respect natural resources by emphasizing the efficient use of raw materials, water and
energy;
Minimize the use of environmentally critical substances;
Continuously seek improvement in the efficiency of production facilities; and

priority and dispose of non-recyclable waste in an environmentally sound manner.

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Reduce waste generation and emissions as much as possible; consider recycling of waste as a

Local Business Policies of Nestl Bangladesh Ltd.

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Regular environmental assessments of Nestls manufacturing practices are conducted to:

Evaluate factory performance;
Review factory compliance with applicable legislation and Nestls own standards;
Packaging fully investigate incidents that could affect the environment and take
relevant measures; and
Compare results with previous targets and set new improvement objectives.
In addition, Nestl exchanges information on environmental protection technology and
practices in order to ensure a wide use of best practices. Nestl encourages its
contract manufacturers to use environmentally sound manufacturing practices.
Packaging serves a major role in our daily lives. It protects food products from spoilage and
ensures safety from manufacture through storage, distribution and consumption. Packaging
may also provide tamper-evidence features. It communicates information, including nutritional
information and serving instructions, and provides the convenience demanded by todays
consumers. Nestl is committed to reducing the environmental impact of packaging, without
jeopardizing the safety, quality or consumer acceptance of its products. It is Nestls objective
to develop safe and wholesome packaged foods using the most efficient and appropriate
packaging materials available, while, at the same time, satisfying consumer requirements and
expectations. Nestl seeks packaging solutions that:

result in the lowest possible weight and volume of packages;

take into account new packaging materials and processes that reduce the impact on the
environment;
avoid the use of substances that can adversely impact the environment during packaging
production and disposal;
decrease packaging waste at all stages, including package manufacturing, utilization and
disposal;
increase the use of recycled materials wherever possible; and

schemes.

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Increase the recyclables and compatibility of its packages with existing waste management

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