BUSINESS COMMUNICATION

RESEARCH PROJECT

Submitted by:

Fakhar Imam

Hina Mall

Sidra Masood

Submitted to: Ms. Rumessa Naqvi

Submitted on: 29th April, 2019

 Table of Contents

ACKNOWLEDGEMENT...............................................................................................................3
Title..................................................................................................................................................5
1. Introduction..............................................................................................................................5
1.1. Background and Context...................................................................................................5
1.2. Statement of the Problem..................................................................................................5
1.3. Significance of the Study..................................................................................................6
2. Research Question:...................................................................................................................6
2.1. Research Hypothesis:........................................................................................................6
2.2. Research Objective:..........................................................................................................6
3. Research Methodology.............................................................................................................6
RESEARCH QUESTIONS...........................................................................................................15
3.1. Primary Research Questions...........................................................................................15
3.2. Subsidiary Research Questions.......................................................................................15
METHODOLOGY........................................................................................................................16
3.3. Interview Analysis..........................................................................................................16
3.4. Survey Analysis..............................................................................................................18
FINDINGS AND DISCUSSIONS................................................................................................25
3.5. Management....................................................................................................................25
3.6. Operations.......................................................................................................................28
3.7. Communication...............................................................................................................28
APPENDICES...............................................................................................................................34
3.8. Survey Questionnaire......................................................................................................34
 ACKNOWLEDGEMENT

First and foremost, our humble thanks to Allah Almighty, Who has blessed us with the ability of

carrying out this research till the end. The following work wouldn’t have been done without

time, endless efforts and support of our families, friends and teachers. We would like to

acknowledge our parents and siblings for their continuous patience, support and encouragement

throughout our endeavors. Significantly, we are thankful to Ms. Rumessa Naqvi, our supervisor,

who was constant source of advice and encouragement throughout the process of research. She

has been an excellent guide and mentor in our journey and we are extremely beneficial to her

selfless efforts and guidance to us.

Department Member
Fakhar Imam Operations
Hina Mall Communication
Sidra Masood Management
Executive Summary

Henri Nestle found Nestle in 1866 in Switzerland. Henri initially came up with the idea of
developing a product for the infants who rejected mother’s milk and to deal with this problem he
created a combination of cow milk, sugar and wheat flour.

Nestle has been operational in Pakistan since 1988 when it acquired Milk Pak’s 40% shares.
Nestle Milkpak was the only company which initiated tetra pack milk in Pakistan with packaging
depicting the national flag of the country.

Over the years competition has grown tremendously causing Nestle Milkpak to loose significant
market share that might have resulted in loosing profitability of the firm hence the purpose of the
research here is to depict degree of loss of market share leading towards declining profitability.

Management aspect of Nestle is identified that it has a zero policy of credit sales therefore
reducing the leverage for retailers and they prefer opting Milkpak’s competition due to absence
of this policy which results in lows sales and decline in market share. However Nestle has kept a
close eye to the operations of the company, in order to implement global standards in its
operations to achieve efficiency but despite all the effort the company has never achieved six
sigma and is prone to several factors that lead to uncertainty that it could achieve such scale in
operations. Moreover, the communication & promotional activities needs to be improved. This is
a significant need to vocalized the sustainable development projects Nestle MilkPak is working
on as well as this is dire need to build strong trust among the consumers for tetra pack milk. The
quality control measures needs to be highlighted and communicated effectively in order to
spread awareness and build trust which in turn will ncrease the market share.
Title

Nestle MilkPak: Understanding the Implications of Decrease in Profit Leading to Decrease in

Market Share

1. Introduction

1.1. Background and Context

Nestle Pakistan Ltd is a subsidiary of Nestle S.A in Switzerland. Nestle is a food processing

company that is registered in the stock market of Lahore and Karachi. In 1988 the company

started operations in Pakistan as a joint venture with Milk Pak LTD, having 40% of its shares.

The company’s headquarter is in Lahore and has 4 production facilities. Its factory in Kabirwala

has the largest milk intake plant as compared to its other facilities worldwide. Being pioneer in

the packaged milk category, Nestle MilkPak has strived to become one of the top 25 companies

in KSE.

Throughout the years Nestle MilkPak has seen several players entering the market and

competing heads on with MilkPak. These competitors include Haleeb, Olper, Good Milk,

Nurpur, Day Fresh etc. to whom the company is losing market share.

1.2. Statement of the Problem

Decrease in profits leading to decrease in market share. Nestle MilkPak has begun to face fierce

market competition, uncertain economic and political conditions in the country that have resulted

in dwindling profits for the company which leads towards missing of potential opportunities for

growth and retain market share for the company.

1.3. Significance of the Study

The significance of this study is to highlight the reasons behind the decrease in the market share

of Nestle MilkPak. With the emergence of different competitors like Olper, Nurpur, Prema and

Day Fresh, the consumers have started to shift from Nestle MilkPak and this has effected the

sales of Nestle Pak. It’s also important to analyze what steps are being taken by the management

of Nestle MilkPak to prevent further decrease in the market share and to prevent them from

losing more loyal consumers of Nestle MilkPak

2. Research Question:

Does the decrease in profits leading to decrease in market share?

2.1. Research Hypothesis:

Hº = Decrease in profits leading to decrease in market share

2.2. Research Objective:

To determine the extent to which the decrease in profits leads to decrease in market share.

3. Research Methodology

Research design explains how research was done with respect to the area of problem, which
research technique to use, how empirical data analysis was carried out to address the research
question.

Methods:
Experiential data was examined using two methods. Qualitative and quantitative. Methodology is
selected with respect to research question that should help explore the answer of research
question. (Maxwell, 1996)

Study Types:

Research design is classified into exploratory or conclusive research. (Malhotra, 2008). The aim
of exploratory research is to develop insights that help understand problems of research.
(Malhotra, 2008). Results from the exploratory research are sub divided into causal and
descriptive research. (Malhotra, 2008).

Literature review of the report majorly comprises of exploratory research. Secondary research
including analysis of scholarly journal articles, industry reports were used to develop insights of
recent developments in packaged milk sector of Pakistan. After analyzing the current scenario of
packaged milk sector, analysis of different departments was done to analyze their contribution to
the level of sales and profitability of the company.

We begin our research with the exploratory research to observe behavior of our specified
industry and strategies implemented by Nestle Milkpak with respect to them. Then we move to
descriptive research with prime focus on description of variables in the problem statement. For
example, consumer surveys to depict market potential along with attitude surveys towards Nestle
Milk Pak were taken into account.

Descriptive research focuses on current scenario which is also done in this study. It tell about
deviations within the scope of the problem so that corrective measures can be suggested and
implemented.

Another benefit of descriptive research is that it provides a thorough understanding of variables

of the study.

It also sets up a premise for decision making.

Lastly data is analyzed to conclude results and findings that lead towards suggesting of
recommendations and action plan.
Population Sample:

The population for any research study is taken to observe collective reactions and draw

conclusion from them. (Babbie, 2005). Due to several limitations such as time, money etc it is

not possible to study all members of population that are interest to the researcher therefore he

selects a specific sample from the population. (Babbie, 2005). Lahore has a population of 11

million and customer survey is restricted to areas near Hyperstar, Mall of Lahore and Saddar

Cantt where footfall of the target population is significant for our field of study.

Target population comprise of Nestle Milkpak’s consumers. Sample population of our

questionnaires is going to be 40 respondents of age 18-60 years. Sample is selected using

convenience sampling which refers to collection of information from member of population who

are readily and suitably available. (Malhotra, 2008)

Population sample is restricted to consumers of packaged milk in Pakistan.

Sources of Data Collection:

Data is collected from primary and secondary sources. Primary data is conducted directly by

researcher to address the problem at hand while the secondary data is collected for other

purposes. (Malhotra, 2008)

Secondary data is covered in literature review and in the background of the area of problem.

Data is collected from multiple sources including news articles, scholarly articles, company

websites and existing market share analysis by Nestle MilkPak. The primary data however is

gathered through questionnaires and interviews. Design of questionnaire comprises of mainly

closed ended questions and a few open ended questions. To gain insights, structured interview

from Nestle officials was taken into account to have accurate analysis of the industry.

Scope & Limitations:

The outcome of the proposed study is to provide reader insights about Nestle’s Milkpak division.

How Nestle monitors procedures involved in production and processing of milk to the

distribution of packaged milk. Apart from this would highlight opportunities and areas of

improvement for Nestle that the company has left exposed to its competition. We’ll encircle

measures that can be taken into account by the company to cover those areas. This will help

understand if there is an extensive need of improving operations, product marketing,

management and communications in order to strengthen Nestles’ vision and mission for its

Milkpak division. Competitor analysis is done to help find points of parities as well as points of

differences to build a competitive edge by reshaping current strategies.

Consumer preference along with their needs and requirements is observed through our consumer

questionnaire to identify how they view the company’s current standing in the market. Most of

the research study would provide reader an understanding of different operational and marketing

concepts that we have studied in our courses of these described fields.

One of the major limitation of this study is time since the study had to be conducted within a

specific time period. Beyond this time-frame consumer preferences may change since they are

quite dynamic in this era of globalization. Apart from this the extent of research has a geographic

limitation to the advised locations and a set number of respondents in the samples size. In reality,

market size of Nestle Milkpak is spread across multiple cities of the country which can distort
the findings to some extent. Overall, the research is subjected to time limitation as well as

resource limitations.

Literature Review

Pakistan is a fast growing economy that has a lot to offer to the multinational organizations.

Changes in business dynamic such as operating costs, competitive environment has its own

implications on the operations and operational strategy of an organization. Operations consist of

daily tasks that are needed to be performed while operational strategy is concerned with long

term planning and goals. How companies handle its operations today help in determining their

long term performance, profitability and market share so it is important to develop a sound

operational strategy. Existing operational strategy of Nestle Milkpak is reviewed with

comparison to other strategies of the company using different benchmarks. Channel utilization is

explored since it’s the very initial process that leads towards actual sale. Long term strategic

issues along with operational are explored to identify gaps and miss opportunities in the

company’s operations. Key component of operations revolve around 6 P’s of manufacturing

strategy which are crucial for observing its significance in operations. They are named as

planning, pro-activeness, pattern of actions, portfolio of manufacturing capabilities, programs of

improvements and lastly performance management. Apart from this, operations also involve

logistics & distribution strategy, warehousing strategy, sales strategy and corporate strategy that

collectively help in gaining and maintaining sales of the organization. Operational efficiency is

one the pillar of strategic implementation of Nestle, which contributes to its sustainable growth

rate and sales. Due to the strategic implementation and operational excellence the operational

excellence they have managed to achieve a 22 percent growth rate. [ CITATION Saa07 \l 1033 ]
Noor Sheikh (2017) in her book talks about Pakistan being the fourth largest milk producing

nation in the world. The livestock and dairy contributes to 11% of the national GDP of Pakistan.

Since gaining independence, there have been many changes in the dairy sector of the country.

Over the years, the development in technology and urbanization has given the opportunity to the

farmers to distribute the milk amongst heavily population areas of the country. In the 1970s and

1980s the Government of Pakistan introduced policies to distribute packaged milk in the country

and started taking measures to help in speeding up the growth of the industry of packaged milk.

Eventually in 1988, a collaboration took place between Nestle and MilkPak to change the dairy

industry and improve its quality as well as quantity. The author in her book describes how Nestle

Pakistan is playing a role in providing Pakistan with milk which is without any chemical. Nestle

Pakistan also has an extensive portfolio on its dairy product mainly MilkPak as Nestle wants to

enhance the lives of Pakistanis which it has been doing for last 30 years.

Shoaib Pervaiz & Farooq Tirmizi (2019) in their article talk about the new phase of war that is

going to start between the package milk producing companies. Engro Foods and Nestle Pakistan

have been part of stiff competition to gain most of the share of the Pakistani consumers. The new

advertisement of Olpers a product of Engro Foods has raised curiosity amongst the consumers of

packaged milk. As in the advertisement the mother is telling her son about an unknown packaged

milk that is not pure and its quality is questionable. Even though Nestle MilkPak was not clearly

shown in the advertisement but still it did not appreciate that a similar box without a name was

shown and that the quality of Nestlé’s products especially that of Nestle MilkPak is being

questioned.

In the article “Only six milks are fit for consumption in Pakistan” the authors talks that tests have

been done on the different packaged milks available in Pakistan and only six are fit to be
consumed by the people. The six brands that have been proved by the Pakistan Council of

Scientific and Industrial Research are Olper, Nestle MilkPak, Haleeb Full Cream, Nurpur, Day

Fresh and Good Milk. The packaged milk were given pasteurization and high temperature

treatment to check whether there any additives in the milk which would are harmful to the life of

consumers.

Amar Ayaz (2018) in his article talks about Nestle being the oldest brand providing milk to the

Pakistani consumers. Milk is an integral part of every human being especially in Pakistan milk is

consumed in different methods. With the spread of awareness amongst people, consumers have

started raising questions regarding the process of production of packaged milk. In this article the

author is telling about Nestle focuses on maintaining the quality of its dairy products and that it

keeps check and balance of the all processes involved in the production of its products. There are

different measures that Nestle takes to ensure the quality of its product; MilkPak.

Wali Zahid (2017) in his article talks about how Pakistani brands have been able to defeat their

international brands. Nestle who has been in Pakistan for 40 years has been defeated by Olpers,

national brand. Olper has been able to secure 54% of the market share of Ultra High

Temperature category of products. Even though there were decline in sales of Olpers from 2014

to 2015, but Olpers by improving their quality and the packaging of their Boxes were able to

increase their sales.

Increasing competition prompts organizations to seek effective performance. To survive in this

competitive environment organizations need to design and implement strategies. Supply chain

management and operational performance have significant impact on financial performance.

Operational efficiency has various dimensions from which it can be measured. These include

service quality and reduction in production and service delivery errors.

Supply chain management also affects financial performance as it focuses on to increase product

quality, lower prices to have competitive advantage and gain more profit. Relationship

management has a broad impact on all aspects of supply chain and performance levels. Right

flow and correct transfer of information and information systems make the process more

efficient and effective thus making the management easier. Another component of supply chain

is logistic management that ensures supplying right product at right time in right amount and

right condition therefore has a significant impact of supply chain’s operational activities. The

quality of supply chain capabilities in the end depicts the intensity of its positive impact on

operational and financial performance.[ CITATION Asg \l 1033 ]

Communication is one of the main drivers of building teams and achieving the performance.

Moreover, communication is greatly linked with management as both of them serve a

complimentary role for each other [ CITATION Buc17 \l 1033 ]. There is no denying in the

importance of communication. In an organization’s workplace, various people belonging to

different social and professional background come together to form a unit. These people are

responsible to achieve a common goal that imbedded in strategic organizational goals. Often it is

seen that when the manager is able to establish a culture that helps in clearly conveying the

organizational goals and vision, and promotes an environment of open communication, the

negative ramifications are minimal and productivity is increased[ CITATION Adu14 \l 1033 ].

Managers are responsible of performing managerial functions such as planning, organizing,

leading and control. These functions will always require strong interpersonal relationships and

better communication for the achievement of goals. Managerial communication is the process by
which employees are informed about the tasks to be performed in order to achieve business

objectives[ CITATION Buc17 \l 1033 ]. There are three types of communication; verbal, non-

verbal and written which are transmitted to audience in formal and informal manner. There is

strong link between organizational communication and performance of an organization it is seen

that when an organization is able to instill an appropriate medium of communication the

company’s strategies can be implemented in an efficient manner such as Training and

development of employees, better customer orientation and marketing activities[ CITATION

Har18 \l 1033 ]. Organizational communication is comprised of two components: inside

communication and outside communication. Inside communication is specifically with the

employees and the management, and the attempt to stimulate the workforce to build a strong

sense of responsibility towards organizational objectives. Outside communication encompasses

keeping connections with suppliers, distributors as they play a crucial role in operations of the a

company. Moreover building customer relations, positively impacting public opinion and

implementing promotional activities which ties all these aspects together [ CITATION Buc17 \l

1033 ].

Nestle Pakistan recently in year 2018 came up with a book named ‘Drops of Divine: A story of

Milk in Pakistan”, which basically talks about milk industry and the journey “from grass to

glass”. This idea of composing a book came into being because of reason given by the Head of

Corporate Affairs, Nestlé Pakistan, Waqar Ahmad. He emphasized that Nestle being a leading

manufacturer in this industry should give its consumers a holistic view of how the milk is

manufactured starting from process of extraction till packaging. The book also covers how the

innovation is happening through the collaboration of farmers, technicians and processors.

Moreover what future holds for this milk industry [ CITATION Kam18 \l 1033 ]. Thus
addressing the issues and ambiguities that consumers face helps in building a positive image of

the company and its brand, the trust issues on the quality of the milk and the processes through

which it is produced is a growing concern for people. Nestle Pakistan by taking this initiative has

moved towards the direction in gaining consumer trust. But the most important requirement is to

improve their advertising in order to reach the consumers and spread the message effectively.

RESEARCH QUESTIONS

3.1. Primary Research Questions

To determine the extent to which the decrease in profits leads to decrease in market share.

3.2. Subsidiary Research Questions

Section 1: Operations

1. Does energy crisis in the country result in production losses or issues in quality?

2. Does seasonality affect the production and sales of Nestle MilkPak?

3. How has Nestle MilkPak tried to achieve six sigma in its operations?

4. How does relationship with farmers and milk distributors affect Nestlé’s overall

production and profitability?

5. How often Nestle MilkPak does invest in R & D to minimize unexpected external

threats (for example diseases in cows) and ensure consistent quality of its milk?

6. What are the steps in process of milk collection, processing and distribution?

Section 2: Communications
 1. What mediums are used by Nestle MilkPak to build sustainable/effective

communication channel with farmers and milk distributors and within the

organization?

2. What types of promotional activities are being used and which ones are more

effective in both retaining and gaining customers of Nestle Dairy Products?

3. What skills are employed by the company for its sales team?

4. Is there sufficient communication between the line managers and the higher

managers? What type of culture exists in the organization (collaborative or

authoritative)? What barriers do managers face in terms of communication?

Section 3: Management

1. What measures have been taken by Nestle to strengthen milk supply?

2. What are MilkPak competitively important resources and capabilities?

3. Is the MilkPak able to take advantage of market opportunities and overcome external

threats to its external well-being?

4. What are the weakness of Nestle MilkPak and what are the threats to Nestle MilkPak?

5. What are the strengthens of Nestle MilkPak?

METHODOLOGY

3.3. Interview Analysis

On 25th April, interview was conducted with Gulraiz Haider Naqvi, Management Trainee at

Nestle Pakistan’s Head Office. Key areas highlighted by him were: In this modern era the

consumers of loose milk account for around 95 to 96 percent and 4 to 5 percent use package

milk. Out of 5 percent of package milk, Nestle MilkPak accounts for approximately of 2.5
percent. Moreover, Olpers has mostly affected the sales of MilkPak. Since 1988, MilkPak had

been leading the market but after the emergence of Olpers along with other package milk brand

the market share of MilkPak has decreased. It no more accounts for 60 percent. The market share

of MilkPak continues to fluctuate as the consumer who once was loyal to only MilkPak now has

many different options and those options are cheaper than Nestle.

The focus of Nestle is to ensure that the supply of milk from the farmers to consumer takes place

without any issues and if there are any issues and the head of supply chain is responsible to

ensure that the issue is resolved as soon as possible. The supply chain from producer to

consumer is traceable by the management at Nestlé’s head office. There are around 25 to 26

quality checks carried out by the management. Nestle get its supply of milk from certified

farmers. Nestlé’s strategy and prime focus is to ensure on shelf availability all times.

Mr. Gulraiz also informed that the weather also effects the production of milk as the cows

produce more during the winters and the demand for milk is also high during the winters. Nestle

through different training programs and workshops ensures that its area manager of sales are

trained for any circumstances. Nestle tries its best that its sales representatives now how to

handle any issues of the consumer as well as of the distributors.

The target class of Nestle is mainly socio economic class A and B. The usage of smart phones

amongst this class is high that’s why Nestle mainly focuses on the marketing through social

media as its impact is increasing and it is more effective.

There is no specific sales team for MilkPak. The sales team at Nestle Pakistan is trained for all

the products. The line managers evaluate the performance of employees and the employees

evaluate the performance of their line managers.

3.4. Survey Analysis

The survey questionnaires were distributed by using Google Forms. The target audience selected

by random sampling amounted up to 40 in number out which 30 responses were gathered.

Gender Distribution

Out of 30 responses got on the survey, 43.3% are male, and female are 56.7%.

Age Ranges
The age group division shows that maximum no. of people belonged to age range 21 to 25 i.e.

46.7% closely followed by 26 to 30 at 40%. This shows that most of the respondents are students

or either the ones who has at least 2-5 years of work experience.

Preference of Open Fresh Milk over Tetra Pack

The question posed to know whether the consumers buy tetra pack or open fresh milk for

consumption, the majority prefers the combination of both Fresh milk and Tetra pack (63.3%),

followed by open fresh milk i.e. 26.7%.

Milk Brand Preference

Nestle MilkPak is preferred by 43.3 % of respondents, Olper stands second a with 33.3%,

followed by Nurpur 13.3% and Day Fresh 10%

Milkpak Price Satisfaction Degree

The inclination of people towards the pricing of MilkPak is somewhat satisfactory. 40 % agree it

to be reasonable but 43.3% has a neutral stance towards it which is a high percentage. This

showing that pricing needs to be looked at considering the consumer’s satisfaction level.

Moreover, it is also to be noticed that 13.3% disagree with the pricing strategy of Nestle

MilkPak.
Assessing the Distribution network of Nestle Milk – is it easily available?

This shows a good distribution network of Nestle MilkPak as 86.7 % responded in affirmation

that Nestle is readily available in their area. Only 13.3% who responded ‘Maybe’, do not

purchase MilkPak which shows the reason why they don’t know about the availability.

Brand Preference in Absence of Nestle MilkPak

 17%
30%
Anhaar
7%
Good Milk
Haleeb full cream milk
13%
Nurpur
Olper
3%

30% Prema

In case Nestle Milkpak is not available which brand will the consumer prefer? The majority

voted for Prema and Olper; 30% each. The next preference is Anhaar 17%, followed by Haleeb

which is preferred 13% followed by Good Milk 7%.

Awareness of Quality Control Procedure through Advertisements

In order to analyze how the information provided in the advertisements are perceived by the

consumers, the question was posed regarding the quality control procedures that are mentioned

in nestle ads. More than half (53%) mentioned that they are not aware of the quality control

procedure mentioned by Nestle in its advertisements which shows that the message is not being

delivered effectively, moreover it is not being decoded like it is intended by the company.
 47% No
53%
Yes

Trust in Nestle MilkPak quality over open milk

Since majority of our community prefer open milk over tetra pack, which is one of the main

reasons for reduced sales of tetra pack milk. This is so as most people do not trust tetra pack milk

for it containing preservatives and not being satisfied by UHT method. Therefore to analysis the

level of trust for Nestle MilkPak this question was raised and it is seen that there is a stark equal

division of people in favor and those who aren’t thus 50% trust the tetra pack whereas other 50%

trust open milk over tetra pack.

No
50% 50% Yes

Quality concerns with Nestle MilkPak

Any quality problem effective buying behavior and purchase decision therefore to understand it

there are any quality concerns regarding Nestle MilkPak this question was asked. 75.9% voted

they don’t have any quality problem where as 24.1% confirmed having experienced quality

problem.

Nestle success rate in resolving Quality grievance

57% opted for no didn’t file any grievance, whereas 30% said yes to nestle resolving the quality

grievance and lastly 13 % stated Nestle didn’t resolve Quality issues.

13%

30%
No
No, Didn’t file any
grievance
Yes
57%

Rating Nestle in terms of superiority to other tetra pack Milk

A 5 point grid question was asked to grade nestle keeping in mind other tetra pack Milk brands.

5 points rated as superior, 1 point rated as poor. It is seen most of the respondents (40%) has

neutral presecption regarding Nestl. Mmoreover, 30% believe it to be rate 4 out of 5. And 10%

opted for superiority but that is just 3 respondents.

Appeal of Nestle MilkPak’s TV Advertisements:

Here again a neutral stance has been adopted by the consumers regarding the advertsing activity

of nestle, followed by almost same proportion opted to agree to the appealing nature of Nestle

Advertisements. Nestle MilkPak has come up with variety of advertisements during past few

years but given the response of the population it shows that effective reforms are needed to bring

a major change.

Strongly agree Agree Neutral Disagree Strongly disagree

13
11

2 2 2

Total
FINDINGS AND DISCUSSIONS

3.5. Management

Nestle MilkPak has been part of dairy industry for a very long period of time and it is more

experienced than any other packaged milk. Olpers has been in market since 2006 and broke the

monopoly of Nestle. Nestle has the competitive advantage of being in the market for a longer

period of time but Olpers with its aggressive marketing campaigns is proving to be more

competitive and a challenge for Nestle. The competitors of Nestle mainly Olpers is providing the

consumers with better products (Ayaz, 2018).

Some of the weakness of Nestle MilkPak has led to the decrease in the market share of Nestle.

Following are some of those weakness:

 The first weakness of Nestle that the competitors have used for their own benefit is of

giving the milk to the shopkeepers on creditors and Nestle does not give MilkPak on

credit. This has led to decrease in the sales of Nestle.

 Companies like Engro have spent a lot of money on the advertisement of Olpers, whether

on social media or advertisements on Television or Newspaper. Olpers has been able to

attract the attention of the customers by making the advertisements colorful and catchy.

Nestle does create advertisement but it does not spent a lot of money on its products like

MilkPak which already have been successful and profitable. Poor marketing campaign of

Nestle also effects the sales of MilkPak.

 With the increase in inflation the buying power of the consumers is also decreasing. If the

prices of the packaged milk are compared then the Nestle MilkPak is more expensive.

Olpers is relatively less expensive than MilkPak and the buyers prefer to buy it.
  Nestle is depended upon Tetra Pack for the packaging of MilkPak and when Tetra Pack

raises the price of packaging then Nestle also has to increase the price of milk.

With the increase in the competitors the threats to Nestle MilkPak have also increased.

Following are some of those threats:

 The quality of milk that is being supplied by the farmers has been decreasing with the

passage of time. This is not only a threat for Nestle MilkPak but for the whole dairy

industry or specifically for the package milk.

 With the increase in the population the consumption of milk has also increased. There are

not enough cows; milk producing animals to fulfill the increasing demand of milk.

 There also has been decrease in the profits being earned by the farmers providing milk to

Nestle.

 Most of the farmers are not aware of how does a market works due to lack of direct

contact between the farmers and market.

 Most of the farmers are illiterate. The lack of education has made it difficult for the

farmers to manage the dairy farms and to manage it systematically.

Even though there are weakness and threats to MilkPak, it is still a very strong brand and

following are Nestlé’s strengths:

 Nestle itself is a strong multinational company and MilkPak is a brand of Nestle. As

Nestlé’s mission is to improve the quality of life by providing people quality food. Due to

this MilkPak is trusted by the consumers throughout the nation due to its taste and

nutritional value of milk.

  Quality of Nestle products has always made it superior from other brands. The quality of

Nestle MilkPak has proved to be the factor which made it possible for MilkPak to

become the leader of the packaged milk market.

 Nestle has a strong distribution network. It easily available in most of the stores whether

in the rural areas or the urban areas. But when there is an increase or decrease in the price

there is usually shortage of MilkPak.

Nestle Pakistan Limited has been taking steps to help the farmers by importing a large number of

animals, mainly they will be high yielding. The company is not importing cows for its own

benefit but to facilitate and to help the farmers. Nestle as a company has started training

programs to help the farmers in taking care of the cows and what steps should they take to keep

cows as productive as possible. The management is also helping the farmers in making the cows

adaptive to the weather of Pakistan as weather impacts the productivity of cows. With the help of

a team of agronomists, Nestle is trying to ensure that the farmers are able to gain from benefit

from the cows that are being imported (Sheikh, 2017).

The herds in Pakistan mainly comprises of buffaloes but these animal are not beneficial to the

farmers as they are not that much productive as compared to the cows that are imported.

Buffaloes prove to be more expensive than being productive as they eat a lot but in result that do

not produce a large amount of milk. Buffaloes only produce 5 to 10 litres a day whereas cows

produce more than 30 litres. This clearly shows that the cows are more productive as they are

bred for years to produce milk (Sheikh, 2017).

3.6. Operations

Nestle Milkpak has developed a structured supply chain by focusing each step of its operations.

It begins with connecting of dairy farms with village milk centers to main milk centers. Milk is

collected from over 200 village centers. The factory operations involve milk reception and

storage, factory warehousing and finally the processing. Once packaged, the packaged milk is

subjected to distribution operations. Nestle has built a personalized relationship with farmers as

well as distributors to ensure consistency and quality of its product.

Nestle Milkpak production unit has been operational at 90% capacity for over 2 years now yet

the concept of six sigma is not relevant for the company since some extrinsic factors coupled

with employees’ lack of technical expertise and knowledge to achieve the magnitude of six

sigma is missing. Frequent energy outages and extensive hot weather have led to wastage of milk

therefore effecting overall operations of Milkpak. Although Nestle maintains training of farmers

about milking and feeding of their animals and occasionally involves in small loans for farmers

for improvements at farms. Despite the fact that Nestle Milkpak has lost market share in Pakistan

due to growing competition yet the company is still maintaining its profitability due to reliance

on improved operations. Milkpak has improved operations since its inception with inventory

management software, SAP to reduce lead times and delivery of products. Nestle Milkpak

provides its distributors incentives based on effective and timely distribution to maintain good

relations with them but fails to motivate all distributors to indulge in their incentive program.

3.7. Communication

The whole logistics and supply chain management of Nestle is based on effective

communication. Nestle has a strong system of supply chain which is the back bone of the
company. Nestle has corporate business principles that emphasis on maintaining a strong

compliance culture. The compliance reporting system follows a “tell us” policy which is

basically to a medium to provide all external stakeholders a communication channel for reporting

instances of non-compliance which are against the corporate business principle [ CITATION

Nes19 \l 1033 ]. This shows Nestle’s dedication to effectively communicated standardized

procedures to its stakeholders. Pakistan’s 60% population lives in rural areas. Nestle contributes

in rural development particularly livestock sector. Nestle believes in building strong relationship

with farmers, and be in a constant communication with them. The company offers training

programs to it farmers regarding the effective production of milk. Methods to improve the

quality of milk being produced by the cows and how to look after the cows for their wellbeing;

this in turn keeps the cows productive and also generates a feeling of mutual trust. Nestle is

empowering young farmers with digital financial services, to provide ease in the payment

process.

Nestle Pakistan has a department of Communication and Marketing services, headed by Mr.

Faisal Akhtar Rana. The marketing department is in various projects ensuring sustainability by

enabling people, promoting innovation. Programs like fulfilling nutritional needs of around

20000 under privileged children and people annually in one example of program run by Nestle.

The promotional activities of Nestle involves: TV advertisements, promotion on social media,

Billboards, Newspapers, Magazines, Ramzan promotional activities, outreach programs. But

recently these activities have not been on the surface like they used to be. The competition from

Olpers is affecting the sales of Nestle MilkPak thus lowering the market share and profits. And

impact of marketing campaign of Nestle is not as effective. The sales team at Nestle Pakistan is

trained for all the products. They must be aware of market trends and has sound selling skills.
They need to be objective oriented and has the ability to handle conflict and come up with

solutions in tense situation for example when handling clients like retailers, wholesalers, farmers

and distributors. They must be knowledgeable of all company’s activities. The culture that exists

in Nestle is enabling culture. This is regular performance evaluation on quarterly and annual

basis. Graphical ranking method in 360 degree evaluation method is employed where the

supervisor evaluates the performance of employees on certain job dimensions like

communication, teamwork etc. and gives them feedback for improvement. Moreover the

employees evaluate the performance of their line managers as well thus ensuring areas that needs

to be dealt with are highlighted in good faith. This shows collaborative culture between the line

managers and employees.

Nestle needs effective communication for spreading awareness among the people regarding the

quality control measures it is taking regularly and the sustainable development projects it is

currently working on. This will in turn build trust for tetra pack milk and increase the market

share.

Conclusion:

The decrease in profit is not primarily the cause of decrease in market share. Rather it is the

overall management, operation and communication which affected the market share. Most

importantly the fierce competition for competitors like Olpers, who took quite a chunk of market

share from Nestle MilkPak. Thus the hypothesis ‘Decrease in profits leading to decrease in

market share’ is nullified as profit is not the sole reason for decline in market share.

Recommendations:
  To reduce productivity losses and minimize costs of operations, Nestle Pakistan should

establish their own dairy farms near their factory. This results in less transportation costs

that incur during the process of collecting milk from collection centers. Such dairy farms

can also act as source of crisis management in dynamic situations such as floods or

diseases among local farmer’s animals.

 Nestle can revise its credit policies to attract potential retailers to re-gain lost market

share in several parts of the country.

 Nestle can integrate Just in Time feature to minimize its warehousing costs and improve

profitability. As this technological advancement will benefit the future of Nestle Milkpak

an increase efficiency.

 Nestle needs to build an effective marketing campaign to face the fierce competition in

the market. It needs to vocalize all the sustainable development measure that its taking

such as ones for rural development. Moreover the book it has launched in 2018 “‘Drops

of Divine: A story of Milk in Pakistan”, needs proper marketing in order to sell the idea

to consumer. Initiatives need to be highlighted with forceful campaigns in order to build

awareness.

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APPENDICES

3.8. Survey Questionnaire