LOCAL BUSINESS POLICIES OF NESTLÉ

BANGLADESH LTD.

INDEPENDENT UNIVERSITY, BANGLADESH

DEPARTMENT OF BUSINESS ADMINISTRATION
 REPORT ON
LOCAL BUSINESS POLICIES OF NESTLÉ 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,
It’s 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 Page

ABSTRACT
PART ONE: INTRODUCTION TO REPORT 02-03
Origin of the Report 03
Objective of the Report 03
Scope and Limitation 03
PART TWO: NESTLÉ BANGLADESH LTD. 04-13
2.1 Introduction 03
2.2 History of Nestlé 04
2.3 Global Brand of Nestlé 09
2.4 Nestlé in Bangladesh 10
Customers of Nestlé Bangladesh Limited 11
Functions of Nestlé Bangladesh 12
Products of Nestlé Bangladesh 13
PART THREE: ORGANIZATION STRUCTURE OF NESTLÉ 14-16
3.1 Global Organization Structure of Nestlé 15
3.2 Organization Structure of Nestlé’s in Bangladesh 16
PART FOUR: STRATEGY OF NESTLÉ 17-35
4.1 Key Success Factors 18
External factors 18
Internal factors 18
4.2 Marketing Strategy 20
Market Segmentation 20
Target market 20
Positioning strategy 20
Advertising and Promotional activities 21
Medium Responses 22
4.3 Competition Structure 23
4.4 Nestlé’s Consumer Communication and Relationship 24
4.5 Retaining Old Customer or Attracting New Ones? 26
Customer Satisfaction Level 26
4.6 Market Audit 27
External Audit 27
Internal Audit 27
4.7 Nestlé’s Commitment to Environmentally Sound Business Practices 30
4.8 The Supply Chain 31
Raw Materials 31
Manufacturing 31
Distribution Marketing 33
4.9 What Makes Nestlé to Become Nestlé? 34
Medical support 34
Food support 34
Sports Development Programme 34
4.10 Conclusion 35
PART FIVE: APPENDICES 36
References 37
Table of Figures
Particulars Page
Figure 01: Sales Regions 11
Figure 02: Sales Process 11
Figure 03: Organizational Functions 12
Figure 04: Nestlé Brands in Bangladesh 13
Figure 05: Global Organizational Structure 15
Figure 06: Organizational Structure in Bangladesh 16
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2.2 History of Nestlé
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1866-1905: Henri Nestlé's quest for a healthy, economical alternative to breastfeeding is
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the important factor that drives the history of Nestlé Company. Henri Nestlé, pharmacist,
Local Business Policies of Nestlé Bangladesh Ltd.
Independent University, Bangladesh
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1938-1944: in this period World War II were felt immediately upset the business once n

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, Nestlé
executives found themselves unexpectedly heading up a worldwide coffee concern, as
well a company built upon Nestlé'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 Nestlé
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'Oréal, 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, Nestlé 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 Nestlé 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 Nestlé 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 Nestlé launched a Group-wide initiative called GLOBE (Global Business

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Customers of Nestlé Bangladesh Limited
Nestlé Bangladesh Limited markets its products throughout the country with the help of the
distributors. A part from that, Nestlé Professional is a separate function which is responsible for
the institutional sale. There are currently 80 distributors of Nestlé Bangladesh products of
which 76 are retail distributors and remaining 4 are Nestlé Professional’s 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 Nestlé products to four types of outlet, while Nestlé
Professional Distributors supply products to different institutions.

Vendin Morder
g Site n Trade

Tea
Retail Distributor Bunk

Ne pendent University,
stl Bangladesh
Nestlé Figure2:é Sales Process
Bangladesh Ltd. Ba
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Functions of Nestlé Bangladesh m

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

Focusing on the substantial growth and the other business t

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

Local Business Policies of Nestlé Bangladesh Ltd.

Independent University, Bangladesh
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G

Breakfast Nutritio
Beverage Culinary Dairy n
Cereal
HunyGol
Maggi, Shad-
Nescafe Nido Comflex d
e-Magic

Lectoze
Nestea Coffeemate Kokocranch n

Nesfuta NAN

Cerelac

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4.1 Key Success Factors
Strong brands / relationships with
consumers-Research and development-
Innovation and renovation-

Product availability-

Building relations with medical and scientific community in light of Nestlé Bangladesh
Ltd., this report tried to analyze the following components of marketing strategy through
different theories and applications:
External factors
Social: Nestlé makes an effort to integrate itself as much as possible into the
cultural and social values of the different countries. During operation in
Bangladesh Nestlé has launched products with integration of social & cultural
factors. This has been done to match the taste buds of Bangladeshi consumers.
Ethical: Although Nestlé 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: Nestlé is more people, product and brand oriented than system
oriented. Nestlé favors long-term successful business development and even to greater
extent, customer life-time value. At the same time Nestlé does not lose sight of the
necessity to improve in terms of quality, price and distribution. However, Nestlé 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.
Nestlé seeks to earn consumer’s confidence, loyalty and preference and anticipate
their demands through innovation and renovations. Therefore Nestlé is driven by an acute
sense of performance adhering to quality and customer satisfaction Nestlé is as
decentralized as possible within its marketing strategic definitions requiring increasing
flexibility. Nestlé is always committed to the concept of continuous improvement of its
activities and customer satisfaction through market segmentation, positioning and target
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marketing.

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Independent University, Bangladesh
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The company then effectively communicates and delivers the chosen position to the i
market. Nestlé strongly believes that their products are specific and so are the product
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benefits. This, Foysal Alam, the marketing officer, termed as “Benefit Positioning”
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Regarding new upcoming products, Nestlé is looking forward to renovation and
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Since Nestlé 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 Nestlé Bangladesh Ltd.:

Nestlé 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 Nestlé had
performed test sampling in the year 2003 on Nescafé.

Nestlé Bangladesh Ltd. has specialized agencies for their promotional

purposes. They are:Product name advertising agencies:

Nescafé -Unitrend
Milo - (25%) Unitrend
Maggi - Protishobdo
Polo – Protishobdo
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Independent University, Bangladesh
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4.4 Nestlé’s Consumer Communication and Relationship t

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Nestlé is committed to offering consumers high-quality food products that are safe,
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tasty and affordable. The Nestlé Seal of Guarantee is a symbol of this commitment.
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It also believes in maintaining regular contact with the consumers. This applies both to how
Although Nestlé is very conscious of its role in communicating responsibility to consumers,
Nestlé in Bangladesh does not really perform much consumer communication. As noted
their marketing officer, “For Nestlé, our consumers are our distributors”. Nestlé 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 Nestlé. This can also be termed as “Post Purchase
Service”. Consumer communication is not much practiced in Bangladesh because at the
moment, Nestlé does not have any organized internal database of its consumers. Hence, it
can be said that Nestlé hardly takes any initiatives in case of consumer communication.

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Independent University, Bangladesh
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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 Threats o Weakness
External Audit: Scanning the external environment of Nestlé, 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 Nestlé’s 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 it………products 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 Nestlé and we figured out the following
strengths and weaknesses:

Strengths:

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

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

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

o Centralized organization that helps in easier coordination of business activities

Local Business Policies of Nestlé Bangladesh Ltd.
Independent University, Bangladesh
 Nestlé 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
Nestlé. In this approach, first, some core factors are identified against which the performance
or relative strength or weakness of Nestlé 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
against each criterion that is summarized here in a tabular format:
Strengths

Fundamental
Strength
Weaknesses

Local Business Policies of Nestlé Bangladesh

Ltd.
Independent University, 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 •Adaptability
•Product quality
•New product program
•Distribution cost
•Dealer network
•Geographical coverage
•Sales force
•After sales service
•Manufacturing cost
•Pricing
•Advertising
•Structure of competition
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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. Nestlé
endeavors to apply the following practices to meet its environmental commitment.

Raw Materials:

In general, Nestlé 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. Nestlé 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. Nestlé 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
Reduce waste generation and emissions as much as possible; consider recycling of waste as a
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priority and dispose of non-recyclable waste in an environmentally sound manner.

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Local Business Policies of Nestlé Bangladesh Ltd.

Independent University, Bangladesh
Regular environmental assessments of Nestlé’s manufacturing practices are conducted to:

Evaluate factory performance;

Review factory compliance with applicable legislation and Nestlé’s 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, Nestlé exchanges information on environmental protection technology and

practices in order to ensure a wide use of best practices. Nestlé 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 today’s
consumers. Nestlé is committed to reducing the environmental impact of packaging, without
jeopardizing the safety, quality or consumer acceptance of its products. It is Nestlé’s 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. Nestlé 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
Increase the recyclables and compatibility of its packages with existing waste management
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schemes.

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