(GL)

Acknowledgements
We have the pearl of our eyes to admire blessing of the compassionate and omnipotent because the words are bound, knowledge is limited and time is short to express His dignity. It is one of the infinite blessings of almighty ALLAH that He bestowed us with potential and ability to complete the present training and make a material contribution towards the deep oceans of knowledge. First we avail this opportunity to bow our head before ALLAH almighty in humility who given us the wisdom and perseverance for completing this piece of report. We invoke peace for Holy Prophet Muhammad (P.B.U.H) who is forever torch. We feel highly privilege to ascribe the most and ever burning flame of my gratitude and deep scene of devotion to the Madam Naseem Bukhari who taught us Strategic Management with heart and also gave a guideline to this report. We are immensely obliged to all our fellow students who guided us in making this report, without whose considerate attention and interest, it would be difficult for us to complete this report on time. Whatever we have learnt from them and this project report has put indelible impression on our mind. It is our conviction that this learning experience will always be a source of help in our practical life and professional career.

Table of Contents
Introduction.11 History.12 Vision14 Mission Statement.15 Brands.16 Chocolate and Confectionary.22 Strategic Model Framework23 Input Stage.23 Matching Stage..33 Decision Stage.40 Matrix Analysis43 Implementation Stage44

Case Study-Nestle
(Global Expansions through National Brand Acquisitions)
The story begins in 1867, when Henri Nestl developed a baby formula that saved a child's life and marked the beginning of Nestl's decades-old commitment to nutrition. In the 140 years since then Nestl is the largest nutrition and foods company in the world, founded and headquartered in Vevey, Switzerland. Nestl originated in a 1905 merger of the Anglo-Swiss Milk Company, which was established in 1866 by brothers George Page and Charles Page, and the Farine Lacte Henri Nestl Company, which was founded in 1866 by Henri Nestl. The company grew significantly during the First World War and following the Second World War, eventually expanding its offerings beyond its early condensed milk and infant formula products. The 1920s saw Nestl's first expansion into new products, with chocolate the Company's second most important activity. During world war II nestle established its fctories in developing countries, particularly Latin America. Ironically, the war helped with the introduction of the Company's newest product, Nescaf, which was a staple drink of the US military. The end of World War II was the beginning of a dynamic phase for Nestl. Growth accelerated and companies were acquired. In 1947 came the merger with Maggi seasonings and soups. Crosse & Blackwell followed in 1960, as did Findus (1963), Libby's (1971) and Stouffer's (1973). Diversification came with a shareholding in L'Oral in 1974. Nestl made its second venture outside the food industry by acquiring Alcon Laboratories Inc. In 1984, Nestl's improved bottom line allowed the Company to launch a new round of acquisitions, the most important being American food giant Carnation. The first half of the 1990s proved to be favorable for Nestl: trade barriers crumbled and world markets developed into more or less integrated trading areas. Since 1996 there have been acquisitions including San Pellegrino (1997), Spillers Pet foods (1998) and Ralston Purina (2002). There were two major acquisitions in North America, both in 2002: in July, Nestl merged its U.S. ice cream business into Dreyer's, and in August, a USD 2.6bn acquisition was announced of Chef America, Inc. Today, the company operates in 86 countries around the world and employs nearly 283,000 individuals.

Nestle Product Line

Nestle Pakistan is principally engaged in the manufacture, processing and sale of food and beverage products which include dairy, coffee, juices, cereals and culinary products. The company markets its products under international brand names that include Nescafe, Maggi, Cerelac, Milkybar, Kit Kat, Bar-One, Milkmaid, and Pure Life. The company with three manufacturing facilities operates all over Pakistan.

Milk, Dairy and Chilled Dairy

In 1988, nestles acquired Pakistans premium packaged milk brand MILKPAK. MILKPAK is a trusted brand known throughout the country for its nutritious wholesome goodness and pure natural taste. Sales in this sector represent about 34% of total Pakistan dairy sector.

Beverages
In this sector Nestle presents three premier brands i.e. Nescafe, Milo, Nestle Fruita Vitals. Sales in this sector represent about 34% of total Pakistan Beverages sector.

Bottled Water
NESTL PURE LIFE is Pakistans favorite water because more people trust it than any other brand. Thats why it is the market leader in this sector.

Baby Food
Nestle Cerelac is a range of nutritious, easily-digested instant cereals. It is suitable as a complimentary food for infants from six months onwards, when breast milk or formula alone no longer meet the baby's growing nutritional requirements. Sales in this sector represent about 48% of total Baby Food sector.

Breakfast Cereals
NESTL CORNFLAKES and NESTL KOKOKRUNCH are delicious breakfast cereals made from wholesome grains and packed with Vitamins, Calcium and other minerals.

Chocolate And Confectionary

KITKAT is by far one of the most popular chocolates all around the world. KITKAT Chunky is also becoming very popular.

Financial Performance
2009 was indeed another year of instability in social, economic, energy, and security terms. However, despite these issues, for Nestl Pakistan it marked a solid recovery from the

much deeper challenges of 2008. Local inflation in key commodities still had an impact in 2009

particularly in fresh milk where supply constraints continued and lead to cost increases of +16%. T he Company continued to expand its dairy development initiatives aimed at accelerating production of good quality milk in the country. The key elements to Nestl performance in 2009 were effective cost management, more investment behind Nestl brandsand diversification of our product portfolio based on deeper consumer insights. T he major new product launches this year included: NE SQUI K milk enhancer, , NIDO, LACTOGEN GO LD, and CERE LAC fruit cereals. Sales for the year surpassed P KR 41 billion, and the growth of 20% was split relatively even between real Internal Growth and pricing movements. Export sales rose dramatically by +48% to PKR 3.3 billion as we continue to leverage our brand strength in other markets. Although G ross P rofit (GP ) margin shows a significant improvement vs. 2008, it is only slightly better than our 2007 results. T he recovery in GP allowed the business to focus more efforts in brand building increasing our spending on consumer initiatives by +66%. T his added investment resulted in a slightly lower improvement in O perating P rofit margin. Net P rofit and margin for 2009 increased due to lower financing costs and foreign exchange impact compared to the turbulent market of 2008. With these healthy results, and in addition to the interim dividends for the year, the B oard of Directors has recommended to pay a final cash dividend of Rs. 20 per share.

Investment Projects
Total capital expenditure for the year reached P KR 2.3 billion, with the most significant projects listed below:

Investments in 2010 of approximately P KR 2.6 billion are planned for milk collection field development, and upgrading of existing production facilities as part of our long-term infrastructure plan.

Competitors
The main competitors of nestle Pakistan in Pakistan are Shakerganj foods products, Shezan International (pvt) Limited, Angro Foods and Cadbury plc. A brief description of their operation is provided below;

Shakerganj foods products

SFPL is a public limited company set up by the Crescent Group with the objective to diversify its business activities. The group has been conducting business in the region for over 100 years and has a varied industry portfolio in sugar, textile, steel and farming. Its head office is located at

Lahore, Pakistan while the production plants are in central Punjab - the main fruit growing and milk supplying region of the country. Its major products are Good Milk, good milk slim, Flavored Milk OOLALA, Good Milk Cream, Pure Desi Ghee, Kinnow Concentrate, Mango Puree etc.

Shezan International (pvt) Limited

The company was incorporated in 1964 as a Private Limited Company to set up an industrial undertaking for manufacturing of juices, squashes, sherbets, jams, pickles and preserves from fruits and vegetables. Shezan International Limited was conceived as a joint venture by the Shahnawaz Group of Pakistan and Alliance Industrial Development Corporation of U.S.A. The agricultural background of the Pakistani sponsors induced them to establish this agro-based industry. Taking advantage of abundance of fruits available in Pakistan and the advanced technology provided by the American partners, Shezan became a pioneer in the field of converting fruits into pulps, concentrates and juices. Today Shezan is the largest food processing unit having developed and installed the capacity to meet the country's local as well as export needs. In 1971, Shahnawaz group purchased all the shares of Alliance Industrial Development Corporation. The company has since shown sustained growth in both domestic and export fields. In 1980-1981 a separate unit was installed in Karachi which now caters for Karachi, Sind and export demand. A new bottle filling plant was set in 1983 in the Lahore unit, increasing the capacity five fold. An independent Tetra Brik plant was commissioned in 1987 making the unit leading manufacturers with the comprehensive range of production in the fruit processing field in Pakistan. In the year 1990 it was decided to install a juice factory at the Hattar industrial estate in North West Frontier Province of Pakistan. In order to take advantage of the government incentive new wholly owned subsidiary of Shezan International Limited was incorporated as Hattar Fruit Products Limited which was later merged into the parent company. Complete bottling plant locally manufactured along with four lines of Tetra Pak was installed, three are filling 250 ml juices and one line is for 1000 ml packs. In all respects the subsidiary is now a complete unit and is manufacturing the complete range of Shezan products except for pickles and canned products.

Engro Foods
Engro Foods Limited is subsidiary of Engro Chemical Pakistan Ltd. which is one of the most reputed enterprises in Pakistan with more than 40 years of diversified business operations in the areas of fertilizer and chemicals. Engro Foods started its business operations in March 2006 and with the successful launch of Olpers Milk, Tarang, Olwell, and Olpers cream, it has established itself as a major player in the foods business. Engro Foods has already set up two

processing plants at Sukkur and Sahiwal. With the ever expanding milk collection network and processing facilities, the Supply Chain has geared us for the growing sales of our products.

Cadbury
Cadbury is a British confectionery company, the industry's second-largest globally after the combined Mars-Wrigley.[2] Headquartered in Cadbury House in the Uxbridge Business Park in Uxbridge, London Borough of Hillingdon, England and formerly listed on the London Stock Exchange, Cadbury was acquired by Kraft Foods in February 2010. Major chocolate brands produced by Cadbury include the bars Dairy Milk, Crunchie, Caramel, Wispa, Boost, Picnic, Flake, Curly Wurly, Chomp, and Fudge; chocolate Buttons; the boxed chocolate brand Milk Tray; and the twist-wrapped chocolates Cadbury Heroes.As well as Cadbury's chocolate, the company also owns Maynards and Halls, and is associated with several types of confectionery including former Trebor and Bassett's brands or products such as Liquorice Allsorts, Jelly Babies, Flumps, Mints, Dolly Mix, Black Jack chews, Trident gum, and Softmints.

Management

Introduction
Nestl is the world's leading Nutrition, Health and Wellness Company. It is committed to increasing the nutritional value of our products while improving the taste. The Nestl Company has aimed to build a business as the world's leading nutrition, health and wellness company based on sound human values and principles While Nestl Corporate Business Principles will continue to evolve and adapt to a changing world, basic foundation is unchanged from the time of the origins of their Company, and the basic ideas of fairness, honesty, and a general concern for people.

Nestle International
Our story begins in 1867, when Henri Nestl developed a baby formula that saved a child's life and marked the beginning of Nestl's decades-old commitment to nutrition. In the 140 years since then, we have expanded around the world and developed a range of products designed to suit every taste, need and cultural preference. Our distinctive seal is recognised everywhere as a guarantee of quality and healthfulness

History
Nestl began in Switzerland in the mid 1860s when founder Henri Nestl created one of the first baby formulas. Henri realized the need for a healthy and economical product to serve as an alternative for mothers who could not breastfeed their babies. Mothers who were unable to breastfeed often lost their infants to malnutrition. Henris product was a carefully formulated mixture of cows milk, flour and sugar. Nestls first product was called Farine Lacte (cornflour gruel in French) Henri Nestl. The product was first used on a premature baby who could not tolerate his mothers milk or other alternative products of that time. Doctors gave up on treating the infant. Miraculously the baby tolerated Henris new formula and it provided the nourishment that saved his life. Within a few years the first Nestl product was marketed in Europe. In 1874 the Nestl Company was purchased by Jules Monnerat. Nestl developed its own condensed milk to contend with its competitor, the Anglo-Swiss Condensed Milk Company. The Anglo-Swiss Condensed Milk Company made products like cheese and instant formulas. The two companies merged in 1905, the year after Nestl added chocolate to its line of foods. The newly formed Nestl and Anglo-Swiss Milk Company had factories in the United States, Britain, Spain and Germany. Soon the company was full-scale manufacturing in Australia with warehouses in Singapore, Hong Kong and Bombay. Most production still took place in Europe. The start of World War I made it difficult for Nestl to buy raw ingredients and distribute products. Fresh milk was scarce in Europe, and factories had to sell milk for the public need instead of using it as an ingredient in foods. Nestl purchased several factories in the U.S. to keep up with the increasing demand for condensed milk and dairy products via government contracts. The companys production doubled by the end of the war. When fresh milk became available again after the war, Nestl suffered and slipped into debt. The price of ingredients was increasing, the economy has slowed and exchange rates deteriorated because of the war. An expert banker helped Nestl find ways to reduce its debt. By the 1920s Nestl was creating new chocolate and powdered beverage products. Adding to the product line once again, Nestl developed Nescaf in the 1930s and Nestea followed. Nescaf, a soluble powder, revolutionized coffee drinking and became an instant hit. With the onset of the Second World War, profits plummeted. Switzerland was neutral in the war and became increasingly isolated in Europe. Many of Nestls execu tive officers were transferred to offices in the U.S. Because of distribution problems in Europe and Asia, Nestl opened factories in developing countries in Latin America. Production increased dramatically after America entered the war. Nescaf became a main beverage for the American servicemen in Europe and Asia. Total sales increased by $125 million from 1938 to 1945.

Nestl continued to prosper, merging with Alimentana S.A., a company that manufactured soups and seasonings, in 1947. In the coming years, Nestl acquired Crosse & Blackwell, Findus frozen foods, Libbys fruit juices, and Stouffers frozen foods. Nescaf instant coffee sales quadrupled from 1960 to 1974, and the new technology of freeze-drying allowed the company to create a new kind of instant coffee, which they named Tasters Choice. Expanding its product line outside of the food market, Nestl became a major stockholder in LOral cosmetics in 1974. Foreign exchange rates decreased, in turn reducing the value of sterling, the pound, dollar and franc. Prices of coffee beans and cocoa rose radically, presenting further problems for Nestl. The company decided to venture into the pharmaceutical industry by acquiring Alcon Laboratories, Inc. While trying to deal with unstable economic conditions and exploring its new ventures, Nestl faced the crisis of an international boycott. Many organized groups began boycotting all of Nestls products because they disapproved of Nestl marketing its baby formula in developing countries. Problems like illiteracy and poverty caused some mothers to use less formula than recommended. In a watered down formula, vital nutrients are lessoned. Contaminated water presented another problem, since the formulas had to be mixed with water. The organizations argued that the misuse of formula resulted in the malnutrition or death of many infants in developing countries. According to Nestl the World Health Organization never made statements tying infant death or malnutrition with baby formulas. The company didnt deny the superiority of breastfeeding and agreed that substituting breast milk for other substances could be very dangerous. Nestl explained that breastfeeding and non-breastfeeding mothers in developing countries often gave their babies whole cows milk, tea, cornstarch, rice water or a mix of flour and water. These alternatives were very unhealthy and a nutritional baby formula was a better choice. Nestl says that it has never discouraged breastfeeding when it was possible. Nestl agreed to follow the International Code in developing countries in 1984, and the boycott was suspended. It resumed several years later when the organizations believed Nestl was sending free or low cost baby formulas to developing countries. Nestl said it only sent formula to countries that allow donations for orphans, multiple births, and babies with no access to breast milk. The company has stopped all public advertising for formula in developing countries for almost 20 years. The boycott continues to some extent to this day without satisfactory resolution. By the 1980s Nestl had a new Chief Executive Officer. The company focused on improving its financial situation and continuing to expand. In the one of the largest takeovers at that time, Nestl bought Carnation for $3 billion and parted with any unprofitable businesses. International trade barriers diminished in the 1990s, opening trade with parts of Europe and China. In the 1990s Nestl acquired San Pellegrino, and Spillers Petfoods of the UK. With the acquisition of Ralston Purina in 2002, the Nestl-owned pet care businesses joined to form the industry leader Nestl Purina PetCare. The leading in the food industry, Nestl brings in $81 billion in overall sales and has 470 factories around the world. Nestl will continue to grow, introduce new products and renovate existing ones. The companys mission is to focus on longterm potential over short-term performance.

The Nestl global vision is to be the leading health, wellness, and Nutrition Company in the world

vision

Mission Statement
Good

Food is the primary source of Good Health throughout life. We strive to bring consumers foods that are safe, of high quality and provide optimal nutrition to meet physiological needs. In addition to Nutrition, Health and Wellness, Nestl products bring consumers the vital ingredients of taste and pleasure

1. Customers 2. Products or services 3. Markets 4. Technology 5. Concern for survival, growth, and profitability 6. Philosophy 7. Self-concept 8. Concern for public image 9. Concern for employees

Yes Yes No No No No Yes No No

Mission Statement(Proposed)
Good Food is the primary source of Good Health throughout life. We strive to bring consumers foods that are safe, of high quality and provide optimal nutrition to meet physiological needs with the best technology around the globe. In addition to Nutrition, Health and Wellness, Nestl products bring consumers the vital ingredients of taste and pleasure that is matched by none. We want to excel as market leader in the industry with an ethical culture and care for its employees.

Brands

OUR BRANDS

Our Brands
We believe that food plays a key role in achieving a well-balanced person. And so our philosophy is Good Food for a Good Life! At Nestl, our products are developed keeping our consumers, their preferences and health in mind. Millions of consumers the world over trust Nestl products for good reason: when they choose a Nestl product they have the satisfaction of choosing quality, taste, variety, convenience and the good nutrition.

Brand Names
Milk, Dairy and Chilled Dairy Beverages Bottled Water Baby Food Food Breakfast Cereals Chocolate and Confectionary

Milk,Dairy And Chilled Dairy

Welcome health, strength and happiness into your home with delicious and nutritious MILKPAK; standardized UHT milk that benefits from NESTLs expertise in bringing you the very best in health, wellness and nutrition. MILKPAK is a trusted brand known throughout the country for its nutritious wholesome goodness and pure natural taste. To secure a happier and healthier future for your family, you need the support of a strong partner like MILKPAK, now fortified with extra strength of Iron, Vitamin C and Vitamin A that keeps you and your family strong! Iron as an essential mineral helps in the formation of healthy blood and strengthens your immune system. Vitamin C helps the absorption of Iron in the body and Vitamin A is important for clear vision.

Beverages
Nescafe Milo Nestle Fruita Vitals

Stimulate your mind. Awaken your soul. Arouse your senses. Come alive with NESCAF. Every great tasting cup of NESCAF is rich, aromatic and favourable. It is frothy, intense and indulging; bold and satisfying Serve it hot or icy cold; strong black or milky, the NESCAF experiences are as diverse and unique as its many blends and varieties. Ranging from the morning wake-me-up, to getting through the day, quiet reflective moments to unwinding, parties to simply hanging out with your pals, the NESCAF magic goes beyond just a great tasting cup of coffee; its eye opening, thought provokin g & stimulating. It stimulates one physically, mentally and emotionally touching the body, mind and soul. NESCAF fits the bill A to Z.

Bottled Water
NESTL PURE LIFE, is pure, safe and healthy drinking water for you and your family. Every bottle of NESTL PURE LIFE is produced with the Nestl Safety System and is carefully sealed with a proprietary seal. Purity of the highest standards is matched by an optimal balance of essential minerals, enhancing the health and wellbeing of your family. No wonder its Pakistans favourite water because more people trust it than any other brand. For your convenience NESTL PURE LIFE is available in non-returnable 0.5 litre and 1.5 litre bottles at retail outlets and Bulk bottles for Home & Office Delivery in 19 & 12 litre (12 litre is available at retail outlets).

Baby

Food
Cerelac is a range of nutritious, easily-digested instant cereals. It is suitable as a complimentary food for infants from six months onwards, when breast milk or formula alone no longer meet the baby's growing nutritional requirements.

Breakfast Cereals
Breakfast has been declared the most important meal of the day and with good reason. Its the first meal after your body has been resting all night and this is the meal that is going to fuel the body and prepare it for the day ahead. All of us: children, teens and even adults benefit from a good breakfast. A bowl of cereal is an ideal way to start your day! Available in two varieties, NESTL CORNFLAKES (275g and 150g boxes) and kids favourite chocolaty NESTL KOKOKRUNCH (330g and 170g boxes) are delicious cereals made from wholesome grains and packed with Vitamins, Calcium and other minerals. Try them with your choice of milk: MILKPAK or NESVITA to give you and your family a nutritious burst of energy and a great start to the day, every day. Breakfast has been declared the most important meal of the day and with good reason. Its the first meal after your body has been resting all night and this is the meal that is going to fuel the body and prepare it for ahead.

Chocolate and Confectionary

Chocolate is one of the most loved indulgences around the world. It is one of life's little pleasures, which delights the senses of all ages. KITKAT is by far one of the most popular chocolates all around the world! Its trademark red and white colours and the distinct KITKAT logo makes it one of the most recognised brands ever. This light hearted treat of wafer fingers coated with delicious smooth chocolate, can be enjoyed in the signature style of snapping one finger at a time. KITKAT Chunky is a single solid finger that is perfect for those who want a mouthful!

THE INPUT STAGE

Strategic Model Framework

Input Stage

Financial Analysis
Liquidity Ratios: 1- Current Ratio = Current Assets / Current Liabilities
2008-2009= 1.11: 1 2007-2008= 1.11: 1
Comparison over the years / Interpretation:
Current ratio is a general and quick measure of liquidity of firm. The current ratio of the firm is constant over the years.

2- Acid-test (or quick) Ratio =[Current Assets Inventories] / Current Liabilities

2008-2009= 0.37: 1 2007-2008= 0.60: 1
Comparison over the years / Interpretation:
The quick test shows firms ability to pay its short-term obligations or current liabilities immediately. The quick ratio of the firm as is shown by the above calculations is increasing over the years, that is, the company is getting more liquid current assets to cover its current liabilities.

Financial Leverage (Debt) Ratios: 1- Debt-to-Equity Ratio = Long term Debt / Shareholders Equity
2008-2009= 1.94 times 2007-2008= 1.70 times
Comparison over the years / Interpretation:
This ratio indicates the proprietors claims of owners and outsiders against the firms assets. The purpose is to get an idea of the cushion available to outsiders and the liquidity of the firm. The debt ratio of the company has increasing constantly over the years right from 2007 that is actually a negative sign for the company.

2- Debt-to-Total-Assets = Long term Debt / Total Assets

2008-2009= 0.89 times 2007-2008= 0.91 times
Comparison over the years / Interpretation:
It can be defined as how much sufficient our assets are in retrieving the total debts. The debt ratio of the company has decreased narrowly but still alarmingly high.

3- Long term Debt to Total Equity = Long term Debt / Total Equity
2008-2009= 1.37 times 2007-2008= 1.59 times
Comparison over the years / Interpretation:
It can be defined as how much sufficient our capital is in retrieving the long term debts. The debt ratio of the company has decreased but still very high. It is not good for the company.

Coverage Ratios: 1- Interest Coverage Ratio = EBIT / Interest Charges

2008-2009= 10.47 times 2007-2008 = 5 times
Comparison over the years / Interpretation:
The interest coverage ratio is a very important from the lender point of view. It indicates the number of times interest is covered by the profit available to pay interest charges. It is an index of the financial strength of the enterprise. A high ratio assures the lender a regular and periodic interest income. But weakness of the ratio may create some problems for the firms financial manager in raising funds from the debts sources. Gradual increase is satisfactory for the lending of the lenders.

Activity Ratios: 1. Receivable Turnover Ratio(RT) = Annual Net Credit Sales / Avg. Receivables
2008-2009= 119.5 times 2007-2008= 85.37 times

Comparison over the years / Interpretation:

Receivables turnover ratio measures the number of times the amount is received from the debtors. So Receivables is good in 2009 as compare to 2008 which shows good performance of the company.

2. Receivable Turnover in days = Days in Year / Receivable Turnover

2008-2009= 3 days 2007-2008= 4 days
Comparison over the years / Interpretation:
Average collection period shows the average length of time it takes affirm to collect credit sales in days From above analysis it is clear that average collection period is decreasing which is a positive sign for the company.

3. Inventory Turnover (IT) Ratio = Cost of Goods Sold /Average Inventory

2008-2009= 9.2 times 2007-2008= 10.3 times
Comparison over the years / Interpretation: Inventory turnover ratio is less as compared to previous year. This ratio indicated that avg. inventory in a year is converted into sales in how many times.

4. Total Asset turnover Ratio

= Net Sales / Total Assets

2008-2009= 2.3 times 2007-2008= 2.1 times

Comparison over the years / Interpretation:
It shows that firms must manage its total assets efficiently and should generate maximum sales through their proper utilization. As the ratio, increases there are more revenue generated per rupee of total investment in assets. So as time is going by this ratio is increasing which means company performance is up to mark in terms of profits.

5. Fixed Asset turnover Ratio

= Net Sales / Fixed Assets

2008-2009= 3.51 times 2007-2008= 3.12 times

Comparison over the years / Interpretation:

As the ratio, increases there are more revenue generated per rupee of investment in fixed assets. So as time is going by this ratio is increasing which means company performance is up to mark in terms of profits.

Profitability Ratios: 1- Gross profit margin = Gross profit / Net Sales

2008-2009=29 % 2007-2008= 26 %
Comparison over the years / Interpretation:
Gross profit margin or gross profit ratio is the ratio of gross profit to net sales expressed as percentage and it is increasing. The gross profit is sufficient to recover all operating expenses and to build up reserve after paying all fixed interest charges and all dividends.

2- Net Profit margin = Net profit after taxes / Net Sales

2008-2009= 7 % 2007-2008= 5 %
Comparison over the years / Interpretation:
This used to show the profitability without concern for taxes and interest. In 2009 net profit ratio increased by 2 % relative to 2008. Higher ratio shows firms high capacity to with stand adverse economic political conditions.

3- Operating profit margin = Operating profit / Net Sales

2008-2009=14 % 2007-2008= 12 % Comparison over the years / Interpretation:
This used to show the profitability after paying all the operational expenses. In 2009 operating profit ratio increased by 2 % relative to 2008. Higher ratio shows firms high capacity to pay off its interest expenses.

4- Return on Asset = Net profit after taxes / Total Asset

2008-2009= 44 % 2007-2008= 27 %

Comparison over the years / Interpretation:

The return on assets shows the net return on per rupee invested in assets. The company shows better returns as compared to previous year.

5- Return on Equity (ROE) = Net profit after Taxes / Shareholders Equity

2008-2009=40 % 2007-2008=20 %
Comparison over the years / Interpretation:
This ratio indicates that on each rupee of shareholder how much is net earned. So, higher ratio is good sign. As the ratio shows the ROE has been doubled from previous year which is a very good sign.

Market Ratios 1. Earnings per share(EPS) = Earnings after tax/No. of shares outstanding
2008-2009=Rs.66.27 2007-2008=Rs.34.24
Comparison over the years / Interpretation:
This ratio shows the worth of the share. As we can see that the worth of the shares has increased. EPS has increased from substantially during 2008-09.

2. Price/Earning Ratio (P/E)= Market Price Per Common Share /Earning Per Share
2008-2009=Rs. 18.8 2007-2008= Rs. 38.9
Comparison over the years / Interpretation:
These ratios results show that in 2008 Rs. 38.9 was to be spent in order to earn Rs.1 profit. But in year 2009 the position had improved substantially showing that Rs. 18.8 have to be spent in order to earn Rs.1 of profit.

Ratios Liquidity Ratios:

Current Ratio Quick Ratio

2009
1.11 0.37

Industry
1.19 .42

Solvency Ratios:
Long Term Debt to Equity Long Term Debt to Assets Debt-to-Equity Ratio Times-Interest-Earned Ratio
1.94 0.89 1.37 10.49
.47 .126 1.1 7.2

Activity Ratios:
Inventory Turnover Ratio Average Age of Inventory (Days) Total Assets Turnover Ratio Receivable Turnover Ratio Average Collection Period (Days) Fixed Assets Turnover
9.2
40 4.56 102 1.23 67.74 5 1.23

2.3 119.5
4

3.51

Profitability:
Gross Profit Margin Net Profit Margin Return on Assets Return on Equity Earning per Share Price-Earning Ratio
29% 7% 44% 40% 30.86 5.8 41.41 48.9 91.62 25.45

66.27 18.8

Growth Ratios
Sales Net Income Earning Per Share
+20% +94% +94%

External Factor Evaluation Matrix (EFE)

Key External Factors Opportunities
Few and weak competitors in the market Disposable income increased by 3.6% Consumer expenditure on food has increased by 3.6% Population density increased by 2.18% (per sq.km) Credit policy can be adopted to increase sales Potential in cold dairy market All companies contribute only 2% to processed milk market Pakistan as 7th largest milk producing country with milk output of 200 billion liters Increase in consumer food industry by 14% 0.12 0.07 0.09 0.05 0.03 0.02 0.12 0.12 2 3 4 3 3 3 4 3 0.24 0.21 0.36 0.15 0.09 0.06 0.48 0.36

Weight

Rating

Weighted Score

0.05

0.20

Threats Engro and Shakarganj as major competitors Market segment growth could attract new entrants Taste of the consumer has already developed Legal & ethical issues Economic slow down can reduce demand Effect of seasonality upon sales Strong advertisement by major competitors Total
0.14 0.04 0.02 0.01 0.01 0.05 0.08 1.00 3 2 2 2 2 3 3 0.42 0.08 0.04 0.02 0.02 0.15 0.24 3.02

Competitive Profile Matrix

Nestle Pakistan

Engro Foods

Shakarkanj Foods

Critical Success factors

Market Share Inventory System Financial Position Product Quality Consumer Loyalty Relationship with Suppliers Global Expansion Organization Structure Production Capacity Advertising Efficient cost Managemen t Product R&D

Weights 0.0 to 1.0

0.12 0.05 0.20 0.15 0.07 0.03

Rating Weighted Rating Weighted Score Score 1 to 4

3 3 4 4 3 3 0.36 0.15 0.80 0.60 0.21 0.09

Rating 1 to 4

Weighted Score

1 to 4
2 2 2 3 2 3 0.24 0.10 0.40 0.45 0.14 0.09

1 2 3 3 1 2

0.12 0.10 0.60 0.45 0.07 0.06

0.06 0.02 0.05 0.15 0.05

3 3 3 2 3

0.18 0.06 0.15 0.30 0.15

1 2 2 4 3

0.06 0.04 0.10 0.60 0.30

1 1 2 3 2

0.06 0.02 0.10 0.45 0.20

.05

0.15

.04

.04

Totals

3.20

2.56

2.27

Internal Factor Evaluation Matrix (IFE)

Key Internal Factors Strengths

Socially Responsible Company Nestle products enjoy strong brand image Sales force as a major physical resource strength Quality product distribution networks in country Net Profit increased by 94% in 2009. Price earning ratio decreased from 38.9 to 18.8 Export Sales increased by 48% to PKR 3.3 billion

Weight

Rating

Weighted Score

0.03 0.07 0.05 0.08 0.20 0.05 0.18

3 3 3 2 4 3 4

0.09 0.21 0.15 0.16 0.80 0.15 0.72

Weaknesses
Lack of awareness among target market Nestle milk always stands at last because of low advertisement. Revenue from confectionary decreased by 14% Low credit sales and profit margin to retailers Weak promotional activities through websites Cant launch expensive brand due to low income groups 0.04 0.09 0.08 0.05 0.05 0.03 1.00 2 2 2 2 3 1 0.08 0.18 0.16 0.10 0.15 0.03 2.99

Total

THE MATCHING STAGE

Matching Stage

SWOT MATRIX
OPPORTUNITIES-O
1. 2. 3. 4. 5. 6. 7. 8. 9. Few and weak competitors in the market Disposable income increased by 3.6% Consumer expenditure on food has increased by 3.6%

STRENGTHS-S
Socially Responsible Company Nestle products enjoy strong brand image Sales force as a major physical resource strength Quality product distribution networks in country Net Profit increased by 94% in 2009. Price earning ratio decreased from 38.9 to 18.8 Export Sales increased by 48% to PKR 3.3b SWOT

WEAKNESS-W
1. 2. 3. 4. 5. 6. Lack of awareness among target market Nestle milk always stands at last because of low advertisement. Revenue from confectionary decreased by 14% Low credit sales and profit margin to retailers Weak promotional activities through websites Cant launch expensive brand due to low income groups

OS-STRATEGIES

OW-STRATEGIES

I.
Population density increased by 2.18% (per sq.km) Credit policy can be adopted to increase sales Potential in cold dairy market All companies contribute only 2% to processed milk market Pakistan as 7 largest milk producing country with milk output of 200 billion liters Increase in consumer food industry by 14%
th

II.
III.

More market penetration through effective sales force (S3+S1) Develop and promote cold dairy products (S2+O6+O8+O3) Create awareness and promote Green marketing concept among the people (S1+O4)

I.
II.

Development of quality products to target the middle class (W6+O2+O3) Increase the sales of confectionaries items through more credit sales to retailers to increase their profit margins (W3+W4+O5)

THREATS-T
1. 2. 3. 4. 5. 6. 7. Engro and Shakarganj as major competitors Market segment growth could attract new entrants Taste of the consumer has already developed Legal & ethical issues Economic slow down can reduce demand Effect of seasonality upon sales Strong advertisement by major competitors

TS-STRATEGIES
I. Strong logistics to help counter the competitors through market development(S4+T2) Related diversification to help in more global expansion(S7+T3)

TW-STRATEGIES
I. Strong advertisement campaigns to communicate the value of nestle products to the target customers better than competitors(W1+W2+T7 Increase promotional activities with more web development to lead the industry (W5+T1)

II.

II.

SPACE SPACE MATRIX

Financial Strength
Nestles net sales increased by 20% in 2009 as compared to 2008 Net profit increased by 94% in 2009 as compared to 2008 Debt equity ratio changes from 63:37 to 66:34 Price earnings ratio in 2009 was 18.8 as compared to 2008 38.9 Return on capital employed increases by 40% Average financial strength 3 5 3 5 4 4

Industry Strength
Increase in consumer food industry by 14% All companies contribute only 6% to processed milk market Market segment growth has attracted new entrants to increase profit potential Due to ease of entry in market, Engro foods, Shezand foods and Shakarganj are properly utilizing their resources Average Industry Strength 5 4 5 4 4.5

Competitive Advantage
Nestle enjoys strong customer loyalty Quality product distribution networks in country Nestle extended product life cycle is being ensured due to quality brand extension strategy Nestle product are market leaders in many product categories Average competitive advantage -2 -1 -2 -2 -1.75

Environmental Stability
Economic slowdown can reduce the demand Fluctuating rate of inflation in the country Price range of competing products Average Environmental Stability -2 -2 -1 -1.75

BCG

Brands
Milk and Dairy Beverages Bottled Water Confectionary and Chocolate Baby Food Foods and Cereals

Sales
13993 7820 9054 1646 5350 3293

% Sales
34 19 22 4 13 8

Profit
1082 661 511 150 331 270

% Profit
38 20 17 5 11 9

% Market Share
100 85 100 31 60 40

% Growth Rate
+15 +10 +3 -15 -5 8

Total

41156

100

3005

100

100

RELATIVE MARKET SHARE

INDUSTRY GROWTH RATE

GSM

RAPID MARKET GROWTH

QUADRANT I

QUADRANT II

WEEK COMPETITIVE POSITION

QUADRANT III

QUADRANT IV

STONG COMPETITIVE POSITION

SLOW MARKET GROWTH

THE DECISION STAGE

Decision Stage

QSPM
Acquisitions Shangrilla & Youngs food Weights AS TAS No Aquisitions AS TAS

Key factors
OPPERTUNITIES
Few and weak competitors in the market Disposable income increased by 3.6% Consumer expenditure on food has increased by 3.6% Population density increased by 2.18% (per sq.km) Credit policy can be adopted to increase sales Potential in cold dairy market All companies contribute only 2% to processed milk market Pakistan as 7th largest milk producing country with milk output of 200 billion liters Increase in consumer food industry by 14%

0.12 0.07 0.09 0.05 0.03 0.02 0.12 0.12 0.05

4 3 3 4

0.48

2 -

0.24

0.27 0.15

1 2 -

0.09 0.10

0.20

0.10

THREATS Engro and Shakarganj as major competitors Market segment growth could attract new entrants Taste of the consumer has already developed Legal & ethical issues Economic slowdown can reduce demand Effect of seasonality upon sales Strong advertisement by major competitors
0.14 0.04 0.02 0.01 0.01 0.05 0.08 1.00 3 1 2 0.02 0.12 0.02 4 4 3 .03 0.48 .08

Key factors
STRENGHTS
Socially Responsible Company Nestle products enjoy strong brand image Sales force as a major physical resource strength Quality product distribution networks in country Net Profit increased by 94% in 2009. Price earnings ratio decreased from 38.9 to 18.8 Export Sales increased by 48% to PKR 3.3 billion

Acquisitions Shangrilla & Youngs food Weights AS TAS

No Aquisitions AS TAS

0.03 0.07 0.05 0.08 0.20 0.05 0.18

2 3 2 3 0.60 0.10 0.54 0.14

1 1 1 1 0.20 0.05 0.18 0.07

WEAKNESSES
Lack of awareness among target market Nestle milk always stands at last because of low Advertisement. Revenue from confectionary decreased by 14% Low credit sales and profit margin to retailers Weak promotional activities through websites Cant launch expensive brand due to low income groups 0.04 0.09 0.08 0.05 0.05 0.03 1 2 0.06 0.05 3 4 0.12 0.15

Total

1.00

2.75

1.89

Matrix Analysis
Alternative Strategies Back ward integration Forward integration Horizontal integration Product Development Market Penetration Market Development Related Diversification Unrelated diversification Retrenchment Divestiture Liquidation Space BCG Grand Strategy Matrix Count

X X X X X X

X X

X X X X X X

2 2 3 3 2 2

IMPLEMENTATION STAGE
Implementation Stage

Decision:
This seemed to an important step where we had to choose either to go for a horizontal integration or more product development. The interesting fact was that from 2008-2009 Nestle Pakistan introduced three new products into the market The major new product launches the year 2009 Included: NESQUIK milk enhancer, NIDO BUN YAD, LACTOGEN GOLD, and CERELAC fruit cereals.

Our Recommendation:
Considering this fact now we recommended Nestle Pakistan to Acquire Shangrila foods and youngs food to excel as a market leader for the year 2010.

Why Horizontal strategy:

Reason Behind:
Nestle SA expands globally either through its own brand or the acquisitions of National brands, considering this fact it seems a critical time for Nestle SA to expand through a National brand.

Evaluations
NESTLE annual financial reports Sales and profits reports (on-line and off-line) based on sales of newly acquired companies. Frequent management meetings between the Top Management at the cooperate levels through Evaluation reports

References

www.nestle.com www.nestle .pk.com