Research Expo International Multidisciplinary Research Journal Volume II , Issue-II June 2012 Section - II ISSN : 2250 - 1630

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ORIGINAL ARTICLE

NESTLE INDIA - ON BCG MATRIX

Ashu Kumar Assistant Professor Department of Commerce & Management Arya P.G. College, Panipat Haryana (India) ABSTRACT

In the commercial arena, the choice of an effective strategy is perhaps the most important and the toughest decision to take. The decision to select among the grand strategies and deciding upon which strategy will best meet the enterprises objectives is rendered complex by multifarious considerations. Nevertheless, the decision to replace the product once its positioning fails is a yet more complex decision. Riding on the growth of its power brands, Nestle has extended its dominance in food business in India as well. However, a number of its brands require a repositioning. The present exercise is an attempt to analyse the position of the different brand offered by Nestle India. The aim of this research is to assess the positioning decision of Nestle as far as its different brands are concerned while also looking for prospects that avail the Indian market. The bulk of the study has been done in this paper is of the BCG matrix of Nestle and all the different brands offered by Nestle in India have been analysed along with a critical insight. Keywords: Strategy, Brands, Repositioning, Critical Insight.
INTRODUCTION With headquarters at Vevey (Switzerland) and established in 1866, Nestle has growth today to be the worlds biggest food and beverages company. Established in the strong foundation of growth through innovation and renovation, the company is known today by its several strong brands which are dominating the markets the world over. Nestle India is a subsidiary of Nestle S.A. of Switzerland. With six factories and a large number of co-packers, Nestle India is a vibrant company offering a number of products in the Indian market. A number of brands are offered by the company in the country of which while some have already established a strong hold, many others exhibit enormous prospects to dominate the market and are only waiting for a favourable opportunity or appropriate and sizeable promotional campaign by the company. The beauty of BCG Matrix, a Matrix developed by a group known as Boston Consulting Group, USA, is that it seeks to place the different products of an organization in different grids such as to analyze them in a comparative manner in terms of profitability or in terms of (a) percentage growth in sales and (b) market share position, to be exact. Thus, it gives an opportunity of self assessment to the organization to reassess its product positioning and thus come out with alternative solution if the original placement of the products in the market does not meet the desired level of growth.

Copyright 2012.Ashu Kumar. This is an open access refereed article distributed under the Creative Common Attribution License which permits unrestricted use, distribution and reproduction in any medium, provided the original work is properly cited. 1

Research Expo International Multidisciplinary Research Journal

ISSN : 2250 - 1630

OBJECTIVES The objectives of the present study are: (i) To place the various brands of Nestle in India in the matrix as suggested by the Boston Consultancy Group, as based upon the data empirically collected. (ii) To analyse the brands so placed and critically compare their placement. RESEARCH METHODOLOGY This research aimed to study the products offered by Nestle in India by placing them on the BCG matrix. The placement of the products on the matrix shall be on the basis of the empirical data collected in different cities of Haryana from a number of sizeable provisional stores which place Nestle products for sale. The data has been collected by interview method and no formal questionnaire was administered to them on account of reluctance of the store managers as well as non-essentiality of the same in the present study. LIMITATIONS (1) The data collected on the field considers a small sample only. Thus, proper corroborative research is required before taking any action based on the findings of the present study. (2) The data for the nationwide figures of Nestle India is not widely available. Nestle India is maintained as a subsidy of Nestle SA and thus proper reporting of its figures is not available. (3) The factual matrix of Nestle brands, as analysed in this study, is based on a limited survey of one Haryana only. Thus, the result may be incomparable with similar study in other areas. (4) In this paper, because of limitation of size, few products have not been explained as per BCG matrix. BCG MATRIX EXPLAINED This matrix was designed to develop business strategy in 1960 by Bruce Henderson, president of the Boston Consulting Group. BCG Matrix places products according to market share and market growth rate in the four-celled matrix. Thus, when all the products of the company are put in four cells (thus it actually provides an opportunity to reassess the entire position of the company in terms of all the products it offers to the market), the market standing of the company can be analysed in four different classes namely, stars, cash cows, dogs and question marks. Each of these classes have a different meaning attached to them and can be represented on the matrix as follow. It is significant to note here that this matrix denotes the areas of strategic search for an organization i.e. how to proceed in replacing the products if they are not found to be of satisfactory placement. L.M. Prasad, Business Policy: Strategic Management, (Sultan Chand & Co., New Delhi, 2001).The author has explained the meaning and significance of each of the categories as follows:

1. Stars (=high growth, high market share) - use large amounts of cash and are leaders in the business so they should also generate large amounts of cash. - Frequently roughly in balance on net cash flow. However, if needed any attempt should be made to hold share, because the rewards will be a cash cow if market share is kept. 2. Cash Cows (=low growth, high market share) - Profits and cash generation should be high, and because of the low growth, investments needed should be low. - Keep profits high. - Foundation of a company. 3. Dogs (=low growth, low market share) - Avoid and minimize the number of dogs in a company. - beware of expensive 'turn around plans'. - Deliver cash, otherwise liquidate. 4. Question Marks (= high growth, low market share) - Have the worst cash characteristics of all, because high demands and low returns due to low market share. - If nothing is done to change the market share, question marks will simply absorb great amounts of cash and later, as the growth stops, a dog.

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ISSN : 2250 - 1630

- Either invest heavily or sell off or invest nothing and generate whatever cash it can. Increase market share or deliver cash. CONSTRUCTION OF BCG MATRIX FOR NESTLE INDIA Nestle has a wide range of products and is the market leader in food business over the world. However, it has a limited number of brands in India. In the following, each product placed on the matrix is explained as to why it finds a place in the grid it has been placed in the matrix, along with the relevant empirical data reproduced therein. Also, in the matrix itself, though the products have been placed in one of the categories, their projected placement i.e. where should be or can be placed with a promotional exercise, is also indicated by an arrow which shows the appropriate category in which the product is aimed to be placed. For example, Maggi Noodles has been the pioneer of the Noodle industry in the Indian market. But as far as Nestle is concerned, it is only a cash cow. Therefore, it is aimed to be placed in the Stars. This is indicated by an upward arrow which signifies that the product is aimed for repositioning and the direction of the arrow shows the grid where it is heading to, in this case upward arrow is indicating to the stars.

Vol - II , Issue II June - 2012 Section - II

Research Expo International Multidisciplinary Research Journal

ISSN : 2250 - 1630

Product Name Nescafe Star One of the leading coffee brands in the Indian market. It has find a dominance which is unparalleled by any other brand in the country. Not only does it have a high market share but it growth rate is also significantly high. The name Nescafe has become generic with coffee. Position Reasons for Present Positioning Intended Placement None It has witnessed a substantial growth in the present times and seems to continue dominating the market for some time. Nestle India must look in for expanding the number of Comments

consumers in the North as it has in the South. It kept on bringing new variants in order to hold on to its position. The market share is firm and needs to major repositioning.

Ceralac

Star

It has become one of the leading baby food products It has witnesses quite a long hold in its market share with its sales increasing on a continuous basis for almost more than one and a half decade. Its different variants have kept competitors at bay and its finds a place easily at almost every general or provisional store in the Indian market. It is a major contributor for Nestle India's revenues.

None

With the increase in population and the growth market in the country, Nestle India can do much better in terms of registering more shares by an aggressive promotional drive. It needs to take aggressive steps to enter into those

households where traditionally followed methods of feeding new born infants are followed. The market exists for Ceralac to expand and though it is already a star, it can do much better in terms of expanding its shares by adopting market development strategies. Star

Maggi Noodles

Cash Cow

The first preference of Indian children in terms of instant food, is only a cash cow and not a star. The reason essentially is that the market growth rate of Noodle

It is undoubtedly the leader in the Noodles market and faces almost no competition, yet the target placement of Maggi Noodles seems to be at fault.
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consumption is not very high. Though the number of repeat purchasers is high in case of Maggi, the rate of increase among the new purchasers is not too high. Instead of continuing to target the children, Maggi Noodles should now also concentrate on placing the products for Office Executives, Mid wives, Young adults, and the elite wing of the society. The need presently is to expand the market or in fact create new markets for Maggi Noodles. Milo Question Mark Though Milo has not totally been removed off the shelves of the stores and caters to the demand of the consumers arising on account of absence of other products in the same design (e.g. Bournvita, Complan, etc.), it has been unable to acquire a market in the basis of its brand name. The reason why it is not placed as a dog is that it has the potential to expand and also because the product lies in a market with high business growth rate. The retailers don't give much importance to Milo as an item on the shelf but they also do not completely disregard it off their stores. Star It has a bit subtle taste and not that sweet as its competitors offer, Bournvita being the primary one. Thus, it needs to develop upon that. Milo has never witnesses a seriously taken promotional drive. The main chunk of advertisements it saw was during the world cup or the Olympics. This has not given an impressive and long lasting image of Milo on the Indian consumers. Milo has not been promoted as a health drink as Boost or Complan and to some extent Bournvita has been done. Milo needs to improve in this regard.

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Research Expo International Multidisciplinary Research Journal

ISSN : 2250 - 1630

Maggi Sauce Question Mark India has a growing Ketchup market and Maggi has been a significant contender as a leader. But as far as Nestle is concerned, it is not turning up that size of revenues which every top brand contributes to Nestle. It has been highlighted with top television celebrities but there was a considerable time lag of more than five years in the two major promotion exercises Maggi Sauce has witnesses; once in the early 1990s and the one which is going on presently. Maggi Sauce, acknowledge the retailers, has the capacity (both on account of the reasons of price and taste) to wipe out competitors (both the branded as well as the local ones) and thus has huge potential to be converted into a star. Maggi Pickles Question Mark Disinvest Star Though it has been kept as a question mark yet, Maggi Sauce has the potential of turning all odds in its way to become a dominating brand. Competitors like Kissan, Tops (especially in north India) etc. do not pose any barrier in the growth of Maggi Sauce as the leader. Extensive market development, followed by an extensive

promotion drive in all nooks and corners of the country is the key to turning Maggi Sauce into a success as a brand leader for Nestle.

Maggi Pickles, on account of its limited variety (especially in this taste crazy country) and

Placing Maggi Pickles on the hearts and mind of the typical taste centric and money

comparatively higher prices, has been unable to acquire a market necessary for its bare minimum existence. The placement of Maggi Pickles is doubted for the twin reasons of its high price and packing, which

conscious Indian consumer will require an overhauling and huge investment. Extensive price cuts are

required but the matching returns are doubtful. Pickles being a non-durable

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ISSN : 2250 - 1630

seems to target it to the upper substrata while the lack of a significant number of variants poses it a challenge to maintain itself in such households. It is not a dog because it is not the market which has low growth rate. In fact, the market of packaged pickle is growing but it is Maggi Pickles which is unable to gather a substantial share in this growing market Maggi Soup Question Mark Maggi Soups have never been rejected by the consumer. According to the retailers, the demand for soup itself is Star Maggi Soup needs to dominate the market but before that it has to develop the market itself. The development of the market is to be based on the twin principles of the nutritive product and their success essentially related to the taste of the consumer, are not one of the core competencies of

Nestle, which is better known to introduce standard taste in the country and get them approved by the consumers. Thus, it is better advised to disinvest in the business and focus on other brands.

underdeveloped (Because of high demand of other soups like, Knorr) and thus, there is no indicator critically against the success of Maggi Soup. Kit Kat Question Mark Star

contents of the soup as well the convenience and taste, which make it a suitable alternative for other fast food.

Owing to crispiness and superior quality, Kit Kat has an upper edge over its competitors. However, on account of the rise of competitors, especially Perk, Kit Kat seems to have loosened up its grip in the market and has lost some of the prominent recognition which it commanded earlier. It is placed as a Question Mark as the brand has the potential but

Kit Kat needs to emphasize over its superiority in terms of quality as well as the superior taste over its competitors. Kit Kat needs to adopt a market penetration strategy and for doing so it needs to start on an aggressive promotional drive. Not confined one segment, it needs to target on the market executives, the University
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lack a significant market share as of now. going folk, and house wives and the elderly in specific quarters and all segments at a time. Kit Kat is already prominent as a brand name in the country. The only requirement is to capitalize upon it. Nestle Milk Question Mark Much market in this regard has been taken over by the local manufactures for example, Mother Dairy in Delhi, Saras in Rajasthan etc. Amul is one such competitor which gives a competition national to Star Once the fact that packaged milk in India has a huge potential and the market will grow at a significant future, it is but imperative for Nestle to go for Market Development i.e. not only create a flourishing market for packaged milk but also reposition Nestle Milk as a market leader which at present seems to be dominated by Amul. The conversion of Nestle Milk from Question Mark to star is primarily based upon a strategic decision of Nestle whether to go ahead with the Market

Nestle on

scale.

However, Nestle Milk has not really find a place in the market that it can be said to be known at least to the typical Indian

consumer, if not unanimously chosen by him. The fact which tends to place Nestle Milk in the category of a Question Mark is the sheer emergence of packaged milk market which is finding gloss in India. More and more Indian are not favoring packaged milk and in fact in most of the urban

development of packaged milk.

households it is only packaged milk that is used. Nestle Butter Question Mark Nestle Butter, though available in the market for some time now, has not found much support from the Disinvest Facts do not favour Nestle to continue with its butter. Thus, it is advisable for Nestle

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ISSN : 2250 - 1630

consumers primarily on account of the dislike of the taste of Nestle Butter. Considered as salt less, Nestle butter again is yet to grow from its pre-launch position on account of the huge competition it faces from Amul, the market leader in this field. Nestea Dogs Disinvest to discontinue with butter, as it did with its water brand, Pure Life. Also, it would be better to concentrate on other brand than to go in for a head on collision with Amul, the market leader, which is inevitable on account of the same market which both the products cater to.

Though

Nestle

has

been

Even if the taste of Nestea is changed, it is very hard to change the mindset of the typical Indian consumer who are more attached to taste than to any other consideration in case of tea. Nestea, as a foreign brand of tea shall have to face the

successful in the beverages section world over, the diverse and typical taste tendered to by the Indian consumers is not in favour of going in with 'one product suits all. It is for this reason that Nestea has not found acceptance with the Indian consumer. But facts are not totally against Nestea. Tata Tea has been

xenophobic consumer

attitude of the who prefers to

successful though, it has also one flavour and serves on a National basis. However, the taste of Nestea has simply, not been accepted by the Indian consumer.

consume local flavors or say variants of tea. It has been advisable to

disinvest the brand from the product line as has been done for Nestle brand of waters.

Nestle Dahi

Dogs

Majority of the consumers are unaware that Nestle offers a Dahi also. The launch of Nestle Dahi has been in select cities.

Disinvest

Dahi is a product which is best if considered fresh. This

traditional mentality of the Indian consumer is the biggest barrier in the success of Nestle
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Research Expo International Multidisciplinary Research Journal

ISSN : 2250 - 1630

The concept of packaged Dahi is not being accepted by the Dahi. It is advisable to leave the avenue then to go in for market development in this case when there is big risk of the failure of the entire investment to doom on account of the psychic barrier of the consumers.

consumer who prefers to play it safe with the local manufacturer wherefrom he can keep a check on the qualitative content of the product as well before consuming it.

CONCLUSION The aim of the exercise was not to highlight on the BCG matrix as such but to use BCG matrix as a tool towards analysis of Nestle India as an organization with all its products in particular as well as on a whole. Thus, the suggestion generated are all brand specific and pertain to the factors behind each brand which contribute to its growth or lead to its fall. Also, one important fact has been witnessed by this study. It is not that organization name which is all for a product. This is to say that though Nestle is the leader is food products in the world and has dominating brands in India as well yet, its name is not sufficient to make all brands a success even though they may be related to the food business and thus within the core competency of Nestle. It is essentially only account of the fact that the present day consumers are changing. The colonial concept of a big name hides all has changed and unless the brand in particular comes up to the expectation in the subjective satisfaction of the consumer, it will not succeed, not matter how big the name of the organization is. Thus, Nestle has to refocus on not so well performing brands and taking each of them in particular, in accordance with the plan of action as well the highlighted technique, decide to reposition its brands in the market.

REFERENCES
Prasad, L. M. Business Policy: Strategic Management, Sultan Chand & Co., New Delhi, 2001. Costin, Harry. Readings in Strategy and Strategic Planning. Fort Worth, TX: The Dryden Press, 1998. David, R. Fred. Strategic Management: Concepts and Cases. Upper Saddle River, NJ: Prentice Hall, 2003. Houlden, Brian. Understanding Company Strategy: An Introduction to Analysis and Implementation. Cambridge, MA: Blackwell Publishers, Inc., 1996. 5. Kotler Philip, Marketing Management: Analysis, Implementation & Control, 2001. 6. Hedley Barry, Strategy and the Business Portfolio Long Range Planning, vol.10, Feb 1977, pg 9-15. WEBSITES: 1. http://www.b.com/companies/companies_m/mcDonald/20020923_froth.html. 2. http://www.b.com/companies/companies_n/nestle_india/19990124nestle_india.html. 3. http://www.gvnews.net/html/DailyNews/alert3195.html. 4. http://www.netmba.com/strategy/matrix/bcg/. 5. http://www.valuebasedmanagement.net/methods_bcgmatrix.html. BOOKS: 1. 2. 3. 4.

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