Strategic Marketing Management Final Project

Nestle Cheese

Submitted To: Mr.Mobin Ul Haque Submitted By: Waqas Afzal Abdullah Saeed Rehman Siddique Ali Shaheen Section A Submission Date: 25-01-2010
1

094532043 094532023 094532045 094532046

Acknowledgement

First of all we are thankful to Allah Almighty for bestowing us with the opportunity to study in such a prestigious university and reap the prospects of learning from such knowledgeable faculty. Justice to my work would not have been done without acknowledging sincere and heartiest gratitude to our resource person, Mr.Mobin ul Haque for guiding us in the related work, finding time from their busy schedules and helping us. We also admire each other for putting our best effort as a team in completing the project and helping eachother in the time of distress. We also want to thanks our friends and colleagues who supported us played a pivotal role in completion of this work.

Preface

The final project of Strategic Marketing Management is based on the idea of launching a new product in the local market of Pakistan. After the joint consensus we have reached to the idea of launching Nestl Cheese in Pakistan which is not in the Pakistani market till date. For the launching of Nestl Cheese in the local market we have to apply all the basic concepts of marketing and strategic marketing. The reason for selecting the Nestl Cheese to be launched in the Pakistan is that there is currently only three local brands that are working on the same product and among them are the brands like Haleeb, Nurpur and Adams. All these brands are also competing with Nestl in the dairy industry. The current competition will change as soon as we will bring a Multinational food manufacturer in the market to compete in the cheese sector. We believe that Nestl is being backed up with the state of the art manufacturing equipment and the years of expertise which will be the key strength along with the brand name itself Nestl. In order to get the desired results by launching the Nestl Cheese in the market we need to put all the marketing tools and technique in a shape to get our work done by launching the Nestl cheese successfully in the local market. We are applying all the marketing tools like Porter Analysis on the industry to check the attractiveness of the industry and then make a Porter Generic Model as well. We are also including STP in order to get the clear idea of the market and the customers in order to make our new launch successful. In order to see where to place our product in the market we are also making a Group Mapping along with the Perceptual Mapping of Nestl Cheese. We are also working on different matrices for getting the better insight of what to do for making our product successful. We are also working on the Ps of marketing to understand the different aspects of our product. We are also working on the SWOT and the Product Mix of Nestl Cheese.

Nestl at a Glance

Ever since Nestl was established, we have been committed to nurturing people worldwide. Today, as the world's leading Food and Beverages Company, and leaders in health and wellness, we try to cater to all your family's nutritional needs, no matter where in the world you live. 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 recognized everywhere as a guarantee of quality and healthfulness. Nutrition, quality and convenience remain the keystones of our products and even as we confront the new century's challenges, we feel it is our duty to adapt to the changing needs of our consumers. Our responsibility does not simply lie in perfecting the products we develop at our R&D centers spanning four continents, but the role our products play in making lives better - both for our consumers and for communities in the countries we serve. Thus, along with old favorites such as KITKAT chocolates and NESCAF, the world's most popular coffee, we keep introducing new, exciting options worldwide. Understanding that people in every country have different tastes and needs, we have developed a range of food and lifestyle products. In India consumers enjoy healthy and convenient MAGGI Noodles Atta Noodles, in Pakistan you can find NESTL Raita and in China, flavored water is strengthened with Prebio1; dietary fiber and traditional Chinese ingredients such as Aloe Vera and Chrysanthemum. Our popularity has come not just from acquisition and corporate expansion, but also from a care for the ever-evolving needs of customers at every point in their lives.

Today, Nestl SA is the world's largest Food and Beverages Company, and a global leader in health, nutrition and wellness. Consumers around the world, from village squares in Nigeria to the skyscrapers of New York and Chicago, are united by the Nestl promise of quality, taste, nutrition and convenience. Though headquartered in Vevey, Switzerland, we now have 487 factories dotted around the globe, employing over 250,000 people in 86 countries. Our products are available in almost every country, and in 2005 our global sales reached $73 billion. Our operations are spread across three global zones covering Europe, the Americas, Asia, Oceania and Africa. Recognizing that every region has its special needs, the three zones operate locally, but are united by a common vision and priorities. The voices of even the smallest local markets are heard at our headquarters in Vevey, Switzerland. Our immense popularity comes from our efforts to develop products that give quality and nutritional benefits at low prices, even in the most remote regions. We distribute them using local means; in Madagascar, for instance, backpacker salesmen sold over 12 million MAGGI tablets within six months, an approach that was duplicated in Pakistan and Mozambique. Our consumers know that they can rely on us to be there when we are needed. Nestl has been serving Pakistani consumers since 1988, when our parent company, the Switzerland-based Nestl SA, first acquired a share in Milkpak Ltd. Today we are fully integrated in Pakistani life, and are recognized as producers of safe, nutritious and tasty food, and leaders in developing and uplifting the communities in which we operate. We at Nestl Pakistan ensure that our products are made available to consumers wherever in the country they might be. Convenience is at the heart of the Nestl philosophy, and our aim is to bring products to people's doorsteps. In line with our parent company's global philosophy, we are proud of our commitment to excellence in product safety, quality, and value. Our products cater to human needs, and we are active in the communities we serve. From spreading awareness about nutrition and wellness to digging wells in the Thar Desert and succoring earthquake victims, we are committed to serving our country and its people. The consumer's voice is key to Nestl Pakistan's vision and working. Whether you live in the remotest village or the metropolis of Karachi, our consumer services team stands ready to listen

to your concerns and provide answers about our products and guidance on matters of health and wellness.

Global Milestone:

1866-1880
Henri Nestl, a Swiss pharmacist, begins experimenting with cow's milk, wheat flour and sugar to develop an alternative for infants who cannot be breastfed. His ultimate goal is to help reduce infant mortality from malnutrition. Eventually, he develops Farine Lacte Henri Nestl, which is sold under his own coat of arms. This remains Nestl's distinctive brand even today. After the formula saves a child's life, people swiftly recognize its value, and soon Farine Lacte Nestl is available across Europe.

1901-1910
In 1904, Nestl reaches an agreement with the Swiss General Chocolate Company & adds chocolate to its range, embarking on the path to becoming a global leader in confectionary. The next year, the long rivalry with a competitor comes to an end as the two merge to become the Nestl & Anglo-Swiss Milk Company.

1911-1920
As World War I sweeps across Europe, the supply of raw materials and distribution of finished products are disrupted. Nevertheless the demand for dairy products grows, and Nestl's production doubles.

1921-1930
As the war ends, government contracts dry up and fresh milk becomes available to consumers. With decreased demand for long-life milk, Nestl records its first, and only, loss.Through the 1920s Nestl expands its range. In 1930, the Brazilian Coffee Institute approaches Nestl for
6

help in reducing its vast coffee surplus, and Nestl embarks upon the eight years of research that will produce NESCAF.

1931-1940
In the interwar years, Nestl expands its range of baby foods and milk products, adding Nestl MILO, a chocolate flavored milk enhancer, to the range. In 1938, after years of R&D, NESCAF is introduced and revolutionizes coffee drinking the world over.

1941-1950
When the United States enters the war, NESCAF becomes a favorite amongst American servicemen. By 1943 annual production hits one million cases of NESCAF, and at the end of the war, Nestl finds itself a worldwide coffee concern. In 1944, NESTEA complement the NESCAF range. In 1947, two years after the war ends, the popular MAGGI brand joins the Nestl family, and cements its place in the convenience food sector.

1951-1960
After the war ends, Nestl sees astonishing growth as dozens of new products are added and sales soar. CROSSE & BLACKWELL, a British manufacturer of preserves and canned foods, is a prominent acquisition.

1961-1970
Nestl's incredible growth continues. Acquisitions are stepped up as food and water companies join the Nestl family, including FINDUS frozen foods in 1963.Meanwhile, NESCAFs popularity shows no sign of abating as its sales quadruple between 1960 and 1965. In 1966, the development of freeze-drying leads to the introduction of TASTER'S CHOICE instant coffee.

1971-1980
Nestl diversifies outside the food industry. In 1974, it acquires a share in one of the world's leading cosmetics companies, LOREAL. During this decade the price of coffee beans quadruples, traditional markets slow down, and activities in the developing world bring new

risks. In 1977, Nestl again ventures outside the food industry and acquires ALCON Laboratories, manufacturers of vision products.

1981-1990
Nestl divested a number of businesses1980 / 1984. 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.

1991-2001
Trade barriers crumble and new markets in Eastern Europe and China open, creating a favorable atmosphere for a company with Nestl's diverse interests. Bottled water is recognized as a major growth area, and the company takes steps to become a world leader in the trade. It buys two leading brands of water: PERRIER and SAN PELLEGRINO. The company's first multi-site brand of water, NESTL PURE LIFE....., is launched in Pakistan in 1998, and soon spreads to 21 countries. Its place in the pet food industry is established with the 1998 acquisition of SPILLERS Petfoods (UK). In 2000, Nestl acquires POWERBAR, and consolidates its place in the performance nutrition segment.

2001-Present
As new millennium dawns, Nestl is the undisputed leader in the food industry, with nearly 500 factories globally, and sales exceeding CHF 81 billion. It launches a worldwide initiative called GLOBE, intended to harmonies and streamline its business processes. In 2002 the PERRIER VITTEL water business is renamed NESTL WATERS. Nestl continues its strategy of strengthening growth areas such as ice cream by buying MVENPICK and DREYER'S Grand Ice Cream. It ultimately takes full ownership of DREYER'S, thus becoming the world's biggest ice cream maker in 2006.In 2005, Nestl reaffirms its commitment to research and nutrition by establishing NESTL NUTRITION, a standalone entity to develop the company's health,
8

nutrition and wellness strategy. It develops science-based nutrition products, designed to improve quality of life for people with specific nutritional needs.

Corporate Social Responsibility:

Our presence in the community is not restricted to making Nestl products available to consumers; it brings with it a responsibility to those around us. In China and Pakistan we provide animal husbandry assistance to thousands of farmers. In Brazil our food education programme has trained hundreds of volunteers to teach families about nutrition, health and hygiene. And in India, we finance and oversee the provision of clean water at village schools near our factories, benefiting some 20,000 children.

MOST Analysis
9

Mission Statement:
Nestl is dedicated to providing the best foods to people throughout their day, throughout their lives, throughout the world. With our unique experience of anticipating consumers needs and creating solutions, Nestl contributes to your well-being and enhances your quality of life.

Vision Statement:

We envision the company to develop an extremely motivated and professionally trained workforce, which would drive growth through innovation and renovation.

Objective:
Companys objective is to be the worlds largest and best branded food manufacturer while insuring that nestle name is synonymous with the products of the highest quality. Its chief objectives are:
10

 To build mutual trust with consumers, governmental authorities and business partners. To ensure continuous improvement of nestles environmental performance. Conservation of natural resources and minimization of waste. Total compliance with the laws. To establish the benchmark for good business practice. Employing new technologies and processing. By committing to resources, both human and financial. Measuring the cost and benefits to business of its activities. Monitor progress. Review targets.

Strategy:
As we know that Nestle uses the strategy of extensive marketing for its products so we will also use the same strategy for our new product that us Nestle Cheese and create awareness among the customers so that they buy it. The other strategies that will be used along with the above mentioned strategy will be the market development strategy as we know the more the market we will cover the more we will increase the sale and capitalize on our resources and investment. At the later stage when we will start market development we will do a market research and will identify customers want and will also look for the product development.

Tactics:
11

We will use the tactic of placing our product as a highly nutritional and healthy in the daily use for the customers to meet their health requirement and satisfy them with the best food from the house of Nestle.

STP Segmenting-Targeting-Positioning

12

Segmentation:
The segmentation of customers will be done on the basis of the basic variable like Demographic Segmentation, Geographic Segmentation, Psychographic Segmentation and Behaviouralistic Segmentation. Demographic Segmentation:

When we talk about the demographic segmentation we consider the variables likes age, gender, Family size, income, education, occupation, socioeconomic. These all variables will provide us with the insight to the potential customers. Age: When we make segmentation on the basis of age in Pakistan then there would be people of all age group that may be the potential customer of our product. Normally the age group will be from 5-65 years old. Gender: Segmentation on gender will not be done deeply as our product will be for both the genders. Family Size: If we talk about the family size in Pakistan than there is a variation in the size of family. There are different family sizes in Pakistan. We also find strong joint family system as well in the Pakistani Society. Income: The income level of customers in urban areas is high as compared to those in the rural areas. If we talk about the income level then we can segment the market on the basis of low income level people, moderate income level people and high income level people. Education:
13

Education is also higher in the urban areas of Pakistan as we know that in rural areas there are not proper channels for the higher education system and mostly the people go towards the urban areas for the sake of higher education. It is also noted that in the new era more people are looking for higher qualification to succeed in their lives. Occupation: When we talk about the occupation then we can see that the occupation is different for different set of people. In Urban areas mostly there are service oriented people and in rural areas there are farmers who earn their income through farming. Language: When we segment the market we also look for the language as in Pakistan there are different languages used in different areas. For each province there is different language. Religion: When we segment the market on the basis of religion then we can observe that almost 97% of the population of Pakistan is Muslim and remaining population consists of Sikhs, Hindus, Parsi, Christians, Ahmadis and Buddhists etc. Nationality: When we talk about the segmentation on the basis of Nationality then there is only little number of overseas nationals. Geographic variables: When we talk about the geographic variables then it include the variables like region, population density, climate etc. Region:

14

If we segment the whole market on the basis of region then we can segment it on the basis of provinces, on the basis of capital cities, on the basis of urban and rural areas etc. Population Density: When we talk about the population density fact we look for the areas in the selected regions that need to be considered for the maximum use of the product in a particular population sector. Climate: When we segment the market on the basis of climate then there are different areas with different climate. If we talk about the Pakistan then the regions could be divided on the basis of climate of summer, winter, autumn and spring. All the climate variation is observed throughout the Pakistan with different intensity in different areas.

Psychographic Variables: When we talk about the psychographic variables then it include the variables like lifestyle, personality, value and attitude. As we have seen that in Pakistan the people in urban areas with high income level look for well-built lifestyle. Some peoples buying behavior is also based on their personality traits and attitude.

Behaviouralistic Segmentation: When we talk about the behaviouralistic segmentation then it is based on the variables like benefit sought, usage rate, user status, brand loyalty, readiness to buy, occasion and attitude towards offering. Benefit Sought:
15

When we segment the market on the basis of benefit that the customers are looking from the product then we might find that it is the foremost priority of the customer to get the maximum benefit from a particular product. Usage Rate: When we segment the market on the basis of usage rate then we mean that how the customer responds to a particular product in the wide scenario and how does it appeals him again to be used. More likely in order of highly used or low used. User Status: When we are talking about the segmentation on the basis of user status then we will check that the product is used for the first time, regularly or occasionally by the end user. Brand Loyalty: When we talk about the brand loyalty segmentation then we mean that how the brand loyalty appeals the customers and is he willing to stay connected to the same brand. Attitude Towards Offering: The attitude towards offering means that if our product is creating a positive or negative impact on the customer.

Targeting

Target Marketing involves breaking a market into segments and then concentrating your Ma marketing efforts on one or a few key segments. Target marketing can be the key to a small
16

businesss success. The beauty of target marketing is that it makes the promotion, pricing and distribution of your products and/or services easier and more cost-effective. Target marketing provides a focus to all of your marketing activities.

Demographic Segmentation Targeting: When we talk about the demographic segmentation we consider the variables likes age, gender, Family size, income, education, occupation, socioeconomic. These all variables will provide us with the insight to the potential customers. Age: Our age group will be from 5-55 years old customers. This will include children, teenagers and mature buyers as the awareness of healthy food is popular among all the groups and preference is also based on the nutritional facts. Gender: We will target both the males and the females as our product is suitable for both male and female who are health conscious. Family: We will not target any individual in the family rather we will target the whole family. Each and every member of the family is targeted for our product. Income: The customer that will be the potential buyer of nestle cheese will be from middle lower class to higher upper class. Education:

17

Education will be a variable that will be important in the new launch of our product. As we know that educated people are much more health conscious. Occupation: When we talk about the Nestle Cheese then we will look for the customers who are highly involved in the daily busy life and prefer fast food. Socioeconomic Status: When we talk about the socioeconomic status of customer then we talk about the customers who are above average or at average socioeconomic status. Geographic Segmentation Targeting:

When we talk about the geographic variables then it include the variables like region, population density, climate etc. As we are about to launch Nestle Cheese we need to get the detailed insight of geographic variables. Region: We have decided that we will look for the market in developed cities like Lahore, Islamabad, Peshawar, Karachi, and Quetta in the initial phase.

Population Density: When we talk about the population density fact we look for the areas in the selected regions that need to be considered for the launching of Nestle Cheese. The areas that are highly dense will be the Urban and Semi-Urban areas. Psychographic Segmentation Targeting:
18

When we talk about the psychographic variables then it include the variables like lifestyle, personality, value and attitude. In the psychographic variable the most important part that will affect our project is the lifestyle. When we talk about the lifestyle then the people with good lifestyle always prefer healthy products. Behaviouralistic Segmentation Targeting: When we talk about the behaviouralistic segmentation then it is based on the variables like benefit sought, usage rate, user status, brand loyalty, readiness to buy, occasion and attitude towards offering. Benefit Sought: We will make sure to make customers realize that the benefit of our product is in the form of good health as we are backed up with the brand name of Nestle which is the best name in the food industry. Usage Rate: We will make sure that our product is used in the fast food industry as the cheese is widely used in the fast foods like burgers, sandwiches and pizzas very commonly.

User Status: We will be targeting the customers that will be using the Nestle Cheese for the first time and make sure we also attract the customers that uses cheese overall in their daily life. Brand Loyalty:

19

Nestle is the big name in the food industry and we will capitalize this brand name to capture our new customer for the new brand of Nestle Cheese. Readiness to Buy: As we have seen that there is only three well known national brands Haleeb, Nurpur and Adams which are in the market with the cheese products whereas Nestle will be the only multinational brand that will be in the market with the cheese by producing it within Pakistan. Attitude Towards Offering: The attitude of customers towards offering will be highly based on the brand name as the giant name in the food industry will be the preference of customers.

Positioning

20

A product's position is how potential buyers see the product", and is expressed relative to the position of competitors. Positioning is a platform for the brand. It facilitates the brand to get through to the mind of the target consumer.

The positioning can be done on different parameters which are discussed below:

Customer Benefit Approach:

When we talk about the customer benefit approach we mean that positioning our product above the competitor in the market by adding some extra feature in it which competitors are not offering. When we talk about our product that is Nestle Cheese we will make an image in the customers mind that our product is high in nutritional benefit as it contains the important ingredients like Calcium, Proteins, Phosphors and Fats that are required for the healthy living. We can position it in this way by making the customer realize that the nutritional benefit of cheese is very important for the body in daily life.

The Price Quality Approach:

The positioning will be done on the Price-Quality approach as well. It means that positioning the product in consumer mind in a way that if high price is charged then high quality is also offered to them. As we have studied the market that the highest price for 1 KG in the local manufacturer is being charged by Haleeb which is Rs.399/=. So we can place our price a bit higher than Haleeb as with the strong Brand name in the food industry and by making sure that we use state of the art technology for the cheese manufacturing in the industry to the consumer. Since we will be the trusted multinational food manufacturer we can charge a little bit higher price than the local competitors. As we know that when it comes to quality food the Nestle dont compromise.
21

The Use or Application Approach:

When we talk about positioning the product on the basis of its use or application then we position the product in a manner that how customer is going to use it for the desired result. We will position Nestle Cheese in a manner that customer can use our Cheese in daily life. The Product Class Approach:

The positioning on the basis of product class approach will be made in a way that we will place our product in a way that all the age group people will be using it.

PEST Analysis for Nestle Political Environment

22

Nestls mega environment in Pakistan initially consists of the political restraints and the objections that the Pakistan Government can placed on Nestle on the way it conduct its business in the country. Another way in which the Pakistan government may influence the way nestle conducts its business is by placing quotas on the amount of products that it can supply, which will limit the amount of revenue that nestle can generate. These constrains may include the amount of a specific tax that nestle pays to the government in order to conduct the business and this may have a resulting impact on the consumers of nestle products in the shape of higher prices, than what it may be offering to the other countries mainly because of a lower tax it has to pay, and it is depended on the policy of the country.

Economic Environment The second mega external environmental factor that influences the organization is the economical factor, which controls the mechanism (contraction and expansion) of production, consumption and distribution. Nestl makes a significant contribution to the economic sector of Pakistan. Through generation of tax revenue, import substitution of milk powder, export and infusion of over 2.3 billion rupees in the rural economy through milk purchases, the company plays an active role in promoting economic growth. The capitalist economic system consists of firms owned privately by individuals or by corporations. In such an economy there is a great scope for the company to take favorable decisions and move towards a better organizational environment. Social economic structure, then the rights of owner ship and decision making (policy making) will be transferred to the state (government) and the company will have a lower
23

scope and less favorable environment, in this manner the political and economical elite will operate the organization according to their own will.

Social Environment

In analyzing the social factors that can influence Nestls course of business activities in Pakistan, we come across the demographical statistic of Pakistan which includes, gender specification, age specification and religious specification, how a social and cultural values of a certain geographical area can influence the important shifts in the demand of the product, which may result in nestle changing some of its strategies accordingly in order to maintain its sales in Pakistan. Nestle lays a great emphasis in penetrating into the market by keeping the cultural and traditional values of the geographic area in which it is conducting its operation. Before nestle begins its operations in any country its main emphasis is on studying the cultural values of that country, in order to get its products warmly welcomed and make it highly preferred among other companys operating at the same level.

Technological Environment

24

Research indicates that technology tend to evolve through periods of incremental change through technology breakthroughs that either enhance or destroy the competence of firms in an industry. At nestle technological factor is of vital importance since many new techniques may change the methods of production of food and make them more efficient. Therefore nestle have to spend some of its earnings in the search of new technologies. If it ignores this factor and do not respond to it accordingly then there is a possibility that rival firms may take its place.

Porter five Force Model on Industry

25

Porter's five forces" is a framework for the industry analysis and business strategy development developed by Michael .E Porter. It uses concepts developing IO to derive five forces which determine the competitive intensity and therefore attractiveness of a market.

Threat of New Entrants:

26

It has been observed that new entrants tend to move towards the flourishing industries which are earning reasonable profits. Keeping this fact in mind we can say that as soon as Nestle is going to launch the Cheese in the Pakistani market there is a chance that dairy giant like Olpers will jump into the same cheese manufacturing sector. Also we can assume that some locally sound investor can also invest in the cheese manufacturing. We have explored that the investment to make cheese on a large level with the state of the art technology requires a lot of investment. If we talk about a low level manufacturing plant then it can be installed and operated on low cost but the quality will be distracted. If Nestle Cheese is going to be launched then the direct competition that will arise if Olpers also launches the cheese. The other barrier to entry can be created by Nestle Cheese by attaining the economies of scale as it is backed up with the string financial backup. This will help Nestle to attain the advantage over its competitors and will help them to create entry to barriers for new entrants than cannot operate at the economies of scale and as a result have to bear high cost.

Threat of Substitute:

In terms of the substitute of Cheese it can be the products like spreads and mayonnaise. But both these products differ in the nutritional aspects. It can be used as a substitute on just few occasions but overall its not a big threat to the cheese. As for the use of cheese it will be used in different fast foods like burgers, pizza etc where spreads and mayonnaise will not be the threat to cheese.

Bargaining Power of Suppliers:

27

When we talk about the bargaining power of supplier then we know that Nestle is having strong relationship with the suppliers by making contracts with them and providing them services for the fitness of their animals and the storage facilities like refrigeration of milk. By providing these services to the suppliers Nestle make long and strong relationship with the suppliers. There is threat of forward integration by the suppliers as they can sell it directly to the end user in the original unprocessed form. There is a threat of forward integration by the supplier in the industry as the supplier can go for forward integration by selling the unprocessed milk directly to the end user by making its own distribution channel. There is a possibility that after the end of the contract the supplier can switch to the new buyer. Since the suppliers in the milk industry are very concentrated so the bargaining power is low. As we know that only 2% of the milk produced in the industry is being processed. Quality is the bargaining power of supplier as they negotiate price on the basis of quality they offer to the buyer. Suppliers usually dont have large storage capacity so for them it is a drawback.

Bargaining Power of Buyers:

The buyers usually dont compromise on the quality and make contracts with the suppliers in order to avoid any problem. The buyers provide extra benefits to the suppliers and with this make strong relationship with the suppliers. The buyers cannot integrate backward as it required a lot of investment and resources. The buyer does not compromise on the quality and set the price on the basis of quality. The other products that are used in the manufacturing of cheese will be imported as there are not well equipped manufacturers of emulsifiers and acidifying agents. So in this part the buyer will be having low bargain power.

Rivalry among the Competitors:

28

When we talk about the competition in the industry then in cheese industry the local manufacturer are already in the market with their products. The Nestle will be the only multinational cheese manufacturer in the industry but it had to compete with the brands that are in direct competition to it in the local market. If we talk about the local brands then they will compete on price as we have already seen. The more the brand power the more the price but the overall low price strategy will be a loss for the competitors in the long run as they will not be able to get the profit. We have suggested that Nestle Cheese comes with the economies of scale concept and even after that place its product on the upper hand as compared to its competitors. The Nestle will be backed up with the state of the art technology and the skilled labor force as compared to its competitors. The best quality and nutritional aspect of Nestle will be designed in a way that it over class the competitors.

Porters five Generic Strategies:

29

Cost Leadership

Differentiation

Focus

Type 1 Large Type 2 Type 4 Small Type 3 Type 5 Type 3

We are in focus generic strategy and use type 5 because in type 5 there is best value focus strategy because we offer products to a small range of customers at the best price value in the market.

30

SWOT Analysis of Nestle

SWOT is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities, and threats to a project. It involves specifying the objective of the project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective. The strengths and weaknesses usually arise from within an organization, and the opportunities and threats from external sources. For Nestle we have developed the SWOT analysis which are explained in detail below.

Strengths

We have seen that the Nestle products are easily available in the Pakistan which is the advantage for the company in the long run for its brand recognition and brand existence.

Immense product range and huge diversification leads to reduce risk. As we know that there is huge range of products for Nestle in case of any new product Nestle can back its new product with the chance of risk for any failure.

High quality standards are always the key strength for Nestle. Effective pricing strategy through larger business operations. High level of market share is the key strength for Nestle. Nestle have a strong Brand image in Pakistan. Nestle is the only multinational dairy company in Pakistan with years of expertise in the same field.

Nestle is a social responsible company and this creates the brand image better in the eye of the customer.
31

Well trained and educated staff is the strength that is very important for the success of any organization and Nestle have it.

Innovation, renovation, product availability and communication are major strengths for Nestle Foods.

Nestle is having the huge market share in the dairy milk industry. The sound financial position of Nestle is the strength for the organization. Nestle have one of the best supply chain network.

Weaknesses

Distributors carried out their businesses for the Nestle products that can be harmful for the organization.

These distributors, though observing the rapid increase in customer demand refuse to hire new, more efficient and innovative staff that would take the organizations to rise rather they stuck to their old staff members.

Lack of awareness among the target market is the major threat. As Nestle had come up with many products that are really helpful for the healthy life of people but are not admired by the target market due to the awareness. NesVita is also among the same class.

Selective investment due to uncertain economic and political conditions. Low sales margins due to highly value added products. Nestle cannot launch many of its international brands in the local industry due to the lower income level and awareness of customers.

32

Opportunities

Nestle in Pakistan has a great opportunity for expanding its markets because in Pakistan there is a large ready market of food and beverages due to trends of eating and the increasing.

Pakistan is the 7th largest milk producer country which can be capitalized by Nestle in the long run.

Sell the products on corporate level will make Nestle to earn a great sum of profit and will help in future expansion as well.

Credit policy can be adopted to increase sales by the Nestle. The coffee brand also offers many opportunities for the company to expand by tuning the taste of the masses towards coffee.

Threats
33

Many conferences and campaigns have been held against Nestle in this regard which can damage the name and trust of its customers.

Another threat is due to the increasing popularity of its competitor OLPERS in local and international markets.

Price fluctuations due to rupee devaluation as raw material are imported. The uncertainty of economic conditions poses a great threat as the major funds invested in the country come from outside Pakistan.

Taste of consumer has already developed which is hard to change. Inflation is getting higher and higher so the purchasing power of the people is decreasing day by day. Price fluctuation due to rupee devaluation as some raw material is imported.
IFE Matrix of Nestle

4- Major strength STRENGTH

3- Minor strength

2- Minor weakness Weight

1- Major weakness Rating 4 WS 0.32

Ease of availability of their products all over 0.08 Pakistan

Immense product range and huge diversification leads to reduce risk.

0.09

0.27

High quality standards

0.1

0.4

Effective pricing strategy through larger business 0.05 operations

0.15

34

High level of market share Have a strong Brand image Well trained and educated staff Innovation, renovation, product availability and communication are major strengths.

0.10

0.30

0.06 0.06 0.07

4 3 4

0.24 0.18 0.28

WEAKNESSES Distributors carried out their businesses. These distributors, though observing the rapid increase in customer demand refuse to hire new, more efficient and innovative staff that would take the organizations to rise rather they stuck to their old staff members. Lack of awareness among the target market. Selective investment due to uncertain economic and political conditions No credit sales. Low sales margins due to highly value added products. Cannot launch its international brands in Pakistan easily Total

Weight

Rating

WS

0.09 0.05

2 1

0.18 0.05

0.05 0.04

1 1

0.05 0.04

0.02 0.09

2 2

0.04 0.18

0.05

0.5

1.00

3.18

EFE Matrix of Nestle

35

4- The response is superior 1- The response is poor OPPORTUNITIES

3- The response is above average 2- The response is average

Weight

Rating 4

WS 0.52

Nestle in Pakistan has a great opportunity for 0.13 expanding its markets because in Pakistan there is a large ready market of food and beverages due to trends of eating and the increasing.

Sell the products on corporate level. Credit policy can be adopted to increase sales.

0.09 0.08

4 2

0.36 0.16

The coffee brand also offers many opportunities 0.2 for the company to expand by tuning the taste of the masses towards coffee.

0.6

THREATS

Weight

Rating 3

WS 0.24

Many conferences and campaigns have been 0.08 held against Nestle in this regard which can damage the name and trust of its customers.

Another threat is due to the increasing 0.09 popularity of its competitor OLPERS in local and international markets.

0.09

Price fluctuations due to rupee devaluation as 0.1 raw material are imported.

0.2

The uncertainty of economic conditions poses a 0.06 great threat as the major funds invested in the country come from outside Pakistan.

0.18

Taste of consumer has already developed which is hard to change. Inflation is getting higher and higher so the purchasing power of the people is decreasing day
36

0.08

0.32

0.09

0.18

by day. 1.00 2.85

GE MATRIX

THE GE TOTAL WEIGHTED SCORE

STRONG 3.0 TO 4.0 HIGH 3.0 TO 4.0 1

AVERAGE 2.0 TO 2.99

WEAK 1.0 TO 1.99

MEDIUM 2.0 TO 2.99

4 IFE = 3.18 EFE = 2.85 5 6

LOW 1.0 TO 1.99 7 8 9

37

The Nestle lies in the 4th quadrant in the GE Matrix and the strategy for the company that lies in the 4th quadrant is that it should grow and build. The further strategies that could be carried out is that it can avail the market penetration strategy, market development strategy and product development strategy which was earlier mentioned in the MOST analysis.

Competitors Analysis

The competitors that are in the food industry manufacturing cheese can be divided into two classes that are direct competitors which are the one operating in an organized sector and then there are the indirect competitors like non branded local cheese manufacturer. As a multinational food company in Pakistan we think that Nestle should compete with the brands that are well known in the market and for this we have analyzed the competitors in detail about their basic profile, products and strategies. The direct competitors of Nestle Cheese are Adams Foods, Nurpur and Haleeb who are already manufacturing cheese.

Adam's Milk Foods (Pvt.) Ltd., specialize in dairy products. Our customers enjoy our products produced under strict quality control and hygienic conditions which has made quality assurance as our trademark. We are also Pakistans first dairy plant which produces whey Milk Powder. We intend to be the leader in providing best quality products to our entire valued customer.

38

It rapidly institutional

acquired a huge customer base of customers includes some prestigious

franchise restaurants and other ventures, apart from institutional base Adam's Food Products caught the eye, and won the hearts, minds of a large number Pakistani families. Today's consumers of dairy products want to know that the food they eat is safe and wholesome. Technology and scientific understanding is used to guide and monitor and control for producing cheeses that are as nutritious, safe, and wholesome to consume. The skills of our cheese making remain paramount. We retains personal control of the whole production process. That's a lot of responsibility and our team, ensures that every piece of cheese that reaches the shelves, is of the same consistent high quality and great taste. High quality milk is needed to produce high quality cheese. We consider cheese making an art and strive continuously to perfect our knowledge and skills. The milk we use meets all federal and state health and quality requirements and standards. Dairy producers monitor critical areas of their production to effectively cool and store milk, closely monitor the use of medicines and chemicals to prevent residues in milk, sanitize their equipment and make sure their wash water is clean. Adam's Milk Products are available nationwide in supermarkets, independent retailers and wholesale specialists. That makes us largest cheese maker in the country, capable of producing over 20,000 tonnes annually.

Products

39

40

Strategies:

Pricing:

The pricing set by Adams is in the premium section as Adams Foods specializes in chilled dairy products. We have seen that in the current market situation Adams Cheese types are at the top of the price bracket as they are the oldest one in the cheese manufacturing at the local level.

Distribution:
The Adams Foods has very strong distribution network and they are covering all the big cities of Pakistan. We have seen that Adams cheese can be found at almost all good stores and retailing points.

Product:

The Adams food had come up with the lot of variants in the Cheese and we can easily analyze that Adams foods are working on the product development strategy as they have covered many areas of Pakistan.

Promotion:

Adams Foods does not promote their products aggressively using ATL activities. However we have seen that BTL activities are used by the Adams Foods for the marketing and promotion of their products.

41

Building an excellent reputation over the years, Haleeb Foods continues to be at the forefront of product and packaging innovation. By the grace of God, it has achieved market leadership in several food categories with a very strong portfolio, consisting of leading national and international brands Haleeb, Candia, Dairy Queen, Tea Max, Skimz, Tropico and Good Day. Apart from its extensive nationwide distribution networks, Haleeb Foods is also serving several export markets including South Korea, Bangladesh, Afghanistan and the Central Asian states. Haleeb Foods has the distinction of being the first company in Pakistan to use Tetra Paks novel packaging formats, Tetra Brick Aspetic (TBA) and Tetra Fino Aseptic (TFA). Haleeb Foods has also introduced a number of unique products previously unknown to the Pakistani market, like Haleeb Labban, delicious traditional lassi (buttermilk) prepared with pure thick milk and yogurt, Candia Tea Max, cardamom flavored tea whitener, Candia milk, packed in distinctive food grade plastic bottle, and Haleeb Good Day, 100% pure and natural fruit juice, free of added sugar, artificial flavors and preservatives. All this and more makes Haleeb Foods Pakistans number 1 and fastest growing packaged food company. As of fiscal 2006, its annual turnover is Rs. 9 Billion. Haleeb Foods products are made with great care, and marked with our quality seal of recognition. We are the only dairy company in Pakistan that undertakes 21 rigorous quality control tests on every portion of the milk collected by our teams. These internationally recognized tests are used to check for: a) adulteration, b) microbiological contamination and c) adequacy of nutritional contents. All processes, from preparation to quality assurance to packaging, are undertaken employing state-of-the-art technology and equipment. Therefore, we take great pride in the fact that Haleeb Foods is the only food company in Pakistan that has the following international certifications of quality and prestige:

HACCP (in process controls for safer products) ISO 9002 (better quality for greater customer satisfaction) ISO 14000 (environment-friendly operations)

42

Products

Strategies:
43

Pricing:

The pricing set by Haleeb Cheese is in the Low as compared to any brand present in the market. They are trying to capture the market by offering low price as compared to the competitors and gain the market share.

Distribution:

The Distribution network of Haleeb is not as good as Adams as we can not easily find the Haleeb Cheese in the market. We have assessed few stores on different locations and found that Haleeb was not available there.

Product:
The Haleeb food had come up with just two variants of cheese in the market which are commonly used. There is no product development strategy by Haleeb Foods.

Promotion:

Haleeb Foods had promoted their Cheese brand in the very beginning of the launch of the Cheese brand by using ATL and BTL activities. We have found that Haleeb is now not using any ATL and BTL activity for its Cheese product.

44

A wholesome life is what Nurpur stands for with Health, Energy and Taste, being the vital ingredients. Our national team of collectors, packers, processors, shippers and employees is committed to consistently providing safe, high-quality Hygienic Milk, Pure Juices, Healthy Nectars, Better Butter and other food products, while protecting the environment in which these products are manufactured and processed. Nurpurs dedication to quality is a commitment solidly backed by: Comprehensive programs for food safety. Stringent quality control measures. State-of-the-art production facilities and transportation technologies. Continuous improvement research and innovation. Dedication to the safety of our employees. Communities and the environment. The Nurpur brand means the finest, high quality products. Nurpur will continue to meet the consumer and customer expectations by consistently providing products that meet the highest standards, the Nurpur standard. For Nurpur, anything else is unacceptable. Nurpur is one of the leading producers of butter and butter products in Pakistan, processed from the best fresh milk. With 80% fat in Nurpur Butter, not only you will get energy but also body required essential fatty acids. Our butter is made from cows, which roam freely and eat fresh green grass all year round. Thats what gives Nurpur butter the rich, creamy taste that nature intended. Nurpur butter is available in consumer packaging and for industrial processors. Innovation is the main focus. Primary examples include the yellow butters in tubs available under the Nurpur butter brand name. In Pakistan, Nurpur markets a range of premium butters. Nurpur also exports butter to many countries.

Products

45

Strategies:

Pricing:

46

Nurpur placed itself in the moderate pricing level in all the products being manufactured. The prices are made in a way that customer can differentiate it from the others and feel it economical.

Distribution:

Nurpur is also not having a good distribution channel. We can see that Nurpur can be found only on large stores which are operating at a high level. So distribution channel of Nurpur is very weak.

Product:

There are many products that are being introduced in the market by the Nurpur from beverages, dairy product and chilled products. Nurpur is also not doing any product development.

Promotion:

Nurpur does it ATL and BTL activities for the promotion of new products. We have seen the ATL activities of Nurpur on some occasions and also we have seen that Nurpur does BTL activities normally.

CPM Matrix of Nestle and its Competitors in Cheese Industry

NESTLE

HALEEB

ADAMS

NURPUR

47

Critical success factor

weight

Rating

WS

Rating

WS

Rating

WS

Rating

WS

Advertising Product Quality Price Management Financial Position Customer loyalty Market Share

0.08 0.25

4 4

0.32 1

2 4

0.16 1

1 3

0.08 0.75

2 3

0.16 0.75

0.13 0.09 0.1

3 3 4

0.39 0.27 0.4

3 3 2

0.39 0.27 0.2

3 2.5 2.7

0.39 0.22 5 0.27

2.7 3 2.8

0.351 0.27 0.28

0.20

0.8

0.6

0.6

0.52

0.15

0.45

2.5

0.37 5

2.8

0.42

2.6

0.39

Total

1.00

3.63

2.99

2.73

2.72

ANSOFF Matrix:

48

The ANSOFF Growth matrix is a tool that helps businesses decides their product and market growth strategy. ANSOFFs product/market growth matrix suggests that a business attempts to grow depend on whether it markets new or existing products in new or existing markets. ANSOFF Matrix:

PRODU CT PRESENT MARKET MARKET MARKET PENETRATION NEW PRODUCT PRESENT MARKET (existing products , existing customers) MARKET DEVELOPMENT NEW MARKET (existing products, new consumers) ( new products, new customers) DIVERSIFICATION DEVELOPMENT (new product ,existing customers) NEW MARKET

Product Development Strategy When any organization choose to develop new products for its existing markets that is product development strategy so if the nestle launch its new product (cheese) then it is in this category so we target the existing as well as new customers to introduce the new product so we can be also be in diversification . Space matrix:
49

Strategic Position & Action Evaluation (SPACE) Matrix is another management tool used to help analyze a company. It can also used to determine what sort of strategy the company should undertake. The SPACE Matrix is broken down into four quadrants as being aggressive, conservative, defensive, and competitive. Additionally, the SPACE Matrix analysis functions upon two internal strategic dimensions which are financial strength (FS) and competitive advantage (CA). Besides, the SPACE Matrix methodology also studies two business external strategic dimensions such as environmental stability (ES) and industry strength (IS). Internal strategic position 1. Financial Strength

When we talk about the financial strength then the company is in strong position as we take data from its annual report. We analyse that the company sales are high as compared to previous year. We take the 2008 and 2007 and there is no report of 2009 so we take the previous year report. In 2008 its sales are 34183.85(million) and in 2007 its sales are 28235.39 (million). So the sales are high. And when we talk about the gross profit of the company that is also high as compared to previous year .in 2008 its gross profit is about 8952.32 (million) and in 2007 its gross profit is 7944.17 (million) that is also high as compared to previous year. So the working capital is also high in 2008 that is 377.51 (million) and in 2007 it is 354.7 (million) .so after these calculation we are concluded that the company is in strong financial position.

2. Competitive Advantage

The competitive advantage of nestle is that they never compromise on quality and quantity. Quality is to win consumers trust and preference.its extensive milk collection system ensures that the Milk you get is of the finest quality and their products are available in every city and town. It has strong financial position because it is multinational company.

50

External strategic position

3. Environmental Stability

So there is a great potential in industry and entry barrier is very high for new unorganised brand because already a lot of well known brands be present. so when we talk about a idea for nestle to introduce the cheese then it has huge loyal customers and a good brand image .so we target the middle upper class and the higher class so our prices are high and we have premier quality. There is less risk involved in this businesses because the nestle is already working on the milk products.

4. Industry Strength :

So in industry we take only milk product and its industry strength because we have planned to introduce the milk product (cheese). So Pakistan with current estimates is the 4th largest milk producing country in the world with 33 Billion litres of milk produced annually. The potential is huge but the sector operates mostly in the informal economy and needs a consistent effort to formalize and be able to contribute better to the national economy. Out of the total milk produced, 97% is in the informal sector (i.e. loose milk consumed in the villages and or sold in the cities through "Gawallas" in unhygienic conditions and without any quality standards). There are 8 Million farming households in Pakistan with a total herd size of 50 million animals. 97% of these farmers are not linked to formal markets and hence are not progressing in economic terms. Dairy Development Company has emerged with guarantee backup by government of Pakistan. . The platform proposes to improve the dairy sector through improved research facilities, training and capacity building of farmers, training veterinarians, improving the cold chain through milk chillers, promoting healthy pasteurised milk, develop model commercial dairy farms, focus on breed improvement, facilitation of credit financing to dairy farmers and linking the rural area based farmer to the market mechanism. Space matrix:
51

Aggressive quadrant:

so when we talk about our company the that is in aggressive quadrant because it has strong financial position that has achieved major competitive advantage in growing and stable industry and dominating factor in industry.

Marketing Mix

The marketing mix is probably the most famous marketing term. Its elements are the basic, tactical components of a marketing plan. Also known as the P's of marketing, the marketing mix elements are price, place, product, promotion and packaging.
52

Product:

As Nestle Cheese we are entering the market with the three basic and widely used cheese types. The three types of cheese are processed in different manner for the taste it gets after processing. The first and most commonly used cheese is the Cheddar cheese which is used in many foods like burgers, lasagna, sandwiches etc. So to cater this segment of market Nestle is coming up with the Cheddar Cheese. On the other hand we have analyzed that there is also a demand for Mozzarella Cheese so we have also decided to come up with the Nestle Mozzarella Cheese. The third type is the Pizza cheese which is specially designed for the Pizza lovers. The shelf life of our product will be one year as Cheese after being processed can retain its life for at least 1 year. As we are committed to deliver the cheese in its healthy form we will try to use minimum preservative to retain the natural flavor.

Price:

The setting of price is a very complex and important task for the brand. For the Price setting we have to analyze the market carefully as what our competitors are offering. For this we have checked that in the current market pricing Adams is charging the premium price as it was mainly in the manufacturing of cheese than the other competitors. On the second number is Nurpur in terms of pricing and on third its Haleeb Foods. We know that for Cheese product we will be looking to target the niche class with the three sound competitors but we will place our price ahead of Adams as we are the multinational company and our brand name justifies our high
53

price as compared to Adams which is a local company. So in this case we will charge approximately 2-5 % high price as compared to Adams.

Place:
We will launch our product in large cities of Pakistan like Lahore, Karachi, Peshawar, Quetta and Islamabad with full force. We will use all possible distribution channels as it is our major strength. We will use Superstores, Departmental Stores, General Stores, Supermarkets and retailers to make sure that our customer never feels like going without purchasing our product if he/she wants to buy.

Promotion:

For the promotion of our product we will be using extensive marketing strategies both in ATL and BTL.

ATL Activities:

54

In the ATL activities we will be using print media for the promotion and awareness of our product. We will use T.V.C for the marketing of Nestle Cheese along with the Radio advertisement. We will also publish our advertisement in daily newspapers that are widely read across our targeted cities. As a new technique we will also use Internet for the promotion of our product by advertising it on our website. We will also place our hoardings on the important places in our targeted cities as we have seen that Nestle already hold many hoarding in major cities at important locations. So we will use those hoarding to promote our Nestle Cheese.

BTL Activities:

The BTL activities are also very important for the companies to create awareness of their product and show their existence in the market at point of sale. For the initial time period we will demonstrate our free taste stalls at the large point of sales. Secondly we will get place on the shelves at the eye level to get the customer attraction. We will also use Fascias for the promotion and marketing of our Nestle Cheese. Bunties will also be placed in the large stores for the customer attraction and marketing. Posters will be placed in departmental stores along with mini stores for marketing and to show our existence of newly launched brand.

Packaging:
For the packaging we have analyzed the market and our competitors. We have seen that Haleeb and Nurpur are coming in plastic packaging where as Adams is using the card board packaging. Based on the market study about the packaging of our competitors we have made a table for the products and their packaging along with the pricing. Company Adams Sliced Cheddar Cheese Adams Sliced Cheddar Burger Cheese Plastic Packaging 1 Kg Rs.472 1 Kg Rs.502 Card Packaging

55

Adams Block Cheddar Cheese 2 Kg Rs.699 Adams Block Mozzarella Cheese 2 Kg Rs.1045 Adams Sliced Cheddar Cheese (10 Slices) Adams Block Cheddar Cheese Adams Block Pizza Cheese Adams Block Mozzarella Cheese Adams Block Pizza Cheese Adams Block Mozzarella Cheese Adams Block Cheddar Cheese Nurpur Sliced Cheddar Cheese Nurpur Block Cheddar Cheese Nurpur Sliced Cheddar Cheese (10 Slices) Nurpur Block Cheddar Cheese Nurpur Block Cheddar Cheese Haleeb Sliced Cheddar Cheese Haleeb Block Cheddar Cheese Haleeb Sliced Cheddar Cheese (10 Slices) 1 Kg Rs.415 2 Kg Rs.689 200 gm Rs.120 225 gm Rs.115 450 gm Rs.235 1 Kg Rs.399 2 Kg Rs.675 200 gm Rs.117 200 gm Rs.128 227 gm Rs.123 227 gm Rs.183 227 gm Rs.143 453 gm Rs.357 453 gm Rs.277 453 gm Rs.242

Based on the above survey from the market we have decided that we will come in card packaging for the Block Cheese in Cheddar and Mozzarella type in 1 Kg, 2 Kg, 450 Gms and 225 Gms. For Pizza Cheese we will come in the card packaging in 450 Gms and 225 Gms.

56

Whereas for the sliced cheddar cheese we will come in the Plastic Packaging in 1 KG, 50 slices, 200 gm with 10 Slices pack with each slice with the weight of 20 gms.

Bibliography:

http://en.wikipedia.org/wiki/Religion_in_Pakistan http://www.consumerpsychologist.com/cb_Segmentation.html http://en.wikipedia.org/wiki/Cheese http://www.adams.pk/product_list.php http://en.wikipedia.org/wiki/Porter_five_forces_analysis http://www.absoluteastronomy.com/topics/Porter_5_forces_analysis http://www.allbusiness.com/agriculture-forestry/agriculture-animal-farming/11734079-1.html

57

http://www.nurpurfoods.com/about.htm http://haleebfoods.com/haleeb/QS_company_profile.php http://en.wikipedia.org/wiki/File:Marketing-Mix_(en).png http://www.marketingteacher.com/Lessons/lesson_marketing_mix.htm http://www.indianmba.com/Occasional_Papers/OP118/op118.html http://freepresentationslides.blogspot.com/2009/08/above-line-promotion.html

58