Nestlé and Nestlé Malaysia

Nestlà © and Nestlà © Malaysia EXECUTIVE SUMMARY The existing company that has selected is Nestlà © (Malaysia) Berhad. This report starts with an introduction and a brief history about Nestlà © and Nestlà © Malaysia. This report includes the vision and mission of Nestlà © and how Nestlà © is going to achieve them. This report also includes a brief summary of Nestlà ©s market segmentation with examples provided. It discusses the strengths and problems of the company followed by the solutions to solve the issues. In the end, there are some suggestions recommended by our group and a conclusion of this whole report. TABLE OF CONTENTS Assessment Criteria..2 Plagiarism Report..3 Executive Summary. 4 Table of Contents..5 Content Introduction..6 Market Segmentation7 Strengths8-9 Problems and Solutions.9-11 Recommendations..11-12 Conclusion.12 References.13 Appendix14 CONTENT INTRODUCTION Nestlà © is a multinational company and is of the worlds largest in food and beverages industry. Heinrich Nestlà ©, whom also known as Henri Nestlà ©, was the founder of Nestlà © Company (Nestle. 2010, Introduction, Nestlà © [Online] available at www.nestle.com), which headquarter is in Vevey, Switzerland in the year of 1866. Nestlà © Malaysia was established in the year of 1912 in Malaysia as Anglo-Swiss Condensed Milk Company. Nestlà © Malaysia head office is now located in Mutiara Damansara, Petaling Jaya, Selangor, and has 6 sales offices with more than 5000 employees nationwide. Besides, Nestlà © manufactures its own products in 7 factories and markets over 300 Halal products across the nation. (Nestlà ©. 2010, Nestlà © in Malaysia, Nestlà © [Online] available at www.nestle.com.my) Nestlà © specialized in foods and beverages industry, a few of the many well known brands Nestlà © has in Malaysia includes Maggi, Nescafà ©, Milo, Kit Kat, Nesvita (formerly known as Ne stum), as well as pet care products such as Purina and Friskies. Nestlà ©s vision (Nestlà ©. 2010, Corporate Philosophy, Nestlà © [Online] available at www.nestle.com.my) is to be the leader in Nutrition, Health, and Wellness Company by delivering world-class products of the highest consistent quality, reliability, and convenience based on business excellence principles throughout the operation. Nestlà ©s mission (The Nestlà © Corporate Essence Our roots and wings 2007, p.4) is to enhance the quality of life with good food and beverages, everywhere, so people could live a healthier life. In order to achieve their vision and mission, Nestlà © Nutrition Research Centre (Nestlà ©. 2010, Research Development, Nestlà © [Online] available at www.nestle.co.jp) pays great attention to understand the consumers nutritional and emotional needs and utilise todays world superior science and technology to produce high quality products to the world. MARKET SEGMENTATION Every consumer has different needs. Hence, it is not possible to satisfy every customer using a same marketing segmentation, which is also known as mass marketing by offering a single marketing mix to all consumers. Moreover, as a global market has become extremely competitive, and consumers are increasingly demanding which is very difficult to satisfy. Therefore, Nestlà © uses target marketing for every product to their customers. For example, in consumer product, Nestlà © baby milk product such as Nestlà © Neslac Excella Gold is segmented only to infants and toddlers. However, baby does not have the capacity or capability to buy the food they needed. Therefore, to market this baby milk product, Nestlà © does not fully focusing on babys basic need which is hunger, but also to the babys parents in terms of how the nutrition provided will give their children the best possible advantages in the childrens life and development. Another example is Nestlà © Milo, the milk beverage with chocolate and malt. Don Howart, the executive director of Nestlà © and Singapore Coffee and Beverages claimed that Milo remains popular among the young and has a 90% (The Sun. 2010, Milo with ProtoMalt to get through the day, Sun2Surf [Online] available at www.sun2surf.com) market share among chocolate malt drinks in Malaysia. Besides the youngsters, old people and active people are also part of the target markets of Nestlà © Milo drinks. However, at first, Nestlà ©s business was launched internationally and realised the fact that food products have to be taken into account to the local eating and social behaviour due to the particular countrys practices, cultures, and traditions. Therefore, (1) Nestlà © has always shown respect for diverse cultures and traditions and trying to integrate itself as much as possible into the cultures and traditions, adding also to the local environment its own set of values. Therefore, (2) Nestlà © embraces cultural and social diversity and does not discriminate on the basis of origin, nationality, religion, race, gender or age. (The Nestlà © Management and Leadership Principles 2006, p.9) STRENGTHS Nestlà © is a multinational company, not to mention Nestlà © is also the largest industry in foods and beverages, hence Nestlà © has every capability to attract more consumers compare to the local companies. On account of its high market share and high financial power, Nestlà © also has greater financial capability in altering existing products in terms of packaging, the formula of the particular product and others or creating new products, as well as to adapt or upgrade latest information system technology in manufacturing, order processing and other related fields in order to sustain their competitive advantage by delivering lower cost of goods and services than their competitors in this dynamic environment. Secondly, Nestlà © has quite an effective strategic marketing capability. For example, Nestlà © Maggi instant noodles has built a stable patent and is very well known in many countries especially in Australia and Malaysia. This is because Maggi instant noodles is easy to be differentiated from its competitors such as Cintan Instant Noodles. Moreover, Nestlà © has also developed a very strong brand name for Maggi instant noodles because of strong advertising, which has indoctrinated most of the people to name the other brands of instant noodles as Maggi instant noodle instead of the brands original name. Furthermore, Nestlà © also has a strong Research and Development operations that helps the company to achieve cross-border synergy such as packaging its global products to local preferences. Nestlà © also emphasises on using todays information technology, which Nestlà © believe it will present a long-term opportunity for them to smoothen the companys operation or to increase efficiency in packaging, among any other companys operations. Besides, Nestlà © also has better technological capability, for instance, to renovate the existing products to be more innovative, higher quality, and much healthier product as Nestlà © realised that consumer-centred innovation and renovation is the most important pillar of Nestlà ©s worldwide strategy, which would accelerate Nestlà © to advance from good to better. (The Nestlà © Corporate Essence Our roots and wings 2007, p.34) And because of Nestlà ©s commitments, more people trust on the products delivered by Nestlà © because of its prope r health and safety measures. Besides, Nestlà © also has great leadership attributes. The leaders such as the top executives, branch managers, and others are responsible in building organisation capability. For example, the Chairman and Chief Executive Officer of Nestlà © S.A., Peter Brabeck, (Castelarhost. 2005, Nestlà © LC1 S.W.O.T Analysis, Castelar Articles [Online] available at www.articles.castelarhost.com) emphasises internal growth worldwide, which means to achieve higher volumes of sales by adding value to the products, renovate existing products, and innovate new products, to keep pace in the industry because of rapidly changing of consumer expectations. PROBLEMS AND SOLUTIONS Nestlà © produces hundreds of products, has a global network of suppliers, and multiple distributions and selling channels. Hence, to anticipate and respond in this rapidly changing in market demand condition is very difficult. When forecasting a market demand, Nestlà © will need information to detect shifts in demand early so they could adjust for trends and send the right messages to the suppliers, shippers, and distribution centres before they are flood with unwanted or defective goods or shortages. (Manhattan Associates. 2010, Planning and forecasting: Anticipate and Respond to Changes in Demand, Manhattan Associates [Online] at www.manh.com) However, every company has its weakest links, so is Nestlà ©. The weakest links are issues they are unable to control. (Labs. 2010, Supply Chain Efficiency Starts at the Top, Food Engineering [Online] available at www.foodengineeringmag.com) Firstly, the most common problem is the sources of supply of raw materials. This is due to a sudden and unexpected increased in demand, which will cause extreme supply shortages for commodities that will result in major price increases. For instance, bad weather and natural disasters have always been an issue affecting incoming raw materials. Secondly, the inaccuracy of orders received in inventory. No company can ever achieve the requirement of zero defects especially in foods and beverages industry. For example, when the purchasing department of Nestlà © ordered 10,000 of mixed berries yoghurt from its dealer, but what the retailer received was only 8,000 of mixed berries yoghurt, or on another occasion they might received defective inventori es. Another example is, when Nestlà © tells its dealer that they needed extra orders of a particular product to be shipped right away because of unexpected increased in demand, but in fact, the supplier may already has orders from other customers. This usually happen during special occasion such as Chinese New Year, the demand of Nestlà © Cornflakes cereal will increase because many people will buy this product to make cookies. This will causes Nestlà © to encounter a great loss because of inaccurate order of magnitude because they could not produce the actual output needed. Therefore, in order to solve these problems, it is crucial for Nestlà © to engage with multiple suppliers or dealers in that particular region, so they could acquire inventories from multiple dealers, which will definitely decrease the risk of shortage due to incontrollable situation. Besides, Nestlà © should also base on their demand and purchase planning on last couple of years of sales to forecast current year of demand and supply. Other than that, mutual trust and strong relationship with all the dealers are needed in order to increase the flexibility of material supply management, as well as to enhance the bargaining power of Nestlà ©. However, if there is a surplus, Nestlà © may need to plan a promotion to clear their inventories, otherwise Nestlà © will encounter a great loss such as paying high material handling cost, waste of warehouses space, or inventories that are not sold became defective and may need to be disposed which no profit will earn. Therefore, when there i s a big event organized such as Jom Heboh Carnival. Nestlà © will set up a booth at the carnival to sell its products, which are close to the expiry date at lower price such as Maggi products, Nescafà ©, Milo, yoghurt drinks, Nestlà © ice creams and so on. People often buy the products in big quantity because of the lower price than the market price. As a result, Nestlà © could clear their inventories rather fast and save some space in the warehouses. which is a win-win situation. Thirdly, even though Nestlà © has a logistics department but it doesnt deal with transportation logistics. Nestlà © outsourced its supply chain transport to the third-party logistics (3PL) as Nestlà © tries to cut their supply chain costs and to concentrate more on their in-plant operations. Although Nestlà © doesnt have a transportation logistics department, but they do have a delivery team to cooperate with the third-party logistics in routing protocol. Nestlà © is using a Dynamic Source Routing (DSR), which is a simple and efficient routing protocol designed specifically for use in multi-hop wireless ad hoc networks of mobile nodes. The protocol is composed of the two main mechanisms of Route Discovery and Route Maintenance, which work together to allow nodes to discover and maintain routes on-demand to arbitrary destinations in the ad hoc network. (Maltz. 2003, The Dynamic Source Routing Protocol CMU [Online] available at www.cs.cmu.edu) Therefore, the delivery team is there to help Nestlà © and the 3PL that DSR is working as per company direction as well as DSR performance. Next, it is the poor partnership relationship between dealerships and consumers. Dealers need these capabilities because they, in close partnership with manufacturers Nestlà ©, are a connecting hub of services for the consumers, and other stakeholders. However, Nestlà © solved this problem by using the Dealer Management Systems (DMS) as well as their dealers. DMS is a software solutions that provide tools for managing sales, services, parts and inventory management, business management, integration, and core architecture. DMS help manufacturers and dealers create integrated marketing campaigns to offer inventory to target markets. This will integrate innovations into traditional in-store sales and service processes and offer technologies for non-traditional merchandising, sales, and service strategies through alternative channels for consumer engagement via Web, by phone, or in-vehicle. (Microsoft Corporation. 2008, Microsoft Offers the Dealer Management Solution Microsoft [Online ] available at www.microsoft.com/automotive) RECOMMENDATIONS After the reviews stated above, those were not the only solutions that are available. MDZ has come up with a few recommended suggestions that may work or solve the problems that were encountered by Nestlà ©. Instead of just finding or having multiple suppliers, Nestlà © could acquire the inventories from the other outlets from the other region. Because some regions have different demographics, for instance, race. Some areas have higher percentage of Malays such as Kuantan, Pahang, and some may have higher percentage of Chinese such as Ipoh, Perak. The Chinese New Year (CNY) example stated above, in Kuantan area, there might be less demand during CNY, so to prevent shortage, Nestlà © could just acquire the inventories from Kuantan. However, if there is a surplus, and unable to clear the inventories at a short time, Nestlà © could consider donation for short-run purpose, this could help to clear the old stocks, as well as to help the donation receivers and build better goodwill and name of Nestlà ©. Secondly, Nestlà © is a multinational company; it definitely has the capability in owning a transportation logistics department. Because of the hundreds variety of Nestlà ©s products, 7 manufacturers in Malaysia, as well as thousands of customers such as retailers, wholesalers, distributors and so on, Nestlà © could handle its own transportation service. Nestlà © could gain the whole power in such as mode selections, routing, and others. They could do almost anything such as consolidating different type of products but to the same outlet. Besides, they could save every penny they use in transportation cost compare to third-party logistics (3PL) because 3PL charges according to the quantity, inventory storage space, value added processes such as special handling, and more. It may benefit in the short run, but definitely not in the long run, as Nestlà © centred in the long-term business and strives to achieve effectiveness and efficiency. Lastly, Nestlà © could use both manual and automation system in managing sales, services, and others. This is because one cannot trust wholly to a machine, as it may not be documenting the steps in its own processor. Because some steps cant be automated and may required operator intervention to prevent the escapement processing steps, even though adapting advanced technologies could help saving cost as labour cost is reduced, but if there are still problems occur, it will affect the business such as loss of customers because of the mistake. Therefore, Nestlà © must update the system software regularly and full utilisation of available technology as well as the manual operators, which will effectively increase the efficiency and dependability of the supply chain systems. CONCLUSION Nestlà © exerts great efforts to achieve its visions to be the leader in Nutrition, Health, and Wellness Company by producing better quality of products to the consumers. Nestlà © also study about the consumers needs from time to time and satisfy the consumers as much as possible. Nestlà ©s strengths such as high financial capability, effective strategic marketing capability, strong research and development, as well as great leaderships have helped them through the obstacles. Above all, Nestlà © focuses on its missions and ensures consistency by making the right decisions to manage and build its business to deliver the promise of Good Food, Good Life all over the world.