TABLE OF CONTENTS 1. 0Abstract2 2. 0Introduction – Company Background3 2. 1Nestle Worldwide3 2. 1. 1Early History of Nestle4 2. 1. 2Nestle’s Business Principles Worldwide4 2. 2Nestle Malaysia6 2. 3 Corporate Policy6 2. 4Creating Shared Value7 2. 5Corporate Governance8 3. 0Nestle Products9 3. 1Halal Policy11 4. 0Industry Analysis12 5. 0Company Analysis14 5. 1 SWOT Analysis14 5. 2 Micro Environment Analysis16 5. 3 Macro Environment Analysis18 5. 4 Key Success Factor19 5. 5 BCG Matrix20 6. 0Product Quality Control21 . 1 Quality Control in Nestle21 6. 1. 1 Quality Policy22 6. 1. 2 Halal Policy25 6. 1. 3 Supplier Policy29 6. 1. 4 Packaging33 7. 0Recommendation & Conclusion References Appendices “Control of Product Quality : A Case Study of Nestle (Malaysia) Berhad” ABSTRACT This paper discusses how Nestle being the largest food and nutrition company in the world has been successful in its business and stay ahead of its competitors for many years, focusing on the product quality control by the company.
Specifically, the paper reviews the quality control over the company’s products by Nestle (Malaysia) Berhad. Additionally, the paper reviews the history of Nestle SA which includes Nestle SA’s business principles. Nestle’s strategy has always been to stick and follow the well-known principle of thinking globally but acting locally, which takes into account every country’s laws and legislations, cultural and economic environment. One of it can be seen from those Nestle brand products that are sold worldwide has different flavours for different regions.
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The paper continues to review the establishment of Nestle (Malaysia) Berhad and all matter related thereto which includes the company’s Corporate Policy, Creating Shared Value and Corporate Governance. A brief information on the company’s brand products in Malaysia are also discussed which also includes the Halal policy which has been practiced by the company since 1996. The paper further examines the food industry in Malaysia as the country’s food industry is as diverse as the multi-cultures of Malaysia, with a wide range of processed food with Asian tastes.
It also includes the extensive report on the company’s analysis which includes the Swot Analysis, Micro Analysis, Macro Environment, Key Success Factors and the BCG Matrix. The paper further discusses extensively on the specific Quality issues and success of Nestle (Malaysia) Berhad and how it relates to the Quality Control of Nestle Worldwide which involves a set of examination process of the organization’s product, services and process, as well as the people, in rder to achieve certain minimum level of quality to ensure that the specific requirements are met and are dependable, satisfactory and fiscally sound. This includes the examination of the Quality Policy as being practiced by the company. Finally, the paper reviews on the Nestle Policy on Environmental Sustainability, the Halal Policy and the Supply Policy. Each of the policies shall adhere to the local Malaysian regulations and additionally, Nestle Malaysia has been complying with the ISO standards and local regulations as well as to the Company’s internal standards and guidelines.
The certified Halal status for all Nestle Malaysia products provides assurance that Nestle products are manufactured, imported and distributed under the strictest hygienic and sanitary condition in accordance to the Islamic faith. 2. 0COMPANY BACKGROUND 2. 1NESTLE WORLDWIDE Nestle S. A. (or “the Company”) is the largest food and nutrition company in the world. The company was founded in 1866 by Henri Nestle. Nestle’s headquarters is located in Vevey, Switzerland. It is a successful international company and today is the world’s leading nutrition, health and wellness company.
Nestle currently has approximately 280,000 employees worldwide. Nestle has 449 in more than 80 countries globally. Nestle markets approximately 7,500 brands organized into several categories that includes baby foods, bottled water, cereals, beverages, chocolates and confectionery, coffee, culinary, chilled and frozen food, dairy products, drinks, healthcare nutrition, ice cream, foodservice, sports nutrition, pet care and weight management. Nestle has the world’s largest private nutrition research capability in Switzerland with 29 Research and Development centres worldwide.
The company’s mission of “Good Food, Good Life” is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night. Nestle has the objective whereby Nestle aims to become the global leader in Food and Nutrition Company in the world and sustain that position. The vision of the company is to meet the various needs of the consumer every day by marketing and selling food of a consistently high quality.
The mission of the company is to provide the best foods to people throughout their day, throughout their lives, throughout the world. With Nestle’s unique experience of anticipating consumer’s needs and creating solutions, Nestle contributes to consumers’ well-being and enhances the quality of life. Nestle believes that Good Food is the foundation of Good Life, as insufficient access in terms of quality and quantity could result nutritional deficiencies, malnutrition and other complex health issues, while unbalanced and excessive consumption can lead to obesity.
Nestle wants to be the leading Nutrition, Health and Wellness company and also a reference for financial performance to enable the company to be trusted by its stakeholders. 2. 1. 1Early History of Nestle In 1866, Nestle was founded by a Swiss pharmacist, Henri Nestle who was in search for a healthy and economical alternative to breastfeeding for mothers who could not feed their infants with breast milks. As a trained pharmacist, he began his experiments with various combinations of cow’s milk, wheat flour and sugar to develop an alternative source of infant nutrition.
It had started in 1867 where there was a high infant mortality in Europe due to malnutrition. Henri Nestle had taken some actions to overcome the said problem. Henri Nestle had developed a milk food supplement and had saved the life of the premature infant. The food supplement was called Farine Lactee Nestle which was marketed throughout many places in Europe which had then a new brand name began to take on life. The company’s first customer was a premature infant who could tolerate neither his mother’s milk nor any of the conventional substitutes, and had been given up for lost by local physicians.
Farine Lactee Nestle was recognized as it had saved the child’s life. Henri Nestle also showed early understanding of the power and knowledge in branding. He had adopted his own coat of arms as a trademark that was in his German dialect, Nestle means ‘little nest’. These attributes are still the guiding legacy for the company Henri Nestle founded as it fulfills its commitment to ‘Good Food, Good Life’ that has been Nestle’s motto until today. The Company’s strategy is guided and in accordance with several fundamental principles.
Nestle’s existing products had grown through innovation and renovation over time and at the same time the Company maintains a balance in all geographic activities and product lines. Long-term potential is never sacrificed for short-term performance. The Company’s priority is to bring the best and most relevant products to people, wherever they are, whatever their needs throughout their lives. 2. Nestle’s Business Principles Worldwide Nestle has been committed to their Business Principles in all countries, taking into account local legislation, cultural and religious practices as follows: ) Nutrition, Health and Wellness Nestle’s core aim is to enhance the quality of consumers’ lives every day, everywhere by offering tastier and healthier food and beverage choices and encouraging a healthy lifestyle. Nestle express this via their corporate proposition ‘Good Food, Good Life’. b) Quality Assurance and product safety Everywhere in the world, the Nestle name represents a promise to the consumer that the product is safe and of high standard. c) Consumer Communication
Nestle is committed to responsible, reliable consumer communication that empowers consumers to exercise their right to informed choice and promotes healthier diets. The company respects consumer privacy. d) Human rights in Nestle business activities Nestle fully supports the United Nations Global Compact’s (UNGC) guiding principles on human rights and labour and aim to provide an example of good human rights’ and labour practices throughout the company’s business activities. e) Leadership and personal responsibility Nestle’s success is based on the company’s people.
The company treats each other with respect and dignity and expects everyone to promote a sense of personal responsibility. The company recruits competent and motivated people who respect the company’s values, provide equal opportunities for their development and advancement, protect their privacy and do not tolerate any form of harassment or discrimination. f) Safety and health at work Nestle is committed to preventing accidents, injuries and illness related to work, and to protect employees, contractors and others involved along the value chain. ) Supplier and customer relations Nestle requires its suppliers, agents, subcontractors and their employees to demonstrate honesty, integrity and fairness, and to adhere to the company’s non-negotiable standards. In the same way, Nestle is committed towards its own customers. h) Agriculture and rural development Nestle contributes to improvements in agricultural production, the social and economic status of farmers, rural communities and in production systems to make them more environmentally sustainable. i) Environmental sustainability
Nestle commits itself to environmentally sustainable business practices. At all stages of the product life cycle the company strives to use natural resources efficiently, favour the use of sustainably managed renewable resources, and target zero waste. j) Water Nestle is committed to the sustainable use of water and continuous improvement in water management. The company recognises that the world faces a growing water challenge and that responsible management of the world’s resources by all water users is an absolute necessity.
Until today, Nestle continues to maintain its commitment to follow and respect all applicable local laws in each of its markets. 2. 2NESTLE IN MALAYSIA In Malaysia, Nestle has been committed to provide quality products to Malaysians since 100 years ago. Nestle was established in Malaysia in 1912 as the Anglo-Swiss Condensed Milk Company in Penang and later, Nestle has grown and expanded to Kuala Lumpur in 1939. Nestle has established and operated its first factory in Petaling Jaya, Selangor in 1962.
Nestle manufactures its products in 7 factories and operates from its head office in Mutiara Damansara. The Company is a public listed on Bursa Malaysia Berhad (formerly known as Kuala Lumpur Stock Exchange) on 13 December 1989. Today, the Company employs more than 5000 people and manufactures as well as markets more than 300 Halal products in Malaysia. Among its top brand name such as MILO®, NESCAFE®, MAGGI®, NESPRAY® and KIT KAT® have become trusted household names and enjoyed for generations in the country. 2. 3NESTLE’S CORPORATE POLICY
Nestle has been operating very well in Malaysia and has established good corporate policy for the company that includes among others as follows:- a) Be the leading multinational company in food, nutrition, health and wellness; b) Manufacture and produce world-class products of the highest consistent quality, reliability and convenience based on business excellence principles throughout its operations; c) Maximize the use of good quality local raw materials; d) Be an exemplary employer with a progressive human resource and social policy; with a management style that is based on “Management Commitment and People Involvement”; ) Be a responsible corporate citizen, fulfilling all obligations to Government, shareholders, customers, communities and consumers; f) Protect the environment by being committed to environmentally sound business practices, and taking into account the need to preserve natural resources and save energy; g) Guarantee that all products manufactured, imported and distributed by Nestle Malaysia are certified HALAL by authorised Islamic certification bodies; and h) Deliver shareholder value through the achievement of sustainable and profitable long-term growth. 2. NESTLE – CREATING SHARED VALUE Creating Shared Value is part of Nestle business ethos that states that in order to create a long-term value for the shareholders, the company has to create value for the society. OUR FOCUS Nestle is committed in its reporting of performance openly and reflecting the areas with a significant current or potential impact on the company. These include areas that are of significant concern to stakeholders over which the company has a reasonable degree of control. At Nestle Malaysia, the concept of Creating Shared Value has been stated as below: Creating Shared Value (CSV) is a fundamental part of Nestle’s way of doing business that focuses on specific areas of the Company’s core business activities where value can best be created both for society and shareholders. Creating Shared Value says that for our business to be successful in the long run, it must consider the needs of two primary stakeholders at the same time: the people in the countries where we operate and our shareholders. Any business that thinks long-term and follows sound business principles creates value for society and shareholders through its activities, e. g. n terms of jobs for workers, taxes to support public services, and economic activity in general. But Creating Shared Value goes one step further. A company consciously identifies areas of focus, where shareholders’ interest and society’s interest strongly intersect, and where value creation can be optimised for both. As a result, the company invests resources, both in terms of talent and capital, in those areas where the potential for joint value creation is the greatest, and seeks collaborative action with relevant stakeholders in society. ” At Nestle Malaysia, the value chain is analysed and determined.
The areas of greatest potential for joint value optimisation with society are Nutrition, Water and Rural Development. These areas are core to the company’s business strategy and operations whereby the company has joint programmes with over 100 organisations around the world in these three areas:- a) Nutrition: because food and nutrition are the basis of health and of the company’s business and hence the reason why Nestle exists. b) Water: because the ongoing quality and availability of it is critical to life, the production of food and to the company’s operations. ) Rural development: because the overall well-being of the farmers and their rural communities are intrinsic to the company’s ability to continue to do business in the future. These three areas are fundamental to the company’s overall business goal, which is “To become the recognised leader in Nutrition, Health and Wellness, trusted by all stakeholders”. To meet Bursa Malaysia’s requirements, Nestle has segmented its CSV initiatives in four areas as follows:- a) The Respect and Care for the Community; b) The Commitment to the Environment; c) The People and the Workplace; ) The Consumers and the Marketplace; The company has complied with the ISO standards and local regulations as well as to the Nestle Internal Standards & Guidelines and the company’s practices are validated by third party SGS auditors during the annual ISO 14001 audits. The Company’s Creating Shared Value activities are monitored internally by the Corporate Affairs Department, where the targets and achievements are compiled and reported in accordance with the Global Reporting Initiative (GRI) guidelines. 2. 5NESTLE – CORPORATE GOVERNANCE The Company is committed to high standards of corporate governance.
The Board of Directors and each individual director is directly accountable to the shareholders and stakeholders for ensuring that good governance is committed and practised at every level of the Company’s operations, including relationships with third parties. The Company has adopted the “Nestle Corporate Governance Principles” of its holding company, Nestle S. A. Vevey, Switzerland, as its best practice in corporate governance. The principles of corporate governance cover four areas, as follows: a) The rights and responsibilities of shareholders; b) The equitable treatment of shareholders; ) The duties and responsibilities of directors; and d) Disclosure and transparency. These principles are in line with the Part 1 and 2 of the Malaysian Code on Corporate Governance and paragraphs 15. 26 and 15. 27 of the Listing Requirements of the Bursa Malaysia Securities Berhad. 3. 0NESTLE PRODUCTS In Malaysia, Nestle’s products have several categories that include coffee and beverages, culinary aids/prepared foods, milks, liquid drinks, junior foods, breakfast cereals, chilled dairy, ice cream, chocolate and confectionary, healthcare nutrition, performance nutrition and Nestle Professional.
The brief review of the company’s products will be entailed below. Coffee & Beverages Under the category of coffee and beverages, the main brand is MILO and NESCAFE. MILO® is an action-packed drink with the mixed ingredients of malt, skimmed milk, and cocoa which has a chocolatey taste. It is a unique combination of 8 vitamins and 4 minerals, which helps to optimise the release of energy from food. The MILO® FUZE® has registered strong growth which has been driven by its original relaunch and the introduction of a new product, MILO® FUZE® Oligofructose.
Under a survey done, Malaysians drink more MILO than any soft drink. Malaysia has the largest MILO factory in the world located at Chembong, Negeri Sembilan. Malaysia is the world’s largest consumer of the beverage. NESCAFE® is Nestle’s own brand of coffee which has achieved a strong performance driven by its NESCAFE® 3in1. Foods Under this category which is in line with the Nutrition, Health and Wellness direction, it includes the MAGGI® 2 Minutes Noodles, the MAGGI® Tastylite low fat noodles and the MAGGI® Cukup Rasa, an all-in one seasoning.
All foods produced under this category are certified Halal and have been produced to meet the objectives of achieving a good health and wellness. Milks Under this category, the products includes NESVITA®, OMEGA PLUS® with ACTICOL® (added plant sterols that has proven cholesterol lowering properties), COFFEE-MATE® coffee creamer, NESVITA® 3 in 1 nutritious cereal drink and family milk powder (EVERYDAY filled milk and NESPRAY® Fortified full cream milk powder) as well as the Growing Up Milk portfolio (NESPRAY® and NESLAC EXCELLA GOLD).
The Milks category will continue to drive the company’s vision of being a recognised nutrition, health and wellness company. Confectionery Under this category, it includes the chocolates namely KIT KAT® which has successfully engaged the Malaysian consumers enticing them to have their break with KIT KAT®. Another growth contributor in Malaysia is the Popularly Positioned Product (PPP) MILO® WAFER which is also a popular confectionery among Malaysians. Nutrition This category includes the infant nutrition whereby the company focuses on sciencebased, stage-appropriate innovation and renovation.
The products include the NAN® Pro & NAN® HA infant formulas with the addition of active probiotics BL Bifidus™. The addition of BL Bifidus™ is aimed at strengthening the natural defences of all infants, when breastfeeding is not a viable option. Other products include NAN® Pro 3 and NAN® HA 3 formulated milk powder for children, which support the optimal growth and development of toddlers while providing users with continuity and usage extension. In addition, a Nestle Infant Cereals also includes the Nestle CERELAC®, launched together with additional protection benefits from BL Bifidus PRO PLUS.
The union of CERELAC®, the baby nutrition expert, with Nestle, the nutrition expert, will further strengthen and entrench Nestle’s position as the baby nutrition expert. Nestle HealthCare Nutrition sustained strong growth momentum through the company’s science based nutritional products that are specially formulated for people with specific nutritional needs. Chilled Dairy Under the category of chilled dairy, which embodies Nestle’s focus on Nutrition, Health and Wellness includes the BLISS® Yogurt Drink which is the only yogurt drink in Malaysia which comes with Inulin (fibre) and Live Cultures that helps maintain a good digestive system.
In addition, it also includes the newly improved YOCO Cultured Milk Drink, which is now a source of calcium, vitamin D and zinc making it the only Cultured Milk Drink that aids in the growth and development of children. Ice Cream Under this category, Nestle Ice Cream has continued to be the market leader in the take home tub segment in both the affordable and premium range categories. Nestle’s premium ice cream, Nestle LA CREMERIA™ has continued to gain market share, attributable largely to a combination of quality, taste, variety and affordability. Among other Nestle’s ice cream includes Nestle DRUMSTICK® Classics cones.
The entire range of ice cream products was renovated with new improved healthy recipes. It also includes Nestle POTONG sticks, the first of its kind with a centre core of whole beans, together with the highly popular brands such as CRUNCH and APPLE SOURZ. Nestle Ice Cream also continues to be the first in the market to offer indulgence with nutritional reassurance. The MAT KOOL® range of kids ice and frozen confections are now made 100% made with no artificial colours and possess the necessary nutritional foundation per serving size recommended for children’s consumption.
Nestle Professional Under this category, NESCAFE PROFESSIONAL provides innovative and creative system solutions and products to its customers. The products under this category include NESCAFE Burgundy and NutriPro. The former offers a brand new dimension to the omnipresent NESCAFE brand as the more stylish & contemporary look of NESCAFE Burgundy conveys assurance that the end cup of coffee delivered through NESCAFE PROFESSIONAL’s services, systems solutions and products is of superior quality.
In addition, NutriPro or Nutrition for Professionals is a resourceful, knowledgeable and reliable coaching tool providing professional expertise and holistic solutions pertaining to everyday nutrition, health and wellness challenges. NutriPro helps guide out-of-home operators to expand their businesses through nutritional relevance. With the debut of NutriPro in Malaysia, NESCAFE PROFESSIONAL was able to clearly stand out from the competition and create shared value by guiding operators on how to enhance their business further with even more healthier choices, which in turn benefits the consumer in the long term.
As Nestle continues to grow and nourish Malaysia, NESCAFE PROFESSIONAL will strengthen its commitment towards being an inspiring growth partner by delivering creative food and beverage solutions to its customers. 3. 1NESTLE – HALAL POLICY In Malaysia, Nestle Malaysia was the first multinational company in the country to voluntarily request for Halal Certification of all its food products when it was first introduced in 1996. However, this does not imply that Nestle products in Malaysia were not halal prior to that.
The certified Halal status for all Nestle Malaysia products provides assurance that Nestle products are manufactured, imported and distributed under the strictest hygienic and sanitary condition in accordance to the Islamic faith. All products manufactured, imported and distributed by the company are certified Halal. Products and premises for manufacturing have been inspected and have earned Halal certification by recognised Islamic bodies. The Halal logo included in all the company’s packaging which indicates that the products have been prepared according to stringent Islamic requirements.
On the other hand, the company also assures that the production adheres to the strictest quality and that non-Muslims will appreciate. Nestle has established an internal Halal Committee in the 1980s comprising of senior Muslim executives from multi-disciplines, responsible for all matters pertaining to Halal compliance. The company exports its products to more than 50 countries worldwide with export sales of over RM689 million in 2009. It also imports Halal products from the 85 Nestle factories worldwide that are certified Halal. 4. 0 INDUSTRY ANALYSIS
Malaysia’s food industry is as diverse as the multi-cultures of Malaysia, with a wide range of processed food with Asian tastes. In 2008, the food processing industry contributed about 10% of Malaysia’s manufacturing output and companies in this industry are predominantly Malaysian-owned. It is estimated that the present global retail sales in food products are worth around US$3. 5 trillion, and are expected to grow at an annual rate of 4. 8 per cent to US$6. 4 trillion by 2020 (taken from Malaysian Industrial Development Authority (MIDA). Malaysia remains a net importer of food.
In 2008, Malaysia’s food exports amounted to RM17. 9billion, while imports totalled RM28billion. Malaysia exported food products to more than 200 countries and the main products exported were cocoa (RM3 billion), fisheries products (RM 2. 5 billion), margarine and shortening (RM 2. 4 billion) and animal feed (RM1. 2 billion). Major food imports in 2008 were cereal and cereal preparations, cocoa, vegetables and fruits, dairy products and animal feed. Raw materials such as cereals and dairy products will continue to be imported for further processing for human consumption as well as for the production of animal feed.
In Malaysia, the food industry is dominated by small and medium scale companies. The major sub-sectors are fish and fish products, livestock and livestock products, fruits, vegetables and cocoa. The fisheries product’s sub-sector includes processed seafood products such as frozen and canned fish, crustaceans and molluscs. This sub-sector remained the main contributor to the exports of processed food. In the livestock sub-sector, Malaysia is the third largest producer of poultry meat in the Asia Pacific region. Malaysia is self sufficient in poultry, pork and eggs, but imports about 80% of its beef requirements.
Among the dairy products produced are milk powder, sweetened condensed milk, pasteurized or sterilized liquid milk, ice cream, yoghurt and other fermented milk. Currently, Malaysia is the largest cocoa processor in Asia and ranks fifth in the world. However, most of the cocoa beans are imported. Malaysia is also one of the world major producers of spices. In 2008, Malaysia’s was ranked as the fifth largest exporter of pepper and pepper-related products (specialty pepper, processed pepper and pepper sauces). In the Ninth Malaysia Plan, the production of fruits and vegetables is targeted to reach 2. 6 million tonnes and 1. 13 million tonnes, respectively, by 2010. Vegetables are mainly grown on a small scale for fresh consumption, and are exported mainly to Singapore. The major locations for the cultivation of vegetables are in Johor, Pahang, Kelantan and Perak. Increasing consumer awareness in nutrition value and food fortification for healthcare has created the demand for functional/healthy, minimally processed fresh food, organic food and natural food flavours from plants and seafood. Functional/health food produced in Malaysia is mainly in the form of food products that are enriched.
Food ingredients such as customised formulations required by food manufacturers, natural food additives and flavours have the potential for further growth. The halal industry in Malaysia provides immense opportunities for Malaysian manufacturers. With a global Muslim population of about 2 billion, the market for halal food is estimated at US$547billionayear. The concept of halal is associated with food products that are of high quality in terms of cleanliness, sanitation and compliance with religious requirements.
Malaysia’s food manufacturer can contemplate joint-ventures with established food manufacturer’s, particularly from Australia and New Zealand, to service the ASEAN, Middle East, European and US markets which have sizeable Muslim populations. Local halal food products can gain easy access into these halal markets as Malaysia’s halal certification is globally recognised. Thus, in order for the foreign food providers must have halal certification for authorised body i. e. Jakim to be able to sustain their presence and acceptance by the Malaysian, where majority of them are really concern about the halal especially the food. . 0COMPANY ANALYSIS 5. 1SWOT Analysis of Nestle Malaysia SWOT stands for Strengths, Weaknesses, Opportunities and Threats, and is an important tool often used to highlight where a business or organisation is, and where it could be in the future. It looks at internal factors, the strengths and weaknesses of a business, and external factors, the opportunities and threats facing the business. The process can give you on overview of where the business, and the environment it operates in, is strategically. This is an important, yet to simple to understand, tool used by many students, businesses and organisations for analysis.
The following SWOT analysis looks at Nestle Malaysia which is operating in food industry. The analysis shows Nestle Malaysia’s Strengths, Weaknesses, Opportunities and Threats. The SWOT analysis will give you a clear picture of the business environment Nestle Malaysia is operating in at the present time. a) Strengths The strengths of a business or organisation are positive elements, something they do well and is under their control. The strengths of a company or group and value to it, and can be what gives it the edge in some areas over the competitors. The following section will outline main strengths of Nestle;- . Nestle an extensive customer base, which is a major strength regarding sales and profit. The company has a big pool of loyal customers due to its long history in the food and nutrition market. ii. A strong brand is an essential strength of Nestle as it is recognized and respected. Big brand name maintain a high standard in its product consistently for more than 100 years of its business iii. High quality products/services is a vital strength, helping to ensure customers return to Nestle. iv. Nestle’s international operations mean a wider customer base, a stronger brand and a bigger chunk of the global market.
Strong network all over the world enable the company to provide its product to its customers throughout the year. v. Nestle has a number of highly skilled staff b) Weaknesses Weaknesses of a company or organisation are things that need to be improved or performed better, which are under their control. Weaknesses are also things that place you behind competitors, or stop you being able to meet objectives. This section will present main weaknesses of Nestle;- i. Having an improper and inaccurate product structured via marketing strategy of Nestle products. ) Opportunities Opportunities are external changes, trends or needs that could enhance the business or organisation’s strategic position, or which could be of a benefit to them. This section will outline opportunities that Nestle Malaysia is currently facing. i. The changes in the way consumers spend and what they buy provides a big opportunity for Nestle to explore. ii. The growth of the food industry is an opportunity for the company to grasp. iii. Expanding the product/service lines by Nestle could help them raise sales and increase their product portfolio. v. Nestle has a number of highly skilled staff, which is an opportunity for them to explore as expertise of their staff can help the company to bring the business forward. d) Threats Threats are factors which may restrict, damage or put areas of the business or organisation at risk. They are factors which are outside of the company’s control. Being aware of the threats and being able to prepare for them makes this section valuable when considering contingency plans and strategies. This section will outline main threats Nestle Malaysia is currently facing. i.
New products/services from rival firms could lead to Nestle’s products/services being less in demand. ii. Changes in the way consumers shop and spend and other changing consumer patterns could be a threat to Nestle’s performance. iii. The actions of a competitor could be a major threat against Nestle, for instance, if they bring in new technology or increase their workforce to meet demand. iv. Consumers are more towards the product conscious rather than brand conscious. 5. 2MICRO ANALYSIS The microenvironment of Nestle includes these divisions: a) Suppliers
Suppliers provide the raw material resources, unfinished goods and labors to the company in order to produce goods and services. The effectiveness of suppliers determines the efficiency of the company in terms of producing the goods. In addition to that the quality of the finished product has a strong with the suppliers of the firm especially in case of food products. As the presence of the company is in more than hundred companies, it is a challenge for the company to maintain its standard all over the world and provide the consistency to its customers in the taste and quality of the product.
Further supplier of Nestle can be dividing into two parts: Labor suppliers and material suppliers. Labor suppliers deal with the quantity of labor is required at the optimum level in order to prevent the loss of labor force and prevent the company from the shortage of labor which again can lead building of inventory as a cost for the company. The skills of labor is again maintained by the labor suppliers, wherein the labors of different skills are managed in such a way that the operation of the firm can run smoothly.
Labor strikes and labor relations are other factors which they cannot ignore in the current scenario as the efficiency of the business depends largely on the factors like attrition and employee satisfaction. Material supplies handle all the material required by the firm in order to manufacture the finished product for sale. Nestle is in the food and quality markets and the quality of such item plays a major role in its success in the market. Nestle has maintained a high quality efficiency in handling the quality and quantity of the two different supplies i. e. abor supplies and material supplies and hence the company has been able to run its business smoothly for more than 100 years in spite of the different business trends in the world market. b) Marketing Intermediaries The market intermediaries of the company help to advertize, sell and distribute its product to the end customers. The physical distribution network of the company decides the medium by which the finished product is delivered to the end customer on time and with safety. This department also ensures the proper storage of the firm that prevents the product from getting any king of damage.
The marketing service department of the firm helps in the promotion of the product and acts as a communication channel between the company and customers. It not only communicates the features of the product to its customers but also get the feedback with the help of survey, which helps the research and development department to develop a product according to the need of the customers. The other intermediaries of the company like banks help to provide the funds to the companies and play an important role in the continuity of the business.
Insurance companies insure the property and the goods of the company against the risk involved in various operations, buying and selling of the product. Nestle has the differential advantage of working in a smooth coordination with all its marketing intermediaries which helps in providing the best and pure food products to its valuable customers in the different parts of the world. c) Customers The immediate customers of Nestle are retail and grocery stores which provide the products of the company to the end customers at a reasonable price and a reasonable profit.
The end customers of Nestle are the consumers who consume its wide range of product. The company has a bright brand image in its big pool of end customers. d)Competitors Although Nestle is leader in packaged food industry of Malaysia but the other competitors who are giving tough competition to Nestle are:- i. Cadbury Confectionery Malaysia Sdn Bhd ii. Kraft Food Malaysia Sdn Bhd iii. Yeo Hiap Seng (Malaysia) Bhd Nestle has a clear advantage over the above mentioned companies is its presence in Malaysia for over a century now.
Nestle has been able to setup a good and trusted distribution channel and a huge retail network. The trust worthiness gained by Nestle among the Malaysian people is build in decades on hard work and quality products and varied range of prices, thus even after facing stiff competition with the above mentioned companies in chocolates, dairy products and other packaged food products the company is able to maintain the bottom lines of its profit and loss statements attractive for its investors and good image in public. e) Marketing
The basic marketing strategy of the Nestle was to develop brands for each their product instead of focusing on making brand value for the entire company, thus never allowing cannibalization of products and gaining multiple brand value for the entire company. The vision of the company could be summarized in following statements:- i. Be the leading multinational company in food, nutrition and wellness. ii. Produce and sell world-class products of the highest consistent quality, reliability and convenience based on business excellence principles throughout Nestle operations. iii. Maximize the use of good quality local raw materials v. Be an exemplary employer with a progressive human resource and social policy; with a management style that is based on Management Commitment and People Involvement v. Be a responsible corporate citizen, fulfilling all obligations to Government, shareholders, customers, communities and consumers. vi. Protect the environment by being committed to environmentally sound business practices, and taking into account the need to preserve natural resources and save energy. vii. Guarantee that all products manufactured, imported and distributed by Nestle Malaysia are certified HALAL by authorised Islamic certification bodies. iii. Deliver shareholder value through the achievement of sustainable and profitable long-term growth. ix. Adhering to the above vision statements the company has been able to maintain the marketing and branding unique and ahead of the competitors. 5. 3MACRO ENVIRONMENT Macro environment include following environment of the country;- a) Political Environment Government of Malaysia has never imposed any political pressure in fact they have always supported foreign investment and foreign businesses to grow in Malaysia.
As the company is into food and nutrition business they have to just adhere to the laws of food and nutrition policies of government and constantly provide good quality which is the vision and mission of the company thus Nestle never faces any problems on political front. b) Cultural Environment Malaysian culture is no doubt of having light food at constant intervals and young crowd of Malaysia likes to have good nutritional food thus Nestle has great scope there. c) Economical Environment The disposable income of country and the high living standard of Malaysia always give better bigger business opportunities for Nestle. ) Technological Environment Malaysia is technologically rich country both in terms of availability of technology and also the technological work force the highly skilled and educated manpower is abundant in Malaysia In case of Nestle and the product offered by the company, these factors do not create much impact in general scenario. However as they have seen the major events like World War had created a positive impact on the sale of confectionary products of the company. The culture has some impact in this company as whether the country has most people as vegetarian or non vegetarian the consumption of milk products is always there.
However, the countries where the people are more dependent on milk products are profitable market for Nestle. 5. 4KEY SUCCESS FACTORS Today, Nestle is one of the leading Food and Nutrition Company in the world. With headquarters in Vevey, Switzerland and established in 1866, Nestle has grown today to the world’s biggest food and beverages company. Nestle has been established in the strong foundation of growth through innovation and renovation, the company today is known by its several strong brands which are dominating the market over the world.
The business of Nestle is supported by its strong network in more than 86 countries with more than 500 factories. Along with that the business also gets the benefit of its international R&D network. They believe that Nestle has been success in the market by holding these strong strings in order for them to remain sustain in the market:- a) Consumer Insight To sustain success the company must have insight of the customers changing needs, you have to be dynamic and innovate and Nestle has been able to do this for last couple of decades. b) Continuous Improvement Programs
Continuous improvement includes improvement in quality to be better than competitors, improvement in distribution channel which will help Nestle to be at the top. c) Regionalization The regionalization means the regionalization of products and raw resources procurement that means that the company will run like independent entity in each divided region with its own targets and resources. d) Development of People Every company’s responsibility is the development of its employees as that brings good will factor among the employees and which results into lower attrition and higher productivity. ) Social Responsibility This is about creating good will among the people where you operate, about the society that helps and allows you to grow and use its resources and at last the protection and responsibility regarding environment. 5. 5 BCG Matrix of Nestle Malaysia Being a company dedicated to food from the beginning, Nestle remains sensitive to culinary and eating habits, and responds to specific nutritional problems, whilst also setting and matching new trends such as growing out-of-home consumption and caring about the well being of its consumers.
In order for us to understand and access the products offered by Nestle, we have identified them by using the Boston Consulting Group (BCG) Matrix to get better and clear understanding of the performance of the product in Nestle Malaysia particularly. The beauty of BCG Matrix is seek to place different product BGC Matrix for Nestle Malaysia will be different from Nestle Pakistan, or India or any other countries due to different product offered at different countries due to different demography factors and other factors as well.
To understand the BCG Matrix of the company, it is needful to know the market share and business growth interrelate. BCG Matrix is simple and easy to understand and it helps to quickly screen the opportunities open to the company and to identify how corporate cash resources can best be used to maximize company’s future growth and profitability. Under BCG Matrix, there are four categories that need to look at namely star, cash cow, question mark and dog. Table below identified and explained the above mentioned categories of BCG Matrix for Nestle Malaysia:- | | |STAR |QUESTION MARK | | | | |The stars are the high relative market hare and high market growth. |The question marks are the breakfast cereals. They have high market | |Nestle beverages i. e. are somewhat the stars in their business, |growth but low market share. The company has to decide about which | |because with the high quality and new designs which comes every now |question mark they should try to build into the stars and which one | |and then makes them more popular among the customers, because |of these should be phased out. |customer with upper class wants the quality and Nestle offers the | | |best quality food items. | | |e. g. The name Nescafe has become generic with coffee. | | | | | | | |CASH COW |DOG | | | | |The cash cows are their baby food items i. e. Nestle Cerelac and |- | |other baby food products.
Company has to take measures to make these| | |products as stars. | | 6. 0QUALITY CONTROL Quality control involves a set of examination process of organization’s product, services and process as well as the people in order to achieve certain minimum level of quality which has been set earlier by the organization. The basic goal of quality control is to ensure that those elements meet with the specific requirements and are dependable, satisfactory and fiscally sound. Each organization should establish their own quality control procedure in order to maintain the quality of the products and services that being produced by the organization.
The failure of the organization to establish and set up such a reliable quality control procedure may affect the performance of the organization as whole in terms of drop in sales and income, low quality of the product produced and weak management team that may harm the credibility of the organization. 6. 1QUALITY CONTROL IN NESTLE The same also applied to the Nestle Company. Nestle regards their every product on the shelf, every service and every customer contact as an important tool that helps to shape and groom their good image that the company currently enjoys. Therefore, quality becomes a cornerstone to the Nestle’s success and there is no difference in a quality standard of the Nestle product either it was made in Malaysia, South Africa, Russia or Switzerland.
The standardization in the quality standard and control in Nestle is mainly contributed by the stringent internal corporate guide to quality known as Nestle Quality System (NQS) which has been applied throughout the Nestle organization all over the world. The NQS programme has been developed in 1993 and the programme emphasizes on the quality and safety of the Nestle production throughout the entire food chain and covers few elements such as raw material sourcing, manufacturing, quality control, and marketing and delivery that guarantee full satisfaction to every consumer. Further, standardization in the quality system in Nestle is seen as the main factor that contributes to the success of the Nestle.
Nestle serves billions of customer all over the world and with the same quality system regardless where is the Nestle product made from will bring the same and equal satisfaction and experience to the customers. There is no such perception arise among the customer that Nestle product from country A is tastes better than country B and etc. In Nestle, there are two main salient points in their product quality control namely ‘Food Safety’ and ‘Food Quality’. Thus, it is very important for the Nestle team to design and develop such a reliable quality system that are able to control and tackle the risk on food safety as well as in ensuring quality of product that is meeting consumers’ expectations.
Basically, each product in Nestle will go through the Quality Assurance division before the products being released to the market to the customer. The main task of the Quality Assurance division is to monitor and inspect all manufactured products are comply to the safety and the quality standard of Nestle which will ensure the safety of products for consumption and delighting the consumers. In case of any risk detected in the products during the inspection time, the necessary corrective and preventive action and system will be taken accordingly. The Quality Assurance division with the rest of the factory technical team is responsible to design a proper and specific quality control system for Nestle products known as Nestle Quality Management System (NSQM).
The designed quality system then will be executed and monitored by the production team during the production process. For example, during the production of Nestle Bliss Yoghurt Drink, the control system designed by Nestle will include the pasteurization temperature needed to bring down the microbial load to a safe level, foreign body prevention measures such as sieves and magnetic traps to ensure no foreign body is contaminated into the yoghurt drink, and many other control procedures like sensory, physical analysis and net weight is to apply. It is crucial to achieve compliance with the safety and quality standard so that the yoghurt drink is meeting both food safety and food quality requirements.
Upon the analysis through the verification of all the above release parameters, as defined in the quality system, Quality Assurance division will then approve the finished products to be safe and have achieved the quality needed for release to the market accordingly. 6. 1. 1QUALITY POLICY For Nestle, quality is simply comprises of six important elements and it has been clearly stated and transpired in the Nestle Quality Policy that guides and governs the quality control of Nestle. [pic] Nestle Quality Policy a) Success Is Built On Quality Nestle’s brand name is promise to the customer that it safe to consume and complies with all the rules and regulations set by the authority. In Nestle, they believe that with high quality standard they will able to avoid mistake and become more productive. Thus compliance to laws and regulation set by the relevant authority is a must and it is not negotiable.
In Malaysia, food and beverages industry is implementing certain food processing standard requires by Malaysian External Trade Development Corporation (MATRADE) such as Hazard Analysis and Critical Control Point (HACCP), Good Manufacturing Practice (GMP) and Sanitation Standard Operating Procedures (SOPs). For Nestle, HACCP is regards as the most important requirement to be complied and fulfilled accordingly. HACCP is a scientific, rational and systematic approach for the identification, assessment and control of hazards in order to ensure that food is safe at the time of human consumption. Under the HACCP certification scheme, food businesses are required to set up and implement a HACCP system in accordance to the MS 1480 “FoodSafety According to Hazard Analysis and Critical Control Point (HACCP) System”. This standard is based on the widely accepted international standard published by the Codex Alimentarius Alinorm Commission.
Tough and tight inspection, and satisfactory audit in the premises are among the criteria need to be fulfilled before a company grant with the HACCP recognition. The compliance to the HACCP standard will assure the safety of the products supplied by Nestle to their customer and thus maintain the loyalty of the customer for a long term period. Further, by having such standards, Nestle is also able to maintain its competitive advantage in food manufacturing industry as compared to the other player within the same industry. b) The Customer Comes First Nestle serves various group of customer with different type of preferences such as their distributors, supermarkets, hotels, shopkeepers as well as the final consumers.
Thus, Nestle grooms their entire team to be able to understand the need and demand of each group and by providing them with a highly quality products and customer services. With more than 10,000 different products and around 1 billion products sold every day in Nestle worldwide, it’s clearly express the commitment and serious effort of Nestle to better serve their customer and meeting their customer preferences. c) Quality Is A Competitive Advantage Being in the competitive food and beverages industry which is the necessities to the people’s life, Nestle foresees that pursuit a highest quality at any price is no guarantee for the Nestle success.
Lasting competitive advantage is gained from a balanced search for optimal value to customers, by simultaneous improvement of quality and reduction of cost. Again, Nestle believes that competitive advantage can be achieved via quality. The establishment of Nestle Research Centre (NRC) is a part of strategic effort and initiative taken by Nestle to transform their existing product into more innovative product and processes through Product Technology Centres and R Centres. Further, Nestle scientists in 280 Application Groups ensure that these are applied locally to meet different consumer needs and preferences. d) Quality Is A Joint Effort Nestle also believes that in order to become a highly quality roducer, a joint effort between every function and department is a must and be shared not only within the organization but with the other business partners as well such as raw material producers, distributors and other related party. The quality in Nestle products is not solely depends on the effort of the Nestle employees but it is also being supported by other business partners. As such, close relationship among those parties is really needed by Nestle. Apart from that, Nestle also communicates their quality standards to their business partners who are expected to share the same commitment on quality and to meet their requirements consistently. e) Quality Is Made By People In Nestle, each and every employee holds large responsibility to provide quality services and products to the customers.
Thus, continuous improvement and teamwork among the employees are the key elements to achieve such standard. For example, in order to engage better relationship with their employees, Nestle has conducted the ‘Nestle & I’ survey in 2010 which aims to encourage feedback from the employees and the programme has received as high as 98% participation among the Nestle employee. The survey outcomes and the key findings have been gathered, and intervention plans to overcome the gaps were strategized and executedto improve and strengthen the leadership styles, collaboration among teams and divisions, coaching skills and others for future improvement among the Nestle employee. f) Quality Is Action
Once again, Nestle specifies in their Quality Policy that quality is actions that must be executed and performed accordingly by every employee. It is depends on the employees effort on how to achieve and make quality happen throughout the company, customers, products, supplier and other relevant parties that relates to the Nestle business. Proper follow up and tracking system is put in place so that all the shortcoming and mistakes can be analyzed and corrected accordingly. Guided by the Nestle Management and Leadership Principles, despite of having people with professional skills, wide practical experiences and focus on results, Nestle also values their employees who add values, open minded and ability to deal with others as well as inspire other people.
Those qualities are believed as a starting point to bring further success to Nestle in the future. 6. 1. 2HALAL POLICY The Nestle Policy on Environmental Sustainability adheres to local Malaysian regulations and their practices are validated by third party SGS auditors during the annual ISO 14001 audits. Nestle Malaysia has been complying with the ISO standards and local regulations as well as to the Company’s internal standards and guidelines. Nestle Malaysia was the first multinational to voluntarily request for Halal Certification of all its food products when it was first introduced in 1996. This does not imply that Nestle products in Malaysia were not halal prior to that.
The certified Halal status for all Nestle Malaysia products provides assurance that Nestle products are manufactured, imported and distributed under the strictest hygienic and sanitary condition in accordance to the Islamic faith. The Nestle Malaysia Halal Policy Halal is about trust, responsibility, respect and strict compliance according to Syariah requirement. As a leading Nutrition, Health and Wellness company, Nestle Malaysia has always been at the forefront of the Halal food and beverage industry in Malaysia. The Nestle Halal Policy clearly states that all food and beverage products that are manufactured, marketed, imported, and distributed by Nestle Malaysia must be certified Halal by the relevant authorities’ bodies. Nestle committed to halal practices before the introduction of the halal certification by authorities in the mid 80’s.
They took the first-mover advantage in 1994 to obtain halal certification from the government. Nestle Malaysia was at the forefront to fulfil all local halal certification requirements. The Halal logo on all Nestle Malaysia packaging is the mark of assurance that the products have passed the stringent Halal requirements. For locally manufactured products, the Halal Industry Development Corporation (HDC) officials, who are experts in Syariah and technical matters, will inspect and verify the Halal status of ingredients, processing and storage, Halal internal management, labelling as well as quality assurance before giving approval for the use of the Malaysia Halal logo.
For imported products, similar inspection and verification are made at all the Nestle factories in the world. Officials from the Islamic Food and Nutrition Council of America (IFANCA) inspect these premises together with a Nestle Halal Committee member to ensure that the products comply with the Halal Certification requirements before the Halal logo can be used on the products. Halal Benefits Everyone Halal food refers to food which is safe, hygienic and not harmful to health. It does not contain any component regarded as flith (najis) under Syariah or constituents that are not safe for consumption. Halal food also refers to food which is free of any forbidden parts or items of animal origin according to the Islamic Law (Syariah).
For meat products, these must be derived from animals that are acceptable and slaughtered according to the Islamic Halal Slaughter Regulation and of quality certified by the Malaysian Veterinary Services Department. Halal does not cover only the religious aspects but it adheres to very strict quality and hygiene compliance which are in line with good manufacturing practices. Halal covers everything from farm to fork, or from sourcing of raw materials to distribution of products. As such, certified Halal products benefit all consumers who will have the peace of mind of knowing that the food they are consuming was produced according to the high standards as required by the Halal Certification System. All products manufactured, imported and distributed by Nestle Malaysia are certified Halal.
Products and premises for manufacturing have been inspected and have earned Halal certification by recognised Islamic bodies. The Halal logo included in all our packaging indicates that the products are prepared according to stringent Islamic requirements, whilst assuring that our production adheres to the strictest quality and non-Muslims will appreciate. Nestle Malaysia Halal Facts a) Manufactures, imports and distributes only products which have been certified Halal by authorised Islamic certification bodies. b) Established an internal Halal Committee in the 1980s comprising of senior Muslim executives from multi-disciplines, responsible for all matters pertaining to Halal compliance. ) Currently the biggest Halal producer in the Nestle world, warranting its appointment as the Halal Centre of Excellence for Nestle worldwide. d) Exports its products to more than 50 countries worldwide with export sales of over RM689 million in 2009. e) Imports Halal products from the 85 Nestle factories worldwide which are certified Halal. Nestle Malaysia gets very strong support from its headquarters in Vevey, Switzerland to commit to halal. Such strong support makes their halal procedure implementation much easier. Nestle invests approximately RM500,000 a year on halal certification costs including travel expenses for religious officers to inspect its premises both locally and overseas, administrative costs and other incidentals.
Nestle ensures strict halal compliance by setting up a special halal committee comprising of select senior Muslim executives from all departments such as manufacturing, technology, marketing, legal corporate affairs and regulatory department within the organization to be responsible for all matters pertaining to halal certification. The committees are responsible to advise, monitor and implement halal policy. They develop precise procedures to ensure all raw materials, manufacturing processes and supply chain meet halal requirements. Nestle’s halal implementation begins with the development of recipes at the respective research and development centres.
Nestle ensures its suppliers comply with its halal needs and provide only halal raw materials of high quality. Nestle maintains good working relationships with all relevant authorities to keep updated with new regulations. In terms of exercising internal halal control in the company, Nestle not only carefully selects its local halal suppliers but also exercises control on its imports from abroad to make sure all products are halal and halal certified. Research and development officers in the US, Switzerland and Singapore must commit to source for halal compliant raw materials. Halal checklists are use to scrutinize all raw materials that they use.
Nestle also implements full control on the production lines, equipment and utensils during the production process to make sure no forbidden products are involved in the production process. The same goes with its storage and transport. In addition, Nestle ensures a high quality of sanitation, hygiene and food safety in its production. Apart from complying with MS: 1500: 2400, Nestle takes the initiative to communicate with its stakeholders on halal procedures so that everyone is informed and aware of the importance of going halal. Nestle provides relevant halal updates to its employees to enable them to answer queries on halal matters from their family and friends. This act could deter activists from making false claims that Nestle Malaysia is not halal.
Nestle Malaysia has undertaken several mentoring programs to develop local small manufacturing enterprises in the food manufacturing industry, offering advice and counsel on good food manufacturing processes. It has trained 1200 small and medium enterprises since the program’s inception and one of the modules is about halal certification, halal cleansing and halal methods. The management believes the mentoring programs will provide assistance to the local industry that needs knowledge to build up its halal manufacturing practices (“Nestle”, 2005). Moreover, Nestle Malaysia continuously searches for solutions in maximizing the prod