Business Strategy (slide)

Business Strategy Nestle Strategic Evaluation and Implementation Lecturer: PhD Pham Quoc Khanh Student: Nguyen Thi Kieu Anh – Snow ID number: F05-014 Class: F05A Nestlé Vietnam Profile • Nestlé Vietnam Ltd is a subsidiary of Nestlé S.A (Switzerland) – the world largest nutrition and wellness company, founded 140 years ago • Foundation: Nestlé Vietnam was found in Dong Nai province in March 1995 • Geographic presence: factories (Bien Hoa Industrial Zone 2, Tri An, Binh An…), distribution centres • Products: Nescafe, Milo, Coffee-Mate, Nestea, Maggi….and repacking milk powders such as Lactogen, Nestlé Gau, Nestlé Infant cereals…(Nestle, 2014) Nestlé Vietnam’s factory 3.1 Analyse possible alternative strategies relating to substantive growth, limited growth or retrenchment 3.1.1 Five year objectives Nestlé’s vision statement: To be a leading, competitive, Nutrition, Health and Wellness Company delivering improved shareholder value by being a preferred corporate citizen, preferred employer, preferred supplier selling preferred products (Nestle, 2014) The suggested objective: Based on Nestlé vision, I suggest new objectives for Nestlé Vietnam in period 20142018 • Objective 1: Belonging to top three leading food and beverage companies in Vietnam with achieving 30% market share by the end of 2018 • • Objective 2: Revenue of Nestlé will increase by 25% in Vietnamese market by the end of 2018 Objective 3: Increase 20% of productivity by the end of 2018 3.1 Analyse possible alternative strategies relating to substantive growth, limited growth or retrenchment 3.1.2 Stages for years In order to achieve objective easier, it will be divided into two periods, respective with two stages: Stage (2014 – 2016) • • • Achieving 15% market share by the end of 2016 Revenue of Nestlé will increase by 15% in Vietnamese market by the end of 2016 Increase 10% of productivity by the end of 2016 Stage (2017 – 2018) Belonging to top three leading food and beverage companies in Vietnam, gain up to 30% market share by the end of 2018 Nestlé’s revenue will increase from 15% to 25% by the end of 2017 Nestlé’s productivity will increase from 10% to 20% by the end of 2018 • • • 3.1.3 Alternatives for Nestlé’s strategies and key activities Alternative Key activities to archive objectives strategies Option #1 Market development Objective Objective Objective Do market research and market Do market research about customers’ demand  - Set up new production line for the best quality segmentation to identify new Develop new promotion and advertising plans to of product and supply enough amount of goods groups of customers attract new customers (packaging size, different for customers demand Developing new distribution pricing policies…) - Provide training Vietnamese farmer to supply enough the amount of materials Nestlé need in channels production process Option #2 Product development Make a research about - Diversity of product design (safe to use, Hiring professional staffs as well as training purchasing behaviour of maintains freshness, and minimizes waste) to staffs annually to accelerate R&D activity  Vietnamese customers  attract customers Shorten time to market launch new products suitable - Enhancing values to customers by having a for the characteristics of each group of staffs who answer customers’ questions market and provide information about new product for customers 3.2 Select an appropriate future strategy for a given organization 3.2.1 Analysis of Suitability Suitability Evaluation Matrix (0-10) No Criteria/Requirement Exploit strengths and distinctive competencies Option #1 Option #2 Market development Product development Obj Obj Obj Obj Obj Obj 8 7 Fix weaknesses 7 8 Generate competitive advantage 9 8 Involve an acceptable level of risk 8 6 32 29 32 31 29 31 Total score Note: The score is directly proportional with the degree of the suitability OBJECTIVE Option #1 Option #2 Market development Product development The strong brand name of existing products such as Nescafé, Distinctive competencies (unique strength) to customize global Nestea, Milo, Maggie…to gain Vietnamese customer trust products with the same quality standards based on Vietnamese Suitability Exploit strengths and distinctive needs by inheriting results of product development research from competencies Nestlé Global High advertising cost in existing market Poor product range Distribution channels is expanded largely throughout Vietnam Competitive advantages of distinctive products in order to meet market  maximize revenue compared to its competitors requirement of new segments, create new customers in current Fix weaknesses Generate competitive market advantage Involve an acceptable level of risk The risk of developing new distribution channels can be The success of new product or marketing campaigns is not measured guaranteed OBJECTIVE Suitability Option #1 Option #2 Market development Product development - Finance strength - Experience in advertising to attract customer retention Exploit strengths and Generate competitive advantage Involve an acceptable level of risk which meet customer requirement about safety, environment protection distinctive competencies Fix weaknesses - Has many innovative staff in researching and developing packaging - Abundant staffs can support for hotline services - Stringent advertising policies - High product prices when launching new product - Lack of attractive packaging - Incompleteness of customer support in term of new product -Different package size  both those buy in bulk and those - Meet customer requirements in environment protection and safety who buy small quantities are catered for - Focus on customer satisfaction - Different price policies  suitable for pocket of each customer groups Risk of high advertising cost can be measured Risk of staff performance which make customer feel disappointed with Nestlé’s service  can not be measured OBJECTIVE Suitability Option #1 Option #2 Market development Product development - Finance strength - Expert people in training farmers Finance strength Exploit strengths and distinctive competencies of products on the fixed production lines - Reduce time for R&D activities - Many expert people reduce mistakes in R&D process of - High cost of materials, lack of materials support for product development - Low production capacity due to produce many kinds Fix weaknesses Generate competitive continual production Large volume of product supply for market Strengthen R&D activity of Nestlé Medium risk Low risk advantage Involve an acceptable level of risk 3.2 Select an appropriate future strategy for a given organization 3.2.2 Analysis of Feasibility Feasibility Evaluation Matrix (0-10) No Organizational capacities Option #1 Option #2 Market development Product development Obj Obj Obj Obj Obj Obj Human resources 8 Time resources 6 7 Financial resources 7 Technology 9 9 33 34 28 26 32 32 Total score Note: The score is directly proportional with the degree of the feasibility 3.2 Select an appropriate future strategy for a given organization 3.2.3 Analysis of Stakeholder’s Acceptability OBJECTIVE Acceptability Option #1 Option #2 Criteria (0-10) Market development Product development S E C Total S E C Total High profitability 22 20 High product quality 9 27 9 26 Low product price 7 23 19 High salary 20 9 23 Total score In which: 92 S - Shareholders E - Employees C - Customers Note: The score is directly proportional with the degree of the acceptability 88 Acceptability by stakeholders (Objective 1) - Option #1 can be implemented with medium risk and less requirement of finance than option #2 which requires a lot of money in investing human resources and R&D activities whilst option #1 still increase shareholder wealth, high quality, reduce product price  Shareholders will put priority to implement option #1 higher than option #2 - Shareholders will accept paying high salary for staffs in accordance with their support In order to implement option #2 need both Shareholders innovative ideas and professional knowledge in R&D  Option #2 is accepted higher than option #1 - Employee interested in profitability of the company which influences to their benefits such as salary, welfare policies Option #2 with high risk which lead to financial damages for company  Employees will assess option #1 have more advantages than option #2 - Employees is considered as customers of company so they also interest in product quality They not concern whether company implement which strategies to improve product quality as long as it brings benefits to them about health is also acceptable  Option #1 is assessed the same as option #2 - Employees also want to buy low product prices but if company face financial damages when revenues lower than expenses, employees is influenced in term of salary, working conditions… Option #1 is accepted more than option #2 Employees - Option #2 requires staffs implement complex work than option #1  Option #2 is higher score than option #1 Acceptability by stakeholders (Objective 1) - Customers not concern about profitability of company Moreover, two options also brings certain benefits for customers If company implement option #1, many customers have opportunities to use Nestlé’s products while 3.2 Select an appropriate future strategy for a given organization implement option #2, customers can be enjoyed new products with variety of flavours  Two options have the same score - Customers of company interest in product quality They not concern whether company implement which strategies to improve product quality as long as it brings benefits to them about health is also acceptable  Option #1 is assessed the same as option #2 Customers - Customers want to buy low product prices  Option #1 is the same score as option #2 with high score is - Customers not concern about staff’s salary of company  Option #1 is the same score as option #2 with score OBJECTIVE Acceptability Option #1 Option #2 Criteria (0-10) Market development Product development S E C Total S E C Total High profitability 22 22 High product quality 22 9 26 Low product price 25 21 High salary 8 21 8 21 Total score 90 90 Acceptability by stakeholders (Objective 2) - Market development helps to attract more customer by sale promotion in new market; product development helps to satisfy customers more Either ways will increase shareholder wealth Thus, it can be accepted by shareholders is the same - Option #2 with high product quality due to safety packaging  Shareholders accepted option #2 better than option #1 - Option #1 with sale promotion can reduce product better than option #2  Shareholders can be accepted option #1 better than option #2 Shareholders - Shareholders will accept paying high salary for staffs in accordance with their support Option #2 is accepted the same as option #1 Acceptability by stakeholders (Objective 2) - Employee interested in profitability of the company which influences to their benefits such as salary, welfare policies  Employees will assess option #1 the same as option #2 - Employees is considered as customers of company so they also interest in product quality  Option #2 is assessed the same as option #1 Employees - Employees also want to buy low product prices  Option #1 is accepted more than option #2 - Employees are always expect to get high salary so they are ready to support for company with their best efforts in any strategies which help them achieve high salary  Option #1 is the same score as option #2 with high score - Customers not concern about profitability of company  Option #1 is accepted the same as option #2 - Implementing option #2, customers can be enjoyed new products with safety packaging and perfect customer support Option #2 is accepted more than option #1 in product quality - Customers want to buy low product prices  Option #1 is accepted more than option #2 - Customers not concern about staff’s salary of company  Option #1 is the same score as option #2 with score Customers OBJECTIVE Acceptability Option #1 Option #2 Criteria (0-10) Market development Product development S E C Total S E C Total High profitability 8 21 8 21 High product quality 9 27 9 27 Low product price 24 8 25 High salary 22 22 Total score 94 95 Acceptability by stakeholders (Objective 3) - Both ways will increase shareholder wealth by promoting productivity  Two options is assessed the same - Both options also help increasing product quality Option #1 increase product quality by investing in product line, support farmer in material, option #2 increase product quality by supporting R&D staffs  Shareholders accepted options is the same - Option #2 can reduce product price more than option #1 which requires more cost for installation of new production line, cost for support farmers  Shareholders can be accepted option #2 better than option #1 Shareholders - Shareholders will accept paying high salary for staffs in accordance with their support Option #2 is accepted the same as option #1 Acceptability by stakeholders (Objective 3) - Employees interested in profitability of the company which influences to their benefits such as salary, welfare policies  Employees will assess option #1 the same as option #2 - Employees is considered as customers of company so they also interest in product quality  Option #2 is assessed the same as option #1 - Employees also want to buy low product prices  Option #1 is accepted the same as option #2 Employees - Employees are always expect to get high salary so they are ready to support for company with their best efforts in any strategies which help them achieve high salary  Option #1 is the same score as option #2 with high score - Customers not concern about profitability of company  Option #1 is accepted the same as option #2 with score - Customers want to buy high quality products and low product prices  Two option is assessed the same - Customers not concern about staff’s salary of company  Option #1 is the same score as option #2 with score Customers 3.2 Select an appropriate future strategy for a given organization 3.2.4 Analysis of risk Note: The higher risks, the lower score The lower risks, the higher score OBJECTIVE Alternative strategies Potential Risks - Social risk: Difference in customer behavior of local when Nestlé enter into new market - Economic risk: The inflation rate increase, the fluctuation of government policies and fuel price Score (0-10) lead to increase production cost or cost of transportation  increase product price which impact significantly on customers’ satisfaction Change in customers leading to changed relative power, Option #1 new competitors in new market Market development Alternative strategies Potential Risks - Score (0-10) Business risk: Market research not measure people’s real purchasing behavior Test marketing can provide more reliable and accurate measure but that process is expensive, very time-consuming Moreover, behavior of customers is often impossible to predict They are likely to change their minds by the time a product is launched - Political risk: The consciousness of implementing law as well as enforcement of punishing for doing illegal in Vietnam is not really good, especially in term of fighting against producing, selling counterfeit product, smuggle, violation of intellectual property law  New products which spend more time, effort, money to create can be copied easily by its competitors in short time Option #2 Product development - Financial risk: The processes of launching new products involve many types of expense (training staffs, R&D activities, investing machines, equipments) which can cause finance debts OBJECTIVE Alternative strategies Option #1 Potential Risks - Score (0-10) Social risk: Difference in customer behavior of local when Nestlé enter into new market Market development Option #2 - Business risk: Staff performance in service hotline which make customers disappointed with company Product development OBJECTIVE Alternative strategies Potential Risks - Score (0-10) Physical risk: Flooding, drought and equipment breakdown can delay the process of Option #1 delivering goods of Nestlé Market development - Business risk: Staff performance will decide success of strategy Option #2 Product development 3.2 Select an appropriate future strategy for a given organization 3.2.4 Scores and Ranking Alternatives Objective Objective Objective Strategies Weight: 10 Weight: Weight: S F A R S F A R S F A R 8.25 7.67 7.25 8.5 22.5 7.83 7.75 6.5 7.33 7.25 22.5 7.75 7.92 Option #1 Market development Option #2 Product development In which: S - Suitability F - Feasibility A - Acceptability R - Risk Alternatives Objective Objective Objective Strategies Weight: 10 Weight: Weight: 30.92 47.25 25.58 26.75 Total score Rank 30.83 794 st 31.67 601 nd Option #1 Market penetration Option #2 Product development • Total score of option #1 = (30.92 x 10) + (47.25 x 7) + (30.83 x 5) = 794 • Total score of option #2 = (25.58 x 10) + (26.75 x 7) + (31.67 x 5) = 601 3.2 Select an appropriate future strategy for a given organization 3.2.5 Selection and improvement • Total score option #1 = 794 • Total score option #2 = 601 The score of option is higher than option Based on this result and all the evaluation above, the conclusion is Nestlé should choose option #1 (market development) as main strategies for the year objectives in Vietnam However, in order to keep stronger position in Vietnam market Nestlé has to adopt combination of market development and product extension strategy Product extension means when company using a successful brand name to introduce additional items in a given product category under the same brand name (such as new flavors, forms, colors, added ingredients, or package sizes) It has score of risk at lower than product development which suitable for using to implement short term plan Thus, Nestlé can take advantages from this strategies by adding extra features to change the product prices of existing products (products which has strong band name in Vietnam market such as Nescafé, Nestea, Milo…) instead of formulation of an entirely new product which spend many resources of company as product development REFERENCES Adjustments to Products - Product Line and Product Mix (2014) Boundless [online] Available at: https://www.boundless.com/marketing/products/product-line-and-product-mix/adjustments-to-products/[Accessed Jun 2014] Nestle, 2012 Nestlé’s approach to packaging design aims to make its products easier to enjoy [Online] Available at: http://www.nestle.com/Media/NewsAndFeatures/packaging_design_easier [Accessed June 2014] Nestle, 2014 Nestlé Việt Nam - Các hoạt động Việt Nam [Online] Available at: http://www.nestle.com.vn/aboutus/nestle-vietnamese [Accessed 18 May 2014] Thu, D.M., 2011 Một số giải pháp nhằm nâng cao lực cạnh tranh công ty TNHH Nestlé Research Dong Nai: Lac Hong University [...]... approval from corporation banks such as HSBC, Citi Bank…) which reduces business opportunities compared with domestic companies Nestlé can full mean of technology to support for this strategy Time to apply new technology take from 6 months to 1 year lead to bring Financial resources Technology slowly new product to market, reduce business opportunities OBJECTIVE 2 Feasibility Option #1 Option #2 Market... Option #2 - Business risk: Staff performance in service hotline which make customers disappointed with 9 company Product development OBJECTIVE 3 Alternative strategies Potential Risks - Score (0-10) Physical risk: Flooding, drought and equipment breakdown can delay the process of Option #1 delivering goods of Nestlé 8 Market development - Business risk: Staff performance will decide success of strategy. .. resources different plans due to nature of strategy All index of liquidity ratio, capital structure is controlled and safe With stable financial situation and support significant from Nestlé  Nestlé has enough financial resources to implement this Global  Nestlé has ability to implement this strategies strategies Nestlé can full mean of technology to support for this strategy Nestlé always approach to modern... company Moreover, two options also brings certain benefits for customers If company implement option #1, many customers have opportunities to use Nestlé’s products while 3.2 Select an appropriate future strategy for a given organization implement option #2, customers can be enjoyed new products with variety of flavours  Two options have the same score - Customers of company interest in product quality... product prices  Two option is assessed the same - Customers do not concern about staff’s salary of company  Option #1 is the same score as option #2 with score 5 Customers 3.2 Select an appropriate future strategy for a given organization 3.2.4 Analysis of risk Note: The higher risks, the lower score The lower risks, the higher score OBJECTIVE 1 Alternative strategies Potential Risks - Social risk: Difference... significantly on customers’ satisfaction Change in customers leading to changed relative power, Option #1 new competitors in new market Market development 7 Alternative strategies Potential Risks - Score (0-10) Business risk: Market research do not measure people’s real purchasing behavior Test marketing can provide more reliable and accurate measure but that process is expensive, very time-consuming Moreover,... training farmer is available but lack of Technology used for hiring and training staffs is also available technology for supporting the installation of production line 3.2 Select an appropriate future strategy for a given organization 3.2.3 Analysis of Stakeholder’s Acceptability OBJECTIVE 1 Acceptability Option #1 Option #2 Criteria (0-10) Market development Product development S E C Total S E C Total... process of Option #1 delivering goods of Nestlé 8 Market development - Business risk: Staff performance will decide success of strategy Option #2 8 Product development 3.2 Select an appropriate future strategy for a given organization 3.2.4 Scores and Ranking Alternatives Objective 1 Objective 2 Objective 3 Strategies Weight: 10 Weight: 7 Weight: 5 S F A R S F A R S F A R 8 8.25 7.67 7 7.25 8.5 22.5... Product development • Total score of option #1 = (30.92 x 10) + (47.25 x 7) + (30.83 x 5) = 794 • Total score of option #2 = (25.58 x 10) + (26.75 x 7) + (31.67 x 5) = 601 3.2 Select an appropriate future strategy for a given organization 3.2.5 Selection and improvement • Total score option #1 = 794 • Total score option #2 = 601 The score of option 1 is higher than option 2 Based on this result and all... development) as main strategies for the 5 year objectives in Vietnam However, in order to keep stronger position in Vietnam market Nestlé has to adopt combination of market development and product extension strategy Product extension means when company using a successful brand name to introduce additional items in a given product category under the same brand name (such as new flavors, forms, colors, added