Business strategy assignment 1

My task isprepare outlines the business environment of Nestlé to support for its future strategyformulation and planning which provide to my team leader Trung and Trang for the comingdis

Assignment Received By: Date:

BANKING ACADEMY OF VIETNAM BTEC HND IN BUSINESS (ACCOUNTING)

ASSIGNMENT COVER SHEET

NAME OF STUDENT Nguyễn Thị Kiều Anh - Snow - F05A

ASSIGNMENT TITLE Nestle Strategic Plan

SUBMISSION DEADLINE 14th April 2014

I, Nguyen Thi Kieu Anh hereby confirm that this assignment is my own work and not copied

or plagiarized from any source I have referenced the sources from which information is obtained by

me for this assignment.

14 th April 2014 Signature Date

-FOR OFFICIAL USE

Unit Outcomes

Outcome Evidence for the

criteria Feedback Assessor’s decision

Internal Verification

First attempt

work

2.1

Carry out an environmental audit for a given organisation

2.2

Explain the significance of stakeholder analysis

2.3

Merit grades awarded M1 M2 M3

Distinction grades awarded D1 D2 D3

( ) Well-structured; Reference is done properly / should be done (if any)

Overall, you’ve

Areas for improvement:

ASSESSOR SIGNATURE DATE / /

NAME:

(Oral feedback was also provided)

STUDENT SIGNATURE DATE / /

NESTLÉ STRATEGIC PLAN

Prepared for:

Lecturer, PhD Pham Quoc KhanhUnit 7: Business Strategy Banking Academy, HanoiBTEC HND in Business (Finance)

Prepared by:

Nguyễn Thị Kiều Anh – Snow - F05ARegistration No: ITP F05-014Submission date: 14th April 2014

TABLE OF CONTENTS

EXECUTIVE SUMMARY 6

INTRODUCTION 7

CONTENTS 8

2.1 Produce an organization audit for Nestlé Vietnam 8

2.1.1 Limiting factors 8

2.1.2 Distinctive competencies 9

2.1.3 Product positions 9

2.1.4 Value-chain analysis 11

2.1.5 Organization structure 12

2.1.6 Market and customer audit 12

2.2 Carry out an environmental audit for Nestlé Vietnam 14

2.2.1 PEST 14

2.2.2 Porter’s 5 forces 16

2.3 Explain the significance of stakeholder analysis 18

2.3.1 Stakeholder significance grid 18

2.3.2 Stakeholder mapping 19

APPENDIX 21

CONCLUSION 22

REFERENCES 23

EXECUTIVE SUMMARY

As an assistant research analyst working in a team for a research firm in Vietnam My task isprepare outlines the business environment of Nestlé to support for its future strategyformulation and planning which provide to my team leader (Trung and Trang) for the comingdiscussion with the clients.

The presentation notes are addressed on the following matter:

 Explain Nestle strategic contexts and terminology – missions, visions, objectives,goals, core competencies

 Review the issues involved in strategic planning for Nestle

 Explain Nestle different planning techniques

A report is provided to formulate a new strategy for Nestle

 Produce an organisational audit for Nestle Vietnam

 Carry out an environmental audit for Nestle Vietnam

 Explain the significance of stakeholder analysis

Nestlé is a multinational corporation, headquarter in Switzerland, is one of the largest foodcompany in the world Nestlé Vietnam which is established in 1992 is a member of NestléGlobal After more than 10 years operating, Nestlé Vietnam has become one of the successfulcompany in the field of beverage drink and nourishing food in Vietnam market NestléVietnam has gradually confirmed as a leading food company in Vietnam deserves to be amember of Nestlé Global One of the key factors contributing to Nestlé Vietnam success isdue to building business strategy rightly, flexibly, and determining to pursue this strategy for

a long time

In this report, I will analyze industry environment of Nestlé Vietnam including internalenvironment and external environment From that, I draw conclusion about strengths andweaknesses of Nestlé from internal environment, and opportunities and threats from externalenvironment

As to complete this report, I based on information in the Business Strategy course book andsome reference books, many sources from internet, newspapers Specifically, I would like toexpress my deep gratitude to my lecturer, Mr Pham Quoc Khanh who supports, motivates

me during the process of completing this report

CONTENTS 2.1 Produce an organization audit for Nestlé Vietnam

seasoning and producemany kinds of products

Shortage

- Do not meet the rising

customer demand in thenear future

- Require adjustingtechnical data constantly,which lead to interruptproduction time and highcost for adjusting themachine

ge

Product sales of Vietnam isincommensurate to themarket: Sale of NestléVietnam products in thedomestic market in 2012 onlyreached 0.6USD/people/yearwhile that of Thailandreached over 10USD/people/year

3 Operating

systems

Product launch system:

Nestlé’s regulations aboutadvertising and introducingproducts are too stringent such

as no advertising of any kinds

of products for children under

12 months of age andadvertising cost is too highapproximately equal 19%

revenue

Difficult

- Reduce competitiveadvantages of Nestléproduct in market

- Decrease company profit

4 Organizati

on and HR

Nestlé Vietnam has more than

800 official labours However,there is limited number of key

Shortage

- Take more time to carry

on tasks

- Easy to arise errors when

personnel such as salespeoplewith technical knowledge andskilled workers

implementing work due tolack of knowledge

- Decrease the performance

of company The most important limiting factor is about assets: shortage of production lines If Nestlé

do not improve this limiting factor, the production is interrupted any time in the nearfuture which lead to damage finance, effect significantly on reputation of company

2.1.3 Product positions

Figure 1: Product/Business Life Cycle

One of the key products in the powdered and liquid beverages category is instant coffee It belongs to the third stage “Business Optimization” This product brought 32%

of revenue with sales of about 171 billion VND in the first six months of 2013 Its marketsegments are also expanded larger Instant coffee has turned to the business optimization

by building a new factory in Bien Hoa which is in Nescafé Plan Global in 2010 withinvestment capital up to approximately 270 million USD [ CITATION Nes13 \l 1033 ]

Instant coffee’s position is at high market share and high market growth It means that

instant coffee of Nestlé Vietnam is standing in STARS where Nestlé has dominant position and is in a growing industry.

 Dominant position

There are 3 coffee brands hold largest market share in Vietnam, that are Cafe TrungNguyen (G7) accounted for 26.3%, Vinacafé Bien Hoa (Vinacafé) accounted for 22.8%,followed by Nestlé (Nescafé) with 21.7%

Figure 2: Market share of instant cafe in 2013 [ CITATION Vin13 \l 1033 ]

 Growing industry

Figure 3: Forecast consumption of coffee in Vietnam [ CITATION vie10 \l 1033 ]

As we can see, coffee consumption in Vietnam is increasing It means that customers’demands are increasing; this is also the trend of high growth rate Therefore, with suchpotential market, Nestlé Vietnam needs more efforts in improving weaknesses, buildingcustomer loyalty to gain more profit and compete its competitors

to the factories through containers which have the temperatures of 2oC to 3oC

 Operations: Nestlé has very sophisticated machinery Quality checks practiced atevery level of value addition Packaging quality is also up to the standards Producttesting security trusts

 Outbound Logistics: Nestlé has well integrated distribution network andwarehousing facilities

 Marketing and Sales: Marketing programs of Nestlé are very influential one.Proper awareness about the project is created and the sales are stipulated

2.1.4.2 Support activities

 Technology development: Nestlé Vietnam develops breakthrough technologies,building blocks that are basis of new product development with the support ofglobal technology centre

 Human resource management: Nestlé trained specialized knowledge which suit forjob functions before employees start working as well as maintain advanced trainingannually to develop staff skills

 Infrastructure: Build an important infrastructure such as waste processing system toprotect environment [ CITATION Nes13 \l 1033 ]

2.1.5 Organization structure

Figure 5: Organization structure of Nestlé Vietnam [ CITATION Nes13 \l 1033 ]

Based on the Mintzberg’s organigram, organization structure of Nestlé Vietnam arecomposed of five basic elements:

 Strategic apex: General manager of Nestlé Vietnam

 Operating core: Worker in factories

 Middle line: Manager of Dong Nai factory

 Technostructure: Personnel managers in HR department, accountants infinancial accounting department, quality assurance manager in quality controldepartment, planner in plan department, researchers in R&D department,engineers in engineering department

 Support staff: Staffs in customer support, marketing and sale department

Nestlé’s organization structure is flat structure which has less level of management and

wider span of control All departments will executive functions and reports directly to thegeneral manager This helps Nestlé to operate business flexibly and efficiently

2.1.6 Market and customer audit

2.1.6.1 Market audit

MARKET AUDIT MATRIX

Factors Nestlé Vietnam Evaluation

Vietnam: Ha Noi, Ho Chi Minh,

Huge customer base helps Nestlé increase profitability In order to maintain and

expand its customer base, it requirescompany to developing new products andadvertising

Segments - Demographic: For baby: Nestlé

baby foods; for young people:

Milo, Nescafé; for old people:

Nestlé health care Nutrition

- Psychographic: Nestlé Breakfast

Cereals is the best choice for busypeople

- Analysing needs of each customer group helps Nestlé create products better than its rivals

- Satisfy different demands of different

customers

Market share Nestlé has largest market share in key

products such as Milo (90%),Nescafé (21.7 %), Maggi (13%)

Nestlé is in strong position in Vietnammarket It requires Nestlé need to put moreefforts to meet customers’ requirement

2.1.6.2 Customer audit

CUSTOMER AUDIT MATRIX

Key customer

identify

Supermarkets, wholesale dealers,retail shops in big city: Hanoi, HoChi Minh Danang

Nestlé is large company, it focus on sellingproducts to others business rather thanindividual Sell in larger quantities andreduce intermediate stage in deliveringproducts to customers

It requires Nestlé focus more on quality ofproducts as well as has promotion sales toattract customers

Focus on making first impression forproducts both product quality and servicequality

The There are many costs involved in Nestlé need to control expenses carefully

profitability of

selling to the

client

supplying products to customers:

R&D, test facilities, salespromotion, delivery

in order to ensure that expenses is not toohigh and company can achieve proposedrevenue

Summary

- High quality product

- Well-known brand

- Sustainable culture and business principles

- Modern productive technology

- Flexible organization structure

- Financial strengths

- Inheriting results of product development

research from global Nestlé

- Poor product range

- Limited number of key personnel

- Nestlé’s regulations about advertising and

introducing products are too stringent

- High advertising cost

- Low production capacity due to produce

many kinds of products on the fixedproduction lines

2.2 Carry out an environmental audit for Nestlé Vietnam

2.2.1 PEST

 Political factors

- In Vietnam, Communist Party is all-powerful Therefore, the system of political in

Vietnam is more stable than other countries Moreover, Vietnam is extending

diplomatic relations with the other countries in the world This is the advantages so

that board of directors of Nestlé consider investing largely into Vietnam.

- All company operate in Vietnam must comply with government obligations such

as tax policy, environmental protection and employment laws If the company

does not follow the laws, government will impose administrative penalty.

According to Vietnam’s law, Nestlé must pay 10% in total profit as taxation

- 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 Nestlé Vietnam need to have brands against counterfeiting to create trust for

consumers

 Economic factors

- The economy of Vietnam is a developing mixed economy Moreover, it is in the

period of integrating into world's economy By joining WTO in 2006, Nestlé can

reduce tax on input materials For example, some kinds of milk materials have the

import rate lower than before, Nestlé can import more and easier powdered milkbecause the local supply is not enough for the production demand.

- Vietnam’s economy develops stably and low inflation (only about 6.2-6.3% in

2013) brings more income (GDP/capita of Vietnam reached the growth rate of7.91%/year in the period 2012-2013) [ CITATION Ton12 \l 1033 ] This changes in thestructure of expenditure for products; customers spend more in consumer goodssuch as food and beverages This will create favourable conditions for Nestlé

Vietnam to develop their products, especially premium product lines

- World crude oil prices continue to rise (from $65/barrel in 2010 to

$107.35/barrel in February 2013) This lead to increase production costs of Nestlé

Vietnam Based on data from energy consumption report of Nestlé, only calculateexpenses from increasing oil prices (from VND7,500/liter before 29/03/2010 up toVND24,690/liter) makes expenses of Nestlé Vietnam raised approximately 7billion VND

 Socio-cultural factors

The population of Vietnam is 90 million people with the population growth rate over 1% per year, is ranked 14 th among the world’s most populous countries [ CITATION Ton12 \l 1033 ] This is good sign for Nestlé to increase the number of potential consumers Nevertheless, market's demand is stricter than before about product

categories and product quality As a result, it requires the company to improve theirproduction, invest more in new technology in order to maintain as well as increasetheir market share

 Technological factors

Nowadays, Vietnam has a rapid pace in technology development For example, in

term of internet technology from 2010 to now, Vietnam has continuously rankedamong the top 20 countries with the largest number of internet users in the world withmore than 30% the proportion of the population [ CITATION dan12 \l 1033 ] Nestlé could

use this advantage to introduce their products on the internet, especially their

official website Customers could get any information from their website Besides,

Nestlé could find more information related to Vietnamese tastes for producing

different products based on the customer demand