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CHAPTER 1

Environmental Scanning
Introduction and Definition
Need for environmental scanning
Techniques/ Approaches of
environmental Scanning.





















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ENVIRONMENTAL SCANNING
Introduction :
Environment refers to all those forces or factors that influence various decisions of
the firm. A firms environment consists of internal and external environment.
The internal environment analysis helps to identify its strengths and weakness and
the external environment analysis helps to identify opportunities and threats, which
are hidden in environmental events and trends. Organisations have to identify such
forces and accordingly interact and adjust its strategies, so as to consolidate its
strengths and minimize its weakness and to grab the opportunities and to minimize
threats.

Environmental Scanning provides broader prospective to corporate planners in
formulating plans and strategies. In short, the process by which organizations
monitor their relevant environment to identify opportunities and threats affecting
their business is known as environmental scanning.

Environmental scanning is one essential component of the global environmental
analysis. Environmental monitoring, environmental forecasting and environmental
assessment complete the global environmental analysis. The global environment
refers to the macro environment which comprises industries, markets, companies,
clients and competitors. Consequently, there exist corresponding analyses on the
micro-level. Suppliers, customers and competitors representing the micro
environment of a company are analyzed within the industry analysis.

Environmental scanning can be defined as the study and interpretation of the
political, economic, social and technological events and trends which influence a
business, an industry or even a total market. The factors which need to be
considered for environmental scanning are events, trends, issues and expectations
of the different interest groups. Issues are often forerunners of trend breaks. A
trend break could be a value shift in society, a technological innovation that might
be permanent or a paradigm change. Issues are less deep-seated and can be 'a
temporary short-lived reaction to a social phenomenon'. A trend can be defined as
an environmental phenomenon that has adopted a structural character.


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DEFINITION
Business Environment consists of all external and internal factors that
influence the complex interaction of the market , production and finance, the
three basic components of our business world
- J Kriz and C. Duggan

NEED FOR ENVIRONMENTAL SCANNING

Environmental Scanning is essential because of following reasons:

1) Prime Influence Environment is a prime influence on the effectiveness of
business strategies. If strategic planning is done without considering
environment, it is likely to be defective. Besides, the success of the
implementation of the strategy depends on the environmental factors.

2) A tool to anticipate Changes Environmental scanning is a very useful tool
not only to understand business surroundings, but also as a good instrument
to anticipate the changes and be prepared to face the challenges of such
changes.

3) Time for adjustment A business unit cannot change the business activities
overnight. It needs time to adjust with the changing environment. If it has to
face the changed environment suddenly, it may be possible to make
immediate changes according to the demand of the changed environment.
Environmental scanning gives time to the company to get adjust to the
changed environment.

4) Early Warning system - Environmental Scanning gives advance warning or
danger signals of the adverse changes in environment. It helps the company
to design defense mechanism to avoid future adverse effects of environment
on the business activities e.g. with the changing marketing environment,
many companies are adopting on-line marketing to survive in this
competitive environment.




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TECHNIQUES /APPROACHES OF ENVIRONMENTAL SCANNING
Environmental Scanning can be effectively done following different techniques or
Approaches as follows:

1) Seeking and getting opinion :- Opinions of experts or knowledge people can be
got by talking to them. Depending upon the nature of industry, and type of
markets, these experts would differ, but they would be the people who are good at
reading the current trends as well as future trends e.g. a businessman who wishes
to establish a holiday resort may talk to an expert in Tourism or expert person in
the hotel business in order to know the prospects of the resort. Opinions can be
sought even from non-experts or laymen who are involved in the relevant business.
This can be done through surveys or informal chats or meetings with the concerned
people. The opinions of experts and non-experts should be integrated to have a
clear picture of environment and future trends.
2) Extrapolating :- To extrapolate means to calculate or estimate unknown factors
or future trends by inference or logic after knowing the facts or present trends. It
involves estimating or forecasting unknown, present trends. It helps a businessmen
to read future with the help of the present. It is not guesswork. It is a calculation
that peeps into the future or in the unknown with the help of proper reading of the
present.
3) Estimate :- An estimate is a techniques of designing the worse case scenario and
the best case scenario. It estimates the best opportunities and the worst threats that
are likely to emerge from the analysis of the environment. It thereafter weights the
possibilities and probabilities of the opportunities and threats and preparing a
balanced, realistic environment.
4) Mapping :- It is an analytical tool that tries to read the process of transformation
of factors in environment. The whole of the environment does not change
suddenly, certain factors change, while others remain the same over a period of
time. Mapping is a techniques that tries to track the environmental factors to find
out how many of them, and which of them are changing. It tries also to find out the
direction and the speed of the change. It locates and plots the changes, their routes
and their magnitude or extent.
5) Modeling :- There are many types of modeling that can be used to scan the
environment. E.g. Regression analysis or probability tables are also used in more
complex types of modeling.


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CHAPTER 2

SWOT Analysis
Business Environment
Meaning, Definition and
components of Business environment
Internal and External Environment





















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SWOT ANALYSIS

In order to survive and grow in this competitive environment, it is essential for
every business organization to undertake SWOT analysis. The process by which
the enterprises monitor their relevant environment to identify their business
opportunities and threats affecting their business is known as environment analysis
or SWOT analysis. In other words analyzing the surrounding environment before
framing policies and taking business decisions is called as SWOT analysis.



SW stands for strengths and weaknesses
OT stands for opportunities and threats
Strengths and weaknesses are derived from internal environment.
Opportunities and threats arise from external environment.
SWOT analysis help the business unit to know its positive points as well as
negative points.

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A Strength is something a company is good at doing or a characteristic that gives
it an important capability. Possible strengths are:
Name recognition
Proprietary technology
Cost advantages
Skilled employees
Loyal customers etc.
Strength is an inherent capacity which an organization can use to gain strategic
advantage over its competitors e.g. Marketing of Hindustan Leaver Limited, they
have around 15 lakhs retail outlets for distributing their various products in India.

A Weakness is something a company lacks or does poorly (in comparison to
others) or a condition that places it at a disadvantage. Possible weaknesses are:
Poor market image
Obsolete facilities
Internal operating problems
Poor marketing skills etc.
Weaknesses are an inherent limitation, which creates a strategic disadvantage for
the organization e.g. limited finance.

Opportunities An opportunity is a favorable condition in the organizations
environment which enables it to strengthen its position.

Threats A threat is an unfavorable condition in the organizations environment
that creates a rise for or cause damage to the organization.






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Environmental Scanning means an examination and study of the environment of a
business unit in order to identify its survival and prosperity chances. It means
observing the business environment both external and internal and understanding
its implications for business opportunities. It also involves knowing beforehand the
risks and uncertainties as well as threats to the business unit.
As business environment is dynamic in nature, it is always changing;
environmental scanning has to be quick and regular. It should not be one time act
to scan the environment. It is the constant telescoping of external environment and
micro scoping of internal environment.

MEANING OF BUSINESS ENVIRONMENT

Business Environment consists of all those forces both internal and external that
affect the working of a business. It refers to the conditions, forces, events and
situations within which business enterprises have to operate.
Business and its environment are closely related and the effectiveness of
interaction of the two determines the success or failure of a business.
DEFINITION
According to Wheeler Business Environment is the total of all things external to
firms and individuals, which affect their organization and operations .
COMPONENTS OF BUSINESS ENVIRONMENT
The business environment can be broadly divided into two groups
A. Internal Environment
B. External Environment
I. Micro Environment
II. Macro Environment





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Components of business environment



Internal External
Environment Environment


Micro Macro

Environment Environment
















Management
Philosophy
Mission and
Objectives
Human
Resources
Physical
Resources
Financial
Resources
Corporate
Image
Research and
Development
facilities
Internal
Relationship
Owners and
Employees
Suppliers and
Intermediaries
Competitors
The Public
Demographic
Environment
Natural
Environment
Economic
Environment
LegalEnvironment/
Regulatory
Environment
Political
Environment
Cultural
Environment
Technological
Environment
International
Environment
The Social /
Cultural
Environment

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A. Internal Environment
1. Management Philosophy
The management philosophy greatly influences the working of business firm. The
management may adopt a traditional philosophy or a professional philosophy.
Nowadays business firm need to adopt professional approach. A proper analysis of
internal environment will reveal the weaknesses of the traditional approach and
force the management to adopt a professional approach.
2. Mission and Objectives
It is always advisable to frame a mission statement and then to list out the various
objectives. An analysis of internal environment will enable the firm to find out
whether the objectives are in line with the mission statement and whether the
objectives are accomplished or not.
3. Human Resources
The survival and success of the firm largely depends on the quality of human
resources. An analysis of internal environment in respect of human resources
would reveal the shortcomings of human resources and as such measures can be
taken to correct such weaknesses.
4. Physical Resources
Physical resources include machines, equipments, building, furniture etc. A firm
needs adequate and quality physical resources. An analysis of the internal
environment may reveal the weaknesses of the physical resources and company
can take appropriate measures to correct such weaknesses.
5. Financial Resources
A firm needs adequate working capital as well a fixed capital. There is a need to
have proper management of working capital and fixed capital.An analysis of the
internal environment will help to make optimum use of available funds as well as
to raise additional funds.
6. Corporate Image
A firm should develop, maintain and enhance a good image in the minds of the
employees, investors, customers and others. Poor corporate image is a weakness.
An analysis of the internal environment enables the firm to build good public
image.

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7. Research and Development facilities
If the organization has adequate research and development facilities, it is in a
position to innovate, introduce new products and services continuously. This
enables the firm to remain ahead of the competition
8. Internal Relationship
There should be a proper flow of vertical and horizontal communication i.e.
between superiors and subordinates and between colleagues at the same level. A
free flow of ideas enables a healthy relationship between colleagues.

B. External Environment
External environment includes all those factors and forces which are external to the
business organization. These include factors such as economic, socio-cultural,
legal, demographic etc.
These factors are beyond the control the company. External environment consists
of two components.
I. Micro Environment
II. Macro Environment

I. Micro Environment
The Microenvironment consists of the forces close to the company that affect its
ability to serve its customers-the company ,suppliers ,marketing channel firms,
customer markets ,competitors and publics. Gilbert Harrell in his own view
emphasizes on stakeholders and industry competition as integral part of the
microenvironment. Looking at the stakeholders as this literally means those who
have a stake in an organization. They are relevant to the day to day running of the
company and therefore company need to understand them. This is so because to a
large extent they have an impact on the market decision and can be affected by it at
the same time. Another phenomenon that is noteworthy is competition. The
marketing concept states that to be successful ,a company must provide greater
customer value and satisfaction than its competitors do.In other words ,marketers
ought to go beyond the level of market targeting, but also allow a strategic
positioning to come to play in order to beat their competitors to it. This strategy
must be relative to the size and industry position compared to those of its
competitors. It is imperative for an organization to also build and maintain a lasting

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relationship with other stakeholders apart from the customers. This is so because
stakeholders can help serve customer needs and wants and can also help the
organization accomplish its set goals and objectives. As a result of this we shall
look at the relationship between these various stakeholders and the organization.
1. Owners and Employees
Every organization is set up for a certain set of goals and objectives. These
objectives are set so as to primarily be of benefit to the owners. They are also set in
such a way so as to bring profit substantially .In non profit organization however,
the objectives are usually aimed at benefiting a target audience or constituents.
Employees: Employees is another group of stakeholders owing to the fact that their
means of livelihood depends on the company. By virtue of their contribution to
delivering value to end customer, each employee has a high stake in the
organization. Companies that take to heart the interest of its employees get in
return maximum productivity from the employees According to the president of
Carlson Hospitality Worldwide Eric Danziger, If you have people who want to
work for you, keeping them is more important than getting them, it is tough to get
the right person ,when you get them, you want to keep them. In other words
contented employees are more likely to produce contented customers.
2. Suppliers and Intermediaries
Suppliers are stakeholders who provide a company with necessary services ,raw
materials and components. Very few organizations can exist without suppliers,
who also can be major factor in creating customer satisfaction. Suppliers
manufacture many of the components that go into vehicles-no matter what brand.
The impact of suppliers on an organization can never be over- emphasized. Having
said this they are also saddled with the task of devising new technology which
could affect positively the general production of the main company and enable it to
compete comfortably with rival organizations. Intermediaries: These are
independently owned organizations that enable the company to promote, sell, and
distribute its goods to final buyers or users. Their role is crucial because they make
the products or services reach the customers wherever they may be. This group
includes Resellers, Physical distribution firms, Marketing services agencies and
financial intermediaries. They checkmate the excesses of company in their pursuit
to maximise profit at the expense of the publics and environment.



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3. Competitors
Contrary to general speculation competition is not limited to two rival
organizations of equal status testing for strength and wits; it could also involve
companies of different types and sizes. Competition is a crucial fact of life to
most organizations operating in a commercial environment. Competition usually
arises when companies seek to attract customers from rival companies by offering
better products and /or lower prices. Competition can also arise in the acquisition
of resources, and where these are scarce relative to the demand for them; rival
buyers will bid up their price. It is therefore important to have a thorough
understanding of the market situation so as to identify each major competitor.
This includes how each competes against your company and every other in the
industry. You should examine each rivals strategy in terms of current and
potential products, pricing, promotion& distribution.
4. The Public
The Micro environment of a company can not be reasonably exhausted without
looking at the publics. The public to some extent has or potentially could have an
impact on an organization in its effort to achieve set objectives. Armstrong &
Kotler identifies seven types of publics. Financial publics like banks, Investment
houses and stockholders which all can affect the companys access to funds. Media
publics like newspapers, magazines, radio and TV which could make or mar the
companys image before the public. Government publics whose policies, gazettes
and directives on product safety, public health, advertising among other issues
should be keenly considered by the companys lawyers. Citizen action groups
whose agitation in the interest of the public and environment should be carefully
handled by the companys public relations department. Local publics like
neighborhood residents and host community organizations which company should
learn how to relate with tactfully lest they are alleged of exploitation. General
public is one whose attitude and perception of the companys product and activity
count. Internal public ranges from the workers, managers, volunteers and the board
of directors. Employees must be made to feel good about the company so as to
affect the external publics with the positive attitude.





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II. Macro Environment
1. Demographic Environment
Demographic environment studies human population with reference to its size,
density, literacy rate, sex-ratio, age composition etc. These factors affect the
demand for good and services, quantity and quality of production, distribution etc.
e.g. a rapidly growing population indicates growing demand for many products.
2. Natural Environment
Business firms use natural resources like water, land, iron, crude oil etc. All
business units are directly or indirectly dependent upon natural environment.
Business firms are responsible for ecological imbalance. So they should take
necessary measures to control pollution.
Business operations have caused considerable changes in ecological balance and
natural environment of the country. The applications of modern technology in
industry leads to rapid economic growth at a huge social cost a measured by the
deterioration of physical environment i.e. air pollution, water pollution, noise
pollution etc. So business enterprises have to calculate net social cost of its
venture.
3. Economic Environment
A business firm closely interacts with its economic environment. Economic
environment is generally related to those external forces, which have direct
economic effect upon business. Economic environment is a sum total of :-
a. Economic conditions in the market ; b. Economic policies of the government ;
c. Economic system of the country.

a. Economic conditions :- It includes nature of economy, the stage in economic
development, national income, per capita income etc. These operate in the market
and influence the demand and supply of goods and services.

b. Economic policies :- Economic policies mean policies formulated by the
government to shape the economy of the country. These include monetary and
fiscal policies, export import policy, industrial policy, licensing policy, budgetary
policy etc. The economic policies of the government affect the business. This
impact may be positive or negative e.g. liberation of the economy has adversely
affected the small scale industry in India.

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c. Economic systems :- Economic systems means the classification of economies
on the basis of role of the government in the functioning of the economy.
Economic system can be classified as
Capitalist Economy There exists least government control in regulating the
working of a market. E.g. U.S.A.
Socialist Economy The government has major control over all activities
e.g. China.
Mixed Economy It combines the features of both capitalist and socialist
economy where both private and public sector play an equally important role
e.g. India.
4. Legal Environment / Regulatory Environment
Legal environment includes laws, which define and protect the fundamental rights
individuals and organizations. It creates a framework of rules and regulations
within which business units have to operate. Business firm must have up to date
and complete knowledge of the laws governing production and distribution of
goods and services. Some of the important laws are-
Indian Companies Act, 1956
The Consumer Protection Act, 1986
The MRTP Act, 1969.
The Essential commodities Act, 1955. etc.
5. Political Environment
It refers to the influence exerted by 3 political institutions namely the legislature,
the executive and the judiciary in developing and controlling business activities.
Business decisions are greatly influenced by the developments in the political
environment. A change in the government brings about a change in attitude,
preference, objectives etc. Business firms need to keep a track of all political
events, anticipate changes in government policies and frame production and
marketing strategies accordingly.
6. Cultural Environment
Every society has a culture of its own. Culture includes knowledge, belief, art,
morals, laws, customs and other capabilities and habits acquired by an individual
as a member of society. Cultural values are passed on from one generation to
another. Culture thus determines the types of goods and services a business should
produce. Business should realize the cultural differences and bring out products
accordingly.

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7. Technological Environment
Technology is the systematic application of scientific or other organized
knowledge to practical tasks. Technological advancement make it possible to
improve the quality of products, increase the output and decrease the cost of
product. Technological changes are rapid and to keep pace with it, businessmen
need to be alert and flexible in order to quickly incorporate them in their business
organization so as to survive and succeed in the competitive business world.
8. International Environment
The international environment is an outcome of political and economic conditions
in the international market. Business firms engaged in the foreign trade are more
affected by the changes in the international environment factors like war, civil
disturbances, political instability, changes in trade policies in other countries with
which India has trading links do affect Indian exporters and importers. Therefore,
business firms, which cater to foreign trade must constantly monitor implications
of international environment on their business. Components of international
environment are - Import and Export policy of a country.
-Rules and regulations laid down by International Institutions like IMF,
World Bank etc.
-The policies of trading blocks like SAARC, EEC, ASEAN etc.
-Foreign exchange regulations like tariffs, quotas.
-Trade cycle like boom, recession at world level

9. The Social / Cultural Environment
The cultural environment includes institutions and other forces that affect the
basic values, behaviors, and preferences of the society-all of which have an effect
on consumer marketing decisions.
Peoples persistence of cultural values and a shift in secondary cultural values can
affect marketing decision making. The major cultural values of a society are
expressed in people's views of themselves and others, as well as in their views of
organizations, society, nature, and the universe.





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CHAPTER 3

Nestle Company Profile
Products of Nestle
SWOT analysis
Environmental scanning
Internal and External environment
in Nestle company
Porters Five Forces Analysis


















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Nestle Is The Worlds Largest Food Processing Company Marketing Essay

INTRODUCTION

The strategic management process is based on the belief that organization should
continuously monitor internal and external events and trends so that timely change
can be made as needed. An organization must be capable of wisely identifying and
adapting to change. In this report, I will choose Nestl S.A, one of the most
successful food processing company in the world to discuss its strategy
management process.

COMPANY PROFILE

Nestl S.A. is the worlds largest food processing company and is headquartered in
Vevey, Switzerland. The company was founded by Henri Nestl in 1866. Nestl
Company had made several name changes from 1866 to 1947, and finally adopted
Nestl S.A. in 1977 as the companys name. Nestle S.A. has factories or office in
almost every region of the world and markets a wide range of brands. The
company is often described as "the most multinational of the multinationals." in the
current food industry market.
Henri Nestl, also know as of the main originator of condensed milk. In 1867, he
developed the first milk food for infants and a baby who could not be breast-fed
was rescued. Nestls invention responded to the need for a nutritionally safe
alternative to breast milk. Thus, Nestl S.A has targeted to build a business based
on sound human values and thoughts.
The key to success of the company is due to its huge Research and Development
network within the food processing industry. With R&D as the competitive
advantage, Nestl has become the worlds leading nutrition, health, and wellness
company. The company is devoted in continuing to improve the nutritional value

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of their products while enhancing the flavor. Nestl achieves this through its
brands and with initiatives like the Nutritional Compass and 60/40+. Millions of
people choose to consume Nestl products everyday because the company sustain
the quality as the fundamental ingredient in all of its brands. Consumers choose to
place their trust in Nestl due to the companys dedication to achieve distinction
and turn to Nestl brands to preserve nutritional balance in todays fast paced
world.
Switzerland-based Nestl S.A. has the highest ranking as the largest player
throughout the entire world in the competitive position within the food industry.
The rating reflects the companys competitiveness and market attractiveness. With
combined sales of 110 billion (Swiss Franc) in 2008, Nestl states a diversified
business portfolio, being the market leader in numerous product categories
worldwide including bottled water, instant coffee, milk and cheese products,
nutrition and baby food, ice cream, frozen foods, culinary preparations, and coco
products. Nestl's broad geographic coverage includes North America and Europe
as well as Asian markets.
The vision of Nestl R&D is long term, it helps shape the future of foods making
consumer needs into research priorities and convert new technologies into
consumer benefits, and services.

OBJECTIVES

Nestls purpose is to offer safe, tasty, convenient and nutritious foods to improve
health and well-being of consumers of all ages all over the world. To meet the
needs and desires of todays and tomorrows consumers, Nestl is strongly
committed to Research and Development (R&D) to improve existing products and
develop new foods with specific health benefits.










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Products of Nestle

Milk Products
Nutrition Products
Prepared Dishes and Cooking Aids
Beverages
Chocolate
Confectionery
Energy Drinks
Instant Noodles





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SWOT ANALYSIS IN NESTLE

Environmental scanning has the management scan internal environment and
external environment. The factors which are the predominant factor for an
organization factor is SWOT standing for strengths, weaknesses, opportunities and
threats.



Internal Environment
Strengths
BRAND STRENGTH:
Quality brands and products
Top selling brand: Nescafe, Maggi, Kit Kat, Honey Stars, Pepsi and etc.



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PRODUCT INNOVATION:

Continuously introducing new products & manufacturing is efficiency.
Strengths include anything a company does well and its resources and capabilities
for developing a competitive advantage.
The greatest strength of Nestl is culture that is team focused and an open door
policy. Nestl focuses on collectivism and performance orientation attitude which
encourages employees to work harder.
Nestl achieves broader range of products by improving existing and innovating
new products. Consumer demands are switched to changes of taste, colours and
design that have been undertaken to products such as Nestls Smarties and Kit
Kats. The launch of Kit Kat Chunky has proven that creativity and innovation can
extend the life cycle of a product.
Strengths-
Parent support
Company Image
High Quality Products
Well-developed strategy
Market Share
Good marketing skills and services
Brand strength
Research & Development Team
Product innovation
HR department

RESEARCH & DEVELOPMENT CAPABILITIES: have the largest R&D network of any food
company in the world, with 32 R&D centres and over 5,000 people directly involved in R&D
MARKET SHARE: high level of market share and that people all over the world trust and
recognizes Nestle as a big brand name.






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Weaknesses
The lack of certain strengths and things a company does not do well are viewed as
weaknesses.
Nestl is poor in targeting some of its products.
Nestl MilkPak is a premium product targeted to upper middle and high class
consumers. Most consumers in India are from lower middle and poor class. They
are not afford to purchase it due to the premium price.
Nestl has a complex supply chain configuration too and traceability is a critical
issue for Nestl India. High standards of hygiene, quality of edible inputs and
workforce are required in the food industry. Fragmented nature of the Indian
market will cause more problems.
Less Proactive
Nestle being a company is less proactive they create changes
but usually unless competitor doesnt change they doesnt adopt a change.
Limited Distribution Channel
Nestles major & bad factor is the limited distribution channel because they
distributes their products to whole seller in their own factory vehicles as compare
to their major competitor they have limited distribution channel but they are
maintaining to penetrate the market as far.
Mature markets
Nestle is entering into markets that are already mature and can give a tough
competition to new entrants

Supply Chain
complex chain management





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External Environment
Opportunities
The external environmental analysis a firms new opportunities for profit and
growth. Nestl has a great opportunity for expanding its milk products because
India is the seventh major milk producer in the world with annual output more than
22 billion litres.
Support from Foreign Investors :- Government support foreign investors to
invest in India which eventually is the opportunity for Nestle.

Enhance Distribution Channel :- Nestle should be working on the
distribution network to enhance the companys network against its
competitor.

Changing Social Trend :- Consumers in urban areas now adopt Western
lifestyles, especially the younger generation which is hugely influenced by
the Western media. Younger consumers tend to follow Western life style.
There was an increase in demand for Nestle products over the review period.

Health conscious :- Increasing health and hygiene awareness among people
has greatly increased sales of nestle products. Both the government and the
media have started health awareness campaigns to make Indiais realizes that
consumption of Nestles hygienic products is as essential as eating food.
Fruit/ juices & eatable products are doing very well in both urban and rural
areas.

Market growth :- Nestle market expands very fast. A new research proves
that in future every person use 85.5 liters juices per years & uses more
hygienic products because of the low hygienic conditions of the
environment.

Health-based products- transition to Nutrition Company
Strong economy- developing & emerging economics
Possible new markets- Potential to expand to smaller towns and other
geographies


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Threats
Adjustments in the external environment present threats to a firm. For an example,
shifts in consumers preferences.
The major threats to Nestls products is Unilevers Walls, a famous ice-cream
brand. It is distributed nationwide and has total control within the local market.
Besides, economic slowdown can reduce demand, and inflation is getting higher
and higher causing the purchasing power of consumers is decreasing day by day.
- Government Regulation :- They face problem if government employ taxes
on them which force them to raise the price of their product.
- Increase in Competition among Competitor :- Competition among
competitors is major threat to Nestle which can be controlled by the help to
retaining more customers & making more loyal ones.
- No Entry Barrier :- There are no many entry barriers so a large numbers of
local companies enter in various Nestles product market.
- Inflation rate :- Increase inflation rate very fast .In 2008 expected inflation rate
23.3%
so with the increasing inflation rate the prices will go down which creates the
market slump, so inflation is very true bad factor which can affect Nestle.
- Unfavorable Changes in Consumer Demand :- With the increase in
the competitors there will be a increase in the number of related products which
eventually harm the Nestles market. Due to which the consumers demand pattern
fluctuate.
- Loss of Market Share :- When the market saturates the loss of the
market share of Nestles products is there major threat to Nestle.
- International Marketing Standards
- Changing Consumer Trends
FMCG (fast moving consumer goods)
Increased consumer spending on consumer durables resulting in lower
spending . Performance of the FMCG sector has been lackluster in past 2-3
years
- Sector Woes
Rising prices of raw materials and fuels
Increasing packaging and manufacturing costs




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Environmental Scanning of Nestle :-
Environment refers to all those forces or factors that influence various decisions of
the firm. The business environment can be broadly divided into two groups
A. Internal Environment
B. External Environment
I. Micro Environment
II. Macro Environment

A] Internal Environment

Nestle has a rich working culture which motivates its employees to serve
best to its customers with the help of the variety present in their product
range.
Nestle has included the benefits of the employees in the goal statement of
the organization as the management of the company strongly believe that the
productivity, quality and the dependability will reflect on the product only if
the employees will take care of all these factors.
Different departments of the company work to contribute in the growth of
the organization and these departments not only keep the customers needs
and demand in mind but also keep the same type of attention for the internal
customers of Nestle.
The company believes if the internal market of the company is fully satisfied
than only the internal market will be able to serve to its customers and able
to understand their needs and able to manufacture the products which can
fulfill these needs.
Nestle has a strong top management team which runs on strong values and
principles of the company. The values of the company give strong focus to
integrity, loyalty and team work. The efficient top management of the
company is able to run finance, operation, marketing, logistics, sales, and
research and development departments with great success which ultimately
leads to the fulfillment of the goal of the organization.



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B] External Environment - I. Micro Environment
II.Macro Environment


MICRO ENVIRONMENT

The micro environment of Nestle includes-

Customer

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.

Nestle has an extensive marketing network to figure out the target customers, it
has marketing specialist to understand the market place and the customer needs,
secondly to is spending a lot to figure out the customers preferences regarding
the substitutes of its products in order to bring the customers on board and
retain them. Nestle has an extensive market share, due to the reason that its
customers are brand loyal and do not compromise over quality and same is the
case with the companys quality assurance (QA) team. One of the principle
strategies that nestle utilizes is to produce differentiated products for each age
group in order to get a high market share and preferences over other.

Competitors

Competitors also play a vital role in effecting the way in which the organization
operates, competitors are basically the rival firms in the same market which is
providing the same product, in the case of nestle the are many competitors since
there is a wide range of products offered by nestle in India. Olpers came after
nestle with a brand new strategy in order to attract new customers and some of
the customers from nestle but did not manage to accomplish it completely since
nestle had already gained and retained many of its customers and faces a
relative low level of competition.



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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.
Although Nestle is leader in packaged food industry of Malaysia but the other
competitors who are giving tough competition to Nestle are
Petra Foods Limited
Chocoladefabriken Lindt & Spruengli AG
Yeo Heap Sang Limited
Mail Dairy Industry Co., Ltd

Suppliers

Suppliers, which are the individuals or the firms that provide resources required
by a company to conduct and maintain its operations in order to produce an
ever lasting range of goods and services in which organizations/companies
specializes. Nestle has an extensive network of suppliers like packaging
suppliers, labor supplier, vendors that over looks after its machinery and finally
the specialized people like engineers and the policy makers that helps to run the
business most efficiently at the minimum cost.

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 we can divide the supplier of Nestle 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

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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 we 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 an 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. labor 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.

Marketing Intermediaries

The market intermediaries of the company help to advertise, 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.



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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.

Be the leading multinational company in food, nutrition and wellness.
Produce and sell world-class products of the highest consistent quality,
reliability and convenience based on business excellence principles
throughout our operations.
Maximize the use of good quality local raw materials
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.
Protect the environment by being committed to environmentally sound
business practices, and taking into account the need to preserve natural
resources and save energy.
Guarantee that all products manufactured, imported and distributed by
Nestl Malaysia are certified HALAL by authorized Islamic certification
bodies.
Deliver shareholder value through the achievement of sustainable and
profitable long-term growth.

Adhering to the above vision statements the company has been able to maintain
the marketing and branding unique and ahead of the competitors.







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MACRO ENVIRONMENT





Political
Political factors include a country or governments regulations and legal issues and
rules which a firm must follow. For example, Nestls famous brand Maggi.
The product stay within the law in all countries including being aware of
legislation health and safety, commercial standards, consumer protection and trade
description.
If government imposes heavy taxes on the industry then it badly effects the
industry growth. The taxes impose is from government side and it varies from
industry to industry.
FMCGs have to pay heavy taxation, changes in any taxation system can badly
effect Nestles productivity & sales(profits).
Nestles some product has like butter andcream which has more taxes.


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Economical
Economic factors such like economic growth, exchange rate and inflation rate will
influence potential customers purchasing power and the firms cash flow.
During recession, customers have less disposable income, demand for Milo might
drop in the market.

Social -cultural
Social factors comprise the cultural aspects and demographic of the external
macro-environment. These factors influence customer needs and potential markets
size. The society is more aware of health conscious nowadays, Nestl can build up
Milo as a new fashionable drink like 100 plus in the fitness industry.
Today people are more health conscious so Nestle products by identifying this
need of the people they are also producing health conscious products with more
elements of pure & quality, which create the market for Nestle & trend of its
products in the market. However when launches it Milk in 1988 back then it was
not so much popular but now a days people are more health conscious.
- High Demand

People in demanding high quality at reasonable price

- Change in population in age and consumer expenditure

Population aged above 65 is increasing
Consumer expenditure also increasing from year of 2009 to 2012. Among
the consumer expenditure, only a parts are spend on food and cause
decreasing

- Successful of the private-label brands by several of Europe's leading
supermarket chains

The trend is the shift away from branded food and beverages towards cheap
non-branded foods and cause price competition in key segments of Nestle



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Technological
Technological factors can reduce barriers to entry, improve products quality and
influence outsourcing decisions.
Advance in science allows Nestl to improve its product such as Milo, the
company can add energy and healthier formula to Milo.
Spending on R&D is long term investment for any organization. Nestle has R&D
department and Nestle total spending on R&D 70 million because with true
technological changes this research & development cannot takes place. So with the
help of technological changes Nestle can enhance its products & diversify its
portfolio of products.
New communication technology .All the modern as well as traditional ways of
communication are being adopted by Nestle including own emails, letters, faxes
and monthly visit in different offices of Nestle for better communication among
customers. Nestle has also established own web site which can be visited any one
for most recent news innovation and activities being taken in the organization with
the technological change adoption the whole organization can be increased.
Legal

Healthy and safety law
Advertising law
Employment law
Consumer protection
Business regulation
Pollution control

Environment

Climate change
Pollution prevention
Air emissions
Natural resources
Water resources
Energy conservation
Recycling wasted
Reducing wasted

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PORTER'S FIVE FORCES ANALYSIS
Michael E. Porter developed Porters five forces in 1979. It is a framework that
helps marketer to differentiate a competitive environment.

Threat of substitute products
An analysis of the threat of substitute products will identify the consumers of a
company might switch their purchasing alternative. There is a tendency for food
and beverages manufacturers to produce broad range of products. These products
may compete with one another to gain market share and become substitute for each
other.
Nestl Koko Krunch Cereal can be the substitute for Nestl Nesvita cereal drink
since both of them are intended for breakfast consumption.
Nestl is not offering all kinds of food and beverages, those unoffered kinds may
act as the substitutes for the Nestls products. For example, Nestl has coffee in
its product lines which is Nescaf, the substitute for it can be the soft drinks which
are not in the portfolio of Nestl. In this case the substitutes are very broad.

Bargaining power of suppliers
An analysis of the bargaining power of suppliers will identify the changing price,
quality and service of suppliers without consequence. Supplier power can be
different due to seasonal or economic cycles. Supplier power is increasing as many
of the food processing companies are not producing their own raw materials.
Nestl itself gets material in the form of raw or semi-processed directly from
farmers and trade channels.
By considering the number of suppliers in the industry and the switching cost, the
dependency to a particular supplier can be reduced. Nestl has operations in many
countries throughout the world, if one supplier unable to offer good price for
Nestl, it can switch to other suppliers.
The bargaining power of supplier depends heavily on the strength of the
companys brand. Big companies such as Nestl can take advantage in bargaining.


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Bargaining power of buyers
Food processing industry is very broad and rivals can come out with numerous
product selections. When the companies step into the maturity stage, they will have
even more products provided to strengthen the companys brand.
Nestl Milo has strong market share and remains a constant favourite amongst
Malaysia consumers. In order to further strengthening the brands image, the
company added Milo Gold to its product range to keep the consumers loyalty
towards the product.

Threats of new entrants
An analysis of the threat of new entrants will identify entry barriers within an
industry. Industries with high barriers to entry will face low risk from new
competitors than an industries with low barriers to entry.
The competition of ice cream business in India is very small. This could create
chances for other international ice cream brand to penetrate their products to
compete with Nestl in India. The major substitutes of Nestls ice cream would be
Walls ice cream and Hico ice cream.

Competitive rivalry within an industry
Rivalry among competing firms is the utmost of the five competitive forces. Firms
within the same industry are competing with one another to gain customer share to
increase profitability. The competitors are of roughly equal size which can make
the competition even stiffer. They will attempt to gain dominance over another.
Nestl and General Mills have joint ventured for breakfast cereal market. By
having such joint venture these two companies can achieve better success instead
of competing with each other.





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CHAPTER 4

Key success Factors of Nestle
Conclusion
Bibliography






















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Key Success Factors of Nestle

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.

Continuous Improvement Programs: Continuous improvement includes
innovation in launching new products but equally important is
improvement in quality to be better than competitors, improvement in
distribution channel which will help Nestle to be at the top.

Regionalization: the regionalization means the regionalization of
products and raw resources procurement which means that the company
will run like independent entity in each divided region with its own
targets and resources.

Development of People: Every companys 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 which helps and allows you to
grow and use its resources and at last the protection and responsibility
regarding environment.












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Conclusion
In conclusion, macro environment can and often will affect the success of any
business. The Macro environmental analysing includes the company operating and
general environment such as demographic, economic, natural, technological,
political and social cultural factors.

The micro environment includes companys internal environment. It influence
marketing decision making. Customers, competitors, intermediaries, suppliers,
government, financial community, local community, pressure groups, value chain.

In conclusion we can say that whether the company is international or local both of
the organizations have strengths & weaknesses which lead them to avail
opportunities & remove threats. So for nestle it important or recommended that
they should pay more attention to their weaknesses &threats in order to compete
for a long time & maintain the sustainable competitive advantage. Nestle is doing
so far in a good way they compete with their competitor with full & strong
response. They are proactive but less reactive which is not good for the firms or
organizations that are reactive.
Nestle is a market leader
Its price is high against its competitors but it matches its quality with its
competitors
The worlds largest food and beverage company with its mission to provide
healthier lifestyle
Can easily find Nestl's product from any retailer shop
It is a Multinational company as compared to its competitor Unilever which
has a lot bigger area of operation and also manufactures food items. But it
has established a strong footing for itself in the food industry. Apparently,
there are no loop holes in the working of the organization, but still some
areas require more attention.
Management has designed rules and regulations which are supposed to be
followed by everyone. Policies have been formulated for major and minor
issues both. Relationship with the employees is maintained at a cordial level.
Employees work with commitment and dedication to achieve the best for the
organization. Job satisfaction soars at a high level.





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Bibliography

http://www.nestle.in/
http://en.wikipedia.org/wiki/Nestl
http://www.ukessays.com/essays/business