Nestl

Pakistan

Table of Contents
History....................................................................................................................3
Global Structure3
Organization Structure.....3 3.1.
Human Resource Department...4 3.1.1.
Shared Services4 3.1.2.
Centre of Expertise..4 3.1.3.
Business Partners.4 3.2.
Brands Department5 3.2.1.
Dairy.5
Mission Statement.5
Vision & Strategy..6
Core Business Activities...6
Consumer Service.6
Corporate Social Responsibility..7 8.1.
Social Investments.7 8.2.
Creating Shared Value..8
Human Resource Function..8 9.1.
Shared Services (SS).8 9.2.
Centre of Expertise...8 9.2.1.
Hiring & Recruitment...9 9.2.2.
Training Programs....9 9.2.3.
Remuneration....10
Interview with the Human Resource Manager....10 10.1.
Tasks & Responsibilities of the Manager....10 10.1.1.
Chain of Command and Span of Control.............10 10.1.2.
Strategic Vs Operational Roles..10 10.1.3.
Role as a Business Partner..11 10.1.4.
Ensuring Coordination & Integration.......11 10.1.5.

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Training & Development of Employees11 10.1.6.
Ensuring Motivation & Communication with Employees......12 10.1.7.
Nestl as a Global Entity.12 10.1.8.
Providing Guidance.12 10.2.
Observations & Evaluation12 10.3.
Application of Mintzbergs Roles......12
Interview with the Category Manager...13 11.1.
Tasks & Responsibilities of the Manager.13 11.1.1.
Sales Situation in Different Regions...14 11.1.2.
Market Research..14 11.1.3.
Shopper Segmentation.14 11.1.4.
Promotion Design.14 11.1.5.
Determining Stock outs...14 11.1.6.
Penetration Data Analysis...15 11.2.
Observations & Evaluation15 11.3.
Application of Mintzbergs Roles..15
Observations & Findings.16
Exhibit 117
Exhibit 218
Exhibit 319
Exhibit 420
Exhibit 521
Exhibit 622
Exhibit 723
Exhibit 824
Exhibit 925
Exhibit 10..26
Sites Used..27

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History
It all began from a little venture by a Swiss pharmacist, Henri Nestl, to develop an
alternative for infants who cannot be breastfed, with a combination of milk, wheat
flour, and sugar. Not only did this formula help reduce infant mortality from
malnutrition across Europe, but also formed the basis for the worlds largest food and
beverages company. To this end, Nestl soon added chocolate, milk, and Nescafe
coffee to its line of items through mergers and research. Nestl kept increasing the
length and width of its product lines to cater to a wide range of consumer needs. As
Nestl was making its operations global, it found an eager market in Pakistan. Nestl
has been serving Pakistani consumers since 1988, when its parent company, the
Switzerland-based Nestl SA, first acquired a share in Milkpak Ltd. Few of the
milestones achieved by Nestl Pakistan and Milkpak Ltd. are mentioned in Exhibit
1.

Global Structure
At the international level, the world is divided into four parts, each reporting to the world
headquarters in Switzerland. Nestl employs bottom-up as well as top-down
reporting. For yearly budgeting, each territory reports next years forecasted sales to
its Area Manager who after gathering all these reports sends a summary for his area
to the Regional Manager. Regional and Zonal Manager do the same process until
National Sales Manager has the forecasted sales for the entire country. Target sales
are then reported down to each zone, from where it is sent to each region, and the
process continues until each territory has its target sales (Exhibit 2).

Organization Structure
Nestl Pakistan follows a flat, matrix organizational structure (Exhibit 3). The
departments are divided function-wise and product-wise. All the products use different
functional departments, and all the functional departments have specific product
departments within them. The span of control is wide, as each department head has many
direct and indirect reporting relations with his subordinates. Also, as in a pure matrix
form, nearly all employees have two or more departments to report to, directly or
indirectly.
The Managing Director of Nestl Pakistan reports directly to the Head Office in
Switzerland, and gets guidance and objectives from them. Directly under the Managing
Director are different functional departments:

Business Executive Managers

Head of Human Resource Department
Head of Sales Department
Head of Supply Chain

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Head of Food Services Department

Head of Technical Department
Head of Finance Department
Head of Corporate and Legal Department

The following departments have an indirect reporting relationship with the Managing
Director:
Head of Nutrition
Head of Waters
UNDP Project
The first two departments are required to report directly to the Head Office, while the
UNDP Project comes under the United Nations.
Since this paper aims to analyze the Human Resource Function and the Brand
Function in detail, the following is the departmental structure of the aforementioned
functions.

Human Resource Department

The Human Resource Department is subdivided into three branches:

Shared Services
Centre of Expertise
Business Partners

Shared Services
Shared Services are responsible for data and record collections of all the employees of
Nestl Pakistan. They handle the payrolls, division of provident funds, medical
allowances, travel allowances, and all other administration of the employee funds.

Centre of Expertise
The Centre of Expertise is the department responsible for recruitments, remunerations
and organization development through Nestls training programs, both local and
international.

Business Partners
The Business Partners form the link between different human resource activities of the
organization, and the functional departments they are working with. The Human
Resource ManagerCommercial is a Business Partner for Sales and reports to the Head of
Sales Department. He is supposed to form a link between the Human Resource
Department and the Sales Department, making sure all decisions made by the Sales
Department are in line with the Companys goals and policies.

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Brands Department
The department for Brands has been subdivided into departments for each product line
that Nestl produces. Each of these product lines comes under a Business Manager, who
has two Brand Managers under him. Each Brand Manager is responsible for specified
products under a certain product line, and has two Assistant Brand Managers reporting to
him.
In each of the units that are under the Business Managers, there is a Category Manager,
who is equivalent in position to the Brand Manager. A Category Manager reports
indirectly to the Business Manager, and directly to the Head of Sales Department.

Dairy
Dairy is the chosen product line for the project. Dairy is divided into four different
product lines, which are further divided into units each headed by a Business Manager.
The product lines of dairy are:

Child Nutrition
Tea Creaming
Adult Health and Wellness
Chilled Dairy

The first two are responsibilities of one Business Manager and the last two of the other.
The Category Managers job is to form a link between the Brand Manager and the Sales
Manager from the Sales Department.

Mission Statement
At Nestl, we believe that research can help us make better food so that people live a
better life.
Good Food is the primary source of Good Health throughout life. We strive to bring
consumers foods that are safe, of high quality and provide optimal nutrition to meet
physiological needs. In addition to nutrition, health and wellness, Nestl products bring
consumers the vital ingredients of taste and pleasure.
As consumers continue to make choices regarding foods and beverages they consume,
Nestl helps provide selections for all individual taste and lifestyle preferences.

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Research is a key part of our heritage at Nestl and an essential element of our
future. We know there is still much to discover about health, wellness and the role
of food in our lives, and we continue to search for answers to bring consumers
Good Food for Good Life.

Vision & Strategy

The Nestl global vision is to be the leading health, wellness and Nutrition Company in
the world. Nestl Pakistan subscribes fully to this global vision along with its
national vision to become a Rs. 100 billion company by 2014. It envisions
to:

Lead a dynamic, motivated and professional workforce.

Meet the nutritional needs of consumers of all age groups from infancy
to old age, from nutrition to pleasure, through an innovative portfolio of
branded food and beverage products of the highest quality.
Deliver shareholder value through profitable long-term growth, while continuing
to play a significant and responsible role in the social, economic and
environmental sectors of the country.
Nestl milk collection and agri-services will continue to play the primary role in
development of the dairy sector in rural Pakistan.
Fully integrated systems (Nestl Pakistan, suppliers, customers) ensure efficient
business processes.
Non-strategic activities and products are outsourced or discontinued.

Core Business Activities

Nestl Pakistan is in the business of manufacturing food items. It seeks to provide
products that have quality, taste, variety, convenience and nutrition. It caters to the needs
of infants to young people, providing foods for both nutrition and pleasure. It has several
product lines, namely:

Milk, dairy and chilled dairy products, e.g. Milkpak, yogurts;

Beverages, e.g. juices;

Bottled water i.e. Nestl Pure Life Water;

Baby food, e.g. Nido;

Prepared meals, e.g. Maggi noodles;

Breakfast cereals, e.g. Kokocrunch, Honey Stars and Chocolate and

confectionary, e.g. Kit Kat.
Apart from that, Nestl also provides food services, i.e. food and beverage solutions, to
out-of-home establishments, including restaurants and hotels. The Boston Consultancy
Group Matrix in Exhibit 4 analyzes Nestls dairy products in terms of their market
growth rate.

Consumer Service

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Nestl believes in providing efficient consumer service as part of its strategy. And this
consumer service is not only limited to handling consumer complaints, rather it revolves
around building a long-term holistic relationship with consumers.
In fact, for Nestl, the organization chart (Exhibit 5) is upside down. The consumers, and
not the managers, lie at the top of the hierarchy. Thus all the activities aim to provide
timely and efficient response to consumer needs and fulfilling their wants in the best
possible manner.
Nestls advanced consumer contact management system CONSO+ helps it in customer
relationship management, and forging close, long term and trustworthy ties with its
consumers.
Apart from the more formal lines of communication, the company also has the human
element-the field staff, which remains in contact with the consumers.
Thus efficient consumer service goes a long way in ensuring consumer loyalty, as well as
guaranteeing higher revenues per consumer, from more consumers.

Corporate Social Responsibility

Nestl understands its role as a corporate entity in the socio-economic demographics of
Pakistan, for which it performs social investments and realizes and promotes the positive
impacts while at the same time restricts the negative impacts that occur as a result of its
operations in the value chain.

Social Investments
Nestl Pakistan complies with Environment Act (1997), and tries to ensure that at every
stage of its operations, the environmental impact is minimal. All Nestl factories are ecoefficient (more production for less resource consumption, waste, and emissions) and have
environment committees that manage and review environment issues.
Nestl Pakistan responded immediately to the earthquake that struck Northern Pakistan in
October 2005 by providing its infra-structure and resources to work in the affected areas
in collaboration with Pakistan Air Force to distribute goods worth over Rs. 20 million.
Nestle and its employees together also donated about Rs. 36 million for the rehabilitation
process.
Nestl Pakistan has wide range of activities under its social investment programme. A
brief outline of each activity is as follows:

Nutrition program for mothers and children

Financial support to victims of natural disasters
Well and hand pump installation projects
Help centre for farmers
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School rehabilitation and education advancement

Research and development initiatives

Creating Shared Value

Nestl realizes that every business is dependent on the society it operates in. For a
business to prosper, its imperative for the society to be a part of that success. Therefore,
Nestl creates shared value at every step of its value chain under the framework
demonstrated in Exhibit 6.

Human Resource Function

Shared Services (SS)
As explained in the organization structure, this department is responsible for maintaining
the data and records of the employees to decide about their pays, allowances etc. The
department is also supposed to carry out the performance appraisals (PA) with the help of
the line managers. The SS sets guidelines and provides the line managers with tools,
systems and processes to evaluate their subordinates. Based on these evaluations, pays
and remunerations are decided. (Remunerations are done by the Centre of Expertise). The
pay and compensation strategy is tied to the achievement of the business objectives and
helps them build a growth-oriented culture.
Apart from payrolls, SS is in-charge of administration of employee funds. It is supposed
to decide that which employee gets which fringe benefit, and to what extent, for example,
medical allowances, travel allowances etc. The provident funds for employees are also
calculated by SS.
The SS is a vital department for maintaining employee motivation and loyalty to Nestl.
It needs to be ensured that all data collection and PAs are done correctly, and in line with
the procedures and guidelines set by the organization. It also needs to give enough
allowances and leverages to the employees to allow them to balance their personal and
professional life.
Nestl believes that employees private and professional life should have a good balance.
In the same spirit, Nestl encourages flexible working conditions whenever possible and
encourages its employees to have interests and motivations outside work.
This not only maintains satisfaction with the job, it also increases loyalty, productivity
and provides motivation for better performance in the future.

Centre of Expertise

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The Centre of Expertise is the department in Human Resource Function which is
responsible for recruitments, organization development (training programs) and
remuneration.

Hiring & Recruitment

Hiring and requirement is the most important task performed by Centre of Expertise. It is
the process on which the entire companys future and performance relies upon. The
Business Partners are supposed to communicate the staff requirements of different
departments, and set the job description and requirements. Contacts with universities and
recruitment events are maintained to have good visibility of the Company and
recruitment sources.
The recruitment office looks for three key characteristics: knowledge, personality and
motivation. For managerial positions, specific leadership qualities and business acumen is
required. Even when promoting employees from within the organization, it is their role to
keep an eye on valuable candidates.
Those who meet the essential requirements are then evaluated through a series of
screening tests, interviews and group discussion sessions to gauge their suitability for the
job. It is extremely important to hire the right person, not just for Companys objectives,
but to help integrate newcomers in the organization so that their skills and behavior can
merge smoothly with the company culture.
At Nestl the recruitment is done keeping the objective of diversification in mind. The
organization has a global mindset which involves diversity to encourage and foster
creativity and new ideas, which forms the unique selling proposition of a business.

Training Programs
Training is seen as an ongoing process. It doesnt only involve training sessions and
lectures, but day-to-day interactions with the superiors and fellow employees, absorbing
their knowledge and ideas: guidance and coaching by managers is a given. Knowledge
also comes through the tasks assigned: simple learning-by-doing and on-the-job training.
Apart from that, Nestl is committed to enhancing employee skills and competencies
through formal training programs. These are selected according to individual
requirements and the job they are working for. The candidates are selected based on their
performance, potential and personal development goals and recommendations come from
the Head of Human Resource Department and the Business Partners of respective
departments. The Centre of Expertise is responsible for designing and providing the
requisite training once the candidate and his needs are identified.

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The programs are not just limited to functional specific training, for example sales
training, but also for augmenting interpersonal skills and image building, in short, the
softer skills.
The training could be local, regional or international, based on need and performance. At
the International Training Centre in Switzerland, the trainee has the opportunity to meet
managers and leaders from all over the globe, getting training sessions from even the
CEO, Peter Brabeck-Letmathe.

Remuneration
Nestls remuneration is benchmarked against other organizations and surveyed on a
regular basis to ensure that it remains competitive and fair. The policy needs to be framed
keeping local market, individual performance, skills and potential for development in
mind. This is what they call the Total Competitive Remuneration.
The managers task is to ensure that the remuneration structure facilitates the
implementation of flat organizational structure and be flexible so as to be able to adapt to
the evolution. It is also the managers task to evaluate remuneration of each staff member
taking into account her/his professional performance and her/his specific responsibilities.
These specialists need to know about stock options, and how to compare and compensate
the employee payroll system. They need to make regular changes in their strategies and
find new ways of operating to increase the efficiency of the whole organization. This
helps ensure not just the companys growth, but motivation for individual growth as well.

Interview with the Human Resource Manager

Name: Omar Hassan Janjua
Designation: Human Resource Manager-Commercial

Tasks and Responsibilities of the Manager

Chain of command and Span of control
Mr Janjua is a two boss manager in the matrix structure. He has a dual chain of command
and reports to the Head of Human Resource Department and the Head of Sales
Department. Two people report directly to him. He also shares targets with the
recruitment centre and can be held accountable for its actions. He comes to the forefront
as the first line of contact person for the Shared Services and recruitment.

Strategic Vs Operational Roles

He is more involved in strategic decision making as opposed to making tactical and
operational decisions. His role can be interpreted as a link between the departments and
the centre.

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The Human Resource Department is responsible for providing tools, processes and
procedures to the managers and then its their responsibility to apply it according to the
demand of the situation. He ensures those tools are being used and implemented
effectively.

Role as a Business Partner

His tasks and responsibilities can be clearly explained with his position in the business as
a Business partner. A business partner is a link between the whole of the organization and
the Human Resource Department. His main focus is on coordinating and integrating the
strategies and plan of actions of different departments in line with the whole organization.
He ensures that the growth objectives and plans of the departments dont come into
conflict with the mission of the organization as a whole. The Centre of Expertise is
concerned with making changes and finding new ways of operating to increase the
efficiency of the whole organization. Mr Janjua has to be careful in maintaining a balance
between innovation and business objectives.
His role is not transactional and he is not involved in the paper work For example, if there
is a need to recruit people in a department, he doesnt advertise the job description
himself. Instead he communicates the needs of the particular department to the Human
Resource Department. He then actively participates in the selection process i.e. selects
the right person from a pool of applicants through interviews and assessments.
In contrast to the Centre of Expertise which requires specialists, Mr Janjua is a generalist;
he doesnt have to be an expert but has to be aware of everything that is going around in
the organization.

Ensuring Coordination & Integration

Different departments come up with different plans which need to be evaluated not only
on terms of finance but also in terms of the business entity as a whole. This places a lot of
emphasis on the decision making ability of Mr Janjua. Authority is delegated so that
others are involved in making changes and plans but he has to remain involved at all
times with the concerned department. He has to remain continuously in touch with the
departments and has to remain updated about their future growth objectives.
Communication has to be ensured on a regular basis.

Training & Development of Employees

Mr Janjua placed special emphasis on the need for training in an organization so that the
employees can handle their delegated responsibilities well. Training can be seen as a tool
to support them in their tasks and responsibilities and to motivate them to perform
outstandingly. The Organization Development Department is responsible directly for the
training needs of the employees. They hire trainees and then Mr Janjua communicates the

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objectives of the training plan to the trainees. For example, should the training be
provided in interpersonal skills or should it be provided in specific functional skills. He
then helps in identifying and nominating a pool of people who can benefit and implement
the training practically in the near future so that the benefits are maximized for the
organization as a whole.

Ensuring Motivation & Communication with the Employees

After the line manger he is responsible for ensuring that the staff is motivated and
committed to their work. He believes in keeping an interactive relation with the
employees and to intervene anytime there is a conflict between two parties. He has also
been involved in conducting road shows and meetings to encourage a spirit of
participation and belongingness in the employees.

Nestl as a Global Entity

Nestl is a global organization so ensuring that the operations and objectives of Nestl
Pakistan are in coordination with the global image is important. Mr. Janjua keeps this in
mind while evaluating projects and plans before implementation. Like other training
projects, he nominates people, for Nestls international training programmes.

Providing Guidance
His role also focuses on providing guidance to the employees when needed e.g. that when
opinion surveys had to be filled out for all the employees; he provided them with an
orientation to ensure there were no confusions as regards to the survey.

Observations & Evaluations

It can be evaluated from his interview that he has the legitimate power and a direction to
ensure coordination and consistency in the organization. He has to optimize and maintain
a balance. He can be referred to as following a middle of the road management system to
keep a balance between control and delegation.
His functions basically include decision making and planning (to evaluate plans), leading
(to ensure motivation and good communication) and controlling. As he can be seen as a
middle manger, human skills are important for motivating, Conceptual skills are
necessary to ensure consistency between objectives of different departments and the
organization as a whole and some technical skills to provide guidance when needed.

Application of Mintzbergs Roles

Role
Interpersonal
Figurehead

Description
He is involved in the UNDP project in collaboration with Nestl for the
empowerment of women in rural areas. He intervenes in case decisions
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Leader
Liaison

are being taken without keeping the organization objectives in mind.

He is constantly involved in motivating and ensuring good
communication with the employees and ensures they have a sense of
direction and they feel part of the organization.
His role doesnt directly deal with maintaining external relations. But
in case of selection and assessment he can make better decisions with
the help of his contacts.

Informational
Monitor
He has to monitor that the plan of actions and strategies of the
departments are in line with Nestls vision i.e. he has to ensure
consistency and coordination.
Disseminator He communicates the recruitment needs of other departments to the
Human Resource Department.
Spokesperson He communicates the needs of the training programmes to the trainees.
He acts as a link between the external environment and the
organization.
Decisional
Entrepreneur He is continuously involved with different departments while making
future plans or changes in the way things work.
Disturbance In order to ensure that departments objectives are in line with the
Handler
organization, he may have to take drastic steps as he forms the link
between the centre and the subunits. He may have to take decisions on
a short notice as he is actively involved in decision making processes.
Negotiator
He intervenes in case of conflicts between two parties.
Resource
He matches the supply of labor with the demand of different
Allocator
departments. He is also involved in the selection process of the
potential employees.

Interview with the Category Manager

Name: Fuad Ghazanfar Saqib
Designation: Category Manager

Tasks and Responsibilities of the Manager

The Category Managers job is a transitional one. He identifies different channels and
shoppers (who ultimately purchase the product). Nestl Dairy provides its products to
approximately 270,000 shops within Pakistan alone. There are 8-9 channels through
which products are provided to customers:

Large groceries
Super markets
Small stores
Khokhas ( cigarette/ pan shops)
Bakeries

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Pharmacies
Wholesalers
Rural channels.

Sales Situation in Different Regions

Mr Saqib is responsible for the daily sales situations in different regions. By reviewing
the daily sales situation in different regions of the country, he analyzes which regions are
worthy of more effort, thus assisting in formulating tactics helpful for the companys
growth. Moreover, a daily analysis also helps in evaluating whether the adopted strategy
is able to achieve the desired results.

Market Research
Mr Saqibs job description also requires him to carry out market research on a regular
basis. This helps in identifying the changing consumer demands and tastes. This also
enables the company to review their strategy so that it synchronizes with the companys
goals and objectives. In this era of fast changing trends it has become almost impossible
for an organization to survive without being aware of the consumers needs. Market
research helps to serve the organizations purpose in this regard.

Shopper Segmentation
An interesting task that is performed by the Category Manager is to analyze the shopper
segmentation i.e. evaluating various customers according to their status, nutritional needs,
age, gender etc and which channel are they prone to buy from. For instance, a huge
percentage of population buying from the grocery stores such as H. Karim Buksh and AlFatah are working mothers. Thus products that cater to the needs of working mothers
should be distributed to various grocery stores. Moreover, keeping in view the short
shelve life of dairy products it becomes vital to distribute appropriate products to each
channel, which meet the needs of each channels ultimate consumers.

Promotion Design
Moreover, the Category Manager also being responsible for analyzing the success of
promotional activities has to evaluate the pre-promotion and the post-promotion scenario.
This enables him to analyze the potential of a particular promotional activity and the
impact it has on the sale of products, thus making certain that the promotional activity is
not detrimental to the profitability of the product.

Determining Stock outs

The Category Manager makes sure that there is no instance of stock outs at each channel
the product is being distributed because a stock out damages the companys reputation
and sales. For instance, if a consumer doesnt find a Nestl Milkpak of 250 ml, he will

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buy Olpers or Haleeb. Thus, its pivotal for the companys profitability and success to
ensure that no stock outs occur. Mr Saqib has to figure out the source of the problem.
He says,
The strategy is not to find the solution to the problem but to find the person who
has the solution. The idea is then to sit down and come to a mutual decision on
how to go about solving it. One should have an open mindthe fault can be at
your own end too.

Penetration Data Analysis

This task requires Mr Saqib to pin-point lapses in different situation across different
channels and get to the root cause of the problem.

Observations & Evaluations

The Category Manager is not directly involved in the planning management function.
Though he is involved in collecting data that helps develop strategic plans but his role in
the planning function is limited.
The Category Managers role as an organizer is essential. He needs to allocate human and
non-human resources to various channels. To ensure that no stock outs occur he needs to
arrange his resources in a manner so that each product is available at each channel.
Moreover, an excellent coordinator and communicator are essentials of a Category
Manager. He coordinates with the sales, finance and the marketing department
constantly. Moreover, to ensure that everything is running smoothly at each channel he
needs to maintain regular contact with the relevant person at each channel.
Since there are not much people working under Mr Saqib, the leading management
function doesnt really come into play. But still he has to guide people on how to analyze
each area and how to collect the data relating to each region.
The Category Managers role as a controller is vital. He makes certain that each activity
being carried out is in conformance with the organizations requirements and standards.
He has to ensure that efficient allocation of funds is being made. Moreover, he has to
control human resources so that each individual is working in the best interest of the
organization and for this purpose he provides guidelines to each employee.

Application of Mintzbergs Roles

Role
Interpersonal
Leader

Description
Though the Category Manager is not directly leading a group of people
but he has to deal with subordinates in the sales and distribution
department. For this purpose he provides them guidelines for various

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Liaison

activities they are required to carry out and is in continuous contact

with them.
The Category Manager has to maintain good relationship with the
distribution department and with external retailers for the smooth
running of the business operations. Moreover, maintaining a good
relationship enables to gather relevant and significant information that
bolsters the organization growth.

Informational
Monitor
The main task of the Category Manager is to analyze the various
factors affecting the consumer demands. For this purpose he seeks
information from the relevant personnel at various channels. Moreover,
he also coordinates with the sales and distribution department to gather
information about the sale of a particular product.
Disseminator As a disseminator, the Category Manager communicates to the
Business Manager all the information gathered from either the
personnel at various channels or the personnel working in the sales and
distribution department.
Decisional
Disturbance In times of difficulty, the Category Manager takes steps to take the
Handler
organization out of trouble. For instance, when Olpers came into the
market, it turned out to be a strong competition for Nestl. The
Category Manager analyzed the strategy adopted by Olpers and took
appropriate steps to counter it.

Observations & Findings

Nestl is the pioneer company in introducing several products in this country. It is a
leading multinational corporation. Upon studying its operating practices, we concluded
that many of the principles that we studied in class have been applied by Nestl.
However, the efficacy of these principles is completely dependent on the way in which
they are implemented and the context in which they are applied. Nestl managers have
carefully evaluated their environment, the challenges they are facing and the situation
they are in, and then they have chosen the practices they employ. For example, for many
companies, matrix organization presents the solution to integrating the product
departmentalization and the cost savings ensured by the functional approach. However,
Nestl has implemented the matrix successfully by having several liaison and
coordinating officers in between such as its Business Partners and Category Managers.
Similarly they have also implemented the performance appraisal system effectively to
reap its full benefits.
It is for this reason that today Nestl is the fastest growing company in Pakistan today,
and more is on its way as it aims to achieve the Rs. 100 billion mark by 2014. It can
continue to expand by employing its favorite principles of innovation, research,
introducing new products, exploring new and finer market segments, and venturing into
unknown territories. Further diversification and introduction of greater value added
products will help it realize its ambitious goals.
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Exhibit 1 (Milestones achieved by Nestl Pakistan & Milkpak Ltd.)

1979
1981
1988
1990
1992
1996
1997
1998

2001
2004
2005

Milkpak Ltd. is founded by Syed Babar Ali. It manufactures UHT milk cream and
butter as well as fruit juices.
Production of long shelf life UHT milk begins at Milkpak Ltd. Sheikhupura factory.
Nestl SA acquires 40% share in Milkpak ltd.
Sheikhupura factory starts the production of Nestl Nido milk powder and cereals. A
new plant is acquired at Kabirwala in the Punjab
Nestl takes over the running of the company and begins to develop its milk
collection network. A maggi noodles plant is installed at the Kabirwala factory.
Milkpak Ltd. is renamed Nestl Milkpak Ltd.
The Kabirwala plant becomes a fully owned unit of Nestl Pakistan Ltd.
Nestl pure life bottled water is premiered in Pakistan. Within a few years it becomes
one of the worlds leading brands of bottled water. Meanwhile, Nestls milk
collection system in Punjab matures and the company is able to buy all its milk from
farmers instead of relying on contractors.
Nestl Pakistan acquires the Fontalia and AVA water companies which specialize in
supplying water to homes and offices.
Afghanistan becomes the fourth sale zone of Nestl Pakistan Ltd.
Nestl Milkpak Ltd. is renamed Nestl Pakistan Ltd. The GLOBE project is
successfully launched, and is intended to have further cooperation and information
sharing with Nestl companies around the world. Nestl Pakistan responds swiftly to
Octobers devastating earthquake, using its own distribution channels to bring aid to
the worst affected areas.

18

Nestl
Pakistan

Exhibit 2 (Global Structure)

Europe
Switzerland

INTERNATIONAL
Americas

REGIONAL

AREA

TERRITORY

Asia
Oceania
Australia

National
Sales
Manager

NATIONAL

ZONAL

Greater
China

North

South

Lahore

Muzang

Samnabad

19

Center

Afghanistan

Nestl
Pakistan

Exhibit 3 (Organization Structure)

20

Nestl
Pakistan

Exhibit 4 (Analysis of Current Strategic Business Units)

BOSTON
BOSTONCONSULTANCY
CONSULTANCYGROUP
GROUPMATRIX:
MATRIX:
Analyzing
Current
Strategic
Business
Analyzing Current Strategic BusinessUnits
Units
Relative Market Share
High

Low

Stars

Question
QuestionMarks
Marks

Milkpak
Nesvita
Everyday
Yogurt

Cream
Cream
Raita
Raita
Fruit
Fruityogurt
yogurt

Low

Cash
CashCows
Cows

Nido
Nido
Neslac
Neslac

Dogs
Dogs

Desi
DesiGhee
Ghee

High

Market
Growth
Rate
21

Nestl
Pakistan

Exhibit 5 (Organization Chart)

Customers
Sales People

Managers

Board of Directors

22

Nestl
Pakistan

Exhibit 6 (Framework for Creating Shared Value)

23

Nestl
Pakistan

Planning
Planning
Exhibit 7 (Use of Management Functions & Use of Key Management Skills)

Organizing
Organizing
Leading
Leading
Controlling
Controlling
Mr Fuad Ghazanfar Mr Omar Hassan
Saqib
Janjua

Use of Management Functions

Technical
Skills

Human
Skills

Conceptual
Skills

Mr Fuad Ghazanfar Mr Omar Hassan

Saqib
Janjua

Use of Key Management Skills

24

Nestl
Pakistan

Exhibit 8 (SWOT Analysis)

Internal Analysis

External Analysis

STRENGTHS
Investment in R&D, and innovative products
Market research about shopper segmentation and
distribution channels
Integrated and centralized information systems
Efficient consumer service builds loyalty
Creating shared value for all strategic partners
Flat structure and decentralized
Matrix organization
Coordination among departments achieved by
Business Partners, Category Mangers, etc
Diverse workforce
Effective and efficient HR systems
Knowledge sharing and training programs
Effective performance appraisals
Achievement based compensation
Competitive remuneration benchmarked against
industry
Motivated workforce
Growth oriented culture
Monopoly in tea whitener because of technology
Own distribution channels for bottled water;
Home delivery increases customer satisfaction.

OPPORTUNITIES
Exemption of dairy sector from taxes
Compliance with environmental laws
Social responsibility & social investment programs
to build a positive corporate image
Partnerships with farmers for sustainable
agriculture and providing farm assistance to create
greater value for all
High brand value of Nestl, which denotes quality;
this cannot be matched by rivals such as Tarang
A larger consumer base can be acquired as much
population still uses Gowalla milk
Entry into more niches possible by defining finer
market segments. Like low cal milk, more
innovative products can be launched, such as foods
for cardiac patients, drinking yogurt, etc. These are
value added products in the premium market that
offer consumers more value for more money and
can fetch higher revenues for the company.
Furthermore, the more differentiated the products,
the more difficult it is for rivals to copy.

WEAKNESSES

THREATS

Company image and consumer base can be

adversely affected by stock outs, caused by either
inefficient distribution or untimely delivery by
suppliers
The Managing Director and Head of Finance are
foreigners, which hinders effective
communication
Multiple indirect reporting relationships might
result in ambiguous accountability lines
More generalists than specialists in the matrix
Produce products with short shelf life
The common man perceives Nestl as a premium
brand and thinks it is expensive.

The soaring inflation rate is eroding the purchasing

power of consumers
Dependent on distribution channels and
supermarket shelves, which can be acquired by
competitors as well, who can influence retailers
The bargaining power of suppliers increases as
demand for milk rises, so price rises. Engro offers
subsidized fertilizers for providing milk to Olpers.
The industry is fast growing; very low barriers to
entry, new competitors are springing up everyday.
Milk is not differentiated, in cost or product variety,
so consumers are indifferent about buying a
Milkpak or Olpers.
After Nestl creates a market, rival firms move in,
e.g. UHT milk was not widely used before Nestl,

25

Nestl
Pakistan
but then Olpers, GoodMilk all began to take
advantage of Nestls marketing.
Adverse public opinion possible due to links to
Israel.

Exhibit 9
(Porters Model)
Threat of New Entrants
For value added products barrier to entry are
higher because these products connect with the
customer on an emotional level. Gaining
confidence and trust of the customers is very
difficult. Brand loyalty is very which means a new
entrant will have difficulty in making a place for
itself. Furthermore even if a new entrant does
make some impact on its consumers it will have to
sell at least 750,000 tonnes of milk to create one
percent market share for itself.
Nestl enjoys monopoly power over powdered tea
whitener market because no company has yet been
able to develop this technology.

Suppliers
The un-processed milk is collected
from farmers and gowallas from
rural areas. There are many
collection centers across Punjab.
With the entry of new milk firms
who are willing to pay higher prices
and as well as provide them with
other attractive incentives, the price
of this milk is going up. An
example of this is that of Olpers of
Engro food Company who have had
long standing relationship with
these farmers and are willing to
give them fertilizers at subsidized
rates in exchange to their
commitment to sell their milk only
to Olpers.

COMPETITORS
Haleeb(CBL Foods)
Olpers( Engro)
GoodMilk( ShakarGanj
Foods)

of
12t

Customers
Dependent on
products.
Young health
conscious customers
for Nesvita.
House holds for
milkpak and yougurt.
Offices, institutions
and households for
Everyday
26
Infants and kids for
Nido

Threat of Substitutes
The main substitute is the
Farmers (Gowalla) milk
U.H.T treated milk caters
to only 9% of the
populations milk needs.
Nestle constitutes, 38%
Olpers19%, and
Haleeb 28% of that 9%
of the total milk market.

Exhibit 10 (Minutes
the Meeting held on
h
May 2008)

Nestl
Pakistan
The group coordinator arranges meetings and holds voting in case of difference of
opinions within the group. All the group members suggested different organizations for
the project but we finally decided upon Nestl Pakistan. Till now we have had around
three meetings in which we decided

Name of the Organization

Contacts within the organization and whom to interview.
o Human Resource Manager
o Brands Manager
Coordinating amongst the team members for a feasible time for the interviews.
Tentative dates are 14th May and/ or 15th May 2008.
The way and structure of the interviews to be held. We have designed a tentative
questionnaire.

Three people will be conducting interviews with the respective managers. We will then
bring together all information and apply different managerial theories on them and
critically examine the structure and functioning of different departments.

Sites Used

27

Nestl
Pakistan
1. http://www.nestle.pk/community/responsibility-to-environment.aspx
2. http://www.nestle.pk/community/earthquake-relief.aspx
3. http://www.nestle.pk/community/welfare-projects.aspx
4. http://www.nestle.pk/community/creating-shared-value.aspx
5. http://www.nestle.pk/index/nestle-pakistan-milestone.aspx
6. http://www.nestle.pk/index/strategies.aspx
7. http://www.research.nestle.com/tools/mission_statement.html
8. http://www.nestle.com/AllAbout/AllAboutNestle.htm

28