Module : BBUS503 Module Title: Value Creation for Customers

2011/12 SEMESTER ONE: ALTERNATIVE ASSIGNMENT

Instructions
The assignment questions are based on a short case study on Nestl reproduced below.

You must answer ALL FIVE questions.

The criteria for assessment of your answers relate to the Learning Outcomes stated in the Module Handbook. Your answers will be assessed on the extent to which you demonstrate, where appropriate, the following;
An understanding of the concept of the value chain and its application to the creation and delivery of customer value. An ability to describe and apply key concepts in operations management for the delivery of customer value An ability to describe and apply key concepts in marketing management for the delivery of customer value An understanding of the relationship between marketing and operational decisions and the impact of these decisions on a companys financial performance.

You should imagine that you are writing as an employee of Nestle in Switzerland who has first-hand knowledge of the initiatives in the Case Study (ie Supplier Code and NatureNes).You have been asked to answer five questions posed by the CEO (Chief Operating Officer) of Nestle in the USA who is interested to know more. The maximum word count is 2500 words. Reference to at least one Operations Management and one Marketing Management textbook as well as one relevant Journal article is required for your answer to question 1.

SHORT CASE STUDY: Nestle

Nestl, with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestl and is today the world's leading nutrition, health and wellness company. They employ around 276,000 people and have factories or operations in almost every country in the world. The Company's strategy is guided by several fundamental principles. Nestl's existing products grow through innovation while maintaining a balance in geographic activities and product lines. Long-term potential is not sacrificed for short-term performance. The Company's priority is to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives. Summary of a recent communication to Suppliers of Nestle The new Nestl Supplier Code was approved by the Executive Board in April 2008. This Code aims to help the implementation of Corporate Business Principles by establishing certain nonnegotiable minimum standards which suppliers, their employees, agents and subcontractors are all asked to respect and to adhere to at all times when conducting business. It aims to ensure both responsible sourcing and supplier relationships which will deliver a competitive advantage. The Code replaces the previous "Nestl Principles of Purchasing". The Nestl Supplier Code is more precise in defining

what Nestl expects from suppliers and is written in a more concise format. The Nestl Supplier Code will be added to all purchasing / supply contracts. Copy of a Press Release issued by Nestle Nestl launches NaturNes- a baby food innovation NaturNes is a baby food made from 100% natural ingredients. The recipes have been created to meet the highest nutritional standards and to ensure that the food tastes great. The NaturNes range, intended for 4 to 6 month old babies, will offer nearly 40 recipes which will be launched in 2008: 15 recipes meat/ vegetable fish/vegetable combinations, and 12 vegetables recipes, followed by 13 fruit recipes. All are prepared without added salt, added sugars, and starch. A novel steam cooking technology was developed to preserve these qualities. Nestle has developed 'green' packing for the NaturNes range which emits 25% less CO2 over its lifecycle and consumes 30% less energy compared to traditional glass jars. The new plastic serving bowls, in which NaturNes will be presented, also brings benefits of practicality and safety. The redesigned packaging considered both the consumer and the environment. The new shape means the bowls are easy to hold and have practical, replaceable lids.

Source: http://www.nestle.com [ Accessed 08 November 2010]

ANSWER ALL FIVE QUESTIONS

Question 1: Why is it desirable for marketing and operations to co-operate in the process of product development for Nestl? Outline other areas of activity where they may need to co-operate and identify potential areas of conflict. (40 marks)

Question 2: Discuss the likely operational implications for Nestl related to its new NaturNes baby food? (15 marks)

Question 3: Suggest the possible benefits to Nestl of their Supplier Code and explain its relevance to the Nestl Supply Chain (15 marks)

Question 4: Describe the alternative pricing strategies which Nestl could adopt for its new NaturNes range. Recommend the strategy which you consider to be the most appropriate for the pricing of the range at launch, giving your reasons. (15 marks) Question 5: How should the Supplier Code be introduced to Nestls suppliers in order to gain their support and compliance? (15 marks)

MARKING GUIDANCE
Question 1: Why is it desirable for marketing and operations to co-operate in the process of product development for Nestl? Outline other areas of activity where they may need to co-operate and identify potential areas of conflict. (40 marks) Answers may include but not be limited to: Students are expected to refer to marketing strategy and operational strategy, the new product development process from both marketing and operational perspective, the supply chain, interfunctional co-ordination and communication. Answers may include: Students may also choose to define marketing /operations as a function or how they see the role of each as a further extension of marketing and operational strategies. Supply chain management is relevant because this is critical in terms of the delivery of customer satisfaction. It includes managing the movement of materials, information and money along the supply chain through to ultimate customer delivery (so the people aspect in this case is relevant). It is about a collaborative effort by all parties in the chain to ensure the timely and efficient provision of materials to the point of sale and the management of customer expectations. Information is crucial to making the chain work effectively and efficiently. And sharing information between supply chain partners is paramount. This is also true for interfunctional co-ordination. Conflicts arise due to poor communication, co-ordination, timing and a poorly defined business strategy. Stronger answers will demonstrate an understanding of the operation and marketing functions. They will be attempted to discuss the issues and give examples e.g. marketing and operations work together on NPD and product launches affect promotions, staff, queuing. They do not suggest that marketing and operations must work together but explain how this might be achieved or why. They will identify the problems that might arise between the two. Answers should also recognise that marketing objectives will only be met if Operations are able to consistently deliver the right product at the right quality and price. Both functions are crucial to meeting customer needs. Students should mention the need for alignment of vision/mission and for regular communication. Role of Operations involvement in NPD is relevant in this Case. Marketing needs to recognise that Operations will have constraints, for example, new technology adoption for production. Consequences of failed coordination or cooperation should be given and will include; failure to meet customer demand, dissatisfied existing customers, lost potential new and repeat customers etc. References to both the core textbooks and at least one relevant Journal is required.

Question 2: Discuss the likely operational implications for Nestl related to its new NaturNes baby food? (15 marks)

Answers may include but not be limited to: Operations management is about managing processes and so the input /transformation /output model may be used. A discussion of process management and the four Vs concept is appropriate Inventory management of products at different stages (Raw materials/WIP/finished goods). Performance objectives are relevant and may be discussed quality, speed, dependability, flexibility, cost and should be supported by examples to illustrate the points The benefits of Operations management may be discussed e.g. reduction of costs, increased revenue through customer repeat purchases and loyalty. It can enhance innovation capability by building the right operational skills and knowledge.

Students should demonstrate that they recognize the operational challenges for Nestl set by offering new baby food with 100% natural ingredients. Implications include: Blueprinting of all steps in process to meet delivery target. Monitoring new ingredients supply to meet 100% natural criterion. Reconfiguration of production process of NaturNes. Demand forecasting, Staffing and training are all likely need to be modified, if not drastically altered. The discussion of Quality Control issue is also appropriate, especially given the consumers (babies). Question 3: Suggest the possible benefits to Nestle of their Supplier Code and explain its relevance to the Nestle Supply Chain (15 marks) Answers may include but not be limited to: Supply chain management is about managing the movement of materials, information and money along the supply chain (from raw materials procurement through to the sale of the finished product to the end customer). It is about a collaborative effort by all parties in the chain to ensure the timely and efficient provision of materials. Information is crucial to making the chain work effectively and efficiently. And sharing information between supply chain partners is paramount. Supplier Code would help Nestl and its supply chain partners have a clear picture of what inventory is where in the chain as well as the inventory requirements at the retail end of the supply chain.

Question 4: Describe and explain briefly the alternative pricing strategies which Nestle could adopt for its new NaturNes range. Recommend which pricing strategy you consider to be the most appropriate for the range at launch, giving your reasons. (15 marks)

Answers may include but not be limited to: Summary of the three pricing methods which Companies can adopt: 1 Cost orientated pricing 2 Competitor Based pricing 3 Marketing orientated pricing Suitable definitions and explanations are expected. A clear recommendation (ideally in support of marketing-orientated pricing) should emerge with supporting reasons. These should as a minimum refer to the relative cost position of Nestle to its competitors and their assessment of the degree of consumer-perceived differentiation. Reference to the Experience Curve is expected in stronger answers.

Question 5: How should the Supplier Code be introduced to Nestls suppliers in order to gain their support and compliance? (15 marks)

Answers may include but not be limited to: Students may consider various methods for telling the suppliers Good answers will consider the methods and benefits of the suppliers as partners. Allowing the suppliers to have an input on the Nestle Code would also help support the notion that the suppliers are part of a team. Provision needs to be made for updates/amendments to the Code and its communication internally as well as externally to all parts of the Supply Chain.