PRODUCTION AND OPERATION MANAGEMENT

SUBITTED TO: SUBMITTED BY:

Prof H.C.Jain Sabzar Kaul- 156

Aditya Suresh- 186

Akash Gupta -188

Alankar Das -190

ACKNOWLEDGEMENT

Gratitude can’t be expressed in Words. But I would certainly like to

name a few, without whose commendable Support, successful of the

project and the learning wouldn’t be possible.

We are also grateful to Prof. H.C. JAIN , the faculty guide of New

Delhi Institute of Management , New Delhi whose excellent

guidance and continuous support gave me knowledge and energy to

complete the project accurately on time. His versatile viewpoint and

understanding of the subject matter, his guidance’s, his constructive

criticisms and above all the level of motivation and faith he showed

really made us to stay focused and work logically during the course of

the study.

We heartily thankful to all of them without whom this report would

have not been successful.

TABLE OF CONTENTS

SL NO CONTENTS

PAGE NO.

01 INTRODUCTION 4

02 MARKET SIZE & MAJOR PLAYERS 10

03 PRODUCT OFFERINGS OF LEADING PLAYERS

13

04 FACTOR INFLUENCING CONSUMER BEHAVIOUR OF SAMSUNG

16

05 OPERATIONS OF NESTLEPRODUCTPROCESSRESOURCES

26

06 CRITICAL BUSINESS SUCCESS FACTORS 35

07 SUCCESS & FAILURES 41

08 PRINCIPAL WEAKNESSESS OF NESTLE 43

09 RECOMMENDATIONS 46

10 ANNEXURE 49

11 BIBLIOGRAPHY 52

INDUSTRY PROFILE

1.0Introduction

The most important thing for most of business company is an

understanding their successful performance among the other

competitors in market place. For some parties, like shareholders, it is

essential for company to make a profit and gain above-average

returns. In this assignment, I will discuss furthermore about Nestlé’s

external environment in all aspects such as their general environment,

industry environment, competitive environment, and scan the

opportunities and threats of the company. And also I am going to

explain briefly about their internal environment includes their

resources, type of their resources, company’s capabilities, evaluate

their core competencies and so on.

1.1Industry and Nestle summary

Nestlé S.A. is a Swiss multinational nutritional and health-related

consumer goods company headquartered in Vevey, Switzerland. It is

the largest food company in the world measured by revenues. Nestlé’s

products include baby food, bottled water, breakfast cereals, coffee,

confectionary, dairy products, ice cream, pet foods and snacks. Nestlé

employ around 330,000 people in over 150 countries and have 461

factories or operations in 86 countries. Nestlé sales for 2011 were

almost CHF 83.7 billion. It is one of the main shareholders of

L’Oreal, the world’s largest cosmetics company. Nestlé history begins

back in 1866, when the first European condensed milk factory was

opened in Cham, Switzerland, by the Anglo-Swiss Condensed Milk

Company. In Vevey, Switzerland, Nestlé founder by Henri Nestlé, a

German pharmacist, launched his Farine lactee, a combination of

cow’s milk, wheat flour and sugar, saving the life of a neighbour’s

child. Nutrition has been the cornerstone of the company ever since.

In 1905, The Anglo-Swiss Condensed Milk Company, founded by

Americans Charles and George Page, merged with Nestlé after a

couple of decades as fierce competitors to form the Nestlé and Anglo-

Swiss Milk Company. The company grew significantly during the

First World War and again following the Second World War,

expanding its offerings beyond its early condensed milk and infant

formula products. In 2011, Nestlé was listed No.1 in the Fortune

Global 500 as the world’s most profitable corporation. The Nestlé

Corporate Business Principles are at the basis of the company’s

culture, developed over 140 years, which reflects the ideas of fairness,

honesty and long-term thinking. Nestlé believes that not only possible

to create long-term value for their shareholders if their behaviour

strategies and operations also create value for the communities where

they operate, for their business partners and of course, for their

consumers.

Nestlé vision is to meet the various needs of the consumer

everyday by marketing and selling foods of a consistently high

quality. Their objectives are to deliver the very best quality in

everything they do, from primary produce, choices of suppliers and

transport, to recipes and packaging materials.

Their mission is they strive to bring consumers foods that are safe,

of high quality and provide optimal nutrient to meet physiological

needs. Nestlé helps provide selections for all individual taste and

lifestyle preferences.

Nestlé 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 today’s and

tomorrow’s consumers, Nestlé is strongly committed to Research and

Development (R&D) to improve products and develop new foods

with specific health benefits (Nestlé.com, 2012).

PRODUCTS/BRANDS COMPETITORS

DAIRY WHITENER

SEGMENT

BRITANNIA,AMUL

NOODLES GSK CONSUMER ( FOODLE )

AND HUL ( KNORR )

COFFEE BRU,LOCAL PLAYER

CHOCOLATES &

CONFECTIONARIES

CADBURY

CURD AMUL,MOTHER DAIRY

BABY FOOD AMUL,HEINZ

ULTRA HIGH TREATED

MILK

BRITANNIA,AMUL

SWEET CONDENSED

MILK

AMUL

COMPETITORS

LEADING PLAYERS TAKEN INTO CONSIDRATION

1) Cadbury

2) Hindustan Uniliver

3) Coca Cola Georgia

4) Britannia

5) Amul

6) Bru

PRODUCTS OF NESTLE

Coffee

Water

Ice Cream

Baby Food

Healthcare nutrition

Confectionary

NESCAFE PRODUCTION PROCESS

COFFEE PRODUCTION PROCESS

Making a cup of

coffee might seem

like the easiest

thing in the world.

But have you

thought of all the

people who help

make that coffee?

About 60 million

people are involved in the coffee industry. Read on and see

how much work and care has gone into your cup.

It all starts on the plantations, where farmers tend to the coffee

plants and harvest the coffee cherries, usually by hand. The

next thing they have to do is separate the bean from the outer

shell of the cherry. This is done either by drying the beans in

the sun or by washing them in a pulping machine.

The dry beans have a greenish tinge and are therefore known

as 'green beans'. They are usually exported for blending and

roasting.

By combining different types of beans you can give the

resulting coffee a more rounded taste. Once you have the right

blend of beans, the most important phase of coffee production

begins: the roasting.

It is not until the green beans are roasted that they release the

coffee aroma and flavor. Depending on the roasting

equipment and the desired flavor of the coffee, green beans

are roasted at between 180°C and 240°C for between three

and 12 minutes.

Before it can be brewed, the roasted coffee must be ground.

Grinding increases the surface area of the coffee, allowing the

flavor to be extracted more easily.

To make soluble coffee, the ground coffee is brewed and then

dried. The drying can either be hot, in a spray drier, or cold, in

a freeze drier.

Finally the coffee is packed and sent to the stores.

NESCAFE PRODUCTION PROCESS

The unique NESCAFÉ process starts with selecting green coffee. Each step of the production is carefully controlled and monitored

to ensure the best quality.

After blending the green coffee, the beans are roasted at the right time and temperature to achieve the desired taste and aroma profile. Next, the beans are ground and brewed. The coffee extract then goes through an evaporation and drying process that turns it into granules or powder: that’s the coffee you use to make a satisfying cup of NESCAFÉ.

But for us, production is more than just providing the best quality in a cup. We place value on coffee that’s made with respect to the environment and to people.

Our attitude is embodied in the NESCAFÉ Plan, a global initiative started in 2010 that supports the responsible farming, production and consumption of coffee.

As part of the plan, we are improving our production processes by reducing water and energy consumption and lowering emissions of greenhouse gases from our factories and transport operations.

2.0Value Chain Analysis of Nestle

The value chain analysis is a template that firms use to understand

their cost position and to identify the multiple means that might be

used to facilitate implementation of a chosen business-level strategy.

A firm’s values chain is segmented into primary and support

activities. Primary activities are involved with a products physical

creation, its sale and distribution to buyers and its service after sale.

Support activities provide the assistance necessary for the primary

activities to take place.

2.1Primary Activities

2.1.1 Inbound Logistics

Nestlé’s Pure Life purchase plastics bottles with different size

form supplier. Establish warehouse in different countries and setup of

water filling plant and disseminate inputs to their products.

2.1.2 Operations

Nestlé operations are water filling packaging and account

maintenance. They know and have approved the manufacturing for all

their raw materials and packaging materials. Nestlé Company

immediately instituted a programmed of major improvement to bring

the facility on par with international standards, introduce more

efficient machinery. This has helped them speed up production.

Nestlé handle their account for exclusive sale in their regional office.

2.1.3 Outbound Logistics

Nestle Pure Life deliver their product to their house. Operation has

been done that deliver to their regional offices according to their

customer demand, innovations in bottled packaging and eco-efficient

packaging.

2.1.4 Marketing and Sales

Nestlé charge value price, product designing Nestlé produce tasty

water in plastic bottles. That produce is place in major city of

Pakistan. Nestlé promote their produce by personal marketing, TVC,

sales promotion and public relation.

2.1.5 Services

Nestlé provides the service home office delivery. They distribute

bottle for exclusive selective on shops, restaurants, hotel, etc. Their

service is very efficient as compared to others.

3.0 Weaknesses of Nestle

One of weakness of Nestlé can be pointed out that there are too

many distribution channels for certain products. The main weakness

of the LC-1 division of Nestlé is that they were not as successful as

they thought they would be in France. The launch in France was in

1994, but since the late 1980s, Danone had already entered the market

with a health-based yogurt. The second weakness is that LC-1 was

positioned as too scientific, and customers did not understand that

LC-1 was a food and not a drug. Nestlé do not have direct market

outlets and this can be one of the weaknesses as it can cause

difference in profit made. They are not having enough raw material

production units; they depend on either local raw material producers

or through other trade channels.

4.0 Current Strategy

Nestlé’s objectives are to be recognised as the world leader in

Nutrition, Health and Wellness, trusted by all its stakeholders, and to

be the reference for financial performance in its industry. They

believe that leadership is not just about size, it is also about their

behaviour. They recognise trust is earned only over a long periods of

time by consistently delivering on their promises. These objectives

and behaviour are encapsulated in the simple phrase, “Good Food,

Good Life”, a phrase that sums up their corporate ambition. The

Nestlé Roadmap is intended to create alignment for their people

behind a cohesive set of strategic priorities that will accelerate the

achievement of their objectives. These objectives demand from their

people a blend of long-term inspiration needed to build for the future

and short-term entrepreneurial actions, delivering the necessary level

of performance. They are seeking to achieve leadership and earn that

trust by satisfying the expectations of consumers, whose daily choices

drive their performances, of shareholders, of the communities in

which they operate and of society as a whole. They believe that it is

only possible to create long-term sustainable value for their

shareholders of their behaviour, strategies and operations are also

creating value for the communities where they operate, for their

business partner and also for their consumers, and they call this

Creating Shared Value. They are now investing for the future to

ensure the financial and environmental sustainability of their actions

and operations in capacity, technologies, capabilities, in people, in

brands, in R&D. Their aims to meet today’s needs without

compromising the ability of the future generations to meet their needs,

and to do so in a way which will ensure profitable growth year after

year and a high level of returns for their shareholders and society at a

large over the long-term.

The basic value chain

CRITICAL BUSINESS SUCCESS FACTORS

1) QUALITY2) SPEED3) DEPENDABILITY4) FLEXIBILITY5) COST6) SERVICE7) INNOVATION8) INTANGIBLES

QUALITY

A. Nestle uses Quality Management System & follows Quality Policy to match customer’s expectation & preference

B. Comply with all internal and external food safety, regulatory and quality requirements

C. To do this, Nestle also follows the concept of Lean Six Sigma

D. Follow the principle of ‘From farm to fork’

E. Work together with farmers in rural communities to help them improve quality of their produce & adopt environmentally sustainable farming practices

F. Quality by designQuality is built in during product development according to requirements of consumers & following all food safety and regulatory requirements. Nestlé’s R&D network applies in this “Quality by design” to all of our products.

SPEED

A. Nestle is able to match the competition when it comes to speed & cycle time

B. Have successfully reduced cycle time leading to higher speeds

C. Uses SAP ERP to ensure traceability & speed ‘time to market’

D. Integrate track & trace processes for foodstuff products throughout the supply chain

E. Remove administrative bottlenecks that slow down introduction of new products

F. Automated order to cash process

G. Capture of process & product data accelerates time to market of new products

DEPENDABILITY

A. Provides product or service as stipulated with a high degree of certainty

B. Wholesale dealers carry inventory that is just adequate to take care of transit time from branch warehouse to their premises

C. Delivery is done on or before due date to the wholesalers & to retailers

D. Dependability helps Nestle to gain competitive advantage through operations

FLEXIBILITY

A. Decentralization of authority is basic principle of Nestle

B. Nestle adopts itself as much as possible to regional circumstances, mentalities & situations

C. Are able to make decisions that are better attuned to specific situations in a given country

D. Policies, decisions concerning personnel, marketing & products are largely determined locally

E. Offer customized products as per country’s requirements

COST

A. Cost is another CBSF of Nestle

B. Low cost per unit of Nestlé's products give them an edge over its competitors

C. By following Lean Six Sigma concept, Nestle is able to bring down the defects in their produce

D. Downsizing & automation helps Nestle to reduce Material cost

E. Economies of scale & Utilization of capacity helps company to reduce the fixed cost

F. Nestle has been trying to reduce the number of brands to cut down their Holistic cost

SERVICE

• Nestlé provides the service home office delivery. They distribute bottle for exclusive selective on shops, restaurants, hotel, etc. Their service is very efficient as compared to others.

INNOVATIONS

A. Nestlé continues to drive the growth of its business in Europe through innovation with the launch of its BabyNes nutrition system for infants and toddlers in France

B. BabyNes offers single-serve formulas that are carefully composed to suit a child’s changing nutritional needs and growth patterns in early life

C. Nestlé owes a large part of its growth in Europe in recent years to the popularity of its system innovations

INTANGIBLES

• Human Resources

• Approximately 330,000 people have been employed by Nestlé Company.

•

• Innovation Resources

• Nestlé R&D generates the innovative science and technology needed to build nutritional and health benefits into products offerings Nestlé legendary sensory excellence.

•

• Reputational Resources

• Nestlé scientists play their part in communicating the health and wellness benefits of products to consumers.

• From consumer need into research priorities.

• From emerging science into consumer benefits and services.

•

5.0Opportunities and Threats of Nestle

5.1Opportunities

High credibility

Potential to expand to smaller towns

Improving trends

Industry leadership

Increase the partnership

Product diversity and offerings

5.2Threats

Highly competitive market

Increasing prices of raw materials

Strong rival like Kraft, Masterfoods, and Unilever

Threat of substitute products

Bargaining power of buyers

6.0 SWOT Analysis

6.1 Strengths

Have a very long history over 140 years

Operated factories in 77 countries in all six continents, a truly

global company

Considered the innovation leader in the global food and nutrition

sector with 3500 scientists in company R&D network

Offering thousands of local products, research and development

capabilities.

Have a great CEO, Peter Brabeck and very strong workforce.

6.2 Weaknesses

Less consumer research in few areas.

Increasing instances of product recalls hampering brand equity

Entering into markets that are already mature and can give a tough

competition to new entrants.

6.3 Opportunities

Well-known company and strong brand name

Health based on products are becoming more popular in the world,

including United States

Ranked first in nearly all the product segments in which it

operated (market leader)

6.4 Threats

Some markets they are entering are already mature

Global competitors

Increasing prices of raw materials

Highly competitive market, multinational companies are very

organized and financially strong

PRINCIPAL WEAKNESSES IN OPERATIONS

• Any business benefits from commitment from

suppliers , cost-efficiency in raw material production &

procurement

• Its drawbacks include its need for enlightened and

committed leadership (through its governing board), and

capable management, which is sometimes difficult to

ensure

• The board is elected and may become politicized,

detracting from sound cooperative and business

practices. Further, antiquated laws governing

cooperatives invite government interference and

prevent use of financial markets for raising equity

capital, thereby constraining expansion and growth to

some extent

RECOMMENDATIONS

• To be able to capture and grab the market share of different markets, Nescafe should be associated with the current agencies in order to create offerings using both global and local perspective.

• However, their promotional strategy should not completely be diverted towards the coffee drinkers of future and should carry out activities for the adults and old-age consumers as well.

• The use of 360 degree marketing campaigns is a very effective way of reaching out to the target consumers which should be carried on further