Electronic copy available at: http://ssrn.com/abstract=1120857 Electronic copy available at: http://ssrn.com/abstract=1120857 A STUDY OF THE CONSTRUCTION OF BCG MATRIX FOR NESTLE INDIA Tarun Jain 1 TABLE OF CONTENTS Executive Summary Objectives Research Methodology Introduction Studying the construction of BCG matrix for Nestle Conclusion Suggestions Limitations Bibliography Annexure – I (The BCG Matrix explained) Annexure – II (List of Nestle Products worldwide) Annexure – III (List of Nestle Products offered in India) Annexure – IV (List of provisional stores surveyed for the study) 1 For details, visit http://ssrn.com/author=660701
Transcript
Electronic copy available at: http://ssrn.com/abstract=1120857Electronic copy available at: http://ssrn.com/abstract=1120857
A STUDY OF THE CONSTRUCTION OF BCG MATRIX FOR NESTLE INDIA
Tarun Jain1
TABLE OF CONTENTS
� Executive Summary � Objectives � Research Methodology � Introduction � Studying the construction of BCG matrix for Nestle � Conclusion � Suggestions � Limitations � Bibliography
� Annexure – I (The BCG Matrix explained) � Annexure – II (List of Nestle Products worldwide) � Annexure – III (List of Nestle Products offered in India) � Annexure – IV (List of provisional stores surveyed for the study)
1 For details, visit http://ssrn.com/author=660701
Electronic copy available at: http://ssrn.com/abstract=1120857Electronic copy available at: http://ssrn.com/abstract=1120857
2
EXECUTIVE SUMMARY
Riding on the growth of its power brands, Nestle has extended its dominance in food
business in India as well. However, a number of its brands require a repositioning. The
present exercise is an attempt to analyse the position of the different brand offered by
Nestle India.
The aim is to assess the positioning decision of Nestle as far as its different brands are
concerned while also looking for prospects that avail the Indian market. In this regard,
the chapter titled introduction gives an insight into the objectives of the study, a brief
explanation of the concept behind BCG matrix and also a brief overview of Nestle India.
The bulk of the study has been done in the second chapter titled a study of the
construction of the BCG matrix of Nestle and all the different brands offered by Nestle in
India have been analysed along with a critical insight and also specific suggestion have
been made therein.
General suggestions as regards Nestle India’s operations follow the Conclusion while
the limitations of the present study have been stated before the Bibliography.
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OBJECTIVES
The objectives of the present study are,
(i) To place the various brands of Nestle in India in the matrix as suggested by
the Boston Consultancy Group, as based upon the data empirically collected.
(ii) To analyse the brands so placed and critically compare their placement.
(iii) To compare the outcomes so obtained and generate suggestions.
The achievement of the above objectives has been made by following the methodology
as stated below.
4
RESEARCH METHODOLOGY
SCOPE:
This study aims to study the products offered by Nestle in India by placing them on the BCG
matrix. The placement of the products on the matrix shall be on the basis of the empirical data
collected in Jodhpur (India) from a number of sizeable provisional stores which place Nestle
products for sale.
METHODOLOGY:
The present study constitutes the construction and study of BCG matrix of Nestle products on
the basis of empirical data collected about Nestle products from six provisional stores in
Jodhpur. The data has been collected by interview method and no formal questionnaire was
administered to them on account of reluctance of the store managers as well as non-essentiality
of the same in the present study.
The study then follows a critical assessment of the positioning adopted for these products and
exploring the possibility of turning the non-star products into stars, as classified in the matrix.
The discussion on the possible transformation and the shift of the products from one grid to
another is again based upon the data and opinion collected from the field study conducted while
the formation of the strategy as well as the suggestions made therein, along with the critical
analysis is solely of the researched who conducted and concluded the study.
Instead of making a separate chapter of suggestions, on account of their relevance and
appropriateness in the study, specific suggestions have been given along with the brands.
Also, the chapter dealing with the critical examination of BCG matrix of Nestle has been merged
with the construction of BCG matrix in order to render the comments on each products placed
with products itself where they could be better understood in the light of the facts associated
with each product. Thus the chapter on ‘construction of BCG matrix’ covers all the practical and
field related aspects dealt with in the construction and analysis of the BCG matrix for Nestle.
TECHNIQUES ADOPTED FOR DATA COLLECTION:
(A) Interview method
(B) Internet Survey
(C) Opinion Generation
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INTRODUCTION
Need for evaluation
In the commercial arena, the choice of an effective strategy is perhaps the most
important and the toughest decision to take. The decision to select among the grand
strategies and deciding upon which strategy will best meet the enterprise’s objectives is
rendered complex by multifarious considerations. Nevertheless, the decision to replace
the product once its positioning fails is a yet more complex decision.
The beauty of BCG Matrix, a Matrix developed by a group known as Boston Consulting
Group, USA, is that it seeks to place the different products of an organization in different
grids such as to analyze them in a comparative manner in terms of profitability or in
terms of (a) percentage growth in sales and (b) market share position, to be exact. Thus
it gives an opportunity of self assessment to the organization to reassess its product
positioning and thus come out with alternative solution if the original placement of the
products in the market does not meet the desired level of growth.
BCG Matrix explained2
Thus, when all the products of the company are put in four cells (thus it actually
provides an opportunity to reassess the entire position of the company in terms of all the
products it offers to the market), the market standing of the company can be analysed in
four different classes namely, stars, cash cows, dogs and question marks.3 Each of
2 Designed to develop business strategy in 1960 by Bruce Henderson, president of the Boston Consulting
Group, BCG Matrix places products according to market share and market growth rate in the four-celled matrix. Henderson noted that companies that dominated their markets tended to be more profitable and businesses that were in this category were termed “cash cows.” It followed logically that if companies could dominate a growing market, they would have both growing profits an assured future. Companies that were in this category of the four-celled quadrant were classified as “stars”. Obviously, strategists should allocate resources to these businesses to enable them to capture and retain shares of a market with a high growth rate. 3 L.M. Prasad, Business Policy: Strategic Management, 247, (Sultan Chand & Co., New Delhi, 2001)
The author has explained the meaning and significance of each of the categories as follows. (1) Stars represent business with high market share position and usually represent the best profit
and growth opportunities in the organisation’s portfolio. These are the businesses that the organisation needs to nurture and groom for the long run. These products require capital over and above their cash flow to maintain their market share. Nevertheless, there may be some products within this category of stars which are self sustaining and thus require investment apart from their cash flows.
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these classes have a different meaning attached to them and can be represented on the
matrix as follows.
It is significant to note here that this matrix denotes the areas of strategic search for an
organization i.e. how to proceed in replacing the products if they are not found to be of
satisfactory placement.4
Nestle India and BCG Matrix
With headquarters at Vevey, Switzerland and established in 1866, Nestle has growth
today to be the world’s biggest food and beverages company. Established in the strong
(2) Cash Cows represent a high market share in a low growth market. These tend to yield
substantial cash surplus over and above their investment requirements. Now cash cows are not very attractive for long term investment but they are needed for generating cash to meet the organizational requirements. There is a further classification in them as strong or weak cash cows. Strong cash cows are those who were stars in the near past and generate substantial amount of cash surplus while weak cash cows are those who might have been stars in remote past and whose cash generation capacity is not high. Such weak cash cows should be considered for divestment.
(3) Dogs represent those businesses which have a low market share in low growth market. These businesses have a very low competitive position and have very low profit potential as the market itself has a low growth potential. Therefore they are not attractive from a long term point of view. These businesses may be harvested or liquidated as they do no generate enough cash to maintain their position in the market, especially on account of the highly competitive market.
(4) Question Marks are those type of businesses which are characterized by the low market share in a growing market. These products are questionable as to whether profit potential associated with growth can realistically be captured. These question marks have two alternatives (i) either to grow them into stars if additional investment can bring them into such position or (ii) to divest them, if costs of strengthening them are quite high as compared to returns.
4 For details, refer to Annexure – I
7
foundation of growth through innovation and renovation, the company is known today by
its several strong brands which are dominating the markets the world over.
Nestle India is a subsidiary of Nestle S.A. of Switzerland. With six factories and a large
number of co-packers, Nestle India is a vibrant company offering a number of products
in the Indian market. A number of brands are offered by the company in the country of
which while some have already established a strong hold, many others exhibit
enormous prospects to dominate the market and are only waiting for a favourable
opportunity or appropriate and sizeable promotional campaign by the company.
The present task seeks to undertake a construction of a BCG matrix for the products
offered by Nestle India Ltd. in India5 and an analysis thereon. The aim is to critically
analyse the relative positioning of the various products offered by Nestle India and to
examine them in the light of the prospects available and if the dogs and question marks
can be converted to sizable opportunities and well established brands.
5 Refer to Annexure – II for list of all the products of Nestle International and Annexure – III for list of
products offered by Nestle in India.
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A STUDY OF THE CONSTRUCTION OF BCG MATRIX FOR NESTLE INDIA
Nestle has a wide range of products and is the market leader in food business over the
world. However, it has a limited number of brands on India. The peculiarity of these
brands is that those brands which are established ones are really ones which dominate
the market and make almost no room for any competition while, the brands which are
not so well established are not so on account of any qualitative deficiency but either
because of a weak promotional campaign of the company or on account of a
misplacement of the product in the target segment. Nevertheless, we go ahead with our
study.
The present chapter is devised in the manner that the overall matrix comes first and
then each products placed on the matrix is explained as to why it finds a place in the
grid it has been placed in the matrix, along with the relevant empirical data reproduced
therein.
Also, in the matrix itself, though the products have been placed in one of the categories,
their projected placement i.e. where should be or can be placed with a promotional
exercise, is also indicated by an arrow which shows the appropriate category in which
the product is aimed to be placed. For example, Maggi Noodles has been the pioneer of
the Noodle industry in the Indian market. But as far as Nestle is concerned, it is only a
cash cow. Therefore it is aimed to be placed in the Stars. This is indicated by an upward
arrow which signifies that the product is aimed for repositioning and the direction of the
arrow shows the grid where it is heading to, in this case upward arrow is indicating to
the stars.
Also, besides the intended placement of the products, there are some products which
need to be taken off the market. For example, Nestlé’s world dominating brand of water,
Nestle Pure Life, was taken off the Indian market on 29.12.2003 when strategically it
was found unviable to continue with it. This shows the intention of Nestle not to play in
the Indian water market though it has a well established base of the same brand abroad
and it could have reaffirmed a market share had it decided to introduce Perrier, another
famous water brand of Nestle.
9
←
←
←
←
←
←
←
↑
↑
x
x
x
10
The diagram above shows the construction of a BCG Matrix for Nestle India. Each
product in the matrix finds an explanation herein below.
Product: Nescafe
Position: Star
Reasons for present positioning:
(1) Nescafe is one of the leading coffee brands in the Indian market.
(2) It has find a dominance which is unparalleled by any other brand in the country.
(3) Not only does it have a high market share but it growth rate is also significantly
high.
(4) The name Nescafe has become generic with coffee.
Intended Placement: <None>
Comments:
(1) Nescafe has witnessed a substantial growth in the present times and seems to
continue dominating the market for some time.
(2) Nestle India must look in for expanding the number of consumers in the North as
it has in the South.
(3) It kept on bringing new variants in order to hold on to its position.
(4) The market share is firm and needs to major repositioning.
Product: Ceralac
Position: Star
Reasons for present positioning:
(1) Ceralac has become one of the leading baby food products
(2) It has witnesses quite a long hold in its market share with its sales increasing on
a continuous basis for almost more than one and a half decade.
(3) Its different variants have kept competitors at bay and its finds a place easily at
almost every general or provisional store in the Indian market.
(4) It is a major contributor for Nestle India’s revenues.
Intended Placement: <none>
Comments:
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(1) With the increase in population and the growth market in the country Nestle India
can do much better in terms of registering more shares by an aggressive
promotional drive.
(2) It needs to take aggressive steps to enter into those households where
traditionally followed methods of feeding new born infants are followed. The
market exists for Ceralac to expand and though it is already a star, it can do
much better in terms of expanding its shares by adopting market development
strategies.
Product: Maggi Noodles
Position: Cash Cow
Reasons for present positioning:
(1) It is surprising to note that Maggi Noodles, which has found more households of
consumption in India that any other country in the world and has become the first
preference of Indian children in terms of instant food, is only a cash cow and not
a star.
(2) The reason essentially lies in the fact that though Maggi Noodles has a
significantly high market share in the Noodles market in India, the market growth
rate of Noodle consumption is not very high.
(3) Though the number of repeat purchasers is high in case of Maggi, the rate of
increase among the new purchasers is not too high.
Intended Placement: Star
Comments:
(1) Maggi Noodles is undoubtedly the leader in the Noodles market and faces
almost no competition which might threaten its existence in near times, yet the
target placement of Maggi Noodles seems to be at fault.
(2) Instead of continuing to target the children, Maggi Noodles should now also
concentrate on placing the products for Office Executives, Mid wives, Young
adults, and the elite wing of the society.
(3) The need presently is to expand the market or in fact create new markets for
Maggi Noodles.
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(4) Therefore, the task for Maggi Noodles lies ahead for Market Development and
thus expanding the consumer base in the presently unexplored sections of the
society.
Product: Milo
Position: Question Mark
Reasons for present positioning:
(1) Though Milo has not totally been removed off the shelves of the stores and
caters to the demand of the consumers arising on account of absence of other
products in the same design (e.g. Bournvita, Complan, etc.), it has been unable
to acquire a market in the basis of its brand name.
(2) The reason why it is not placed as a dog is that it has the potential to expand
and also because the product lies in a market with high business growth rate.
(3) The retailers don’t give much importance to Milo as an item on the shelf but they
also do not completely disregard it off their stores.
Intended Placement: Star
Comments:
(1) Milo is a food drink with a bit subtle taste and not that sweet as its competitors’
offer, Bournvita being the primary one. Thus it needs to develop upon that.
(2) Milo has never witnesses a seriously taken promotional drive. The main chunk of
advertisements it saw was during the world cup or the Olympics. This has not
given an impressive and long lasting image of Milo on the Indian consumers.
(3) Milo has not been promoted as a health drink as Boost or Complan and to some
extent Bournvita has been done. Milo needs to improve in this regard.
(4) Thus, in essence, Milo is not weak in terms of its qualitative deficiencies but on
account of lack of an extensive promotional exercise meant to place it in the
mindset of the Indian psyche.
(5) It has huge avenues for growth especially analyzing the extending Indian market
for health and milk drink and Nestle can convert this question mark into a star by
aggressively placing it in the top shelves.
13
Product: Maggi Sauce
Position: Question Mark
Reasons for present positioning:
(1) India has a growing Ketchup market and Maggi has been a significant contender
as a leader. But as far as Nestle is concerned, it is not turning up that size of
revenues which every top brand contributes to Nestle.
(2) Maggi Sauce has been highlighted with top television celebrities but there was a
considerable time lag of more than five years in the two major promotion
exercises Maggi Sauce has witnesses; once in the early 1990s and the one
which is going on presently.
(3) Maggi Sauce, acknowledge the retailers, has the capacity (both on account of
the reasons of price and taste) to wipe out competitors (both the branded as well
as the local ones) and thus has huge potential to be converted into a star.
Intended Placement: Star
Comments:
(1) Though it has been kept as a question mark yet, Maggi Sauce has the potential
of turning all odds in its way to become a dominating brand.
(2) Competitors like Kissan, Tops (especially in north India) etc. do not pose any
barrier in the growth of Maggi Sauce as the leader.
(3) Extensive market development, followed by an extensive promotion drive in all
nooks and corners of the country is the key to turning Maggi Sauce into a
success as a brand leader for Nestle
Product: Maggi Pickles
Position: Question Mark
Reasons for present positioning:
(1) Maggi Pickles, on account of its limited variety (especially in this taste crazy
country) and comparatively higher prices, has been unable to acquire a market
necessary for its bare minimum existence.
(2) The sales of Maggi Pickles has never really trigged since its launch.
(3) The placement of Maggi Pickles is doubted for the twin reasons of its high price
and packing, which seems to target it to the upper substrata while the lack of a
14
significant number of variants poses it a challenge to maintain itself in such
households.
(4) It is not a dog because it is not the market which has low growth rate. In fact the
market of packaged pickle is growing but it is Maggi Pickles which is unable to
gather a substantial share in this growing market.
Intended Placement: Disinvest
Comments:
(1) Placing Maggi Pickles on the hearts and mind of the typical taste centric and
money conscious Indian consumer will require an overhauling and huge
investment.
(2) Extensive price cuts are required but the matching returns are doubtful.
(3) Pickles being a non-durable product and their success essentially related to the
taste of the consumer, are not one of the core competencies of Nestle, which is
better known to introduce standard taste in the country and get them approved
by the consumers.
(4) Thus it is better advised to disinvest in the business and focus on other brands.
Product: Maggi Soup
Position: Question Mark
Reasons for present positioning:
(1) With the success of Knorr and other local packed soup, it is clear that packaged
soup market in India has a good future.
(2) Maggi Soups have never been rejected by the consumer.
(3) According to the retailers, the demand for soup itself is underdeveloped and thus
there is no indicator critically against the success of Maggi Soup.
Intended Placement: Star
Comments:
(1) Maggi Soup needs to dominate the market but before that it has to develop the
market itself.
(2) The demand for packages soup is underdeveloped and thus there is a need for
extensive market development strategies.
15
(3) The advantage of Maggi Soup in going in for such market development
strategies is that it will get the advantage of early start and thus like Maggi
Noodles it can make a monopoly on packaged soup.
(4) The development of the market is to be based on the twin principles of the
nutritive contents of the soup as well the convenience and taste, which make it a
suitable alternative for other fast food.
Product: Kit Kat
Position: Question Mark
Reasons for present positioning:
(1) Owing to crispiness and superior quality, Kit Kat has an upper edge over its
competitors.
(2) Had this survey been made a couple of years ago, may be Kit Kat would have
found the position of a Cash Cow because of the market share it acquired in a
fairly decent and yet to develop wafer-chocolates market.
(3) However, on account of the rise of competitors, especially Perk, Kit Kat seems
to have loosened up its grip in the market and has lost some of the prominent
recognition which it commanded earlier.
(4) It is placed as a Question Mark as the brand has the potential but lack a
significant market share as of now. Also, a mere repositioning in the market
segment can lead to the success of the brand
Intended Placement: Star
Comments:
(1) Kit Kat is one of the major successful brands of Nestle, which has proclaimed its
dominance and success world over, ruthlessly dominating the European and the
South American markets. There is no reason why it cannot repeat the story of its
success in the Indian markets as well.
(2) Kit Kat needs to emphasize over its superiority in terms of quality as well as the
superior taste over its competitors.
(3) Kit Kat needs to adopt a market penetration strategy and for doing so it needs to
start on an aggressive promotional drive. Not confined one segment, it needs to
16
target on the market executives, the University going folk, and house wives and
the elderly in specific quarters and all segments at a time.
(4) Kit Kat is already prominent as a brand name in the country. The only
requirement is to capitalize upon it.
Product: Bar One
Position: Question Mark
Reasons for present positioning:
(1) Though was in prominence for quite long a couple of years back but its sales
never really clicked. The qualities which a leader exhibits were never shown by
Nestle wherever Bar One was concerned.
(2) In tight competition for the market leader spot with Five Star, Bar One has
superiority as far as its ingredients are concerned. It also sells well. Nonetheless
there seems to be some barrier for which the retailers seem to recognize it only
as a market challenger with subtle features.
(3) Bar One has a growing market but lacks a considerable market share. Thus it
finds the place as a question mark.
Intended Placement: Star
Comments:
(1) Market already exists for Bar One. The need is of market penetration.
(2) Bar One needs to focus on the adolescences who seem to be the major buyers
of chocolates of this type.
(3) The Rs. 5/- which it has recently introduced is a classic example of cashing in
the consumer psyche but it cannot be denied that it has done so following the
example of Five Star. It needs, therefore, to take more initiatives but more so of
its own accord and not as a follow up measure.
(4) Bar One needs to pursue a strategy of market penetration, as already stated, but
it also needs to emphasis on the fact that it has to sell itself in the market as a
chocolate. Though it is in the form of a bar but it still faces competition from other
forms of chocolate wherein Cadbury is the toughest competitor to it. Thus it has
to go on an extensive promotional drive and also illustrate the superiority of bar
17
over the other forms of chocolate both in terms of convenience while
consumption as well as the price.
Product: Nestle Milk
Position: Question Mark
Reasons for present positioning:
(1) Packaged milk has not found much market till the later half of the 1990s.
However much market in this regard has been taken over by the local
manufactures for example Mother Dairy in Delhi, Saras in Rajasthan etc. Amul is
one such competitor which gives competitor to Nestle on a national scale.
However, Nestle Milk has not really find a place in the market that it can be said
to be known at least to the typical Indian consumer, if not unanimously chosen
by him.
(2) The fact which tends to place Nestle Milk in the category of a Question Mark is
the sheer emergence of packaged milk market which is finding gloss in India.
More and more Indian are not favoring packaged milk and in fact in most of the
urban households it is only packaged milk that is used. However, on account of
non-capitalization of Nestle Milk of the growing share in this market, is finds a
place in the Question Mark.
Intended Placement: Star
Comments:
(1) Once the fact that packaged milk in India has a huge potential and the market
will grow at a significant future, it is but imperative for Nestle to go for Market
Development i.e. not only create a flourishing market for packaged milk but also
reposition Nestle Milk as a market leader which at present seems to be
dominated by Amul.
(2) The conversion of Nestle Milk from Question Mark to star is primarily based upon
a strategic decision of Nestle whether to go ahead with the Market development
of packaged milk or not, which again is based upon a cost benefit analysis for
Nestle upon the decision whether to invest such a huge amount in developing
18
the market would yield such desired returns, both in terms of revenue as well as
all round growth.
Product: Nestle Butter
Position: Question Mark
Reasons for present positioning:
(1) Nestle Butter, though available in the market for some time now, has not found
much support from the consumers primarily on account of the dislike of the taste
of Nestle Butter.
(2) Considered as salt less, Nestle butter again is yet to grow from its pre-launch
position on account of the huge competition it faces from Amul, the market
leader in this field.
(3) Now, as the market growth rate is quite significant, yet as Nestle Butter has not
acquired a better share in the market, it has been placed in the category of
Question Mark.
Intended Placement: Disinvest
Comments:
(1) Facts do not favour Nestle to continue with its butter.
(2) Instead of no response, a significant number of retailers are of the opinion that
Nestle Butter seems to be rejected by the consumers for the reason that its taste
does not suit the Indian psyche.
(3) Thus it is advisable for Nestle to discontinue with butter, as it did with its water
brand, Pure Life. Also, it would be better to concentrate on other brand than to
go in for a head on collision with Amul, the market leader, which is inevitable on
account of the same market which both the products cater to.
Product: Nestle Fruit N’ Milk
Position: Question Mark
Reasons for present positioning:
19
(1) Nestle itself seems to be unclear as to which market it has been targeted to. On
own side it is a fruit drink with pleasant flavors, on the other head, it is a health
drink with nutrients of milk as well as fruits.
(2) Also, the placement of the brand is dubious. While it finds a place with retailer of
sizeable capacity, it seems absent from other health and juice shops. Thus there
has to be a definite decision of made by Nestle as to the placement of Nestle
Fruit N’ Milk.
(3) The product however, on its own accord, has not been a failure totally. It seems
to find a place consistently in some of the firms but there are no regular
consumers for the products the consumers are either occasional users are those
who have a flair to try new products.
(4) The market for health drinks, however, is growing and the health conscious
Indian consumer is now choosing a health drink like Real than just going in for
cold drinks and other junk food.
Intended Placement: Star
Comments:
(1) Despite the fact there has not been much promotion of Nestle Fruit N’ Milk by
Nestle itself but the fact that it has not been rejected by the Indian consumer in
itself is a positive signal.
(2) The present step, therefore, that needs to be taken by Nestle is to promote it in a
pre-defined market, wherein placing it as a health drink would be most
favourable to Nestle towards establishing it as a successful brand.
(3) Thus, Nestle Fruit N’ Milk needs to be placed as a competitor to Real fruit juice
and there is a certain prospect for this to succeed on account of the fact that it
gives additional features than Real, which is only a fruit juice but Nestlé’s
products offers the nutrients of both fruits as well as milk.
(4) Therefore the need for Nestle is to go in for Market Development Strategy and
capitalize on the growing concern of the Indian consumer of going in for health
drinks.
(5) The aim is to place Nestle Fruit N’ Milk as the generic brand for health drink to a
typical middle class Indian consumer.
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Product: Nestea
Position: Dogs
Reasons for present positioning:
(1) With taste conscious Indian consumer, typically a middle class one, the morning
has to essentially begin with a cup of tea which suits the tongue and also gives a
fresh start. But the peculiarly lies in the diverse local flavors of tea, which
essentially has to be perfect in order to favour that brand.
(2) There lies the problem with Nestea. Though Nestle has been successful in the
beverages section world over, the diverse and typical taste tendered to by the
Indian consumers is not in favour of going in with ‘one product suits all’. It is for
this reason that Nestea has not found acceptance with the Indian consumer.
(3) But facts are not totally against Nestea. Tata Tea has been successful though it
has also one flavor and serves on a National basis. However the taste of Nestea
has simply not been accepted by the Indian consumer.
Intended Placement: Disinvest
Comments:
(1) Though there is a possibility for Nestea to find acceptable from the consumers if
some amount of research and development is diverted towards the taste of
Nestea but there are a multifarious reasons for which divestment of Nestea is
recommended.
(2) Firstly, even if the taste of Nestea is changed, it is very hard to change the
mindset of the typical Indian consumer who are more attached to taste than to
any other consideration in case of tea.
(3) Secondly, Nestea, as a foreign brand of tea shall have to face the xenophobic
attitude of the consumer who prefer to consume local flavors or say variants of
tea than any other foreign tea as illustrated by Ruby Dust in Maharashtra Circle.
(4) Also, going into the local taste has never been the attitude of Nestle. Instead it
has always chosen to go in for making the foreign taste accepted to the local
consumers. The same story has been told by the success of Maggi Noodles,
Nescafe, Kit Kat etc. and wherever it has been unsuccessful, it has been
21
advisable to disinvest the brand from the product line as has been done for
Nestle brand of waters.
Product: Milky Bar
Position: Dogs
Reasons for present positioning:
(1) It become quite popular in and around the year 2000 but it never reached the
stage of a power brand.
(2) Primary tried by the Indian consumer as a craze which laid in trying the first non-
brown chocolate, Nestle Milky bar was a sweet chocolate with cream color. Thus
the primary acceptance of Milky bar was not based on its core qualities but on
the basis of certain peculiarities which it contained, differentiating it from other
products in the same line.
(3) Milky Bar, as a chocolate, though has a growing market, yet it has been placed
as a dog on account of the inherent lack of core quality which makes it generic
with chocolates. This was the main reason why it was never considered a
competitor by other chocolate manufactures and the consumers also treated it
so.
Intended Placement: Disinvest
Comments:
(1) Milky Bar has lost the primary battle which it had with mindset of the unaware
Indian consumers who could never contemplate a non-brown chocolate.
(2) The market positioning of Nestle Milky Bar has been only to children (as one can
contemplate from the advertisements which relate only to children in the age
group of 10 -15) and thus it has lost the adolescent consumer, which is also a
major part of the entire consuming segment of chocolates.
(3) The promotion style of Milky Bar has never been dominating. The
advertisements have been too soft and not too impressive. Thus success of
Milky Bar requires rebuilding the image of Milky Bar.
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(4) The cost benefit analysis also shows that continuing with Milky Bar is expensive
as the amount required for its promotion and development has not led to the
same amount of returns.
Product: Nestle Dahi
Position: Dogs
Reasons for present positioning:
(1) Majority of the consumers are unaware that Nestle offers a Dahi also.
(2) The launch of Nestle Dahi has been in select cities but there too only select
outlets retail it. (It is not offered in Jodhpur)
(3) The concept of packaged Dahi is not being accepted by the consumer who
prefers to play it safe with the local manufacturer wherefrom he can keep a
check on the qualitative content of the product as well before consuming it.
(4) Thus, lack of a growing market makes Nestle Dahi to be placed in as a Dog.
Intended Placement: Disinvest
Comments:
(1) Dahi is a product which is best if considered fresh. This traditional mentality of
the Indian consumer is the biggest barrier in the success of Nestle Dahi.
(2) The concept of packaged Dahi is yet to materialize in India. Therefore its launch
by Nestle is premature.
(3) It is advisable to leave the avenue then to go in for market development in this
case when there is big risk of the failure of the entire investment to doom on
account of the psychic barrier of the consumers.
Product: Crunch and Munch
(Since both these chocolates of Nestle cater to the same market and are also similar in
composition and variety, they have been considered together in this case)
Position: Dogs
Reasons for present positioning:
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(1) Both the brands are non dominating, taste centric chocolates in the bar category
with not much association with any particular core quality which they depict
which differentiates them from other brands.
(2) The market is growing almost the right pace but the share of these two
chocolates is not considerable in the present market. Therefore they are
classified as dogs.
Intended Placement: <none>
Comments:
(1) Although if we proceed with this fact situation that these two brands are not
doing well and also they do not have a core competence upon which they can be
promoted, the obvious answer would be to disinvest them. However that is not
suggested in the instant case.
(2) The primary reason for such is that these two brands are continuing on a no
profit no loss basis and though they do not offer much of prospects for Nestle in
terms of contributing with higher revenue, they in are in fact making Nestlé’s
presence felt in the chocolate market of which only Kit Kat is a probably power
brand for Nestle.
(3) Thus, the primary solution would be to continue with the brand such that Nestle
keeps its prospects open in the chocolate market and thus diversifies its risk of
proceeding just with one chocolate (Kit Kat and to some extent Bar One)
especially when the disinvestment of Milky Bar has also been suggested.
This marks the ends of the construction and the study of the BCG matrix for Nestle
India. The attempt herein made was primarily to focus on each brand in particular, as
offered by Nestle in India, to analyse its pros and cons, to look for prospects and to find
solutions for them to perform better. Critical observations have been made along with
the discussion of brands and thus the critical examination part, which was earlier sought
to be taken up in a separate chapter (as contemplated in the synopsis) has been
merged in this chapter itself, which also accounts for the length of the discussion made
in this chapter.
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CONCLUSION
Any strategic decision making exercise cannot be successful unless the fact situation
and the figures have been taken account of and the taken accordingly. The present
attempt also follows the trend. In a field exercise, pertinent data has been collected as
regards the different brands of Nestle as being offered in India and based on the facts
collected, specific suggestions has been made for the promotion of the brands which
are not performing well and also those which have already become the power brands.
The aim of the exercise was not to highlight on the BCG matrix as such but to use BCG
matrix as a tool towards analysis of Nestle India as an organization with all its products
in particular as well as on a whole.
Thus the suggestion generated are all brand specific and pertain to the factors behind
each brand which contribute to its growth or lead to its fall. Also, one important fact has
been witnessed by this study. It is not that organization name which is all for a product.
This is to say that though Nestle is the leader is food products in the world and has
dominating brands in India as well yet, its name is not sufficient to make all brands a
success even though they may be related to the food business and thus within the core
competency of Nestle. It is essentially only account of the fact that the present day
consumers are changing. The colonial concept of a big name hides all has changed and
unless the brand in particular comes up to the expectation in the subjective satisfaction
of the consumer, it will not succeed, not matter how big the name of the organization is.
Thus Nestle has to refocus on not so well performing brands and taking each of them in
particular, in accordance with the plan of action as well the highlighted technique,
decide to reposition its brands in the market. Escaping from the cumbersome task of
repeating the observations made herein, it is only advisable to state that the present
study has really come out with some glaring defects in the strategy followed in some of
the products and Nestle has to revisit its plan of action in order to convert its dogs and
question marks into stars.
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SUGGESTIONS
The suggestions for each of the brands in particular have been stated along with the
brands in the study of BCG matrix itself however there are certain general suggestion
which have been stated herein below.
(1) Nestle India, no doubt is a leading company in food business yet, it has to focus
on its distribution system and offer better incentives for retailers who have till
date been clinging on to its products only because of the great demand they
carry despite the fact that there is not much which Nestle offers to these
retailers.
(2) Nestle India has to stop adopting a brand focus promotion strategy and also has
to go in for general promotional drive for the name Nestle itself. (Because
majority of the consumers do not know that Nestle has so many brands to offer.
In fact a huge number of them related Maggi as a different firm altogether than
Nestle)
(3) Nestle India needs to do away with this attitude of every time trying to impose a
foreign taste on the local consumers. Instead, as regards the products which
necessarily relate to the taste satisfaction of the consumer, proper research and
Indianization of the products is essential.
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LIMITATIONS
(1) The data collected on the field considers a small sample only. Thus proper
corroborative research is required before taking any action based on the findings
of the present study.
(2) The data for the nation wide figures of Nestle India is not widely available. Nestle
India is maintained as a subsidy of Nestle SA and thus proper reporting of its
figures is not available. This also poses a limitation as far as comparison of the
results of the study with the national figures is concerned.
(3) The factual matrix of Nestle brands, as analysed in this study, is based on a
limited survey of one city (Jodhpur) thus the result may be incomparable with t a
similar study in other areas.
(4) Not much data was available as far the not to successful brands of Nestle were
concerned.
27
BIBLIOGRAPHY
BOOKS:
1. L. M. Prasad, Business Policy: Strategic Management, 247, (Sultan Chand &
Co., New Delhi, 2001)
WEBSITES:
(1) <http://www.domain-
b.com/companies/companies_m/mcDonald/20020923_froth.html> (last visited on
The BCG Matrix explained, as stated in <http://www.valuebasedmanagement.net/methods_bcgmatrix.html> and
<http://www.netmba.com/strategy/matrix/bcg/>
The BCG matrix
method is based on
the product life cycle theory that can be used to determine what priorities should be given in the product portfolio of a business unit. To ensure long-term value creation, a company should have a portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash. It has 2 dimensions: market share and market growth. The basic idea behind it is that the bigger the market share a product has or the faster the product's market grows the better it is for the company.
Placing products in the BCG matrix results in 4 categories in a portfolio of a company:
1. Stars (=high growth, high market share) - use large amounts of cash and are leaders in the business so they should also generate large amounts of cash. - frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold share, because the rewards will be a cash cow if market share is kept.
29
2. Cash Cows (=low growth, high market share) - profits and cash generation should be high , and because of the low growth, investments needed should be low. Keep profits high - Foundation of a company 3. Dogs (=low growth, low market share) - avoid and minimize the number of dogs in a company. - beware of expensive ‘turn around plans’. - deliver cash, otherwise liquidate 4. Question Marks (= high growth, low market share) - have the worst cash characteristics of all, because high demands and low returns due to low market share - if nothing is done to change the market share, question marks will simply absorb great amounts of cash and later, as the growth stops, a dog. - either invest heavily or sell off or invest nothing and generate whatever cash it can. Increase market share or deliver cash
The BCG Matrix method can help understand a frequently made strategy mistake: having a one-size-fits-all-approach to strategy, such as a generic growth target (9 percent per year) or a generic return on capital of say 9,5% for an entire corporation.
In such a scenario:
A. Cash Cows Business Units will beat their profit target easily; their management have an easy job and are often praised anyhow. Even worse, they are often allowed to reinvest substantial cash amounts in their businesses which are mature and not growing anymore.
B. Dogs Business Units fight an impossible battle and, even worse, investments are made now and then in hopeless attempts to 'turn the business around'.
C. As a result (all) Question Marks and Stars Business Units get mediocre size investment funds. In this way they are unable to ever become cash cows. These inadequate invested sums of money are a waste of money. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become a cash cow (or star), or otherwise companies are advised to disinvest and try to get whatever possible cash out of the question marks that were not selected.
Some limitations of the Boston Consulting Group Matrix include:
• High market share is not the only success factor • Market growth is not the only indicator for attractiveness of a market • Sometimes Dogs can earn even more cash as Cash Cows
Water Nestlé Pure Life, Nestlé Aquarel, Perrier, Vittel, Contrex, S.Pellegrino, Acqua Panna, Levissima, Vera, Arrowhead, Poland Spring, Deer Park, Al Manhal, Ozarka, Hépar, Ice Mountain, Zephyrhills, San Bernardo, Quézac
Other beverages Nestea, Nesquik, Nescau, Milo, Carnation, Libby’s, Caro
