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