Jjjll; Ommnnj Essay Example

style="text-align: justify;">Nestle is the world's leading nutrition, health and wellness company today and was founded in 1866 by Henri Nestle. It has employed around 250,000 people and has factories or operations in almost every country in the world. Nestle is the world's leading nutrition, health and wellness company today. Being the world's leading bottled water company is based on a firm economic model: strong brands, global presence, innovation capacity, environmental stewardship and passionate people.

Nestle has been serving Pakistani consumers since 1988, when our parent company, the Switzerland-based Nestle SA, first acquired a share in Milkpak Ltd. Today, firm is fully integrated in Pakistani life, and is recognized as producers of safe, nutritious and tasty food, and leaders in developing and uplifting the communities in which we operate. Nestle Pakistan ensures that their products are made available to consumers wherever in the country they might be. Convenience is at the heart of the Nestle philosophy, and their aim is to bring products to people's doorsteps.

The product is known for its taste, energy and growth. Nestle Milkpak is available in different product range and stylish packaging. Nestle is committed to reduce the environmental impact of packaging without jeopardizing the safety, quality & consumer acceptance of its products. Milk is a perishable item & requires a special packaging. To meet this objective Nestle MilkPak use Tetra Pack to deliver fresh milk to its customer without sacrificing in health measures.

The product is composed of key ingredients like Iron and calcium for those who want to maintain healthy life style. Milk Pak is positioned as good quality milk. From its tag line “Dhood ke Qudarti Gazaeat”

it is evident that the priority of Milk Pak is to provide customers with nutritious and milk which is safe from every unhygienic element. Milk Pak caters those customers which are health conscious and like healthy products. Price Pricing is very important regarding every product. We have to consider consumers buying power, competitor’s price and cost of production as well.

As of fiscal 2006, its annual turnover is Rs. 9 Billion. Recently, Haleeb Foods has built yet another plant in Rahim Yar Khan whose purpose is to provide Haleeb’s quality products to maximum number of consumers. Building an excellent reputation over the years, Haleeb Foods continues to be at the forefront of product and packaging innovation. It has achieved market leadership in several food categories with a very strong portfolio, consisting of leading national and international brands – Haleeb, Candia, Dairy Queen, Tea Max, Skimz, Tropico and Good Day.

Haleeb Foods has the distinction of being the first company in Pakistan to use Tetra Pak’s novel packaging formats, Tetra Brick Aspetic (TBA) and Tetra Fino Aseptic (TFA). Haleeb Foods has also introduced a number of unique products previously unknown to the Pakistani market, likeHaleeb Labban, delicious traditional lassi (buttermilk) prepared with pure thick milk and yogurt, Candia Tea Max, cardamom flavored tea whitener, Candia milk, packed in distinctive food grade plastic bottle, and Haleeb Good Day, 100% pure and natural fruit juice, free of added sugar, artificial flavors and preservatives.

 Haleeb Foods Limited is producing the quality products as per the standards of ISO ;HACCP. Haleeb Milk is available in three sizes i. e. quarter, half and liter packs. The packaging is not so much attractive

but it is easily identified by consumers with its blue color. But they should come up with more colorful packaging to attract their customers. The taste of the milk is so delicious and it is positioned to be pure milk. Consumers everywhere know that only Haleeb Milk makes the best tea because of its thickness. Its tag line is “nutritious thick milk”.

Haleeb is pasteurized, homogenized, and standardized pure UHT milk of the highest standard. It is Haleeb Foods premier brand. Packed in easy to open, 6-layered Tetra Pak Slim Brick Aseptic packaging, it comes with a 3 months shelf life. Haleeb milk is in focus for many years in innovating and improving its milk products by introducing flavored milk and other new products in this category. Price: A products price is the major determinant of the market demand for it. Haleeb is using market penetration pricing strategy for their product since it is not performing well now days. It is seeing the worst phase of its life cycle.

Consumers This above flow shows that Haleeb is passing through producers to their distributors that will distribute Haleeb to different retailers and markets then the consumers will buy Haleeb from retailers. Haleeb is currently available in the market but it is not easily available. Haleeb cannot be easily found. The distribution is not good. The product is not distributed everywhere. Haleeb has to improve its distribution channel so the consumers can buy it according to their convenience. Promotion: Currently Haleeb is doing promotion as effectively as compared to its competitors. They hardly give any advertisements.

They are not doing other type of promotional activities

like displaying their product in an attractive manner in big stores. While it’s major competitor Milk Pak is doing all kinds of promotional activities. Haleeb should concentrate more on promotion in order to increase its sales. They should do advertisements on electronic media like televisions and other mediums like outdoor. In the past three years only 3 new TVCs have been aired by Haleeb despite the fact that it is losing a lot of customers. Posters are pasted at the small shops to enforce the impulse buying and Haleeb gives a lot of weight-age to the shelf space that they get.

But this strategy is used in big shopping malls only because nestle enforce the retailers through other products so that Haleeb can’t enforce small retailers. Mission Statements of Haleeb ; Milkpak HALEEB Foods Limited (Actual) “Build Branded food business to improve quality of life by offering tasty, affordable and highly nutritional products to our consumers while maximizing stake holders' value. ” HALEEB Foods Limited (Proposed) “To serve consumers of all age groups and our employees by enhancing our image as a market leader in Pakistan’s food industry by providing high quality and tasty food products utilizing state of art technology.

The actual mission statement of Haleeb Foods covers only the products and services and also shows the concern for survival but it is not specific. The other seven elements are missing. It lacks in giving the right. The ideal mission statement covers the nine elements. NESTLE Pakistan (Actual) “Nestle is dedicated to providing the best foods to people throughout their day, throughout their lives, throughout the world. With our unique experience of

anticipating consumers’ needs and creating solutions, Nestle contributes to your well-being and enhances your quality of life. ” NESTLE Pakistan (Proposed)  For industry analysis one of the analytical tool used is the Porter’s five Forces. This tool also helps firm to develop business strategies relative to the competitors of the firm. The five forces of the model are:

1. The threat of new entrants
2. The bargaining power of buyers
3. The bargaining power of suppliers
4. The threat of substitute products and services
5. The intensity of rivalry among competitors in the industry.

The dairy industry is attractive, as it is growing quite rapidly. Due to population growth, urbanization and increase in per capita income the demand for dairy products is increasing. Growing urbanization and globalization are changing lifestyles of people in Pakistan. Consumers of packaged milk mostly belong to middle and upper classes of income that have a growing need for such type of products. However, if we consider the entry barriers than they are high meaning it’s not possible for any new firm to enter the market that easily.

The major sources of entry barriers are the following: Economies of scale: Economies of scale prevent entry for any new firm the reason being that is new firms would either need to enter on a large-scale basis which is a costly and perhaps a risky move or they would need to accept a cost disadvantage which is a lower profitability for them. Initially there unit cost of production is going to be high and in return higher prices are going to be charged to the consumers. Economies

of scale are the cost advantages that a business can exploit by expanding their scale of production.

The effect of economies of scale is to reduce the average costs of production. For a firm not achieving its economies of scale it is difficult for them to compete in the market. Scale-related barriers not just in the production, but in advertising, marketing, distribution, financing, and raw milk purchasing as well maybe encountered by the new entrants in the pasteurized milk business. Product Differentiation: Brand loyalties make it hard for a new firm to introduce their new brand into the market so unless and until it has low price and superior quality.

In packed milk industry only few quality brands are available which are Haleeb, Milk Pak, Olpers and Good milk. These are mostly preferred by the people as compared to newly introduced brands. Moreover, in all the scenarios following existing brands have a strong brand recall in the minds of customers like Haleeb have “the thickest milk” and for Nestle it’s the Iron & Vitamin concept. Capital Requirements: Limited is the pool of new entrants when there is a need for larger total rupees investment and other resources to enter the market successfully.

Production of packed milk requires huge investment of not just financials but also of human, technical and marketing resources. High budget is needed to install a plant for processing milk unit and then there is infrastructure cost, advertising costs etc. To set up a UHT plant is also costly. At the moment, current milk-producing firms have no threat of new entrants but in the future if any foreign firm decides

to enter the market then they can be a threat in the current market scenario the following organization haven’t faced any major competitor having such a head on competition. ) Access to distribution channels: Handling a commodity like milk requires intensive care. Great care needs to be taken on its way till end-user. Distribution of packed milk is a challenging job and distributors are reluctant to take distribution of those brands, which lack buyer recognition. Current brands in the market already have strong effective distribution channel, so it’s difficult for a new entrant to enter unless it comes up with a carefully knitted channel strategy will not only be an edge for the firm but also preserves the freshness of perishable items.

Government policies: It’s a barrier to entry because many different licensed and registered companies already dealing in packaged milk and especially on national level in terms of environmental friendly packing along with the recyclable form of material used. 2) Bargaining Power of Suppliers: In milk industry, milk is the core and only raw material used. It is provided by the milk men who are the only main supplier of the industry. So therefore they have high bargaining power. They can exert bargaining power in the industry by raising their prices or by reducing the quality of the milk.

They can charge the firms with higher prices in order to increase their profits. The milk men that had been supplying milk to packaged milk brands have more choices now as they can sell their milk to any of the packaged milk brands who offer more prices and favorable terms of payments etc.

On the other hand firms that need the milk have no other sources of getting it. Milk is collected from the farmers by the milk collectors and transported through company’s chiller to the production units.

Farmers got the option of selling door to door milk too. For them the importance of milk companies is not that such as they got the option of earning income through the traditional selling method. In milk one of the most important thing to take care is of quality so the farmers providing best quality are going to have a high bargaining power, so in order to retain them the company is going to accept their demands etc. The switching of one supplier to another is high for the firm as it requires more complex procedures.

Like, if Haleeb buys milk from one buyer and switch to other it will need to re make its policies and negotiation terms and conditions, along with that it also had to make other changes etc. 3) Bargaining Power of Buyers: The buyers of milk industry are mainly the distributors and consumers. As there is large number of distributors, who are buying and distributing the product, so their bargaining power is low and company has leverage to implement its terms and conditions on distributors. If we see from the onsumer point of view, we would come to know that Pakistan’s major population is still living in the rural areas where they consumer loose milk. The concept of modern packaged milk is there now and evolving but still not been adopted by many consumers because of their perceptions related to packaged milk that

it is not fresh etc. Therefore, the concentration of buyers in the processed milk industry is not very high which makes the bargaining power of buyers relatively low. As the number of buyers is not high, therefore the volume of purchase of the packaged milk is relatively low.

The buyers do not pose a threat of backward integration because of high investment and R&D in the processed milk plant; therefore they are not able to secure bargaining concessions. Buyers can not threaten an industry by forcing down prices, and bargaining for higher quality product. But on the other hand Generally speaking power of buyers is high when there are only few firms in the industry. In the milk industry consumers have more choice now as there are different brands available in the market.

If any brand doesn’t live up to the expectations in terms of quality or convenience and pricing then buyer got the power of switching to another brand. 4) Intensity of Rivalry among competitors: Rivalry among existing competitors takes the form of jockeying for position. Companies use tactics like price competition, advertising battles, product introduction and increased customer service or warranties. In the milk industry, all competitors producing same product at a same price but the difference which occurred is positioning of the product.

Firms face difficulty to come up with something really new and unique in the processed milk industry. Fixed cost and Storage cost Fixed and storage cost is high because everyone produce same product therefore all firms would want to increase capacity to cater to majority of the customers and excess capacity often leads to escalating price

cutting. Product Differentiation All competitors producing same product at a same price but the difference which occurred is positioning of the product Switching Cost Customers switching cost is low because many homogenized and loose milk available in the market.

If the brand that they like to consume is not available at the spot, they would definitely ask for other rival brands all the existing companies are offering nearly the same products along with having same core level. Exit Barriers Exits barriers are high because huge investments of financial, human, and marketing resources are required to enter in this business and required plants which can produce quality with consistency. After obtaining such plants it takes years to recover the fixed costs and to breakeven so it is not quite feasible for firm to close its business and jump into any other business.

Thus, rivalry is strong but firm has to stay and compete with existing rivals. 5) Threat of Substitute Product All firms within an industry compete with industries producing substitute products and services. A products price elasticity is effected by substitute product as more substitute become available, demand becomes more elastic since customer have more alternative and its also limit the potential returns of the industry. A close substitute products constrains the ability of firms in an industry to raise prices. In the milk industry, substitute of processed milk/UHT milk is Gawala milk and powdered milk.