Business strategy assignment 1

Nguyễn Thị Kiều Anh - Snow - F05014

BANKING ACADEMY OF VIETNAM
BTEC HND IN BUSINESS (ACCOUNTING)
ASSIGNMENT COVER SHEET
NAME OF STUDENT
REGISTRATION NO.
UNIT TITLE
ASSIGNMENT TITLE
ASSIGNMENT NO
NAME OF ASSESSOR
SUBMISSION DEADLINE

Nguyễn Thị Kiều Anh - Snow - F05A
F05-014
Unit 7: Business Strategy
Nestle Strategic Plan
1 of 2
PhD. Pham Quoc Khanh
14th April 2014

I, ____Nguyen Thi Kieu Anh____ hereby confirm that this assignment is my own work and not
copied or plagiarized from any source. I have referenced the sources from which information is
obtained by me for this assignment.

________________________________

________14th April 2014________

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Unit Outcomes
Outcome

Evidence for the
criteria

Feedback

Assessor’s decision
First
attempt

Understand
the process
of strategic
planning

LO1

Be able to
formulate a
new strategy
LO2

Explain strategic
contexts and
terminology –
missions,
visions, objectives,
goals, core
competencies

1.1

Review the issues
involved in strategic
planning

1.2

Explain different
planning techniques

1.3

Produce an
organisational audit

for a given
organisation

2.1

Carry out an
environmental audit
for a given
organisation

2.2

Explain the
significance of
stakeholder analysis

2.3

Merit grades awarded

M1

M2

M3

Distinction grades awarded

D1

D2

D3

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Internal
Verification

Rework

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Assignment
( ) Well-structured; Reference is done properly / should be done (if any)

Overall, you’ve

Areas for improvement:

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NESTLÉ STRATEGIC PLAN

Prepared for:
Lecturer, PhD. Pham Quoc Khanh
Unit 7: Business Strategy
Banking Academy, Hanoi
BTEC HND in Business (Finance)

Prepared by:
Nguyễn Thị Kiều Anh – Snow - F05A
Registration No: ITP F05-014
Submission date: 14th April 2014

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TABLE OF CONTENTS

EXECUTIVE SUMMARY
As an assistant research analyst working in a team for a research firm in Vietnam. My task is
prepare outlines the business environment of Nestlé to support for its future strategy
formulation and planning which provide to my team leader (Trung and Trang) for the coming

discussion with the clients.
The presentation notes are addressed on the following matter:
•

Explain Nestle strategic contexts and terminology – missions, visions, objectives,
goals, core competencies

•

Review the issues involved in strategic planning for Nestle

•

Explain Nestle different planning techniques

A report is provided to formulate a new strategy for Nestle
•

Produce an organisational audit for Nestle Vietnam

•

Carry out an environmental audit for Nestle Vietnam

•

Explain the significance of stakeholder analysis

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INTRODUCTION
Nestlé is a multinational corporation, headquarter in Switzerland, is one of the largest food
company in the world. Nestlé Vietnam which is established in 1992 is a member of Nestlé
Global. After more than 10 years operating, Nestlé Vietnam has become one of the successful
company in the field of beverage drink and nourishing food in Vietnam market. Nestlé
Vietnam has gradually confirmed as a leading food company in Vietnam deserves to be a
member of Nestlé Global. One of the key factors contributing to Nestlé Vietnam success is
due to building business strategy rightly, flexibly, and determining to pursue this strategy for
a long time.
In this report, I will analyze industry environment of Nestlé Vietnam including internal
environment and external environment. From that, I draw conclusion about strengths and
weaknesses of Nestlé from internal environment, and opportunities and threats from external
environment.
As to complete this report, I based on information in the Business Strategy course book and
some reference books, many sources from internet, newspapers. Specifically, I would like to
express my deep gratitude to my lecturer, Mr. Pham Quoc Khanh who supports, motivates me
during the process of completing this report.

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CONTENTS
2.1 Produce an organization audit for Nestlé Vietnam
2.1.1 Limiting factors
No

Factors

1

Assets

2

Products,
brands,
markets

3

Operating
systems

4

Organization
and HR

Influence
- Do not meet the rising
Dong Nai only has 5 production

customer demand in the near
lines. Although Nestlé Vietnam
future
uses modern technology of global
- Require adjusting technical
Nestlé, some production line must Shortage
data constantly, which lead to
operate with high capacity as
interrupt production time and
coffee and sauce seasoning....and
high cost for adjusting the
produce many kinds of products
machine
The product range of Nestlé
Product sales of Vietnam is
Vietnam is too poor (87 kinds)
incommensurate to the market:
compared to Nestlé Global (more
Sale of Nestlé Vietnam products
than 30 thousand kinds of Shortage in the domestic market in 2012
products)
only reached 0.6USD/people/year
while that of Thailand reached
over 10USD/people/year
Product launch system: Nestlé’s
regulations about advertising and
- Reduce competitive advantages
introducing products are too
of Nestlé product in market
stringent such as no advertising of

- Decrease company profit
Difficult
any kinds of products for children
under 12 months of age and
advertising cost is too high
approximately equal 19% revenue
Nestlé Vietnam has more than 800
- Take more time to carry on
official labours. However, there is
tasks
limited number of key personnel
- Easy to arise errors when
such as salespeople with technical Shortage
implementing work due to lack
knowledge and skilled workers...
of knowledge
- Decrease the performance of
company

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Examples

Status

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The most important limiting factor is about assets: shortage of production lines. If Nestlé

do not improve this limiting factor, the production is interrupted any time in the near
future which lead to damage finance, effect significantly on reputation of company.
2.1.2 Distinctive competencies
Nestlé has the unique strength to customize global products with the same quality
standards based on customer needs in the Vietnam market. For instance, in Europe,
Americas market: Milo is so fat with high-dairy ingredients, low sugar content, in West
Asia market: Milo has a bitter taste with high cocoa, low sugar content. Thus, in order to
suitable with Vietnamese tastes, Nestlé Vietnam customize Milo product with high sugar,
low cocoa. Applying those distinctive competencies, Nestlé Vietnam can earn greater
returns and gain a sustainable advantage over its competitors (Johnson, 2008).
2.1.3 Product positions

Figure 1: Product/Business Life Cycle
One of the key products in the powdered and liquid beverages category is instant
coffee. It belongs to the third stage “Business Optimization”. This product brought 32%
of revenue with sales of about 171 billion VND in the first six months of 2013. Its market
segments are also expanded larger. Instant coffee has turned to the business optimization
by building a new factory in Bien Hoa which is in Nescafé Plan Global in 2010 with
investment capital up to approximately 270 million USD (Nestlé, 2013).

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Instant coffee’s position is at high market share and high market growth. It means that
instant coffee of Nestlé Vietnam is standing in STARS where Nestlé has dominant
position and is in a growing industry.

•

Dominant position

There are 3 coffee brands hold largest market share in Vietnam, that are Cafe Trung
Nguyen (G7) accounted for 26.3%, Vinacafé Bien Hoa (Vinacafé) accounted for 22.8%,
followed by Nestlé (Nescafé) with 21.7%.

Figure 2: Market share of instant cafe in 2013 (Vinaresearch, 2013)
•

Growing industry

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Figure 3: Forecast consumption of coffee in Vietnam (viettrade, 2010)
As we can see, coffee consumption in Vietnam is increasing. It means that customers’
demands are increasing; this is also the trend of high growth rate. Therefore, with such
potential market, Nestlé Vietnam needs more efforts in improving weaknesses, building
customer loyalty to gain more profit and compete its competitors.
2.1.4 Value-chain analysis

Figure 4: Value chain
2.1.4.1 Primary activities
•

Inbound Logistics: Nestlé has a very large and integrated milk collection network.
Milk collection centers, sub centers and village center have been established for
milk collection. At these centers the milk is stored in chillers and then transported
to the factories through containers which have the temperatures of 2oC to 3oC.

•

Operations: Nestlé has very sophisticated machinery. Quality checks practiced at
every level of value addition. Packaging quality is also up to the standards. Product
testing security trusts.

•

Outbound Logistics: Nestlé has well integrated distribution network and
warehousing facilities.

•

Marketing and Sales: Marketing programs of Nestlé are very influential one.
Proper awareness about the project is created and the sales are stipulated.

2.1.4.2 Support activities
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•

Technology development: Nestlé Vietnam develops breakthrough technologies,
building blocks that are basis of new product development with the support of
global technology centre.

•

Human resource management: Nestlé trained specialized knowledge which suit for
job functions before employees start working as well as maintain advanced training
annually to develop staff skills.

•

Infrastructure: Build an important infrastructure such as waste processing system to
protect environment (Nestlé, 2013).

2.1.5 Organization structure

Figure 5: Organization structure of Nestlé Vietnam (Nestlé, 2013)
Based on the Mintzberg’s organigram, organization structure of Nestlé Vietnam are
composed of five basic elements:
•

Strategic apex: General manager of Nestlé Vietnam

•

Operating core: Worker in factories

•

Middle line: Manager of Dong Nai factory

•

Technostructure: Personnel managers in HR department, accountants in
financial accounting department, quality assurance manager in quality control
department, planner in plan department, researchers in R&D department,
engineers in engineering department...

•

Support staff: Staffs in customer support, marketing and sale department

Nestlé’s organization structure is flat structure which has less level of management and
wider span of control. All departments will executive functions and reports directly to the
general manager. This helps Nestlé to operate business flexibly and efficiently.
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2.1.6 Market and customer audit
2.1.6.1 Market audit

MARKET AUDIT MATRIX
Factors
Nestlé Vietnam
Evaluation

Size of
- Large
supermarkets:
BigC, Huge customer base helps Nestlé increase
customer base
Metro..
profitability. In order to maintain and
- Large wholesale dealers, market expand its customer base, it requires
and retail shops throughout company to developing new products and
Vietnam: Ha Noi, Ho Chi Minh,..
advertising.
Sale revenue Revenue and profit after tax increase This proves that Nestlé Vietnam running
and
annually.
business efficiently. It creates good
profitability
- Total revenue in 2013 increased condition for company expand market and
compared to 2010 is 1.24 times
invest more into Vietnam market.
Segments
- Demographic: For baby: Nestlé - Analysing needs of each customer group
baby foods; for young people:
helps Nestlé create products better than
Milo, Nescafé; for old people:
its rivals
Nestlé health care Nutrition
- Satisfy different demands of different
- Psychographic: Nestlé Breakfast
customers
Cereals is the best choice for busy

people...
Market share
Nestlé has largest market share in key Nestlé is in strong position in Vietnam
products such as Milo (90%), market. It requires Nestlé need to put more
Nescafé (21.7 %), Maggi (13%)...
efforts to meet customers’ requirement.
2.1.6.2 Customer audit
CUSTOMER AUDIT MATRIX
Factors
Nestlé Vietnam
Evaluation
Key customer
Supermarkets, wholesale dealers, Nestlé is large company, it focus on selling
identify
retail shops in big city: Hanoi, Ho products to others business rather than
Chi Minh. Danang
individual. Sell in larger quantities and
reduce intermediate stage in delivering
products to customers.
Relationship of When customer experience product, It requires Nestlé focus more on quality of
customer to
they will evaluate product’s quality. products as well as has promotion sales to
product
If the product is assessed high, they attract customers
will be used frequently. If not, they
will never buy it anymore.
Customer
The buying decision of Vietnamese Focus on making first impression for
attitude
and usually based on the people who products both product quality and service

behaviour
used to that product
quality...
The profitability There are many costs involved in Nestlé need to control expenses carefully
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of selling to the supplying products to customers: in order to ensure that expenses is not too
client
R&D,
test
facilities,
sales high and company can achieve proposed
promotion, delivery...
revenue.
Summary
-

Strengths
High quality product
Well-known brand
Sustainable culture and business principles
Modern productive technology
Flexible organization structure
Financial strengths
Inheriting results of product development
research from global Nestlé

-

Weaknesses
Poor product range
Limited number of key personnel
Nestlé’s regulations about advertising and
introducing products are too stringent
High advertising cost
Low production capacity due to produce
many kinds of products on the fixed
production lines

2.2 Carry out an environmental audit for Nestlé Vietnam
2.2.1 PEST
•

Political factors
-

In Vietnam, Communist Party is all-powerful. Therefore, the system of political in
Vietnam is more stable than other countries. Moreover, Vietnam is extending
diplomatic relations with the other countries in the world. This is the advantages so
that board of directors of Nestlé consider investing largely into Vietnam.

-

All company operate in Vietnam must comply with government obligations such
as tax policy, environmental protection and employment laws... If the company
does not follow the laws, government will impose administrative penalty.

According to Vietnam’s law, Nestlé must pay 10% in total profit as taxation.

-

The consciousness of implementing law as well as enforcement of punishing for
doing illegal in Vietnam is not really good, especially in term of fighting against
producing, selling counterfeit product, smuggle, violation of intellectual property
law...Nestlé Vietnam need to have brands against counterfeiting to create trust for
consumers.

•

Economic factors
-

The economy of Vietnam is a developing mixed economy. Moreover, it is in the
period of integrating into world's economy. By joining WTO in 2006, Nestlé can
reduce tax on input materials. For example, some kinds of milk materials have the
import rate lower than before, Nestlé can import more and easier powdered milk
because the local supply is not enough for the production demand.

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-

Vietnam’s economy develops stably and low inflation (only about 6.2-6.3% in

2013) brings more income (GDP/capita of Vietnam reached the growth rate of
7.91%/year in the period 2012-2013) (gso, 2014). This changes in the structure of
expenditure for products; customers spend more in consumer goods such as food
and beverages. This will create favourable conditions for Nestlé Vietnam to
develop their products, especially premium product lines.

-

World crude oil prices continue to rise (from $65/barrel in 2010 to
$107.35/barrel in February 2013). This lead to increase production costs of Nestlé
Vietnam. Based on data from energy consumption report of Nestlé, only calculate
expenses from increasing oil prices (from VND7,500/liter before 29/03/2010 up to
VND24,690/liter) makes expenses of Nestlé Vietnam raised approximately 7
billion VND.

•

Socio-cultural factors
The population of Vietnam is 90 million people with the population growth rate over
1% per year, is ranked 14th among the world’s most populous countries (gso, 2014).
This is good sign for Nestlé to increase the number of potential consumers.
Nevertheless, market's demand is stricter than before about product categories and
product quality. As a result, it requires the company to improve their production, invest
more in new technology in order to maintain as well as increase their market share.

•

Technological factors
Nowadays, Vietnam has a rapid pace in technology development. For example, in
term of internet technology from 2010 to now, Vietnam has continuously ranked

among the top 20 countries with the largest number of internet users in the world with
more than 30% the proportion of the population (dantri, 2012). Nestlé could use this
advantage to introduce their products on the internet, especially their official
website. Customers could get any information from their website. Besides, Nestlé
could find more information related to Vietnamese tastes for producing different
products based on the customer demand.

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2.2.2 Porter’s 5 forces

Figure 6: Porter’s five force
•

The threat of new entrants - Low
At the first glance, food processing industry is not too difficult to enter because the capital
requirement of entry is not high so it enables many businessmen to open their business in
this industry. Nestlé has operated Vietnam for a long history of quality products and
consumer satisfaction, which has allowed the company to obtain a certain market share
as well as have more experience in term of distribution channel, customer tastes and
supplier loyalty in Vietnam. To achieve what Nestlé has achieved so far is very difficult
for the other companies, especially new entrants. Therefore, the threat of new entrants is
relatively low.

•

Threat of substitutes - High
Due to the nature of the industry, the threat of substitute is high. There are many
competitors in food processing industry that provides the similar kinds of products like
Nestlé. For example, the substitute for Nescafe can be the soft drinks which are not in
the portfolio of Nestlé. The substitute products for seasoning powder and soy sauce are
monosodium glutamate plant and fish sauce. For such fierce competition, Nestlé need
continuously find the ways to improve their products to maintain the competitive
advantages in Vietnam market.

•

Bargaining power of suppliers - Medium
The basis of Nestlé products are agriculture raw materials such as milk, cocoa,
coffee...Suppliers’ power is increasing because Nestlé are not involved in agricultural raw
material and do not own the farms feeding cows to provide milk. Nestlé rely totally on
the suppliers to provide the raw material. Nestlé itself purchases agricultural
materials in either raw or semi-processed form directly from farmers or via trade
channel in which domestic material accounted for 40% and imported materials
accounted for 60% (Nestlé, 2013). However, due to the large purchasing power, Nestlé

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refers to create and maintain long-term relationships with its suppliers for ensuring the
raw material quality as well as minimize unnecessary costs.
•

Bargaining power of buyers - High
Main customers of Nestlé Vietnam are domestic consumers (consumed of 90-95% of
production). Thus, Vietnamese customers have a large amount of bargaining power in
consumption of Nestlé products. As mentioned above, there are many substitutes for
Nestlé products which creating many choices for customers. However, by understanding
the power of customers and requirement of consumers (consumers has started
becoming more health conscious so they interested in product quality more than its
prices), Nestlé is incorporating health and wellness into creation of its product to meet
customers’ requirements (Nestlé, 2013).

•

Competitive rivalry within the industry - High
There are many competitors of Nestlé in Vietnam market. In which, there are strong
competitors from abroad such as Unilever Vietnam, Dutch Lady, Ajinomoto...and lowcost companies from domestic such as Vinamilk, Vinacafe... (Nestlé, 2013). Therefore,
rivalry is fierce in this industry. It requires Nestlé need to continue striving to improve
itself as well as create innovative strategies to compete with its competitors such as:
advertising, introducing more new products for the market with variety of flavours,
provide after-service such as professional advice for customer about nutrition
information...

Conclusion
Opportunities
- Stable political and economic growth, high
GDP, higher living standard which create
favourable conditions for Nestlé Vietnam
to develop nutrition drink and premium
product lines.
- Population growth is good sign for Nestlé
to increase the number of potential

consumers.
- Reputation and brand company is well
known

-

-

-

Threats
There are many competitors: the high potential
competitors from abroad and the low-cost
companies from domestic.
The price of fuel continues to rise leading to
increase production costs
There are more competitors joining the industry
leading to source of input material become scarce,
Nestlé must import raw materials at higher prices.
The risk of stolen technology, counterfeit goods,
smuggling
The requirements of environment legislation are
increasing which affect production costs.

2.3 Explain the significance of stakeholder analysis
2.3.1 Stakeholder significance grid
In case of Nestlé, I mentioned the following stakeholders:
•

Internal stakeholders: Management, employees

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•

Connected stakeholders: Customers, suppliers, competitors

•

External stakeholders: Vietnam government

The Power/Interest grid below illustrates the power and interest of each stakeholders of
Nestlé Vietnam:

Figure 7: Power/ Interest Grid of Nestlé Vietnam
Vietnam government and competitors are the group has low interest but high power in
company. Vietnam government forces Nestlé operate legally in Vietnam market while
competitors create incentives for the company to improve itself and continue to strengthen its
position each day because of competitors’ constant growth. Suppliers have high interest but low
power in the company. They interested in company operation is because it effects on their
benefits such as revenue...Finally, the most important stakeholders is customers, management
and employees of Nestlé. Company needs to manage them closely because they are both high
power and interest. For example, the more the number of customers increases, the more
profitability company can gain.

2.3.2 Stakeholder mapping

STAKEHOLDER MAPPING
Types

Stakeholders

Key
Players

Internal
stakeholders

Management
Employees

X
X

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Keep
Satisfied

Keep
Informed

Minimal
Effect

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Connected
stakeholders
External
stakeholders
•

Customers
Suppliers
Competitors
Vietnam
Government

X
X
X
X

Internal stakeholders
a)

Management - Key Players
Managers have significant impact on the performance of Nestlé. Pierre Schaufelberger
(General Manager of Nestlé Vietnam) has responsible for main tasks in the company,
namely orientations in developing product, researching market and controlling
activities of Nestlé...Other managers of marketing and sale department have
responsible for increasing turnover for company. More than anything, managers also
are the people communicate directly with employees in which effect significantly on
employees’ satisfaction and working efficiency. Therefore, Nestlé need to create

professional, friendly working environment, and support for manager to promote the
capability of individual, and motivate their creativity.

b)

Employees - Key players
Employees are people who support and implement strategies from management.
Their performances and attitudes affects significant on strategy success. According to
Nestlé “Our employees helps us to gain and build competitive advantage through
their energy, imagination and local insights. It is essential that we reward them
competitively and invest in their development to ensure that we remain responsive to
a rapidly changing world”. As can be said that Nestlé understand the important roles
of employees when treat them as precious assets of the company.

•

Connected stakeholders
a)

Customers - Key Players
Customers has always been key stakeholders of whatever companies, especially for
those that are operating in a competitive market such as food processing industry
where there are both domestic and international players who are interested in
obtaining more market share by attracting customers. The purchasing decisions of
customers are the key to success of Nestlé. Therefore, it is necessary for Nestlé
research cautiously Vietnam market, accordingly set up plan to launch the products
which meet customers demand and tastes. Besides, company need provide customers
with information of Nestlé products to enhance customer’s awareness, and help them

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depth understand product’s quality along with best services that Nestlé supply after
buying products.
b)

Suppliers - Keep informed
Product quality of Nestlé depends greatly on quality of raw material. With the best
materials from the suppliers, Nestlé can launch high quality products for customers.
It requires company to create and maintain long-term relationships with its suppliers
for ensuring the raw material quality as well as minimize unnecessary costs.

c)

Competitors - Keep Satisfied
Competitors become an important part of any industry. Companies which exist in
competitive market are good thing for consumers because competitors are the
motivation to urge them to make more good services and higher product quality. In
Vietnam, Nestlé must face many strong competitors such as Vinamilk, Vinacafe,
Unilever, Ajinomoto...Therefore, it requires company need to have innovative
strategies to compete with them.

•

External stakeholders
a)

Vietnam government - Keep satisfied
Vietnam government protect the benefits of the business against counterfeit product,
smuggling...On the other hand, they set up the laws and regulations such as
corporation tax, competition law which company must comply. Accordingly, it forces
Nestlé Vietnam follow, specifically; all company’s strategies enhance the fairness in
business, no tricks are used as dumping products in order to compete with
competitors. Thus, in order to exist and operate efficiency in Vietnam market, it is
necessary for Nestlé to comply Vietnam law and build up good relationship with
Vietnam government by participating in social work such as doing charity...

APPENDIX
Unit: Ton/year
Production line Production capacity Capacity utilization-2010
Coffee
1,939
97%
Milo
5,230
62%
Nestea
5,100
50%
Sodium
3,450
89%
Soy sauce
1,560
91%
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Uniclan 1 -2
Nalbak
Olympia1 -2
Volpack1
Volpack2
Topack1-2
Topack 3-4
Sanko1-2 -3-4

2,860
1,200
1,200
1,300
1,400
3,250
3,500
6,500

77%
75%
70%
85%
82%
86%
82%
88%

Figure 8: The production lines of Nestlé Vietnam (Nestlé, 2013)

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CONCLUSION
By using strategic formulation, namely PEST, SWOT, Porter’s 5 forces and applying strategic
positioning techniques, we can have an overview about Nestlé business environment and
business position in Vietnam market, from that to support for its future strategy planning.
In order to exist in such fiercely competitive industry, Nestlé Vietnam needs to have right
strategy in the right time at the right segment. The pursuit of multiple strategies can weaken
the force of the company. Nevertheless, with its present ability and support of Nestlé global,
Nestlé can implement these strategies at the same time. These strategies are developed and set
up based on many stages of research, planning and selection. During the process, the
information needed to use to analyse including information about macro environment and
micro environment as I have already mentioned in this report. In order to promote effectively
of all of these strategies, it requires Nestlé need constantly update information and research
changes of market to make appropriate adjustment. Hopefully, readers can find out useful
information from this report.

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REFERENCES
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Available at: [Accessed 05 April 2014].
gso, 2014. Diện tích, dân số và mật độ dân số năm 2012 phân theo địa phương. [Online]
Available at: />[Accessed 04 April 2014].
Johnson, 2008. Strategic Management. [Online] Available at:
[Accessed 07 April 2014].
Nestlé, 2013. Annual report - Corporate Social Responsibility. Nestlé.
viettrade, 2010. Thị trường cà phê Việt Nam - Phần 2. [Online] Available at:
[Accessed 09
April 2014].
Vinaresearch, 2013. KHẢO SÁT VỀ THỊ TRƯỜNG CÀ PHÊ BỘT. [Online] Available at:
/>2013.pdf [Accessed 08 April 2014].

BS A1 QCF Feb 2014 BAV

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