Nestle

The procurement life cycle followed by Nestle is broken up into several integrated components in the business and involves large number of intermediary processes like purchase requisition, purchase order, vendor involvement, goods receipt and inventory management and accounts payable. All this processes make together the life cycle of procurement process.

Each time an inventory item is received or issued from the inventory at one of the Nestle locations, the system automatically updates stock quantities and values, and reduces inventory. Time consuming tasks are simplified through determining optimum source of supply, analyzing and comparing vendor pricing, issuing purchase orders, managing the authorization for purchase requisitions, processing invoices for payment and recording the same. The efficient supply chain at Nestle requires all stock planning and operational activities to be integrated into a uniform business-process flow.

At the inventory management there are three types of Goods Movements namely goods receipt, goods issue and transfer posting. As soon as the goods movement is entered stocks are updated, material documents are created to record the event and accounting documents are created when change in valuation area occurs.

At Nestle, sending a purchase order to a supplier, it is necessary to have some internal agreement on what is required, together with an audit trail of approvals for that requirement. A Purchase Requisition (PR) provides this facility and is an internal request to purchasing.  Once it has been electronically signed off (workflow), it can be used to generate a Purchase Order, which is an external request to the Nestlé’s supplier.

A purchase requisition is an internal request at Nestle to purchasing.  You ask the buyer to provide a certain quantity of a material or service on a certain date. A purchase requisition can be created automatically by MRP or manually created.  The MRP controller can also convert a planned order into a purchase requisition. Source determination is a separate function.  The buyer receives proposals if, for example, fixed vendors or outline agreements exist for the material.

The material requirements planning, inventory, production, and procurement processes all work together to orchestrate a smooth flow of high quality material. Workflow events are configured to Nestlé’s requirements by taking into consideration the degree to which automated or manual controls are required. Vendors quotation and selection processing is also done with great focus on the SAP implemented for that purpose at Nestle.  The materials requirement planning system at Nestle usually makes good a calculated definition about the requirements for a particular territory and at all locations over the enterprise. The stock management system collaborates with the inventory system in the SAP system to manage its products.

CHAPTER – ONE

Conceptual framework and basic issues 1. 1 INTRODUCTION India is one of the largest economies in the world in terms of purchasing power and is among the fastest-growing, with a population of around 1. 12 billion people, with huge natural resources, and with costs that are at the very low end of the global average. All major consumer companies of India have sophisticated marketing and product development plans. Moreover, the multinationals that are operating in India have business models that are tailor-made to local markets and customs.

After the economic liberalization of 1991, many MNCs have entered India. Today, global companies having subsidiaries in India include Unilever, Nestle, BATA, Colgate Palmolive, Procter & Gamble, General Electric, General Motors, Ford, Pepsi and Coca-Cola. Historically, the main reason for the entry of MNCs into India was to jump the tariff wall. High import duties ruled out the option of exporting finished goods from the home country to India. On the other hand, once they entered the country and set up operations, the country’s high tariffs guaranteed adequate protection.

In some cases, the need to customize products necessitated a strong local presence. The multinational companies in India represent a diversified portfolio of companies from different countries. There are a number of reasons why the multinational companies are coming down to India. India has got a huge market. It has also got one of the fastest growing economies in the world. Besides, the policy of the government towards FDI has also played a major role in attracting the multinational companies in India.

While several MNC’s have entered India, However, even within a given industry, some MNCs seem to be doing better than the others. Consider the automobile industry. Here, Suzuki and Hyundai are way ahead of formidable rivals such as General Motors, Honda and Ford. Similarly in the FMCG sector, even after allowing for its relative late entry, Hindustan Unilever Limited and Nestle remains a big player in the Indian market. FMCG are products that have a quick shelf turnover, at relatively low cost and don’t require a lot of thought, time and financial nvestment to purchase. Three of the largest and best known examples of Fast Moving Consumer Goods companies in India are Nestle, Hindustan Unilever limited and Procter ; Gamble. The Indian FMCG sector is an important contributor to the country’s GDP. It is the fourth largest sector in the economy. It has a strong MNC presence and is characterized by a well established distribution network, intense competition between the organized and unorganized segments and low operational cost. The Indian FMCG sector is the fourth largest sector in the economy.

It has a strong MNC presence and is characterized by a well-established distribution network, intense competition between the organized and unorganized segments and low operational cost. Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India a competitive advantage. The FMCG sector consists of three product categories, each with its own hosts of products that have relatively quick turnover and low costs: * Household Care * Personal care * Food and Beverages Food and Beverages * Health beverages; soft drinks Staples/cereals * Beverages bakery products (biscuits, bread, cakes) * Snack food * Chocolates * Ice cream * Tea * Coffee * Soft drinks * Processed fruits, vegetables * Dairy products * Bottled water * Branded flour Household care * Fabric wash (laundry soaps and synthetic detergents) * Household cleaners(dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish and furniture polish) Personal Care * Oral care, hair care, skin care, personal wash (soaps) * Cosmetics and toiletries deodorants Perfumes * Feminine hygiene * Paper product 1 • Food & Beverage My project topic is on the study of Hindustan Unilever limited and Nestle India, which are major MNC’s (FMCG) in India. Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this category include all consumables (other than groceries/pulses) people buy at regular intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, and household accessories.

In India, companies like HUL, P& G and Nestle have been a dominant force in the FMCG sector . These companies were, therefore, able to charge a premium for their products. With the gradual opening up of the economy over the last decade, FMCG companies have been forced to fight for a market share. An average Indian spends around 40 per cent of the income on grocery and 8 per cent on personal care products. The large share of fast moving consumer goods (FMCG) in total individual spending along with the large population base is another factor that makes India one of the largest FMCG markets.

Source: KSA Technopak Consumer Outlook 2004. Figure:1. 1 Even on an international scale, total consumer expenditure on food in India at US$ 120 billion is amongst the largest in the emerging markets, next only to China. Figure 1. 2 TOP 10 Fmcg companies in India 1. Hindustan Unilever Ltd. 2. ITC (Indian Tobacco Company) 3. Nestle India 4. AMUL 5. Dabur India 6. Britannia 7. Cadbury India 8. Pepsico 9. Procter & Gamble Hygiene and Health Care 10. Marico Industries The FMCG sector has traditionally grown at a very fast rate and has generally outperformed the rest of the industry.

Given the large market and the requirement for continuous repurchase of these products, FMCG companies continue to do well . Moreover, most of the companies are concentrating on cost reduction and supply chain management and sustainable competitive advantage. FMCG must keep fine-tuning their strategy till they have a winning formula in place. It is FMCG’s which show both commitment and flexibility that are most likely to succeed in India 1. 2 Need of the study Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and chieve a sustainable competitive advantage. The need of the study of this project entitled ‘Comparative study on the marketing strategies of the HUL and Nestle in India’ is to understand whether the marketing strategies is suited to the Indian market because each markets in India follow different political and cultural environment, therefore different marketing practices are implemented to get the desired outcome, that is profit, so there is a need to study how these MNC’s adapt to Indian markets. 1. 3 Objective of the study To identify and compare the marketing strategies of Hindustan Unilever Limited and Nestle India * To identify the SWOT analysis. * To identify the marketing mix of both the companies * To analyse the various strategies adopted by both the companies to gain competitive advantage CHAPTER – TWO 2. 1 Profile of Unilever Unilever is a British-Dutch multinational corporation that owns many of the world’s consumer product brands in foods, beverages, cleaning agents and personal care products and operates in around 100 countries. Unilever is a dual-listed company consisting of Unilever N.

V. in Rotterdam, The Netherlands and Unilever PLC in London, United Kingdom. Both Unilever companies have the same directors and effectively operate as a single business. The current non-executive Chairman of Unilever N. V. and PLC is Michael Treschow while Paul Polman is Group Chief 2. 1. 1 History of Unilever Unilever was created in 1930 by the amalgamation of the operations of British soap maker Lever Brothers and Dutch margarine producer Margarine Unie, a merger as palm oil was a major raw material for both margarines and soaps and could be imported more efficiently in larger quantities.

In the 1930s the Unilever business grew and new ventures were launched in Latin America. In 1972 Unilever purchased A;W Restaurants’ Canadian division but sold its shares through a management buyout to former A&W Food Services of Canada CEO Jefferson J. Mooney in July 1996. By 1980 soap and edible fats contributed just 40% of profits, compared with an original 90%. In 1984 the company bought the brand Brooke Bond (maker of PG Tips tea). In 1987 Unilever strengthened its position in the world skin care market by acquiring Chesebrough-Ponds, the maker of Ragu, Pond’s, Aqua-Net, Cutex Nail Polish, and Vaseline.

In 1989 Unilever bought Calvin Klein Cosmetics, Faberge, and Elizabeth Arden, but the latter was later sold (in 2000) to FFI Fragrances In 1996 Unilever purchased Helene Curtis Industries, giving the company “a powerful new presence in the United States shampoo and deodorant market”. The purchase brought Unilever the Suave and Finesse hair-care product brands and Degree deodorant brand. In 2000 the company absorbed the American business Best Foods, strengthening its presence in North America and extending its portfolio of foods brands. In April 2000 it bought both Ben ; Jerry’s and Slim Fast.

The company is multinational with operating companies and factories on every continent (except Antarctica) and research laboratories at Colworth and Port Sunlight in England; Vlaardingen in the Netherlands; Trumbull, Connecticut, and Englewood Cliffs, New Jersey in the United States; Bangalore in India and Shanghai in China. The US division carried the Lever Brothers name until the 1990s, when it adopted that of the parent company. The American unit has headquarters in New Jersey, and no longer maintains a presence at Lever House, the iconic skyscraper on Park Avenue in New York City.

The company is said to promote sustainability and started a sustainable agriculture programme in 1998. In May 2007 it became the first tea company to commit to sourcing all its tea in a sustainable manner, employing the Rainforest Alliance, an international environmental NGO, to certify its tea estates in East Africa, as well as third-party suppliers in Africa and other parts of the world. It declared its aim to have all Lipton Yellow Label and PG Tips tea bags sold in Western Europe certified by 2010, followed by all Lipton tea bags globally by 2015. In 2008 Unilever was honored at he 59th Annual Technology & Engineering Emmy Awards for “Outstanding Achievement in Advanced Media Technology for Creation and Distribution of Interactive Commercial Advertising Delivered through Digital Set Top Boxes” for its program Axe: Boost Your ESP On September 24, 2010, Unilever announced that it has entered into a definitive agreement to sell its consumer tomato products business in Brazil to Cargill and on September 27, 2010, Unilever purchased Alberto-Culver, the maker of personal care and household products such as VO5, Nexxus, TRESemme, and Mrs.

Dash for $US3. 7 billion. On September 28, 2010, Unilever and EVGA announced that they have signed an agreement under which Unilever will acquire EVGA’s ice cream brands (amongst others, Scandal, Variete and Karabola) and distribution network in Greece, for an undisclosed amount. 2. 1. 2 Mission Unilever’s mission is to add Vitality to life. We meet everyday needs for nutrition; hygiene and personal care with brands that help people feel good, look good and get more out of life. 2. 1. Vision We work to create a better future every day, help people feel good, look good and get more out of life with brands and services that are good for them and good for others and will inspire people to take small, everyday actions that can add up to a big difference for the world, develop new ways of doing business with the aim of doubling the size of our company while reducing our environmental impact and fully recognize that we will need to develop a new model for business growth.

We are embarking on a long-term programme of work with our employees, suppliers, customers and other partners to realize this goal. With our portfolio of strong brands, presence in emerging markets and long-standing commitment to shared value creation, we believe we are well placed to deliver on this ambition. 2. 1. 4 Brands * Food brands Becel, flora, Bertolli, Blue band Rama, Heartbrand, Hellmann’s, Amora, Knorr, Lipton, Slim-Fast * Homecare Brands Cif, Comfort, Domestos, Omo, Radiant, Sunlight, Surf * Personal Care brands

Axe, Dove, Lux, Lifebuoy, Ponds’, Rexona, Signal, Close-up, Sunsilk, Tigi, Vaseline 2. 1. 5 Purpose ; principles Our corporate purpose states that to succeed requires “the highest standards of corporate behaviour towards everyone we work with, the communities we touch, and the environment on which we have an impact. ” * Always working with integrity Conducting our operations with integrity and with respect for the many people, organizations and environments our business touch has always been at the heart of our corporate responsibility. Positive impact We aim to make a positive impact in many ways: through our brands, our commercial operations and relationships, through voluntary contributions, and through the various other ways in which we engage with society. * Continuous commitment We’re also committed to continuously improving the way we manage our environmental impacts and are working towards our longer-term goal of developing a sustainable business. * Setting out our aspirations Our corporate purpose sets out our aspirations in running our business.

It’s underpinned by our code of business Principles which describes the operational standards that everyone at Unilever follows, wherever they are in the world. The code also supports our approach to governance and corporate responsibility. * Working with others We want to work with suppliers who have values similar to our own and work to the same standards we do. Our Business partner code, aligned to our own Code of business principles, comprises ten principles covering business integrity and responsibilities relating to employees, consumers and the environment. . 1. 6 Management Our operating model is designed to deliver faster decisions. Learn more about our senior corporate officers and the Unilever Executive. The Executive directors are those members of the Unilever executive (UEX), including the group chief executive, who are also directors of Unilever. NAME | DESIGNATIONS| Paul Polman | Chief Executive Officer, Executive Director to the Boards of Unilever PLC and Unilever NV | Jean-Marc Huet | Chief Financial Officer. |

The Unilever executive (UEx) is responsible for managing profit and loss, and delivering growth across our regions, categories and functions NAME| DESIGNATION| Professor Genevieve Berger | Chief Research and Development Officer| Jean-Marc Huet| Chief financial officer| Pier Luigi Sigismondi| Chief Supply Chain Officer| Keith Weed | Chief Marketing and Communication Officer | Douglas Anderson Baillie Chief HR Officer| Chief HR Officer| Non-executive directors The non-executive directors are the independent element in Unilever’s governance. NAME| DESIGNATIONS|

Michael Treschow | Chairman Unilever N. V. and PLC, Member of Unilever’s Nomination and Remuneration Committees. | The Rt Hon Sir Malcolm Rifkind, MP| Chairman of the Corporate Responsibility and Reputation Committee| Hixonia Nyasulu | Member of Unilever’s Corporate Responsibility and Reputation Committee| Paul walsh| Member of Unilever’s Nomination and Remuneration Committees. | 2. 1. 7 Financials Items | Amounts | Revenue| €44,262 billion (2010)| Operating Income| €6,339 billion (2010)| Net Income | €4,598 billion (2010)| Source:-www. unilever. com 2. 2 HINDUSTAN UNILEVER LIMITED

Hindustan Unilever Limited (HUL) is India’s largest Fast Moving Consumer Goods Company with a heritage of over 75 years in India and touches the lives of two out of three Indians. HUL works to create a better future every day and helps people feel good, look good and get more out of life with brands and services that are good for them and good for others. With over 58 brands pning 20 distinct categories such as soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers, the Company is a part of the everyday life of millions of consumers across India.

Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair ; Lovely, Pond’s, Vaseline, Lakme, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit. The Company has over 15,000 employees and has an annual turnover of Rs. 17,873. 44 crores (financial year 2009 – 2010). HUL is a subsidiary of Unilever, one of the world’s leading suppliers of fast moving consumer goods with strong local roots in more than 100 countries across the globe with annual sales of about €44. billion in 2010. Unilever has about 52% shareholding in HUL. 2. 2. 1 History of Hindustan Unilever limited In the summer of 1888, visitors to the Kolkata harbor noticed crates full of Sunlight soap bars, embossed with the words “Made in England by Lever Brothers”. With it began an era of marketing branded Fast Moving Consumer Goods (FMCG). Soon after Lifebuoy was launched in 1895 and other famous brands like Pears, Lux and Vim. Vanaspati was launched in 1918 and the famous Dalda brand came to the market in 1937.

In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three companies merged to form HUL in November 1956; HUL offered 10% of its equity to the Indian public, being the first among the foreign subsidiaries to do so. Unilever now holds 52. 10% equity in the company. The rest of the shareholding is distributed among about 360,675 individual shareholders and financial institutions. The erstwhile Brooke Bond’s presence in India dates back to 1900.

By 1903, the company had launched Red Label tea in the country. In 1912, Brooke Bond & Co. India Limited was formed. Brooke Bond joined the Unilever fold in 1984 through an international acquisition. The erstwhile Lipton’s links with India were forged in 1898. Unilever acquired Lipton in 1972 and in 1977 Lipton Tea (India) Limited was incorporated. Pond’s (India) Limited had been present in India since 1947. It joined the Unilever fold through an international acquisition of Chesebrough Pond’s USA in 1986.

Since the very early years, HUL has vigorously responded to the stimulus of economic growth. The growth process has been accompanied by judicious diversification, always in line with Indian opinions and aspirations. The liberalization of the Indian economy, started in 1991, clearly marked an inflexion in HUL’s and the Group’s growth curve. Removal of the regulatory framework allowed the company to explore every single product and opportunity segment, without any constraints on production capacity. Simultaneously, deregulation permitted alliances, acquisitions and mergers.

In one of the most visible and talked about events of India’s corporate history, the erstwhile Tata Oil Mills Company (TOMCO) merged with HUL, effective from April 1, 1993. In 1996, HUL and yet another Tata company, Lakme Limited, formed a 50:50 joint venture, Lakme Unilever Limited, to market Lakme’s market-leading cosmetics and other appropriate products of both the companies. Subsequently in 1998, Lakme Limited sold its brands to HUL and divested its 50% stake in the joint venture to the company. HUL formed a 50:50 Joint venture with the US-based Kimberly Clark Corporation in 1994, which markets Huggies Diapers and Kotex Sanitary Pads.

HUL has also set up a subsidiary in Nepal, Unilever Nepal Limited (UNL), and its factory represents the largest manufacturing investment in the Himalayan kingdom. The UNL factory manufactures HUL’s products like Soaps, Detergents and Personal Products both for the domestic market and exports to India. The 1990’s also witnessed a string of crucial mergers, acquisitions and alliances on the Foods and Beverages front. In 1992, the erstwhile Brooke Bond acquired Kothari General Foods, with significant interests in Instant Coffee. In 1993, it acquired the Kissan business from the UB Group and the Dollops Ice cream business from Cadbury India.

As a measure of backward integration, Tea Estates and Doom Dooma, two plantation companies of Unilever, were merged with Brooke Bond. Then in 1994, Brooke Bond India and Lipton India merged to form Brooke Bond Lipton India Limited (BBLIL), enabling greater focus and ensuring synergy in the traditional Beverages business. 1994 witnessed BBLIL launching the Wall’s range of Frozen Desserts. By the end of the year, the company entered into a strategic alliance with the Kwality Ice cream Group families and in 1995 the Milk food 100% Ice cream marketing and distribution rights too were acquired.

Finally, BBLIL merged with HUL, with effect from January 1, 1996. The internal restructuring culminated in the merger of Pond’s (India) Limited (PIL) with HUL in 1998. The two companies had significant overlaps in Personal Products, specialty Chemicals and Exports businesses, besides a common distribution system since 1993 for Personal Products. The two also had a common management pool and a technology base. The amalgamation was done to ensure for the Group, benefits from scale economies both in domestic and export markets and enable it to fund investments required for aggressively building new categories.

In January 2000, in a historic step, the government decided to award 74 per cent equity in Modern Foods to HUL, thereby beginning the divestment of government equity in public sector undertakings (PSU) to private sector partners. HUL’s entry into Bread is a strategic extension of the company’s wheat business. In 2002, HUL acquired the government’s remaining stake in Modern Foods. In 2003, HUL acquired the Cooked Shrimp and Pasteurized Crabmeat business of the Amalgam Group of Companies, a leader in value added Marine Products exports.

HUL launched a slew of new business initiatives in the early part of 2000. Project Shakti was started in 2001. It is a rural initiative that targets small villages populated by less than 5000 individuals. It is a unique win-win initiative that catalyses rural affluence even as it benefits business. Currently, there are over 45,000 Shakti entrepreneurs covering over 100,000 villages across 15 states and reaching to over 3 million homes. In 2002, HUL made its foray into Ayurvedic health ; beauty centre category with the Ayush product range and Ayush Therapy Centres.

Hindustan Unilever Network, Direct to home business was launched in 2003 and this was followed by the launch of ‘Pureit’ water purifier in 2004. In 2007, the Company name was formally changed to Hindustan Unilever Limited after receiving the approval of share holders during the 74th AGM on 18 May 2007. Brooke Bond and Surf Excel breached the Rs. 1,000 crore sales mark the same year followed by Wheel which crossed the Rs. 2,000 crore sales milestone in 2008 and on 17th October 2008, HUL completed 75 years of corporate existence in India. 2. 2. 2 Management

The fundamental principle determining the organization structure is to infuse speed and flexibility in decision-making and implementation, with empowered managers across the company’s nationwide operations. Management Committee The day-to-day management of affairs of the Company is vested with the Management Committee which is subjected to the overall superintendence and control of the Board. The Management Committee is headed by Mr. Nitin . Paranjpe and has functional heads as its members representing various functions of the Company and Management committee includes the members in the Executive directors

Executive directors The Executive directors are members of the HUL Management Committee as well as the Board of HUL. NAME| DESIGNATION| Nitin Paranjpe| CEO and Managing Director| R. Sridhar| Chief Financial Officer| Gopal Vittal| Executive Director, Home ; Personal Care| Pradeep Banerjee| Executive Director, Supply Chain| Shrijeet Mishra| Executive Director, Foods| Hemanth Bakshi| Executive Director| Ms. Leena Nair| Executive Director, HR| Dev Bajpai| Executive Director, Legal and company Secretary| Non-executive directors The non-executive directors are the independent directors in the HUL Board NAME| DESIGNATION|

Mr. Harish Manwani| Chairman of the Company| Mr. D. S. Parekh| Indepedent Director| Mr. A. Narayan| Independent Director| S. Ramadorai| Independent Director| Dr. R. A. Mashelkar| Independent Director| 2. 2. 3Financials of HUL Items | Amounts | Revenue| 17,873. 44 crore (2009-2010)| Net income| 2,202. 03 crore (2009-2010)| Source:-www. hul. co. in 2. 3 Profile of Nestle 2. 3. 1 History Nestle with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestle and is today the world’s biggest food and beverage company and the world’s leading Nutrition, Health and Wellness Company.

Our mission of “Good Food, Good Life” is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night. Today, the company operates in 86 countries around the world and employs nearly 280,000 people and has factories or operations in almost every country in the world. The Company’s strategy is guided by several fundamental principles. Nestle’s existing products grow through innovation and renovation while maintaining a balance in geographic activities and product lines.

Long-term potential is never sacrificed for short-term performance. The Company’s priority is to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives The company dates to 1867, when two separate Swiss enterprises were founded that would later form the core of Nestle. In the succeeding decades the two competing enterprises aggressively expanded their businesses throughout Europe and the United States. In August 1867 Charles A and George Page, two brothers from Lee County, Illinois, USA established the Anglo-Swiss Condensed Milk Company in Cham.

Their first British operation was opened at Chippenham, Wiltshire in 1873 and In September 1867, in Vevey, Henri Nestle developed a milk-based baby food and soon began marketing it. The following year, 1868 saw Daniel Peter begin seven years of work perfecting his invention, the milk chocolate manufacturing process; M. Nestle’s was the crucial cooperation M. Peter needed to solve the problem of removing all the water from the milk added to his chocolate and thus preventing the product from developing mildew. Henri Nestle retired in 1875, but the company, under new ownership, retained his name as Farine Lactee Henri Nestle.

In 1877 Anglo-Swiss added milk-based baby foods to its products, and in the following year the Nestle Company added condensed milk, so that the firms became direct and fierce rivals. In 1905 the companies merged to become the Nestle and Anglo-Swiss Condensed Milk Company, retaining that name until 1947, when the name Nestle Alimentana SA was taken as a result of the acquisition of Fabrique de Produits Maggi SA (founded 1884) and its holding company, Alimentana SA of Kempttal, Switzerland. Maggi was a major manufacturer of soup mixes and related foodstuffs. The company’s current name was adopted in 1977.

By the early 1900s, the company was operating factories in the United States, United Kingdom, Germany and Spain. World War I created new demand for dairy products in the form of government contracts; by the end of the war, Nestle’s production had more than doubled. After the war, government contracts dried up and consumers switched back to fresh milk. However, Nestle’s management responded quickly, streamlining operations and reducing debt. The 1920s saw Nestle’s first expansion into new products, with chocolate the company’s second most important activity.

Nestle felt the effects of World War II immediately. Profits dropped from US$20 million in 1938 to US$6 million in 1939. Factories were established in developing countries, particularly Latin America. Ironically, the war helped with the introduction of the company’s newest product, Nescafe (“Nestle’s Coffee”), which was a staple drink of the US military. Nestle’s production and sales rose in the wartime economy. The end of World War II was the beginning of a dynamic phase for Nestle. Growth accelerated and companies were acquired.

In 1947 came the merger with Maggi seasonings and soups. Crosse & Blackwell followed in 1950, as did Findus (1963), Libby’s (1971) and Stouffer’s (1973). Diversification came with a shareholding in L’Oreal in 1974. In 1977, Nestle made its second venture outside the food industry by acquiring Alcon Laboratories Inc. In 1984, Nestle’s improved bottom line allowed the company to launch a new round of acquisitions, notably American food giant Carnation and the British confectionery company Rowntree Mackintosh in 1988, which brought the Willy

Wonka Brand to Nestle. The first half of the 1990s proved to be favorable for Nestle: trade barriers crumbled and world markets developed into more or less integrated trading areas. Since 1996 there has been acquisitions including San Pellegrino (1997), Spillers Pet foods (1998), and Ralston Purina (2002). There were two major acquisitions in North America, both in 2002: in June, Nestle merged its U. S. ice cream business into Dreyer’s, and in August a US$2. 6 billion acquisition was announced of Chef America, the creator of Hot Pockets.

In the same time frame, Nestle came close to purchasing the iconic American company Hershey’s, one of its fiercest confectionery competitors, though the deal fell through. Another recent purchase included the Jenny Craig weight loss program for US$600 million. In December of 2005, Nestle bought the Greek company Delta Ice Cream for €240 million. In January of 2006, it took full ownership of Dreyer’s, thus becoming the world’s biggest ice cream maker with a 17. 5% market share. In November of 2006, Nestle purchased the Medical Nutrition division of Novartis Pharmaceutical for $2. B, also acquiring in 2007 the milk flavoring product known as Oval tine. In April of 2007, returning to its roots, Nestle bought baby-food manufacturer Gerber for $5. 5 billion. In December of 2007, Nestle entered in a strategic partnership with a Belgian chocolate maker Pierre Marcolini. Nestle agreed to sell its controlling stake in Alcon to Novartis on 4 January, 2010. The sale was to form part of a broader US $39. 3 billion offer, by Novartis, for full acquisition of the world’s largest eye-care company 2. . 2 Mission Nestle strives to be a leader in nutrition, health and wellness, with the belief that good food is central to health and wellness. At the Nestle Research Center, nutrition research meets food innovation to bring consumers of all ages and stages of life, foods and beverages that contribute to health and wellness, while offering remarkable taste and convenience 2. 3. 3 Vision At Nestle, we believe that research can help us make better food so that people live a better life.

Good Food is the primary source of Good Health throughout life. We strive to bring consumers foods that are safe, of high quality and provide optimal nutrition to meet physiological needs. In addition to Nutrition, Health and Wellness, Nestle products bring consumers the vital ingredients of taste and pleasure. As consumers continue to make choices regarding foods and beverages they consume, Nestle helps provide selections for all individual taste and lifestyle preferences. Research is a key part of our heritage at Nestle and an essential element of our future.

We know there is still much to discover about health, wellness and the role of food in our lives, and we continue to search for answers to bring consumers Good Food for Good Life” 2. 3. 4 Business Principles The Nestle Corporate Business Principles are at the basis of our company’s culture, which has developed over the p of 140 years. Corporate Business Principles will continue to evolve and adapt to a changing world, our basic foundation is unchanged from the time of the origins of our Company, and reflects the basic ideas of fairness, honesty, and a general concern for people.

Nestle is committed to the following Business Principles in all countries, taking into account local legislation, cultural and religious practices: 1. Nutrition, Health and Wellness :-Our core aim is to enhance the quality of consumers lives every day, everywhere by offering tastier and healthier food and beverage choices and encouraging a healthy lifestyle. We express this via our corporate proposition Good Food, Good Life. 2. Quality Assurance and product safety everywhere in the world, the Nestle name represents a promise to the consumer that the product is safe and of high standard. . Consumer Communication :-We are committed to responsible, reliable consumer communication that empowers consumers to exercise their right to informed choice and promotes healthier diets. We respect consumer privacy. 4. Human rights in our business activities :-We fully support the United Nations Global Compact’s (UNGC) guiding principles on human rights and labor and aim to provide an example of good human rights’ and labor practices throughout our business activities. 5. Leadership and personal responsibility:- Our success is based on our people.

We treat each other with respect and dignity and expect everyone to promote a sense of personal responsibility. We recruit competent and motivated people who respect our values, provide equal opportunities for their development and advancement, protect their privacy and do not tolerate any form of harassment or discrimination. 6. Safety and health at work:- We are committed to preventing accidents, injuries and illness related to work, and to protect employees, contractors and others involved along the value chain. 7.

Supplier and customer relations:- We require our suppliers, agents, subcontractors and their employees to demonstrate honesty, integrity and fairness, and to adhere to our non-negotiable standards. In the same way, we are committed towards our own customers. 8. Agriculture and rural development :-We contribute to improvements in agricultural production, the social and economic status of farmers, rural communities and in production systems to make them more environmentally sustainable. 9. Environmental sustainability :-We commit ourselves to environmentally sustainable business practices.

At all stages of the product life cycle we strive to use natural resources efficiently, favor the use of sustainably-managed renewable resources, and target zero waste. 10. Water:-We are committed to the sustainable use of water and continuous improvement in water management. We recognize that the world faces a growing water challenge and that responsible management of the world’s resources by all water users is an absolute necessity. 2. 3. 5 Management Nestle has a Board of Directors, led by our Chairman Peter Brabeck-Letmathe, who was the former Nestle CEO.

There are 14 members of the Board of Directors. The day to day management of the Nestle business is taken care by the Executive Board members. The 13 designated Board Members manage diverse parts of the global business. Nestle Group is managed by geographies (Zones Europe, Americas and Asia/Oceania/Africa) for most of the food and beverage business, with the exceptions of Nestle Waters, Nestle Nutrition, Nestle Purina Pet care, Nespresso, Nestle Professional and Nestle Health Science which are managed on a global basis – these we call the Globally Managed Businesses.

We also have joint ventures such as Cereal Partners Worldwide and Beverage Partners Worldwide. NAME| DESIGNATIONS| Paul Bulcke | Chief Executive Officer, Nestle S. A. Member of Nestle Board of Directors: Chairman’s and Corporate Governance Committee | Werner J. Bauer | Executive Vice President Chief Technology Officer Head of Innovation, Technology, Research and Development | Frits van Dijk | Executive Vice President Zone Director for Asia, Oceania, Africa and Middle East | Jose Lopez| Executive Vice President operations| John J.

Harris| Executive Vice President Chairman and CEO of Nestle Waters| James Singh | Executive Vice President Finance and Control, Legal, IP, Tax, Treasury, Global Nestle Business Services | Laurent Freixe | Executive Vice President Zone Director for Europe| Petraea Heynike | Executive Vice President Responsible for the Strategic Business Units, Marketing, Sales and Nespresso | Chris Johnson| Executive Vice President Zone Director for United States of America, Canada, Latin America, Caribbean | Marc Caira | Deputy Executive Vice President CEO of Nestle Professional | Jean-Marc Duvoisin | Deputy Executive Vice President Head of Human Resources and Centre Administration | Nandu Nandkishore | Deputy Executive Vice President Head of Nestle Nutrition | David P. Frick | Senior Vice PresidentCorporate Governance, Compliance and Corporate Services | Committees : Committees : Committees :

Committees : 2. 3. 4 Financials Items | Amounts| Revenue| CHF 109. 72 billion (2010)| Operating Income| CHF 16. 19 billion (2010)| Profit | CHF 34. 23 billion (2010)| Source:-www. nestle. com 2. 4 Nestle India 2. 4. 1 History of Nestle India Nestle is one of the oldest food MNC operating in India, with a presence of over a century. For a long time, Nestle India’s operations were restricted to importing and trading of condensed milk and infant food. Over the years, the Company expanded its product range with new products in instant coffee, noodles, sauces, pickles, culinary aids, chocolates and confectionery, dairy products and mineral water.

Nestle’s relationship with India dates back to 1912, when it began trading as The Nestle Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished products in the Indian market. Nestle has been a partner in India’s growth for over nine decades now and has built a very special relationship of trust and commitment with the people of India. The Company’s activities in India have facilitated direct and indirect employment and provides livelihood to about one million people including farmers, suppliers of packaging materials, services and other goods. Nestle India Ltd, 51% subsidiary of Nestle SA of Switzerland, is among the leading branded food player in the country. It has a broad based presence in the foods sector with leading market shares in instant coffee, infant foods, milk products and noodles.

It has also strengthened its presence in chocolates, confectioneries and other semi processed food products during the last few years. With seven factories and a large number of co-packers, Nestle India is a vibrant company that provides consumers in India with products of global standards and is committed to long-term sustainable growth and shareholder satisfaction. The Company insists on honesty, integrity and fairness in all aspects of its business and expects the same in its relationships. This has earned it the trust and respect of every strata of society that it comes in contact with and is acknowledged amongst India’s ‘Most Respected Companies’ and amongst the ‘Top Wealth Creators of India’.

After nearly a century-old association with the country, today, Nestle India has presence across India with 7 manufacturing facilities and 4 branch offices spread across the region. Nestle India’s first production facility, set up in 1961 at Moga (Punjab), was followed soon after by its second plant, set up at Choladi (Tamil Nadu), in 1967. Consequently, Nestle India set up factories in Nanjangud (Karnataka), in 1989, and Samalkha (Haryana), in 1993. This was succeeded by the commissioning of two more factories – at Ponda and Bicholim, Goa, in 1995 and 1997 respectively. The seventh factory was set up at Pantnagar, Uttarakhand, in 2006. The 4 branch offices in the country help facilitate the sales and marketing of its products. They are in Delhi, Mumbai, Chennai and Kolkata.

The Nestle India Head office is located in Gurgaon, Haryana. The Company continuously focuses its efforts to better understand the changing lifestyles of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness through its product offerings. The culture of innovation and renovation within the Company and access to the Nestle Group’s proprietary technology/Brands expertise and the extensive centralized Research and Development facilities gives it a distinct advantage in these efforts. It helps the Company to create value that can be sustained over the long term by offering consumers a wide variety of high quality, safe food products at affordable prices.

Nestle India has products of truly international quality under internationally famous brand names such as NESCAFE, MAGGI, MILKYBAR, KIT KAT, BAR-ONE, MILKMAID and NESTEA and in recent years the Company has also introduced products of daily consumption and use such as NESTLE Milk, NESTLE SLIM Milk, NESTLE Fresh ‘n’ Natural Dahi and NESTLE Jeera Raita. Nestle India is a responsible organization and facilitates initiatives that help to improve the quality of life in the communities where it operates. 2. 4. 2 Management NAME| DESIGNATIONS| Antonio Helio Waszyk| Chairman and Managing DirectorMember of the the Shareholder / Investor Grievance Committee| Shobinder Duggal| Director  – Finance & Control| Christian Schmid| Director – Technical| Michael W. O. Garrett| Non Executive DirectorMember of the Audit Committee| Dr. Rakesh Mohan| Non Executive Director|

Ravinder Narain| Non Executive DirectorMember of the Audit CommitteeChairman of the Shareholder / Investor Grievance Committee| Dr. Swati A. Piramal| Non-Executive Director| Richard Sykes| Alternate Director to Mr. Michael W. O GarrettGeneral Counsel of Asia, Oceania ,Africa, Middle East Region| 2. 4. 3 Financials Items| Amounts | Revenue| 590102 lakhs (2009-2010)| Net income| 81866 lakhs(2009-2010)| Source:-www. nestle. in/financial statements CHAPTER – THREE 3. 1 THEORITICAL BACKGROUND International marketing (IM) refers to marketing carried out by companies overseas or across national borderlines. This strategy uses an extension of the techniques used in the home country of a firm.

It refers to the firm-level marketing practices across the border including market identification and targeting, entry mode selection, marketing mix, and strategic decisions to compete in international markets. International marketing is more concerned with micro level of the market and uses the company as a unit of analysis. According to the American Marketing Association (AMA) “international marketing is the multinational process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. ” Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.

Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketing objective. Marketing strategy involves careful scanning of the internal and external environments which are summarized in a SWOT analysis . Internal environmental factors include the marketing mix, plus performance analysis and strategic constraints External environmental factors include customer analysis, competitor analysis, target market analysis, as well as evaluation of any elements of the technological, economic, cultural or political/legal environment likely to impact success. A key component of marketing strategy is often to keep marketing in line with a company’s overarching mission statement.

Combination of marketing elements used in the sale of a particular product. The marketing elements center around four distinct functions, sometimes called the Four Ps: Product, Price, Place (of distribution), and Promotion. All these functions are considered in planning a marketing strategy, and any one may be enhanced, deducted, or changed in some degree in order to create the strategy necessary to efficiently and effectively sell a product. The term marketing mix refers to the four major areas of decision making in the marketing process that are blended to obtain the results desired by the organization. The four elements of the marketing mix are sometimes referred to the four Ps of marketing.

The marketing mix shapes the role of marketing within all types of organizations, both profit and nonprofit. Each element in the marketing mix, product, price, promotion, and place consists of numerous sub elements. Marketing managers make numerous decisions based on the various sub elements of the marketing mix, all in an attempt to satisfy the needs and wants of consumers. FIGURE 1. 3 3. 2 Product The first element in the marketing mix is the product. A product is any combination of goods and services offered to satisfy the needs and wants of consumers. Thus, a product is anything tangible or intangible that can be offered for purchase or use by consumers.

A tangible product is one that consumers can actually touch, such as a computer. An intangible product is a service that cannot be touched, such as computer repair, income tax preparation, or an office call. Other examples of products also include places and ideas The strategies involved in the product mix includes:- 3. 2. 1 Product strategies in international market Although products in the international industrial market are more homogeneous than consumer products, there are more product variations internationally than domestically due to the greater number of international economic, cultural, and political/legal variables. 3. 3 Market segmentation

Is a Process of defining and sub-dividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment. Few firms are big enough to supply the needs of an entire market. The four basic market segmentation-strategies are based on (a) behavioural (b) demographic, (c) psychographic, and (d) geographical differences. 3. 3. 1 Market Segmentation Strategies. * Behavioural Segmentation: Behavioural segmentation is based on the customer’s needs and subsequent reaction to those needs or toward the purchase of intended products and/or services.

This study is conducted on all variables that are closely related to the product itself, like loyalty to a particular brand, cost effectiveness in terms of benefits and usage, circumstances responsible for the purchase, whether the customer is a regular, a first timer or and has the potential to become a customer, and whether the readiness to buy is linked to status. * Demographic Segmentation: Demographic segmentation refers to a wide study of the potential customers. While marketing a product many variables like age, gender, education, income, size of the family, occupation, socioeconomic status, culture and religion, language and nationality are taken into account. There are many instances where such a segmentation has worked very profitably, toys and clothes for every age group, certain food products that do well in certain counties and don’t in some, either due to cultural or religious reasons.

Demographic segmentation plays a vital role in determining whether a product can be mass marketed * Psychographic Segmentation: Segmenting people according to their lifestyles and values, and how they translate into consumption or purchases of products of services is what psychographic segmentation is all about. How one’s interest, opinions, values, attitude and the activities they perform, all affects how and why a group of people would lean towards one product more than others. A high status would translate into an expensive flying habit, while a thrift value will translate into an economy flight. * Geographical Segmentation: Geographical segmentation is done by dividing people (markets) into different geographical locations.

The country, state, or neighbourhood, the king of gentry, climate, and size of a place segmented into size of its age wise population, etc. all play a role in devising market strategies. This helps the producer and the marketers to understand what will sell and what won’t, For example, a market for winter wear would definitely not work in warm regions. 3. 3. 2 International market segmentation Segmentation, in marketing, is usually done at the customer level. However, in international marketing, it may sometimes be useful to see countries as segments. This allows the decision maker to focus on common aspects of countries and avoid information overload. 3. 4 Positioning

In marketing, positioning has come to mean the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. Although there are different definitions of Positioning, probably the most common is: identifying a market niche for a brand, product or service utilizing traditional marketing placement strategies (i. e. price, promotion, distribution, packaging, and competition). Also positioning is defined as the way by which the marketers creates impression in the customers mind. 3. 5 Targeting Targeting is the next step in the sequential process and involves a business making choices about segment on which resources are to be focused.

There are three major targeting strategies: undifferentiated, concentrated, and differentiated. During this process the business must balance its resources and capabilities against the attractiveness of different segments. Target Marketing involves breaking a market into segments and then concentrating the marketing efforts on one or a few key segments. Target marketing can be the key to a business’s success. 3. 6 Product standardization Product standardization means that a product originally designed for a local market is exported to other countries with virtually no change, except perhaps for translation of words and other changes. It is an efficient method to reduce costs and increase quality.

By minimizing the differences in your products, you are able to rapidly increase production, streamline distribution, decrease raw material costs and reinforce product branding. The best product standardization strategies allow you to balance the need for targeted adaptation with the cost savings of standardization. 3. 6. 1Benefits of product standardization in international marketing * Projecting a global product image. * Catering to customers globally . * Cost savings in terms of economies of scale in production. * Designing and monitoring various components of marketing mix economically 3. 7 Packaging strategy An important part of the product decision making process surrounds the packaging of the product.

An effective packaging strategy can contribute to the firm’s competitive advantage. Some points to consider when developing a packaging strategy include 1. Make sure the packaging is unique. 2. Make sure it performs the function required. 3. Make sure packaging promotes your product and brand. 4. Make sure packaging is identifiable and reinforces the brand. Although not a separate part of the marketing mix, having a good packaging strategy is an essential part of the marketing strategy of a firm. A good strategy will comprise of the packaging being unique, functional, promotes the brand, reinforces the brand and is easily identifiable by the consumer. 3. 8 Product adaptation

Marketing strategy whereby new products are based on modification or some improvement on existing or competing products, and not on pioneering innovations. It is the strategy of a follower. The need to develop an adaptation strategy can lead to changes in pricing, delivery and packaging 3. 8. 1 Benefits of product adaptation in international markets * Enable a firm to tap markets which are not accessible due to mandatory requirements * Helps in gaining a market share * Increase sales leading to economies of scale 3. 9 PRICE The second element in marketing mix is price. Price is simply the amount of money that consumers are willing to pay for a product or service.

In earlier times, the price was determined through a barter process between sellers and purchasers. In modern time Pricing new products and pricing existing products require the use of different strategies. For example, when pricing a new product, businesses can use either market-penetration pricing or a price-skimming strategy. A market-penetration pricing strategy involves establishing a low product price to attract a large number of customers. By contrast, a price-skimming strategy is used when a high price is established in order to recover the Cost of a new product development as quickly as possible. 3. 9. 1 Pricing strategy in international marketing

Although pricing practices appear to be no different internationally than nationally, in some respects there is wide divergence. These differences occur in the areas of transfer pricing, dumping, and governmental influence over price. 3. 9. 2Transfer Pricing Transfer prices are the prices placed on products as they are transferred between units belonging to the same company. Transfer prices can be used to mitigate the effects of government regulation. 3. 9. 3 Dumping. Dumping is disposing of goods in a foreign country at less than their full cost. Goods will sometimes be exported at prices that only cover direct costs to dispose of excess inventories.

Companies sell their excess inventories overseas to avoid disturbing their own national markets (e. g. , reducing prices or causing price wars at home. ) There are five price-adjustment strategies: * Discount pricing and allowances include cash discounts, functional discounts, seasonal discounts, trade-in allowances, and promotional allowances. * Discriminatory pricing occurs when companies sell products or services at two or more prices. These price differences may be based on variables such as age of the customer, location of sale, organization membership, time of day, or season. * Geographical pricing is based on the location of the customers.

Products may be priced differently in distinct regions of a target area because of demand differences. * Promotional pricing happens when a company temporarily prices products below the list price or below cost. Products priced below cost are sometimes called loss leaders. The goal of promotional pricing is to increase short-term sales. * Psychological pricing considers prices by looking at the psychological aspects of price. For example, consumers frequently perceive a relationship between product price and product quality. 3. 10 PROMOTION Promotion is the third element in the marketing mix. Promotion is a communication Process that takes place between a business and its various public.

Public are those individuals and organizations that have an interest in what the business produces and offers for sale. Thus, in order to be effective, businesses need to plan promotional activities with the communication process in mind. There are four basic promotion tools: Advertising, sales promotion, public relations, and personal selling. Each promotion tool has its own unique characteristics and function. 3. 10. 1Promotional strategy in international marketing In the international industrial market, the primary element of the promotional mix is personal selling, for only through personal selling can the coordination so essential to the industrial buyer-seller interface be effectively achieved.

Sales promotion in the form of trade fairs is playing an increasingly important role in international marketing because so many prospects can be contacted in one place and because they enable quick comparisons of products. Direct mail is also becoming popular, although mailing lists are usually difficult to obtain. The use of publicity, although growing in popularity, is limited due to language difficulties and media coverage. Advertising is given little attention in the international industrial market, perhaps because of the difficulties in determining media coverage and numerous, widely varying, governmental regulations. 3. 10. 2 Advertising

It is described as paid, non personal communication by an organization by using various media to reach its various publics. The purpose of advertising is to inform or persuade a targeted audience to purchase a product or service, visit a location, or adopt an idea. Advantages of advertising include the ability to reach a large group or audience at a relatively low cost per individual contacted. Further, advertising allows organizations to control the message, which means the message can be adapted to either a mass or a specific target audience. Disadvantages of advertising include difficulty in measuring results and the inability to close sales because there is no personal contact between the organization and consumers. 3. 10. 2. 1 Advertising media

There is a huge variety of media available through which a business can conduct an advertising campaign. * Advertising media includes * Newspapers * Magazines * Internet * Television * Radio * Cinema * Posters * Billboards 3. 10. 2. 2 Advertising appeals There are various appeals in advertising which aims aim to influence the way consumers view themselves and how buying certain products can prove to be beneficial for them. The most important types of advertising appeals include emotional and rational appeals. Emotional appeals are often effective for the youth while rational appeals work well for products directed towards the older generation. * Emotional Appeal

An emotional appeal is related to an individual’s psychological and social needs for purchasing certain products and services. Many consumers are emotionally motivated or driven to make certain purchases. Advertisers aim to cash in on the emotional appeal and this works particularly well where there is not much difference between multiple product brands and its offerings. Emotional appeal includes personal and social aspects. * Fear Appeal Fear is also an important factor that can have incredible influence on individuals. Fear is often used to good effect in advertising and marketing campaigns of beauty and health products including insurance.

Advertising experts indicate that using moderate levels of fear in advertising can prove to be effective. * Rational appeal Rational appeals as the name suggests aims to focus on the individual’s functional, utilitarian or practical needs for particular products and services. Such appeals emphasize the characteristics and features of the product and the service and how it would be beneficial to own or use the particular brand. Print media is particularly well suited for rational appeals and is often used with good success. It is also suited for business to business advertisers and for products that are complex and that need high degree of attention and involvement. * Endorsement appeal

Celebrities and well known personalities often endorse certain products and their pitching can help drive the sales. 3. 10. 3Sales promotion The second promotional tool is sales promotion. Sales promotions are short-term incentives used to encourage consumers to purchase a product or service. There are three basic categories of sales promotion: consumer, trade, and business. Consumer promotion tools include such items as free samples, coupons, rebates, price packs, premiums, patronage rewards, point-of-purchase coupons, contests, sweepstakes, and games. Trade-promotion tools include discounts and allowances directed at wholesalers and retailers. Business-promotion tools include conventions and trade shows.

Sales promotion has several advantages over other promotional tools in that it can produce a more immediate consumer response, attract more attention and create product awareness, measure the results, and increase short-term sales. 3. 10. 3. 1 Sales promotion in international marketing Sales promotion refers to any consumer or trade program of limited duration that adds tangible value to a product or brand. Sales promotion techniques in the international market consist of the following: promotional pricing tactics, contests, sweepstakes and games, premium and specialties, dealer loaders, merchandising materials, tie-ins and cross promotions, packaging, trade shows 3. 10. 4 Public relation

Public relation is the third promotional tool. An organization builds positive public relation with various groups by obtaining favourable publicity, establishing a good corporate image, and handling or heading off unfavourable rumours, stories, and events. Organizations have at their disposal a variety of tools, such as press releases, product Publicity, Official communications, lobbying, and counselling to develop image. Public relations tools are effective in developing a positive attitude toward the organization and enhance the credibility of a product. Public relations activities have the drawback that May not provide an accurate measure of their influence on sales. 3. 0. 4. 1 Public relation in international marketing A company’s public relations (PR) effort should-foster goodwill and understanding among constituents both inside and outside the company. The basic tools of PR include news releases, newsletters, press conferences, tours of plants and ether company facilities, articles in trade or professional journals, company publications and brochures, TV a

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I nternship Report TRAINING FUNCTION OF NESTLE BANGLADESH I nternship Report TRAINING FUNCTION OF NESTLE BANGLADESH Prepared for: Afsana Akhtar Assistant Professor and Coordinator BRAC Business School, BRAC University Prepared by: Syed Mohammad Shihan Sazid ID: 07204036 BRAC Business School, BRAC University Date of Submission: 8th January 2012 Letter of Transmittal January 8, 2012 Afsana Akhtar Associate Professor and Coordinator BRAC Business School BRAC University SUBJECT: SUBMISSION OF INTERNSHIP REPORT Dear Madam,

This is to inform you that I am submitting the internship project report “Training function of Nestle Bangladesh” upon completion of my formal internship attachment with Nestle Bangladesh Limited. I have tried to discuss all the relevant points of a feasibility study while keeping consistency with Nestle Bangladesh Limited. I would be glad to clarify any discrepancy that may arise or any clarification that you may require regarding my project and report. Sincerely, _________________________ Syed Mohammad Shihan Sazid ID: 07204036 BRAC Business School BRAC University i Acknowledgement

Firstly, I would like to thank Hasibur Rahman, Comapany Security Manager, Nestle Bangladesh Ltd, and my Internship Supervisor, for entrusting me with such an important project and allowing me scope to work independently, providing all required support. I also thank Sumit Chakraborty, HR Officer – Training, Nestle Bangladesh Ltd. for providing me with the information required to conduct my study. Lastly and most importantly, I would like to show my sincere gratitude to Ms. Afsana Akhtar, Associate Professor, BRAC Business School, BRAC University, my faculty supervisor for constant supervision and guidance.

I am also thankful for the patience that she has shown during the project. In addition to this, knowledge on business strategies and training and development course has been of much help to my decision making. ii Executive Summary Nestle is world’s largest health, nutrition and wellness company. Although globally it is twice in size of its nearest FMCG (fast moving consumer goods) competitors, in Bangladesh its journey is relatively new. But recent times it has experienced an organic growth of 40% and this trend predicted to continue in the coming few years.

Nestle Bangladesh focus on continues excellence of their employees for their better performance in the work at Nestle and for the betterment of their career. In this paper there is a complete discussion about the current training process and also the process of end result evaluation. Training need assessment, preparation, training, feedback and finally work on feedback these are the step to conduct any training. By following these processes they providing training on Functional Skills, Organizational Knowledge, Business Skill, and Leadership Skill. The company has particular standard that they need to maintain for each session conducted.

However every time it becomes difficult to evaluate the outcome by using rating or scoring process from the trainings and also it is not possible to numerically express the improvement of knowledge, skill and behavior that are use deliver through trainings. As a result in this paper an assessment is shown from result evaluation perspective and process evaluation perspective. Kirkpatrick Model is used for assessing from the result evaluation perspective and Context, Input, Process, Product Model (CIPP Model) is used for process evaluation perspective.

The existing process of Nestle Bangladesh does to match point to point with these models but it is serving the purpose efficiently and cost effectively. However in the coming days current training function will require modification according to the business need, as a result these assessment may help them for further improvement. iii Table of Content Part One: Introduction to the report……………………………………………….. …1-3 Part Two: Nestle Bangladesh Ltd………………………………………………….. ….. 4-15 2. 0 Introduction………………………………………………………………………… 5 2. 1 History of Nestle…………………………………………………………………… 6 2. Global Brands of Nestle…………………………… ………………………………. 9 2. 3 Nestle in Bangladesh……………………………………………………………….. 10 2. 4 Creating Shared Values…………………………………………………………….. 15 Part Three: Performed Jobs in Nestle…………………………………………………. 16-19 Part Four: Training Function of Nestle………………………………………………… 20-45 4. 0 HR Practice in Nestle………………………………………………………………. 22 4. 1 Review of training Function of Nestle…………………………………………….. 25 4. 2 Training Cycle……………………………………………………………………… 27 4. 3 Trainings in Nestle Bangladesh……………………………………………………. 36 4. 4 Assessment of the Training Outcome and process ………………………………… 39 4. Conclusion………………………………………………………………………….. 45 References……………………………………………………………………………… 46 Appendices ………………………………………………………………………………47 iv List of Figure & Table Figure 1: Sales regions…………………………………………………………….. …………11 Figure 2: Sales Process………………………………………………………………….. ……11 Figure 3: Organizational Functions…………………………………………………………… 12 Figure 4: Functional Organogram: HR……………………….. ………………………………13 Figure 5: CSV structure………………………………………………………………………. 15 Figure 6: HR function…………………………………………………………………………22 Figure 7: Types of training……………………………………………………………………25 Figure 8: 4 Nestle Behaviors…………………………………………………………………. 6 Figure 9: Employee Work Process……………………………………………………………27 Figure 10: Training cycle…………………………………………………………………….. 28 Figure 11: Nestle zones in the globe…………………………………………………………. 30 Figure 12: Performance Evolution Criterion………………………………………………… 30 Figure 13: Training Preparation process………………………………………………………32 Figure 14: Feedback Criterion………………………………………………,………………. 34 Figure 15: Nestle Framework of Leadership………………………………………………….. 37 Figure 16: Kirkpatrick’s Four Levels of Evaluation………………………………………….. 40 Figure 17: Kirkpatrick’s Four Levels……………………………………………………. ……43 Figure 18: Formative and summative evaluation in the CIPP Model…………………….. . 43 Table 1: Nestle Brands in different Category………………………………….. ……………. 14 v Part One: Introduction to the Report 1 Introduction In every field of study, theoretical course work and the field experience play major role to shape the knowledge and skill of a student. In case of business studies the real life experience make the difference in a bigger aspect. To achieve excellence business studies always tries to reflect the real life scenario and the theoretical assumptions side by side. Due to the ever changing nature of business organizations today almost every business schools and institutes are arranging internship programs.

In one side as a business student the course works build my basic and this very internship program gives me the real life exposure in one of the well-known corporate of Bangladesh- Nestle Bangladesh Limited. I would like to show my gratitude to the respect ed authorities of BRAC Business School, Career Service office and especially to Nestle Bangladesh Ltd to offer me such a great scope of learning. In this twelve weeks engagement program I worked in the Corporate Affairs function under the supervision of Mr. Hasibur Rahman, Company Security Manager- Nestle Bangladesh. A part from that I am also grateful to Ms.

Afsana Akhtar, Associate Professor and Coordinator, BRAC Business School for her guidance and advice. In this paper I discussed about the business of Nestle Bangladesh and the tasks I performed in this organization; most importantly there is a complete discussion on the training function of the Nestle Bangladesh in the project part of this paper. Along with the discussion I also relate the current process with the two training models for assessing the outcomes. Objective Broad Objective: Gain a real life exposure with a business organization to relate with the theoretical practice.

Specific Objective: ? To understand the business of Nestle Bangladesh Limited ? To get knowledge how the HR function in Nestle Bangladesh Methodology Both primary and secondary sources are used to collect information for this report. Main source of information about the business of the Nestle Bangladesh and for the analysis is the training functions are taken from the Human Resource department. 2 ? Primary source: several discussions with the different person of Nestle Bangladesh. Moreover at the time of doing different task, from there I collected different information. Secondary source: along with the primary sources information are also gathered from the intranet and the files of Nestle Bangladesh. Scope This report talks about the current business operation of Nestle Bangladesh. There is only detail description of the HR function of the company because of the availability of information to me as I worked in this function. Moreover in the project part I talked about the training function where the current process is described and a comparison is being made to analyze the efficiency of outcome analysis of the training conducted. Limitation For the confidentiality concern, access to some information was not available. ? Moreover, the current effectiveness of the training function was not able to compare with the other FMCGs of the Bangladesh, which was my primary intention to include in this paper. 3 Part Two: Nestle Bangladesh Ltd. 4 2. 0 Introduction Today’s Nestle, the world’s largest food and nutrition company, founded by the Henri Nestle (10 August 1814 – 7 July 1890); a German confectioner in Vevey, Switzerland in 1866. In the food industry Nestle is the most trusted name with high quality products. Good food Good Life? is the mission of Nestle, which drives the company to provide consumers with the best tasting and most nutritious choices in a wide range of food and beverage categories and eating occasions. The vision of ? creating shared value? and the very own ? Corporate Business Principles? sh aped the company culture and made them a reliable investor over 86 countries of the world. Today Nestle employs around 280000 people and have factories or operations in almost every country of the world with a total equity of CHF 62. 0 billion. 5 2. 1 History of Nestle 1866-1905: Henri Nestle’s quest for a healthy, economical alternative to breastfeeding is the important factor that drives the history of Nestle Company. Henri Nestle, pharmacist, began experimenting with various combinations of cow milk. His ultimate goal was to help combat the problem of infant mortality due to malnutrition. People quickly recognized the value of the new product, as Nestle’s new formula saved the life of children within a few years.

In August, 1867 Charles and George Page, two brothers from Lee County, Illinois, USA, established the Anglo Swiss Condensed Milk Company in Cham. In 1877 Anglo-Swiss added milk-based baby foods to their products and in the following year the Nestle Company added condensed milk so the firms became direct and fierce rivals. Henri Nestle retired in 1875 but the company under new ownership retained his name as Farine Lactee Henri Nestle. Their headquarters in Glendale, California, USA. 1905-1918: The Company formed by the 1905 merger was called the Nestle and Anglo-Swiss Milk Company.

Most production facilities remained in Europe, however, and the onset of World War I brought severe disruptions, as a result acquiring raw materials and distributing products became increasingly difficult. At the same time the war created tremendous new demand for dairy products, largely in the form of government contracts. By war’s end, the Company had 40 factories, and its world production had more than doubled since 1914. Moreover in this period Nestle added chocolate to its range of food products and also the Condensed-milk exports increased rapidly as the Company replaced sales agents with local subsidiary companies.

In 1907, the Company began full-scale manufacturing in Australia. 1918-1938: The end of World War I brought with it a crisis for Nestle. Rising prices for raw materials, the worldwide postwar economic slowdown, and declining exchange rates made the situation worst. In 1921, the Company recorded its first loss. Nestle’s management brings Louis Dapples as an expert to deal with the situation; his rationalized operations and reduction of the company’s outstanding debt improve the financial condition.

On the other hand Nestle’s first expansion beyond its traditional product line came in 1920s by producing chocolates. In the 6 meantime Brazilian Coffee Institute first approached to Nestle in 1930 to reduce Brazil’s large coffee surplus, after eight years of research Nestle came with Nescafe became an instant success. 1938-1944: in this period World War II were felt immediately upset the business once again and Profits dropped from $20 million in 1938 to $6 million in 1939. To overcome distribution problems in Europe and Asia, factories were established in developing countries; particularly in Latin America.

As the end of the war approached, Nestle executives found themselves unexpectedly heading up a worldwide coffee concern, as well a company built upon Nestle’s more traditional businesses. 1944-1975: The graph of growth sets its trends little higher between 1944 and 1975. As a result many new products were added as and outside companies were acquired. In Nestle merged with Alimentana S. A in 1947, purchase of Findus frozen foods occurred in 1960, Libby’s fruit juices joined the group in 1971 and Stouffer’s frozen foods in 1973and finally in 1974 the Company became a major shareholder in L’Oreal, one of the world’s leading makers of cosmetics.

The Company’s total sales doubled in the 15 years after World War II. 1975-1981: In 1920s the economic situation was in challenge due to price of oil rose, growth in the industrialized countries slowed down and worldwide unstable political situation. In 1975 and 1977 price of coffee bean and the price of cocoa tripled. In this situation to maintain a balance, Nestle went to second venture outside the food industry by acquiring the pharmaceutical and ophthalmic product producer Alcon Laboratories Inc. of U. S; as a result it increased competition and shrink the profit margins. 981-1995: Improvement of financial situation through internal adjustments and strategic acquisitions are the two important moves in this period. As a result between 1980 and 1984, diversification of several non-strategic or unprofitable businesses occurred. On the other hand Nestle managed to put an end in the third World to about a serious controversy over its marketing of infant formula in this period. In 1984 Nestle acquire American food giant Carnation and became one of the largest company in the history of the food industry. 996-2002: The opening of Central and Eastern Europe, along with China and a general trend towards liberalization of direct foreign investment was good news for the company. On the other hand in July 2000 Nestle launched a Group-wide initiative called GLOBE (Global Business 7 Excellence) aimed to simplifying business process. Two more acquisitions took place in this period-U. S. ice cream business was to be merged into Dreyer’s and the acquisition of Chef America, Inc. a leading U. S. -based hand-held frozen food product business. 003-2009: Within this area the acquisition of Movenpick Ice Cream, Jenny Craigand Uncle Toby’s enhanced Nestle’s position as one of the world market leaders in the super premium category. On the other hand Novartis Medical Nutrition, Gerber and Henniez join the Company in 2007. Meanwhile Nestle entered into a strategic alliance with the Belgian chocolatierPierreMarcolini at the end of 2009. 2010 to onward: In mid-2010 Nestle finalized the sale of Alcon to Novartis; at the same time Nestle bought Kraft’s frozen pizza business. Another important move in this period is launch of Special.

Tea machine system and the completion of the CHF 25 billion share buyback program 8 2. 2 Global Brands of Nestle The brand portfolio delivers the message once again how big Nestle in the food industry. It is the trust and effort of the Nestle professionals which created the win wining scenario. Today Nestlecovers almost every food and beverage category – giving consumers tastier and healthier products. ? Baby foods: Cerelac, Gerber, Gerber Graduates, NaturNes, Nestum ? Bottled water: Nestle Pure Life, Perrier, Poland Spring, S. Pellegrino ? Cereals: Chocapic, Cini Minis, Cookie Crisp, Estrelitas, Fitness, Nesquik Cereal ?

Chocolate & confectionery: Aero, Butterfinger, Cailler, Crunch, Kit Kat, Orion, Smarties, Wonka ? Coffee: Nescafe, Nescafe 3 in 1, Nescafe Cappuccino, Nescafe Classic,NescafeDecaff, Nescafe Dolce Gusto, Nescafe Gold, Nespresso ? Culinary, chilled and frozen food: Buitoni, Herta, Hot Pockets, Lean Cuisine, Maggi, Stouffer’s, Thomy ? Dairy: Carnation, Coffee-Mate, La Laitiere, Nido ? Drinks: Juicy Juice, Milo, Nesquik, Nestea ? Food service: Chef, Chef-Mate, Maggi, Milo, Minor’s, Nescafe, Nestea, Sjora,Lean Cuisine, Stouffer’s ? Healthcare nutrition: Boost, Nutren Junior, Peptamen, Resource ?

Ice cream: Dreyer’s, Extreme, Haagen-Dazs, Movenpick, Nestle Ice Cream ? Petcare: Alpo, Bakers Complete, Beneful, Cat Chow, Chef Michael’s Canine Creations, Dog Chow, Fancy Feast, Felix, Friskies, Gourmet,Purina, Purina ONE, Pro Plan ? Sports nutrition: PowerBar ? Weight management: Jenny Craig 9 2. 3 Nestle in Bangladesh Popular Nestle brands started entering this part of the sub-continent during the British rule and the trend continued during the pre-independence days of Bangladesh. After the independence in 1971, Nestle World Trade Corporation, the trading wing of Nestle S.

A, sent regular dispatch of Nestle brands to Bangladesh through an array of indentures and agents and some of the brands such as NESPRAY, CERELAC, LACTOGEN, and BLUE CROSS etc. became some very common products. Nestle Bangladesh Limited started its commercial operation in Bangladesh in 1994. Its total authorized capital is TK1. 5 billion and total paid up capital is TK 1. 1 billion. The only factory of the company in Bangladesh is situated at Sreepur, 55 km north of Dhaka. The factory produces the instant noodles and cereals and repacks milks, soups, beverages and infant nutrition products. Today Nestle Bangladesh Ltd. s a strongly positioned organization. The Company is continuously growing through the policy of constant innovation, concentrating on its core competencies and its commitment to high quality food to the people of Bangladesh. Since the beginning of Nestle’s operation in Bangladesh, the chairman of the company has been Mr. Latifur Rahman, one of the top industrialists of the country, his firm Transcom used to import the products of Nestle. His business house Transcom is still involved in wide range of business like beverage, pharmaceutical, electronics, newspaper, tea export, fast food franchises etc.

Still he remains as an honorary chairman of the company although his group Transcom does not capture any share today as Nestle S. A. holds 100% share of this company. In Bangladesh Nestle’s vision is-to be recognized as the most successful food and drink Company in Bangladesh, generating sustainable, profitable growth and continuously improving results to the benefit of shareholders and employees. 10 Customers of Nestle Bangladesh Limited Nestle Bangladesh Limited markets its products throughout the country with the help of the distributors.

A part from that, Nestle Professional is a separate function which is responsible for the institutional sale. There are currently 80 distributors of Nestle Bangladesh products of which 76 are retail distributors and remaining 4 are Nestle Professional’s distributors providing products for the out of home consumptions. The whole country is divided into six regions: Dhaka North Dhaka South Chittagong Bogra Khulna Sylhet Figure1: Sales regions The retail distributors supply Nestle products to four types of outlet, while Nestle Professional Distributors supply products to different institutions.

Vending Sites Retail Distributors Nestle Bangladesh Limited Tea Bunk Modern Trade Retail/ Wholesale Nestle Professional Institutional sale Figure2: Sales Process 11 Functions of Nestle Bangladesh Day by day demand and trust on the Nestle products are growing. Focusing on the substantial growth and the other business perspective, the company developed its own functional areas. Currently the existing fictional areas are: General Management Finance and Control Human Resource Supply Chain Marketing Nutrition Sales Nestle Professionals Figure3: Organizational Functions

No matter how many functions are running, their main aim is to gain ultimate excellence. Every function contributes from their end to meet the corporate goal. The General Management take cares of the overall operation of the company and makes the key decisions. Human Resource focuses the management of employees and organizational culture; moreover HR professionals are also responsible for retaining the people who are making the difference with their competitors at the end of the day. Supply Chain ensures the stable supply of the products according to the demand of the customers.

Marketing looks after the existing brands, market share and product development of the products. Nestle is the world’s largest Nutrition Company that is why the importance of the Nutrition products is much more in compared to the other food companies; as a result they created a totally separate team to look after the Nutrition products, such as, CERELAC, LACTOGEN. Finance and control deals with the financial transactions and most importantly they also apply the control mechanism to remain the company complaint financially and procedurally.

Finally Sales and Nestle Professionals are responsible for earning revenue for the company, but sales goes for the retail distributors and Nestle Professionals looks after the institutional sales. 12 HR Director HR managerReward HR managerTraining & Learning HR managerAdmin HR managerFactory Company Security Executive- Admin HR office- MIS HR office-Talent Acquisition Employee Relationship Manager Executive- Office security HR welfare officer HR office-Talent Acquisition Figure 4: Functional Organogram: HR 13 Products of Nestle Bangladesh

Globally the product line of Nestle is very large but in Bangladesh currently there are only 12 products. Nestle believes all foods and beverages can be enjoyable and play an important role in a balanced and healthy diet and lifestyle; as a result no matter how short the product line may be but it ensures the same quality in compare to the other countries. Category Beverage Culinary Dairy Breakfast Cereal Nutrition Brands Nescafe Nestea Nesfuta Maggi, Shad-e-Magic Nido Coffeemate Cornflex Kokocranch HunyGold Lectozen NAN Cerelac Table 1: Nestle Brands in different Category 4 2. 4 Creating Shared Values Nestle always focused on long term, sustainable and profitable growth and helped communities around its operation to improve their quality of life in a similar manner. That is why Nestle says ? Creating Shared Value? rather than corporate social responsibility. In the process of delivering shared value the company first of all puts emphasis on the compliance, where they remain compliant to the local and international law then it focus on its sustainably as a business organization and finally contribute for creating shaded value.

CSV Sustainability Compliance Figure 5: CSV structure In its portfolio Nestle is currently working to secure safe drinking water, provide education and training to develop skilled manpower. In a country like Bangladesh, Nestle is arranging the safe drinking water, where the sources of the pure drinking water are rare; currently this program is organized for the factory workers and their family members in Sreepur. This particular initiative is also active in India and other countries. Nestle supports initiatives to create awareness about the right to education nd encourages the communities around its factories to send their children to school. That is why the company already builds up several schools for the workers’ children of the factory. Moreover Nestle Bangladesh from 2009 started to distribute laptops among the school going children to make chance for the students to get modern education, already 49 schools have been covered under this initiative. On the other hand Nestle India employees have developed a special play ‘Let Us Go to School’ for this purpose.

This has been staged amongst the communities around our factories, and its recordings screened at smaller gatherings even in Bangladesh. 15 Part Three: Performed Jobs in Nestle 16 During this internship period so many activities are assigned to me from where I learned a lot and also it is a great pleasure to work with these professionals. People here are so helpful and most importantly they create the scope to learn by performing different responsibilities. Among so many responsibilities the followings are the important ones: Restructure Leave file

This was my first job given by the Mr. Bulbul Islam, HR Officer – MIS & Services. Previously in Nestle Bangladesh there was a MS excel file in which they keep record of the leave data of the different employees according to their function. I was initially responsible to update the leave file, but after that I was told to study about the existing leave policy of Nestle Bangladesh and also the entitled one in the Bangladesh Labor Code 2006. This is because to restructure the leave file in such a way, so that it can able generate report by using several criterion.

By doing this I came to know how the corporate enforce the leave policy. To make the file able for generating report I have to make it in the MS excess. Here I had to do homework on the MS excess. However this file is currently access-able only by Mr. Bulbul Islam and he is responsible for modification. It will be better if the file is making access -able to every employee with read only view so that the reporting responsibility will become short. Creating Handbook for Expatriates Developing the handbook for the Expatriates was my second job which was assigned by Mr.

Sayemul Karim, Executive -Operations & Expat Services. Here I prepare a handbook for expatriates working in Nestle Bangladesh. Most of the expatriates are from India but the Managing Director is from Switzerland. After their arrival what and how facilities this office is providing to the expatriates is noted down descriptively there; such as, how to get work permit, how to extend the VISA validity, resident facility or emergency contacts from the Nestle Bangladesh counterpart etc.

To perform the job I had to study and take part into discussions with several people about the detailed services that are provided by the Nestle Bangladesh office and the procedure; based on that I develop the handbook in PDF format and mail it the respective expatriates. Along with the very official necessaries, I also include the name location and description about the restaurant, 17 hospitals, clubs, money exchange, police stations etc. ; this kind of papers need time to revision and update so there is someone to make it real time updated.

Nestle the Blue Tie Challenge ?Nestle the Blue Tie Challenge? is the business case competition by the Nestle Bangladesh to the talented business graduating students from the different reputed business schools of different universities. It is the first time Nestle Bangladesh is arranging this kind of event but the success of the event make them hopeful to continue it in the coming days. It was a big event and also crucial one for the image of the organization. I became attached with the arrangement of the event by Mr.

Sumit Chakraborty, HR Officer – Training. Here I helped to develop the case content and also the event. The most significant responsibility to deal with the event management agencies and prepare the schedule for the two daylong program. Also I contacted with the faculties of eight participant universities. Moreover I prepared an AV file with the help of the images of different road shows for the final event. The team had to work round the clock to make the event successful. The main challenge that we face was to select a venue for this huge program.

For the coming years to make the event successful a commercial should be good to arrange the program. Training History This particular job was assign to me by Mr. Sumit Chakraborty, HR Officer – Training; where I prepared a MS excel file for the conducted training by the training team. The main purpose of preparing this file is to find out the attendance of the trainees; which is curtail for assessing of the outcome of the training conducted. To perform this task at first I gather idea of the trainings conducted for the whole year and which training is applicable for what type of employees.

After knowing all that, I started to prepared the file, where I specified the name of the attended person and also the absent one; especially with reason of their absent. Depending on the file another session were arranged in the December 2011. 18 Prepare the training content of “Human Rights in Business Organizations” After completing the training history I was given another task by Mr. Sumit Chakraborty to prepare the content of a newly introduced awareness session. Recently the United Nation is enforcing the human right issue in the business organizations.

As a wellness company Nestle globally attached with this program; as a result from Vevy of Nestle Global Headquarter an online trading module sent to all the sister-concerns. In this task my responsibly was to prepare an overview of the Human Rights in business organization issue and also prepare the Power Point Presentation, which will be helpful for the trainer. To perform the job I did a thorough study on the issue of human rights and its scope to ensure it in the business organizations; especially how human right is now enforcing in different organization and what Nestle Bangladesh wants.

The main challenge to develop this content is that make it available to all. Safety and You It is a survey conducted by Mr. Hasibur Ranhman, Company Security Managerto assess the safety concern among the employees in different region. I was assigned to distribute the survey form and collected it back after the cutoff time. The important aspect of the task is to make the list of the management and non-management employees of Nestle Bangladesh who are mainly targeted for the survey. After completing the survey it was sent to Nestle India for calculating the result.

Mainly two types of forms are prepared, English for the white color employees and Bangla for blue color employees. Based upon the survey result new awareness training programs are going to be developed soon. 19 Part Four: Training Function of Nestle 20 Origin The report is prepared under the supervision of Afsana Akhtar, Associate Professor, BRAC Business School, and BRAC University; while Hasibur Rahman, Company Security Manager– Corporate Affairs Department, Nestle Bangladesh Limited acted as the organizational supervisor.

This report involves the project work at Nestle Bangladesh Limited for a 12 weeks period from October 2, 2011 to January 2, 2012. Objective Broad Objective: Gain knowledge about the training function of Nestle Bangladesh and analyze its effectiveness. Specific Objective: ? To understand the training function of Nestle Bangladesh Limited ? To identify the curtail aspects of training function ? To analyse its effectiveness Methodology Information has been collected for the report from both primary and secondary sources. Main source of information for the analysis is the Training team of the Human Resource department.

The analysis has been done on the existing process of 2011. Primary source: To understand the training process, several interviews were conducted with key personnel from training team of Human Resource department inside the company. For the same reason some interviews were held with other partners in the process like the reward management team, recruitment team and admin. Secondary source: To understand the group focuses regarding the process several internal files were studied. Scope This report works on only the recent process of the training team.

A complete discussion the current process of training is included along with a comparison with two models from process evaluation and outcome/result evaluation perspective, Limitations ? Due to confidentiality concern, access to some information was not available. 21 4. 0 HR Practice in Nestle Fundamentally, human resource management refers to the assumption that employees are individuals with varying goals and needs. Employees of organization are not similar to the basic business resources; an employee of any organization drives other materialistic resources to attain its goals.

Nestle believes that the long-term success depends on attracting, retaining and developing employees’ ability to ensure its growth; upon this belief the primary responsibilities of HR managers are developed. Moreover to maintain the bridge with the ultimate corporate mission Nestle Bangladesh sets its HR mission – To be within the top 3 Employer of Choice in Bangladesh. Recruitment, reward management, employee engagement, training and development, compliance these are the very basic practice in HR function like any other organization in Nestle Bangladesh.

However, the basic HR practice in Nestle may be same like other organizations but the Human Resource policy which guides the whole practice makes it unique from the others. This policy encompasses those guidelines which constitute a sound basis for efficient and effective HR Management in the Nestle Group around the world. Human Resource Head office Reward & Recruitment Personal Development & Learning Factory Admin Employee Relation Operations Employee Welfare Figure 6: HR function 22 Figure 6 describes the total HR function at a glance; according to the importance total HR can be divided into two parts: Head Office and Factory.

HR teams in head office mainly look after the Reward and Recruitment, Personal Development & Learning and Administrative responsibilities. On the other hand in factory HR deals with employee relation, Operations and employee welfare. Due to the business need total HR function is divided into two parts but both of the parts reports to the HR functional head; however the factory HR at the same reports to the HR functional head and Management Committee of factory. Rewards: Nestle Bangladesh maintain a stable compensation structure in compare to the other corporate of Bangladesh.

Compensation in the different levels of the employment always remains equal to or above the market benchmark. Compensation practice takes relevant external compensation levels as well as the requirement of internal fairness. Nestle regularly surveys and gathers relevant information on the remuneration levels practiced in local and international level. Moreover reviews occur regularly between its competitive positions with other companies. It is also advised by the management that, wage and salary structures should be kept simple and avoids unnecessary complexity.

Recruitment: Importance has been given on the matching of Nestle values and candidate’s values with the company culture. On the other hand for managerial positions specific leadership qualities and business insights are major requirements. For promoting employees within the organization, it is the role of management and HR to keep an eye on valuable candidates from outside and to benchmark internal skills with external offers. Nestle strives to provide a working environment which protects the health welfare hygiene security and safety of the employees.

It is advised to each employee that they should not only care for their own safety but also that of their colleagues. Nestle favors the policy of long-term employment, as a result whenever an operation cannot be maintained within the Nestle circle steps will be undertaken to avoid overall loss of employment. Administrative Support: HR professionals are to provide professional support in handling people but not by substituting the responsible manager. In case of business partners, the HR managers usually offer solutions which result in positive impact on the organization’s success. 23

Personal Development & Learning: In Nestle, training is done on-the-job basis along with guiding and coaching. It is a part of the responsibility of each manager to recommend training programs to their subordinates. Nestle tries to develop trainings based on action learning. In this regard the responsibility of HR management to provide the support for implementing the necessary planning tools, having in mind the necessary flexibility to cope with unexpected situations. Employee Relation: Intolerance, harassment or discrimination or any kind of expression of disrespect is strongly discouraged in Nestle.

Emphasis has been given on the transparency and honesty in dealing with people for efficient communication. It is ensured that every employee has the right to an open conversation with superiors or colleagues. However, in case of discord between an employee and the respective superior, the situation is advised to be resolved by a fair hearing. As a result HR staffs provide assistance to ensure that the disharmony is dealt with impartially. It is the responsibility of the local management to maintain a harmonious Industrial relation in appropriate levels.

Nestle’s relations with unions is established under strict observation of national law, local practices as well as those international recommendations to which Nestle has followed to on a voluntary basis as stated in its corporate business principles. Employee Welfare: Nestle is providing enough space to its employees to take an active part in the life of the community or by assuming responsibilities in professional, civic, cultural, religious or voluntary organizations. Nestle believes that any activity during working hours has to be first approved by the company. 24 4. Review of training Function of Nestle It is important to build up the capabilities for future business success and to ensure Nestle people have the right understanding, skills and behaviors to perform their jobs effectively. That is why Nestle regularly offers a wide range of training actions at local, regional and global level; including on-the-job training as well as coaching. Employees from different backgrounds and cultures attend the training programmers on management and leadership development, as well as other intensive courses and workshops on functional areas of expertise.

Approximately 75% of the speakers at different training programs are internal experts and top managers from corporate headquarters, including all members of Executive Board. Nestle also developed the process of elearning, already hundreds of general e-courses are being offered in Nestle Bangladesh Ltd. There are four types of training: Organizational Knowledge Functional Skills Types of training Business Skill Leadership Skill Figure 7: Types of training HR function of Nestle Bangladesh usually deals with the organizational knowledge and leadership skill. On the other hand functional training and usiness skill related trainings are arranged by the respective functions. Especially in the Organizational Knowledge trainings, trainers provide the overview and the current market situation of the brands of Nestle. On the other hand the leadership training tries to develop the basic leadership skills among employees. 25 There is a separate leadership framework in Nestle which consists of 13 basic aspects, however among these 13 the most important 4 are known as the ? 4 Nestle Behaviors? Result Focus Proactive Cooperation 4 Nestle Behaviors Practice what you preach

Initiative Figure 8: 4 Nestle Behaviors One of the important key factors of today’s business success of Nestle is aligning the functional goals to the corporate goal. As a result it is important to become result focus and drive the teams according to their KPIs. On the other hand proactive cooperation is embedded in the Nestle’s culture. People focus on the proactive cooperation for the smooth coordination of the functions. Moreover the concept of practice what you preach focuses on the freedom of choice in the organization in terms of their belief and right to speech.

Finally Nestle always encourage the initiatives of the people to make their workplace a place for flourishing for organizational and personal development. 26 4. 2 Training Cycle In Nestle Bangladesh trainings are divided in several proportions; where 70%- On the job training, 20%-Coaching, 10%- Class room training. On the job trainings are held in every function, where employees learn by doing the job. In coaching the senior managers or skilled employees provide the coaching and take care of their team. In the class room trainings are delivered in class rooms where trainers deliver interactive lectures. Join On the job training Set Objective

Performance Evaluation Find out the improvement areas Training Need Assessment Training Figure 9: Employee Work Process Figure 9shows the employee work process in Nestle Bangladesh. At first an employee joins the company, works in his/her respective function to learn the job initially, after a certain period of time his/her respective supervisor set the objective for him/her. When the objective is once set for an employee then he/she has to face performance evaluation twice in a year, in the first half of the year respective supervisors of the employee analyze the progress and mark the achievement of the KPI [Key Performance Indicator] nd guide him to attain the 100% of his/her 27 objective by the end of the year. Finally after the year ending another performance evaluation is done by the supervisors and they find out the improvement areas of his/her subordinates and decide what training will needed to improve the performance in the coming years. This particular decision of training for performance improvement is known as Performance Development Guide (PDG). Training Need Assessment Work on feedback for improvement Feedback Preparation Training

Figure 10: Training cycle Figure 10 shows the training cycle, where the training team of HR starts their work on the basis of training need assessment. After having all the PDGs the HR training term prepare the nomination of the trainee, schedule the event, set the module, contact with the trainer and provide other logistic support for the training. After each training session a feedback is taken from the participants based on which the management decides on which areas need further improvement Training Need Assessment

People are an organization’s most important resource. For an organization to accomplish its mission, its employees must have a clear understanding of their roles, know how well they are performing those roles and be given opportunities to develop. These factors lead to positive 28 outcomes for individuals, teams and the organization. Thus, it is important for an organization to have an effective system for assessing employee performance, communicating performance information to employees and providing on-going support.

The purpose of a training needs assessment is to identify performance requirements or needs within an organization in order to help direct resources to the areas of greatest need, those that closely relate to fulfilling the organizational goals and objectives, improving productivity and providing quality products and services. Assuming that the needs assessment identifies more than one training need, the training manager, working with management, prioritizes the training based on the urgency of the need, the extent of the need and the resources available.

Based on this information, the training manager can develop the instructional objectives for the training and development program. In Nestle Bangladesh particularly Training Need Assessment is done and the training programs are set upon the performance evaluation and the Performance development guide of the employees. At beginning of the year an objective is set for every employee and then the first review on the performance is occurred at the mid of the year; here the corresponding manager checks how much of the given objective is achieved and gives feedback on the achievement.

Finally at the year end the total performance of the year is evaluated and from here the development areas comes out. For developing that area the performance development guide is prepared and the training team prepares the training according to that guide. Performance Evaluation: In Nestle Bangladesh the internal culture is very much performance driven. The combined performance of every function ultimately brings the wining situation for the company. As a result every line manager has to take the performance evolution very seriously.

At first each and every employee has a particular define responsibility to maintain and upon that responsibility is assessed in performance evaluation. These responsibilities are mainly set according to the corporate goal. This goal has set in the global level from the global headquarter of Nestle then it is divided into the zones; Nestle address the zones as: 29 Nestle Global Zones Zone Africa, Asia & Oceania (AOA) Zone Europe Zone America Figure 11: Nestle zones in the globe Into a different zone there are different regions and under in this particular region there are markets; here market is Bangladesh.

To achieve the goal performance is assessed under four Key indicators: EBIT (Earnings before Income Tax) RIG(Real Internal growth) OG(Organic growth) ATWC (At working capital) Figure 12: Performance Evolution Criterion EBIT refers to Earnings before income tax; as a business organization the sustainability and the growth. All the functions have to contribute to this particular area to make the company financially stable. On the other hand RIG ensures the increase of the new customer and also the sales. In this particular area the company has to increase its market and the production along with 30 he brand value of the existing brands. Finally the ATWC is the parameter to check whether the working capital is handling by the employees efficiently or not. Performance development guide (PDG):The Progress and Development Guide (PDG) focuses on quality development of an employee during his performance appraisal. In this process a dialog occurred between the line manager and his/her subordinate upon which the development areas are find out. Because the continuous development of extension employees to meet current and future clientele needs is critical to the health of extension as an organization.

Particularly the total development guide is developed upon a dialog for ensuring him willingness of the employee. The PDG allows employees to improve his/her career goals, strengths and development needs, on the other hand its helps the organization to develop a focused and actionable development plan. All the employees in Nestle Bangladesh are required to participate the process time to time. The total development guide answers the question-? Development/progress on what?? for an employee. Mainly Knowledge of the work, Skill required for performs the task and behavior required for the task is focused.

Usually to perform a job at lest basic knowledge is must; upon which anyone will acquire skill and improve farther. On the other hand skill is important for the development to become competitive; it is the way how an employee learns how to apply the theoretical knowledge on the field. Finally the behavior focus on the proper attitude requires for performing the job. Moreover the total development needs focus on the current job and also for the future jobs as well. Every employee in Nestle Bangladesh has equal opportunity to promote for the next level according to the performance of the current job and his leadership quality.

As a result it is important to train-up the people to perform better and assist the organization to achieve its goal. On the other hand the role of any particular position is changing everyday according to changing nature of the business; that is why this guide also focuses on the changing nature of the roles and develop the employees accordingly. Finally any development need which is mentioned in the guide has reverent from the employee perspective and also for the organization. Moreover the identified needs also evaluated in 31

SMART criteria as well; which allow the training team to specify the need, measure the importance and set priority, check whether it is attainable, relevant and time bound or. For the PDG to function successfully, the relationship between employee and supervisor should be collegial rather than hierarchical. This is the essence of teamwork. Such an atmosphere enhances the opportunity to coach rather than supervise. A collegial relationship requires a twoway exchange. Just as the supervisor has the responsibility for development of staff members in a unit, staff members have an obligation to assist the supervisor in his or her development.

Preparation This is the most lengthy and critical part of the total training function. By comprising so many small parts this preparation is done. In this part the most important aspects are: Decide what training will be conducted Set the Training Calendar Prepare the Nomination, Trainer , Training Content & Logistics Book Vanue of the Training Prepare budget Figure 13: Training Preparation process At first the training team decides what trainings need to be conducted in the coming year. Every year there is some training which need repetition, such as the ?

Training on Business principle? or other corporate value related training. 32 To make the process simple the training team divides the total period into different quarters; the actual dates are finalized later; based on this quarterly estimation a full training calendar is prepared. However this training calendar needs modification for different emergency or other purposes. Another important aspect in terms of setting a training calendar is to match with the globally published one; which comes from the Vevy; global headquarter of Nestle.

Globally there are some trainings are offered every year, so the local training calendars are developed in such a way that it should not clash with global one. The nomination for the training actually comes from the PGD and also from the improvement areas identified which comes out from the performance appraisal. After the nomination the trainees are informed before the training is conducted by locking the Microsoft Outlook Calendar. On the other hand all the trainings arranged by the training teams are not taken by the Nestle internal employees, some time they bring other experts from different training institutes.

Here the training team communicates with the institute according to the training need. It is the responsibility of the trainer to develop the training content according to requirement. Sometimes some training is recommended conducting in the local headquarters; in that case those training contents are directly sent from Vavy. A part from that the required logistic supports for conduction training are prepared by the training team and with the help of Admin. Selecting the venue of the training depends on the nature and the number of the trainee.

When the training is conducted for 20 to 25 and the nature of the training is lecture based they use the office canteen; other than that when the session is developed as a workshop manner then they or if the training include any other practice then they book external venue; such as the Flabme or the BDMS of BRAC at Saver. Based on all the aspect the total budget of the training is set. HR function of Nestle mainly prepares this budget for those training which are prepared by the HR training team. Training After all the preparation is done the training is conducted.

All the trainings the trainer tries to deliver the message in a communicative manner. Depending on the people who are attending the 33 training trainers delivers the message. They use different methods as well depending upon the nature of the audience. Training methods like Classroom training, workshop model, On the Job Training Role Playing etc. are used. If the trainees are much young then the audio visual presentation are included more. On the other hand for the aged employees are aged the question answer session remains curtail. Feedback After every training participants need to give their feedback on the trainings.

It is one of the important documents which allow the training team to evaluate their performance while conducting training sessions. For the next training cycle this feedbacks are also important to improve the training sessions. Moreover sometimes this feedback information reflects the need of another different kind of training. There are actually four important parts of the feedback sheet: Overall Assesment Design Facilatator/Factor Content Figure 14: Feedback Criterion In the overall assessment segment the participants evaluate the session by comprising all the factors of training. In the ? Design? art participants are to mark on the Liker Scale about the structure, duration, Content, Quality and quality of audio and visual aids of the training. In the facilitator part the participants are to evaluate the activities of the trainer. By using Liker Scale in 34 this section relevancy of the content, organization of the content, presentation style, time management and question handling by the trainer are particularly assessed. In some training session trainer use to provide some training content to the trainees; to assess the relevancy and the importance of the delivered content the in the ?

Content? part of the Liker Scale is given. A part from these four parts of the feedback sheet some particular questions are asked to the trainees to know the comments of the trainees. The questions are: ? How well this training help you in maintaining your work better? ? What aspect of the workshop you appreciate most? ? What are the areas of the improvement in the workshop? Every feedback sheet tracks who is filling up the sheet; so that the training team can work on the comments according the perspective of the individuals.

Moreover, every Likert Scale is marked from one to five, which indicate bad poor to good respectively. Work on feedback Working on the feedbacks is a one of the most important parts which reflects the effort of the training team. Assessment practices are critical to improving learning and are often the most powerful element. Well-formulated assessment ensures that trainees have clear expectations of what is required of them, and is an important tool for trainer to use to stimulate the type of learning that they want their students to achieve.

In Nestle Bangladesh Ltd the scoring in the every Likert Scales are accumulated and after that the average is calculated. For example in the ? Design? part of the feedback five Likert Scales are there under five headings, like structure, duration, content, quality and quality of the audio and visual aids; the training team calculates the average of the score of those five Likert Scale. The calculated average reflects the overall score of the every criterion under four broad aspects. After calculation the average for every criterion, they compare it to the benchmark that is fixed for criterion.

However every criterion has to achieve at least 4. 5 after calculation the average which is considered as a good level and below four is consider as poor. 35 4. 3 Trainings in Nestle Bangladesh In a year most of the trainings are conducted to improve the efficiency of the employees. In the year of 2011 the trainings are: Communication Skill This training mainly emphasizes on the corporate communication. In different situations of different positions employees need to communicate in different layers of the organization. In this training trainers are mainly the senior employees in the managerial position.

Most interesting aspect of this training is that, after the training session the trainers and trainees arrange a role playing session to practice the skill in real life model. Presentation Skill Here employees are trained about the presentation skills which are very necessary in day to day life. The trainers of this session are also the senior employees in the management level or sometimes the training team brings experts for it. Especially for the employees of the Nutrition function doctors are bought up by the training team. It is mostly class room based training.

Training on Nutrition Awareness Nestle itself is very well-known for its nutrition related products; as a result the company also arranges awareness session to aware the employees about the nutrition in our day to day life. Mainly the nutrition specialists are welcome to conduct the session. Along with that the company also arrange nutrition awareness program in the different schools in the rural arrears of the country. Everyday Coaching Awareness Session This training program is mainly to get familiar with the rules and regulation to conduct business in the food industry.

As a wellbeing company Nestle is bound to maintain the compliance issues; as a result this training session mainly focus on the existing and new rules imposed by the 36 Government and WHO (world health organization). Along with that Nestle also has its own principle to ensure the nutrition and quality factors for its product which are also discussed here. Product Knowledge Particularly this training is organized for the new joiners of the company; in compare to world market the product line is not so extended in Bangladeshi market. However day by day new products are being introduced in this region.

As a result this training is arranged with the help of marketing team by the HR training team for the new joiners. Leadership through 360 Degree Workshop This program is fort all the employees of Nestle; the company nurture the talent from the very beginning of an employee to become a leader and as well as a good successor. Moreover in this training it is also emphasized that how to work in a team and follow leadership; senior employees and as well as the renowned trainers for leadership training is bought here. It’s basically class room based training. Overview on Nestle Framework of Leadership

Nestle defines its leadership in a different manner; where they emphasize the people leadership in the beginning level, after that the business leadership then the strategic leadership. That is why they are arranging Nestle Framework of Leadership where mostly 13 core aspects: Inspering People Lead People Develop People Practice what you preach Adding Value Result focus Initiative Inovation/Renovation Figure 15: Nestle Framework of Leadership 37 Dealing With others Opening Up Proactive Coperation Know Yourself Impact & Convince Others Insight Service Orentation Couriosity & Courage Figure 15: Nestle Framework of Leadership

Proud to be Nestle In is not actually a training session, here employees from different functions come and share their success stories or challenges that they face in Nestle. The main motto behind this session is to develop the team bonding and reduce the communication gap. It used to run as a gathering for sharing success stories but some time people come with their new ideas which will help their life to become easier. 38 4. 4 Assessment of the Training Outcome and Process The trainings are organized to fine tune the knowledge, skill and job behavior of the employees which will reflect in terms of achieving organizational goals.

As a growing organization Nestle Bangladeshis assessing the outcome or the effectiveness of the training for some training; however as the organization will grow the investment on the trainings will also increase, in this scenario in the coming days it will be curtail to identify the outcomes against the investments made. However in one hand in generally it is not always possible to identify the outcomes especially from a training function in monitory terms, because it is really difficult to value the knowledge or skills which is delivered financially; on the other hand this knowledge or skill actually help to perform better.

That is why in this part of this paper a comparison is made with the two famous models to assess

About Nestle Nestle is a multinational packaged foods company founded and headquartered in Vevey Switzerland. it is the world`s foremost Nutrition. Health & Wellness Company committed serving consumers all over the world. Their focus on responsible nutrition and promoting heaLth and wellness is a core value, emphasizing responsibility and sustainability. Nestle products are sold in almost every country in the world. MISSION STATEMENT 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. ” COST ACCOUBTING INFORMATION SYSTEM OF NESTLE INPUT MEASUREMENT BASIS STANDARD COSTING Nestle is using STANDARD COSTING as a base for input measurement Standard costs are usually associated with a company’s costs of direct material, direct labor, and manufacturing overhead. Rather than assigning the actual costs of direct material, direct labor, and manufacturing overhead to a product, nestle’ like many manufacturers assigns the expected or standard cost.

This means that its inventories and cost of goods sold will began with amounts reflecting the standard costs, nor the actual costs, of a product Nestle’, of course still has to pay the actual costs. As a result there almost always differences between the actual costs and the standard costs, and those differences are known as variances, REASON FOR USING STANDARD COSTING Nestle is currently using Standard costing method because the related variances are valuable management tool. If a variance arises, management becomes aware that manufacturing costs have differed from the standard (planned. xpected) costs. • If actual costs are greater than standard costs the variance is unfavorable. An unfavorable variance tells nestle’ management that if everything else stays constant the company`s actual profit will be less than planned. • If actual costs are less than standard costs the variance is favorable. A favorable variance tells management that if everything else stays constant the actual profit will likely exceed the planned profit. The sooner that the accounting system reports a variance, the sooner that Nestle management can direct its attention to the difference from the planned accounts.

DIRECT MATERIALS USAGE VARIANCE Under a standard costing system. Production and inventories are reported at the standard cost—including the standard quantity of direct materials that should have been used to make the products. If the manufacturer actually uses more direct materials than the standard quantity of materials for the products actually manufactured, the company will have an unfavorable direct materials usage variance, If the quantity of direct materials actually used is less than the standard quantity for the products produced, the company will have a favorable usage variance.

The amount of a favorable and unfavorable variance is recorded in a General ledger account Direct Materials Usage Variance. (Alternative account titles include Direct Materials Quantity Variance or Direct Materials Efficiency Variance. ) Lets demonstrate this variance with the following information. Direct Labor: Standard Cost. Rate Variance, Efficiency Variance Direct labor refers to the work done by those employees who aciually make the product on the production line. (“Indirect labor” is work done by employees who work in the production area. but do not work on the production line.

Examples include employees who set up & maintain the equipment. ) Unlike direct materials (which are obtained prior o being used) direct Labor is obtained and used at the same time, This means that for any given good output, we can compute the direct labor rate variance. The direct labor efficiency variance, and the standard direct labor cost at the same time. Variable Mfg Overhead: Standard Cost, Spending Variance, Efficiency Variance Manufacturing overhead costs” refer to any costs within a manufacturing facility other than direct material and direct labor.

Manufacturing overhead includes such things as indirect labor, indirect materials (such as manufacturing supplies), utilities, quality control, material handling, and depreciation on the manufacturing equipment and facilities. “Variable” manufacturing overhead costs will increase in total as output increases. Fixed Mfg Overhead: Standard Cost, Budget Variance, Volume Variance “Fixed” manufacturing overhead costs remain the same in total even though the volume of production may increase by a modest amount. RELATIONSHIP BETWEEN VARIANCES

If the direct labor is not efficient at producing the good output, there will be an unfavorable labor efficiency variance. That inefficiency will likely cause additional variable manufacturing overhead—resulting in an unfavorable variable manufacturing overhead efficiency variance. If these inefficiencies are significant, it is possible that the company may not be able to produce enough good output to absorb the planned fixed manufacturing overhead—resulting in an unfavorable fixed manufacturing overhead volume variance. TREATMENT OF VARIANCES

The treatment of variances follows these guidelines: If the variance amount is very small (insignificant relative to the company’s net Income), simply put the entire amount on the income statement. If the variance amount is unfavorable, increase the cost of goods sold—thereby reducing net income. If the variance amount is favorable, decrease the cost of goods sold—thereby increasing net income. If the variance is unfavorable, significant in amount, and results from mistakes or inefficiencies, the variance amount can never be added to any inventory or asset account.

These unfavorable variance amounts go directly to the income statement and reduce the company`s net income. If the variance is unfavorable significant in amount and results from standard costs not being realistic, allocate the variance to the company’s inventory accounts and cost of goods sold. The allocation should follow the standard costs of the inputs from which the variances arose. If the variance amount is favorable and significant in amount, allocate the variance to the company`s inventories and its cost of goods sold. INVENTORY VALUATION METHOD ACTIVITY BASED COSTING

Activity based costing (ABC) assigns manufacturing overhead costs to products in a more logical manner than the traditional approach of simply allocating costs on the basis of machine hours. Activity based costing first assigns costs to the activities that are the real cause of the overhead. It then assigns the cost of those activities only to the products that are actually demanding the activities. IMPLEMENTATION OF ABC IN NESTLE Nestle company is using activity based costing method for inventory valuation. Firstly they identify all activities that use resources.

Cost pools are set up for each of the activities identified. They assign overhead costs to the cost pools based on a cost driver. Cost pools are used to assign costs. Costs are assigned to its, batches, or products. REASON FOR USING ACTIVITY BASED COSTING Nestle is currently using ABC techniques because it helps it in determining accurate product cost. Complex companies Like Nestle may see the most benefit from this type of costing because it is most helpful when the costing information is difficult to understand or evaluate.

ABC provides information to Nestle regarding processes that should be improved and the products or services that are contributing the most to company’s profitability, ABC system also helps Nestle in knowing what are the factors that contribute most to cost, which in turn assists management in choosing best alternative in reducing overall costs incurred by the Nestle Company. ABC system can be the best tool to be utilized in implementing environmental accounting at the firm level. COST ACCUMULATION METHOD

Nestle is using process costing method. It is a costing system in which the cost of a product or service is obtained by assigning costs to masses of lake or similar units and then computing unit costs on an average basis. Process costing averages the costs over all units to come to the per unit cost. In Nestle. Direct material and direct labor costs are tracked by department, and are assigned evenly to the products that pass through each department. Overhead costs are applied to each department and are assigned evenly to each product.

Multiple WIP accounts are used one for every process. As products are moved from one process to another, the costs of the previous process are transferred to the next process. Five steps are involved in Nestles process costing method firstly it summarizes the flow of physical units of output. Secondly, computes output in terms of equivalent units, Thirdly, computes equivalent unit costs. Fourthly, summarizes total costs to account for. And at the end, they assign total costs to units completed and to units in ending work in process inventory.

REASON FOR USING PROCESS COSTING Process-costing used in Nestle because it broadens the economics of quality by classifying cost of non-conformance and cost of conformance i. e. “costs incurred when a process is running without failure. It also allows Nestle tracking and reduction of costs normally associated with efficiency in addition to effectiveness (quality)”. COST FLOW ASSUMPTION FIFO In Cost flows assumption. Nestle is using FIFO method. FWO is an acronym for First In, First Out.

A method of valuating the cost of goods sold that uses the cost of the oldest items in inventory first What comes in first is handled first what comes in next waits until the first is finished. Etc. REASON FOR USING FIFO Nestle is using FIFO as cost flow assumption for its products. Because most of its products are perishable and they have short expiry date. Nestle also believe in tax minimization. For taxation purposes, FIFO assumes that the assets that ate renaming in inventory are matched to the assets that are most recently purchased or produced.

Because of this assumption, there are number of tax minimization strategies associated with using the FIfo asset-management and valuation method. Due to this reason, Nestle is using FIFO method as a cost flow. FWO gives Nestle a better indication of the value of ending the inventory on the balance sheet. One of the reasons for using FIFO method by Nestle is the increasing rate of inflation. Because of this, Nestle uses FIFO inventory accounting in order to make their balance sheet look better. RECORDING INTERVAL CAPABILITY

Inventory records can be maintained on a perpetual or a periodic basis In the past manufacturers tended to keep perpetual inventories, while retailers used the periodic method. However, today a variety of point of sale devices and dedicated microcomputer software are readily available to provide any company with perpetual inventory capability. NESTLE’S METHOD Nestle is Currently using perpetual method for maintaining the inventory records because this method provides the company with real time and true inventory information.

To record purchases, the periodic system debits the Purchases account while the perpetual system debits the Merchandise Inventory account. To record sales, the perpetual system requires an extra entry to debit the Cost of goods sold and credit Merchandise Inventory. By recording the cost of goods sold (or each sale, the perpetual inventory system lessens the need for adjusting entries and calculation of the goods sold at the end of a financial period, both of which the periodic inventory system requires.

The reasons for which Nestle is using perpetual method rather than periodic inventory method is that • By using perpetual method Nestle can determine their COGS and profit or loss after every sale unlike periodic, in which you get profit or loss at the end of the period. • Nestle has preferred perpetual system because it is a realistic double entry system while periodic is arbitrary. • The company can watch the inventory more closely using this method because whenever there is an increment and decrement inventory, some other account like profit loss must be debited or credited. And in the perpetual system stock loss gain is immediately noticed and not at the end of year when the physical count of the inventory is taken The advantages that Nestle has got due to the use of the perpetual inventory system, is a high degree of control, it aids in the management of proper inventory levels, and physical inventories can be easily compared. Whenever a shortage (Le. a missing or stolen good) is discovered, the Inventory Shortages account should be debited.

Nestle was founded in 1866 by Henri Nestle and is today the world’s biggest food and beverage company. Henri Nestle developed the first infant food in 1867 to save the life of a friend’s baby who could not be breastfed. (this is a combination of cow’s milk, wheat flour and sugar). Since then, the company has looked to build on a tradition of providing nutritious products. The Nestle Group invests around 1. 5 billions swiss franc in R&D every year. It’s more than any other food company. Every day Nestle sells over a billion products. These individual consumer transactions give the Company total nnual sales of more than 90 billion swiss francs Nestle markets its products in 130 countries across the world. Nestle manufactures around 10,000 different products and employs some 250,000 people; A marketing orientated approach means a business reacts to what customers want. The decisions taken are based around information about customers’ needs and wants, rather than what the business thinks is right for the customer. Most successful businesses take a market-orientated approach Since then, the company has looked to build on a tradition of providing nutritious products.

It builds its business around: -discovering what customers want -identifying pressures for change e. g. government campaigns, health education initiatives -responding to changes in the market place. Nestle concentrates on their consumers and tries to understand their physical and emotional desires. They have a wide range of products and consumed by all age groups. Nestle try to understand the economic, geographic and social factors which affects the diets of the consumers and try to concentrate on the nutritional and health value of the products.

Example Nestle have used their research and technological expertise to their ice cream products to reduce their calories but too keep the same taste. They have also introduced sugar free products and lower sugar products like Kit Kat Light. Nestle also try to understand the motivations, decision making and purchasing habits of the customers by spending time with the people. Example: Nestle employees spent three days living with people in suburbs of Lima in PERU to understand their everyday aspects of their life, and based on their understanding they sold relevant products in the local markets.

A market led company like Nestle is continually monitoring customer attitudes and requirements through market research. This research takes two main forms: Qualitative research. This involves setting up small focus groups of consumers who express their ideas and opinions about their needs and views on different products. Quantitative research. Whereas qualitative research involves only relatively few people, quantitative research involves much bigger numbers. For example, professional market researchers may interview thousands of people through postal or telephone interviewing.

Nestle regularly uses both forms of research to gain a clear idea of consumer opinions and trends. Market research helps the company to keep in touch with an ever changing environment in which social attitudes and buying patterns are continually shifting. The Company’s strategy is guided by several fundamental principles. Nestle’s existing products grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Long-term potential is never sacrificed for short-term performance.

The Company’s priority is to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives. Nestle is committed to the following Business objectives in all countries, taking into account local legislation, cultural and religious practices: Nestle continues to maintain its commitment to follow and respect all applicable local laws in each of its markets. Analysis of Market Analyzing the market means getting the information about the current market trends. There are different ways, which are adopted by Nestle to get the information of the market.

By Sales Department Sales department is a primary source of getting the information about the market. They actually visit the market and find out that who are the competitors, and what strategies they are adopting. Customer Service Department For Every product there is customer service department.. Nestle knows that regular contact with their consumers is very important. This is why Nestle have a worldwide Nestle Consumer Services network Nestle cares for its consumers because its success depends on meeting their needs and expectations.

Through listening and understanding, it can make products that they will want to use all through their lives. Research and Development Department The nestle Research and Development head office is in Switzerland. The customer complaints are forward to the R where research is conducted. Suppliers and distributors To know about the market Nestle has established the close relationship with their suppliers who provide the raw materials. Conclusion Nestle is one of the world’s leading food companies. Its commitment to high quality market research ensures that it remains fully aware of changes in consumer behaviour and consumer tastes.

Its excellent product research and development network ensures that it is well placed to meet the challenge of changes in consumer expectations. The company’s Wellness strategy is carefully geared to delivering to customers what they want in relation to the foods they eat. Thus it’s clear that Nestle is a Market Oriented company because they try to understand the customer or market needs and produce products accordingly to achieve the organizations goals. And they believe that people are the main strength of the company.