Institute of Business and Information Technology

International Marketing
Final Project

Submitted to: Mr. Aly Raza Syed

By: 04 Qasim Arsalan F06MD003

08 Talat Hussain Khan F06MD015
11 Rabya Jalil F06MD019
18 Hassaan Muzaffar
F06MD040
22 Syed Rizwan Ali Jafri
F06MD053
 Table of Contents
Title Page
INTRODUCTION 3
HISTORY 4
Notable Facts 5
Company Information, Business Lines 6
HIERARCHY 8
Pakistan – Key positions occupied 8
Site locations – Head Offices and Factory Locations 9
STRATEGIC POSTURE OF LOCAL 10
BUSINESS
Nestlé in Pakistan, Mission Statement, Vision and 10
Strategy
Corporate Social Responsibility in Pakistan 11
Nestlé Framework for CSR 12
INTERNATIONAL BUSINESS 13
INVOLVEMENT
Phase of International Involvement, Cultural Borrowing 13
and Cultural Impacts
THE MODE OF INTERNATIONAL 14
OPERATION
Mergers and Acquisitions, Joint Ventures 14
Tariff and Non-Tariff Barriers, Duties and Taxes 15
STRATEGIES ADOPTED TO REDUCE 15
VULNERABILITIES
Corporate Business Principles – Pakistan 19
Regulatory Authorities 19
Regulatory Authorities within Pakistan 20
FINANCIALS 21
Figures - International 21
9 Month Sales Presentation 23
Figures - Pakistan 24
STRATEGIES FOR INTERNATIONAL 25
BUSINESS OPERATIONS

8
PROBLEMS/OPPORTUNITIES 27
Problems, Growth drivers, Opportunities, Direction for
2008

8
 INTRODUCTION
(SOURCE: www.Nestlé.pk, www.Nestlé.com)

Nestlé is a Switzerland Based International Food Group and is a merger

of two companies:

Henri Nestlé (1867) + Anglo Swiss (1886) =

Merged (1905)

Through its effective marketing and a vast sales and distribution

network throughout the country, it ensure that its products are made
available to consumers whenever, where ever and however. Nestlé has the
unique ability to provide a complete range of food products, services and
well known brands to meet the needs of consumers around the world. It is
not a faceless corporation catering to faceless consumers, but a human
company providing a response to individual human needs. It respects the
cultures of the countries it operates in and recognizes the need for quality of
life of their people.

Nestlé’ Pakistan is proud of its commitment to excellence in providing

value and services to its consumers

Nestlé’ Pakistan Ltd is registered on the Karachi and Lahore stock

exchange. It operates in many ways but people, products and brands are the
main flag bearers of the company’s image.

Nestlé Pakistan envisage to grow in the shortest possible time into a

food company with the unique ability to meet the needs of consumers of
every age group - from infancy to old age, for nutrition and pleasure, through
development of a large variety of food categories of the highest quality.

The Company's strategy is guided by several fundamental principles.

Nestlé'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.
Nestlé Pakistan visualizes the company to develop an extremely motivated
and professionally trained work force, which would drive growth through
innovation and renovation. It fulfills its social responsibilities and
environment is also taken care of.

The Company's priority is to bring the best and most relevant products
to people, wherever they are, whatever their needs, throughout their lives.

8
Now Nestlé is undisputed leader in food industry, with more than 509
factories in 83 countries out of which 220 are in Europe, 153 in America, 136
in Africa and Oceania.

8
 HISTORY
(SOURCE: www.Nestlé.pk, www.Nestlé.com)

1860-1905
In the 1860s Henri Nestlé, a pharmacist, developed a food for babies
who were unable to breastfeed. His first success was a premature infant who
could not tolerate his mother's milk or any of the usual substitutes. People
quickly recognized the value of the new product, after Nestlé's new formula
saved the child's life, and soon, Farine Lactée Henri Nestlé was being sold in
much of Europe.
Henri Nestlé endowed his company with the symbol derived from his
name. His family coat of arms, the nest with a mother bird protecting her
young, became the Company's logo and a symbol of the Company's care and
attitude to life-long nutrition. The Nestlé nest represents the nourishment,
security and sense of family that are so essential to life.

1905-1938
In 1905 Nestlé merged with the Anglo-Swiss Condensed Milk Company.
By the early 1900s, the company was operating factories in the United
States, Britain, Germany and Spain. World War I created new demand for
dairy products in the form of government contracts. By the end of the war,
Nestlé's production had more than doubled. After the war Government
contracts dried up and consumers switched back to fresh milk. However,
Nestlé's management responded quickly, streamlining operations and
reducing debt. The 1920s saw Nestlé's first expansion into new products,
with chocolate the Company's second most important activity.

1938-1975
Nestlé felt the effects of World War II immediately. Profits dropped from
$20 million in 1938 to $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, Nescafé, which was
a staple drink of the US military. Nestlé's production and sales rose in the
wartime economy.
The end of World War II was the beginning of a dynamic phase for
Nestlé. Growth accelerated and companies were acquired. In 1947 came a
lot of mergers. Diversification came with a shareholding in L'Oréal in 1974.

1975-1996
Nestlé divested a number of businesses1980 / 1984. In 1984, Nestlé's
improved bottom line allowed the Company to launch a new round of
acquisitions, the most important being American food giant Carnation.

8
 Nestlé's growth in the developing world partially offset a slowdown in
the Company's traditional markets.

1996-2000
The first half of the 1990s proved to be a favorable time for Nestlé:
trade barriers crumbled and world economic markets developed into a series
of more or less integrated trading areas. The opening of Central and Eastern
Europe, as well as China, and a general trend towards liberalization of direct
foreign investment was good news for a company with interests as far-flung
and diverse as Nestlé. While progress since then has not been as
encouraging, the overall trends remain positive.
Nestlé opened the 20th century by merging with the Anglo-Swiss Condensed
Milk Company to broaden its product range and widen its geographical
scope.

2000-present
In July 2000, Nestlé launched a Group-wide initiative called GLOBE
(Global Business Excellence), aimed at harmonizing and simplifying business
process architecture; enabling Nestlé to realize the advantages of a global
leader while minimizing the drawbacks of size. Nestlé was First to Produce:
Infant milk, Condensed milk, Milk chocolate, Soluble coffee and Freeze-dried
coffee.

NOTABLE FACTS
Nestlé, based in Switzerland, is the world's largest food company. It
manufactures a wide variety of food products, from chocolate to frozen
dinners to pet food, and is one of the top four water bottling companies in
the world. It controls one-third of the American bottled water market, selling
water under 70 different brand names.

 Bottled water contributes to the plastic waste problem and seizes

water that should remain a shared public resource. Nestlé has been
repeatedly sued for the impacts of its bottled water operations on
communities and for false advertising of its products.
 Nestlé has been criticized internationally for its aggressive marketing
of infant formula in countries where potable water is scarce, leading to
a reduction in breastfeeding and increased risk for infants.
 Nestlé is also one of the world's largest chocolate producers, and critics
charge that this makes it a contributor to child and forced labor
problems in cocoa-growing nations.

8
 Switzerland-based Nestlé S.A. manufactures a wide variety of food
products from chocolate to frozen dinners to pet food. In addition,
Nestlé is one of the most prominent bottled water companies in the
world, and also produces personal and health care products. Nestlé SA
employs 247,000.

 According to a 2006 global survey of online consumers by the

Reputation Institute, Nestlé has a reputation score of 70.4 on a scale of
1–100.

8
 COMPANY INFORMATION
Ticker:
NESTLÉ

Country:
PAKISTAN

Major Industry:
Food & Beverages

Sub Industry:
Diversified Food

2007 Sales:
28,235,393,000 (Year Ending Jan 2008)

Employees:
2,345 (Pakistan – as of January 2008)

Currency:
Pakistan Rupee

Market Capital:
61,221,938,400

Fiscal Year Ends:

December

Shares Outstanding:
45,349,584

Share Type:
Ordinary

BUSINESS LINES
Coffee
Nescafé, Taster’s Choice, Ricoré, Ricoffy, Nespresso, Bonka, Zoégas,
Loumidis

8
Water
Nestlé Pure Life, Nestlé Aquarel, Perrier, Vittel, Contrex, S.Pellegrino,
Acqua Panna, Levissima, Arrowhead, Poland Spring, Deer Park, Ozarka,
Hépar, Ice Mountain, Zephyrhills

Other beverages
Nestea, Nesquik, Nescau, Milo, Carnation, Libby’s, Caro, Nestomalt,
Nestlé

Shelf stable
Nestlé Nido, Nespray, Ninho, Carnation, Milkmaid, La Lechera, Moça,
Klim, Gloria, Svelty, Molico, Nestlé Omega Plus, Bear Brand, Coffee-
Mate

Chilled
Nestlé Sveltesse, La Laitière, La Lechera, Ski, Yoco, Svelty, Molico, LC1,
Chiquitin

Ice cream
Nestlé Antica Gelateria del Corso, Dreyer's/Edy's, Drumstick/Extrême,
Maxibon/Tandem, Mega, Mövenpick, Sin Parar/Sem Parar/Non Stop

Infant nutrition
Nestlé Nan, Lactogen, Beba, Nestogen, Cerelac, Neslac, Nestum,
Guigoz, Good Start

Performance nutrition
PowerBar, Pria, Musashi

HealthCare nutrition
Nutren, Clinutren, Peptamen, Modulen

Bouillons, soups, seasonings, pasta, sauces

Maggi, Buitoni, Thomy, Winiary,Torchin

Frozen foods (prepared dishes, pizzas)

Stouffer’s, Lean Cuisine, Hot Pockets, Buitoni, Maggi

Refrigerated products (cold meat products, dough, pasta, pizzas,

sauces, snacks)
Nestlé, Buitoni, Herta, Toll House

Chocolate, confectionery and biscuits

Nestlé, Crunch, Cailler, Galak/Milkybar, Kit Kat, Smarties, Butterfinger,
Aero, Polo

FoodServices and professional products

Chef, Davigel, Minor’s

8
L’Oréal (equity interest)

8
 HIERARCHY
(Source: International website www.Nestlé.com)

Organizational Chart - International

Pakistan – Key Positions Occupied

Trevor Clayton, Managing Director, MD Office (Country
Head of Operations)
Syed Yawar Ali, Chairman
Raymond Franke, Head of Finance and Controls, Finance
& Control Division

8
 Haseeb Aslam, Country Business Manager Water, Water
Division
Peter Wuethrich, Head of Technical, Technical Division
Salman Nazir, Head of Supply Chain, Supply Chain
Division
Uzma Qaiser Butt, Head of Human Resources, Human
Resources Division
• Zafar Hussain, Head of Sales, Sales Division

SITE LOCATIONS INCLUDING HEAD OFFICE

AND FACTORY LOCATIONS
(Source: www.Nestlé.pk)

Registered and Corporate Offices

308 – Upper Mall, Lahore
+92 042 111.637.853
+92 042 578 9303
+92 042 578 9304

Corporate Office Annex

304 – Upper Mall, Lahore
+92 042 111.637.853

Park Lane Tower

72-Tufail Road, Lahore Cantt
Lahore
+92 042 609 9300

Sheikhupura Factory
29thK.M.Lahore-Sheikhupura Road, Shiekhupura
+92 056 340 6615-25
+92 042 636 8710

Kabirwala Factory
Kabirwala-Kabirwala Road, Kabirwala, District Khanewal
+92 065 111.637.853
+92 065 241 1432

Islamabad Factory (Water)

Plot no. 32, Street 3, Sector 1 – 10/3, Islamabad

8
+92 051 444 5991-3
+92 051 444 5997

Karachi Factory (Water)

23-A, North Western Industrial State, Port Qasim Authority, Karachi
+92 021 472 0151-3
+92 021 472 0154

8
 STRATEGIC POSTURE OF LOCAL BUSINESS
(SOURCE: www.Nestlé.pk, www.Nestlé.com)

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

Mission Statement
At Nestlé, 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, Nestlé products bring consumers the vital ingredients of taste
and pleasure.
As consumers continue to make choices regarding foods and
beverages they consume, Nestlé helps provide selections for all individual
taste and lifestyle preferences.

Research is a key part of our heritage at Nestlé and an essential

element 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.

Vision and Strategy

 The Nestlé global vision is to be the leading health, wellness, and
Nutrition Company in the world. Nestlé Pakistan subscribes fully
to this vision. In particular, we envision to:
 Lead a dynamic motivated and professional workforce – proud of
its heritage and bullish about the future.
 Meet the nutritional needs of consumers of all age groups – from
infancy to old age, from nutrition to pleasure, through an

8
 innovative portfolio of branded food and beverage products of
the highest quality.
 Deliver shareholder value through profitable long-term growth,
while continuing to play a significant and responsible role in the
social, economic and environmental sectors of the country.
 We have profitable and diversified high quality food and
beverage product portfolio, delivering 60:40+ advantage to
consumers, available across all sales channels.
 Our brands are the preferred choice in their categories.
Consumer insight drives all aspects of our marketing and
communication efforts.
 Our communications to the consumer are relevant, cutting-edge,
and adhere to the highest standards of responsible
communication.
 Our company is seen as the No. 1 career destination for talented,
motivated and ambitious professionals.
 Our result-oriented organizational structure ensures effective
communication and empowered self-management.
 Our milk collection and agro services will continue to play the
primary role in development of the dairy sector in rural Pakistan.
 Our proactive innovation and renovation culture is the key to our
success in the marketplace.
 Fully integrated systems (Nestlé Pakistan, suppliers, customers)
ensure efficient business processes.
 Non-strategic activities and products are outsourced or
discontinued.

Corporate Social Responsibility in Pakistan

In 140 years of experience, Nestlé have learnt that businesses and the
societies in which they operate are in a symbiotic relationship. If society
flourishes, business is good. If a business does well, it brings wealth and
stability to a society.
From this organic interdependence comes Nestlé’s conception of
corporate Social Responsibility (CSR).
Nestlé tries to Create Shared Value at every step of the value chain, to
ensure that their actions benefit not only the company, but also society at
large. Both are, after all, interdependent. This consideration affects all of
Nestlé’s corporate initiatives.

8
Nestlé Framework for CSR:

8
 INTERNATIONAL BUSINESS INVOLVEMENT

Phase of International involvement

Nestlé is in the Global Marketing phase of international involvement. It
has more standardization but still it adopts products to countries where for
example culture or religion require products to be manufactured from
different raw materials or packaging to be made in a different way or show
something more suited to their understanding and conform to their cultural
norms. Thus there is more standardization and a little adaptation.

Cultural Borrowing and Cultural Impacts

Nestlé, while being a Swiss company has adopted the culture and
norms of Pakistan in the respect that besides the Zonal Manager and Country
Head of Operations, all other positions are filled by Pakistani citizens. In this
way, the cost of labor is reduced by hiring local human resources to fill
positions. Another impact of following this strategy is that locals do not feel
alienated and do not alienate Nestlé as a “strange foreign firm” having
nothing but foreigners selling foreign products. In addition, local know-how
and cultural norms are better understood and situations involving local
market knowledge or supply chains and in dealing with negotiations are
much better handled by having locals perform those duties.

8
 THE MODE OF INTERNATIONAL OPERATION
(Source: Nestlé Factbook, Nestlé, 2007 )

MERGERS & ACQUISITIONS

Key Dates
1866 Company Founded
1905 Merger between Nestlé and Anglo-Swiss Condensed
Milk Company
1929 Merger with Peter, Cailler, Kohler Chocolats
Suisses S.A.
1947 Merger with Alimentana S.A. (Maggi)
1969 Vittel (equity interest)
1971 Merger with Ursina-Franck
1974 L'Oréal (equity interest)
1977 Acquisition of Alcon (2002: partial IPO)
1985 Acquisition of Carnation
1988 Acquisition of Buitoni-Perugina
1988 Acquisition of Rowntree
1992 Acquisition of Perrier
1998 Acquisitions of San Pellegrino and Spillers Petfoods
2000 Acquisition of PowerBar
2001 Acquisition of Ralston Purina
2002 Acquisition of Schöller and Chef America
2003 Acquisition of Mövenpick, Powwow and Dreyer's
2004 Acquisition of Valio (ice cream activities)
2005 Acquisition of Wagner, Protéika, Musashi

JOINT VENTURES
Key Dates
1974 L’Oréal
1981 Galderma - (joint venture with L’Oréal)
1990 Cereal Partners Worldwide - (joint venture with General
Mills)
1991 Beverage Partners Worldwide (formerly CCNR) – (joint
venture with Coca Cola)
2002 Dairy Partners Americas - (joint venture with Fonterra)

8
 Laboratories innéov - (joint venture with L’Oréal)

TARIFF AND NON-TARIFF BARRIERS

As per information provided by the Nestlé official we interviewed for
this information, we were told that “Being a Multinational company, Nestlé is
exempted from almost all tariff and non-tariff barriers”. However a finance
official was not available for interview to provide more thorough detail as to
which barriers Nestlé is in fact exempted from and which barriers it isn’t
exempted from.
However, we would disagree with this information and evaluate the
trade, tariff and non-tariff barriers and the regulations laid out in this regard
by local law and government regulatory authorities. A detail of these barriers
can be obtained from legal documentation about the Statutes, Rules,
Regulations and Guidelines from the Securities and Exchange Commission of
Pakistan website: http://www.secp.gov.pk/laws.asp

DUTIES AND TAXES APPLIED

A similar set of information was provided to us in this regard as well.
However we can safely say that the duties and taxes applied upon Nestlé
conform to the rules and regulations by Government Regulatory authorities
like the State Bank of Pakistan, The Chamber of Commerce and The
Securities and Exchange Commission of Pakistan.
In that respect, Nestlé conforms to the rules laid out by local law and
duties and taxes applied are duly paid out by Nestlé as is stated later on in
the financial reports, e.g. in the year ending on December 2007 Taxation on
Nestlé was Rs. 744, 544, 000

STRATEGIES ADOPTED TO REDUCE POLITICAL,

OPERATIONAL AND ADMINISTRATIVE
VULNERABILITIES

Corporate Business Principles (International)

(Source: Nestlé Corporate Business Principles Document, Third Edition,
September 2004, Nestlé S.A., Public Affairs.)

Nestlé is committed to the following Business Principles in all countries,

taking into account local legislation, cultural and religious practices:
 Nestlé’s business objective, and that of management and
employees at all levels, is to manufacture and market the
Company’s products in such a way as to create value that can be
sustained over the long term for shareholders, employees,

8
 consumers, business partners and the large number of national
economies in which Nestlé operates;
 Nestlé does not favor short-term profit at the expense of successful
long-term business development, but recognizes the need to
generate a healthy profit each year in order to maintain the support
of our shareholders and the financial markets, and to finance
investments;
 Nestlé recognizes that its consumers have a sincere and legitimate
interest in the behavior, beliefs and actions of the Company behind
brands in which they place their trust, and that without its
consumers the Company would not exist;
 Nestlé believes that, as a general rule, legislation is the most
effective safeguard of responsible conduct, although in certain
areas, additional guidance to staff in the form of voluntary business
principles is beneficial in order to ensure that the highest standards
are met throughout the organization;
 Nestlé is conscious of the fact that the success of a corporation is a
reflection of the professionalism, conduct and the responsible
attitude of its management and employees. Therefore recruitment
of the right people and ongoing training and development are
crucial;
 Nestlé operates in many countries and in many cultures throughout
the world.

This rich diversity is an invaluable source for our leadership. No single

document can capture every legal obligation that may be required in each of
these countries. Indeed, there may be conflicting legal requirements. Nestlé
continues to maintain its commitment to follow and respect all applicable
local laws in each of its markets. If an interpretation of anything contained in
Nestlé’s Corporate Business Principles is construed as contrary to local laws,
such interpretation should not be followed in that country.

1. Customer
Meeting Consumers’ Needs: Nestlé aims to create value that can be
sustained over the long term by meeting consumer needs for nutrition,
enjoyment, and quality they can trust.

Nestlé’s Communication with consumers is based on the following

Basic Principles:
1. Nestlé consumer communication should reflect moderation in food
consumption, and not encourage over-eating. This is especially important
regarding children.

8
 2. Wherever possible, we should show children in healthy energetic
pursuits and avoid the portrayal of an inactive lifestyle combined with
unhealthy dietary patterns.
3. Nestlé consumer communication must be congruent with healthy,
balanced diets. Our advertising must not imply the replacement of meals
with indulgence or snack foods, nor encourage heavy snacking.
4. Nestlé is committed to advertising to children in a way that does not
undermine the authority, responsibility, or judgment of parents or care
providers. It must not encourage “pester power”.
5. Nestlé advertising to children must not portray children in unsafe
situations nor encourage them to accept invitations from people they do not
know.
6. Nestlé consumer communication about health benefits of products
must have a sound nutritional basis.
7. Nestlé consumer communication should not exploit violence, bad
manners, or profanity. Its content must reflect good taste in a given country
and culture. It should not depict attitudes that are discriminatory or offensive
to religious, ethnic, political, cultural, or social groups.
8. Nestlé communications must not show or encourage the consumption
of our products in a way that could be considered dangerous.
9. Regarding advertising placement, it is against our principles to sponsor
television and radio programmes or magazines whose strategy for attracting
viewers or readers relies on exploiting violence, sex, or encouraging
offensive behavior toward others.
10. Nestlé consumer communication should not portray competitors’
products inaccurately, nor denigrate them.

2. Infant Health and Nutrition

When Henri Nestlé developed his milk food for babies over 130 years
ago, it saved the life of a baby who could not be breast-fed. Nestlé’s
invention responded to the need for a nutritionally safe alternative to breast
milk. Today, Nestlé research and development creates high quality infant
formula products for use when an alternative to breast milk is needed that is
specifically nutritionally adapted. Nestlé also offers superior complementary
(weaning) foods.
Henri Nestlé also insisted that every mother able to breast-feed should do
so. This principle is still the cornerstone of Nestlé policy today, and is in line
with the aim of the International (WHO) Code of Marketing of Breast-
milk Substitutes, which was adopted by the World Health Assembly in
1981.
The International Code recognizes a legitimate market for breast-milk
substitutes and provides recommendations to governments on how its
marketing should be regulated.
Therefore Nestlé:
– encourages and supports breastfeeding as the best start in life;

8
 – carries out research and development aimed at the constant
improvement of infant formula products for use when a safe alternative to
breast milk is needed;
– ensures that its infant food marketing practices conform strictly to
national legislation, regulations, or other measures taken by governments to
give effect to the aim and principles of the International Code.
In addition, in all developing countries, whether or not their governments
have taken action to fully implement the International Code, Nestlé:
– gives detailed instructions to its staff on how to implement the
International Code;
– provides a summary of its policy for the information of employees and
the public in the form of the Nestlé Instructions, which is translated into
many languages;
– regularly conducts training of employees to ensure complete
understanding of the Company’s responsibilities under the International
Code;
– develops its infant formula labels and educational materials in line with
the International Code, after field research and consultation with health
authorities
– has an internal ombudsman system enabling employees to alert the
Company on potential non-compliance with the International Code in a
confidential way, outside line management structures. In each country the
designated ombudsman investigates and reports alleged violations of the
International Code directly to a member of the Nestlé S.A. Executive
Committee at the Company’s global headquarters;
– conducts audits on a regular basis of its companies’ infant formula
marketing practices.
Nestlé is a founding member of the International Association of Infant
Food Manufacturers (IFM), which was formed to facilitate industry
dialogue with WHO and governments, and to encourage responsible
marketing standards for the infant food industry.

3. Human Rights
Nestlé fully supports the United Nations Global Compact’s two
guiding principles on human rights.
Nestlé therefore:
Supports and respects the protection of international human rights within
its sphere of influence (Principle 1)
and
Ensures that its own companies are not complicit in human rights’ abuses
(Principle 2)
Nestlé aims to provide an example of good human rights’ practices
throughout its business activities and has an interest in encouraging the
improvement of social conditions, which are an important factor for
sustainable development. Nestlé also recognizes that governments are
ultimately responsible for the establishment of a legal framework for
protecting human rights within their markets. Nestlé expects each market to

8
respect and follow the local laws and regulations concerning human rights’
practices.

4. Human Resources and the Workplace

Nestlé fully supports the United Nations Global Compact’s four
guiding principles on labor.
Nestlé therefore upholds:
Freedom of association and the effective recognition of the right to
collective bargaining (Principle 3)
The elimination of all forms of forced and compulsory labor (Principle 4)
The effective abolition of child labor (Principle 5)
The elimination of discrimination in respect of employment occupation
(Principle 6)
Nestlé also respects the local laws and regulations applicable to human
resources in each of its markets. Human Resource Policy is also set by the
local markets, which must follow local legal requirements
Nestlé regards its personnel as its most valuable asset. Involvement at all
levels starts with open communication, whether on specific aspects of the
business, or about the activities of the Company in general. Suggestions for
changes and proposals for improvements of Nestlé’s practices are
encouraged.

5. Child Labor
It is generally acknowledged that the causes of child labor are complex
and include poverty, differing stages of economic development, social values
and cultural circumstances.
Nestlé believes policy development must take into account the social and
legal situation of individual countries.
Action to eliminate child labor must be guided by the best interests of the
child, as ill-considered policies and commercial measures can make the
situation worse for children.
Therefore, Nestlé:
– is against all forms of exploitation of children. The Company does not
provide employment to children before they have reached the age to have
completed their compulsory education, as defined by the appropriate
authorities. Nestlé expects its industrial suppliers and business partners to
apply policies that have the same standards as the Company’s Business
Principles and reserves the right to audit their compliance.
– abides by national laws in all countries in which it has operations and
complies with the International Labor Organization (ILO) Convention
138 on the Minimum Age for Employment and the ILO Convention 182 on the
Worst Forms of Child Labor. The ILO recommendations are based on the
United Nations Convention of the Rights of the Child (Article 32);
– offers its co-operation with the relevant United Nations agencies,
governments and the business community in their efforts to deal with the
problem of child labor, which include the encouragement of universal
primary education and all aspects of economic development worldwide.

8
Corporate Business Principles (Pakistan)
We are dedicated to following the best practices laid down by our parent
company, Nestlé SA. We have implemented the Corporate Governance
Principles established by Nestlé SA, covering four core areas:
 Rights and responsibilities of shareholders
 Equitable treatment of shareholders
 Duties and responsibilities of the board of directors
 Disclosure and transparency

Corporate Internal Audit

Recognizing the need to maintain transparency and verify the application
of corporate standards, Nestlé Pakistan has established an internal audit
department that monitors administrative and operational functions
throughout the company. Thanks to its operations, we can be assured that
adequate internal controls are in place, management information is reliable,
resources are used effectively, and company assets are safeguarded.

Regulatory Authorities
(Source: Nestlé Corporate Business Principles Document, Third Edition,
September 2004, Nestlé S.A., Public Affairs.)

National Legislation and International

Recommendations
Nestlé emphasizes that, as a minimum, its employees must comply with
the laws applicable in the countries in which it operates.
Nestlé ensures that the highest standards of responsible conduct are met
throughout the organization, by complying in a responsible way with the
Nestlé Corporate Business Principles, which guide Company activities
and relationships worldwide in each sector of business interest.
Nestlé supports and publicly advocates the United Nations Global
Compact and its ten principles, an initiative of the United Nations Secretary-
General. The Global Compact asks companies to embrace, support and
enact, within their sphere of influence, a set of core values in the areas of
human rights, labor standards and the environment.
Nestlé recognizes that increasing globalization is leading to the
development of more and more international recommendations. Although, as
a general rule, these recommendations are addressed to governments, they
inevitably impact on business practices. Among others, Nestlé has incorpo-
rated relevant International Labor Organization Conventions, and the
International (WHO) Code of Marketing of Breast-milk Substitutes
into its policies.

8
 Nestlé endorses relevant commitments and recommendations for
voluntary self-regulation issued by competent sectoral organizations,
provided they have been developed in full consultation with the parties
concerned. These include the International Chamber of Commerce (ICC)
Business Charter for Sustainable Development. Also, Nestlé uses the
Organization for Economic Co-operation and Development (OECD)
Guidelines for Multinational Enterprises, approved in June 2000, as a
reference point for its Corporate Business Principles.

Regulatory Authorities within Pakistan

Nestlé is in constant contact with the following three main government
organizations whilst operating in Pakistan: While representatives of Nestlé
were unable to give any specific details on the direct influence of any of
these organizations, we can see that they have obvious implications on local
operations of Nestlé as an MNC operating within Pakistan.

1. State Bank of Pakistan (SBP)

State Bank of Pakistan is responsible for formulating and conducting
monetary and credit policy in a manner consistent with the Government’s
targets for growth and inflation and the recommendations of the Monetary
and Fiscal Policies Co-ordination Board with respect to macro-economic
policy objectives. The basic objective underlying its functions is two-fold i.e.
the maintenance of monetary stability, thereby leading towards the stability
in the domestic prices, as well as the promotion of economic growth.
The "Rules of Business" for NBFIs became effective since the day NBFIs
came under State Bank’s jurisdiction. As from January, 1997, modarbas and
leasing companies, which are also specialized type of NBFIs, are being
regulated/supervised by the Securities and Exchange Commission (SECP),
rather than the State Bank of Pakistan.
As the custodian of country’s external reserves, the State Bank is also
responsible for the management of the foreign exchange reserves. The task
is being performed by an Investment Committee which, after taking into
consideration the overall level of reserves, maturities and payment
obligations, takes decision to make investment of surplus funds in such a
manner that ensures liquidity of funds as well as maximizes the earnings.
These reserves are also being used for intervention in the foreign exchange
market.

2. Pakistan Chamber of Commerce & Industry

The PCCI serves as a bridge between the private sector and the
Government. It plays an important role in policy formulation by maintaining a
constant interaction with the relevant authorities in both the Government
and businesses.

3. Securities and Exchange Commission of Pakistan (SECP)

The SECP is responsible for providing the rules regulations, policies and
guidelines for MNCs, SMEs and all other businesses operating within the

8
boundaries of Pakistan. The SECP is responsible for promoting Corporate
Social Responsibility in Pakistan and Regulation, Supervision and
Performance in Corporate Governance.

The Nestlé officials who were interviewed for this purpose mentioned that
the policies that Nestlé is following are in accordance to the rules stated by
the legal requirements of the Government of Pakistan.

8
 FINANCIALS
(Source: Nestlé Pakistan Limited, Financial Report for the year ending 31
December 2007, Nestlé Group 2007 Company profile)
Figures - International
Note: CHF means Swiss Franc

8
8
2008 – 9 month sales presentation
Source: - Roddy Child-Villiers, Head of Investor Relations

8
Figures - Pakistan
Sales:
2007 2006
Sales – net (Rupees in ‘000)
Own manufactured
Local 27,959,032 22,050,093
Export 1,902,751
1,355,324
29,861,783 23,405,417
Goods purchased for resale 593,669 656,591
Less:
Sales tax (588,870)
(700,703)
Trade discounts (1,631,189)
(1,330,347)
28,235,393 22,030,958

Profits
2007 2006
(Rupees in ‘000)
Profit before taxation 2,549,756
2,005,455
Taxation (744,544)
(642,165)
Profit after taxation 1,805,212
1,363,290

8
STRATEGIES FOR INTERNATIONAL BUSINESS
OPERATIONS

8
8
(SOURCE: NESTLÉ 2008 HALF-YEAR ROADSHOW – SEPTEMBER 2008, JAMES SINGH, CFO)

8
 PROBLEMS/OPPORTUNITIES
(Source: Yasir Malik, Operations Officer, Nestlé Pakistan Limited,
www.Nestlé.com)

Problems:
As such, there seems to be no problem that Nestlé is facing in almost
all zones it is operating in, including The Asia, Oceana and Australia
(AOA) region including Pakistan. Also, local competition, although high,
provides little in the way of taking away profits from Nestlé. There is constant
market growth and potential in the market for future growth.
Potential risks and uncertainties include such factors as general
economic conditions, foreign exchange fluctuations, competitive product and
pricing pressures and regulatory developments.

Growth in Key markets driven by:

 The strength of the Nestlé Brands
 Clear priorities for innovations
 Above average growth with top customers & Discounters

Opportunities:
 AOA: growth opportunity
 Performance is on track
 Potential for continued growth is promising
 Aligned organization and portfolio with a vision and a plan
 Strong management with local expertise

Direction for 2008

 Focus on growing business
 Focus on delivering return on investment
 Focus on profitable growth