CRAFTING CORPORATE STRATEGY

FARIZ + RADZLAN + DEVA MALAR + AZZIN + ZAFIRAH + EZZI

 Background: Nestlé
•  Established in Switzerland
•  Founded in 1866 by Henri Nestlé, now with presence in 191 countries
around the world
•  Largest food company in the world by revenue
•  Over 8,000 brands across markets, including coffee, breakfast cereals,
soups and sauces, refrigerated foods, and pet food
•  Started in Malaysia in 1912
•  Eight manufacturing facilities in Malaysia producing 500 Halal products
•  Listed on Bursa Malaysia since 1989
•  Employs almost 6000 staff, mostly Malaysian
[1] Getting to know Nestlé
INTERNAL &
EXTERNAL
FACTORS
EVALUATION
 Internal Factor Evaluation (IFE)
STRENGTH WEIGHTAGE RATING WEIGHTED SCORE
Loyalty and trust from global customers 25% 3 0.75
Excellent management team, workforce and innovative R&D unit 20% 3 0.60
Established worldwide distribution line 16% 4 0.64
Continuosly adapting new technology and introducing new products 10% 4 0.40
Nestle brand is well-known for quality and reputation 9% 4 0.36

WEAKNESSES
Less priority in after-sales customer services 6% 1 0.06
Complex supply chain management 6% 2 0.12
High distribution costs 4% 2 0.08
Less consumer research in few areas 2% 1 0.02
Weak promotional activities through social media 2% 1 0.02
1 = major weakness; 2 = minor weakness
100% 3.05
3 = minor strength; 4 = major strength
 External Factor Evaluation (EFE)
OPPORTUNITIES WEIGHTAGE RATING WEIGHTED SCORE

Expansion of product portfolio by introducing more brands 22% 4 0.88

Potential to expand further into other Southeast Asean countries 20% 4 0.80

Few strong competitors in the Malaysian market 18% 4 0.72

Increase in consumers’ purchasing power 10% 3 0.30

Ability to cater to changing consumers’ preference and taste 10% 3 0.30

THREATS

Changing consumer trends 6% 2 0.12

International marketing standards 6% 1 0.06

Change in government regulations including taxation 4% 2 0.08

Economic slowdown can reduce demand 2% 1 0.02

Strong advertisement by major competitors 2% 1 0.02

1 = major weakness; 2 = minor weakness
3 = minor strength; 4 = major strength
100% 3.30
SPACE AND
ANSOFF
MATRICES

[2] Evaluating the best

strategy moving forward
Strategic Position and Action Evaluation Matrix (SPACE)
Internal dimension
Financial Position Competitive Position
+5 (Best) to +1 (Worst) -5 (Worst) to -1 (Best)
Profitability 5 Market share -2
Financial leverage 3 Quality of products -1
Earnings per share 3 Customer preference -2
Cash flows 4 Support from government -4
FX risk management 2 Technological know-how -1
Average 3.4 Average -2
External dimension
Environmental Stability Industry Position
-5 (Worst) to -1 (Best) +5 (Best) to +1 (Worst)
Technological changes -3 Utilisation of resources 4
Inflation -2 Utilisation of capacity 5
Demand elasticity -2 Financial stability 4
Barriers to entry into market -3 Profit potential 2
Fluctuation of exchange rate -2 Growth potential 3
Average -2.4 Average 3.6
 SPACE MATRIX
FP
Conservative Aggressive

CP IP
Recommended strategy
- New acquisitions
Competitive - Increase market share
Defensive
- Focus on competitive products
ES
 ANSOFF MATRIX
Products and services
Existing New
Existing
Product
Market penetration
development
Market

Market development Diversification

New
[3] Identification of root causes
ISHIKAWA
FISHBONE &
PARETO ANALYSIS
 Children
Insufficient
Recommended
by product
Too much focus
ISHIKAWA
expertise developer

2H 2018
on confectionery
business FISHBONE
CEO’s Spent too much
Seniors Increase of
Who aspiration When demand for
How on marketing
new Kit Kat in
layer cake 2017
R&D Unit
Product Insufficient
Family development
Consultant’s Limited funds for Lack of
tabled to CEO in production major
review 2016 diversification
Teenage Aug 2017 capacity expansion
For S.E.A and
Market introduction of
new products in
SEA recent years to
Market Increasing Have never
Increase of F&B business explored sustain business
demand for number of
down by 3% in production growth and
Production & layer cake competitors
SEA (Nelson) of cakes market share
Distribution
In Malaysia Potentially
outside Local People in
Declining
SEA S.E.A Preference
market share Layer cake
Unexplored
Where product Why Culture
What
Not enough
allocation for Increasing Variety of Flavor
R&D Opportunity to acquire number of
Apollo as EPF has just Opportunity competitors Not enough
Capable to leverage on
innovative R&D to divested its majority to generate allocation for
improve the business shares in the co more profit R&D
 PARETO ANALYSIS
Adjusted Cumulative
No Potential Root Causes Frequency Weightage Percentage
Frequency Percentage
1. High R& D cost 4 22.5 90 28.71 28.71

2. Limited capacity for production 4 17.5 70 22.33 51.04

3. Demand from customer for layer cake 3 13.5 40.5 12.92 63.96

4. Increasing number of competitors 3 10.5 31.5 10.05 74.00

5. Insufficient expertise 3 9.5 28.5 9.09 83.09

6. Declining market share 2 8.5 17 5.42 88.52

7. Time constraint 2 11.5 23 7.34 95.85

8. Untapped Market Segmentation 2 6.5 13 4.15 100.00

100 313.5 100%

[4] Problem solving and evaluating
the potential acquisition of Apollo
Food Industries using

McKinsey 7S
Framework
 McKinsey 7S Framework (1)
Issues Risk
Alignment
Company (Current Situation / (What state they want to be Compliance
(How to get there)

As-Is) when they merge)
Hard Elements

1.  Strategy
-  Nestle Differentiation Strategy Increase the company's Develop a set of Actions to strengthen
market share and strengthen resources and market standing and
-  Apollo Cost Leadership Strategy the growth capabilities suited to the competitiveness
current strategy -
Acquisition
2.  Structure
- Nestle Global Geographic Divisional An organizational structure Align the structure with Establish lines of
Structure matched the equirements of a the strategy - Divisional authority and
successful strategy execution Structure reporting relationship
- Apollo Functional Structure
3. Systems
- Nestle Organic System Formal and informal Adopt best practices Cut layers of
procedures that governs and business management and
- Apollo Mechanistic System everyday activity processes decentralized decision
making
 McKinsey 7S Framework (2)
Issues Risk

Alignment
Company (Current Situation / (What state they want to be Compliance
(How to get there)
As-Is) when they merge)
Soft Elements

4. Shared Values
- Nestle Trust, Respect,Involvement,
Pride and Commitment (TRIPC)
and Passionate Pursuit of
Excellence
The norms and standards Instill corporate Effective set of vales
that guide employee behavior culture that are incorporated and
and company actions. promotes good promoted to guide
strategy execution employee behavior

- Apollo Ethical, Professional and

Socially responsible manner
5. Skills
- Nestle Leadership & Personal Capabilities and Employees are Training and
Effectiveness Programme competencies that exist equiped with development to
within the company necessary skills to maintain knowledge-
- Apollo Mandatory Accreditation achieve goals and based and skill
Programme objectives based capabilities.
 McKinsey 7S Framework (3)
Issues Risk
Alignment
Company (Current Situation / (What state they want to be Compliance
(How to get there)
As-Is) when they merge)
Soft Elements

6. Style
- Nestle Democratic Leadeship Style Leadership approach of top Exercise strong Working on new
management and the leadership to propel ideas, sharing values
- Apollo Task Oriented Leadership Style company's overall operating strategy execution and bringing
procedures forward innovative style of
management
7. Staff
- Nestle Staffs are valuable assets, Capable and promising Staff the Recruiting and
prioritise overall wellbeing and employees in order to sustain organization with retaining talented
development with the organization's right people for employees
corporate policies, shared executing the
- Apollo Recognise employees as as values and practices strategy
important asset and secure
welfare
[5] Achieving vision and
mission through

STRATEGY MAP
STRATEGY MAP
HAVE A BREAK,
HAVE A KIT KAT