Nestle Company in Malaysia - Case Study Example

University: A Report on the Nestlé Company in Malaysia Name: Date: EXECUTIVE SUMMARY Nestlé is a Swiss based food and beverage multinational company. By revenue figures, the company ranks as the largest and leading food company in the world (Sengupta, 2012, p.21). The report presented herein undertakes to evaluate the development and conduct a market analysis of Nestlé in the Malaysian market. As such, this report details the changing market dynamics of Nestlé in the Malaysian market with emphasis on the company’s profile, it’s market penetration, and the scope of the company’s future outlook. This report is especially beneficial in predicting the company’s future operations in the wider Malaysian market and offers fresh and valuable insights on market exploits in the larger Asian continent, guided by the fact that Malaysia has been on the fast track to becoming a major world economic player INTRODUCTION. With an annual Gross Domestic Product averaging at 6.6% increase annually, Malaysia has been one of the fastest developing countries in the Asian continent. The history of the Nestlé Company in the Malaysian market dates back to the year 1912 in where the company began in Penang (Zarnock, 2010, p.16). The company later moved to the country’s capital of Kuala Lampur and successfully set up its first factory in 1962 and established its head office in the current day Mitiara Damansara city. The Nestlé Company penetrated the Malaysian market so effectively that in 1989, it went public and was listed in the Kuala Lampur Securities Exchange (Caslione & Thomas, 2009, p.64). Since then, the company has made major milestones and opened seven other offices within Malaysia with a range of soft drinks products under the Nestlé label. These include; Milo, Kit-Kat, Maggi, Nesvita and Nescafe. MARKET DESCRIPTION. Since 2001, the Malaysian soft drinks industry has been growing steadily. Malaysia is generally a hot country and as such, the popularity of cold soft drinks has recorded an upward trend, with the most enthusiastic consumers being the young adults and children, a fact contributable to their active lifestyles. According to the report released in 2012 on Soft drinks in Malaysia, the soft drinks industry had achieved a 5.8% growth in the annual consumption between the years 2004 to 2010 (Huber & O'gorman, 2008, p.29). With the increased growth in the economy of Malaysia, it is anticipated that the growth in the soft drinks industry will rise by double digits. The Malaysian population is slightly over 28 million, with population demographics dictating that an estimated 60% of the population reside in the rural areas while 40% in urban centers (O’guinn et al., 2009, p.67). While Nestlé has been able to cement its brand in this rather conservative country, there has been a large market inclination to only consume soft drinks deemed to be of substantial health benefits. This is the most distinctive factor that has defined the unique Malaysian market. When Nestlé Company realized this, it made collaboration with the government on the implementation of the National Plan of Action for Nutrition Malaysia (Karataş et al., 2008 p.71). Moreover, Nestlé was able to capture a niche market, especially with the older generation due to their concerted efforts to manufacture and sell healthier products. This has created an outstanding differential advantage that has kept the company highly competitive over the last three decades. However, there is still a strong market presence in the soft drinks industry, with other competing brands such as The Coca Cola Company, PepsiCo, and F&N Sdn Bhd taking share in the market). F&N was a franchise of the Coca Cola Company until 2011, and accounts for 64% of the total market share in the Malaysian soft drinks market (May et al., 2007, p.102). Coca Cola has been able to gain ground successfully in Malaysia because, unlike Nestlé, their products are fairly priced, putting into consideration the low and middle class. Nestlé has however faced criticism over the pricing of their products, with consumers arguing the company only targets the affluent in the society. Nestlé has, however, been able to sell its products in the Malaysian market primarily through engaging national retailers such as the KK supermarket, Tesco, and Giant (Zinkin, 2010, p.42). These wide spread retail stores have contributed enormously towards bridging the gap between consumers and the soft drinks company. Based on the Soft drinks Report in Malaysia, it is anticipated that the slow but steady growth of the soft drinks industry is expected to continue in the same trend, with projections intimating that the growth could reach highs of 13% in the next 5 years, driven by the rising positive economic outlook, the stable political climate, and the increase in consumption of soft drinks across all age brackets (Caslione & Thomas, 2009, p.78). While there are still some regions that are not adequately accessible due to challenges in infrastructure, competing brands have engaged in massive campaign programs in a bid to appeal to the target customers. SWOT ANALYSIS STRENGTH. Nestlé is a very reputable brand in the Malaysian Market and also one of the strongest brands with the company’s brand valuation estimated to be $7 billion (Karataş et al., 2008 p.76) The company has well established and effective distribution channels and outlets throughout the Malaysian capital of Kuala Lumpar and other major cities. Nestlé has very alluring and innovative digital and social network and advertisement initiatives, a factor that has heightened their market presence in Malaysia. The fact that Nestle has a strong financial position makes it very easy for the company to compete favorably in any new market within Malaysia. WEAKNESS Nestlé soft drinks are still considered to be way expensive by a large number of Malaysians. Nestlé has been criticized for not getting involved in corporate Social Responsibility initiatives in Malaysia (Jacob, 2011, p.53). Selective advertising results to some of Nestlé’s products not being popular or known by the customers OPPORTUNITIES Focusing on its reputation of being a wellbeing and nutrition company and thus deliver health based products. The company can acquire startups and hence consolidate the fragmented market and increase market share With the growth in the International markets, Nestlé Malaysia has great opportunities for further expansion. The company can embark on extending credit sales service as a strategy to increase sales. THREATS Intense competition for Nestlé from other market players in the industry Uncertainty about future economic prospects in Malaysia is worrying as poor economy would definitely hurt sales. The SWOT analysis presented above provides an insightful tool for assessing the Nestlé Company’s current performance relative to the existing market situation in Malaysia. While the company has been making tremendous improvements, we deduce from the SWOT analysis that the company has a lot of untapped potential judging from the opportunities available to the company from this country. Moreover, it can be noted that the company is doing well in the Malaysian market as the number of strengths in the SWOT analysis is higher than that of the weaknesses. The threat on uncertain economic turns is an external one and as it is, companies ideally have little or no influence on external market factors. RECOMMENDATION. The analysis of Malaysia presents a very interesting study in light of market segmentation. While it might be easy to categorically define the segmentation of consumers in other countries by their geographical location, Malaysia consists of the East Malaysia and Peninsula Malaysia, and as such, this segmentation would fail to arrive at any conclusive findings (De Kluyver, 2010, p.45). However, for this purposes of this report, I embarked on the use of demographics to determine the target of my product. The target of my product is for the elderly and those in the middle ages in the community. The potential for this product is huge and it should attract over 90% of the elderly based on the business idea behind it. Most of Nestlé’s soft drink products that have been circulating in the Malaysian market have been mainly appealing to the younger generation. This has created a misconception of Nestlé as a drinking mainly for this market segment. The marketing mix of this new product will be as detailed below. a. Product – The product here shall be a fresh avocado packaged drink made by extracting fresh avocado juice with the only addition of preservatives and mild sweeteners. Obtaining Avocado fruits is possible since there are large avocado farms in Malaysia. Moreover, avocado is a loved fruit in Malaysia, therefore the product is sure to get a positive response. b. Place – As the targeted market for this product lies primarily with the elderly, this product is targeted in institutions for the elderly, in rural homes and also for the working class middle age who are in urban centers. c. Promotion – As I shall explain below, this product is to be promoted first through collaboration with the Malaysian Ministry of Health, and also through Nestlé’s digital and social network which shall be equally effective considering the high literacy levels of 92.4% and exposure to modern technology in Malaysia. d. Price - The price for this product will be way cheaper than that of other Nestlé products. Moreover, this product shall be distributed to the institutions for the elderly for free to the elderly people suffering from coronary heart disease. Coronary heart disease is the leading killer disease in Malaysia with statistics indicating that one in every four women die of heart disease. The figure is equally alarming for men. The aim of this product is to create awareness on the need for the Malaysian population to check on their health (Nestle, 2013, p.28). While it might seem alarming that two in every five Malaysians adults are either obese or overweight, the Ministry of health has done little to address the issue of living a healthy lifestyle. Avocado greatly reduces the occurrence of coronary heart disease and, therefore, in as much as this product will hit the shelves in retail stores, it is will greatly assist in reducing the number of deaths caused by CHD in Malaysia (Pitchford, 2012, p. 56). In conclusion, as can be seen in the Company’s SWOT analysis, this product should make use of the opportunity of Nestlé’s long held view by consumers as being a wellness and nutrition based company to produce a product that actually improves the lifestyle of the Malaysian people. Moreover, the product will also alleviate a weakness of the company which is the long held criticisms of the company’s lack of involvement in corporate social responsibility. By selling the drink at very low price and giving free distributions of this drink to the elderly suffering from heart diseases, the company shall undoubtedly have played in being a socially responsible company to the Malaysian people. REFERENCES. CASLIONE, J. A., & THOMAS, A. R. (2009). Growing your business in emerging markets: promise and perils. Westport, CT, Quorum. DE KLUYVER, C. A. (2010). Fundamentals of global strategy a business model approach. [New York, N.Y.] (222 East 46th Street, New York, NY 10017), Business Expert Press. HUBER, M., & O'GORMAN, S. (2008). From customer retention to a holistic stakeholder management system living a vision. Berlin, Springer.  JACOB, N. (2011). Intercultural management. London, Kogan Page Stylus. KARATAŞ-ÖZKAN, M., NICOLOPOULOU, K., & ÖZBILGIN, M. 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(2010). Challenges in implementing corporate governance whose business is it anyway? Singapore, Wiley Read More