BBPM2103

OUM BUSINESS SCHOOL

JANUARY / 2017

BBPM2103

MARKETING MANAGEMENT I

MATRICULATION NO: 900703035124001

IDENTITY CARD NO. : 900703035124
TELEPHONE NO. : 016-4474291
E-MAIL : ashrul.red@gmail.com
LEARNING CENTRE : TAWAU LEARNING CENTRE

TABLE OF CONTENTS

Page

Cover Page -
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Table of Contents -
1.0 Introduction 1-2

2.0 New Economy Drivers 3-6

2.1 Industry Convergence

2.2 Digitalization and Connectivity
2.3 Disintermediation and Reintermediation

2.4 Customization and Customerization

3.0 The Economy Drivers That Affected Nestl 7

4.0 Recommendation On How To Manage The 8

New Economy Drivers in Nestl

5.0 Conclusions 9-10

References 11-12

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1.0 Introduction

Almost all of the Malaysian whose age is more than half of a century certainly has
their own personal experience with Nestl product as early as their childhood. Nestl is
one of the most popular food products in Malaysia until now. Food and drink plays and
increasingly important role in peoples live, not only for the social pleasure and enjoyment
of eating the food together but more in the terms of personal nutrition and health.
Nestl is a multinational food and drinks manufacturer company which founded and
headquartered in Vevey, Vaud, Switzerland. Nestl was founded from the merger in 1905
between the Anglo-Swiss Milk Company, which is a milk company founded by the Page
brother in Cham, Switzerland in 1866 and Farine Lactee Henri Nestl Company which
founded in 1867 by Henri Nestl which produce food products for babies. Most of the
Nestl brand is known around the world, then making it a global market leader in the
production of a number of products inclusive of chocolate, milk, pet food, creamer,
bottled water, food seasoning, and coffee.
Meanwhile, Nestl started its business in Malaysia in 1912 as the Anglo-Swiss
Condensed Milk Company in Penang and later expanding to Kuala Lumpur in 1939.
Nestl Malaysias started their business with their first factory in Petaling Jaya in 1962,
since then they are currently having 7 factories producing the products and currently
operates from the headquarters in Mutiara Damansara in Petaling Jaya. Nestl Malaysia
has been listed on the KLSE now known as Bursa Malaysia Berhad on 13 December
1989. Today, the company has more than 5000 people and produces and markets more
than 300 halal products in Malaysia. Among the product brand that produces by Nestl
are Nescafe, Nespray, Kitkat, and Milo is all time favorite for the Malaysians.
As a responsible corporate citizen, Nestl Malaysia import, manufacture, and
distribute only the products that have been certified halal by Jabatan Kemajuan Islam
Malaysia (JAKIM) and the Islamic authorities who recognized the connection. Halal
status certified for all Nestl products assured the customers that the products distributed,
produced, and imported by Nestl are scrutinized under a very strict control in terms of
cleanliness and hygiene in line with the Islamic faith. The halal logo is included in all the
packaging and indicates that the product was prepared according to Islamic requirements

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and adheres to strict hygiene, quality and safety are very appreciated by the Muslim
Malaysian users especially.
Nestl in Malaysia strives to offer products that are related to the ever-changing
lifestyles and consumer needs. Nestl invests more than RM6 billion annually on their
R&D and has taken continuous innovation and renovation to ensure that its products meet
the requirements. Consumers Nestl Research Center in Lausanne, Switzerland is
working with the scientists, specialists and technical support personnel who served in the
Nestls 27 R&D centers around the world.

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2.0 New Economy Drivers

Media frequently use the new economy terms to define the changes that taken place
in the business world since the implementation of the internet technologies. The new
internet technology has been applied to a far-reaching range of issues and circumstance,
the most astonishingly are the rise and fall of internet startup and high tech companies.
The fundamental idea behind the new economy drivers was that the internet and
computer have basically changed the conventional way of doing business. Investors and
analyst are focused on the stock price evaluation and technology acceptance rather than
long-term business plan and the firms incomes when theyre evaluating companies and
businesses.
The new economy has influence the companies to be involved in biotech industries
and the internet and the heave of the new technologies have spread out to other industries
as well. Effective marketing should not only convey the delivery methodology, price and
product but more significantly it is the tool use to communicate the value the company
creates for their partners, society and customers.

2.1 Industry Convergence

Industry convergence based on the recombination of existing technologies and

associated knowledge basis with the multifarious pool of industry players. According to
Lee, Olson, & Trini 2010; Greenstein & Khanna, 1997; Prescott, Karim, & Hsu, 2014,
Industry convergence alter the basis of competition by dissolving the boundaries between
two previously separated industries. The industry convergence frequently disturbs the
conventional industry foundations and possibly challenges the competitive advantages of
established companies, while giving the new opportunities for both various start-ups and
competitors. Industry convergence has become progressively prevalent and becoming an
empirical phenomenon.

The examples including of the industries like forest and plastics, telecom and
entertainment, servers and enterprise software, mobile handset and digital cameras,
consumer electronic and watches, chemicals and crop seeds, and food and pharmaceutical
industries. There is research which shows that more that 50% of the industries players

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either undergone or currently in the process of convergence. Industry convergence has

been a phenomenon which is relatively little studied and remains poorly understood and
misjudged. Industry convergence has become the basis of all industries. Its on the brink
of transforming the industries players as we know now and changing the way we work,
live, play, do business, and even think.

2.2 Digitalization and Connectivity

The laymen term meaning of digitalization means the conversion of analogue

information into digital information. Digitalization gives a clear idea of technology and
development dependent world. Digitalization also means computerization of jobs and
systems for better accessibility and ease. According to Business Dictionary, digitalization
is the amalgamation of digital technologies into everyday life by digitisation of
everything that can be digitised and the process of converting information into digital
format.
For example, the new Apple watch is a great example of the digitalization, as they
took a normal watch and introduce technology with internet capabilities, messaging and
phone capabilities. As digitalization capabilities expand, every aspect of life is captured
and stored in digital form and we are moving closer towards the networked
interconnection of everyday objects.
A new world of possibilities unfolds when the information becomes digitised and
communicated through the digital network. A Huge amount of information can be
compressed and squeeze and transmitted at the speed of light. The information can be
stored and accessible from everywhere in the world, which providing us with the instant
access to all the information needed. The new digital appliances created which will fit in
the pocket and will impact a lot of aspects of personal and business life. It is foreseen that
by 2020, the entire generation, which is generation C (for connected), will have grown in
a primarily digital world. The internet, computers, social networking, mobile phones and
texting will the second nature to this group. Their familiarity with the desire to remain in
contact with their family, reliance on mobile communications and technology will
transform on how they work and what they eat.

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Overall, digitisation means conversion of non-digital material to digital forms.

Digitisation is needed for and easy storage and retrieval. The phone books and print
advertisement are now nearly obsolete due to the digitisation of the business world.
Consumers now use the social networking platform and search engines such as Google to
search and locate for any product and services that they need. Product reviews and word
of mouth are made via social media sites such as Instagram, Twitter or Facebook. In order
to survive and thrive in todays market, businesses and firms have to use the social media
and online networking to approach and capture their customers interest.

2.3 Disintermediation and Reintermediation

Disintermediation can be defined as cutting out the middleman in e-commerce

transactions. Instead of going through the conventional distribution channels, which have
some type of mediators such as wholesaler, broker, distributor or agent, companies now
deal with their customer directly online via the internet. For examples, General Motor
Corp. bypassing their dealership to sell their cars directly to the consumers and the
insurance company is skipping their agents to sell products and services.
Disintermediation resulted in high market transparency in which the customer are aware
of the supply prices directly from the manufacturers. The research done by the Peppers
and Rogers Group of Stamford predicted that the number of customer direct sales channel
triple between 1998 and 2010 from 11 percent to 33 percent respectively.
A lot of companies now sells their product and services directly to the businesses
and consumers online, cutting out the middleman or intermediaries. Unfortunately, the
disintermediation did not turn out as it has been predicted to. Predictions by the Gartner
Grop Inc. is that more than half of the companies that maintaining or building their direct
to customer websites will the abandon them in next three years. And it is predicted that
the companies will start to rely on the new web-based intermediaries which bring sellers
and buyers together in new ways.
Meanwhile, Reintermediation refers to the use of the internet to reassemble seller,
buyers and their partners in the traditional supply chain the new way. Reintermediation is
the reintroduction of an intermediary between the producer and end users. This applies
when the disintermediation had occurred first in the business. Reintermediation happened

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when there is too many issues associated with the direct consumers approaches.
Customer services issues, high shipping cost and confronting the anger of the
disintermediation retailer is one of the main reasons for the businesses or company to
choose Reintermediation approaches.
For example, brands like Nike, Adidas and Puma have their own flagship stores
and online store to reach to their customer directly without going through the middleman,
but then now they have work together with the other online shopping application such as
Zalora to promote and sells their products, as it is very convenience to the customer to
purchase the products that they needed only in one place without the needs to register in
few websites.

2.4 Customization and Customerization

Customization is the process when a business or company customises their

services or products by using the feedback they obtained from their customers. The
company will then uses the advanced form of customization when they can tailor their
services, communication and products based on an individual specific customer
preference. Customization normally practised by the companies whose product is unique
or expensive, such as aeroplane manufacturer or home builders because this product can
be designed to suit the special request for each individual customer. The company or
business adapts its marketing program and product with a high degree of speciality.
Customised marketing is considered to be the ultimate form of their target marketing to
promote their products.
The differences between customization and customization are that in customization,
the consumers are involved in the designing process and become both producer and
consumer at the same time. For example, florists where you can select the flowers that
you want for a flower bouquet arrangement. On the other hand, in customization, the
producer produces the products based on the customers individual requirements.
Customization, on the other hand, means that its a combination of marketing and
operational customization. The company or businesses have to be able to work together
with each of their customer personally in terms of services, customer relation and
message.

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3.0 The Economy Drivers That Affected Nestl

Digitalization and connectivity has becoming the basic of all industries sectors. The
new economy has already begin to transform the way education is delivered, the way
scientific research conducted, and the way in transform the arts. Nestl ambition is to be
the industry leaders in digital and ecommerce which one of the steps taken by them to
grow with the new economy. Nestl is confident to excel in consumer communication,
digitally-powered innovation and driving to conversion on ecommerce.
For example, Nestl started their new campaign that dramatically reshaping brand
perception which then convinced women that Nestl understands whats important to
them, which drive positive sentiment and conversations. Theyre also inspiring women to
make a difference through cooking with Maggi for the Middle East customer, Maggi act
as the catalyst which makes a difference in everyday cooking. Nestl has also improved
their websites which can be view by using mobile phone, the website has been won the
Worlds Best Corporate Websites by the Bowen Craggs & Co. Index of Online
Excellence 2016.
Based on the report by Sheryl Sandberg, COO, Facebook, Nestl take their TV
advertisement for their Natural Bliss Coffee Creamer and then edited it for the mobile
feed. Nestl then showed both of the original TV advertisement and mobile advertisement
on Facebook. The mobile feed advertisement has a stronger increase in advertisement
recall and increase in the product awareness.
Nestl external innovation focus in digital marketing is increasing; Nestl is
offering the nutrition and food solution which offer the consumers new digital and
ecommerce enabled services, Nestl also enhancing their brand experiences by
leveraging connected devices to improve the quality of life and also having a new direct
to consumers model. Nestl helps the parents to raise healthy and active kids by
introducing Milo program. They have launches new Milo mobile application and
wearable devices which can be use as the nutritional advice, coaching and monitoring.
The Milo program is a dynamic content platform which involve direct consumer
engagement and skills acquisition programs which help to delivering nutrition, sports and
success stories.

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4.0 Recommendation On How To Manage The New Economy Drivers In Nestl

Nestl have to utilise the digital channels to create a seamless and consistent
engagement with their customers. Nestl should come out with an innovative move such
as taking the elements of all the channels available which their customers value the most
and combine them as one to deliver the most priceless experience overall to their
customers. Nestl should be focusing on the way to deliver a meaningful and seamless
cross-channel engagement programs for their stakeholders benefits and convenient. The
example of the technology that Nestl can use to improve their brands loyalty is by using
QR coding which allow the customers to scan a physical product or the advertisement to
access for further information on the advertisement, product details and promotion on
their mobile.
Other than that, Nestl should use the digital technology to support and boost their
traditional business model. They can use the digital and automated service to compete
with and extend their existing manual services by making a better use of the self-service
channel and customer services through social media such as Facebook, Twitter and
Instagram. This will definitely helps Nestl to reduce their operating cost to serve and
reduce time to revenue as well. Nestl also should transform their existing business
model digitally by offering their existing services though a new digital channel, this
without doubt will be a very convenient way for the customer to purchase the products.
Furthermore, it also will increase the business revenue stream and reduced the
company cost to serve. In short, Nestl should take a proactive measure to stay in the
business and cope with the digitalization which it seems will never stop evolving.

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4.0 Conclusions

Nowadays, the companies and businesses need new ideas on ways to operate and
succeed in the new economy. The new economy which surfaced in the last few decades
calls for a new business and marketing practice. Even though its a new economy, it is
still encompasses few old economy traits. The companies and marketers have to
understand what the meaning of the new economy is and the steps that should be taken to
ensure their businesses and company sustainable in the new economy. There are four
main drivers that is shaping the new economy which is disintermediation and rein-
termediation, industrial convergence, digitalization and connectivity, and customization
and customerization. Each of the drivers plays important roles in shaping the new
economy and moving the businesses forward.
Industry convergence is a situation where two separate industry have come together
to produce a product or services to the customers. For example, Nestl are using
technology to support their product marketing strategies to stay in the driving seat of food
business. Customization and customerization ensures that all customers needs are
fulfilled. Customization is where the producer uses the feedback from their customers to
customize their product and services to suits the customer needs. While customerization
when the customer and the company working together in the process of producing the
product.
Digitalization and connectivity plays a very important role in the business nowadays.
Everything is digitalise, long gone the use of the old economy of doing business. The
consumers now spending most of their time online, they do everything using the
technology, from study to shopping. It is because digitalization and connectivity offers
the customer the convenient way of living. And lastly disintermediation means the
removal of middleman in between companies and customers. Companies now can
approach their customers faster by using the digital technology and remove the agents or
middlemen.
Reintermediation in the other hand happens when there is reintroduction of an
intermediary between the producer and customer such as a web-based intermediary. A lot
of company nowadays are either thinking about or moving ahead with the digital
transformation ideas. A few company sign off their marketing strategies without

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incorporating the new business channel which is the social media despite having their
own company or business website. Undoubtedly, social media nowadays has becoming a
critical component of any digital marketing strategy, but then a holistic approach to the
digital shift should go further than it is now.
Certainly digital is changing the world that we know, there are a lot of potential
revolutions waiting to be discovered. Nestl should be able to explore what the digital
advances means to their business and their stakeholders. The digitalization of everything
is a huge step change and even greater than the adoption and innovation of the internet,
the reason being because of the digitalization scale and its pace of change.

(2952 words)

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