A
GLOBAL / COUNTRY STUDY AND REPORT
ON
“Switzerland and Business Opportunities for Gujarat’s / India’s businesses”
Submitted to Gujarat Technological University
IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ASMINISTRATION
UNDER THE GUIDANCE OF
Dr. Sarika Srivastava Assistant Professor
Submitted by
Global Institute of Management(794), Gandhinagar MBA PROGRAMME Affiliated to Gujarat Technological University Ahmedabad Batch: 2010-12
PART – I: ECONOMIC OVERVIEW OF SWITZERLAND
INTRODUCTION
Switzerland was founded more than 700 years ago. It is also known as "Confoederatio Helvetica", therefore the abbreviation CH. "Confoederatio" stands for "confederation", "Helvetica" derives from the Latin word "Helvetier", the name of the people who lived in the area which became later Switzerland. The federal constitution defines Switzerland as a federal state composed of 26 cantons (until 1976: 25 cantons) with far reaching autonomy. The people living in Switzerland are friendly and hospitable though somewhat reserved at times. They share an independent spirit and a respect for tradition. Switzerland is probably really the "safest place on the planet", considering both technical safety standards and security aspects (low rate of criminality, cautiousness of the population).
DEMOGRAPHIC PROFILE OF SWITZERLAND The population is mostly urban: 74% of the population lives in urban areas; in 1930 the urban population was only 36%. About half of the urban population lives in the agglomerations of the five major cities of Zurich, Basel, Geneva, Bern and Lausanne. Ageing society: During the course of the 20th century, the proportion of elderly people increased, while that of young people (under age 20) and people of working age (aged 20 – 64) declined. The ageing of the population will continue. The proportion of persons aged 65 and over is expected to rise from 17% (2009) to 28% in 2060. Foreign population: Foreigners account for 22% of the permanent resident population. More than half of the residents without a Swiss passport (52%) have been living in Switzerland for more than 15 years or were born here. Changing living patterns: Increasingly fewer people live in a family household with children. In 1970, it was 65%; today it is 48%. More and more people live as couples without children (1970: 18%; 2009: 27%).
DEMOGRAPHIC PROFILE TABLE NO. 1 Population:7,639,961 Ethnic Groups: German 65%, French 18%, Italian 10%, Romansch 1%, other 6% Age Structure: 0-14 years: 15.2%,15-64 years: 67.8%,65 years and over: 17% Median Age: Total 41.7 Years, Males 40.6 Years, Females 42.8 Years Birth Rate: 9.53 births/1,000 , Country comparison to the world: 202 Death Rate: 8.72 deaths/1,000 population (July 2011 est.) Urbanization Ratio:- Urban population: 74%, Rate of urbanization: 0.5% Sex Ratio:- At birth: 1.054 male(s)/female Total Fertility: 1.46 children born/woman Nationality: Swiss Religion: Roman Catholic 41.8%, Protestant 35.3%, Muslim 4.3%, Orthodox 1.8%, other Christian 0.4%, other 1%, unspecified 4.3%, none 11.1% Language: German, French, Italian, and Romansch are all national and official languages. Literacy Rate: Total population: 99% Male: 99%,Female: 99% SOURCE: https://www.cia.gov/library/publications/the-world-factbook/geos/sz.html
ECONOMIC OVERVIEW OF THE COUNTRY Switzerland is a peaceful, prosperous, and modern market economy with low unemployment, a highly skilled labor force, and a per capita GDP among the highest in the world. Switzerland's economy benefits from a highly developed service sector, led by financial services, and a manufacturing industry that specializes in high-technology, knowledge-based production. The government has renegotiated its double taxation agreements with numerous countries, including the US, to incorporate the OECD standard, and it is working with Germany and the UK to resolve outstanding issues, particularly the possibility of imposing taxes on bank deposits held by foreigners.
ECONOMIC FORECASTS FOR SWITZERLAND TABLE NO. 2 Real Year on year change in % (at previous year prices) 2009 2010 2011 2012 GDP, Real -1.9 2.7 1.9 2.0 Consumer Spending 1.4 1.7 1.3 1.5 Public Spending 3.3 0.8 1.8 1.2 Capital spending on machinery and equip. -10.8 10.9 4.4 3.5 Construction investment 3.0 3.5 3.5 1.5 Exports (Goods & Ser.) -8.6 8.4 3.5 5.0 Imports (Goods & Ser.) -5.5 7.3 3.5 4.5 Unemployment Rate (%) 3.7 3.9 3.0 2.6 Inflation Rate -0.5 0.7 0.3 1.0 SOURCE: Credit Suisse Economic Research, State Secretariat for Economic Affairs, Swiss Federal Statistical Office
Switzerland Stock Market SWITZERLAND STOCK MARKET Switzerland's main stock market GRAPH NO. 1 index, the SMI declined 880 points or 13.46 percent during the last 12 months. From 1988 until 2011 the SMI market value averaged 5021.55 points reaching an historical high of 9531.46 points in June of 2007 and a record low of 1287.60 points in
January of 1991. Source: http://www.tradingeconomics.com/switzerland/stock- market
Switzerland GDP Growth Rate
Historically, from 1980 until 2011, Switzerland's average quarterly GDP Growth was 0.40 percent reaching an historical high of 2.10 percent in June of SWITZERLAND GDP GROWTH RATE 1989 and a record low of -1.10 GRAPH NO. 2 percent in December of 2008. Switzerland's economy has low unemployment, a highly skilled labor force, and a per capita GDP among the highest in the world. Its policy of long-term monetary security and bank secrecy has made Switzerland a safe haven for investors, creating an economy that is increasingly dependent on a SOURCE: steady tide of foreign investment. http://www.tradingeconomics.com/switzerland/gdp-growth
Switzerland Inflation Rate The inflation rate in Switzerland was last reported at -0.1 percent in October of 2011. From 1971 until 2010, the average inflation rate in Switzerland was 79.12 percent reaching an historical high of 4617.84 percent in June of 1994 and a record low of -0.10 percent in November of 1986.
Economy at a Glance
ECONOMY AT A GLANCE TABLE NO. 3 GDP (2010) : $475.8 billion (495.8 billion Swiss francs [CHF]). Government Exp. : 38.3% (federal, cantonal, and local) (in GDP%, 2008) Annual growth rate : 2.6%.(2010) Unemployment : 3.4%.(March 2011) Per capita income : $66,367 (2010 est.) Avg. inflation rate : 0.7% (2010); 1.1% (2011 est.). Natural resources : Water power, timber, salt. Agriculture (1% of : Products--dairy (21%), livestock (25%), grains (4%), fruit GDP) and wine (10%), and vegetables (14%). Arable land (1999)--26%. Industry (est. 29% of : Types--machinery, chemicals, pharmaceuticals, time GDP): pieces, precision instruments, textiles and clothing, pigment, transportation equipment. Services : 70% of GDP Trade: : Merchandise exports (2010)--$195 billion (official exchange rate): food, beverages, and tobacco (4%; +8%); metal and chemical industries (44%; +10%); precision instruments (15%; +18%); watches (8%; +27%); machinery and electronics (22%; +12%); clothing (1.5%; -3%). Merchandise imports (2010)--$176 billion (official exchange rate): consumer goods (38%); equipment (19%); energy (7.1%); raw materials (28%). Major suppliers--EU, U.S., Canada, CIS, South Africa. Major markets : EU, United States, Canada, CIS, India, Brazil, Japan. Major suppliers : EU, U.S., Canada, CIS, South Africa. SOURCE: http://www.state.gov/r/pa/ei/bgn/3431.htm
OVERVIEW OF INDUSTRIES TRADE AND COMMERCE
The World Economic Forum
Switzerland is the home of the World Economic Forum (WEF), an international organization which brings together world leaders from the realms of politics and business, to discuss and shape future policies. The WEF, which has its headquarters in Geneva, was founded in 1971 by a German-born professor of business, Klaus Schwab.
Switzerland Exports
Switzerland exports were SWITZERLAND EXPORTS worth 16.6 Billion CHF in GRAPH NO. 3 September of 2011. Trade has been the key to prosperity in Switzerland. Exports accounts for 50% of its GDP. Swiss main exports are: medicinal and pharmaceutical products, watches and clocks, machinery for special industry and metalworking machinery and tools. Swiss main export SOURCE: http://www.tradingeconomics.com/switzerland/exports partners are Germany, United States, Italy and France.
Switzerland Imports
Switzerland imports were worth SWITZERLAND IMPORTS 14.8 Billion CHF in September of GRAPH NO. 4 2011. Switzerland imports mostly machinery, chemicals, vehicles, metals; agricultural products and textiles. Its main import partners are: European Union countries (Germany, Italy, France, Netherlands, and Austria) and United States.
SOURCE:
http://www.tradingeconomics.com/switzerland/imports
Switzerland Consumer Confidence In Switzerland, the consumer confidence survey is conducted every year, in the months of January, April, July and October. 1,100 households are questioned for State Secretariat for Economic Affairs regarding their subjective evaluation of the economic situation, financial situation of the household in question, inflation, job security etc. Generally consumer confidence is high when the unemployment rate is low and GDP growth is high.
Switzerland Business Confidence In Switzerland, the KOF Swiss Economic Institute economic barometer measures the level of optimism that people who run companies have about the performance of the economy and how they feel about their organizations’ prospects. The most important module included in KOF economic barometer is GDP, which excludes construction and banking sectors and accounts for more than 90% of Swiss GDP.
OVERVIEW OF DIFFERENT ECONOMIC SECTORS OF SELECTED COUNTRY
About two third of the area of Switzerland is covered with forests, lakes and mountains. Since Switzerland has no mineral resources, it must import, process and resell them as products. "Services" are the most important part of the economy. This includes banking, assurances and tourism.
Farming is also an important part of the economy. But the production of the Swiss farmers does not fulfill the needs of all people, so Switzerland must rely on imported goods from other countries.
The economy in Switzerland is divided into three sectors: 1. Landwirtschaft ("agriculture"): Less than 10% of the population is employed in the "agriculture", also considered the primary sector. This sector is strongly supported by the government.
2. Industrie ("industry"): About 40% of the population are employed in the "industry, trade and handicraft", also SWITZERLAND’S GDP BY SECTOR considered the secondary sector. GRAPH NO. 5 This sector includes the "machine and metal industry", "watch industry" and the ”textile industry". All of them export much of their products to foreign countries and suffer a lot because of the expensive Swiss SOURCE: http://www.bern- Franc. The fact that Switzerland cci.ch/de/export/pdfs/Directory_20of_20Swiss_20Co does not belong to the European mpanies_20in_20India_202010.pdf Union additionally slows down the Swiss exports.
3. Dienstleistungen ("services"): More than 50% of the population is employed in the "services", also considered the tertiary sector. This sector includes banking, assurances, tourism and so on. Banking is one of the most important businesses in Switzerland. Many of the banks have started to use the Internet for business purposes.
SECTOR PERFORMANCE GRAPH NO. 6
SOURCE: Credit Issue Economic Research, Swiss Issues Industries, “Sector Handbook 2011: Structures and Prospects” available on https://www.credit- suisse.com/ch/unternehmen/kmugrossunternehmen/doc/branchenhandbuch_en.pdf
This chart represents a snapshot of the relative positions of the different sectors in a stylized economic cycle, with the three curves representing differing levels of cyclicality. The whole is viewed in terms of these levels, i.e. a downward movement indicates negative growth (and vice versa). The turning points of the curves thus mark the points of maximum growth (negative or positive). Over time, the sectors move from left to right. However, it must be borne in mind that not all sectors move at the same speed. CORE SECTORS
Food Industry Despite agricultural problems, Switzerland has also developed a major food industry, relying in part on the country's capacity for milk production. Condensed milk was first developed in Switzerland, as were two other important processed food products: chocolate and baby food. The largest company is Nestlé, the biggest food company in the world. It has around 278,000 employees, about 97% of them outside Switzerland (2009).
Mechanical and electrical engineering The mechanical and electrical engineering industries – known collectively in German as the MEM industries – are one of the major branches of the Swiss economy.
Pharmaceuticals Switzerland is among the world's leading producers of chemicals and pharmaceuticals. The chemical industry focuses on dye-stuffs, perfume essences and food flavorings. The largest pharmaceutical companies are Roche and Novartis. The chemical and pharmaceutical industries export 85% of their output.
Watches Switzerland is one of the world's largest watch manufacturers. In terms of value, it is responsible for about half of all world production. But along with its luxury output, Switzerland is also known for the world's best selling plastic watch: the Swatch. The watch industry exports 95% of its products, according to the export promotion body, OSEC.
Banking Banks and financial institutions play a key role in the Swiss economy. The Swiss franc is among the world’s most stable currencies. The Swiss capital market is one of the most important in the world, and the two major Swiss banks – UBS and Credit Suisse – are major forces in the global financial market. In 2009, the Swiss financial sector employed 195,000 people, or 5.8% of the entire Swiss workforce.
Tourism Figures released by the United World Tourism Organization ranked Switzerland 19th among world destinations for international tourism earnings in 2008, and 27th for the number of international visitors, which was estimated at 8.4 million.
Insurance The Swiss spend a lot of money on insurance. Some is compulsory - like state pension contributions, pension fund and unemployment insurance, which are deducted at source from salaries, and health insurance which every resident must arrange privately. The Swiss are among the world leaders in expenditure on private insurance. Despite this, insurance companies earn half their money abroad. Switzerland is the leading insurance exporter in Europe.
BUSINESS AND TRADE AT INTERNATIONAL LEVEL Switzerland has virtually no mineral resources and a restricted surface area. It depends for its wealth on foreign trade. The relatively small size of its domestic market - a total population of just over 7,785,800 - is another factor which has encouraged Swiss manufacturers to look abroad: they need foreign markets in order to make investment in research and development worthwhile. Switzerland imports bulky raw materials and exports high-quality goods
Swiss companies are extremely competitive in world markets. In some branches, more than 90% of goods and services are exported. The best-known export items are watches, chocolate and cheese, but in fact mechanical and electrical engineering and chemicals together account for over half Swiss export revenues. The areas where Switzerland is a leading supplier SWISS FOREIGN TRADE (2005-2009) include looms, paper and printing TABLE NO. 4 machinery, blanking tools for metalworking, elevators and escalators, packaging equipment and rack-and-pinion railways. Exports of goods and services alone amount to about 25,000 francs - 16,000 dollars - per head per year, according to the OSEC business network, which SOURCE: http://www.bern- promotes Swiss foreign trade. cci.ch/de/export/pdfs/Directory_20of_20Swiss_20Companies _20in_20India_202010.pdf Switzerland’s Major trading partners Switzerland's main trading partners are European Union members. By far the biggest partner is Germany. In 2010 it was followed in descending order by Italy, France, the Netherlands, the US and the United Kingdom. In 2009, 59.7% of exports went to EU countries, and 78% of the imports came from EU states. This is despite the fact that the Swiss have consistently voted to remain outside the bod SWITZERLAND’S MAJOR TRADING PARTNERS TABLE NO. 5
SOURCE: Swiss Federal Office of Statistics & Swiss Customs Administration
India’s Major trading partners
INDIA’S MAJOR TRADING PARTNERS TABLE NO. 6
SOURCE: Indian Ministry of Commerce & Industry (Department of Commerce) & Indian Ministry of Finance
Trade at international level "Every third computer mouse sold world-wide is produced by a Swiss company, Logitech. One third of the most sophisticated textile machines sold world-wide are Swiss made. Nine out of SWISS INDIAN TRADE ten ball-point pen tips GRAPH NO. 7 are made on Swiss machines. The watch industry remains at the cutting edge of technology. Last but not least, Swiss high tech made it to Mars. The electrical micro engine driving Pathfinder, the robot which explored the surface of Mars, was produced by
Maxon in Sarnen." SOURCE: Swiss Foreign Trade Statistics Pascal Couchepin, Federal Councillor for Economic Affairs, 2001.
Despite the steady growth in trade and investment flows in both directions, the potential to further intensify the economic ties remains huge. India still accounts only for 2% of Switzerland’s worldwide trade. Considering India’s impressive economic growth trajectory and a deepening cooperation in science and R & D, the prospects are indeed very promising.
PRESENT TRADE RELATIONS AND BUSINESS VOLUME OF DIFFERENT PRODUCTS WITH INDIA
The emergence of friendship between India and Switzerland formally started with the Treaty of Friendship and Establishment of 1948 and was strengthened in various fields such as development, economy, and culture. The exchanges between the two countries have since then increased. The two nations had a first commercial contact in 1851 when Salomon and Johann Georg Volkart simultaneously founded their company Volkart Brothers in Bombay and Winterthur.
Swiss development cooperation with India started 50 years ago. The first project of the Swiss Agency for Development and Cooperation (SDC) was initiated in 1963 in Kerala with the purpose to contribute towards the improvement of livestock in the State, mainly for dairy production. The successful result was an eight-fold increase in milk production over 35 years in the region. From Kerala, SDC India geographically extended its activities to other regions and domains of cooperation, including to green technologies at present.
The bilateral relations between India and Switzerland have grown closer over time. On 1st April 1947, Switzerland opened a Trade Mission in India, which in 1948 was converted into a Mission and in 1957 into an Embassy. India opened a mission in Switzerland in 1948, which was elevated to an embassy in 1954.1
Bilateral agreements: The Treaty of Friendship and Establishment of 14th August 1948, which came into force on 5th May 1948 (AS 1949, I 431/RO 1949, I, 431). Indo Swiss Agreement on Technical and Scientific Co-operation signed on 27th September 1966. The Exchange of Letters on 20th February 1989 between Switzerland and India concerning assistance in criminal matters, which came into force on 20th February 1989 (AS 1989, 777/ RO 1998, 777). The Agreement for the Avoidance of Double Taxation between the Swiss Confederation and the Republic of India with respect to income taxes, which came into force on 29th December 1994 (AS 1995, 845/RO 1995, 845).
1 ttp://www.indiaswitzerland.in/jubilee/index.php?link_id=87&parent_id=87&type=general The Agreement on Indo-Swiss Collaboration in Biotechnology for 5 years was signed on 13th September 1999. The Agreement for the Promotion and Protection of Investments between the Swiss Confederation and the Republic of India, which came into force on 16th February 2000. Indo-Swiss Agreement relating to Co-operation in Air Services signed on 2nd May 2001. The Agreement on Co-operation in the fields of Science and Technology between the Swiss Federal Council and the Government of the Republic of India signed on 10th November 2003. The Grant Agreement between the State Secretariat for Economic Affairs and the International Competence Centre for Organic Agriculture in India signed on 3rd February 2005 A Memorandum of Understanding between the Ministry of Commerce and Industry of India and the Federal Department of Economic Affairs of Switzerland on intellectual property signed on 7th August 2007. India urges ratification of DTAA with Switzerland: The India government asked the Swiss government to expedite the ratification of the Double Taxation Avoidance Agreement (DTAA) signed between the two countries in August 2010, but the Swiss Parliament will take time to ratify the tax treaty.
ECONOMIC RELATIONS BETWEEN SWITZERLAND AND INDIA
In terms of foreign direct investments, Switzerland has remained amongst the top 10 foreign investors in India. About 150 Swiss companies have formed joint ventures or subsidiaries, and many more have representatives or agents in India. As more and more Indian companies are now venturing abroad, Switzerland is offering many attractive advantages as a business and investment location, especially for those Indian companies which would like to cover their European business activities from within Switzerland.
The Swiss Business Hub India (SBHI) which is part of OSEC Business Network Switzerland and which is located in the Consulate General in Mumbai and the Swiss Embassy in New Delhi offers a wide range of services to assist small and medium-sized enterprises (SMEs) from Switzerland and Liechtenstein in their efforts to penetrate the Indian market.
The Swiss-Indian Chamber of Commerce (SICC) is a key actor in promoting Swiss- Indian bilateral trade and investment. SICC is a bi-national, non-profit association with over 320 Swiss and Indian members. It has offices in Zurich, Delhi, Bangalore, Mumbai and Chennai. The Chamber provides members in Switzerland and India access to first- hand information and expertise thanks to the reservoir of know-how offered by its board and extensive partner network in both countries.
The EFTA countries (Iceland, Liechtenstein, Norway and Switzerland) and India will soon launch negotiations for a broad-based agreement on trade and investment. The Indo-Swiss joint economic commission meeting that used to be held every four years will now be held every year.2
2 http://www.indiaswitzerland.in/jubilee/index.php?link_id=87&parent_id=87&type=general
BUSINESS VOLUME OF DIFFERENT PRODUCTS WITH INDIA TABLE NO. 7 Major items of export by Swiss Francs in Major items of import by Swiss Francs in Switzerland to India Million (% Switzerland from India Million (% Share) (2009) Share) (2009)
SOURCE: Swiss Foreign Trade Statistics, January-December 2009
GROWTH PERSPECTIVE OF NESTLÉ IN INDIA A stronger rural economy, increasing disposable income and a shift to branded products will mean higher growth rates for the FMCG industry in the coming decade. India’s population is over one billion, which means that one in every six people in the world is Indian. This population is young (70% below 35 years) and there is a burgeoning middle class.
The Indian consumer’s aspirations are changing. This can be gauged by growing urbanization, exposure to media, rising ownership of consumer durables and greater use of credit. Declining birth rates, increasing education of women, and rising per capita income are all delivering a ‘demographic dividend’. This is expected to translate into rising consumption of convenience foods and out-of-home eating.3
3 http://www.allardpartners.com/upload/documents/allard/case studies/NestleAGF.pdf PESTLE ANALYSIS 1. Political Factors Formulation of the National Food Processing Policy Complete de-licensing, excluding for alcoholic beverages Declared as priority sector for lending in 1992 Excise duty waived on fruits and vegetables processing from 2000 – 01 Income tax holiday for fruits and vegetables processing from 2004 – 05 Customs duty reduced on freezer van from 20% to 10% from 2005 – 06 Enactment of FSS Bill 2009 Food Safety and Standards Bill, 2010 Further liberalization in agriculture could enhance resource allocation In 1999, the EU accounted for 61.1 per cent of Switzerland's exports and 77.8 per cent of its imports. liberalization of the telecommunication sector In the realm of intellectual property, Switzerland affords protection over and above the minimum standards provided for in the TRIPS Agreement. Swiss policy on technical barriers to trade provides for the adaptation of national technical requirements so as not to create technical barriers to trade. Switzerland is currently producing legislation in the area of genetic technology and products containing genetically modified organisms. The Swiss Government pursues a very active policy on environmental protection. With regard to labour standards, Switzerland recognizes the key role of the International Labour Organization (ILO) confirmed at the Social Development Summit in Copenhagen (1995) and the WTO Ministerial Conference in Singapore (1996). In the area of agriculture, Switzerland is going through a period of gradual reform driven simultaneously by the WTO Agreement, its own efforts at rapprochement with the EU and budgetary constraints. 4
4 http://www.wto.org/english/tratop_e/tpr_e/tp150_e.htm 2. Economic Factors Production and Supply As technological improvements came to farms, the owners produced more food and transported it to market more effectively. However, fast production does not always mean better prices. The commercial market is fierce, and the cost of maintaining farms significant. To offset this, some countries like the United States provide farm subsidies in order to stabilize farm production and the food market. Additionally, research continues searching for ways to improve food yields in the face of an ever-growing population. Consumer Demand The tastes of people around the world change from era to era, particularly when exposed to new cultures or ideas. For example, in the 1980s America began embracing sushi and other Asian-fusion foods. According to Food & Wine Magazine, from 1988- 1998 the number of sushi bars quintupled in the United States. Global Warming When weather damages crops, the cost of that loss increases the prices consumers pay. Scientists study the issue of global warming for it's inevitable long-term effect on food economics. Dramatic climate changes impact yields, and therefore the food supply. To offset this, farms started investing in technological measures that help minimize loss. This additional cost for upgrades also figures into the final price of food. Preparation Time Time is money. Another economic factor affecting food lies in the hands of the home cook. In determining selection, many cooks consider how much time it takes to locate and prepare specific items. This particular tendency made fast food and instant mixes increasingly popular, especially in homes where two people work outside the house.5
3. Social Factors Changes in social trends:- Cultural life in Switzerland is characterized by geographical diversity, multilingualism, religious pluralism and local customs. This is reflected in an
5 http://www.ehow.com/list_7174208_economic-factors-affecting-food.html amazing range and variety of literature, art, architecture and music. Tradition is alive and well in Switzerland and varies from region to region and even from village to village. Religious festivals, traditional countryside festivities and the commemoration of historical events are all occasions for celebration. Availability and willingness of individuals to work:- Job satisfaction among PwC employees is already at a high level, as the firm’s Global People Survey indicates. At PwC Switzerland, 80% of staff voluntarily took part, a participation rate which is again above the worldwide average. Both the People Engagement Index and the High Performance Index for PwC Switzerland have shown improvements on the levels reported last year. At first glance, PwC Switzerland’s fluctuation rate of 16% may not appear congruent with high levels of job satisfaction among staff. A closer look does however show that this relatively high fluctuation rate – which is typical for the industry as a whole – can be easily explained. The average age of PwC Switzerland’s staff is 34, and it is clear that many young employees decide to capitalize on the training opportunities the firm has provided by moving into other industries. In an economy like Switzerland’s, with virtually full employment, people’s willingness to change jobs will tend to be higher than elsewhere. This is particularly true after a period of economic downturn. Ageing population:- The country's population is ageing, and women are having fewer and fewer children. On average, 2.1 children would have to be born to every adult female to maintain numbers in subsequent generations. But today's birth rate is only 1.3 children per Swiss woman and 1.5 children on average overall. And there is no improvement in sight. Life Style:- Lifestyle can vary greatly depending on the area of the country and the background of the inhabitants. Nowadays, the Swiss population is mainly modern and urban, with one- third of the population living in the five biggest cities (Zurich, Basel, Geneva, Bern and Lausanne), another third in smaller urban areas and the final one-third in rural area. The Swiss population on the whole enjoys a high level of living and Switzerland deserves its reputation of high-quality standards and services in all sectors (health, industry, public transport, education, etc.). Social Cost and Benefits:- Social security systems in EU countries still show substantial differences, and this calls for a necessary coordination of social security regulations. Common rules ensuring access to social benefits are important to avoid disadvantages for European workers exercising their right of free movement. They are designed to prevent EU citizens from running the risk of being ensured twice or losing their social security benefits when moving to another country.
4. Technological Factors i. Setting up an efficient Milk Collection system Environmental On-going technical assistance to farmers for improved milk productivity and quality Maintenance of sustainable farming practices Establishing milk collection points and arranging milk collection Installing chilling centers Installing farm cooling tanks Arranging transportation to the factory ii. Technical Assistance to Farmers Veterinary & field staff offering round the clock technical services Veterinary medicines are provided to farmers Artificial insemination centers highly pedigreed bulls are provided
5. Legal Factors Swiss people have many different political rights. Not only can they elect the members of the Federal Assembly, but also the members of the cantonal executive and the cantonal parliament, as well as the local executive body and - if existing - the local parliament. In addition, on the federal level all changes of the Constitution and the membership to some international organizations must be accepted by the majority of the people and the cantons. With the signatures of 100,000 people a so-called popular initiative can be launched and a change of the Federal Constitution be proposed. The popular initiative must be discussed by both chambers of the Federal Assembly. The parliament can recommend accepting or rejecting the initiative or can make its own counter proposal. The people also have the right to referendum. If 50,000 signatures are collected within 100 days, a new law enacted or certain international treaties accepted by the Federal Assembly are subjected to a popular vote. The people are also entitled to address requests, suggestions and complaints to the authorities (so-called right to petition). On the cantonal and local level, people enjoy similar and often even additional political rights. In a few cantons (Glarus and Appenzell Innerrhoden) people still vote in the form of the "Landsgemeinde", a form of open-air meeting of all citizens.6
6. Environmental Factors Weather and Climate change:- Switzerland is acutely aware of the threat of climate change. In Switzerland the immediate impact of temperature rises on the human population will come from the mountains and their cover of snow and ice. Human settlements will be affected by landslides and floods. The all-important tourism industry will suffer as the areas available for winter sports shrinks more and more. Agriculture will also be hit. Climate change is a cause for concern both economically and socially. The leading reinsurance company, Swissre, has called for strategies to be implemented now to tackle climate change before it is too late.7
6 http://www.llrx.com/features/swiss2.htm Bio- Diversity in Switzerland:- It is estimated that Switzerland is home to over 50,000 species of plants and animals – although only 83 of these are mammals, most of them bats and other small species. Thirty thousand of them are insects. There have been considerable fluctuations in the diversity of species in the past. It is thought that species diversity reached its highest point in the middle or end of the 19th century. Switzerland signed the non-binding UN convention on biodiversity in 1994. This aims to reverse the world-wide decline in the number of different species of animals, plants and other organisms.8
The travel and transportation industries:- The main producer of greenhouse gases in Switzerland overall is transport, which accounted for nearly 31% of such emissions in 2000. The main gases involved are carbon dioxide (CO2) and nitrous oxide (NO2). The Swiss produce about six tonnes of carbon emissions per head per year, of which transport is responsible for 2.6 tonnes. This compares with a total of 20 tonnes for the US, and a world average of about four. The average car in Switzerland has a two-litre engine, compared with only 1.6 litres in neighboring countries, according to the European Automobile Manufacturers' Association. Drivers are encouraged to turn off their engines when waiting for short periods. The Swiss government has proposed legislation to lower taxes on fuels that produce fewer harmful emissions, and to abolish them completely on fuels from renewable resources. Projects are underway at different Swiss research institutions to develop new, more environmentally friendly fuels.9
7 http://www.swissworld.org/en/environment/climate_change/impact_of_climate_change/
8 http://www.swissworld.org/en/environment/biodiversity/biodiversity_in_switzerland/
9 http://www.swissworld.org/en/environment/vehicle_fuels/vehicle_fuels/ Environmentally friendly products and processes:- The Swiss attach a lot of importance to recycling. Ordinary citizens are encouraged to recycle as much as possible. Zzuzzz3In many cantons householders pay a tax according to the volume of rubbish they put out for the dustmen to collect. This acts as an incentive to dispose of anything recyclable at recycling points for which they do not have to pay. The Swiss are champion recyclers. In 2003, 47% of all urban waste was recycled - a new Swiss record. They recycled 70% of paper, 95% of glass, 71% of plastic bottles, 85-90% of aluminium cans and 75% of tin cans. Not only individuals are involved in collecting this rubbish. Companies like the Swiss Federal Railways (SBB) play their part too. Every year the SBB collects from its trains:
2.5 million plastic bottles, weighing 65,000 kg (143,300 lb) - enough for 276,000 T-shirts or filling for 39,500 sleeping bags
2 million aluminium cans, weighing 29,000 kg (63,930 lb) - recycling them saves 116 tonnes of bauxite and takes only a 20th of the energy that it takes to produce them from scratch
Nearly 1 million glass bottles, weighing 190 tonnes, which are resmelted.
PART II: INTRODUCTION OF NESTLE AND IT’S ROLE IN THE ECONOMY OF SWITZERLAND NESTLE STORY Nestlé saw their seed in 1867 in Vevey, Henri & Switzerland first produced the “Farine Lactée Nestlé”, a toddler cereal founded by Henri Nestlé to fulfillment need of baby nutrition. In 1950 Nestlé have done historical merger with the Anglo-Swiss Condensed Milk. After this merger Nestlé has grown to become the leading and most diversified food Company in world, and is a propos double the size of its next competitor in the food & beverages industry.
Nestlé’s brand of birds feeding in a nest, resulting from Henri Nestlé’s personal coat of arms, which sparks the values upon which Henri founded his Company. Namely: The values of safety, motherhood and care, environment and nourishment, family and belief. The first Nestlé logo 1868 It is not only the vital element of Nestlé’s corporate distinctiveness characteristics but serves to identify the Company’s products, tasks, business practices, ethics and targets.10
LOGO
Henri Nestlé One of the First Nestlé logo (1814 - 1890) original advertisement
VISION OF NESTLE
“To be a leading, competitive, Nutrition, Health and Wellness Company delivering improved shareholder value by being a preferred corporate citizen preferred employer preferred supplier selling preferred products.”
10 http://www.nestle.in/nestlestory.aspx accessed on 25/09/2011 MISSION OF NESTLE Mission of Nestlé, according to Henri Nestlé, is to: “...positively influence the social environment in which we operate as responsible corporate citizens, with due regard for those environmental standards and societal aspirations which improve quality of life.” -- Henri Nestlé, 1857.11
NESTLÉ'S CORPORATE BUSINESS PRINCIPLES Nestlé have the 140 years old Business principles that all are derived from the culture of Nestle Organization which reflects the justice, truthfulness, and long-term views.
Nestlé’s core principal is “we have to create significant value for society”. Corporate Business Principles of Nestlé’s follows to develop and adjust to a shifting world, Basic foundation of Nestlé is unaffected from the time of the birth of the Organization, & reflects the vital thoughts of fairness, truthfulness, and a general concern for people.
Nestlé Corporate Business Principles is the institution for the Company’s pledge to be environmentally sustainable and to form shared value. Developing Shared Value is the core way of Nestlé’s business practices, this all proves Nestlé is succeed in order to develope long-term value for stakeholders.
11 http://www.nestle.co.za/AboutUs/Pages/MissionVision.aspx assessed on 25/09/2011 The ten principles of business operations:
SOURCE:http://www.nestle.com/Common/NestleDocuments/Documents/Library/Documents/Corporate_ Governance/Corporate-Business-Principles-EN.pdf NESTLÉ’S COMPANY PROFILE AND STRATEGY Nestle is having the 443 factories within 81 countries in a globe and 2,81,000 employees. As per geographical are America has 168 factories, Europe has 150 factories, Oceania, Asia and Africa has 125 factories12.
COMPETITIVE ADVANTAGES
12http://www.nestle.com/Common/NestleDocuments/Documents/Library/Documents/About_Us/Quick-Facts-2010- EN.pdf Nestlé have the hard to copy compititive advantage in value chain which is developed after the decades. This Shows the power of compititive advantage which nestle have. There are natural associations between vast products and strong Research & Development, among the broadest geographic existence and an entrepreneurial force, among great group and strong ethics.
1. Nestlé’s unique product and brand assortment, with well-built market positions: Nestlé have the sales over 1 CHF billion annual from 20 Nestlé brands. Whether global or regional, our brands are always relevant to consumers locally. 2. Nestlé’s unmatched Research & Development: Is the unseen impetus behind the growth of our brands. It is science-based, consumer centric and focused on differentiation from our competitors. It goes beyond food to cover new products, packaging, technology and manufacturing, quality and safety. 3. Nestlé’s unmatched geographic existence: has been established over many years and is a reflection of both the breadth of our presence, with our brands available more or less everywhere, and the duration for which Nestlé have been present in countries the world over. 4. Nestlé’s culture: enable us to be decentralized and entrepreneurial. It combines devolved responsibilities with a cohesive strategic direction. Nestlé is patient and not averse to taking reasonable risks. Our speed and focus enable us to remain competitive in spite of any challenges in the marketplace.
GROWTH DRIVERS Nestlé is focusing on four areas for the growth strategy. They are relevant across all their categories and in the region of the world. Everything Nestlé do is driven by their diet, fitness and Wellness program Good Food, Good Life, which look for offer consumers products with the most excellent nutritional profile in their categories. 1. Nutrition, Health and Wellness: Each of our product categories, from Chocolate to Baby Food, has a specific strategy to ensure that it can be the nutrition leader in its space. 2. Emerging markets and Popularly Positioned Products: Nestlé has tailored not just their products, but also their business models and marketing mix to ensure that Nestlé is best able to realise the rising chance to provide healthful, reasonable, branded food to lesser income consumers around the world. 3. Out-of-home: consumption is increasing faster than in-home. Nestlé is the largest branded manufacturer, with a business built on branded ingredients but increasingly achieving new standards in customer solutions, systems and service. 4. Premiumisation: Incomes are increasing & spare time also. These are just two things that point to accelerate increase in premium food and drinks, each a moment of reasonable luxury, a moment of delight. Each of Nestlé’s manufactured goods categories has its own specific premium plan, encompassing brands such as Nespresso, S.Pellegrino, Perrier, Häagen-Dazs and Cailler.
OPERATIONAL PILLARS Nestlé always focus and try to do extremely well at each of these 4 inter connected factors to create core competences. They focus on0 product development, product renewal and product quality, operational performance & Excellence, interactive relationships with stakeholders and differentiation from their rivals. If they excel in these areas they will be consumer-centric, they will accelerate their performance in all key areas and they will achieve excellence in execution. 1. Innovation & renovation: Innovation is about big steps and changing the rules of the game, or even changing the game. It is hard to copy. Its rewards can be measured by profitable growth for years to come and sustainable competitive advantages. Renovation is more incremental, and lies behind the still-growing success of brands such as Nescafé and KitKat, both over 70 years old. 2. Operational efficiency seeks to ensure that we have the highest quality, the lowest cost and best customer service. The aim is to improve our sustainability by being better, faster, more efficient, and less wasteful and, as a result, higher performing. 3. Whenever, wherever, however is the expression of our aim to have our products always at an arm’s reach of our consumers. We have created specific business models, distribution strategies and solutions to meet this objective. 4. Consumer communication is about building trust, exciting consumers, and learning from them to help drive our R&D. It is about citizenship and responsibility and being aligned with the expectations of our consumers.
NESTLÉ’S BRANDS
Most people know about the company through their brand or brand portfolio. Nestlé’s portfolio covers almost every brand which is under food and beverage class with tastier and healthier products which gives joy to consumer at every eating. Here is a sample of some of Nestlé’s brands.13
Baby foods
Gerber Cerelac Gerber NaturNes Nestum Graduates
Bottled water
Nestlé Pure Life Perrier Poland Spring S.Pellegrino
13 http://www.nestle.com/Brands/Pages/BrandsSearchList.aspx assessed on 27/09/2011 Cereals
Chocapic Cini Minis Cookie Crisp Estrelitas Fitness Nesquik Cereal Chocolate & confectionery
Butter Aero Cailler Crunch Kit Kat Orion Smartis finger
Coffee
Nescafé 3 Nescafé Nescafé Nescafé Nescafé Dolce Nescafé in 1 Cappuccino Classic Decaff Gusto Gold
Culinary, chilled and frozen food
Hot Lean Buitoni Herta Maggi Stouffer's Thomy Pockets Cuisine
Dairy Drinks Food Services
Coffee- Carnation Milo Nestea Maggi Nescafé Mate
Healthcare nutrition Ice cream Sports nutrition
Nutren Boost Dreyer’s Nestlé Ice Cream Power Bar Junior
NESTLÉ STRATEGY FOR RESEARCH & DEVELOPMENT
Nestlé’s Research and Development is a major competitive advantage for them. Research and Development is a one of the main reason to be excelent in nutrition, health and wellness.
R&D Department of Nestle is a biggest R&D department than other food & Beverage companies. Nestle have the 29 R&D facilities in different country. Nestlé’s have the 5000 employee group in their network.
Ahead of sound nutritious food, the future of foods will progressively more be motivated by science. Nestlé R&D Team & scientists are looking further0 to the food of the future.
Nestlé R&D is converting nutrition and food science in 2 ways: Consumer: Their needs into explore priorities Science: New research & findings apply into consumer benefits.
A. Product Development
Every product of Nestle is result of team of a R&D in which product is developed by the a group in which there is a Scientist, nutritionists, product developers, designers & consumer service representative and regulatory affair specialists.
This diagram shows the GRAPH NO: 8 steps of product Product Development development in this these experts are involved, to identifying the best consumer benefit from the product launch and on towards continuous development. Nestlé R&D Source:http://www.nestle.com/RandD/Product projects are the first footstep Development/Pages/ProductDevelopment.aspx in a pipeline of novel nutrition solutions for products of the future in all their business categories.
B. Innovation Most important competitive advantage of Nestle is its 140 year research, development & scientific expertise. Nestle have the Global R&D Centers which gives the pure & applied science research to gain the customer with the nutritious benefits.
Future Innovation: Nestlé is committed to reducing the environmental crash of packaging without put in danger the safety, quality of goods or consumer acceptance of its products. Example: Maggi noodles: Less fat, less salt – same great taste.
Consumer Benefits: Nestlé R&D covering three areas of benefits for consumers: 1.Safety and Quality - this underpins all Nestlé products,
2.Nutrition and Health & Taste,
3.Texture and Convenience
GLOBAL PRESENCES
Nestlé's supreme geographic presence in world is one of its competitive advantages. From Swiss beginnings, the company grew to create a presence in approximately every country in the globe. Today, Nestlé's attendance in most markets, including rising markets, dates back many decades, and in some cases more than a century.
This has shaped very close relationships between its brands and consumers, as well as a deep sympathetic of local needs and trends wherever Nestlé deals. Local organization teams, developed, R&D have all been developed, as well as long-term affairs with farmers and other suppliers.14
ROLE OF NESTLE IN THE ECONOMY OF SWITZERLAND Contribution towards Industry: The Food industry generates approximately 7.3% of the turnover and 5.3% of the added value created by the country’s industrial sector as a whole. Nestlé is the world’s leading Nutrition Health and Wellness Company which began in Switzerland during the rise of Swiss industrialization. Nestlé is one of the twenty biggest companies on the planet based on market capitalisation in the Financial Times Global 500. The US magazine Fortune maintains a list of the most popular companies from any industry worldwide and ranks Nestlé at the 31st place in the Fortune’s Top 50 World’s Most Admired Company and at number one in its sector.
14 http://www.nestle.com/AboutUs/GlobalPresence/Pages/GlobalPresence.aspx assessed on : 26/9/11
Biggest Food And Beverage Companies Table No. 8 Share Of Market in In CHF Million Name of Company Region global food industry 2010 in % 1 Nestle CH 103,721 1.8 2 Pepsi Co USA 60,441 1.1 3 Kraft Foods USA 51,421 0.9 4 Coca-Cola USA 36,699 0.7 5 Mars USA 32,395 0.6 6 Unileaver GB/NL 31,350 0.6 7 Danone FR 23,460 0.4 8 General Mills USA 15,463 0.3 9 Con Agra Foods USA 13,565 0.2 10 Kellog's USA 13,141 0.2 Weighted average exchange rate 2010: CHF 1= USD 0.9569 SOURCE:http://www.nestle.com/Common/NestleDocuments/Documents/Library/Documents/About _Us/Nestle-in-Switzerland-EN.pdf assessed on : 26/9/11
Economic impact: Nestlé Group’s economic impact in Switzerland is not limited to sales figures or exports by Swiss sites; it also comprises financial flows resulting from consulting and management activities as well as payment for patents registered by the Group’s research and development centers based in Switzerland and used by sites all over the world. Almost two out of every three individuals working for Nestlé in Switzerland are not directly involved in the financial results obtained within the country, because they are employed at the global headquarters or in the research and development centers. These figures serve to illustrate the way in which the wealth created by Nestlé benefits the population, through its contributions to financing of public and private pension funds both in Switzerland and abroad.
Employment Generation: Between 2001 and 2010, Nestlé recorded a net increase of 2954 jobs – after deduction of those who left or transferred to independent units. This represents an increase of 46% of the Company’s workforce. At the end of 2010, the Nestlé Group employed a total workforce of around 281000 spread across 86 countries in the world. About 46% of Nestlé’s workforce in Switzerland is female, compared to the national average for the Food industry of around 36%. The Group enjoys an equally excellent reputation among investors, employees and graduates entering the employment market. According to studies carried out by independent agencies, economics graduates perceive Nestlé to be the first most attractive employer in Switzerland.
Contributions to financing of public and private pension funds Table No.9 In CHF Million 2010 2009 2008 Creation of global wealth by 80666 63198 70359 Nestle group over 10 years Value of this creation attribution 2827 2215 2466 to Swiss pension fund SOURCE:http://www.nestle.com/Common/NestleDocuments/Documents/Library/Documents/About_Us/N estle-in-Switzerland-EN.pdf
Exports: In terms of value, 67% (and rising) of Nestlé’s Swiss made products are exported, as opposed to just 22% in the industry in general during 2010. The exports by the Group from Switzerland amounted to 35% of total food exports by the country as a whole. This represented more than five times that of the export of the Swiss cheese that was worth CHF 559.1 million in 2010.
Environmental sustainability Table No.10 In CHF Million 2010 Value exported by Swiss industry 203484 Value exported by food industry 8498 Value exported by Nestle Group of Swiss 2956 SOURCE:http://www.nestle.com/Common/NestleDocuments/Documents/Library/Documents/About_Us/ Nestle-in-Switzerland-EN.pdf assessed on : 26/9/11
Investments & Taxes: Nestlé is one of the largest contributors to local taxes, through the direct corporate taxes Nestlé pays and indirectly through the social contributions and taxes paid by its employees. Between 2001 and 2010, Nestlé carried out investments worth CHF 3.0 billion in Switzerland, during 2010 alone; Nestlé invested CHF 402 million in its production and distribution infrastructures, thereby reinforcing its commitment to its home country. The volume of sales to Swiss consumers generated by Nestlé’s various local markets amounted to CHF 2143 million in 2010. Export sales also rose significantly to a total of CHF 2956 million.
Environmental sustainability : In 2009–2010, Nestlé units in Switzerland have spent over CHF 3.7 million on environmental sustainability related projects and activities, representing 0.5% of the total capital investment budget.
Environmental sustainability Table No. 11 All factories located in Switzerland 2007 2008 2009 2010 Waste for Disposal rate (Kg/tone) 5.5 2.5 4.2 51 Greenhouse gasses emission rate (kg CO2 equ. / tone) 308 1630 164 168 Total water withdrawal rate(m3/tone ) 61.6 27.2 25.6 23.8 Energy consumption rate(GJ/tone) 8.5 4.7 4.8 5.1 Production Volume 162,240 307,110 289,495 309,603
SOURCE: http://www.nestle.com/Common/NestleDocuments/Documents/Library/Documents/About_Us/Nestle-in- Switzerland-EN.pdf
STRUCTURE, FUNCTIONS AND BUSINESS
ACTIVITIES OF NESTLE Food is core element in our daily lives. Not only does it enable us to survive, but appropriate amounts and quality also help to ensure a better standard of living by contributing to our health and wellness. Consumer needs and expectations associated with a particular food product are not fixed, but change with time and according to geographic region, culture and the various stages of life. Ever since its foundation in 1866, Nestlé’s goal has been to keep in step with this stable process of change. It reacts to new consumer requirements with inventive and continually renovated products, and implements new scientific findings in tasty foods. Motto of Nestlé is “Good Food, Good Life”.15
ORGANIZATIONAL STRUCTURE Organizational structure is the formal structure by which jobs tasks are divided, grouped, and coordinated. Nestlé is a function-based organization. The tasks are divided into divide jobs and then these jobs are grouped together under different departments i.e. functional departmentalization is found in organization. Each major area is kept under the manager who is expert in that concerned field and is responsible for all activities, which that department performs.
Organizational structure of Nestlé is hierarchical. There is a chain of command that extends from upper organization levels to the lowest levels and clarifies who reports to whom. The orders move from upward to downward and suggestions move downward to upward direction. The continuous improvement section is made for this purpose. It encourages employees to give their suggestions and share the new ideas. The jobs are formalized; there are open job descriptions, several organizational policy, and clearly defined procedures covering work procedures. But in spite of formal rules and regulations, Nestlé keeps on changing to keep a pace with the changing environment. So, it is harsh but not rigid organization. In effort to be more flexible and responsive, there has been distinct trend in this organization toward decentralizing decision-making.
15 http://www.scribd.com/pomi_pbs/d/60004511‐Nestle Organization Structure
DEPARTMENTS
Analyzing the market is to get the information about the current market trends. The image of the product in the minds of the customers is also judged over here. There are many ways, which are adopted by Nestle to get the information of the market. Sales Department
Sales department is a primary source of getting the information and analyzing the market. They actually visit the market and find out that which are the competitors, and what strategies they are adopting. They are also analyzing the complaints of the customers and make sure the availability of the product in the markets.
Customer Service Department
For Every product in the market there is customer service department. Its head office based department i.e. every head office has its own department.
In this department, customer’s complaints are analyzed and collected which are gathered through the sales force or directly submitted by the customers. Then batch number is given to these complaints and is transferred to the Marketing Department. If Marketing Department can’t be able to solve the problem then these complaints moved to the Quality Assurance Department.
Nestle believes in maintaining regular contact with their customers.. When Henri Nestlé prepared his first box for sale, he put his address on the packages so people would know where to go if they had questions. Today, Nestlé’s Consumer Relationship Panel with the words "Talk to Nestlé" expresses the same.
This is why Nestle have a worldwide Nestle Consumer Services network which is devoted to caring for consumers. Their employees provide the prompt, efficient and high quality service. Employees are taught to talk with consumer.
Research and Development Department In Nestle, R&D departments are localized and its head office is in Switzerland. Nestle has divided the whole world into 3 zones with their own R&D. 1. America 2. Europe 3. A.O.A. (Asia Oceania Africa) The R&D is in America Zone is in America itself, in Europe Zone, it is in France and in A.O.A. Zone it is in Australia. The customer complaints are given to the R&D where research is conducted.
Suppliers and distributors
Nestle established the close relationship with their suppliers who provide the raw material and they distributes who distribute the product in the market. Both have an up- to-date knowledge about the market as they have a close interaction with the customers and also with the competitors.
NESTLÉ’S FUNCTIONS
Driving functional excellence requires the implication and commitment of talented and skilled managers at all levels with specific expertise required to succeed in key functions at Nestlé Waters. It also implies a perfect coordination with Nestlé functional communities.
Our success depends on our employees. They bring their expertise and know-how and their ambition and commitment drives them to developing new skills continuously contributing to our organization’s growth. Get a feel for their commitment and you’ll want to be part of the teams that drive Nestlé’ functions excellence! While the company contributes the top-line business strategy and sets in place the processes and resources for achieving them, we rely on the expertise and ingenuity of our people to bring the business to life. Their contribution, commitment, mindset and engagement fuel the entrepreneurial spirit that you will find in all our operations worldwide. They are truly our N°1 Asset.
Human Resources Human Resources help drive high performance throughout Nestlé Waters by supporting and facilitating individuals, teams, and business processes. Our approach is to develop every employee to perform at their highest levels, linking company objectives and individuals’ career goals. We believe in the ingenuity and resourcefulness of our people, so we work to set the stage for employees to take the lead on their own development. Employees and their managers work together to map out their own individualized development paths. The goal is simply to find the links between individual capability and motivation and the objectives of the company.
In the countries where we do business, Human Resources business partners play a key role in the organization as they work alongside our leaders in the development and implementation of strategies and programs responding to the needs of our business and our people. They provide expertise and support to our leaders across a range of management decisions and processes.
Human Resources also play a vital role as advocates for the principles and culture of the Nestlé Group. As our Human Resources managers define organizational structures and implement management processes, they reinforce the company’s values across all our operations.
Finance Our Finance teams enjoy the excitement of working in a highly competitive market and supporting a truly global company. They belong to the Nestlé F&C community and they share its commonly recognized professional expertise and "savoir faire”. They are our business partners. They drive the long term strategy process and the monthly dynamic forecast process. They contribute to help us identify and seize opportunities, set aggressive goals and deliver them. They partner with the company’s top executive managers, provide an independent and objective global economic vision of the business, alert them of potential risks towards achieving the targets and propose corrective mitigation actions. They also contribute to improve process efficiency. On the corporate level, they deal with challenges that cross brands, businesses and geographical regions, contributing to the achievement of the company’s strategy and objectives.
At the country level, our financial people operate in very diverse markets -from emerging countries to mature markets- and in varied business models -100% owned subsidiaries, joint ventures or integrated business units. Our finance people also work in a large variety of functions –industrial, sales, supply chain, etc.- and in different sales channels –modern and traditional trade, Out-Of-Home, Home & Office.
As for our auditors, they assist the company’s executive managers around the world in the fulfillment of their responsibilities by serving as independent and objective assessors. They help improve operations and manage risk, working hand in hand with the executive teams.
Marketing & Sales Supply Chain:
Our mission is to be a preferred supplier for service reliability, agility and process innovation while optimizing all company resources and assets and
While having sustainability always at the centre of each our decision. An efficient supply chain relies on talented and passionate people with strong management skills and key competencies either demand or supply planning, transportation, warehousing, customer service, customer management and purchasing.
STP (Segment, Target and Position) Market Segmentation Market segment consists of a large identifiable group within a market with similar wants, purchasing power, geographical location, buying attitudes, or buying habits. In a total market, there is always some diversity among the buyers. Within same general market there are group of customers, market segments, with different wants, buying preferences, product use behavior. In some markets these differences are relatively minor, and a single marketing mix can satisfy benefits sought by the consumer. The market segment is based on need based and it’s targeted for every one who cares for his/her life and wants to maintain good health.
Target Market After the company has segmented a market, management must next select one or more segments as its target markets. The company can select any one of the tree strategies i.e. Market Aggregation, single segment concentration, or multiple segment targeting. The target market consists of upper lower class to upper upper class due to their purchasing power and company is following multiple targeting strategy which includes mainly two focus groups i.e. home & office consumption especially for bulk water.
Positioning After identifying the segments and then selecting one or more to target, the marketers must next decide what position to pursue. “A position is the way a firm’s product, brand, or organization is viewed relative to the competition by current and prospective customers.” When positioning a product the marketer wants to convey benefits most desired by the target market.
Research & Development Our R&D experts are one of the reasons behind our position as leader: they deliver a continuous stream of creativity, innovating and renovating products, processes and technologies with high sustainability and added value. Innovation has always been the vital engine of our growth. This is especially true for our brands and products, for which Nestlé Waters regularly introduces new varieties and formats to meet consumers’ changing needs.
Recognized as some of the world’s best in the beverage sector, Nestlé Waters’ Research & Development teams bring new ideas to life. Most of these experts and researchers –nutritionists, hydro-geologists, biochemists, microbiologists, experts in PET plastics chemistry- are assembled at the company’s Product Technology Centre located in the East of France, close to the Vittel and Contrex bottled water factories. These specialists focus primarily, but not solely, on innovation. A large portion of our research and development is also devoted to renovating existing products and contributing to decreasing our carbon footprint throughout lightweight packaging. The company’s R&D leads research in many different areas: water-based beverages, packaging materials and their sustainability, optimization of industrial processes, technical assistance, quality assurance, product safety, energy consumption, etc. In fact, our researchers and scientists have created some of the most significant innovations ever launched in the bottled water industry, like the ½ liter Eco-Shape bottle for North America, which is the lightest branded beverage bottle on the market.
Technical operations Our technical teams based in over 100 factories worldwide play a key role in building our business, ensuring that the safety of people and products as well as environmental responsibility are absolute priorities.
Marketing Strategy For each target market, management must design a Marketing strategy, which includes the designing of the marketing mix. The Marketing Mix is the combination of multiple aspects of the following four elements: a product, how it is distributed and promoted, and its price. These four elements are intended to please the target market(s) and, equally important organization marketing objectives. 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. The Company's priority is to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives.16
To achieve the objectives, the product, price, place and promotion strategies for Nestlé Pure Life are as following:
16 http://www.gulftalent.com/home/Nestle-Products-Export-Corporation-jobs-2.html 1. Product Strategy Anything offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want. Product is set of tangible and intangible attributes, including packaging, color, price, manufacturing, prestige, retailing, services, etc. which the buyer may accept as offering want is satisfied.
Nestlé is offering the products, which comes under the category of fast moving consumer goods (FMCG).
Nestlé is committed to offering consumers high-quality food products that are safe, tasty and affordable. The Nestlé Seal of Guarantee is a symbol of this commitment. To be successful in marketing, producers must need carefully planned strategies for their products. Now the question is that how Nestlé has planned the product strategies for NPL.
1. Positioning the Product In relation to the attribute Nestlé is positioning its water as pure and safe water, which is essential to good health. They say that Trust Nestlé Pure Life and also Nestlé pure life is Happiness, Hope and Trust; this is the message which they are giving in their advertising campaign. Nestle also claims that NPL is Pakistan’s favorite water and currently their slogan is JIYO! kay yehi hay zindagi. On basis of these, it is said that Nestlé is positioning in relation to the attribute and quality of the product. Its basic foundation is unchanged from the time of the origins of Company, and reflects the basic ideas of fairness, honesty, and a general concern for people.
2. Product Line Expansion Product line expansion is accomplished by increasing the depth (variety of sizes, colors, models) within the product line. Nestlé is offering variety of sizes in NPL product line, which are as follows:
3. Branding The company name combined with a product name: A Nestlé brand name on a product is a promise to the customer that it is safe to consume, that it complies with all regulations and that it meets high standards of quality.
4. Packaging, Design, Color Packaging consists of all the activities of designing and producing the container or wrapper for a product. Packaging is intended to serve vital purposes:
Packaging connotes pleasure and attraction. By adding value to the product, the shape of the bottle contributes to building brand identity. NPL round bottle and the classic elegance of bottle are instantly recognizable. Constant research into materials and styles generates innovative packaging in ever more attractive shapes, textures and colors. Renovation in design, graphic identity and labels helps set new standards and energize brands by anticipating trends in consumer tastes. Beyond the basic requirements – strength, water tightness, etc. – ease of daily use is a subject of regular research. Innovation in this area can focus on transportation convenience, making the pack more comfortable to carry the bottle.
Packaging is an essential protection. It guarantees product safety and quality from manufacturing through warehousing and distribution up until the end consumer In addition to this primary role, packaging fulfils several complementary functions, including product identification and enhancement, practicality, consumer information, functionality to suit changing lifestyles, and so on. Given greater diversity in packaging types and quality, along with the emergence of new consumption patterns, packaging must also meet new ecological challenges. In this context, Nestlé Waters continue its efforts to develop more environmentally friendly bottles.
This responsible corporate policy relies on a dual approach: reducing both packaging weight and energy requirements during the manufacturing process while considerably increasing the quantity of material recycled. 5. Labeling A grade label is used in case of NPL. Grade label identifies the product’s judged quality with a letter, number, or word. Nestlé is using different phrases words to show the quality of the product. Like Trust, Happiness, Pure, Pakistan’s favorite water, safe, healthy and Premium drinking water.
6. Quality There’s no agreement on a definition of product quality, even though it is universally recognized as significant. Quality is a relative term and it varies from person to person due to the personal interests; what one likes, another may dislike. But one thing is common that when an organization fulfills the expectations of the customers through its products then the image that organization is established as a quality-delivering organization. The same case is with NPL it is satisfying the needs and expectations of the customers through its standardized products.
Every day, millions of people all over the world show their confidence on Nestlé by choosing Nestlé Pure Life. This confidence is based on quality image of Nestlé and a reputation for high standards that has been built up over many years.
2. Price A product price influences wages, rent, interests, and profits. Some prospective customers are interested in low prices, where as another segment is more concerned with other factors, such as service, quality, value, and brand image. Consumer’s perception of quality may be influenced not just by price but also by such factors as store reputation and advertising. Nestlé has adopted following for setting the pricing:
1. Non-price Competition Nestlé is trying to maintain stable prices of NPL and attempt to improve its market positions by emphasizing other aspects of their marketing programs. Of course, competitors’ prices still must be taken into considerations, and price changes will occur over time. Nevertheless, the emphasis of Nestlé is on something other than price. To maintain this non-price competition Nestlé is developing distinctive, hopefully unique, products and to create a novel, appealing promotional program. In addition, it emphasizes the variety and quality of the NPL, which they are offering to customers.
Market Entry Strategies The price of NPL is maintained constant over the period as the base for this is qualitative product which over the time period has reaped more market by keeping price constant.
2. Discounts and Allowances Discounts and allowances result in a deduction from the base (or list) price. The deduction may be in the form of reduced price or some other concession, such as free merchandise or advertising allowances. Discounts and allowances are common in business dealings.
Nestlé (NPL) offers the Trade Discounts to it customers. Trade discounts sometimes called functional discounts are deductions from the list price offered to buyers in payments for marketing functions the buyer will perform. The examples of these functions are: storing, promoting, and selling the product.
3. One-Price Strategy NPL is using this special price strategy i.e. one-price strategy in which the company charges the same price to all similar customers who buy identical quantities of a product. But for different quantities the company is offering different price. Even prices are set for the NPL products.
4. Resale Price Maintenance Some manufacturers want to control the prices at which middlemen resell their products; this is termed as resale price maintenance. Nestlé is also following this strategy. It is doing so to protect the brand’s image. They say that their control of prices provide middleman with ample profit margins. 3. Place Inn marketing strategy, Place means distribution of the products. It is a very important element of the marketing-mix. Ownership of a product has to be transferred some how from the individual or organization that makes it to the consumer who needs it and buy it. Goods also must be physically transported from where they are produced to where they are needed. For this purpose, middlemen are used. Middleman is a business firm that renders services related directly to the sale and/or purchase of a product as it flows from producer to consumer. Due to these middlemen, activities such as creating assortments and storing products can be shifted from one party to another in an effort to improve efficiency. They are also able to carry out distribution activities better or more cheaply than either producers or consumers.
A distribution channel consists of the set of people and firms involved in the transfer of title to a product as the product moves from producer to ultimate consumer or business user.
4. Promotion From marketing point of view, Promotion informs, persuades, and reminds prospective and current customers and other selected audiences about a company and its products. The most useful brand is failure if no one knows it is available. a. Promotional Mix A promotional mix is an organization’s combination of personal selling, advertising, sales promotion, and public relations. An effective promotional mix is a critical part of all marketing strategies. Promotion, in whatever form it takes, is an attempt to influence. Nestlé is using following methods for promotion of NPL: b. Advertising It is non-personal communication paid for by a clearly identified sponsor promoting ideas, organizations, or products. The most familiar outlets for ads used for the advertisement of the NPL by Nestlé are the broadcast (TV and Radio) and print media (news papers and magazines). The Nestlé also uses other advertising vehicles like billboards, T-shirts and, more recently the Internet. Nestlé has its own website which is giving the information about the different brand of the company. Nestlé is doing the selective demand advertising that is intended to stimulate demand for individual brands. In the advertisement the message is given that, There is one water, which gives you, hope, happiness and trust and that water is Nestlé Pure Life. It is pure, safe, and healthy water. And in recent advertising campaign, their slogan is, JIYO! Kay yehi hay zindagi. On billboards the pictures of NPL advertisement seems so attractive, especially in summer season across the roads that it motivates the customer to purchase it immediately. Nestlé has the internal advertising department as well as hire the services of the external Media manager assisted by it’s assistant to devise all campaigns…… c. Sales Promotion It is demand-stimulating activity designed to supplement advertising. It is paid for by the sponsor and frequently involved a temporary incentive to encourage a sale or purchase. Many sales promotions are directed at consumer. Nestlé has designed it in away to encourage the company’s sales force or other members of the distribution channel to sell products more aggressively. Nestlé Pakistan limited arranges concerts, trade shows, event sponsorship, in-store displays, and discounts. In Nestlé, a separate sales department is working. The function of this department is to taking the sales orders, visiting the market, collecting the customer’s complaints and transferring to the concerned department. They also make sure the availability of the NPL to the consumer at right time and at right place. d. Public relations It encompasses a wide variety of communication efforts to contribute to generally favorable attitudes and opinions toward an organization and its products. Unlike most advertising and personal selling, it does not include specific sales message. The targets may be customers, stockholders, a government agency, or a special-interest group. Public relations can take many forms, including newsletters, annual reports, lobbying, and support of charitable and civic events. e. Publicity Publicity is also a promotional method used by the Nestlé. Publicity is specific form of public relations that involves news stories about organization or its products. Like advertising, it consists of an impersonal message that reaches a mass audience through the media. But several features distinguish publicity from advertising. The company does not pay for it and it has little or no control over this and it appears as news and therefore has grater credibility than advertising. The company seeks for good publicity and frequently provides the material for it in the form of news releases, press conferences, and photographs. When a picture of a company’s CEO appears on the cover of business publication and it accompanied by a flattering article in the magazine, it is often attributable to the efforts of the firm’s public relations department. f. Integrated Marketing communication Nestlé is using the integrated marketing communication system. In this, company is trying to coordinate all promotional efforts make an effective impact on the customer mind and to deliver a consist message. The Nestlé has incorporated several different promotional campaigns. Depending upon the objectives and available funds, it undertakes simultaneous local, regional, national, and international programs.
Activities of Nestle In September 1867 in Vevey Henri Nestlé developed a milk-based baby food, and soon began marketing it. The following year saw Daniel Peter begin seven years of work perfecting his invention, the milk chocolate manufacturing process. Nestlé's was the crucial cooperation that 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 Nestlé retired in 1875 but the company under new ownership retained his name as Farine Lactée Henri Nestlé.
In 1877 Anglo-Swiss added milk-based baby foods to their products and in the following year the Nestlé Company added condensed milk so that the firms became direct and fierce rivals.
In 1905 the companies merged to become the Nestlé and Anglo-Swiss Condensed Milk Company, retaining that name until 1947 when the name Nestlé 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 were operating factories in the United States, United Kingdom, Germany, and Spain. The First World War created demand for dairy products in the form of government contracts, and, 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-manufacture becoming the company's second most important activity.
Nestlé felt the effects of the Second World War immediately. Profits dropped from US$20 million in 1938, to US$6 million in 1939. Factories were established in developing countries, particularly in Latin America. Ironically, the war helped with the introduction of the company's newest product, Nescafé ("Nestlé's Coffee"), which became 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 the merger with Maggi, a well-known manufacturer of 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'Oréal in 1974. In 1977, Nestlé made its second venture outside the food industry, by acquiring Alcon Laboratories Inc.
In 1984, Nestlé'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 Nestlé.
The Brazilian president, Lula da Silva, inaugurates a factory in Feira de Santana (Bahia), in February 2007. The first half of the 1990s proved to be favourable for Nestlé. Trade barriers crumbled, and world markets developed into more or less integrated trading areas. Since 1996, there have been various acquisitions, including San Pellegrino (1997), Spillers Petfoods (1998), and Ralston Purina (2002). There were two major acquisitions in North America, both in 2002 – in June, Nestlé 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, Nestlé came close to purchasing the iconic American company Hershey's, one of its fiercest confectionery competitors, although the deal eventually fell through.[3] Another recent purchase included the Jenny Craig weight-loss program, for US$600 million.17
Ethical and Sustainable Efforts In 2000, Nestlé and other chocolate companies formed the World Cocoa Foundation. The WCF was set up specifically to deal with issues facing cocoa farmers, including ineffective farming techniques and poor environmental management (disease had wiped out much of the cocoa crop in Brazil). The WCF focuses on boosting farmer income, encouraging sustainable farming techniques, and setting up environmental and social programmes.
17 http://www.oppapers.com/essays/History-Of-Nestle/804154 Nestlé is a founding participant in the International Cocoa Initiative (ICI), an independent foundation set up in 2002 and dedicated to ending child and forced labour in cocoa growing, and eliminating child trafficking and abusive labour practices.[15] However, there is little evidence that Nestlé has reduced any of its child labour practices in countries such as the Ivory Coast.
In October 2009, Nestlé announced its Cocoa Plan. The company will invest CHF 110 million over ten years to achieve a sustainable cocoa supply. On 23 October 2009, Nestlé and CNRA (the Ivorian National Centre for Plant Science Research), signed a frame agreement for cooperation in plant science and propagation, with a target of producing 1 million high-quality, disease-resistant cocoa plantlets a year by 2012. The aim is to replace old, less productive trees with healthier new ones.
Recent activities: Nestlé included in FTSE4Good In 2011: Nestle were included in the Financial Times Stock Exchange Ethical Index (FTSE4Good), the only responsible investment index that has criteria on the marketing of breast-milk substitutes in addition to human rights and supply chain management.
Water award for Nestlé: On August 24, 2011 during World Water Week, Nestlé won the Stockholm Industry Water Award, organised by the Stockholm International Water Institute.
In 2011, Nestlé became a partner of the Fair Labor Association. The NGO will investigate whether children are involved in harvesting cocoa in Nestlé’s supply chain and propose solutions if this are the case. “Child labour has no place in our supply chain,” says EVP José Lopez
Maggi opening in Karnataka Nestlé India finished a CHF 73 million investment in record time to meet growing demand for Maggi noodles. The plant is an extension to the coffee factory at Nanjangud, Karnataka in Southern India, and created 630 jobs.
COMPARATIVE POSITION OF NESTLE WITH INDIA/ GUJARAT
OVERVIEW OF DAIRY SECTOR IN SWITZERLAND AND INDIA (GUJARAT)
India
India is the highest milk producer in the entire world. India is well known as the ‘Oyster’ of the global dairy industry, with opportunities galore for the entrepreneurs. It might be dream for any country in the world to capitalize on the largest and fastest growing milk and milk products' market. The dairy industry in India has been witnessing rapid growth with liberalization. As the economy provides good opportunities for MNCs and foreign investors to release the full potential of this industry. The main objective of the Indian Dairy Industry is to manage the national resources in a manner to enhance milk production and upgrade milk processing using innovative technologies.
The crossbred technology in the Indian Dairy Industry has further augmented with the surviving of the dairy units by increasing the milk production per animal. Then subsequently milk production has also increased at an reasonable rate while the benefits of an increase in milk production also reached the consumers from a relatively lower increase in the price of milk. The favorable price environment for milk producers for the Dairy Industry in India however appeared to have weakened during the 90's, a decline in the real price of milk being noticed after the year 1992. And then slowly increasing it is glory after 1992 to till now.
In India dairying from very much earlier is observed as an instrument for social and economic development. The country’s milk supply comes from millions of small producers, who are discrete throughout the rural areas. All these farmers maintain an average herd of one or two milch animals, comprising cows and/or buffaloes. Mostly ample labour and a small land base encourage farmers to practice dairying as an occupation subsidiary to agriculture. As income from crop production is seasonal instead dairying provides a stable which is a year-round income and also an important economic incentive for the small farmer.
India had marvelous milk production in 40 years and has become the world’s largest milk-producing nation with a gross output of 84.6 million tons in 2001. The Indian Dairy Industry has achieved this strength of a producer-owned and professionally- managed cooperative system, despite the facts that a majority of dairy farmers are illiterate and run small, minor operations and for many farmers, selling milk is their sole source of income. More than 10 million dairy farmers belong to 96,000 local dairy cooperatives, who sell their products to one of 170 milk producers’ cooperative unions who in turn are supported by 15 state cooperative milk marketing federations.
In India dairy industry has been practiced as rural cottage industry over the years. Semi-commercial dairy started with the establishment of military dairy farms and co- operative milk unions throughout the country towards the end of the 19th century. Since Independence this Industry has made rapid progress. A large number of modern milk and milk product factories have since been well-known. The organized dairies in India have been successfully engaged in the routine commercial production of Pasteur ized bottled milk for Indian dairy products.
The growth of Indian Dairy Industry during the last three decades has been inspiring, at more than 5% per annum; and in the 90's the country has emerged as the largest producer of milk. This is not a small achievement when we consider the fact that dairying in India is largely stringent that farmers in general keep dairy animals in ratio to their free crop and also are available for family labor with little or no purchased inputs and a minimum of marketed outputs. The existence of restrictive trade policy milk in the Diary Industry and the emergence of Amul type cooperatives have changed the dairy farming practices in the country. A farmer has gained the favorable price for their milk and for their production which was basically a self- reliant one is which is now being transformed into a commercial proposition.
In India Milk production is dominated by small and marginal land-holding farmers and also by landless labourers who in collective own 70% of the national milch animal herd. And as the crop production on 78% of the agricultural land still depends on rain, which is prone to both drought and floods, rendering agricultural income is very much uncertain for most of the farmers. Dairying, as a subsidiary source of income and occupation, is real relief to most of the farmers in the society. Usually one or two mulch animals enable the farmers to generate sufficient income to break the vicious subsistence agricultural-debt cycle.
The Operation Flood which is the successful Indian dairy development programmed has analyze that how food aid can be utilized as an investment in building the type of institutional infrastructure that can bring about national dairy development. Programmers like this, with similar policy orientations, may prove to be appropriate to dairy growth in in India.
India in the early 1950's was commercially importing around 55000 tones of milk powder annually to meet the urban milk demand. Most of the important developments in dairying have taken place in India in this century only.
Switzerland
Dairy farmers across Europe have been protesting against declining milk prices for months. The small-scale Alpine farms of Switzerland are among the producers rigid hit by the dairy crisis.
At a recent protest in the Swiss town of Fribourg, hundreds of tractors stopped traffic and angry dairy farmers swing cow bells and waved banners saying "ca suffit" (that's enough). It is one of just many demonstrations which have taken place over the past months throughout Switzerland. The farmers are angry about tumbling milk prices, caused by a combination of high production, decreased demand and a phasing out of milk quota.
According to Valentina Hemmeler from the farmer's union Uniterre, Swiss dairy farmers, once regard as the backbone of the country's agriculture, can't even afford to feed their cattle."We are here to demand a fair price for milk," she said, addition that the farmers were being paid approximately half of what they needed to cover the costs of production.
"The current price for milk is 0.55 Swiss francs (0.36 euro, $0.53), and we need one franc to go in front with production."
The traditional Swiss celebration of Desalpes – when the herds of cows are brought down from the high alpine pastures for the winter – is not such a big event as it once was. This is because the number of dairy farmers in Switzerland is already half what it was 20 years ago.
Nevertheless, the Desalpes at the village of Charmey, 30 kilometers south of Fribourg, is still a day of celebration, with the cows trying huge bells and crowns of flowers, and the farmer spruced up in traditional dress. The whole village comes is out to welcome them.
But despite the celebrations the atmosphere was strained at this year's Desalpes. In the village square where local produce was on sale, farmers simply gave their milk away.
"The price we are being paid per liter simply doesn't cover the cost of production any longer, said young farmer Bruno Cardineau, explaining the protest action."This is a quality product and the price should return that."
Swiss dairy farms have steep plots of land – which limits the size of the herds. This means overheads are high, and the farms aren't especially competitive. They are also usually family affairs, with fathers handing over the business to their sons. Farmer Brunoi Fahrni, with three young boys, is beginning to realize that's probably not realistic in the current climate.
Gujarat India has emerged today as the largest producer of milk in the world. This has been achieved through “operation flood” one of the world’s largest dairy development programs, which created strong linkages between the rural producers and urban consumers. The Indian dairy sector contributes a large share in the agriculture at Gross Domestic Product (GDP). The private sector companies counting multi-nationals were allowed to set up milk processing and product manufacturing plants. The basic idea underlying DE licensing was to encourage the competition in procurement and marketing of milk, thus increasing value for both producers and consumers. Now-a-days, Indian dairy industry will have to face the world dairy markets At the time in changing scenario Gujarat State is undergoing considerable modernization with latest technology. The present study deals with performance appraisal of co-operative dairy industry of Gujarat State which is engaged in dispensation and selling of milk and milk products. It will be right to study and analyze the performance of the district co-operative milk unions of Gujarat and to recommend measure to cost control and improve their profitability. For these purpose nine most important co-operative dairy units are selected which are associated with GCMMF. For analyzing the performance of dairy units of Gujarat state, the data related to all the nine district co-operative dairy units for the past ten years viz. 1993-94 to 2002-03 have been collected and various techniques of measuring performance like.
Major players in dairy sector
Sr Switzerland India Gujarat 1 Kongo Coffee Ltd. Nestle Amul Dairy 2 WR Carpenters And Amul Mehsana Dist Estats Cooperative Milk Producers' Union Ltd 3 Ramu Sagar Ltd. Britannia Mother Daier 4 Chin H Main & Sons Dynamix Dairy Sumul Dairy Ltd 5 Colgate Palmolive Sterling Agro Dudh Sagar Dairy Ltd 6 Kingston Ltd. Haryana Milk Food 7 Poultry Industry Ltd Mohan Food 8 Papindo Modern Dairy 9 BNG Treading K Dairy Company
Growth rate Amul in India The Gujarat Co-operative Milk Marketing Federation Limited (GCMMF), which markets the Amul brand has registered a 27.7 per cent growth in 2008-09 to post a record turnover of Rs 6711.31 crore. This is for the third successive year that Amul has posted double-digit growth rate. In 2007-08, the figure was 22.9 per cent. The 35th Annual Report 2008-09’ of Amul released on Friday in Anand, said the growth was registered mainly due to Amul’s sharp focus on the domestic market, despite the slump in global demand for dairy products and prices hitting an all-time low. The report said the co-operative has helped expand the rural economy, thereby defensive rural India from the worst impact of the economic meltdown. Giving specifics of Amul’s business last year, GCMMF Chairman P G Bhatol said the milk procurement in 2008-09 witnessed a growth of 14.87 per cent and averaged 87.19 lakh kilograms per day. The highest procurement was recorded during January 2009 at 114.24 lakh kilograms per day. To add to it, the sale of Amul milk pouches grow by 44 per cent in value terms, Ultra High Temperature (UHT) milk segment by 26 per cent, and Amul Processed Cheese by 25 per cent. Amul also claim that it has remained the number one icecream brand in India with a growth rate of 16 per cent. ‘Amulspray’, the co-operative’s instant milk food category, also grew by 20 per cent. The concept of Amul parlours initiated in 2002, also witnessed a capacity addition of more than 2000 parlours last year. This retailing business sales turnover of Rs 200 crore in 2008-09. Amul improved its exports slightly from Rs 125 crore in 2007-08 to Rs 133 crore in 2008-09, the report said. At present, there are 27,97,937 producer members of GCMMF and 13,328 village societies. GCMMF said it has chalked out a ‘Mission 2020’, a long-term plan envisaging a group turnover of Rs 27,000 crore to improve its milk procurement capacity to 195 lakh kg per day in the flush season by introducing relevant strategies in co-operative working, increasing productivity of milk cattle and installing high-tech processing infrastructure. The scheme also calls for providing nourishing feed to the milch animals in an effort to increase the milk production. GCMMF is planning to expand the cattle feed manufacturing capacity to more than four times to 12,000 MTs per day by 2020. All the member unions are part of this plan.
Nestle in Switzerland The world’s largest food company Nestle has posted 2012 first quarter sales growth of 7.2 per cent, owing to strong demand in emerging markets. Sales rose by 5.6 per cent to 21.4 billion Swiss francs (€17.8 billion) between January and March, the owner of brands such as KitKat and Haagen Dazs said. Chief executive Paul Bulcke said in a statement that 2012 was shaping up to be the “challenging year” the food giant had anticipated. “In many developed markets where consumer confidence is low, the trading environment is subdued while in most emerging markets, conditions remain dynamic and rich in growth opportunities, The company confirmed its full-year sales forecast of five to six per cent growth In the first three months of the year business grow by 13 per cent in emerging markets compared with 3.1 per cent in developed markets. There was weak demand for frozen food products in North America, but pet food sales were strong there. Maggi sold strongly in Africa as did Nescafe products in China, Nestlé said, while KitKat performed well in Japan. “The good growth in the first quarter together with the pricing effect for the rest of the year and a likely improved raw material environment in the second half, allows us to confirm our full-year point of view of delivering five to six per cent organic growth together with an improvement in the year-end margin and underlying earnings per share in constant currencies,” Nestle said. last year company posted a 9.5-billion-Swiss-franc profit, up 8.1 per cent from 2010. At its new annual general meeting shareholders elected chairman and chief executive of the AXA Group Henri de Castries to its board for a three-year term.
Market position
Amul in India In butter, cheese and saturated fast, Amul has remained the un disputes market leader in india since its inception in 1995. Today the Market Share of Amul ice cream is 38% Share against the 9% market share of HLL thus making it 4 times largest than its closest competitor. Nestle in Switzerland
NESTLE brand has had a great distribution. Nestle to start with launched its Nestle Milkmaid and Nestle Everyday range. The Everyday milk powder which is popular even now among people all over India especially in rural India. Then Maggi Noodle was launched.Another most popular brand they have is range of beverages ( Nescafe classic , sunrise) The other range is chocolates and confectioner. Soley on the basis of the quality products and not a very “India” image of the brands, they have surely endured and have been quite popular. Nestle has great marketing strategies that maintains good distribution reaching out to the mass. However the number and variety of products and category ranges are limited here
Sales turnover
Amul In India GCMMF, chairman, Parthibhai G. Bhatol said that this performance is even more extraordinary, when viewed from the perspective that the organization was able to achieve 1 billion dollar turnover in the 33rd year of its configuration while it took only just four more years to add another one billion dollar to its turnover. Turnover of GCMMF registered CAGR of 23% during the last 4 years. 'GCMMF plans to achieve turnover of Rs 12,000 crores in the year 2011-12," he said. year 2010-11, GCMMF paid Rs 8345 crore to its 30 lakh farmer members. Payout to farmers also registered 23 percent CAGR in the last 4 years.
This time and again high growth is also reflected in the performance of its various mega-brands as the organization further improved its market-share in different product categories. Sales of Amul butter have also shown a growth of 26 percent in 2010-11. Sales of Amul milk in pouches have grown by 34 percent. Sales of Amul processed cheese have shown growth of 29 percent. Amul beverage range including flavoured milk, buttermilk and lassi has shown a growth of 28 percent over the last year. Sales of Amul masti dahi also grew by 39 percent. With improved focus on fresh and fermented products, GCMMF launched Amul Probiotic Lasee in ready to drink cups, Amul Probiotic Buttermilk in PET bottles and flavoured yoghurt under the brand name Amul Flaavyo. In the infant milk food category GCMMF recently initiated its largest distribution expansion exercise to extend its reach to smaller towns and semi-urban areas. Through completion of its new 'hub & spoke' model of distribution, GCMMF plans to appoint 150 new super-distributors and extend its reach to 3,000 additional smaller towns & semi-urban areas in 2011- 12. Retailing continues to be an important strategic initiative for GCMMF. During the year 2010-11, 1000 new Amul Parlours have been added, taking the total strength to 6000, thus reinforcing the wide popularity of the concept. Apart from 160 parlours at railway stations and 177 parlours operating at various centers of excellence, Amul also has 375 air-conditioned Ice-cream scooping parlours. In order to align supply chain strategy with corporate objectives across key lines of business in a timely & cost-effective manner and to achieve superior supply chain. Performance, GCMMF successfully implemented SAP ERP application in 2010-11. It shows growth of dairy sector in India.18
Nestle in Switzerland
Nestle India has reported a sales turnover of Rs 1,962.70 crore and a net profit of Rs 345.59 crore for the quarter ended Dec '11.
For the quarter ended Dec 2010 the sales turnover was Rs 1,675.52 crore and net profit was Rs 203.40 crore.19
18 http://articles.economictimes.indiatimes.com/2011-06-21/news/29683465_1_gcmmf-flavoured-sales-of- amul-milk
19 http://www.moneycontrol.com/news/results/nestle-dec-11-sales-at-rs-196270-crore_668263.html
Quarterly Results of Nestle India ------in Rs. Cr. ------Dec '10 Sep '11 Dec '11 1,969.2 Sales Turnover 1,675.52 1,962.70 7 Other Income 9.34 5.92 10.05 1,975.1 Total Income 1,684.86 1,972.75 9 1,558.9 Total Expenses 1,345.98 1,579.25 7 Operating Profit 329.54 410.30 383.45 Profit On Sale Of Assets ------Profit On Sale Of Investments ------Gain/Loss On Foreign Exchange ------VRS Adjustment ------Other Extraordinary Income/Expenses ------Total Extraordinary Income/Expenses -13.49 -- -- Tax On Extraordinary Items ------Net Extra Ordinary Income/Expenses ------Gross Profit 338.88 416.22 393.50 Interest 0.10 2.34 3.31 PBDT 325.29 413.88 390.19 Depreciation 35.79 39.35 44.60 Depreciation On Revaluation Of Assets ------PBT 289.50 374.53 345.59 Tax 86.10 113.35 -- Net Profit 203.40 261.18 345.59 Prior Years Income/Expenses ------Depreciation for Previous Years Written Back/ Provided ------Dividend ------Dividend Tax ------Dividend (%) ------Earnings Per Share 21.10 27.09 35.84 Book Value ------Equity 96.42 96.42 96.42 Reserves ------Face Value 10.00 10.00 10.00 Source : Dion Global Solutions Limited
SWOT ANALYSIS
SWOT Analysis Of Amul Strengths 1. The company is having Indian origin thus creating feeling of oneness in the mind of the customers. 2. It manufactures only milk and milk products, which is purely vegetarian thus providing quality confidence in the minds of the customers. 3. It is aiming at rural segment, which covers a large area of loyal customers, which other companies had failed to do. 4. People are quite confident for the quality products provided by Amul. 5. Amul has its base in India with its butter and so can easily promote chocolates without fearing of loses. 6. The prices of chocolates of Nestles are comparatively cheap as compared to other companies.
Weaknesses 1. There are various big players in the chocolate market, which acts as major competitors restricting their growth. 2. Lack of capital invested as compared to other companies. 3. Improper distribution channel in India.
Opportunities 1. There is a lot of potential for growth and development as huge population stay in rural market where other companies are not targeting. 2. The chocolate market is at growth stage with very less competition so by introducing new brand and intensive advertising there can be a very good scope in future.
Threats 1. The major threat is from other companies who hold the majority share of consumers in Indian market i.e. Cadburys and Nestle. 2. There exists no brand loyalty in the chocolate market and consumers frequently shift their brands. 3. New companies’ entering in Indian market like Fantasie fine poses lot problems for Amul.
SWOT Analysis of Nestle Strengths 1. Ability to leverage strong brand name to make generate sales. 2. Ability to Customize the Product to the local market conditions. 3. Strong global operations with diversified revenue base. 4. Research and development Capacity.
Weaknesses 1. Increasing instances of product recall hampering brand equity.
Opportunity 1. Transition to a nutrition and Wall-being Company. 2. Focus on developing and emerging economies. 3. Booming out of home eating market.
Treats 1. Compliance issue resulting in penalty payment. 2. Macro economy factor. 3. Allegation an ethical business Activity.
PRESENT POSITION AND TREND OF BUSINESS (IMPORT- EXPORT) WITH INDIA/GUJARAT DURING LAST 3 TO 5 YEARS
PRESENCE OF NESTLE ACROSS INDIA
NESTLÉ PROCESSING UNITS IN INDIA
After nearly a century-old relationship with the country, today, Nestlé India has presence across India with 7 industrialized facilities and 4 branch offices spread across the county.
Nestlé India’s first manufacture facility, set up in 1961 at Moga (Punjab), was followed soon after by its second plant, set up at Choladi (Tamil Nadu), in 1967. Accordingly, Nestlé India set up industrial unit in Nanjangud (Karnataka), in 1989, and Samalkha (Haryana), in 1993. This was succeed by the commissioning of two new factories - at Ponda and Bicholim, Goa, in 1995 and 1997 correspondingly. The seventh plant was set up at Pantnagar, Uttarakhand, in 2006.
The 4 branch offices in the country assist facilitate the sales and marketing of its products. They are in Delhi, Mumbai, Chennai and Kolkata. The Nestlé India head office is situated in Gurgaon, Haryana.
NESTLE PLANTS IN OVERALL INDIA
Nestle India is an ancillary of Nestle S.A. of Switzerland. Nestle India produced a range of food products such as baby food, milk products, beverages, ready dishes & catering serve, and chocolates & confectionary. Some of the famed products of Nestle are NESCAFE, MAGGI, MILKYBAR, MILO, KIT KAT, BAR-ONE, MILKMAID, NESTEA, NESTLE Milk, NESTLE SLIM Milk, NESTLE Fresh 'n' Natural Dahi and NESTLE Jeera Raita.
Nestle was established in 1867 in Geneva, Switzerland by Henri Nestle. Nestle's primary manufactured goods was "Farine Lactee Nestle", and kid cornflakes. In 1905, Nestle obtained the Anglo-Swiss Condensed Milk Company. Nestle's correlation through India in progress 1912, when it initiate operate as The Nestle Anglo-Swiss thick Milk business (Export) Limited, bring in and advertising final goods in the Indian market.
After independence, in respond to the then economic rule, which highlight local manufacture, Nestle shaped a corporation in India, specifically Nestle India Ltd, and set of connections its primary factory in 1961 at Moga, Punjab, somewhere the administration required Nestle to expand the milk economy. In Moga, Nestle skilled and recommend farmers concerning basic farming and animal husbandry perform such as growing the milk give way of the cows in the course of enhanced dairy farming technique, irrigation, scientific produce management perform etc. Nestle set up milk assortment centres that make certain punctual collection and paid reasonable prices. Thus, Nestle altered Moga into a prosperous and energetic milk region.
In 1967, Nestle set up its next place at Choladi (Tamil Nadu) when a pilot undergrowth to procedure the tea grown in the region into soluble tea. Nestle release its third plant in Nanjangud (Karnataka) during 1989. Subsequently, Nestle India release plant in Samalkha (Haryana), during 1993 and two in Goa taking place Ponda, and Bicholim during 1995 as well as 1997 correspondingly. Nestle India is now place the 7th place on Pant Nagar inside Uttarakhand.
Nowadays, Nestle is the world’s biggest and most expand Food Corporation. It have about 2,50,000 workers universal, activate 500 industrial unit in concerning 100 countries and suggest over 8,000 products to millions of consumers across the world. NESTLE IN GUJARAT
Nestle India Ltd, a secondary of Nestle SA, the Swiss main into cooking and drink, strategy to expand almost Rs 500 crore going on a largely Maggi noodles along with confectionery-manufacturing place in the ground in Gujarat after that time.
This would exist the eighth place of Nestle India within the nation.
It as well has Bihar going on its radar used for the ninth place at the same time as part of its hostile business extension strategy within the western as well as eastern situation with repetition capacities. So far, Nestle India has paying attention on top of the southern as well as northern situation used for dairy and drink separation.
When the Chairman of FICCI cooking dispensation Committee, Mr Waszyk as well for a split second convene the head priest, Mr. Narendra Modi through the commerce body’s National administrative team conference inside Gandhinagar previous week. He said Nestle is survey for 50-100 acres, preferably in the region of Ahmedabad, for its projected plant.
At mid 2012, they are in a superior phase of research and they would finally confirm the strategies. They would start to build up in 2014-15 if things are go as per their plans”, he said.
From locally Gujarat many companies get wheat like nestle India, Maggi Noodles. However the nestle has no any plans as current for expand dairy products or in dairy sector in Gujarat. Wherever Amul is in superior position in dairy sector.
From one lakh farmers including Punjab, Haryana, Maharashtra and Rajasthan Nestle get 13 lakh liters milk from them for its products.
In 1961, Nestle India had association its first production potential at Moga in Punjab. Nestle has seven expanded plants in Goa, Uttarakhand, Karnataka, Tamil Nadu, Himachal Pradesh, Haryana and last one set to release in March, 2012.
Nestle R&D department is at Manesar, Haryana will begin next year. Nestle at present works in four divisions:
1. Milk and Nutrition 2. Coffee 3. Foods 4. Beverages and confectionary
Nestle’s net sales were R.s 6255 crore in 2010 and from that it get net profit of R.s 819 crore. The Nestle group sales were nearly CHF (Swiss france) 110 billion in 2010.
NESTLE INDIA
Nestle India is exports mostly through the shipments to other nestle business units, like Nestle India is export coffee to Nestle Russia and Nestle Egypt and also export of cooking products to western European as well as American markets.
Currently, nestle is imported its products in domestic market foremost price in India. It is beneficial to many Indians who are desire frozen foods as compare to spending hours in the kitchen buy the imported ones at affordable rates.
Nestle India is imports stood at Rs. 3842 million and exports are Rs. 3537 milion. And one thing is that not all the products exported were denominated in a foreign currency.
POSITIVE ON VOLUME GROWTH; CAPEX PLAN REFLECTS MANAGEMENT CONFIDENCE
Nestle India's market analyst meet reaffirmed their confidence in the vast expansion potential in the Indian processed foods market and the company's resolution to confine the same. Their key takeaways:
. Management is very optimistic on volume expansion prospective. It has designated capex of Rs17b across sections (they approximation over the next 24 months); greenfield units are also under reflection, and the existing capex program has full support of the parent.
. The R&D center at Manesar will be set up by the parent company (cost: Rs2.5b) and will commission by 2012. This will be the parent's 30th R&D center and demonstrate its assurance in India's expansion potential.
. Raw material expenses remain a challenge; milk prices have not come off as expected earlier, prices of coffee (up 34% QoQ) and palm oil (up 31% QoQ) have spurted recently while other input prices are holding firm. Though the company has been taking sensible price increase, the situation is challenging.
. Nestle's capacity has improved by 16.3% during 9MCY10 (19.6% in 3QCY10) despite a late Diwali and reduced delivers of milk products in fewer profitable channels. ready Dishes and Chocolates & Confectionery volumes have improved by~25%.
. Nestle India has happening broaden its product range, with latest launches in Beverages (Sjora Flavored Milk), Chocolates (Yorkie, Nestle Selections, Toffee Crisp, Aero and Black Magic), Milk Products (Nestle Double Toned Milk, Vanilla Milk, Cerelac and Nan Pro 1).
. Management highlighted that they would look at funding the capex by falling the payout ratio and increase both domestic and offshore debt.
EXPECT STRONG GROWTH TO CONTINUE; VALUATION PREMIUM TO SUSTAIN
They stay affirmative on the rising growth story of Nestle India. They consider that greater capex plan is a indication of further acceleration in expansion rates in the coming years. They expect rivalry to raising but strong brands and technology hold up from parent will facilitate the company to continue of the pack.
They are modifying their estimates to factor in
1. superior volume-led sales traction (19% v/s 17% earlier), 2. continual input cost pressure (flat EBITDA margins v/s 110bp expansion earlier), 3. better depreciation on account of the capex plan (Rs2.3 CY12 v/s Rs1.8b earlier), and 4. Interest burden on loans rose for capex Rs228m v/s Rs18m earlier).
Their EPS estimation placed downgraded by 7% to Rs103.1 for CY11 and by 5% to Rs125.5 for CY12. Nestle remains one of the best consumer plays, with Strong growth visibility. We estimate 21% PAT CAGR over CY09-12. Maintain.
DOMESTIC VOLUMES UP 18.2%; CHOCOLATE AND CONFECTIONERY VOLUMES UP 25% IN 9MCY10
Domestic capacity has increased 18.2% for 9MCY10 while export capacity have increased 12%. Overall capacity has increased 16.3% for 9MCY10 and 19.6% for 3QCY10. Capacity growth would have been higher but for (1) Planned decreased in inferior margin milk product sales to a small number of channels (armed forces), and (2) A late Diwali (holdup the boost in sales of chocolates and gift packs to 4QCY10). Their approximated aspect in volume growth of 19% in CY10 and 17% for CY10-12.
POLICIES AND NORMS OF INDIA FOR IMPORT OR EXPORT TO THE SWITZERLAND INCLUDING LICENSING & TAXATION
The Indian foreign trade is regulated by the Foreign Trade Policy and it is framed by the Ministry of Commerce and Industry (Directorate General of Foreign Trade). India still remains comparatively a secluded market in the world, due to its higher import tariffs and some increase in the obligation of non-tariff barriers. The tough bureaucratic procedures, lack of consistency in certain policies, rigid labor laws, and inadequate infrastructure in the country make slow down in the utilization of India’s trade and investment potential.
For a Swiss exporter, it may be valuable to note that the Indian market has, like many other countries, some unique features, e.g., there is a ‘cultural gap’ about many business practices, such as practical approach towards administrative procedures, importance of “unwritten” information etc.
The Swiss Business Hub India is at the disposal of the Swiss companies, which are intending to do business in India or already doing business in India, for all possible assistance and guidance to help promote their business activities. Customs even if In India has brought down its import duties since the opening up of its economy from 1991 onwards, the same are still high as compared to import duties inhabitable, for example, in other emerging economies of Asia. By gradually dismantle the high import tariff wall, India has not only been fulfilling its obligations under the WTO, but is approaching its export industries to be competitive in the international market and preparing its local industries to face foreign competition.
The import duty structure in the country remains a complex one. In general, the following four duties/cess are levied on imports: a) Basic Customs Duty (BCD): The peak rate is fixed at 10% for most of the non- agriculture items, however goods such as food products, liquor, automobiles etc. attract higher duties up to 150%. On the other hand, there are many products (e.g. machinery and equipment) which attract lower duty of 7.5%. BCD is calculated on assessable value (CIF value + Landing Charges @1% of CIF value) b) Countervailing Duty (CVD): 0-20%, (mainly 10.30%, inclusive of 3% cess, and is calculated on assessable value+ a) c) Special (education) Cess: 3% (calculated on BCD+CVD). d) Special CVD: 4% (is calculated on assessed value +a +b +c)
IMPORT AND EXPORT REGULATIONS The external trade of India is regulated by the Foreign Trade Policy and which is framed by the Government every five years. Though this policy is announced for a period of five years, the government reviews it every year and makes amendments/new announcements, if measured necessary. This process of amendment sometimes causes inconsistency in a policy matter that could impact the business plan of a company, including the one that is already operating in the country. Presently, the said Policy is mainly focused on the promotion of Indian exports.
Any Indian resident person/entity who intends to export from or import into India needs to obtain an Importer-Exporter Code (IEC) from the Directorate General of Foreign Trade. The imported goods need conformity with the domestic laws, technical specifications, regulations, environmental and safety norms wherever prescribed and as applicable to locally produced goods. In order to promote foreign trade, mainly export from India, there are a number of schemes run by the government.
For example Special Economic Zones which offer a number of incentives, including tax incentives, for setting up export units and offshore banking units.
Currency regulations A visitor to India is allowed to bring in foreign exchange without any upper limit by declaring to Customs authorities on his/her arrival the relevant particulars in the Currency Declaration Form (CDF). The visitor needs not give any declaration in the CDF, if the gathering value of the foreign exchange brought in by him/her in the form of exchange notes, bank notes or traveler’s cheques does not exceed US$ 10,000 or its corresponding, and/or the value of foreign currency notes does not exceed US$ 5,000 or its equivalent. Such visitor will be permitted by Customs to take out his/her unspent foreign currency provided (i) The amount being taken out does not exceed the amount that he/she had declared to the Customs authorities, in form CDF, on arrival in India, or (ii) The amount being taken out of India in foreign exchange is less than the amount for which a declaration in CDF is required to be made at the time of arrival in India to the Customs authorities. (iii) with reference to import of currency through post, the Reserve Bank of India has permitted the Customs authorities (Deputy/Assistant Commissioner of Customs) to allow import of both Indian and foreign currencies received by residents by post, provided the value does not exceed INR 5000 and subject to some conditions for maintenance of records of such remittances.
The Indian rupee is also fully convertible on the capital account for the foreign investors (e.g. FDIs). The repatriation of the investment capital is acceptable, except where the original investment was allowed on the specific condition that it would not be repatriated.
the repatriation of business profits (dividend/interest) and royalty is also acceptable. In the case of sale of shares by a foreigner/non-resident Indian to a resident Indian, the amount can be repatriated subject to fulfillment of certain conditions.
The dissolution/winding up of a company may be either voluntary or following a decision by the High Court. In such cases, the RBI considers the payment of net proceeds to foreign partners of a dissolved company on a case-by case basis.
BIS recognize CB Test Certificates issued under IECEE-CB Scheme for the selected product categories for Grant of License under its Product Certification Marks Scheme. BIS also operate a product certification scheme for Indian importers. Such an importer should fulfill the following conditions: 1) The importing unit should arrange a fully equipped laboratory for testing the product for its consistency to Indian Standard. 2) The cost of inspection and testing shall be borne by the applicant firm. BIS may require any conditions to ensure fulfillment of the product to given Indian quality standard. These conditions may include (i) Pre-certification of components / raw materials; (ii) A visit to the original product manufacturer property to evaluate their in-process quality controls. In such a case, the applicant will have to accept expenses of travel, stay, miscellaneous expenses like visa etc. and per diem as applicable by BIS regulations for a team of officers (normally not more than 2 officers) for their visit to the manufacturing premises.
The Indian importer would have to apply to BIS looking for a license, each of the notify products it intend to import. BIS would record the application after satisfying itself that all the above conditions are met and that the applicant importer has installed the test facilities. Based on the recording of application, the Customs can clear the shipment, which will be tested by the BIS and a license issued if the product conforms to the relevant Indian standard. The BIS maintains, through its surveillance operations, a close vigil on the quality of goods certified.
The Standards of Weights and Measures Rules 1977 in India have the provisions for labeling on the packages of the products covered under these rules. Any of the products covered under these rules, when imported into India, shall be subject to compliance of the said provisions before the same is cleared by Customs for home consumption. In particular, all pre-packaged commodities, which are imported into India and are meant for retail sale, shall carry, inter alia, the following declaration on the packages: (i) Name and address of the importer. (ii) General or common name of the commodity packed. (iii) Net quantity in terms of standard unit of weights and measures. If the net quantity in the imported package is given in any other unit, its corresponding in terms of standard units shall be declared by the importer. (iv) Month and year of packing in which the commodity is manufactured, packed, imported. (v) Maximum retail sale price at which the commodity in packaged form may be sold to the final consumer.
Taxes Indian legislation relating to taxes is contained in different Acts relating to the nature of the tax (e.g. Income Tax Act 1961 or Customs Tariff Act 1975). Indian tax rates as well as customs duties are being reviewed and amended, if required, on an annual basis, when the Indian budget is prepared (usually in February/March of each year). The Indian fiscal year run from 1st April to 31st March. India has a broad variety of taxes, especially a diversity of indirect taxes, levied partly by the Centre and partly by the States.
A summary of India’s income taxes is given here below, but remember that, for a Swiss company, the Swiss-Indian DTAA is partly offering lower rates than the generally applied tax rates.
The Swiss-Indian Double Taxation Avoidance Agreement/DTAA (1994) defines the specific tax competences and tax rates applicable to Swiss companies doing business in India and vice-versa to Indian companies in Switzerland. As per the Protocol signed later on to amend the Swiss Indian DTAA, the current rate of Indian withholding tax on incomes earned by Swiss companies in India are: Dividend 10% (in India, the recipients do not pay dividend tax) Interest 10% Royalty 10% Technical Service Fee 10% As per recent amendment made in Indian tax law, every recipient including a non- resident/foreign company, has to furnish a Permanent Account Number (PAN) to the payer in India. If the recipient fails to provide the PAN, withholding tax rate would increase to 20% on aforesaid payments. By obtaining the PAN, Swiss companies can enjoy lower withholding tax rates specified in the bilateral treaty.
Personal Income Taxes - Indian residents are taxed at progressive rates (10%, 20% or 30%); the maximum rate of 30% is applicable to an annual income of INR 800’000.-- or more (i.e. approx. SFr. 18’000.-- or more). The detailed information is available at the website of the Income Tax India has currently only about 4 percent of its population paying income taxes. The Indian Government’s efforts at widening the tax base have not been very successful so far. Corporate taxes are levied at flat rates, as follows: Domestic company, incl. joint venture/subsidiary 30% (on its world-wide income) in India Foreign company 40% (only on that income which is derived out (e.g. Branch/Project office in India) of its business operations carried out in India) The domestic and foreign companies are liable to also pay 7.5% and 2.5% surcharge respectively, if the income exceeds INR 10 million.
Additionally, education cess of 3 per cent is to be charged on personal and corporate income taxes (including surcharge). Thus the current effective rate of corporate tax for domestic and foreign companies is 33.22 per cent and 42.23 per cent respectively. Short-term capital gains are taxed at the normal corporate income tax rates, with the some exceptions.
Indian capital gains taxes: In general, the Long-term capital gains are taxed at a basic rate of 20%. Alternatively, a security transaction tax is levied, which is at a rate of 0.017 - 0.25 per cent (varies according to the type of transaction made at the stock exchange). Any firm, corporation or individual, which is not resident in India, can obtain advance rulings on any matters relating to Income Tax. Some other taxes on manufacturing/business activities: - Dividend Distribution Tax (payable only by domestic company) - Excise Tax (manufactured goods) - Customs Duty (imported goods) - VAT / Sales Tax - Central Sales Tax - Service Tax
Taxes applicable to expatriates in India - A foreign national in regular employment with an Indian company is liable to pay tax on his/her earnings, wherever received. Any other income is taxable only if received in India. For an expatriate in India, it makes a lot sense to ask the advice of an Indian tax expert in order to structure his/her earnings in such a way that tax benefits/rebates can be fully availed of.
In accordance with the Swiss-Indian Double Taxation Avoidance Agreement, the remuneration derived by a Swiss resident in respect of employment, services or activities performed in India shall be taxable in Switzerland only, if the Swiss is present in India for a period or periods not exceeding 183 days in the aggregate in any 12- month period, and the payment is paid by the employer who is not resident in India and it is not borne by a permanent establishment which the employer has in India.
POLICIES AND NORMS OF SWITZERLAND FOR IMPORT / EXPORT INCLUDING LICENSING & TAXATION
Import Clearance Information
Process of clearance Switzerland’s Customs consent is done electronically by a system called Model 90 which provides a link between the importer's customs broker/agent and Customs. A formal entry is mandatory for all non-document shipments. Entries are submitted through electronically, a invoice and a waybill are compulsory for all goods and not for goods which are classified as non-dutiable. Manual entry is used only for goods that go along with a person entering Switzerland.
Before submitting electronically entry to Customs, the shipment detail are being reviewed by the customs broker and uses the description and goods weight are being calculated by the total sum of tax and duty and to determine any contents are subject matter to regulatory controls such as licenses. Payment of duties and taxes are being arranged by the customs broker Customs requires payment before the customs clearance. Importer's Centralized Customs Clearance (ZAZ) no. and Value Added Tax (VAT) number on customs documents helps broker decide if the importer pays the Customs directly through a deferred account or the broker will submit payment on importers behalf.
Customs review electronic entry & responds with following clearance messages, generally in 60 minutes. Free / without (Entry is being done by using electronical submission of information.) With/Free (Entry is allowed, but other documentation must be submitted within regulatory deadlines.) Blocked (Without the examination of documents and shipment contents entry is not allowed.)
The data for how frequently entry types are applied are as follows: Free without & Free with = ca. 80.0% Blocked = ca. 20.0% Import inspection = ca. 2%
Shipments those are selected "free" or as “with / free" are entitled for instant release. For shipments selected as "with /free" or "blocked", the customs broker will submit essential documents in their ownership. For "blocked" shipments, if Customs or the regulatory agencies set extra conditions such as an inspection that must be accomplished to the customs clearance, the customs broker will support their client in satisfying the requirements.
Prior to arrival of shipment the majority of goods are released and the Switzerland allows entries to be submitted. Swiss importers required to keep documents related to the transaction for five years from the entry date. These documents may be important for purpose of customs audit. Importers who fail to keep records are fined.
Import Controls The imported goods are the regulatory controls and a license of import or consent is required, the importer has to request for import permission from the import department or through agent. Although all goods are not require that license to be obtained prior to import.
Some goods which are regulated are allowed for weight tolerance exception which allows importation of shipments having low weight without a license. Though the limit of tolerance limits of goods are based on gross weight, Customs does sanction tolerance exemption for few goods based on net weight.
Authorities of customs are required to give extensive performance and/or random review of all goods. Customs authorities are obliged to handle the full process of investigating the goods which are selected for examination. Customs authority insures consistency in application of all essential restrictions and keeps extra care in their determinations. While examining, if goods are found to be pornographic or of violent nature they are detained and/or excluded. They are required to inform immediately to public prosecutor’s office in Kanton – (Province) where the public prosecutor’s office having jurisdiction, where the addressee resides. Films require for import permit or license is not subject to these measures. Government regulations made through due to detained goods and punishable by their laws. The complaints regarding these are by customs authorities are not permitted.
Duties of Import The goods which enter or exit Switzerland must clear customs. Imports are related to duty, excise duty & value added tax except for those exempted under law. In few cases imports may also be anti-dumping duties, which result in the obligation of additional rates of duty. Customs will release goods for import only when the duties and taxes are paid before.
Duty Rates Duties of customs are assessed at a defined rate (a set amount) and are generally based on the gross weight of the product which is imported inclusive of packaging. Though customs use their discretion and duty on net weight in its place of the gross weight for particular goods like tobacco, watches, jewelry etc. These goods are very high duty rates, and it is recommended to exporter to include both net and gross of all products on the waybill and invoice when possible. Duty rates vary’s on the specific goods and are available in the Switzerland’s Harmonized Tariff Schedule. The high rate is as 3,999 CHF/kg gross, duties of import customs are generally between 0 & 40 CHF/kg gross. In some goods, the additional rates of duty also imposed.
Antidumping Under article VI of the GATT rules and WTO standards for complying with reference to antidumping measures.
Excise Duties Excise taxes apply on automobiles, their parts & mineral oils, tobacco products in Switzerland.
Additional Duties Switzerland has the right to apply added duties on some goods including agricultural goods for animal feed.
Import taxes Value Added Tax (VAT) Value Added Tax is levied on all goods imported. The VAT rate is 7.6%, but few goods are exempted from VAT and are eligible for a reduction. On the transaction value of the goods, the VAT is calculated plus the amount of customs duty plus all charges to the port of entry include freight and insurance. Importers have a VAT number. Though at the time of export and entry the VAT number is not required.
Refunds Importers are sometimes eligible for VAT refund from Switzerland when the goods that are re-exported within 60 days of import. The importers have to provide sufficient proof that the goods were imported and again re-exported within the 60 days period for which they are eligible for VAT refund. Some goods are entitled for refunds on customs duties depends on the situation and the refund claim is submitted within deadlines.
Other Taxes Levied On Import Goods Additional taxes is been imposed on certain goods in Switzerland. On alcoholic products the monopoly tax is applied. Tax on products subject to veterinary and phytosanitary controls. Additional taxes also levied on the import of mineral oils, tobacco, and lubricants, vehicles, and organic chemicals.
Customs Fees There are added fees assess while examination of goods is requisite, this applies to many commodities such as plants and their products and animals. Exchange Controls And Consular Fees Switzerland has no exchange controls in place. And no consular fees aswell. Technical Barriers to Trade (TBT's) Switzerland apply control measures and has specific assigned agencies to implement these controls for Precious Metals and Mineral/Fuel Oils.
Import Prohibitions in Switzerland Prohibited Goods Goods that are completely prohibited includes: Â Â Radar Detectors. All products contain the biocide dimethylfumarate (DMF). Products of animals from third countries.
Restrictions on Import Any international destinations the items are not acceptable for carriage is followed: Depending on destinations the additional restrictions may apply. For particular goods the various regulations for clearance applies to customs clearance and the extension of the transit time. 1. APO/FPO addresses. 2. Cash on Delivery (C.O.D) shipments. 3. Human body parts, Pornographic and obscene. 4. Explosives such as Firearms, weaponry, Shipments that cause damage. 5. Perishable food stuffs and goods which requires refrigeration. 6. Plants and plant material, Lottery tickets and any gambling instruments are prohibited, Live animal. 7. Money such as cash, any coins, or any country currency, negotiable instruments such as stocks or bonds and paper money. 8. Special permit or licenses required for the exportation, transportation and importation. 9. Shipments processed are: Advance arrangements being made or the duty drawbacks are claimed, import bonds which are temporary acceptable by the broker, export permit for US drug Enforcement admin., Carnets Letter of credits for shipments are being prohibited except the LC for courier receipt., the hazardous wastes and medical wastes.
General Export Clearance Information Clearance Process In Clearance process, there is a Customs clearance of the general export goods, which is generally done through a system called Model 90. It helps to connect between Customs and the importer’s customs dealer. (Manual entry is generally used only for those goods that go together with a person exiting Switzerland and not for every person who is a part of Switzerland). There are non-document shipments which are required for all formal export entry. Even though entries are made electronically for the various exports, a commercial invoice is a requisite and compulsory for all goods, with the exclusion of few goods that are classified as documents.
There is a customs broker who is accountable of the contents which are under the regulatory controls for example an export license, only before submitting the entry electronically to customs. Goods that were imported for the interim are excluded from the electronic submission process. The customs broker of the exporters will submit their customs documents manually to their customs officials at their port of export for those shipments.
The review for the electronic entry and answer to the following clearance messages is done by the customs, as a rule in 60 minutes or less than that:- Free/ without -Shipments done through electronically submitted information. Free/ with-Shipments is permissible, but added documents must be submitted within dictatorial deadlines. Blocked-Shipments is not allowed until the documents, shipment contents, etc. are examined and accepted.
There are only two clearance messages i.e. “Free” and “Free/ with” exports are actually qualified for the direct export. If any documents are required for free and blocked shipment, the same would be submitted by the customs broker, which is in their possession. If any additional conditions are been set by the customs or any of the regulatory agencies then it has to be accomplished and fulfilled prior to customs clearance and the customs broker will guide their client in fulfilling the required conditions i.e. inspection or license.
Commercial documents relating to a transaction are required to be preserved by the Swiss exporters for at par 5 years from the date when the clearance of the exports is made. These commercial documents are very essential for the customs audit purposes, and the exporters may be fined, for the negligence or irresponsibility in preservance for keeping the records of the commercial documents.
Examination of Export Cargo Export Cargo is subject to customs control and is legally liable for the examination. Export cargo is examined by the various customs officers for a variety of reasons such as to verify the goods with the documentation made, to identify the prohibited goods, and also to scrutinize the various documents, etc.
General Export Clearance Process Export Controls Exported goods are subject matter to various regulatory controls and license for the export is required. The exporter is liable for obtaining the export permission from the appropriate department or the bureau. Some goods which are qualified for the low weight tolerance exemption are allowed for the exportation of shipments without a license or consent. Tolerance limits are decided on the basis of gross weight, but customs department allow exemption for certain goods based on net weight too. Goods subject to Export Controls The lists of goods which are prohibited by law and are subject to export approval and/or must meet up other regulatory requirements are:- Certain farming produce(agricultural goods) Dual-use goods i.e. both armed forces and civilian uses Medicines(Drugs) and other chemicals Fuels Certain knives Motors, turbines, etc. Articles made of metals like steel/ iron, Copper Radar and other navigation devices Vehicles ( All Modes of Transportation)
Export Prohibitions of Switzerland Restricted Goods The goods which are prohibited include the following: Radar Detectors (Although it is prohibited for import and export, it may be exported or imported if properly requested and declared to customs abiding proper instructions).
General Export Restrictions The following are the various things which are restricted to any international destinations for carriage except it is specified for:- Army Post Office Addresses/ Fleet Post Office Addresses Cash On Delivery Shipments Human organs and their body parts, and animal organs and their body parts Explosives (Class 1.4 explosives acceptable for carriage to countries like Canada, Germany, France, Japan, UAE, UK,) Ammunitions and weaponry parts (tolerable only between U.S. and Puerto Rico). Perishable or unpreserved food products and beverages. Living animals including insects, except as provided the specific purpose of it. Plants and plant material, including cut flowers Game of Chance (Lottery) and gambling devices and instruments where it is prohibited by law. Money i.e. All types of money Pornographic, obscene material. Shipments requires advance arrangements for the drawback claims, U.S. State Department licenses, U.S. Drug Enforcement Administration export permit, temporary import bonds for initial import only, Carnets, Letters of Credit, Certificate of Registration shipments. Harmful and hazardous waste including the medical waste i.e. used hypodermic needles or syringes. Shipments causing damage to the equipment, human resources, or other shipments. Shipments which necessitate us to get hold of Special permit or licenses required for the exportation, transportation and importation.
Import-Export Policy for Dairy Products of Nestle Regulatory Environment in the Processing Sector of Dairy In the last few years the Indian Processed Dairy Industry has extremely grown and diversified. For the proper growth and development of this Dairy Processing Sector, Various laws and regulations are instituted by Government of India. Different regulations that govern this industry are classified as follows: Compulsory Legislation: Prevention of Food Adulteration Act, 1954 To protect the common Customer against the supply of contaminated food this act is planned. For different food articles it specifies different standards. For ensuring safety in the consumption and protecting these food items against harmful adulteration and impurities this standards are been planned in terms of minimum quality levels. For the operation of this Act, the Central Committee for food standards under the Director General of health services,, Ministry of Health and Family welfare. The provisions of the Act are compulsory and breach of the rules can lead to fines and imprisonment.
Milk and Milk Product Order (MMPO) 1992 The MMPO, 1992, issued on June 9, 1992 look to ensure the supply of liquid milk, which is an essential commodity, to customers by regulating its processing and distribution. In just eight years of its operation, the Central/State Registering Authorities have registered 666 units with a total processing capacity of 65.8 million liters per day.
Main Features of the MMPO consist of the following: State Government grants the registration for handling units up to 75000 liters per day of milk while more than 75000 liters per day of milk are registered by Central Registering Authority. The Certificate also specifies the milk shed area, which is defined under the order as a geographical area demarcated by the Registering Authority for the collection of milk by the registered unit. Specified hygienic conditions should be maintained in the premises where the milk and milk products are been handled, processed and manufactured or stored. Near the operation of a processing plant, the collection, transportation and processing of milk usually takes place. Milk shed is the area from where the marketable extra milk production finds the way to the processing plant. The concept of milk shed areas is essential to the MMPO. A proper assignment/allocation of milk shed is vital, for an orderly development of the dairy industry All the milk produced by the farmers is procured by the cooperatives, in U.K. Private Dairies have to buy their milk from the cooperatives as per there requirements. There are no private sector dairy plants in New Zealand. As many as 90 per cent of dairies in the erstwhile West Germany and 100 per cent in Denmark, Netherlands and Sweden are in the cooperative sector. 70% of the dairy industry is co-operative, in U.S. Government participation or regulation is higher in Dairy Programmes then most of the other domestic agricultural industries in the U.S.A. Federal Milk Marketing Orders and movement barriers in the USA for "orderly marketing control are also there, which is associated with stabilizing flowing milk prices, for providing secured and dependable markets for individual farmers producing milk primarily for the fluid market and improving the balance of market power between farmers and handlers. Trade-distorting agricultural policies have been the focus of the GATT multilateral trade negotiations, in the emerging liberalized global scenario. In the next few years, the heavy subsidies prevailing in the dairy industry have to be brought down in EU and USA because of the liberalization of agricultural trade under the new GATT regime. Then the competitive advantages prevailing in the Indian dairy industry are considered to be substantial. In the next few decades, India can be a major exporter of dairy products with considerable and constant investment in building up milk production. Standards on Weights and Measures (Packaged Commodities) Rules, 1977 These rules have put down definite mandatory conditions for all commodities that are in packed form, with respect to declarations on quantities contained. These rules are managed by the Directorate of Weights and Measures, under the Ministry of Food and Civil Supplies. Export (Quality Control & Inspection) Act, 1963 For the operation of this act the export inspection council is responsible. A compulsory pre-shipment inspection is to be done for a large no. of exportable commodities, under this act. Through a network of more than 50 offices located near main production hub and ports of shipment, the quality control and inspection of various export products are administrated. For inspection and quality control, organizations are also known as agencies. The govt. have exempted agricultural products, food products, fruit products, fish & fishery products from compulsory Pre-Shipment inspections, unless and until the exporter has a firm letter from the overseas buyer, stating that the overseas buyer does not require Pre-Shipment inspection from the official Indian inspection agencies Pollution Control From the Pollution control Board a certificate of no objection is must.
Voluntary Standards: There are two main organizations which deals with voluntary standardization and documentation system in the food segment. Under the purview of the Directorate of Marketing and Inspection, the standardization of processed foods and raw agricultural produce is inspected by Bureau of Indian Standards. Directorate of Marketing and Inspection (DMI): This organization enforces the Agricultural Products Act, 1937. This Act explains that Grade Standards are set for agricultural and allied commodities. These are recognized as Agmark Standards. Grading is done voluntary beneath the provisions of this Act. Manufacturers are allowed to use "Agmark" labels on the products manufactured by them, who have agreed with the standards laid down by Directorate of Marketing and Inspection Bureau of Indian Standards (BIS): The actions of Bureau of Indian Standards are twofold, one is to formulate the Indian standards in the processed foods segment and the second one is to execute the standards through advertising and through voluntary and third person certification systems. Bureau of Indian Standards has documentation of, standards for most of processed foods. In general terms, these standards include raw materials allowable and their quality parameters, hygienic conditions in which products are manufactured and labeling and packaging requirements. Those manufacturers who comply with the standards which are laid down by the Bureau of Indian Standards can attain an “ISI" mark which can be exhibited on the product packages. There are certain items which are identified by BIS like containers for packing, vanaspati ,food colors, , milk powder and condensed milk, which has to get compulsory certification. Other Government Regulations: Industrial License: In India, no authorization or certification is essential for setting up a Dairy Project. There is only a Memorandum to be submitted to the Secretariat for Industrial Approvals (SIA) and after that recognition has to be obtained from them. However Certificate of Registration is essential beneath the Milk and Milk Products Control Order (MMPO) 1992.
Foreign Investment: As dairying has not been integrated in the list of High Priority Industries, Prior consent has to be obtained from the Ministry of Industry and Secretariat of Industrial Approvals for foreign investment in the dairy industry. To the maximum limit of 51%, automatic approval will be given for foreign investment in High Priority Industries. In case of other then high priority Industries, proposals for the foreign investment will be cleared on case to case basis. Under Foreign Exchange Regulations Act at its discretion, Government may permit upto 51% with the enforcement of old limit of 40% applicable
Foreign Technology Agreements: Foreign Technology Agreements are liberal in high priority industries under the following terms: Royalty payment of 5% on domestic sales and 8% as exports subject to total payment of 8% on sales turnover, over a period of10 year from the date of agreement or 7 years from the origination of production. Payment of Rs 10 million. Foreign Exchange requisite will have to be purchased at market rates for the payment of royalty. Prior sanction needed for Foreign Technology Agreements in dairying. Foreign Technicians can be freely hired. Import Of Capital Goods: If the import of capital goods is financed through Foreign Equity, it is automatically allowed. On the other hand, approval has to be obtained from the Secretariat of Industrial Approvals, if it is not financed through foreign equity. The approval can be granted only if the Foreign Exchange Resources are available and are not in scarce.
PRESENT TRADE BARRIERS FOR IMPORT/ EXPORT OF SELECTED GOODS
Overview of Trade India's trade performance during 2003-04 was influenced by a number of factors which included productivity changes in the manufacturing sector, recovery of global economy and world trade, continued trade promotion and trade facilitation efforts of the Government and an appreciating Indian Rupee against the US dollar. In the last quarter december 2003, Manufacturing sector activity recorded a significant growth during the year exceeding 7%, World trade recovered. The trade recovery was initially limited by a combination of unusual temporary factors the outbreak of SARS and tensions in the Middle East combined with sluggish GDP growth in Western Europe (the world's largest regional trader). The global economy is become strengthen when the impact of the temporary factors faded at the end of the second quarter. The expansion of global output and trade gained substantial drive in the second half of 2003. In the United States and East Asia, trade in goods strongly rebounded in the second half of the year, in particular in the United States and East Asia. Trade is expected to increase further in 2004 should the global economy continue to improve.
GOVERNMENT PROCUREMENT Switzerland is a signatory to the WTO Agreement on Government Procurement (GPA). Tender dealings are to be made when the value of the contract exceeds SFr. 248,950 ($219,212), whereas GPA obligations apply when the procurement exceeds SFr. 383,000 ($337,249), under the current Federal Law on public procurement public. All private or public owned companies such as utilities, transportation, communications, defense, and construction that propose tenders in government procurement must make their bids public only when the contract exceeds SFr. 250,000 ($220,136), according to a 2002 revised law on public procurement. Total procurement expenses are valued at around SFr. 31 billion, and are split among the federal government (19%), the cantons (38%) and the local communities (43%); this is about 25% of all public operating cost and 8% of GDP. Cantonal and communal governments bring up many of the public projects. Their procurement is around two to three times that of the central government. A 1995 law provides for equal access to government procurement, on the cantonal and local levels.
INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION Generally high level of principles can be maintain by Switzerland for intellectual property rights protection. But as compare to Switzerland, Indian Industry has expressed revised copyright legislation that is intended to implement the World Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty, which concerns over broad exceptions for use of multimedia content. The United States will watch over the development of this legislation.
RECENT ECONOMIC POLICY DEVELOPMENTS (i) Domestic policy areas 1. Key reforms have strengthened Switzerland's competitiveness over the last four years. Particular mention should be made of the regulations introduced by the new laws not only concerning competition, the domestic market, technical barriers to trade and government procurement but also the efforts at liberalization in several areas dependent on infrastructure.
2. Switzerland has a competitive hub for industry and services and has endeavoured in particular to strengthen its position as an open economy. Switzerland also has an economic centre with substantial value-added potential and an innovative centre for training and research. Some of the key feature of Swiss domestic guidelines concerning to competitiveness, future priorities and agriculture are set out in more detail.
3. The liberalization of the telecommunication sector was convoyed by a very considerable decrease of prices with the entrance of competitors into the market in the field of infrastructure. The postal service (1 January 1998: partial opening of the market) and the federal railways (1 January 1999: initial opening of the market) have also undergone far- reaching reorganization that should be continued with the supplementary removal of barriers to market entrance. Important steps have been taken to organize for the deregulation of the electricity and gas markets for arrange to allow outside ventures to gain access to the network and to take apart the production, transport and distribution services.
4. Since the entry into force of the new law in 1996, Switzerland has basically focused on action to fight horizontal price cartels or conspiracy in respect of quantities and market allocation in the field of competition. Besides that a number of illegal practices based on market governance have been forbidden, particularly in sectors undergoing liberalization, such as telecommunications or power. The Swiss Government is making a legal amendment to strengthen both Government authority on the basis of the experience acquired in the area of competition and the protective effect of legislation.
5. Switzerland have sufficient funds for and more than the minimum standards offered for in the TRIPS contract in the territory of intellectual property. Besides that it is presently bringing the law concerning to patents, copyright and industrial designs with the new technologies. Switzerland attaches supreme significance to this activity intended at determinedly promoting efforts at research, improvement and innovation in the corporate sector. Only solid security in a strict international framework can justify huge research costs in a number of sectors concerned, inter alia, with the life sciences. The safety of appellations of origin and geographical indications is also necessary for both agricultural and manufactured goods. As a result of that recognition and international respect for geographical indications is a main concern for Switzerland.
6. Swiss policy on technological obstacles to business present for the edition of national industrial necessities so as to make them compatible with those of our main trading partners and not to create technological obstacles to business. Switzerland recognizes test information or conventionality certificates issued by foreign bodies which are additionally subject to convinced circumstances and in an independent way. These efforts hand over with the cooperation of shared credit agreements in this area.
7. Switzerland is presently producing legislation in the area of hereditary technology and goods containing hereditarily customized organisms. Switzerland adopted a rigid structure for hereditarily customized organisms and has developed a policy based on information, use of preventive measures, safety, deliberation of moral influence, forward-looking guideline open to future developments and admiration for international policy on the basis of two referendums (1992/1998). While guaranteeing environmental protection, the Swiss Government's aim is to make stronger Swiss industry's position next of kin to the latest technologies through a set of policy geared to future needs which include popular approval of these latest technologies. This means that consumers must constantly be kept informed about the potentialities of these technological advances and production methods.
8. The Swiss Government pursues a very active strategy on environmental safety and attaches main concern to steadily growth with the intend of protecting and civilizing the environment for future generations. Switzerland has participated in the cooperation and contributed to the completion of most of the multilateral contracts on the environment in this connection. Switzerland supports those requirements of environmental contracts which have an crash on business are not arbitrary in nature provided that they are essential and do not comprise indefensible bias or a uneven or camouflaged constraint on international business.
9. Switzerland recognizes the key role of the International Labour Organization (ILO) with regard to labour principles established at the Social Development Summit in Copenhagen (1995) and the WTO Ministerial meeting in Singapore (1996). Switzerland has ratified three core ILO conventions at the national level in current years, the minimum age for right of entry to employ and the most awful forms of child labour, trade with communal bargaining rights. Switzerland vigorously supports the work of the ILO operational Party on the Social measurement of Globalization as well as the conclusions of the particular meeting of the United Nations General Assembly on social growth and globalization which held in Geneva in June 2000 called on all States to value basic rights at work.
10. Switzerland is going through a era of steady improvement driven simultaneously in the area of agriculture by the WTO Agreement, its own hard work at rapprochement with the EU and budgetary constraints. Since the Second World War, an agricultural plan geared to merely national objectives and to food safety with price and marketing guarantees and defense from global competition, is steadily being deserted.
11. Agricultural development and the restructuring of agricultural policy are based on Article 104 by the people and the cantons, by a large majority of the Federal Constitution adopted on 9 June 1996. The article lists agricultural tasks and provide different strategies for agricultural policy; agricultural tasks are multifunctional and they work over the simple production of foodstuffs. The organization ensure for the multifunctional tasks fulfilled by gearing production to sustainable growth necessities. It provides non profitable environmental services used by farmers and direct payments for public-interest.
(ii) Foreign policy areas 12. In recent years Switzerland has seven specific agreements with EU in the area of European integration, with the EU in array to make stronger its regional integration links with its main trading partner. These agreements apprehension mutual recognition of tests and certificates, government procurement, agriculture, free movement of persons, road and air transport, and research. These new agreements enable Switzerland not only to further open up its economy and improve its market access to the EU as a follow-up to the 1972 free-trade agreement but also to strengthen the “eurocompatability” of technical rules under national legislation.
13. Switzerland regards the efforts at integration with the EU as an active preparation for the achievement of the Federal Council's strategic objective of EU membership. To acieve the goal the Government will continue to undertake reforms in the next few years for the improvement of Switzerland's “euro compatibility”. Switzerland will be capable to act independently in some areas (VAT, for example), while in others (e.g. internal security) its necessary to negotiate with the EU.
14. The Federal Council will establish the timetable for reactivating the appeal to release EU agreement negotiations, on the basis of knowledge with the new bilateral agreements concluded with the EU in 1999 and the state of development of the internal reforms needed to organize the succession progression. The Federal Council will also affix great importance to broad political support in the assembly. Switzerland and the EU could carry on to extend their relationship in respect of matters such as processed agricultural products, training and the environment, or new issues such as internal security, including asylum and migration policy, customs fraud and taxation of savings in the meantime.
15. Switzerland and its EFTA partners are making a dynamic policy and have 15 free- trade agreements to their credit to date in the area of free trade. Switzerland, its EFTA partners and the EU have enhanced their free-trade relationships with Central and Eastern Europe by means of a number of agreements establishing a free-trade structure (1 January 1997) based on the Pan-European cumulating of policy of foundation. Turkey joined this system in 2000.
Domestic and foreign market barrier Pillar 1: Domestic and foreign market access 1.01 Tax and duty barriers 1.02 Tax barriers for non-agricultural products 1.03 Tax barriers for agricultural products (hard data) 1.04 Non-duty barriers 1.05 Domestic tax peak 1.06 Explicit duties 1.07 Number of distinctive duties 1.08 Share of tax-free imports 1.09 Tariffs faced 1.10 Margin of liking in major export markets Pillar 2: Efficiency of customs administration 2.01 trouble of civilization procedures 2.02 Customs service’s index Pillar 3: Efficiency of import-export procedures 3.01 Effectiveness and efficiency of authorization 3.02 Time for import 3.03 Cost to import 3.04 Era for export 3.05 Credentials for export 3.06 Cost to export Pillar 4: Transparency of border administration 4.01 Unequal payments in exports and imports 4.02 Corruption perception Index Pillar 5: Availability and quality of transport infrastructure A. Availability of transport infrastructure 5.01 Airport compactness 5.02 Transshipment connectivity index 5.03 covered roads B. Quality of transport infrastructure 5.04 Road obstruction 5.05 Worth of air transport infrastructure 5.06 Worth of port infrastructure Pillar 6: Availability and quality of transport services 6.01 Liner Shipping Connectivity Index 6.02 Easiness and affordability of shipment 6.03 Capability of the logistics industry 6.04 Ability and easiness of tracking 6.05 Appropriateness of shipments in reaching destination 6.06 Postal service effectiveness 6.07 GATS commitment in the transport sector Pillar 7: Availability and use of ITCs 7.01 Firm-level technology absorption 7.02 Broadband Internet subscribers 7.03 Internet users Pillar 8: Regulatory environment 8.01 Property rights 8.02 Moral values and fraud 8.03 Gratuitous power 8.04 Government inadequacy 8.05 Domestic competition 8.06 Honesty to foreign involvement 8.07 Easiness of hiring foreign labor 8.08 Dominance of foreign tenure 8.09 Business impact of rules on FDI 8.10 Capital control Pillar 9: Physical security 9.01 Consistency of police services 9.02 Business costs of offense and brutality 9.03 Business costs of terrorism
POTENTIAL FOR IMPORT AND EXPORT IN INDIA/ GUJARAT MARKET
History of Import- Export between India and Switzerland
Let us understand about Switzerland and India’s Import Export or potential of import and export in Indian market.
Mr. Flavio Cotti, vice- president of the Switzerland Confederation and Federal Minister of Foreign Affairs said that after the first visit to India that. o India is one of the most emerging countries in the world and he also state that India has potential market in the world.
Around in August 14, 1948 Jawaharlal Nehru signed India’s First Friendship pact with Switzerland.
The relation of India and Switzerland has risen to grater height and it gives an opportunity to both the countries.
Mr. Sushil K. Premchand president of Swiss-Indian chamber according to them Business attraction is not inspiration but it is an opportunity. And according to them because of India’s strength it is good to do business with India.
New Entrants of Swiss company in Indian market There are some of the major Switzerland company’s expand their business roots in Indian market before independence. o Like ABB and Nestle expand their business in Indian market in the year 1947. Because of this we can say that India is one of the countries who has liberalize investment policy.
And it was also recognized by the Switzerland’s government. And because of this they setup their business hub in India.
And The Economic counselor of Switzerland Dr. Jacques Derron Said that by establishing the Swiss business hub in India Switzerland recognize Indian market potential and attractive.
Dr Derron Saied that over the years India’s FDI become Investor friendly over a time. And he also observes that India yet can achieve more inflow of FDI by open a sectors like Banking, Insurance and retail.
Hurdles for FDI in India In the year 2002 Murasoli Maran who is Indian industry minister said that the Switzerland industry highlight many hurdles which is face at a time of bilateral trade and investment. o The problems include like, . Delay in getting Approvals from agency. . Infrastructure Inadequacy.
Action against Hurdles for FDI in India Dr Derron Saied that foreign companies will try to reduce the import export terrif barriers in India for doing business in India easily.
Indo-Swiss Trade Detail In the year 1994 to 2003 the bilateral trend shows that it was increased from 865.3 mio sfr 1.24 billion mio sfr.
At this duration the export of india to Switzerland was up by 63.29 percent which sift from 316 mio sfr to 516 mio sfr In the year 1993. And import from Switzerland increase 641 mio sfr in 2002 from 404 mio sfr in year 93.
In the year 2003 India’s Export to swiss was 421.3 mio sfr and Import 606.3 mio sfr.
India’s Import from Switzerland include
Mainly it include Chemicals, Machinery, Instrument, Metal, jwellary.
Switzerland Import from India include
Mainly it include Textile, Agri-product, jwellary.
Some Fact Annual report of INDIA year 2002 state that, Swiss and India enjoying good relation since long. Both the country has some uniqueness which is helpful for both the country in trade and investment.
India’s Effort towards EXIM Policy Now a day’s India identify the needs of revise the EXIM policy annually so as to increase efficiency of export strategy.
Further WTO service is also in process at that time, so we can say that India is increasing their strength by various service segment.
At the time of interview EC says that though in India FDI policy become More Friendly but its implication is troublesome yet because of regulatory approvals especially at state level
There are many economic reform programme happen in India, in a report compiled by Swiss on India’s major business sector they identify no of growing industry which will help full to Indo-Swiss collaboration.
It include IT and Telecommunication, Chemical, Bio technology, Genetic Engineering, Financial services, these are the sectors which offer a waste scope.
Growth of IT Industry
So Far IT industry has registered a growth of 26% in India. During 2002-2003 India’s software revenue increase by 30 % so its export projected to grow by 22%. India’s Software sectors export include around 20.4% of country’s overall export during 2003. Indian Government gives priority to IT Foreign ownership and impose no taxes, The national association software and Service company is India’s National platform for IT industry it was expected by 2008. Indian IT industry can able to reach export target of US$ 50 billion and 70 to 80 US$ billion as a overall revenue. Because of these many Swiss company mostly companies outsource their work from Indian.
Chemical Industry This industry is also provide good opportunity for FDI. For Indo-Swiss bilateral agreement chemical assume a significant position. According to the latest available statistic India import chemical of US$ 56.31 in the year 2001-2002 and in the year 2002-2003 it increase to US$86.59mn. India Exported chemical of US$ 52.76 mn to swiss in the year 2001-02. It was believe that during 2010 India emerge as one of top in Plastic and synthetic fiber. If we look towards the polymer market the growth in this sector will be 7 to 8 percent in next five years. According to the ABE amro in the year 2003 India’s Pharmaceutical industry rank 4th in terms of volume and 13th interims of value. And this market grow 8 to 9 percent per annul. For Pharmacy industry there are three major player at global lever which are Dr Raddy’s Laboratory, Ranbaxy, Cipla these are the major player who help to earn mostly 50% of total foreign exchange income from pharma export. India’s Pharma export is grow by 30 % largely they export in developing nation like CIS , South east Asia, Africa. GATT’s signatory is India and is likely to put new patent shortly, it must introduce nw drugs product in Indiand market. Major product which exported is including antibiotic, anti-bacterial. On Drugs and Pharmaceutical Indian govt provide 100% FDI. The manufacture should require prior Government approval to get FDI proposals of licensable drugs and pharmaceuticals.
Biotechnology According to SBH India report it is a potential area because of country has rich bio-diversity, strong IT skill, and powerful scientific and industrial base. The main reason behind this Indo-swiss collaboration in this biotechnology is to enhance the biotechnology capability.
Indian Telecom Sector Indian telecom is one of the fastest growing sector it register 25 to 30% growth and it offer vast scope to attract FDI. For Expansion of business and trade relation Between India and Swiss the president of SICC says that The opportunity should be addressed in more detail so that it will helpful to the swiss medium size business. He also State that India should communicate in batter way with SME sector which is more critical for the swiss economy and for the president also so it is necessary for growth in investment in India. Major problems that should be Present in proper perspective so that it will help in reducing India's continual trade deficit with Switzerland. Switzerland is a major exporter of gold and silver. In the year 2001-02 India imported US$ 2.47 billion worth of precious stones and jewellery and exported precious metals, stones and jewellery to Switzerland worth US$ 120.96 million. The opinion of the Swiss India chamber of comers president that the deficit balance of trade with Switzerland is notwithstanding. And as Indian market is opened progressively under WTO so trade should increase in both the direction so India does not resort to non-tariff to protect the domestic Indian market.
India's exports to India's imports from Total Trade Year Switzerland ((in US$ Switzerland (in US$ (in US$ Million) Million)) Million)
2010 589.3 14698.4 15287.7
2009 196.0 4248.8 4444.8
2008 461.9 8736.6 9198.5
BUSINESS OPPORTUNITY IN FUTURE
As per the Confederation of Indian Industry (CII), Switzerland is the 10th largest country investing in India. Since long, trade relation between India and Switzerland has grown in many different ways indicating a huge potential of growth for both countries. Firstly Indian exports were coffee, tea, plastics, readymade garments, textiles, organic chemicals, precious stones, jewellery, leather products and dyestuffs to Switzerland. While, Switzerland exported pharmaceutical products, essential oils and cosmetics, precision machinery, plastics and electrical machinery watches to India. In both countries analysts and government bodies felt that there are many areas of mutual aid which can be helpful for small and medium enterprises (SMEs) for business opportunities in India and Switzerland. A number of major sectors which could grow through mutual alliances comprise of automobile, biotechnology, information technology (IT), and information and communication technology (ICT) industries.
For example, one of the leading industries in the world is Swiss auto industry which manufactures high precision parts and various kinds of equipments which are in great demand in India. Thus, Indian SMEs in the auto space can work together with their Swiss counterparts to offer these equipments in India.
Likewise, high skilled workforce of India is best suited to deliver its services in the knowledge-driven industries in Switzerland. Both the countries have understood the vital role that the Indian IT industry can play in the field of research and development in Switzerland. Thus, both of them can help each other to perform joint research in different fields like biotechnology, nanotechnology and life sciences.
Chemical industry can also involve future collaborations and partnerships. This industry is on the edge to emerge as a vital component of Indo-Swiss bilateral trade. Few of leading Swiss chemical companies that have entered into the Indian market are Ciba, Clariant and Novartis. To tap the Swiss market Indian SMEs are collaborating with such Swiss firms.
To improve the trade relations between both the countries they have shown a huge interest, thus the governments should take further initiatives to facilitate a smooth flow of business. To bridge the gap between the SMEs of both the countries Indo- Swiss trade body and Swiss business hub India are taking certain steps such as exploring the various unexploited areas of growth that can benefit the SMEs.
The association thus make out a bright future of India-Swizz bilateral trade which would see an increased number of collaborations, joint ventures and exports in the upcoming years.
CONCLUSION
Switzerland is a calm, wealthy, and modern market economy with low unemployment rate, an extremely trained labor force, and a per capita GDP among the highest in the world. Switzerland exports were worth 16.6 Billion CHF in September of 2011. The basic reason of prosperity in Switzerland is trading activities with foreign countries.
Core sectors of Switzerland are Food Industry, Mechanical and electrical engineering, Pharmaceuticals, Watches, Banking, Tourism, and Insurance. The largest company of Switzerland is Nestle and it is the largest food company in the world.
Switzerland has no adequate mineral assets and a limited area; as a result it mostly depends on foreign trade. Swiss companies are known for its competitiveness in the world markets. Business activities with Swiss companies were started many years ago. The mutual associations between India and Switzerland have developed over time. In terms of FDIs, Switzerland has remained amongst the top 10 overseas investors in India. Switzerland proposes many eye-catching rewards for business purposes, especially for those Indian groups which would like to cover their European commercial activities from within Switzerland.
The Swiss Business Hub India (SBHI) and the Swiss Embassy in New Delhi offers a wide range of services to support SMEs from Switzerland in their efforts to penetrate the Indian market. The Swiss-Indian Chamber of Commerce (SICC) plays a major role in promoting Swiss-Indian bilateral deal.
Nestlé is celebrating a 100 years of profound engagement with India that has proven its potential to be one of Asia’s economic superpowers. First sales agent of Nestle in India started work in Chennai and Kolkata in 1912.Today, the company directly employs 6,000 people in India and more than half a million indirectly. Its products are sold in more than 3.5 million outlets across the country.
The implications of imports have in general been stronger for the coastal states as compared to the land- locked states of the country. The benefit to producers and consumers following free import of milk products has been analyzed with the economic surplus approach. This economic surplus approach is based on the fact that imports will affect the domestic prices; reduction in domestic price would affect the quantity demanded of the commodity. The change in the quantity demand will influence consumers’ surplus. The supply of the commodity cannot be increased in the short run since short run supply elasticity for milk will be extremely low; therefore, a decline in the price of the commodity without a shift in the domestic supply function would adversely affect the producers’ surplus. The economic surplus approach also ignores loss of employment as a result of decline in milk production following import liberalization.
Nestle products are famous among customers for their high quality and opportunities to expand Nestle business will continue to develop as nowadays many people want to purchase healthy and nutritious food items of branded company. Nestle considers that undertaking the double burden of under and over nutrition will make a positive impact on India’s productivity and that Nestle has a responsibility to play in this.
A new phase of economic relations was started after liberalization in 1991. Today India is one of Switzerland's main partners in Asia. Bilateral and political contacts are regularly rising. Trade, economic, cultural and scientific cooperation are flourishing. The Times of India report says that Swiss company Nestle’s Indian subsidiary Nestle India has decided to spend Rs 1000 crore to set up a snacks and confectionery plant near Sanand, Gujarat.
A stronger economy, increasing disposable income and a shift to branded products will mean higher growth rates for the FMCG industry in the coming decade. Despite the steady growth in trade and investment flows in both directions, the potential to further intensify the economic ties remains huge. India still accounts only for 2% of Switzerland’s worldwide trade. Considering India’s impressive economic growth trajectory and a deepening cooperation in R & D, the prospects are indeed very promising.
BIBLIOGRAPHY
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