A Study on the Impact of Cost Improvement on Nestle's Revenue

This report investigates the impact of cost improvement techniques on the revenue of Nestle, a leading manufacturing company. It begins with an introduction outlining the study's aims, objectives, and research questions, emphasizing the significance of cost control in enhancing profitability and growth. The literature review explores various cost improvement methods, their significance, and their influence on revenue, including process reengineering and other techniques. The methodology section details the research approach, philosophy, and data analysis methods, including ratio analysis of Nestle's financial data. The data analysis chapter presents findings on the effectiveness of cost control, the impact on direct and indirect expenses, and the overall financial performance of Nestle. The report concludes with a discussion of the findings, recommendations for Nestle, and a summary of the study's contributions to the field of cost management and its implications for manufacturing companies.

To analyze the impact of costs improvement
techniques on the revenue of manufacturing
company: A study on Nestle
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TABLE OF CONTENTS
TABLE OF CONTENTS......................................................................................................................2
CHAPTER 1: INTRODUCTION.........................................................................................................3
1.1 Background of the study............................................................................................................3
1.2 Aims and objectives of the research..........................................................................................3
1.3 Research questions.....................................................................................................................4
1.4 Rationale of the study................................................................................................................4
1.5 Significance of the study............................................................................................................4
1.6 Dissertation structure.................................................................................................................5
Conclusion.......................................................................................................................................6
Chapter 2: Literature review.................................................................................................................7
2.1 Introduction................................................................................................................................7
2.2 Meaning and types of cost improvement techniques.................................................................7
2.3 Significance of the cost improvement techniques.....................................................................9
2.4 Impact of cost improvement techniques on firm's revenue and growth..................................10
2.5 To recommend ways through which Nestle can enhance its market revenue..........................11
2.6 Impact of cost control methods on the revenue sold................................................................11
2.6 Impact of cost control methods on financials of business firm...............................................12
Conclusion.....................................................................................................................................12
Chapter 3: research methodology.......................................................................................................14
3.1 Introduction..............................................................................................................................14
3.2 Research approach...................................................................................................................14
3.3 Research philosophy................................................................................................................14
3.6 Data analysis............................................................................................................................15
3.7 Ethical consideration................................................................................................................15
3.8 Reliability and validity.............................................................................................................16
Conclusion.....................................................................................................................................16
chapter 4: Data analysis......................................................................................................................17
Theme 1.........................................................................................................................................17
Theme 2.........................................................................................................................................18
Theme 3.........................................................................................................................................18
Theme 4.........................................................................................................................................19
Theme 5.........................................................................................................................................19
Conclusion.....................................................................................................................................25
chapter 5: Discussion..........................................................................................................................26
Conclusion.....................................................................................................................................28
chapter 6: CONCLUSION AND RECOMNDATION.......................................................................29
references............................................................................................................................................31
APPENDIX........................................................................................................................................33
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ABSTRACT
Cost improvement methods are usually used by the firms in their business. Time to time many
researches are conducted on cost improvement techniques. In the current research study detail
analysis of Nestle is done in respect to cost control methods and its impact on the business firm.
Ratio analysis of Nestle is done in the report and it is identified that cost control methods prove
effective for the mentioned firm as it successfully maintain control on its cost. Hence, it can be said
that if cost control methods will be implemented in proper manner at the workplace then firm will
observe positive results in its business. In order to conduct research on the Nestle secondary data is
collected from the available database. On the basis of collected secondary data literature review
section is prepared in the research report. Under this articles that are prepared by varied intellectual
people are reviewed. On analysis of literature it is identified that there are varied methods of the
cost control like process reengineering and EOQ etc. All these things help one in controlling varied
sort of expenses in the business. Organizations can use single or multiple cost control methods at
the workplace in order to control cost in the business. In order to measure the extent to which firm
control its direct and indirect expenses ratio analysis is done and varied ratios are computed. By
doing so various areas in respect to cost are evaluated in proper manner. Meaningful conclusions
are derived from ratio analysis and it is identified that varied sort of cost are controlled by the
business firm at its premises. Nestle in proper manner implement cost control methods at the
workplace. Thus, it can be said that prudent application of cost control method lead to strong
control on elevation of expenses of the business. Firm successfully control its direct and indirect
expenses. Thus, both sort of expenses are effectively controlled by the business firm. Ratio analysis
is selected as method to evaluate business firm. This is done because by using ratios firm
performance in terms of cost control can be measured in better way. By using ratios firm
performance in varied areas like assets, inventory, and direct and indirect expenses control are
easily measured. Ratios results reflects the extent to which Nestle is performing its internal
operations in better way. In the current research study deductive approach is selected and
interpretivism philosophy is used. The main reason due to which mentioned philosophy used in
research is that current research study is not scientific in nature. Deductive approach is selected for
the present study because by doing so entire research can be carried out in better way. On the basis
of overall analysis of secondary data and literatures it is identified that cost control methods prove
effective for the business firms. After implementation of cost control methods at the workplace
significant decline is observed in the operating and non-operating expenses of the business.
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CHAPTER 1: INTRODUCTION
1.1 Background of the study
In the present era, there are several companies which are facing problem in relation to
maintenance of the cost level. Moreover, cost which is incurred by the firm in relation to the
manufacturing of products has high level of influence on the price and revenue. In addition to this,
rising cost level also acts a barrier in the organizational growth and development (Banerjee, Hezar
and Ding, 2015). Moreover, business unit can expand the business operations and functions only
when they have enough amount of fund or profit margin. In this, regard by using the cost
improvement techniques companies can make improvement in the profit level to the large extent
(McIvor, 2016). Hence, there are several techniques such Kaizen, asset utilization and performance
improvement technique business organization can make significant improvement in the cost level.
The present report is based on Nestle which is Swiss manufacturing company that offers
wide range of food and beverages to the customers. This is the reason due to which it is at leading
position in the industry (Ioannou and Sun, 2012). Mentioned firm is following a process re-
engineering process in order to curtail its cost. In this regard it take help of Dematic equipment
management system whose system interface is established with Nestle warehouse management
system. In this way in the firm USA Indiana branch cost declined by 35% (Gandhi and et.al., 2010).
Such company has attained leading position in UK in terms of revenue. It offers variety of food and
beverages to the customers namely tea, coffee, snacks etc. In this, present dissertation will describe
the extent to which Nestle has attained success in making improvement in cost level. In this regard
detail analysis of cost improvement methods will be done in the present study. Further, it will also
shed light on the extent to which cost improvement techniques influence the revenue and growth
level of firm.
1.2 Aims and objectives of the research
Aim of the study is to assess the impact of cost improvement technique on the revenue of
Nestle.
Objectives of the study
 To evaluate relevance of the cost improvement techniques available to manufacturer.
 To assess the significance of new cost improvement techniques in modern era.
 To determine the influence of cost improvement technique on revenue of Nestle.
 To recommend ways through which Nestle can enhance its market revenue.
Note
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There is no need to measure financial revenue because value of same is already given in the firm
annual report. In order to measure revenue annual reports are taken in to consideration and by using
same ratios are computed which are compared with each other.
1.3 Research questions
` In order to conduct study in the right direction researcher is required to frame questions
which are as follows:
Q.1 what is the significance of cost improvement techniques in the modern era?
Q.2 Is cost improvement techniques have influence on the revenue level of Nestle?
Q.3 Which kind of methods used by Nestle to reduce the overall cost?
1.4 Rationale of the study
The reason behind selection of such topic is rising in the cost of manufacturing company is
one of the significant issue that have high level of impact on the growth aspect of the firm (Ellis and
Christofides, 2014). It is the issue because if business unit does not have enough amount of fund
then they are not able to offer high level of dividend to the shareholders. In this way, such aspect
has high level of impact on the growth and performance of the firm (Lanke, Ghodrati and Lundberg,
2016). Hence, researcher conducts study on such topic by doing survey on the professionals of
Nestle. In this way, research study will shed on the extent to which cost improvement techniques
have influence on the growth and profit level of Nestle. This in turn provides Nestle and other
scholars with the effectual framework for decision making.
1.5 Significance of the study
Study which is conducted by the scholar is highly significant for the manufacturing
companies including Nestle. This is because there is a significance of the cost control methods for
the business firms. By using cost control methods stiff control is maintained on elevation of cost.
This reduce cost of production and elevate profitability for the business firm (Bhatt, S. and et.al.,
2013). Nestle is selected for the present research because it is the company that produce wide
variety of products that have huge demand in the general public. Mentioned firm make use of cost
control methods at the workplace in order to control cost of production. Nestle was selected for the
present research because by conducting research on same it can be identified the extent to which
cost control methods prove effective for the business firm.
Hence, on this basis it can be said that there is a great importance of the cost control methods
for the business firm. Moreover, outcome of this study will provide deeper insight to the firm about
the ways through which they can control the cost level (Agyapong-Kodua, Wahid and Weston, R.H.,
2011). Moreover, cost is one of the main factors which have high level of impact on the growth and
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profit margin of the manufacturing companies. Along with this, Nestle can also assess the
effectiveness of their cost improvement techniques and thereby its impact on growth level
(Sivakumar and Sundaram, 2013). Further, by taking into consideration the recommendations'
scholar can improve both revenue and growth level. In this way, study and its outcome will help
company in building and sustaining competitive edge over others by resolving the issue of
profitability. Along with this, other scholars will also make use of such study who are going to do
investigation on such topic. In this way, study will offer high level benefits to Nestle and other
manufacturing companies as well as scholars.
1.6 Dissertation structure
Chapter 1: Introduction
Researcher presents background about the extent to which cost improvement techniques
have high level of influence the growth and revenue aspect of the companies. Besides this, in this
chapter researcher also mentions the significance and rationale of the study. Further, aims and
objectives are also developed by the scholar in this section to carry out the study in an appropriate
manner. Investigator also describes the level to which such study will help other scholar and
companies in making improvement in their performance level.
Chapter 2: Literature review
In this, researcher develops themes by taking into consideration the research questions.
Thereafter, researcher has been evaluated the findings of other scholars who have presented their
views regarding such topic. In this, by making assessment of both positive and negative aspects of
each research question scholar would become able to gain in-depth understanding about the topic.
Chapter 3: Research Methodology
Third chapter of dissertation entails the methodology or framework which has been
undertaken by the investigator for the purpose of data collection and analysis. In this, researcher
makes selection of the approach and philosophy to carry out the whole investigation in the best
possible way.
Chapter 4: Data analysis and Findings
Under this chapter, researcher evaluates data by using the effectual tools and techniques.
This section of the dissertation is highly important which renders information about the extent to
which cost improvement techniques help in enhancing the sales revenue of Nestle. In this,
researcher makes use of thesis to support the findings to the large extent.
Chapter 5: Conclusion and Recommendations
In the last chapter, researcher will conclude all the findings that directly address the aims
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and objectives of investigation. Further, scholar will also give recommendations to Nestle on the
basis of findings. This in turn helps company in making improvement in both cost and revenue.
Conclusion
It is concluded that detail research will be carried out on secondary data which is related to the
company. The main of the present study is to measure the effectiveness of cost control methods in
respect to improving organization performance. In this regard ratio analysis will be done.
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CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
In the present research journals and books relevant to the research study will be reviewed in
the proper manner. In the current research report main focus is given on the cost control methods
that are adopted by the Nestle in its practice. Main focus is given on the importance that cost control
methods have on the business firms. Apart from this impact that cost control methods have on the
revenue of the business firm will also identified. In this regard primary and secondary research will
be done in the report. This will help in understanding the various cost improvement methods that
are usually used by the business firms at then workplace in order to control cost of production at the
workplace. Detail research will be done on the advantages that firms usually obtained by making
use of the methods like just in time, total quality management and process reengineering at the
workplace. This section also enables firm to prepare thesis for conducting the data analysis more
effectively and efficiently.
 To develop understanding about the several cost improvement techniques which are
available to manufacturer.
 To assess the significance of cost improvement techniques in modern era.
 To determine the influence of cost improvement technique on revenue of Nestle.
 To recommend ways through which Nestle can enhance its market revenue.
2.2 Meaning and types of cost improvement techniques
Types of cost improvement methods
According to Goetsch and Davis (2014), improving the cost is important for every
organization because it increases the revenue and further results in growth. Cost effectiveness of the
firm is measured by using gross profit ratio. This is because when cost of production is reduced at
the workplace a time gross profit in the business get enhanced. Thus, it is a very powerful tool that
is used to measure firm performance in terms of control on cost. There are several cost
improvement techniques which can be adopted by the organization to improve the cost incurred in
manufacturing the products. In case of Nestle, the firm can adopt business process re-engineering in
which Nestle and improve the process which is involved in manufacturing the food products (Petrin
and Train, 2010). The company makes the process simpler and introduce new ways through which
the organization can reduce the cost (Ellis and Christofides, 2014).
The new process assists in improving the quality and enhancing the customer satisfaction. As
it is one of the renowned organizations and have huge finance so that they can spend money on
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adopting new process. According to Sivakumar and Sundaram (2013), further, another method
which can improve the cost is Just In Time. This technique is generally used by all the companies
who are manufacturing the goods. In case of Nestle, this technique helps in reducing the material in
hand which further save the cost of storing the inventory. Besides this, the materials which are
stored require maintenance. So by this, the cost is reduced and it will help the company in
increasing revenue. Further, this is efficient cost improvement tool because it reduces the time in the
production process (Yeh, Pai and Yang, 2010). As it helps in avoiding stockpiling which makes the
process easier and the product is manufactured in less time.
According to Miles (2015), Nestle is the manufacturing organization so it is important to
reduce the cost as this will help in increasing the revenue and even through this finance the
organization can grow efficiently. Besides this, all the cost improvement technique leads to
customer satisfaction because the cost is reduced this help in delivering the products at the lower
price. On the other hand, it is delivered on time which increases the trust in the organization.
Inventory management
According to Kovach, Cudney and Elrod (2011), Inventory management is also one of the
tools which are required to be focused by the organization. For managing the inventory it requires
huge amount and even if it is destroyed by some reason then it is added in the expense of the
company. Firm efficiency in respect to controlling cost of inventory can be measured by using
inventory turnover ratio. This ratio reflects the extent to which by using methods like Just in time
firm manage to control its inventory holding cost. Nestle being the food manufacturing organization
requires inventory for produce the products so in that case Just In Time can be used for managing
the inventory and reducing the cost of the firm. Besides this, management audit also helps in
improving the cost which is incurred by the company in manufacturing the food items. This process
assists the management of the organization to identify the areas which needs improvement
(Griesberger, Leist and Zellner, 2011).
In this, critical analysis is done by the management in reducing the cost and improving the
quality of the process. Further, it also aids in reducing the waste which is incurred in the
manufacturing process (Kamien and Schwartz, 2012). But on the contrary this method is adopted by
all the companies but it does not effectively help in identifying the areas and the process which is
carried out requires time. It cannot be adopted as the long term process in increasing revenue as
well as the growth. With the help of this, authentic results are not derived by the organization.
According to Ellis and Christofides, (2014), in the manufacturing organization, continuously
improvement in the process improves the cost of manufacturing the product.
With the process will improve it will reduce the time as well as the cost and even it will
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enhance the quality of the product. In Nestle, TQM is also a significant technique which focuses on
continuously improving the quality of the process (Miles, 2015). With this, the additional benefit of
the company is that it helps in meeting the needs and demands of the consumer and increasing
satisfaction through providing them goo quality of the products.
Life cycle costing
According to Yeh, Pai and Yang (2010), on the other hand, life cycle costing is also one of the
latest techniques which are used by the company. In this, they estimates and compares the cost
earned at the time of manufacturing and evaluates with the pre and post manufacturing. This helps
in deriving the profit and the wastage of it. This will be effective in earning huge revenue and in the
long time will assist in achieving the growth. These are some of the techniques which can be
adopted by Nestle for improving the cost and increasing revenue of the organization (Griesberger,
Leist and Zellner, 2011). There is a strong relationship between cost and revenue and this is
measured by using gross profit ratio. This is because elevation in value of ratio reflects that firm
have strong control on its direct and indirect expenses. This is because entire price of the product is
determined by considering cost of production of per unit and margin that firm intends to earn on
sale of each unit of the product (Kumar, and et.al.al., 2011). When cost of production declined firm
reduce price of its product. Due to this reason demand for the product increase in the market and
this lead to elevation in the revenue of the business firm. Hence, it can be said that there is a strong
relationship between cost and revenue of the business firm.
2.3 Significance of the cost improvement techniques
According to Kushner, (2012) there is a significance of the cost improvement technique for
the business firms. This is because by using cost improvement methods cost of the production
process is reduced significantly by the business firms. There are many companies like Toyota that
are using cost improvement methods like total quality management in order to reduce their cost of
production. Toyota strongly maintain command over its cost and this is measured by computing
gross profit and net profit ratios (Gorard, 2010). As the values of profit and sales and movement in
same clearly reveal that strong cap is maintained on elevation of cost. It can be observed that
manufacturing firms by using relevant methods to large extent are reducing their cost of production
and earn huge profit in their business. Merely compliance with the approaches that are used to
control cost are not sufficient. Managers have to ensure that relevant cost control methods are
implemented in proper manner at the workplace. If same will not happen then it will not be able to
reap full advantage of using cost control methods at the workplace. Hence, there is a great
importance of the cost control methods but their implementation at proper manner at the workplace
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ensures the extent to which it will be able to maintain stiff control on elevation in cost.
Contrary to this Li, Tang and Zhang, (2012) state that there are many methods that are
available to the business firms that can be used to control cost at the workplace. It depends on the
firm that which method it used to control cost at the workplace. There are large number of firms that
use different cost control methods in order to curtail cost of production at the workplace. The
approaches are totally different from each other in terms of the way in which they control cost.
Every business firm manufacturing operations are totally different from each other. Problems faced
by the business firms are totally different from each other (Kumar and Varaiya, 2015). Hence,
specific cost control method cannot be used by the all business firms. It is not necessary that just in
time method or process reengineering method will equivalently prove effective for all sort of the
business firms. This is because size of business determine same of the operations. If business size is
small then in that case there is no need to use complex cost control techniques at the workplace.
Many times it is observed that managers make a wrong decision in respect to the use of cost control
methods at the workplace. They make use of irrelevant cost control method at the workplace. Due
to this reason they failed to obtain required advantages from the application of cost improvement
methods that are implemented at the workplace (Fraser and et.al., 2010). Hence, it is very important
for the business firms to ensure that they are using appropriate cost control method in the
production plant.
2.4 Impact of cost improvement techniques on firm's revenue and growth
According to Blackwood, Hastings and Costello, (2010) cost improvement techniques have a
great impact on the firm revenue and growth. This is because implementation of the cost control
methods help firm in reducing cost which lead to elevation in the margin if sales price is same or
only reduced by some percentage points. In this way implementation of cost control methods at the
workplace lead to enhancement in the firm revenue and growth. Impact of cost improvement
methods on the overall business is measured by using multiple ratios like EPS, gross and net profit
as well as stock turnover ratio (Wang and Labarthe, 2011). In most of firms that are operating in the
manufacturing sector due importance is given to these ratios. This is because by using them in
varied areas to what extent firm is controlling cost is easily measured. Process reengineering is the
method that is commonly used by the business firms in there production place. It is observed that
many times business operations are very complex and this lead to elevation in cost or high cost of
production at the workplace. By using process reengineering methods business firms reduce
complexity in the production operations and simplify the production stages. This lead to saving of
lots of time and resources at the workplace. By doing process reengineering firm ensure that its
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manpower will be used in the systematic way and it will be more productive than before. Apart
from this, time as a resources is used in the more prudent way which lead to increase in the
production units. It can be said that use of control methods lead to reduction in the production cost.
As per views of Li and et.al., (2010) those business firms that make use of cost curtail
strategy at the workplace manage to grow at the rapid pace in their industry. This is proved from the
example of Nestle and Toyota which are leading players in their industry. It can be said that more
and more business firms must make use of the relevant methods at the workplace. This is because
use of same lead to reduction in the cost and sales price as well as elevation in the firm profitability.
All these things results in the elevation of the firm growth rate. Hence, to great extent cost control
methods like just in time and Total quality management help firm in reducing cost and elevation of
business growth rate.
2.5 To recommend ways through which Nestle can enhance its market revenue.
As per views of Dhawan and Kar, (2010) there are number of ways by using which firms can
increase its market revenue. It is observed that business firms often compete with each other in
terms of cost and the product quality. With passage of time customers are giving much importance
to the price and quality both. They wants to buy product at low price which deliver high quality to
the customers. Those firms that offering products at low price with high quality product are market
leader and are earning higher amount of revenue in their business. Thus, it can be said that Nestle in
order to enhance its market revenue needs to reduce its product cost as much as possible. At same
time it also needs to ensure that it is delivering chocolates and other items whose taste is excellent.
It can be said that with passage of the time period competition for the business firms increases at
rapid pace and in order to compete with the rival firms it is important to reduce cost as much as
possible.
According to Hu and Li, (2012) in order to enhance market revenue business firms can review
the process that is followed to do production of goods at the workplace. This process can be used by
each and every business firm in order to reduce its product cost. This is because every company
follow a specific production process in order to manufacture goods at the workplace. There is
complexity in these operations in most business firms and due to this reason most of them can use
this method to curtail cost. Decline in the cost will lead to elevation in the firm profitability. Hence,
it is the way that can be used by the most of business firms to reduce cost and elevating profitability.
2.6 Impact of cost control methods on the revenue sold
Firm sales and cost of goods sold are increasing at fast pace. It is observed that rate of growth
of sales is higher than sale of the cost of goods sold. According to K, C. Bayindir and etc.al.
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