The Effect of the production strategy on the relationship

between corporate social responsibility (CSR) and the

profitability moderated by environmental analysis: case
study of Nestle Bottling Company (new plant in Buxton).

PRESENTED TO:
DR/TAREK ALI

PREPARED BY GROUP 4:
SALAH KHALIL
MOHAMED HESHAM
AMJAD MAJED
MOHAMED SHAABAN
AHMED SAMY
SCIENTIFIC RESEARCH

0
1. TITLE

THE EFFECT OF THE PRODUCTION STRATEGY ON THE RELATIONSHIP BETWEEN

CORPORATE SOCIAL RESPONSIBILITY (CSR) AND THE PROFITABILITY MODERATED BY
ENVIRONMENTAL ANALYSIS: CASE STUDY OF NESTLE BOTTLING COMPANY (NEW
PLANT IN BUXTON).

1.1 INTRODUCTION
About Nestle
 The history begins in 1866, with the foundation of the Anglo-Swiss Condensed
Milk Company. Henri Nestlé develops a breakthrough infant food in 1867, and in
1905, he founded merges with Anglo-Swiss, to form what is now known as the
Nestlé Group. During these period cities grow, railways, and steamships bring
down commodity costs, spurring international trade in consumer goods.
 In the UK, Nestlé employs more than 8,000 people across 23 sites (including 15
factories). Nestlé is one of the UK and Ireland’s major exporters, exporting
almost £400 million worth of products every year to over 50 countries around the
world. Since Henri Nestlé founded the company in 1867.
 The Nestlé Waters business has continued to grow in the UK, supported by the
success of its strong local brands, Buxton Natural Mineral Water (the number
one British branded bottled water) and Nestlé Pure Life spring water. The UK
bottling factory at that time had no space to expand to meet demand. The site
also had inefficiencies in the production process, which meant time, and
resources were unable to be optimized. These factors lead to Nestlé Waters UK
(NWUK) deciding to look for a new site and invest £35 million to build a brand
new state-of-the-art combined plant and warehouse facility to bottle the two local
waters. The new plant is one of Europe’s most innovative and efficient bottling
facilities.
 In Nestle, they have a statement, which say.
 ‘We believe that, to succeed as a business in the long-term and create value for
our shareholders, we must also create value for society. We call this Creating
Shared Value (CSV). Across the globe, Nestlé has three keys focus areas for
Creating Shared Value as part of its ‘Nestlé in Society’ initiative. These are
nutrition, water and rural development. This case study examines this

1
1.2 RESEARCH PHENOMENA
 The Nestlé Waters business has continued to grow in the UK, supported by the
success of its strong local brands, Buxton Natural Mineral Water (the number
one British branded bottled water) and Nestlé Pure Life spring water. The UK
bottling factory at that time had no space to expand to meet demand. The site
also had inefficiencies in the production process, which meant time, and
resources were unable to be optimized. These factors lead to Nestlé Waters UK
(NWUK) deciding to look for a new site and invest £35 million to build a brand
new state-of-the-art combined plant and warehouse facility to bottle the two local
waters. The new plant is one of Europe’s most innovative and efficient bottling
facilities.
 In our Case, we use the Deduction thought process to know what happened in
our phenomenon (the profitability) which affected by the independent variables
(CSR, production strategy & environmental analysis)
 The phenomenon is the profitability that has the strong relationship with the other
variables CSR and the production strategy. That means when the company take
a steps toward the community as a CSR this will affect the market share, which
will reflect on the profitability. CSR as a strategic perspective helps us to
understand how firms gain competitive advantage through engaging in socially
responsible behaviors. There is a positive relation between stakeholder
management and firm performance based on strategic CSR, participation rooted
in straight donations is negatively associated with firm performance.

0
2.RESEARCH VARIABLES
2.1 DEPENDENT VARIABLES

• Profitability: - is the ability of a business to earn a profit. A profit is what is left of

the revenue a business generates after it pays all expenses directly related to the
generation of the revenue, such as producing a product, and other expenses
related to the conduct of the business activities.
• Profitability in accounting is the ability of a company to use its resources to
generate revenues in excess of its expenses. In other words, this is a company's
capability of generating profits from its operations

2.2 INDEPENDENT VARIABLES: -

• Corporate social responsibility (CSR):- is a management concept whereby

companies integrate social and environmental concerns in their business
operations and interactions with their stakeholders. Such as our case study of
Nestle company which has a statement which say
‘We believe that, to succeed as a business in the long-term and create value for
our shareholders, we must also create value for society. We call this Creating
Shared Value (CSV)’’ Corporate social responsibility is a broad concept that can
take many forms depending on the company and industry. Through CSR
programs, philanthropy, and volunteer efforts, businesses can benefit society while
boosting their brands.

0
2.3 INTERVENING OR MEDIATING VARIABLES: -

• Production strategy: A production strategy helps a company to make operational

and strategic decisions that follow a logical pattern and supports the corporate
strategy and the competitive priorities of the company. When no strategy exists the
decisions may be arbitrary and Unpredictable leading to an under- achieving
production system. Lean production is a good strategy, which is implemented in
man businesses.
Lean Production can be defined as a philosophy or as a strategy which depends
on a set of practices used to minimize waste in order to improve an
Enterprise’s performance. Lean Production comes from the Toyota production
system, a concept Adopted by many major companies across the world in an
attempt to remain competitive in an increasingly globalized market.

2.4 MODERATING VARIABLES: -

• Environmental analysis: - The environment is something you are very familiar

with. It is everything that makes up our surroundings and affects our ability to live
on.
Customers, competition, the economy, technology, political and social conditions,
and resources are common external factors that influence the organization. In
order for managers to react to the forces of internal and external environments,
they rely on environmental scanning.

0
3.RESEARCH GAB

 The case study is taking from the operation of the Nestle bottling group in UK.
Which describe the relation between the variable and the phenomenon
(profitability)
 The no. of population taken to make survey through questionnaire may be not
enough and we need more to evaluate the position of the company in the
community.
 The Data taken for 2018 and 2019 may be not enough to evaluate the CSR effect
on the profitability so we need more data for more years.
 In our research, we discuss how the variables production strategy and the CSR
effect on the sales growth and profitability of Nestle when the company focus on
the environment externally and internally.

4. RESEARCH QUESTIONS

• What is the current situation of Nestle bottling in UK market?

• What is Nestlé bottling in Society initiative in UK market?
• What is the impact of corporate social responsibility on the production strategies
of Nestle bottling in UK market?
• What is the impact of production strategies on the profitability of Nestle bottling in
UK market?
• What is the impact of production strategies on the relationship between CSR and
profitability of Nestle bottling in UK market?
• What are the rules of environmental improvement of Nestle bottling in UK market?
• How Nestle bottling can increase profitability in UK Market?

0
5. RESEARCH OBJECTIVES
• Describe Nestlé bottling current situation in the UK market in bottled water industry
and the necessity to expand the production facilities and building new factory in
Buxton.
• Describe Nestlé bottling in Society initiative in the UK market.
• Explain the reasons why corporate social responsibility affects production
strategies of Nestle bottling in UK Market.
• Explain the reasons why production strategies affect Nestle bottling profitability in
UK Market.
• Explain the reasons why production strategies affect the relationship between CSR
and profitability of Nestle bottling in UK Market.
• Explore the rules of environment improvement of Nestle bottling in UK Market.
Explore how can Nestle bottling increase profitability in UK Market.

6. LITERATURE REVIEW (THEORETICAL FRAMEWORK)

• We have a direct relation between environmental CSR and profitability.
• (The study highlights that environmental CSR has a positive effect on
corporate/brand reputation and corporate profitability.)
• REFRENECE: https://www.emerald.com/insight/content/doi/10.1108/EBR-03-
2014-0029/full/html.
• CSR has direct relation on economic crisis.
• Some of the findings were as follows: most of the studies analysed reported that
CSR helps companies to cope with economic crises by increasing the efficiency of
investments and establishing better relations with stakeholders and markets;
environmental practices are related to negative environmental performance in
periods of economic crises; and CSR relates positively to financial performance in
periods of economic crises.
• Reference: https://www.emerald.com/insight/content/doi/10.1108/JOCM-05-
2017-0159/full/html
• Although corporate social responsibility (CSR) has been an issue of major concern
for marketers for more than half a century, only recently has it attracted the

0
 attention of international marketing researchers. During the last two decades, this
body of research has experienced an increasing trend, which, however, is very
fragmented and diverse. In response, the purpose of this paper is to review,
assess, and synthesize extant research on the role of CSR activities in
international marketing.
• The evidence suggests strongly that, irrespective of the subjective will of CEOs,
corporate profitability acts as a fetter to authentic social responsibility.
• (s to examine five themes arising from definitions of corporate social responsibility
(CSR): responsibility to the community and society; promoting democracy and
citizenship; reducing poverty and the inequality between rich and poor; employee
rights and working conditions; ethical behaviour. The paper also aims to evaluate
three important articles on CSR, and investigate conceptual value added, with
reference to these five themes.)
• •REFRENCE:https://www.emerald.com/insight/content/doi/10.1108/17471110710
840215/full/html
• •There is a significant direct effect between CSR and ROI and ROE.
• •Reference: http://103.17.76.13/index.php/eldinar/article/view/2525
• CSR has strong relation with corporate citizenship in which affect profitability.
• Corporate citizenship relates to a company’s commitment to addressing problems
in society beyond its own business activities and is usually limited to the company’s
local environment. Typical examples of corporate citizenship include donation and
sponsorship (corporate giving), the creation of benevolent company institutions
(corporate foundations) and the direct involvement of company staff in social
projects and undertakings (corporate volunteer.
• •The relation between CSR and Sustainable development. Stainable development
is, “a form of development that meets the needs of the present without
compromising the ability of future generations to meet their own needs

1
 6.1 CONCEPTUAL FRAMEWORK

+H4

Corporate social +H3

+H
responsibility Production Profitability
1
strategy

+H
2

Environmenta
l analysis

Significance: 95

6.2 RESEARCH HYPOTHESIS

H1: The higher the CSR the higher the productivity.

H2: If the environmental analysis increases, the productivity will be increased.

H3: The higher the productivity the higher the profitability.

H4: The higher the CSR the higher the profitability.

2
7. RESEARCH DESIGN:
7.1 POPULATION UNIT AND LEVEL OF ANALYSIS:

Our target population is made up of a set of direct consumers for Nestle products,
wholesalers and retailers.
Consumer will be asked about compatibility of the product and corporate social
responsibility and the extent of its impact on price and purchasing value.
our targeting consumer of this research is direct consumer of Nestle and we will study
the case of several products from the most demanding ones to the least and we will
target the middle and high income groups and below the average and the sample size
will eat 500 consumers and 200 of wholesalers and retailers.

No. of
Direct
Num. Product target Wholesalers Retailers
Consumers
population
1 Water consumer 300 200 50 50
Milk and ice cream
2 100 50 25 25
consumer
Health science
3 50 30 10 10
consumer
Prepared dishes and
4 cooking Aids (Maggi) 50 30 10 10
consumer
Nestle confectionery
5 200 140 30 30
consumer
Powdered and liquid
6 beverages (Nescafé) 100 50 25 25
consumer

Stores and
Malls Pharmacies Hospitals
Warehouses

Those respondents of the current research proposal will involve all different
gender
, age and different educational background.

7.2 SAMPLING
Besides that, Non-probability sampling was used in the current research

3
 proposal because the respondents are chosen through Snowball sampling.
Samples developed from contacting the existing customers face to face –
‘word of mouth’ type approach.

The response of wholesalers to the extent of compatibility of Nestlé's products with the
CSR system was positive, and there is a good desire for the consumer to repeat the
purchase of these products, because the purchasing power of Nestlé products within
the market has a constant height and to a certain degree, and the percentage of
demand when Wholesaling retailers is amazing in UK.

in addition to some retailers adding that Nestlé provides good offers on its products and
perfect offered to the retailer to motivate them to promote the product inside the stores
and sales point, but there are some disadvantages that the price does not correspond
to the fluctuating conditions and their prices remain constant.
This was a response segment of consumers in some of the reports received from the
social media platform, was the response Nestle company and with the follow-up to
consumers through those platforms that offer discounts and deals at certain times in
the year, such as Black Friday and holidays, public events and other expression,
including strong desire for consumer satisfaction.
So! Regarding the Effect of the production strategy on the profitability moderated by
environmental improvement, our question here with the sales department and
production department and financial department in nestle company is about the
profitability:

4
What is your opinion about the effect of the production strategy on the profitability
moderated by environmental improvement?
We targeted 6 persons in nestle bottling company
Target population Sales department Production department Financial department
No. of target population 2 2 2

Where, the response was with this decision and with the discussion of the income list
with the sales department and others we found that, there is a decent preservation at
the level of income and sales and a comparison of 4 parallel years:

2018 2019
Sales 91,439 92,568
Profit 10,468 12,904

Note: numbers in millions CHF (Confederation Helvetica Franc) Swiss franc.

So The beginning of work on the CSR system started in 2018-2019, except that there
is a consensus in the sales value and the value of profitability, and reports show that:
- The number of profits increased to 2,436 million CHF for the year of 2019 more
than 2018.
• These numbers are evident in the appended income statement, and the sales
department adds that the company is still insisting on raising the percentage of
profits for more than that, with actual and violent maintenance at the level of
sales, in addition to satisfying the customer’s desire and dedicating the role of
social responsibility to the consumer. As the Sales Department says, Nestlé is
the consumer company and it hijacks the heart of everyone who buys it and
wants to consume it and buy it again because the company focuses on quality in
a very wonderful way.

5
6
7
• Using the attached financial reports, we were able to reach the
calculated ratios, which will be used for the financial data analysis.

-Here we have the ratios for 2018, we talking about Short-Term

solvency, or liquidity, ratios:
- Current ratios = Current assets / Current liabilities
= 41,033 / 43,030 = 0.95
- Quick ratios = (Current assets – inventory) / Current liabilities
= (41,033 – 9,125) / 43,030 = 0.74
- Cash ratios = Cash / Current liabilities
= 4,500 / 43,030 = 0.10
- ratios for 2019, we talking about Short-Term solvency, or liquidity,
ratios:
- Current ratios = Current assets / Current liabilities
= 35,663 / 41,615 = 0.85
- Quick ratios = (Current assets – inventory) / Current liabilities
= (35,663 – 9,343) / 41,615 = 0.63
- Cash ratios = Cash / Current liabilities
= 7,469 / 41,615 = 0.17

8
7.3 DATA COLLECTION:

A. Source: We will use the secondary method because there is data already
available and collected on nestle.com such as nestle.com/aboutus/strategy,
the basic source of information for this field and we use secondary data
because it is cheaper to collect secondary data than to obtain primary data,
thin we will make a privet meeting with coordinators in the company to now
more information about the profitability of company operation so we going to
use primary method
B. Approach: We will use quantitative methods & qualitative methods form
through a survey that going to do with consumers and employees for Nestlé
and doing interviews with each of them because our reliance in this case is on
statistics.
C. Method: We will use case study is with structured way of collecting
standardized information from:
https://businesscasestudies.co.uk/achieving-sustainability-through-lean-
production-2/
By examining the article on the site above, deduction of data and explore the
data necessary to study the phenomenon
D. Techniques: We can use two types of Techniques:
 Indirect Observation: Through indirect observation and case study,
consumer satisfaction, product quality, company satisfaction, reasons for
each component’s direction for a particular type, and the effect of this
behaviour indirectly on the profitability of the company, whether increase
or decrease, can be analyzed.
 Direct Observation: We will use direct observation to track and analyze
customer behavior, preferences and direction for any type of product. And
the effect of the phenomenon on the sales rate.
We will use direct feedback because we are dealing with a specific
segment of users who use Nestlé products. The work will be on direct
interviews with the director of the company's sales division and the
account manager and production manager at Nestlé bottling.

9
 E. Tool: In our case study, they have used two types:
Online:
 E-Mail by preparing structured messages and sending them to users.
 Nestle website and their pages on social media.
 Survey for asking the consumer about corporate social responsibility.
Offline:
Through the use of the phone, they guaranteed a large percentage of interaction and
responses that will provide a large amount of information necessary to uncover more
mystery of the phenomenon.

7.4 DATA ANALYSIS

The data Analysis have been conducted to identify the factors affecting Consumer
behavior towards the company’s products and determine the relationship between
factors and The Company’s profitability.

• Descriptive analysis has been conducted to summarized and describe the data
collected we will do that by using “SPSS” program as that can analysis opinions
and people behaviors / attitude.
• Financial analysis (Horizontal ratios analysis) has been conducted to
measure the profitability affected by the factors. Also by using “SPSS” program
to conduct the descriptive analysis which will be able to describe the current
situation of the profitability and the impact of the factors (ratios calculated above)
on it.
• SPSS data analysis
Ratio statistics for 2018/2019

The confidence interval for the median is constructed without any distribution assumptions The
actual coverage level may be greater than the specified level. Other confidence intervals are
constructed by assuming a normal distribution for the ratios.

10
8. REFERENCES

https://businesscasestudies.co.uk/topics/case-studies/operations/
https://businesscasestudies.co.uk/achieving-sustainability-through-lean-
production-2/
https://www.emerald.com/insight/content/doi/10.1108/EBR-03-2014-
0029/full/html.
https://www.emerald.com/insight/content/doi/10.1108/JOCM-05-2017-
0159/full/html
https://www.emerald.com/insight/content/doi/10.1108/174711107108402
15/full/html
https://www.bing.com/search?q=www.nestlewatersusa.com&src=IE-
SearchBox&FORM=IESR3A

11