Category: Nestle

Introduction

Biscuits are some of the common snacks found within Australian market. The products mostly target the young people but can be consumed by any anybody regardless of age or gender. The consumers of biscuits are therefore varied. However, there are concerns about the biscuits on health; it is medically proven that too much consumption of snacks like biscuits have the potential of causing toothache, and since they contain sugar they can increase sugar level in the body. This is one of the main factors determining the amount of consumption of biscuits as snacks. This report examines the biscuit industry within Australia (Tiezzi, 2006).

Market Background

The biscuit market in Australia has undergone lots of transformation since the first time biscuits were manufactured in Australia. The first biscuits to be introduced in Australia appeared in the 17^th and 18^th centuries; they were hard and were referred to as ‘sea biscuits’ because they were mostly used by sailor at sea. Since then, the biscuit products have evolved to become one of the easiest snacks to eat within the Australian market and beyond.

Since the introduction of biscuits in Australia, so many market players have entered the industry and the competition has been increasing tremendously. Currently, the leading biscuit manufacturing company in Australia; it has over forty years of experience in biscuit production and supply. Nonetheless, the whole biscuit market within Australia has been characterized with lots of acquisitions and mergers within the past decade. This has been due to the fact that producers seek to increase their market share and increase their base with commercial synergies. The market industry has three major competitors which are the Arnotts Biscuits Holdings Pty Limited, Goodman Fielder Limited and Kraft Foods (Australia) Limit. Their market shares are as follows:

Looking at the pie chart, it is clear that Arnotts Biscuits Holdings is leading with 65% of the market share. This owes to the fact that the company is the first amongst the initial biscuits companies to operate in Australia. The second largest company in the market is Goodman Fielder Limited with 20% and the last is and Kraft Foods (Australia) Limit with 15%. However, it is important to note that there are over 400 biscuit companies whose products access the Australian biscuits market industry (Dun & Bradstreet, 1995).

Environmental Factors

There are a number of environmental factors affecting the biscuit industry in Australia. The prices of biscuit products are influenced by several political factors. One of the factors is the Goods and Service Tax which accounts for approximately ten percent of most transactions across all the industries. It is also important to note that the prices of biscuits are vulnerable to any government decisions with regard to prices and production policies.

Economic factors have the most potential effects on the production of biscuits. Kin case of economic slow down, whether global or domestic, the biscuit industry is most likely to experience its negative impacts in terms of productivity and consumption. During economic slowdowns, organizations and individuals tend to cut on their expenditures; they limit such expenditure to basics only. Another economic factor that has negative effects is inflation and currency fluctuations which can possibly destabilize the market prices for biscuits.

In the 21^st century, effective and efficient productions are facilitated by increased level of technology. Therefore, it is important to note that increase in related technology is likely to enhance the production of biscuits with the Australian market. This greatly depends on how fast the biscuit companies adopt the new technological inventions and innovations.

Culturally, the consumption of biscuits and other snacks has been on the increase within the Australian market. The number of consumers of these products is rising tremendously. It implies the consumption of such snacks is strongly becoming part of the Australian population. Therefore, the biscuit industry is set to gain more in terms of revenues and profit margins.

Nestle Company

Background

The Nestle Company was started in 1860s by a trained and experienced pharmacist who did lots of experiments with a view of coming up with an alternative nutrition for mothers who were not able to breastfeed their babies. In 1905, the company was formed after a merger and operated under the name Nestle and Anglo Swiss Milk Company. It ultimately expanded to other nations like the United States, Spain, Germany and Britain in the period running from 1905 to 1918 (Nestle, 2010).

The company experienced increased sales during the First World War; however, after the end of the wars, the company experienced slowed sales due to the fact that most consumers went back to purchasing fresh milk. After the Second World War, the company came up with workable strategies that saw the company expand its operations. Never the less, the end of World War Two resulted into the drop of its revenues and profit margins.

Despite the slowed financial performance of the company, it began to expand its operations globally by establishing its plant in developing countries. The consequent of this expansion was the recovery of its high performance in which its productions and sales increased impressively. Its expansion has included acquisition and mergers with other like minded companies (Nestle, 2010).

Nestle Operations

The company operates on global scale; it has presence in both developed and developing nations where its products are being produced and consumed. It has international human resources, huge capital base and a large number of customers spread across the world. The company has diversified its brands besides investing in unrelated products. It owns 30 percent of the L’Oreal Cosmetic Company. However, the company owns brands like Kit Kat, Pickled Plum, Bubblegum and Onctueux amongst other many brands.

The operations of the company include collecting fresh milk from farmers and store the fresh milk with a limited period of time before using it as raw material for the production of its varied brands. The company manufactures its products, keeps its own inventory and ensures that its final products are largely distributed in the market for final consumptions. In addition, the company is also involved in other unrelated operations through its Corporate Social responsibilities. Apart from participating in environmental sustainability campaigns; it also supports local activities in regions of its operations.

Mission Statement

The Nestle Company believes that use of research for its products can ensure it provides it consumers with better quality life. The company is committed in providing the consumers of its products with quality and safe food items; the food products that meet the optimum physiological needs of the consumers. Moreover, the company ensures its products are tasteful and pleasurable.

Nestle SWOT Analysis

Strengths

The company has several strengths that are able to keep it as the market in its industrial operations. The company has international presence hence making it easy for it to penetrate more market segments. Besides, the company has large capital base for its expansion. The company also enjoys a large number of customers for its range of products giving it a competitive advantage over its competitors. The company’s other strengths include having a well experienced and focused Chief Executive Officer and strong research team with the ability to conduct though research and come up with quality innovations (Castel Articles, 2005).

Weaknesses

The main weakness of the company is that its expansion to other countries has not been successful. This is due to tight competition and business policies existing in those countries. For instance, its LC1 was not as successful in France as the company wished it should have been. This might have been due to the possibility that consumers might have considered the LC1 division as being scientific and therefore might have misunderstood the products to be food instead of drug (Castel Articles, 2005).

Opportunities

The health-based goods are becoming very common in the global market. This is attributed to growing health concerns in which consumers are becoming more sensitive than ever with what they consume in terms of food (Castel Articles, 2005).

Threats

A number of markets in which the company plans to enter are already occupied by strong competitors. Besides, the company is prone to effects of economic slowdowns. Another threat to the company is the possible entry of new players into the market. This is likely to flood the market and hence destabilize prices in the industry. Moreover, political instabilities and currency fluctuations in its countries or regions of operations may adversely affect its operations (Castel Articles, 2005).

Reference List

Castel Articles. (2005). Nestle SWOT Analysis. Web.

Dun & Bradstreet. (1995). Jobson’s year book of Australian companies, Volume 66. Australia: Riddell Information Services

Nestle. (2010). History. Web.

Tiezzi, E. (2006). The sustainable city IV: urban regeneration and sustainability. Volume 93 of WIT transactions on ecology and the environment. Australia: WIT Press.

Introduction

Nestle has been operating in the global market for quite a while, gaining the reputation of worldly renowned entrepreneurship and becoming the household name for millions of people all over the world. However, as society progresses to the next stage of development, the company must keep pace with it. Particularly, the issue regarding the use of IR governance as the approach for making the firm more efficient and increasing customer satisfaction rates deserves to be brought up. Although the current state of IT governance in Nestle can be interpreted as bearable, the company still needs a creativity and agility-based framework that will help it improve its current rates, primarily, the derived value.

Objectives

Among the essential objectives that Nestle will have to attain, the identification of the dents in its current IT governance framework and the effects that the problems with the latter have on the firms’ success, especially the increase in derived value, need to be identified. In addition, the tool for assessing the progress made by the organization will have to be introduced into the evaluation process. Although CORBIT helps locate the crucial factors in a rather efficient manner, it does not permit evaluating the situation in detail.

Moreover, the identification of the IT governance strategy to be used in the company is going to be a crucial step on its way to global success. Creating the IT governance framework that will help the firm process data faster, respond to the needs of its stakeholders and maintain the company data safe will contribute to a significant drop in the derived value rates, attract more customers, and avoid suffering severe losses.

Strengths

Identifying the company’s strengths, one must give it credit for being open to innovations and new challenges (“Nestle Global” par. 1). In addition, the leadership strategy adopted by the company leader invited opportunities for a fast change and the renovation of the frim’s operational frameworks (“The Nestlé Management and Leadership Principles” par. 3).

Weaknesses

A single look at Nestlé’s current IT strategy of governance will show that the firm is in desperate need of a global IT renovation. According to recent reports, the entrepreneurship has suffered a harsh blow from one of its partners, Peters Ice Cream, which terminated its operations with Nestle: “Peters Ice Cream will have no second chances when it breaks away from former parent Nestlé’s global SAP system, as it pushes to stand up a completely new IT environment by August 1” (Crozier par. 1).

The lack of a proper IT governance strategy that will help the firm coordinate the key processes across its global supply chain and meet the demands of its customers leads to a major drop in quality and a range of losses inflicted by an increase in the derived value rise.

Risk factors

A closer look at the risk factors above will reveal that the largest threat faced by the company at present concerns the mismanagement of data due to poor use of the existing IT data transfer tools as well as the danger of information leakage (i.e., data theft committed by cyber criminals).

Effects of IT Governance

IT governance, in its turn, will help not only mend the holes in the current security system of the organization but also prevent further instances of information mismanagement from occurring. Particularly, the IT governance framework will create premises for enhancing awareness regarding the subject matter. As a result, it is expected that the staff will become aware of the essential security management steps that have to be taken to store and transfer data properly.

Derived Value

According to the existing records provided by the company in question, the derived value of Nestle may be reduced significantly. The specified objective can be attained by suggesting a different mode of data transfer by introducing the corresponding IT tools and creating a more balanced IT governance strategy.

The above steps are curial as the speed and efficacy of data transfer define the course of a company’s development and success rates in the global economy to a considerable extent. For instance, the use of the latest IT innovations will help identify the possible hindrances in the transportation processes so that the raw materials or the end products could be delivered in a manner as efficient and expeditious as possible. At this point, the significance of maintaining the product quality rates high needs to be mentioned.

With the adoption of the IT Governance system that will help trace every process occurring in the system of the company’s Global Supply Chain, the threat of the product being deformed and the raw materials suffering serious damage will be reduced significantly. As a result, the shipment value, which is related directly to the derived value, can be reduced significantly. Indeed, according to the existing definition. The derived value is defined by the shipment-related expenses to a considerable extent (Lami, 2014). Therefore, by preventing accidents that may possibly occur in the process of shipment, one is likely to reduce the derived value of the product significantly, therefore contributing to the increase in the firm’s success in the target market.

Next Steps

Seeing that the introduction of CORBIT into the framework of the company’s operations is likely to bring its efficacy rates up, it will be necessary to introduce an evaluation system into the company’s framework based on the changes that the CORBIT strategy has allowed for. Particularly, it will be crucial to make sure that the firm adopts the IT governance strategy that can coexist with the rest of the corporate processes.

Therefore, Nestlé should consider developing the IT governance framework that is linked directly to logistics-related issues. Thus, the environment, in which the entrepreneurship and the IT department can cooperate so that requirements could be located and controlled as demanded by the CORBIT system (“IT Governance: Developing a Successful Governance Strategy” par. 2), can be created.

In addition, seeing that CORBIT will take the firm to the next level of information management, it will be essential that the issue of information security should be addressed. There is no secret that cybercrime rates are very high in the realm of the contemporary global market (“Case Study” par. 4). Recent studies show that, despite the introduction of harsher penalties for the people stealing companies’ data, the threat persists and is getting increasingly high, especially with the development of the so-called crypto viruses (“‘ Ransomware’ a Growing Threat to Small Businesses” par. 2). Therefore, the design of an elaborate strategy aimed at preventing the instances of security breaches in the organization must be viewed as the next reasonable step to take. Once the IT processes are secured, the governance process can be executed successfully.

Works Cited

ISACA 2015, Developing a Governance Framework for the global support organization at GlaxoSmithKline, Using COBIT. Web.

IT Governance: Developing a successful governance strategy 2005, Web.

Lami, Ivan. Analytical Decision-Making Methods for Evaluating Sustainable Transport in European Corridors. New York, NY: Springer, 2014. Print.

Nestle Global 2016, Web.

The Nestlé Management and Leadership Principles 2015, Web.

‘Ransomware’ a Growing Threat to Small Businesses 2015, Web.

Introduction

Nestle is a nutrition company that aims at enhancing better and quality livelihoods to people. It has varied products that mainly help in improving healthy lifestyle of the people.

Over the years, the company has used its resources and technology to find sustainable solutions to socio-economic needs of its customers.

Some of these needs include poverty eradication, better sanitation and food security. This gives the company a competitive advantage over many other companies¹.

Apart from corporate social responsibility, the company created Nestle nutrition, a business strategy meant to focus on the core nutrition business. Therefore, strengthening the leadership in this market is crucial for their success.

This market is the primary motivation for the purchase of its product based on the nutritional value. Nestle nutrition is autonomous global business unit that is meant to increase the competitive edge of the company.

The unit is charged with the profit and loss responsibility in its utmost domains, which include Infant Nutrition, Healthcare Nutrition, and Performance nutrition.

The latter is aimed at delivering superior business performance to consumers by offering science based nutritional products and services².

To enhance its competitive advantage, the company has Corporate Wellness Unit, which focuses on integrating nutritional value to food and beverage products. It encompasses communication effort, which brings the necessary expertise in consumer benefits.

Nestle Production and Services

Nutrition has been the cornerstone of Nestle Company since its inception in the year 1867. Therefore, most products and services provided by the company revolve around nutritional needs.

The company strives at providing quality products and services which will help in promoting a better and healthy wellbeing of its consumers. Nestle has gained a world reputation for its consistency in providing quality and safety products.

Many of the products generated by Nestle Company are beneficial based on the nutritional aspects. They include breakfast cereals, milk and other dairy products as well as bottled water which has diverse accrued advantages³.

Many of these products dominate in both local and global markets. The company has ventured in chocolate and confectionery industry. Some of these products have been in existence for over a century.

For example, S. Pellegrino and Nestle Moca are known in Italy and Brazil for many years. The most revered world brands include Nescafe, Nestea, Maggi, Buitoni, Purina and Nestle. Other brands, such as Milo and Nespresso, sell in many countries.

Nestle takes a holistic approach in providing nutrition to the people. This entails devising of wellness programs that facilitate the people to make their living healthy.

The services include baby’s development, Sports Nutrition and Weight management. No doubt, Nestle brand portfolio practically covers all food and beverages categories.

Nestle Operations Management

The running of the company’s business is governed by two fundamental documents, Nestle Corporate Business Principles and Nestle Management and Leadership Principles.

The two provide the code of ethics that governs the policies and strategies of the company. They outlay the tone and style of approach to the running of the business.

The company’s business strategy is to produce and market its products in a way that creates sustainable value to all stakeholders including the employees, consumers and business consortium in the areas that the company operates. The company does not favor short-term profits over long-term business orientation.

The company recognizes that consumers have a legitimate interest in the behavior and the success of the company’s business, hence it embraces cultural and social diversity.

The company is not discriminatory in management of the business on the basis of nationality, religion, race or age. The company does not involve in political issues.

The rich cultural diversity helps in building innovative ideas for generating products which would meet the needs of the society.

The company has not been left behind in environmental conservation. It has invested heavily in conservation of the environment. In a bid to save the environment, the company has endeavored in recycling of waste materials and packaging.

Nestle pioneered the Kyoto Protocol, an agreement to control carbon dioxide emissions in combating global warming⁴. The company was the first to produce biodegradable containers as an alternative to plastics for packing their food products.

Nestle Operations Strategy

Nestle is a global organization, and its international strategy should be the heart of its competitive domain. The competitive strategy of the company mainly focuses on foreign investment in dairy and other food businesses.

When operating in a more developed environment, Nestle strives to attain the economies of scale via foreign direct investment⁵. In a developing environment, Nestle Company goes the local way by utilizing the local raw materials and employing the appropriate brand.

Nestle Company strikes strategic partnership with other large companies. For example, the company entered an alliance with Coca Cola Company to produce ready-to-drink beverages, such as tea and coffee⁶.

Conclusion

This was in a bid to utilize the established bottling system and necessary expertise in beverage preparation. The Company has employed the strategy of acquiring the local companies to form an established autonomous regional manager who is aware of the local markets dynamics⁷.

Nestle company has left a significant mark in food and nutrition sector, hence becoming very competitive in the scope of business⁸.

Bibliography

Franzen, G. & Moriarty, S. The Science and Art of Branding. New York: M.E. Sharpe, 2008.

Kapferer, J.N. The New Strategic Brand Management: Creating and Sustaining Brand Equity Long Term 4^th. London, UK: Kogan Page, 2008.

Nestlé LC1. ‘Nestle’s Competetive Strategy‘. Castelar Articles, 2005. Web.

Footnotes

1. Franzen, Giep & Moriarty, Sandra.The Science and Art of Branding. New York: M.E. Sharpe, 2008.
2. Nestlé LC1. ‘Nestle’s Competetive Strategy’. Castelar Articles, 2005.
3. J.N. Kapferer. The New Strategic Brand Management: Creating and Sustaining Brand Equity Long Term 4^th. London, UK: Kogan Page, 2008.
4. J.N. Kapferer. The New Strategic Brand Management: Creating and Sustaining Brand Equity Long Term 4^th. London, UK: Kogan Page, 2008.
5. Nestlé LC1. ‘Nestle’s Competetive Strategy’. Castelar Articles, 2005.
6. Ibid.
7. Ibid.
8. G. Franzen & S. Moriarty. The Science and Art of Branding. New York: M.E. Sharpe, 2008.

Four Strategic Goals of Location

Nestle is a worldwide food producer, and as such, it has numerous production facilities and brands located in different parts of the world. Nestle’s strategic goals that define chosen locations are as follows:

• Establish the company in the local market. Being able to produce foods domestically significantly reduces costs of logistics and makes a good reputation for the brand by employing locals.
• Economic feasibility. Producing foods domestically may be cheaper than importing them due to the proximity of resources necessary for production.
• Labor market accessibility. Hiring labor force in countries such as Brazil and Argentina is cheaper than doing so in Europe, which contributes to choices of certain locations.

Institution-Based View

The institution-based view is a type of international business strategy that encompasses the elements of industry-based and resource-based strategy, as well as adding the analysis of societal differences and cultures added into the mix. Nestle operates using institution-based views and incorporating them into their location and pricing strategy. For instance, their policy on how much should a product be charged for in different countries is based on what the local population could afford without jeopardizing their family budgets. Nestle’s goals, as stated in the case study, are about promoting good food and a good life for their customers. Affordability is one of the qualities necessary for achieving that goal. It ties in with location strategy, as producing cheaper goods domestically means a lower price for the local markets.

Five Dimensions of Culture

Hofstede’s five dimensions of culture can be applied to any international business for analysis. The dimensions include power distance/proximity, individualism/collectivism, masculinity/femininity, uncertainty avoidance/acceptance, and short/long-term orientation. In the case of Nestle, it is a Power Distance company due to large distances between lowest and highest-ranking employees. It is a collectivist company due to the nature of mass production. Its strategic approach to the markets is feminine, as Nestle seeks to collaborate and establish joint ventures rather than suppress the local competition. It establishes structured environments to avoid uncertainty, with a clear chain of responsibilities and a command structure. Lastly, the company shows a clear orientation for long-term gains, as it establishes alliances and builds factories in promising markets.

Equity and Non-Equity Alliances

Equity alliances are alliances based on cross-shareholding and supplemented by passive equity investments, meaning that companies owe equity to one another. It is a complex system of relationships that ensure reduced incentives for competition between members of the alliance and reduce chances of a takeover. An example of an equity alliance would be the alliance between Nestle and Polar Beverages, as they share knowledge and resources to make products under both brand names.

Non-equity alliances are closer to gentlemanly agreements between companies, usually not official, which are made to ensure coexistence and cooperation between companies. Although less complex, they are also more prone to being broken. An example of such an agreement involves the NaturALL bottle alliance between Nestle, Danone, and Origin Materials.

Liability of Foreignness

Liability of foreignness is a concept that defines additional costs international companies face when operating outside of their country of origin. It is genuinely motivated by difficulties imposed by foreign legal systems as well as competition with domestic brands and distrust of foreigners by the local populace. Nestle deals with the liability of foreignness in several ways. It builds production facilities to establish itself as a domestic brand. Additionally, it purchases local brands and forms joint ventures and alliances with them to mask itself for a domestic brand as well. Lastly, it establishes a good reputation in the market by implementing region-focused pricing policies.

Introduction

Modern globalization and increased level of competition encourages many companies to become multinational to win the world markets and remain at the top positions in sales, spread, customer appreciation, etc. Before getting down to the analysis of the competitiveness and the global spread of Nestle, Bartlett and Ghoshal’s definitions of global, multinational, international and transnational organisations should be considered.

According to Bartlett and Ghoshal’s typology, there are three types of multinational companies, global, multidomestic and transitional.

Global company combines “high integration with low responsibility”, multidomestic one comprises “low integration with high responsibility” and transitional company comprises “high integration with high responsibility” (Harzing, 2000, p. 3). Nestle is a transitional multinational company with the representations in many countries which products are manufactured and sold internationally.

Operation in the Country of Residence and Abroad

Nestle is a multinational company which has manufacturing plants in many countries of the whole world. The company has plants in Europe, Asia, Oceania, and Africa however, most of the manufacturing is concentrated in the USA. Switzerland, Germany, and India have some of the largest manufacturing plants which produce foods and beverages with the company label.

Having conducted SWOT analysis it becomes obvious that the company has many opportunities with its international plants and manufacturing (Company Spotlight, 2006).

Having various products lines, starting with baby nutrition and other products and finishing with cosmetics and pharmaceutical products, Nestle has an opportunity to satisfy the needs of the customers by means of manufacturing specific product types which appear under demand in a particular country.

Presence at Home and International Markets

Operating worldwide, having presentations in various parts of the world and manufacturing plants, Nestle has an opportunity to save and increase its competitiveness among the companies whose world presentation is lower.

Dwelling upon the scope of sold Nestle products worldwide, it is important to divide world market into several niches where Nestle’s products are present, food, beverages, baby nutrition, cosmetics, pharmacy, etc. Nestle is guided by local market and according to customers’ preferences creates worldwide distribution (DATAMONITOR, 2011).

Global spread of Nestle

Looking at the United Nations list of countries and the American intelligence service, it may be concluded that most of these countries have Nestle products at heir markets. Moreover, some of those countries are the leading manufacturers of Nestle products.

Depending on the country’s needs, Nestle tries to provide the clients of this or that country with the particular products, trying to reduce the distribution of the products to the country where they are of no demand (Nestle, 2011).

Major Markets

Considering the major markets of Nestle, it is important to mention the USA and Europe. The competitors at these markets are Nestle, the Coca Cole Company and PepsiCo. However, these companies are Nestle rivals only in beverages segment.

Nestle products are various, “powdered and liquid beverages, water, milk products and ice cream, nutrition, prepared dishes and cooking aids, confectionery, pet care and pharmaceutical products” (‘Soft Drinks Industry Profile, 2011, p. 32). Thus, it has more chances to be recognized at the international market.

Conclusion

Therefore, Nestle is a multinational transitional company with representation in different countries of the world which occupies leading positions in sales. Having many rivals, Nestle remains leading among other competitors due to the variety of products and global manufacturing presentation that helps the company coordinate its business.

Reference List

Company Spotlight: Nestle, 2006. MarketWatch: Drinks, 5 (6), pp. 21-31.

Datamonitor: Nestlé SA, 2011. Nestle SA SWOT Analysis, pp. 1-10.

Harzing, A., 2000. An empirical test and extension of the Bartlett and Ghoshal typology of multinational companies. Journal of International Business Studies, 31 (1), pp. 101-120.

Nestle: Good Food, Good Life, 2011. Nestle. [online] Available at: <https://www.nestle.com/> .

Soft Drinks Industry Profile: Global, 2011. Soft Drinks Industry Profile: Global, p. 1.

Executive summary

Nestle is a multinational company that is involved in manufacturing products, in the nutrition, health and wellness industry. Since its establishment in 1886, it has undergone through several changes which its CEO, Brabeck-Letmathe, says are steady and well calculated. A recent change is use of GLOBE, system Codification-Based Strategy, in information use and sharing.

It was meant to improve productivity, efficiency and increase the quality of customer care services. This system changed the way information is accessed, used and shared among employees in various departments all over the world. This system called for a change in the way employees related with management and vice versa which necessitated a change in the organizational structure of the company.

In this report I take a brief look at some of the changes that have occurred at Nestle over the years and the current change due to GLOBE system and the need for it. The structures of the organizational changes that occur at Nestle are discussed in detail.

This process presented challenges for the implementers and Nestle in general since it was met with resistance and delay. This was countered with intensified campaigns to create awareness and lobby for the changes. Finally, an action plan of the change management activities in Nestle is outlined detailed what will be done in each program, who will do it, for how long and the cost to the company.

The Nestle Change Management

Nestle is a multinational company that is involved in manufacturing products, in the nutrition, health and wellness sector. The buzzword in nestle is ‘good food, good life’ which summarizes its mission of providing their consumers with a broad range of food and beverage products for all events that are the best tasting and most nutritious.

Another buzz word for Nestle is ‘creating a shared value’ which Broeckx, (2007) explains means that the corporation creates and pursues long term sustainable value in actions, strategies and processes to all stakeholders be it consumers, communities, shareholders, employees and business partners.

Beside these, are the corporate, business principles where the company outlines its culture, which has been in use for more than 140 years, and are a manifestation of Nestlé’s thoughts on fairness, honesty and long-term thinking (Nestle, 2011).

The company was founded in 1866 by a Swiss national, Henry Nestle in Vevey, in Switzerland. During this time, marketing of products outside the country was through sales agents. This, however, changed in 1900s when the company started buying subsidiaries in foreign countries. In America, the company launched its products after the First World War in response to increased demand for dairy products.

This was done through acquisition of existing factories, and soon after the Second World War, many executives in the Vevey headquarters were transferred to the country. These moves were part of the changing strategies to increase efficiency and productivity for the company (Douglas & Craig, 2009).

The first major change came in 1974 when the company bought majority shares in the cosmetic giant L’Oreal. This was a well calculated move to increase the company’s growth and diversification. The company was criticized for investing in a company that was debt ridden, but soldiered ahead.

The second major change was in diversifying to the pharmaceutical industry by buying a U. S company, Alcon Laboratories, who were makers of pharmaceutical and ophthalmic products. Many other changes came in the 1980s and 1990s when financial improvement through strategic acquisitions and diversifications.

This necessitated the sale of non-strategic and nonperforming businesses while acquiring others such as the 1984 acquisition of Carnation (Nestle, 2011).

Today the company is continually restructuring its business with an annual budget of $3000 million set aside for this. Nestle CEO, Brabeck-Letmathe says that steady and well calculated change is what Nestle implements and does not do this as a fashion thing but as a well thought long term strategy.

He implemented a complete overhaul of the executive board and replaced them with 10 new executives so as to build on the company’s strength something that has guides the company’s organizational changes. Nestle managers’ commitment is what keeps the company steady with their “steeped in Nestle corporate culture” which orients them to focus on the long term goals of the company rather than short term profits.

This corporate culture also established the company’s major strengths such management of corporate growth and its relation to technology. The executive focuses on strengthening and upholding the company’s strength, as opposed to their completed overhaul (Broeckx, 2007).

The most recent change has been on using and sharing information which gave birth to the Codification-Based Strategy of which nestle chose GLOBE. This connects all Nestle departments around the world, and makes company information accessible to all its employees.

This makes information available to all employees and, therefore, no one is more important than the other due to the information he has that others do not have. Information is power, as it allows communication flow between people in the company. However, in order to access specific information or data, one fills request form.

This means employees should be taught how to access and use this information. This also requires a change in the way communication is carried out in the company since the current model could not support the change in information sharing (Nestle, 2010).

The nature of change

As we have seen above, in order for an employee to access specific information or data, one fills request form. This means employees need to be trained on how to access and use this information. Further, the old organizational structure has to go, which in this case was the top-down approach.

Top-down organizational structure used in Nestle had several limitations; professional development followed a vertical manner within a function which does not encourage networking, communication is done through the ranks which do not encourage contribution from employees, cooperation was shadowed by competition and the obedience orientation which discourages initiative (Broeckx, 2007).

This change in the organizational structure will need management strategies to allow employees to cope with change and contribute to the organization’s goals as they are now empowered.

The organizational structure changes that were implemented in Nestles the structurally changing processes approach that involved making substantial changes to the existing organizational structure. This meant that every employee will be oriented to focus on the changes introduced by GLOBE.

This is in line with the corporate ‘Untouchables’ or strong points of the company that focuses on strengthening its strengths and the role of technology in the company. The GLOBE system was meant to improve productivity, efficiency and increase the quality of customer care services, therefore, need to position the organizational structure to meet these needs (Chaudron, 2006).

The structural approach to managing change was implemented by forming steering committees of senior managers to appoint a multidisciplinary team that will design which actions to be taken in order to realize the goal of the company using this new change in information access.

The team assessed the culture of the company, the system used, and the conditions prevailing in the company and came up with recommendations for action which were reported to the committee of senior managers.

The recommendations focused on things such as self-directed work teams, pay for information and restructuring the company away from traditional roles to focus more on the products, customers and geographical point of reference (Management Decisions and Research Center, 2000).

The advantages with this structure as explained by Chaudron, (2006) are that major issues arising in the company are dealt with upfront as opposed to being postponed to the next meeting or such, some aspects of the company such as direct communication flow from marketers to production and finance department improved the productivity of the company and showing the employees that the company really wanted to change the way the company is run.

The disadvantage is that too much information was being revealed to employees and managers felt as if they were losing their bearing or that their power was being taken away from them (Durant, 2008).

Change structures

A traditional hierarchical, pyramidal organizational structure is what existed in Nestle before the GLOBE system was introduced. This system cannot function effectively and efficiently in such a structure. In order for nestle employees to match their goals with that of the company, share ideas with the management, act proactively and collaborate in making the goals of the company realistic, this structure had to change.

Furthermore, the new system of sharing information required highly skilled and informed employees who will no longer need to be supervised. An organizational structure named ‘Nestle for the future’ was implemented (Chaudron, 2010).

This structure focused on addressing four things that were identified as an impediment to organizational management; align employees’ goals with those of the company, utilizing employees’ insight and action, enhancing cooperation and encouraging employees to be proactive.

To divert the employees towards a performance way of life, a program with five parts was then formulated. These programs were implemented simultaneously (Cummings & Worley, 2008).

The flat and flexible structures

This involved dismantling the pyramidal structure and replacing it with a non-pyramidal structure that focused on networking between management and employees. This reviewed structures and retained fewer hierarchical levels worldwide that allowed flexibility and quickness in responding to issues while still sustaining its growth (Cummings & Worley, 2008).

Inspiring management

A review of how management related with its staff showed that action was needed to encourage contributions and cooperation from the staff. This had to start from the way management saw the staff and in regard to this two programs were developed; Nestle leadership program and the grow people program.

Nestle leadership program

The leadership program was done on four bases. These include change had to start with leadership at the top level managers needed to accept they can improve, outsourcing for the program providers and program to be based on feedback from those working close to the managers, colleagues, superiors and subordinates (Carley & Hill, 2009).

Grow people initiative

This involved changing how people were assessed. These new developments were on the basis of cooperation, promotion of personal development and sharing of the information. This changed the way managers assessed by people by just ‘judging’ them as if they are not involved themselves to making them committed developers of people.

A progress and development was introduced for this purpose. The traditional rating model, which focuses on the past rather than the future, was abandoned (Pries-Heje, 2005).

Long-term development

This was aimed at developing long-term careers not in the previous silo thinking model but in developing talents, and skill in a structure which is flexible and responsive to specific talents of skills. Previously careers moved in a vertical manner within one function which was not sensitive to talents and geographical integration.

This was made possible by the network structure, and a talent pool was established which has more than 2000 names from across the globe (Broeckx, 2007).

Dynamic compensation

The new career paths were important, to achieve this, the flattened organization was structured through creation of a new remuneration model. This model allows staff to raise their salaries without the need for promotion.

This involved laying down concrete measures for measuring pays and compensations which encompass not only past achievements but also long term incentives. In addition to this, a long-term incentive plan was introduced (Broeckx, 2007).

Lifelong learning program

This program involved ensuring continuous education and learning experiences for employees which is very important in the ‘Nestle for the future’ strategy. This is in line with nestles philosophy of continuous learning (Cummings & Worley, 2008).

Challenges in the Nestle Change Management

Resistance to change by some managers was a major challenge the ‘nestle for the future encountered where some managers had problems with various aspects of the program. The elimination of the rating system for staff to be replaced by the progress and development guide was too much for them.

They argued that, rating employees drive performance, but Nestle is for long term growth not short tern profits. Those that were unable to cope with this quit, while others were given early retirement. It, however, slowed down implementation of the program in some regions. The program was eventually embraced wholly when it benefits were understood and working become more exciting (Broeckx, 2007).

Delay in program implementation was experienced. This was caused by the managers resisting the changes that were introduced. Though various aspects of this program were meant to run simultaneously, this was delayed for close to two years as the program was viewed with a lot of skepticism and others felt threatened by the changes.

The steering committee composed of the senior managers and the team of employees carried out a vast campaign which included visiting different regions and affiliates and giving presentations on the changes and the benefits to be accrued besides other forms of communication.

The Progress and Development Guide, which had brought a lot of issues was put on the website and operated there so as to aid its implementation (Cummings & Worley, 2008).

The unwillingness of the management to share their skills and gifts with other regions, functions and businesses was an impediment that was encountered in the process of implementing the process. In the flat and more flexible model, networking is the core word which means increased communication and sharing of information between the above.

This took three years to see anything substantial which delayed the long-term learning aspect of the program. Communication was intensified through various channels until people were comfortable with the program (Carley & Hill, 2009).

Action Plan

Reference List

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Carley, K., & Hill, V., 2009. Structural Change and Learning Within Organisations. United States of America: Carnegie Mellon University.

Chaudron, D., 2010. Begin at the beginning in organizational change. Organized Change Consultancy. Web.

Chaudron, D., 2006. Organized Change: A Tale of Three Vilages: Approoaches to Implementing Organisational Change. The Business Forum, 43-48.

Cummings, T., & Worley, C., 2008. Institutionalizing Structural Change at Hewlett Packard. In T. Cummings, & C. Worley, Organisational Development and Change (pp. 208-216). United States of America: Cengage Learning.

Douglas, S., & Craig, S., 2009. International Brand Architecture: Development, Driver and Design. New York: New York University.

Durant, M., 2008. Managing Organisational Change. United States of America: CCE, CPA.

Kezar, A., 2001. Understanding and Facilitating Organizational Change in the 21^st Centuary: Recent Research and Conceptualizations. United States of America: john Wiley & Sons.

Management Decisions and Research Center., 2000. Organisational Change. Washington, DC: Department of Veteran Affairs.

Nestle., 2010. Current Situation. Web.

Nestle., 2011. History. Web.

Pries-Heje, J., 2005. eGovernment and Structural Reform on Bornholm: A Case Study. Electronic Government: 4th International Conference (pp. 124-145). Coppenhagen: university of Coppenhagen.