Nestle - Case Study Nestlé By 2000 Nestlé was considered...

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Unformatted text preview: Case Study Nestlé By 2000 Nestlé was considered the world's biggest food company with 500 factories operating in 80 countries employing 224,000 people with annual sales of $47 billion.124 A worldwide leader known for manufacturing products as diverse as chocolates and cosmetics, it is now a far cry from the company that was created by the underlying desire to help new mothers who could not breastfeed their newborn infants.125 With a commitment to long- term outcomes that "will never be sacri- ficed for short-term performance,"126 Nestlé has clearly been through many changes over the years. CHANGING NESTLE As a Swiss national organization, Nestlé only sold through sales agents to countries outside of its home market. By the 19005 it changed its approach to global expansion and began purchasing local subsidiaries in foreign markets.127 lts launch into the American market was initiated when the First World War increased demand for dairy products. Nestle took this opportu- nity to establish its presence in the United States by acquiring several existing facto- ries.128 During the Second World War, a feeling of isolation in Switzerland led to the transfer of many executive offices offshore to the United States.129 These moves into offshore markets were part of Nestlé's commitment“ to changing the company in order to increase efficiency and productivity. in 1974 Nestlé diversified for the first time outside the food industry in order to promote growth. It became a major share- holder in the cosmetic giant L’Oréal. This diversification has had significant conse- quences for the organization that con- tinue today with investor concern that Nestle may have overextended itself with its acquisition of debt-ridden L’Oréal.130 To offset the instability of the risk involved in investing in developing markets,131 Nestlé later made a second foray outside the food industry with the purchase of Alcon Laboratories Inc., a U.S. manufacturer of pharmaceutical and ophthalmic prod— ucts.‘32 The CEO during the 19805, Helmut Maucher, focused on financial improve- ment through divestitures and a continua- tion of strategic acquisitions. This resulted in the sale of many nonstrategic and nonprofitable businesses and more focused acquisitions such as the purchase of Carnation in 1984.133 The restructuring that continued through this period into the 19905 created a company that was designed to be more flexible.134 NESTLE TODAY You can have slow and steady change, and that is nothing to be ashamed of [CEO Brabeck—Letmathe].13S Restructuring is a continual process at Nestlé, with restructuring charges of up to $300 million each year.136 When he first began as CEO of Nestlé, Brabeck-Letmathe initiated a complete overhaul of the executive board, replacing it with 10 new executives.137 Nevertheless, Brabeck- Letmathe views his focus as developing the strengths of the organization and holds the view that radical change is ideal for a crisis, but if a company is doing well, then unnecessary change should be questioned: Why should we manufacture dramatic change? Just for change's sake? To follow some sort of fa'd without logical thinking behind it? We are very skeptical of any kind of fad.138 The way in which change occurs at Nestlé is focused and conscious. Brabeck- Letmathe admits that My actions may sound slow in Silicon Valley, but they are fast for a company with factories in more than 80 countries and products that are sold in every country in the world.l3'3 Nestlé relies on the commitment of its managers who have been “steeped in Nestlé's , corporate culture" and who would choose to maintain the longevity of the organization rather than improve its short-term operating profit.140 In this culture, Nestlé has developed a list of "untouchables"—a number of the com- pany’s strengths such as how corporate growth should be handled'“ and the role of technology. In relation to technology, for example, Nestlé does not deny the importance of IT as a tool that can be used within the organization but rejects the implementation of new technology as being a central strategic direction in and of itself.”2 For Brabeck—Letmathe the focus is on how to reinforce and sustain strengths rather than changing them. You have to be clear about why the company has been successful in the past, and how you are going to keep those fundamentals from breaking down or disappearing.143 Questions 1. Did Nestlé undergo either first-order and/or second—order change according to the case? Answer, listing examples of types of change from the above story. 2. Brabeck-Letmathe emphasizes the need for an incremental approach to change. Do you agree that this is what he has done? Discuss the differences and simi- larities between his view and your view of what has occurred at Nestlé, both historically and in recent times. 3. What implications for change man- agers would apply Specifically to Nestle? Outline how the Nestlé management team may have reacted to each impli- cation. 4. Find three examples of lessons from the front line that are evident in the Nestlé case. How could these issues be over— come? TABLE 4.12 Additional Case Studies ER PY and the Dome (A) Voss, C.; Pullman, M.; & Gerbeau, P. (2000) London Business School Managing Cultural Change at P&G Gupta, V. (2004) ICFA/ Knowledge Centre, India Renault and Nissan—A Marriage of Reason Lasserre, P.; Flament, A.-C.; Fujimura, S.;'& Nilles, P. (2001) lNSEAD-EAC, Singapore Deloitte 8: Touche: Integrating Arthur Andersen Seijts, G., & Mark, K. (2004) Richard Ivey School of Business KR Vi ,“ H. ‘-4 Bibliography «: 'A ._ .. Anonymous. 2000. The great irony of AOL Time Warner. BusineSSWeek, no. 3665 (January 24):]88. Anonymous. 2001a. Nestle finds mild recipe for success. Human Resource Management lnfernatiotm/ Digest 9(6):4~5. Anonymous. 2001b. Downsizing: Lessons learned. Association Management 53(4) (April):26. Anonymous. 2001c. Peter Brabeck-Letmathe. Business Wee/r Online, June I l. ...
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This note was uploaded on 02/10/2012 for the course OLS 386 taught by Professor Staff during the Spring '08 term at Purdue University-West Lafayette.

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Nestle - Case Study Nestlé By 2000 Nestlé was considered...

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