Nestles Changes in Organizational Architecture and Strategy - Case Study Example

Nestle’s Changes in Organizational Architecture and Strategy Nestlé is one of the world’s biggest food companies with 500 factories operating in 80 Countries. It was originally formed with the desire to help new mothers who could not breastfeed their new born babies, but now the company manufactures everything from chocolate to cosmetics. Nestle has been through numerous changes throughout the years and they have an organization commitment to long term outcomes that will never be sacrificed for the short term. From the beginning Nestle only sold its products through sales agents outside of its home country. But in 1990s they started their globalisation and the best way for them to do that was to purchase local subsidiaries in foreign markets. The launch in American markets was around the First World War when there was an increase in demand for dairy products; they constructed a lot of different factories in US at that time period. The underlying objective of moving into foreign markets was to increase efficiency and productivity in the company. In 1974 they diversified into the completely different branch of cosmetics by becoming a major shareholder in Loreal. This was a very bold and daring move and till today investors doubt whether this was a correct financial move or not. The other diversification Nestle engaged in was the purchase of Alcon Laboratories, a U.S manufacturer of pharmaceutical products. The diversification and constant restructuring the firm did was to make it more flexible and adaptable to rapid market changes. Restructuring is a continuous process at Nestle and their restructuring charges run upto $300 million a year. The company has done well over decades, which is why a lot of people often wonder if they are doing everything right why try to change? But that is just Nestles culture and what sets the company apart. The change is often slow in nature as one has to consider the magnitude of the multinational, yet it still happens. Nestle greatly relies on its intrinsic corporate culture to reform employees and make them think the same way. Everyone wants to increase the longevity of the organization rather than focus on solely short term profits. Nestle has also developed a list of “untouchables”, which comprises of the companies strengths and should never be changed. One example of this is that nestle understands the importance of IT yet they don’t consider is as a sole tool for implementing successful strategies. It is important to reinforce and focus on the strengths and leave them as is. R & D is one of nestles strengths, which is why the company is so open to change. They constantly come up with innovative practical ideas to succeed. Innovation is in fact the first pillar of Nestles corporate strategy. They recently implemented an “Innovating the future” leadership strategy which is based on: Continuous improvement in consumer research, to find out exactly what they want and to build superior products to satisfy that demand. Using the vast expertise that Nestle has in its R&D network. Recruiting the best open minded and passionate innovators is included in this strategy. This also includes working closely with leading universities to find out the latest in technology. Lastly the innovations should meet the core demand of nestle which is Nutrition, health and wellness. In 2008, nestle was struck hard by the Chinese food scandal. Even though the company has developed a great reputation over the years when something this serious happens the images takes a huge hit. Nestle however responded well by announcing changes and new operations. The Swiss food giant opened a $10.2 million R&D centre in Beijing to ensure that their products are and remain safe in the future. Since they are highly consumer driven company, they have to continuously monitor customer attitudes and requirements through in depth research. The research is both qualitative and quantitative. Lifestyles, attitudes, behaviour and actual numbers are taken into context. It is further analyzed what the customer actually want sand what minor changes they can make in their existing products to make it better.   This detailed market research has helped Nestle to keep in touch with the customer’s ever changing tastes and monitor their buying patterns. The researchers then work with product developers, scientists and convey what the market need is. Nestlé spends more on Research and Development (R&D) than any other company in the food industry. It is constantly looking at ways to improve its products. An example of listening to consumer is the fact that Nestlé introduced and developed its Sveltesse ('slimness' or 'elegance' in French) range.    Changes in strategy: The ongoing strategy of nestle is to have a ‘wellness’ approach that includes manufacturing nutritional products. They make good tasting food and it is surprisingly healthy too. The change that they look for can be highlighted in this quote by the Nestlé’s chief executive in 2001 that “We want to grow from the respected and trustworthy food company that we are known as now, into a respected and trustworthy food, nutrition and Wellness company” Nestles original commitment was to nutrition and health, due to constant evolving this has now become the ‘wellness’ approach. Due to change over the past five years, Nestle has developed or reformulated over 700 products to cater exactly to the consumer’s desires. In order to improve their image that was tarnished to some extent they have also introduced campaigns to educate consumers about healthy lifestyles and nutrition. The company has recently setup a Strategic Wellness Unit. Its job is to promote wellness both internally and outside the organization. Some of the more recent changes that help in improving their image and research facilities are: • A Nestlé Prize in Creating Shared Value will be awarded every two years, Starting in May 2010. Financial support will be given to the eventual winner. • Abidjan Research and Development Centre in Côte d’Ivoire is opened that will help in making the country better and more developed while improving their standards of living. • They have a Nestlé Healthy Kids Global Programme, in which they educate school children. As far as the organizational architecture restructuring goes Nestle has developed programs like Nestlé Leadership Program. They want to develop both managers and leaders. According to this programs philosophy leadership skill can only be improved in managers when they consider it as a self development program. The program has to be run with an outside organization and will contain a 360 degree feedback. This program really helped in changing the organizations culture a top management and young employees interacted leading to a change in both’s mentality. The second initiative is ‘The Develop People Initiative’ in which nestle restructured its assessment process. They wanted to encourage knowledge sharing and corporation. So the managers were made responsible for developing their employees in the long term instead of constantly assessing them. All the changes that Nestle has gone through are very effective. It’s a company that listens to its customers and this will always keep them ahead of the pack. Even in times of crisis they respond very well to keep the situation calm. Internally the organization is strong too as they have a culture of change, wherever change I concerned they will benefit. The global economy is constantly changing with a lot of shifts up and down with such an organizational culture and strategic fit Nestle will sustain itself easily. Read More