Nestle Corporation - Assignment Example

Nestle Corporation is a company that has been very successful in the marketplace for over 100 years due to its ability to adapt to market changes and implement first order and second order changes whenever necessary. Throughout its history Nestle has implemented changes to ensure the success of the company. Most changes in industries are driven by the desires of customers (Doublethink, 2010). In the 1900s the company implemented second order change when the firm transformed from a domestic company into a global enterprise.

The organization penetrated new marketplaces by purchasing subsidiaries in the foreign markets. Nestle aggressively targeted the U.S. marketplace during the World War II due to the increasing demand for dairy products. Another second order change that occurred at Nestle was the movement of corporate offices from Switzerland to the United States. The firm’s moves were based on the goal of increasing efficiency and productivity. In 1974 Nestle underwent another second order change when the firm decided to change its strategic approach by implementing a diversification strategy.

A diversification strategy captures whatever strategic benefits that exist within a portfolio of businesses and turns them into a competitive advantage for the company (Chaneta). The firm became a major shareholder of the cosmetics company L’Oreal. A second acquisition that increased the level of diversification of the company was the purchase of Alcon Laboratories. Alcon Laboratories is dedicated to the manufacture of pharmaceutical and ophthalmic products. A first order change that the new CEO of the company, Brabech-Letmathe, implemented was the hiring of ten new executives to the executive board.

Another first order change that occurred during recent times was the minor restructures that Brabech-Letmathe implemented on a yearly basis. Nestle spend $300 million each year in restructuring the company. The firm was very adaptive to market changes. The use of incremental change at Nestle worked effectively both in the past in the present. In the past Nestle adjusted well to the changes that companies faced in the 20th century associated with the globalization movement. The firm realized that the only way for the company to achieve continuous growth was by rapidly expanding its operations outside of Switzerland.

The diversification strategy the company implemented helped reduce the business risk of the company. I agree with the strategy taken by Brabech-Letmathe of overhauling the executive staff with new personnel that had fresh ideas and new perspectives on how to move forward and ensure the company achieved success in the 21st century. The firm has been able to expand so much that its products are sold in every country around the world. I completely agree with the use of a global strategy that is able to penetrate 100% of the population.

An implication for change that Nestle has handled in a peculiar way is the use of technology within its organization. Nestle recognizes the importance of IT, but the company does not belief that technology by itself represents a strategic direction for the firm. A second implication for change is the use of acquisitions to change the operating composition of a firm. Nestle has managed acquisitions in an effective manner in order to expand to other marketplaces by establishing subsidiaries of the firm.

The company has also use acquisitions to implement a diversification strategy. The implications of diversification of the company include a reduce business risk, the creation of new income streams, and the ability to attract new customers in difference marketplaces. The case study demonstrated different business lessons that can be analyzed by students to learn more about business. The first business lesson demonstrated in the case study is that companies must take advantage of the global markets to expand their reach.

Some of the advantages of expanding beyond your domestic market into foreign markets include increased interdependence, connectivity, and integration at the global level (Buzzle, 2012). Companies that lack the resources to expand oversees can overcome that constraint by utilizing an exporting strategy. A second lesson learned from the case study is that the use of diversification can help companies achieve sales growth. Nestle used diversification wisely which enabled the company to expand beyond its core business.

The firm had a lot of money available, thus it was a wise investment to use that money to acquire other businesses outside its industry. Constraints such as not knowing a lot about a new industry can be overcome by Nestle by hiring new personnel that has expertise in the target industry. A third lesson learned from the case study is that companies should beware of acquiring firms that have too much debt. A way to overcome this problem is by issuing a secondary offering of common stock to use the proceeds to liquidate the debt.

References Buzzle.com (2012). Advantages of Globalization. Retrieved January 6, 2013 from http://www.buzzle.com/articles/advantages-of-globalization.html Doublethink.com (2010). Agile Marketing Part I – The importance of adapting to change. Retrieved January 6, 2013 from http://thedoublethink.com/2010/11/agile-marketing-part-i-the-importance-of-adapting-to-change/ Chaneta, I. Corporate Diversification Strategies. Journal of Comprehensive Research, 6. p.30. Retrieved January 6, 2013 from http://jupapadoc.

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