Corporate Strategy and Strategic Directions of Nestle - Assignment Example

? Strategy: Process, Content, And Context: An International Perspective Contents Contents 2 Section A 4 Corporate Strategy and Strategic Directions of Nestle 4 Outside-In Strategic Approach 4 Porter’s Five Forces Model 4 Analysis based on CAGE Factors 6 Analysis based on Ansoff’s Strategy 7 Section B 8 Comparing and Contrasting Strategic Vision and Leadership Style of Three CEO’s 8 Paul Bulcke 8 Helmut Maucher 9 Peter Brabeck-Letmathe 11 Evolutionary vs. Revolutionary Approach 12 Innovation to Create Competitive Advantage 12 Organisation Framework 12 VRIO Framework 13 Porter’s Value Chain Model 15 References 17 Section A Corporate Strategy and Strategic Directions of Nestle Outside-In Strategic Approach Nestle operates based on the structure of ‘Outside-In’ corporate strategy framework where the company tends to revise its business, production and innovation model based on the changes in the external environment. It is found that the company in regards to the changes and developments brought about in the consumer sphere operates on a dynamic scale to invest potentially in research and development areas to help produce new commodities. New business policies are created by the form’s managers to help the corporation venture into newer segments like nutrition and wellness through the combined actions of research and development and incorporation of new technology and business principle. Moreover the company further works in enhancing the level of communication with the effective consumer base spread along various regions and thereby to modify its production and business policies. Development or modification in the production lines together working on business policies aimed at creation of local supplier networks helps the company in gaining the due potential of positioning its brand on a higher scale (Schmid, Slabeva and Tschammer, 2001, p.278-279; Bell and Shelman, n.d., p.775). Porter’s Five Forces Model The strategic framework of Nestle can also be analysed based on Porter’s Five Forces Model that would help analyse the industrial environment of the firm. The Porter’s Five Forces Model can be reflected as under. Figure 1 (Hill and Jones, 2012, p.50) Firstly in regards to the power of buyers, the company works in changing its production and business paradigm to rightly adapt to the changing needs of the consumer sphere. The management body of the company renders special focus on enhancing the level of communication with consumers in the targeted market thereby identifying their needs and changing production patterns accordingly. Secondly the company takes effective control of the supply chain activities by setting of local and regional supply chain and distribution networks. The company acting on the information technology paradigm effectively communicates with the supply chain networks spread along geographical territories to govern their actions pertaining to supply of healthy and fresh produces. Thirdly the company reduces the threat rising from the growth of substitute products through the gaining of patents and trademarks pertaining to the different innovative activities. Further the company also enhances the assortment of its production base to help develop a huge array of products pertaining to different product and consumption categories like nutrition, pet and baby products, pharmaceutical products and the like. Working on such huge array of products limits the chances of being imitated by local and regional producers. Nestle working on a highly integrated supply chain structure focused on regional and local areas helps in gaining on economies of scale thereby producing products at low costs. Moreover its enhanced communication base with targeted consumers pertaining to regional economies also restricts the consumers to shifting over to other local brands. Its acquisition strategies also help in gaining over the control of regional and local players thereby creating further entry barriers. The company also works based on an umbrella branding strategy that helps the consumers to get more related to the company’s brand image. Finally the company working on its expansion drives and acquisition activities also aims to counter competition from other global players. The company focuses on largely expanding into newer territories both in the developed and emerging markets thereby gaining on in market shares and brand awareness functions. Acquisition drives of the company in regards to other potential global players like Novartis and L’Oreal help the concern in reducing the level of competitive threat imposed by the players in the wellness and care segments (Bell and Shelman, n.d., p.783-790). Analysis based on CAGE Factors The analysis of Nestle’s corporate based on CAGE Factors as rendered by Ghemawat reflects that the company works on production of food, nutrition and other wellness products based on conducting a cultural analysis of different consumer segments spread along large geographical territories. Working on the administrative front the company works on deputing regional and national heads in different regional and geographical areas that render local governance upon the supply chain groups and production bodies to render fresh products on time. Working on the geographic scale the company focuses on international expansion strategies that help the concern develop regional production and supply chain houses to meet the needs of the local consumers. It integrates the global operation constructs based on working in the ambit of effective information technology. Finally the company in its expansion operations focuses on meeting the needs of both the developed and developing economies thereby gaining on larger market share in the global consumer market (Horn and Faulkner, 2010, p.8; Bell and Shelman, n.d., p.791-794). Analysis based on Ansoff’s Strategy The analysis of Nestle’s international expansion and growth strategy can be analysed based on Ansoff’s Matrix that can be shown as follows. Figure 2 (Stone, 2001, p.51) The company is found to work based on both ‘product development’ strategy and ‘market extension’ strategy to gain an enhanced market share pertaining to both existing and new markets respectively. The company works in the realm of product development by working to produce newer products pertaining to newer categories like health and nutrition, wellness, pet and baby care, pharmaceuticals and the like. This development of the product base in regards to consumer needs helps the company in carving out niche consumer segments and business categories in the present market. Further the company based on carving out new supplier bases in newer consumer areas focus on expanding its market into newer geographical regions. Herein, the company tends to set local operations through the creation of regional head roles that would help the company in enhancing its brand image through effective communication and rendering of cost effective and high quality products. Thus, Nestle acting on two matrices gradually gain the business and market potential to become a business leader in the food and nourishing consumer market (Bell and Shelman, n.d., p.783, 786). Section B Comparing and Contrasting Strategic Vision and Leadership Style of Three CEO’s Paul Bulcke Paul Bulcke, appointed in 2008 as the Chief Executive Officer of Nestle is found to reflect signs of visionary leadership. As in Visionary Leadership style, Paul Bulcke is found to share with the organisational people his vision of driving both growth and profit margins for the company. In that, Paul Bulcke stresses more on capitalising on the existing organisational culture in terms of a global brand leadership, persistent research and development and human resources to fulfil the objectives. Paul Bulcke’s leadership style thus reflected a continuous passion to grow and develop along the company’s several product and business categories thereby growing in terms of value and margins. Again the leadership style of Paul Bulcke can also be evaluated in regards to management of organisational competencies based on set objectives. Here the organisational leader first defines goals and objectives to be achieved and thereby shares the same with the people concerned. Through this approach the leader tends to communicate with the people in an enhanced fashion to help in fulfilling objectives or goals set. Herein, Paul Bulcke at the very outset of being appointed as the Chief Executive Officer of Nestle divulged in defining the goals of the concern in terms of gaining growth and efficiency in the margins. In that, Paul Bulcke being a Charismatic Leader also stated of his trust in the existing cultural and resource parameters of the concern in regards to gaining potencies to achieve goals set. Through the above approach, Paul Bulcke focuses on motivating the workforce and in installing confidence among them to rightly achieve and sustain the growth and market leadership. Employees working under a Charismatic or a Visionary Leader feel a high sense of enthusiasm that in turn draws high level of loyalty to fulfil the goals set (Landry, 2012; Bell and Shelman, n.d., p.790-791). Helmut Maucher The leadership style of Helmut Maucher focuses on the transformational business leadership style. Maucher joined as the Chief Executive Officer of the company during 1980 when Nestle was going through turbulent times facing a huge decline in the profitability trends. Again, the level of transformation or changes brought about in the concern by Helmut Maucher also earns relevancy in regards to the specific situation or contingency when he took over as the CEO of the concern. Helmut Maucher focused on bringing about dramatic changes in the organisation through revising and reducing the impacts of organisational bureaucracy. Huge changes were brought about in the concern by Maucher that involved slashing down of underperforming brands with also reinvigorating the organisational management to adapt to the changing process. The change management or transformational style of Helmet Maucher however rendered emphasis on enhancing and reviving the brand leadership of Nestle. Moreover, Helmut Maucher also worked in helping the company diversify into uncharted product segments pertaining to mineral water and confectionary products other than the existing ones. These strategic actions or transformations were brought about by Helmut Maucher in the company based on a strategic vision and mission. Helmut Maucher reflected a vision that such strategic changes put into place would help the company gain on both market shares pertaining to regional and global marketplace and market leadership pertaining to product categories and segments. Thus, Helmut Maucher acting as a transformational leader firstly identified the need for bringing about dramatic changes in the organisation’s operation and decision making style. Secondly he also reflected a vision and mission which he desired to achieve through the change process. Thirdly Maucher focused on drawing individual consideration in regards to the managers to help in accomplishing the change objectives. Fourthly acting as a transformational leader, Maucher reflected some characteristic differentiation in bringing about breakthroughs in the current or existing working style of the concern (Marshall, 2010, p.3-6). These managerial traits of Maucher gained significance in relevance to reviving the situation of the concern from its loss making position to gaining on in market leadership. Henceforth the management style of Maucher can also be referred to as Situational or Contingency based leadership style (Iafc, 2011, p.15; Bell and Shelman, n.d., p.774-775). Peter Brabeck-Letmathe Unlike the transformational or change actions brought about by Helmut Maucher in Nestle in regards to the contingency or situation to which he was subjected, Peter Brabeck-Letmathe showed attribute of being a change leader. In that, Brabeck reflected both a charismatic ideal in rendering an organisational vision and also crafted the goal or was instrumental in setting about the change process. His management ideology or vision was grounded or mainly four operational aspects-achieving operational efficiency through minimizing production and operational cost, rendering innovation, enhancing interpersonal communication among the people in the concern and finally gaining the advantage of enhanced consumer mindset. He envisioned that such changes incorporated would help in driving both growth and operational margins for the concern. In regards to implementing the change process, Brabeck focused on areas like enhancement of research and development activities, market intelligence functions and also incorporating the process of outsourcing and acquisitions. Furthermore the change management process that Brabeck incorporated was effectively communicated to different stakeholder groups like employees and customers. The benefit of the change process was reflected through in sales revenue by around 78 percent during his tenure. Further his management ideology was instrumental in transforming the consumer outlook for the company from a beverage producer to a food and nourishing company focusing on consumer wellness. Thus the change management process of Brabeck acted as a pioneer in motivating the management body to take managerial decisions based on market intelligence and thereby receiving rewards based on enhanced sales revenue. It also worked in designing projects pertaining to food and wellness categories thereby changing the attribute of the Nestle Brand (Utley, 2010, p.302-303; Bell and Shelman, n.d., p.775). Evolutionary vs. Revolutionary Approach The leadership styles in Nestle under the management leadership approach of Bulcke and Maucher reflected more of a revolutionary approach where business decisions were taken depending on a sense of urgency. Herein, the management functions lacked proper planning with also effective allocation of responsibilities along with timelines to meet desired goals and thus invited a chaotic organisational structure. However, in regards to Brabeck the leadership style reflected an evolutionary process through controlled approach based on planning, implementing and executing the goals formulated. Innovation to Create Competitive Advantage Organisation Framework Nestle gained competitive advantage in the global consumer market pertaining to food, beverage, and nourishment and wellness products through the system of sustained and continuous innovation supported by its organisational structure. It is observed that the organisational structure of Nestle was built on flat structures that demanded the decentralisation of authority. Middle level managers were given the full autonomy to take decisions on their own that would help in the enhancement of the profitability and productivity aspects of the concern. Moreover a flat or horizontal organisational structure also involved people pertaining to various departments and teams interact with each other. This cross functional interaction of the team members and managers in the concern coupled with a sense of empowerment helped the employees in formulating and creating innovative strategies. Moreover the level of autonomy rendered to the Country Managers by the company helped them in largely interacting with the consumer groups of the region and thereby in formulating strategies and fostering innovation to meet their specific needs. Hence a flat organisation structure practiced in Nestle is held to largely promote innovation in the organisation (Stamn, 2008, p.106; Bell and Shelman, n.d., p.786, 789). VRIO Framework Moreover the company tends to invest largely on intangible resources pertaining to research and development. The research and development activities of the company being enhanced on a large scale in regards to the segments of food and nutrition, wellness and pharmaceutical business help the company in gaining due potency in such areas. Nestle; harness the process of innovation in the organisation through gaining of competencies developed by scientists employed. The research and development activity of Nestle enhanced helped the company render value addition to the scope of products and services produced. Owing to the value addition rendered the company gained the potential from moving over from the realm of beverage and food processing to the category of health and wellness. The company managers worked in the designing of research and development wings that would help in the production of nutrition and wellness products. Moreover during the period prior to 2008 the nutrition and wellness market lacked the availability of branded products that would help cater the pharmaceutical, baby and children and other potential nutrition needs of the market. Thus the research and development activities carried out in Nestle helped the company in the production of products pertaining to the category of baby food, pharmacy products, food for pet animals and other nutrition segments. The potential of a single brand to address the multifarious needs of the consumer market being rare at that time helped the company to gain a first mover advantage in the stated market. In regards to the fear of the business and innovation model of Nestle being imitated by other potential competitors in the consumer market, the company went on an acquisition spree. In that potential firms were acquired partly or wholly by Nestle thereby reducing the chances of such to proliferate its developed market place. Moreover acquisition of companies pertaining to the realm of pharmaceutical, pet products and other nutritional categories also helped the company in significantly raising the potential to further innovate and gain new consumer segments. Again the company vouches to get hold of patents and trademarks to the different new product segments and innovations brought about in the course of its global operations. Nestle as an organisation largely worked to harness the potential of the staff by means of generating a horizontal or flat structure through which the people pertaining to different levels can effectively communicate with each other. This level of inter-organisational communication would evidently help the company in unleashing the potential of the people to generate new and flexible ideas. Further the organisation is found to invest a lot in regards to training and research and development that in turn enhances the potential of the human resources of the firm to develop and design new products. Moreover the work environment of Nestle is built on effective guidance of superiors to help direct the people to work in an empowered manner to move with effective strategic tools to gain effective entry into newer markets. Thus it is found that the company enhances the resource development and innovation framework based on the Value-Rarity-Imitability-Organisation Framework. Acting on the VRIO Framework helps the concern gain enhanced potential to gain effective entry into new products and market segments and thereby develop and sustain a larger market share in the global consumer space (Kazmi, 2008, p.126-127; Bell and Shelman, n.d., p.786-790). Porter’s Value Chain Model The innovation framework for the company can also be analysed on The Value Chain Framework of Porter that can be rendered as follows. Figure 3 (Wang, 2007, p.81-82) Nestle, operates based on integration of different business segments and departments spread along regional and geographical territories through effective use of information technology. Working on information technology enables the firm to communicate with its supplier, marketing and production base in a much faster fashion. Secondly the firm works to develop the potential of its human resources through continuous training and development activities. The people are also empowered to take decisions in an independent fashion that helps in developing their skills and competencies. Moreover the use and advocacy of effective teamwork is conducted to help the people share potential information with each other and thereby help the concern gain on productivity. Thirdly the firm largely invests in areas pertaining to research and development functions to develop its technological base. Production technology developed based on market trends helps the firm produce products and services catering for the needs of new consumer segments. The firm operates based on a huge manpower source of researchers and scientists that helps in enhancing the production potential of the company. Finally in the fourth case the purchase and procurement functions of the company are carried out through the networks with local supplier bases working in different regions. This function helps the company both in reducing the costs regarding procurement functions and also helps in earning fresh and quality produces that would effectively meet the needs of the local market (Bell and Shelman, n.d., p.786, 789-790). The company through the above functions rightly exploits innovation as a key resource to gain market leadership in consumer markets. References Bell, D., and Shelman, M. No date. Nestle in 2008. Case Study. Hill, C., and Jones, G., 2012. Strategic Management: An Integrated Approach. United States: Cengage Learning. Horn, S., and Faulkner, D., 2010. Understanding Global Strategy. United States: Cengage Learning EMEA. Iafc, 2011. Chief Officer: Principles and Practice. United Kingdom: Jones & Bartlett Publishers. Kazmi, A., 2008. Strategic Management and Business Policy. New Delhi: Tata McGraw-Hill Education. Landry, C., 2012. The Creative City: A Toolkit for Urban Innovators. United Kingdom: Routledge. Marshall, E., 2010. 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