Managerial Performance of Nestle - Research Paper Example

Every organization in the world needs to bring about changes in its system to remain competitive in the long run. Being the biggest food company in the world Nestle needs to introduce changes to maintain its commitment to long-term outcomes. During its initial years, Nestle only sold in international markets through agents, with its headquarters being in Switzerland. In the twentieth century, however, Nestle decided to change its strategy into global expansion by buying local subsidiaries in foreign markets along with opening itself in the United States to cater to the increasing demands due to World War 2. To improve its performance, it also shifted its executive offices to the United States. Another major organizational change took place when Nestle took its first step towards diversification by becoming a major shareholder in L’Oreal, the largest company in the cosmetics industry. Instead of investing in developing markets like cosmetics, Nestle purchased Alcon laboratories and entered the pharmaceutical industry. The main focus of Nestle during this time was to restructure its organization by focusing on strategic acquisitions and improve its financial improvement through diversification. In the later period, however, the new CEO focused on slow and conscious organizational change.

In simple words, first-order change is when a company does something similar to that done before and is a reversible option. A second-order change is an irreversible practice that an organization adopts which is fundamentally different from the practices adopted before (Leadership and institutional change, n.d.). According to the case studies, Nestle incurred both first-order and second-order changes. The first change of relocating its executive offices from Switzerland to the United States during the World War 2 is considered to be a first-order change because the core identity of the company, as well as its organizational values, were maintained. During this change, the company underwent an organizational climatic change which is a king of transactional change. The second order changes incurred by Nestle would be the decision of global expansion and diversification. By buying out shares in L’Oreal and Alcon Laboratories the company underwent transformational change as it had to face radical transformation as well as organizational development. This organizational change transformed the core organizational values and practices of Nestle. Together these changes made up the stream of organizational changes that Nestle went through.

The CEO of Nestle, Brabeck-Letmathe, believed in sustaining and developing the strengths of the organization and introducing radical changes only if the company is facing a crisis. He believed in slow and conscious changes which are considered to be an incremental approach. He also believed that any change should only be adopted after conscious decision making which should be focused on the long term rather than short-term success of the organization. The first change made by the CEO was changing the entire executive board and replacing it with 10 new executive members. The CEO also focused on reinforcing and sustaining the strengths and relying on the commitment of the managers. But the overhaul of the executive board might demotivate these managers and instil in them a fear of losing their jobs. Also, slow and conscious growth in today`s fast-paced world hinders the growth of the organization and might affect Nestle negatively.

According to the Nestle case, there were several key issues which were quite evident and which could be overcome with several strategies. One of the key issues was its investment in the cosmetics giant, L’Oreal. This is because L’Oreal was a debt-ridden company and becoming a major shareholder, Nestle took the entire risk on itself and the consequences of this investment are still being faced by Nestle today as the investors are concerned with the acquisition of this company. All organizations should be really careful when making investments because these decisions can either make or break the company`s position and reputation. Another evident issue was the overhaul of all the executive members and their replacement with new executives. This is a huge issue as this step might affect the performance of all the previous employees and might even de-motivate them. The employees might not see this as a good sign and they might not like the management under the new CEO. As Nestle relies on the commitment of its managers, this step of changing the executive board might affect the work performance and job satisfaction of these managers. Another issue is rejecting the implementation of new technology as a strategic tool. This is a key issue as IT is what enables the organization in today`s world to compete and make its position in the market. Rejecting this strategic tool might be hazardous for the company and might even harm its reputation and market power. Read More