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Controlling Nestle - Essay Example

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According to Matlack, Nestle is greatly underperformed compared to its competitors Unilever and Kraft Foods (56). The CEO Brabeck has delivered more than $1.5 billion in cost savings by "streamlining and integrating the far-flung Nestle operations". As the result the operations profits have much increased…
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Download file to see previous pages Most of the attention is paid to the raw material prices easing in order to ensure that the major product categories will meet the financial targets this year. CEO Mr. Brabeck has noted that Nestle has a plan on how to deal with the higher input costs and this plan is working better than some other big food companies have. CEO predicted the increase of costs associated with the raw materials and had started raising the prices earlier and advanced the price increase in the beginning of the year. Such move has made it possible for Nestle to meet the financial targets.
The increased prices have never been assumed as a competitive advantages, however, when the raw materials costs increase is predictable and inevitable, then the timely reaction can help to avoid the loss of customers and assure the sales level. Nestle did not only predict the potential cost increase, but has also timely reacted and gained the desired sales volume. One of the concerns CEO focused on was high division of financial operations - every country had its own financial system with managers making decision with freedom and choice of the most appropriate methods. Brabeck has centralized the financial activities and the whole structure became more controllable.
The special attention is currently being paid to the creation of additional value for nutrition and wellness products. CEO has a clear vision of what products are desired by customers. The issue of extra weight is no longer the American problem and many people in Europe are struggling to become healthier and lose the weight. For this reason the wellness products are getting more and more popular. Nestle has managed to save enormous amount of money through acquisitions of the well-known brands. In addition, less money is invested into research and development of new products because the company has bought not only the brand name but the all operations with all specialists working for that particular acquired company. As it will be discussed further, acquisitions are the best cost saving investment opportunity that helps to control the spending and reduce the costs on research.
What are some of the operating standards the CEO is implementing at Nestle Why are these standards effective or why not
One of the key challenges of Nestle was to gain control over the decentralized structure - the country managers has freedom in everything starting with the purchasing and up to capital investments. From one side, it was very helpful from the marketing standpoint because local managers were more knowledgeable about the customer's preferences. From the other side, such system was highly inefficient - headquarters could not track the costs. First of all, the five global centers were established to control coffee and cocoa purchasing (Matlack 56). The information technology system was introduced to give managers data about the performance of other units. These standards are more effective because can be easier controlled and tracked.
Matlack (56) provides the number Nestle recipe for Richer Margins: Streamlining operations (intensive costs savings through improvements in info tech and centralizing of activities), Strengthening key ...Download file to see next pagesRead More
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