CHANGING THE NESTLE COMPANY

Abstract

Most business organizations have been on the verge of maximizing their sales and expanding their market base. To achieve this noble task, these companies move with a lot of speed to integrate great advancements in their plans, strategies and even the core values so as to appeal to more customers thus increased customer base. The Nestle Company is one of such business organizations which have undergone countless organizational changes with an intention of increasing its worldwide customer base. This paper objectively intends to look into the organizational changes that the Nestle Company has undergone. It will further categorize the changes whether they are of the first order or the second order depending with the supportive reasons available. The paper will also explore on the changes with reference to the incremental approach as put forth by Brabeck-Letmathe. Finally, the paper will give some lessons from the front line and how the arising issues were overcome.

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 Introduction

The Nestle Company is a multinational company which has continued to move the international markets. The range of products that the company produces has appealed to wide range of the market share that has dramatically boosted its income. This Swiss company has continuously appraised countless organizational changes that have been estimated to have cost the company millions of dollars annually (Palmer, Dunford, Akin, 2009). Initially, the Nestle had laid down strategies that never worked so well and had to change tact of venturing into an extensive international market. Most importantly, it had intended to reach out to wider range of customers beyond the eighty nations. This called for exemplary leadership and great executive boards that were driven by this will to expand. The company had to embrace different organizational changes to realize this need (Feldman, 2000).

The Nestle company management- executive board went extra miles by adjusting the company’s strategies. This involved initiating the first order changes that saw it moves towards the right direction. The most important issue is the aspect of initiating mergers and acquisitions as a way of facilitating its organizational changes (Foundation Strategy Group, 2006). This first-order change in focus tended to lean on the incremental changes that as anticipated tuned the Nestlé company, which resulted to a great improvement that enhanced its product development at the much needed pace (Amis, Slack, Hinnings, 2004). However, as the company has continued to shake the entire world market, the management has never taken an initiative of adapting new technologies. This has seen them remain laggards as the company’s president holds that the new technologies are a very expensive venture that should be adopted with a lot of caution (Anonymous, 2001a).

Organizational changes undergone by the Nestle Company

The Nestle Company has maintained its strong reputation worldwide because of different reasons. But most important reason is that of regular initiating organizational changes that tended to be in tandem with its objectives. This has been a continued activity and has ever been viewed as a culture. Since the time of its inception, the Nestle Company has based its organizational changes that at some point raised queries among the stakeholders. This even saw the dramatic sending packing of the whole management board of directors and replacing them with new faces all in the name of change. In 1980, the company had conducted tremendous acquisition strategy that almost left the company bankrupt. These forced the then Chief Executive Officer to refocus on ways of improving the company’s financial base. This saw the CEO-Hemut Maucher suspend the acquisition objectives. The company recapitulated its financial base by conducting a downsizing program through sales of its non-strategic and non-profitable businesses (Palmer, Dunford & Akin, 2009).  Therefore, the company has undergone downsizing organizational change, has initiated acquisition organizational change and has slowly adapted new technologies which have been initiated internally (Amis, Slack & Hinnings, 2004).

Downsizing

The aspect of downsizing is the move of to restructuring of an organization by reducing the size of the staff. For the case of Nestle Company, the Second World War incident forced it to outsource most of its staff that were based in the gulf to the United States. This boosted its business base in the northern America. The outsourced staffs were competent, but other was to be sent off as more of the company’s companies had been shut down in the war rocked regions. In 1980, the company was also forced to sell some of its non-profitable businesses and non strategic businesses that caused a lot of retrenchment and downscaling (Palmer, Dunford & Akin, 2009). This move caused restructuring of the company with an intention of reducing costs and increasing production. The sales also boosted the company’s financial base that was hampered with by the regular strategic acquisitions across the continent. This proves to be a costly venture as the payment of compensation is quite exorbitant (Anonymous, 2000).

Acquisition and merger

According to Palmer, Dunford and Akin (2009), merger and acquisition is one of the major ways of achieving organizational growth. As for the case of the Nestle Company, it ensured that its worldwide expansion was achieved through purchasing of local subsidiaries in the foreign countries. It managed to use this means to expand its base in the United States by acquiring several established factories. The Second World War was a real pre-requisite of the changes that the Nestle initiated. This forced the company to diversify its production to allow it serve wider range of market target. The company did acquire some of the mostly debt ridden companies such as the L’Oreal. This merger and acquisition organizational changes led to restructuring of the company thus allow it to embrace the flexibility spirit (Cascio, 2002).

New technologies

Even though the Chief Executive Officer acknowledges the importance of new technologies to any business organization, he (Brabeck-Letmathe) does not recommend it as the chief priority in the Nestle Company. He argues that such implementation is only meant to boost the central strategic direction. He further claims that such development were not only meant to reinforce but also sustain the strength rather than focusing on changing such strengths. The Nestle Company has been for several years been implementing the technological changes as an internal initiative. This has enabled it to improve its information systems thus making it easier to keep in close contact with the clients, customers and other stakeholders (Anonymous, 2000).

The initiated type of changes by the Nestle Company

            The company had initiated both the first-order incremental changes and second order changes. Its first order incremental changes were supported by the fact that the company initiated numerous adjustments in its systems, structure and processes. The processes and system adjustments involved diversifications of its products (Eriksson & Sundgren, 2005). The adjustments were entirely meant to enhance continuity and order of the organization. The Nestle also fined tuned its products to match the varied needs of different customers inhabiting both developing and developed nations. The aspect of merger and continued acquisition by the company intentionally conformed to its external environmental needs (Foundation Strategy Group, 2006).

The second order changes were inevitable in the way the company intended to expand its market base by new acquisitions. This saw the company embrace the anticipatory move that revealed its structure reorientation. The way in which the CEO withheld the management board and installed new managerial board was anticipated to reorient the company towards the global markets (Feldman, 2000). The recreation was also inevitable as the company CEO tried to break away from the past practices. The new decisions were born to recreate the company towards the modern customer requirements. The acquisition of new factories was part of the strategy that supported the transformational change. This forced the company to over invest in its line of supply as a way of reaching out to its customers as quick as possible (Foundation Strategy Group, 2006).

Lessons learnt from the front line evident in the nestle case and Ways of overcoming the issues

It is worth noting that certain second order changes are quit dangerous. This is because they may overhaul organizational operations by cutting down the size of staff. To add insult to injury, the moves such as those of down sizing an organization may render majority of the employees jobless thus impose them to miseries. Moreover, downsizing may also be a costly venture to an organization for the retrenched employees need to be heavily compensated thus the company, if not well organized may collapse. It may also illicit numerous court cases that may lead to huge fines as required by the labor laws. Other lessons would involve cultural adjustment as a result of restructuring of an organization; tampers with effective communication whenever the companies fail to be open the exiting market situations. It therefore master mines countless challenges that must be rested before long (Cascio, 2002; Anonymous, 2001a).

The technological changes may also prove to be an expensive venture. But as much as it is expensive, its adaptations should be treated with ease. All companies should try as much as possible to adapt new technologies to enable them compete with other players in the market. Those companies displaying quality and efficient work are normally associated with elaborated and huge investments on technology. The technology of relevance ranges from customer relationship management to the e-commerce should form the major priorities of any organization. Before the introduction of the new technologies, the management should consider other core factors including goal synthesis, technology choice, communication, political barriers, contingency planning, the IT team and any other factors (Cascio, 2002).

The merger and acquisitions are also an important strategy to practice as an expansion plan for any growing organization. This move normally may call for diversification. But as much as it is an accelerated idea, it may prove top be an expensive venture. Consolidating the operations of the company may call for an extra effort. It might prove quit imperative to balance the aspect of change and continuity as dictated in the normal operation of any organization. Other challenges may also include escalated initial costs, cultural adjustment involved in adopting any new operational system resulting from the merger (Eriksson & Sundgren, 2005).

Conclusion

            The Nestle Company has undergone numerous iterative changes to position itself in the market. Most importantly is the aspect of the Nestle Company going multinational from the local production. This saw the Nestle Company move an extra mile by heavily spending on its new market expansion objective. The company was forced to initiate new ways of expanding in other markets. This was meant to accommodate the differing cultures of its customers which ranged from the poor in the developing nations to the rich in the developed nations. The company’s move to rise to occasion was through the merger and acquisitions. This forced the company to diversify its products so as to appeal to the new market. To realize its objectives, the nestle company undertaken the second order changes with an intention of matching the corresponding business environment of the time.

The company started by acquisition, merger that later caused the company a lot. In responding to this, the Nestle Company reverted to downsizing by reselling its non-profiting business units. As the company gained the momentum, it again continued with its objective of acquisition but has never permitted the adaptation of new technologies rather than initiating it internally. The company has also faced myriad of challenges in trying to accomplish its objectives.

 

References:

Amis, J., Slack, T. & Hinnings, C.R. (2004). The pace, sequences, and linearity of radical change. Academy of management journal, 47(1): 15-39.

Anonymous. (2001a). Nestle finds mild recipe for success. Human Resource Management International Digest, 9(6): 4-5.

Anonymous. (2000). “The great irony of AOL Time Warner.” Business Week, 3665 (January 24):188.

Cascio, W. F. (2002). Strategies for responsible restructuring. Academy of management executive, 16(3):80-91.

Eriksson, M. & Sundgren, M. (2005). Managing change: strategy or serendipity-reflection from the merger of Astra and Zenneca. Journal of change management, 5(1):15-28.

Feldman, M.S. (2000). Organizational Routine as a Source of Continuous Change. Organization Science, 11(6): 611-629.

Foundation Strategy Group. (2006). The Nestle concept of corporate social responsibility: as implemented in America. Geneva, Switzerland: Nestle S.A.

Palmer, I., Dunford, R. & Akin, G. (2009). Managing organizational change: A multiple perspectives approach, (2nd Ed.). New York: McGraw-Hill.

 

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