A Group Presentation On

Critical Review On Nestle Organisational

Structure & Cultural Challenges

Participants:
Ola Talabi
Ankit
Ishtiaq
Nazrul
Hasanat

10/09/09 1
Key Facts
1. Largest Food & Beverage company in the world.

2. One of the oldest of all the multinational companies.

3. Estimated 8500 brands manufactured around the world.

4. 10,000 different products in 500 factories in 83 countries.

5. Market its products around 130 countries around the world

with annual revenue of £71 billion (2007).

6. Invest around £750 million in R&D every year.

10/09/09 2
Financial Highlights (December 2008)

Revenue Growth (1 yr): 9.00%

Employees (2008): 283,000
Employee Growth (1 yr): 2.50%

Top Competitors

• ConAgra Foods, Inc. (cag)

• Groupe Danone (gdnny.pk)
• Kraft Foods Inc. (kft)

http://biz.yahoo.com/ic/41/41815.html

10/09/09 3
Present culture of Nestle

Adaptive
.Ability to Become a Local company.
.Tolerant to different Cultures and value sets.

Absorptive
.Continuous Learning.
.Flexible-Willingness to change.
.Principles not rules.

Collaborative
.Team work
.Open, Transparent and sharing
.Pioneers and Innovators
.Creating long term sustainable shared values
10/09/09 4
Present culture of Nestle

For a business to be successful in the long term, it must create

value not only for its shareholders but also for society. Nestlé
recognize that success means creating value for everyone –
from the farmers who supply products, to the employees and to
consumers and the communities where Nestle operate.

10/09/09 5
Cultural Challenges – Internal

1.Workforce try to resist the changes in the working system.

E.g., Local Managers tried to resist the implementation of

‘GLOBE’ or ERP (Enterprise Resource Planning) system.

2.Cross-Cultural communication & Knowledge Management.

E.g., Nestle struggles to successfully implement its own quality

control checks in China.

3.‘Hands on’ corporate parenting create tension between

corporate and local managers.

E.g., Problems in Perrier production site in France.

10/09/09 6
Cultural Challenges – External.

1.Nestle struggle to find out the right balance between its

homogeneous culture and various national cultures of different
countries.

e.g., tough resistance it received while promoting breast milk

substitute in some of the countries.

2.Production standardization Problems-Struggle to maintain

consistency in quality, Labelling, Packaging ingredient etc, in
different parts of the world.

E.g., Deceptive labelling of powdered milk in Columbia by the

local mafia.

10/09/09 7
Cultural Challenges – External.

10/09/09 8
Cultural Challenges – External.

3. Law of Land in which Nestle operates will provide

challenges.

E.g., Nestle was forced to withdraw its takeover bid of Hershey

company by Pennsylvanian Government.

4.Customers preferences are changing quickly around the

globe forcing Nestle to rethink its product placement.
E.g., Indian consumers with disposable income are demanding
better quality products.

10/09/09 9
Possible Actions on cultural challenges.

1.Start a centralised training division under HRD so that higher

level of cross cultural competency can be achieved.

2. Quicker implementation of ‘GLOBE’ system will facilitate

better cross-cultural communication and knowledge
management. It will also help the standardization of products.

3. Inspire, motivate and compensate – This will ease the

tension between Managers, facilitate better knowledge flow and
win over the workforce.

4. Better knowledge management practices of GLOBE system

will help in increasing the awareness of the Laws of the Land

10/09/09 10
Organisational Structure:

The way or method through use of a

hierarchy that a group, business,,
organization, people or a object
collaborate to achieve success on one
common goal.

10/09/09 11
Nestle - Present Organisational Structure

10/09/09 12
Nestle - Critical Review of Present Structure:
Advantages:

Ability to react quickly according to the market conditions.

In 1999 in India, quickly reformulated the Noodles recipe

according to local environment.

Tailoring of products according to Regional market.

All Nestle products are ‘Halal’ certified in Middle East and other
Muslim countries.

Standardisation of practices and products.

All Nestle managers are expected to follow ‘The basic Nestle
management and leadership principle’ document issued by
Head office.
10/09/09 13
Nestle - Critical Review of Present Structure:
Advantages:

Good coordination between various divisions bringing in more

efficient use of resources.

Nestle (UK) able to launch curry products in UK by using

expertise of Nestle (India).

10/09/09 14
Nestle - Critical Review of Present Structure:
Disadvantages:

High Administrative Cost

Nestle is trying to cut off 250 jobs by 2009 in two of their French
plants due to high administrative cost.

Lack of effective Communication

Nestle America used to pay 20 different prices for Vanilla from

the same supplier due to incompatible system used in different
factories.

Potential conflict of interest due to role ambiguity.

Nestle managers dealing with the same thins in zones SBU’s

and Headquarters.
10/09/09 15
 Nestle-Optional Structure

CEO

Vice Vice Vice Vice

President President President President
Finance Operations Marketing Research
& Sales &
Develop
ment

Director Director Director Europe Director Director Director

Africa Latin Middle Asia North
America East America

10/09/09 16
The Hybrid/Mixed Structure.

Features
It combines the advantages of both the functional and divisional
strategy.

Advantages
It is flexible owing to the fact that it would create the leverage to
mix and match advantages from either the functional/ divisional
structures.
It would allow for the achievement of economies of scale.

Disadvantages
It might be some what costly in practical terms
The mixed structure might raise problems of dual reporting and
the ambiguities which follow from there on.

10/09/09 17
Suggestions on Present Structure:

1. Continue with the present structure but some modifications:

2. Environmental and Social responsibility under corporate

governance at divisional level.

3. Start a separate training division under HRD to achieve

higher level of cross cultural competency .

4. Globe system should be implemented as soon as possible to

facilitate interdivisional communication.

5. Purchasing decisions should be centralised which will help in

cost effectiveness and standardisation.

10/09/09 18
Conclusion:

1. Continue with the present structure but some modifications:

2. Start a separate training division under HRD to achieve

higher level of cross cultural competency .

3. Globe system should be implemented as soon as possible to

facilitate interdivisional communication.

4. Evolution rather than revolution in all areas will lead Nestle

closer to their objectives/goals

10/09/09 19
Sources:
www.Nestle.com
www.greenpeace.org/internation/news/chines-consumer-challeng

http://en.wikipedia.org/wiki/hershey_food_corporation#cite_note-3

www.super-business.net/Intercultural-management/302
http://www.corporatewatch.org.uk/?query=nestle&lid=21&go=GO

http://www.scribd.com/doc/14183891/Critical-Evaluation-of-Nestle

www.corporatewatch.org.uk

10/09/09 20