Nestle Company Nestle's Long History Case Study
- Length: 50 pages
- Subject: Business
- Type: Case Study
- Paper: #23326176
Excerpt from Case Study :
Governments in these developing countries also may have issues with foreign companies expanding within their borders. Lastly, establishing local suppliers, and the infrastructure required for these suppliers, may be a challenge, especially for those they develop from the ground up.
Nestle's mission statement is simple. "Good Food,
Good Life'. That mission is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night, and thereby to help them to live enjoyable, healthy lives" ("Annual report," 2010, p. 2). The corporation's current objective is to transform the company into a leader in the nutrition and health and well-being industry, moving away from simply a food and beverage provider. Strategies the company is currently utilizing include reformulating many of the organization's recipes to reflect this healthier corporate image. This include lowering salt, sugar and removing trans fatty acids. In addition, healthy additions are being made as added whole grains, antioxidants, Omega-3s, vitamins, and minerals.
Paul Bulcke is Nestle's current Chief Executive Officer. He has been in office since 2008. Prior to this position, from 2004 to 2008, he served as Nestle's Executive Vice President and Zone Director fo Americas. He held several other positions in the company, including sales and marketing, as well as division functions at Nestle Ecuador, Nestle Peru, and Nestle Chile. He was Managing Director at Nestle Portugal, Nestle Czech and Slovak, and Nestle Germany, giving him excellent insight into how important autonomy can be for each geographic region ("Nestle SA," 2010).
Werner Bauer is the current Executive Vice President, Chieft Technology Officer, and Head of Innovation, Technology, Research, and Development. Before he accepted this position in 2007, Bauer was the Head of Nestle Research Center. He also served as Technical Manager for Nestle Southern and Eastern Africa, and then became Region Head of this area. Bauer also was appointed Executive Vice President, Head of Corporate Technical, Production and Research and Development ("Nestle SA," 2010).
Frits Van Dijk is Executive Vice President and Zone Director for Asia, Oceania, Africa and Middle East. Luis Cantarell is Executive Vice President and Zone Director for United States, Canada, Latin America, Caribbean. Jose Lopez is Executive Vice President, Operations, GLOBE. Each of these, and the several other, members of Nestle's executive board all have one thing in common. They all have extensive experience within the Nestle corporation. These are not executives that have been recently brought onboard from other competitors or other industries. Instead, most of these executive board members have tenures at least two decades in length. This gives Nestle's executive team practical insight into the workings of the corporation. Their knowledge isn't simply theoretical or implied, but instead, the Nestle executives have worked in the organizational levels that will now be charged with implementing their vision. For this reason, they have a greater affinity with those they are now directing.
Nestle's Corporate Culture:
Nestle's corporate culture has always centered on quality. This quality focus has helped the company emphasize the value of the brand. The company relies more on this culture than on management systems. Most of the organization's top managers have been with Nestle for more than two decades. For this reason, these business leaders are in sync with Nestle's principles and objectives. This is the reason they rarely recruit executives from other companies. Their culture often doesn't mesh with Nestle's culture, with a different set of priorities.
Nestle owns numerous brands that are known around the world, including more than 29 brands that are worth than more than CHF1 billion annually. The company's top 30 brands, according to Datamonitor, earn approximately CHF81 billion in annual sales. This accounts for 75% of Nestle's sales. One of the best known Nestle brands is Nescafe. Nescafe was ranked the 25th most recognizable brand in the world, by Interbrand, a brand management company ("Nestle," 2010). Clearly, Nestle is skilled in leveraging their brand names to generate sales.
Another strength Nestle can utilize to their benefit is their ability to customize their global products for the specific cultural and consumer demands of a local market. Although Nestle has several brands that are sold globally, the organization has always understood that culturally there are no standard worldwide tastes. Nestle performs this customization through empowering its subsidiaries, such as its country managers, who they rely upon to understand the local market and consumer preferences, in order for products to be customized to meet these unique needs. Nestle's Nescafe brand comes in several variations that are specifically adapted to the preferences and local tastes of the local market, while still providing the same international quality and recognizable brand name ("Nestle," 2010).
Nestle has historically had a strong commitment to research and development. Between 1998 and 2007, Nestle's spending on research and development more than doubled, reaching CHF1.88 billion. Sixty percent of this investment supported the company's food, nutrition and health and wellness division, with 40% supporting Nestle's pharmaceutical businesses. Nestle had a permanent staff, in their Research Center in Switzerland, of 700 employees, including 300 scientists, in 2007. In addition to these staff members, Nestle has 23 Product Technology Centers (PTCs) globally, that develop category-specific innovations, that are aligned with one or more of the organization's SBUs and global businesses. According to Datamonitor, Nestle has more than 5,200 employees working in the food and beverage development and PTCs. The PTCs are one of three core functions of Nestle's R&D activities, which also include their Research and Development Centres and Nestle's Application Groups. The PTCs are aligned with specific Nestle businesses. They provide specific product category expertise and form a hub for global product and process development. The Research and Development Centres work closely with the PTCs, to fulfill the regional research and development requirements, as well as to provide input for customization of products to meet the preferences of local consumers. Located in Nestle's factories, the Application Groups ensure products fulfill the local tastes preferences of the consumers. The Application Groups work closely with the Research and Development Centres, as well as the PTCs. They test scientific applications as close to Nestle's end consumer as possible ("Nestle," 2010).
Werner Bauer, executive vice president of innovation, technology, and R&D, stated,
Given our internal growth targets, CHF3 billion of new sales has to come from renovation or innovation each year. Therefore we must understand the global business strategy to see where R&D should be working. The goal is to identify the sweet spot of three elements: What is needed by the consumer, what is technically and scientifically feasible, and what is commercially viable (cited Bell & Shelman, 2009, p. 9).
CFO James Singh noted,
Nestle was founded on invention and, 140 years later, this spirit is still here. We have a spirit of discovery, especially today since what we become in the future will be driven by our ability to innovate today. Nespresso is a great example of a true invention that created a new industry. Nestle built the unique business model, technology, machine, capsules the entire experience. It took 15 years to get to the first billion (dollars) of revenues, but only three years to get to the second. Nespresso is now growing 40% a year -- the fastest of all Nestle brands (cited Bell & Shelman, 2009, p. 9).
Research and development initiatives have been key to the company's increased profitability. Powdered and liquid beverages saw an organic growth of 9.5% in 2009, thanks to the continued roll-out of renovated Nescafe brands, including Nescafe Green Blend ("Nestle," 2010). These research and development capabilities help Nestle renew their product line, while renewing revenue growth.
Nestle's history of product recalls has negatively affected brand equity. In 2009, the company was notified by the United States Food and Drug Administration (FDA) and the Centers for Disease Control (CDC) that their Nestle Toll House refrigerated and frozen cookie dough possibly was connected to sickness caused by E.coli bacteria and the consumption of Nestle's uncooked cookie dough. In 2008, Nestle USA performed a recall of their Nesquik Strawberry Powder, for fear that it contained small bits of aluminum. Nestle's Lean Cuisine brand had to recall approximately 900,000 pounds of frozen chicken meals, because bits of blue plastic had been reported in the meals. In the beginning of 2008, Nestle's UHT pure milk product was recalled in Hong Kong, when a tiny amount of melamine was discovered in the product ("Nestle," 2010). Not only do these product recalls indicate an issue with product quality control, but also they damage the brand image Nestle has worked so hard to build and can negatively affect customer loyalty and brand equity.
The volume trend for Nestle dropped in 2009, due to the economic downturn. Datamonitor notes,
Although the industry has been in course of recovery since 2009, it has not been led by the company's diversified profile, relative higher pricing and smaller relative contribution…