Strategic Audit a CORPORATION1 I. Current Situation

¶ … Strategic Audit a Corporation1 I. Current Situation A. Current Performance How corporation perform past year terms return investment, market share profitability? B.

Nestle's performance Audit Report

Performance of Nestle in the year 2011

Market performance

In the developed world the corporation faced economic frailty and uncertainty more so in the developed world. The economic down turns in the developed world economies had a significant impact on the performance of the product in the market which set in new challenges. Key to remaining afloat with all this challenges at Nestle is to focus on delivery of both short-term performance result and considering investing along the long-term profitability and sustainable lines Nestle The World's Leading Nutrition, Health and Wellness Company 32()

On top of the normal growth Nestle corporation experienced organic growths of up to 7.5%. Real internal growth was recorded at 3.9% while growth in pricing stood at 3.6% Nestle The World's Leading Nutrition, Health and Wellness Company 32.

In the developed markets business grew by 4.3% while in new emerging markets it was 13.3%, Nestle continued to grow. Operating profit margins improved compared to previous years accounts although the year was filled with high cost pressures and compounded with increasing competition around the world Nestle The World's Leading Nutrition, Health and Wellness Company 33.

The corporation excellence is said to have contributed greatly to its growth leverage in the year.

Forging relations with partners in the Yinlu and Hsu Fu Chi is expected to deepen their expansion avenues and foster future growth in revenues. Additional to the growth and revenues in the previous year, the corporation initiated Nestle Health Science and the Nestle Institute of Health Sciences. These are meant to propel the products of the company to be more consumer preference oriented. They also create potential for the corporation to stand against prospective competition as well as laying platforms for future growth.

In the year 2011 the corporation earned net profits that were 8.1% an improvement on the previous year. Its financial debt increased in the year attributed to share stock buy-back following divestitures associated with Alcon Nestle The World's Leading Nutrition, Health and Wellness Company 39.

The returns on capital invested realized 30.3% excluding goodwill earned in the year.

Mission

Nestle observes the mission to "provide the best food to people throughout the world."

Objective

The objective observed by the corporation is to strengthen and consolidate the leading position in the market of foods through cutting edge innovation in the industry in a bid to meet the needs and desires of customers al around the world with pleasure convenience health and well being

With this mission and objective Nestle holds the vision to lead in health, nutrition and wellness in the world. The vision held by Nestle is one that pertains to:

1. Leading a dynamically motivated workforce with a rich aspiration about the future,

2. Delivery of stakeholder value through long-term ventures that is profitable as well as including social, economic and environment aspect.

3. Communication to clients of the relevant cutting edge and adhere to the highest standards of communication responsibility.

4. Innovation, Proactive and renovation culture serve to enforce sustainability in operations

5. Considering health and nutrition needs of all age groups

6. Attracting talented ambitious and motivated employees in all departments

7. Outsourcing non-strategic services from organization with clear objectives and mission compatible to those of the corporation.

Sustainable Development as Nestle's Core Values and Principle

Nestle view of sustainable development is a process of increasing world's access quality food at the same time adding to long-term economical and social development while seeking not to ruin the environment for future generations. The operational efficiency required to come up with dedicated innovations on products is not inconsiderate of environmental consequences.

During it operations for the past more than a century, Nestle has always upheld the need for long-term sustainable gains over short-term gains that would otherwise compromise the long-term gains. To uphold these values insistence for the need for profits has been made but not at the expense of developments in the future which is more sustainable. As the chief executive officer Peter Brabeck says, the values and principles observed at Nestle are stated and practiced in performance. Peter mentions that the in the corporations commitment to lead in sustainable development is guided by innovation and efficiencies in operation Nestle The World's Leading Nutrition, Health and Wellness Company 21()

Principles observed within Nestle corporate business operations include Nestle Corporate Governance Report 22()

Preference for long-term development as opposed to short-term development;

The corporation goes for long-term commitments with its stakeholders

Appreciation of cultures integrating them in their respective operations where need comes

Conduct and ethical values properly as basis for operations by both the managements and employees

Consumer needs and preferences are core concern and as such failure to appreciate that deal a hard blow on the corporation's market performance

The principles mentioned above are mandatory for observation among the employees and managers in all the branches of the corporations. The principles are enforced through workshops, training programs, and operations meetings and board meetings Nestle Corporate Governance Report ()

Together the principle mentioned above is a Safe work environments strategy that works to ensure efficiency and motivation among employees. The emphasis for a safe working environment is done through regularly auditing the safety measures at work. These must meet Nestle's minimum corporate standards on work environment. The safety work environment enforcement is among the many measures of ensuring that the corporation practically follows through with the strategies set.

The strategies are in line with the external environment and this ensured through planning before starting operation in a location. The assessment is carried out to determine the regulations and policies set by administrative boundaries. Further, the assessment considers whether, given the companies policy, the rules and regulations can be incorporated. Looking at Nestle labour and employment practices, it is evident that the corporation ensures respect of values and culture upheld in the location Nestle Corporate Governance Report ()

. This is also emphasized by incorporation of a number of the common rules needed to suit local customs. Promotion in the organization is wholesomely based on merits which work to increase employee motivation and commitment to values of the company.

The corporation also upholds the values for gender balance and ensures that the employees equally represent both genders and treatment of the genders is reflective of values of the corporation.

Corporate governance

Members of the Nestle Board of Directors are nominated and carry out their duties according to law in Swiss. The Board of directors is given a degree of independence since they are all non-executive members, with the exception of the "administrator delegue"(CEO), the Board member delegated to actively manage the company.

In exception of Paul Bulckle, all member of the board of directors are non-executive members. Peter Brabeck-letmethe is the active chairman and holds the responsibilities for the direction and control of the Group including the Nestle health Science Company and Nestle's engagement with L'Oreal Galerma and laboratories inneov Nestle Corporate Governance Report 5()

All non-executive members of boards of directors are independent, and external sourced. They previously were not sourced from the Nestle management and clearly they do not have any link with Nestle. The exception in this category is Paul Bulcke Nestle The World's Leading Nutrition, Health and Wellness Company 6.

Two directors of Nestle (Peter Brabeck-Letmathe and Jean-Pierre Meyers) serve as Board of Directors for both Nestle and L'Oreal.

The powers and responsibilities of each Committee are established in the applicable Committee Charter, which is approved by the Board. Each Committee is entitled to engage outside counsel. The Chairman's and Corporate Governance Committee consist of a Chairman, the two Vice Chairs -CEO and members as elected by Board of directors. Laison is between the chair and the complete composition of the Board of directors. This is in order, to act as a consultant body to the Chairman and to expedite whenever necessary the handling of the Company's business. The Committee periodically reviews the Corporate Governance of the Company and prepares recommendations for the Board. It also advices on certain finance-related tasks including the Company's financing and financial management. While the Committee has limited authority as per the Board Regulations, it may in exceptional and urgent matters deal with business matters which might arise between Board meetings. In all cases it keeps the Board fully appraised. It reviews the Board's annual work plan Nestle Corporate Governance Report 3()

Nomination Committee includes a Chairperson, independent and non-executive member to the Board; the other members are Board of Directors Chairperson and independent and non-executive members of the Board who ought to be two Nestle Corporate Governance Report 35-36.

The Nomination Committee establishes the principles for candidate's selection the Board. It is charged with the responsibility to select board member candidates for election or re-election and prepare proposals for a decision from the Board's.

Stock ownership

Nestle shares capital is public traded, fully paid and registered at a nominal value of CHF 10 each. Members of the Executive Board are eligible to receive Long-Term Incentives in the form of Stock Options Nestle Corporate Governance Report 38()

The corporation allowing the board members to own shares in the company through whichever means may set in conflict of interest in management. The board of directors may take up selfish ends to seek maximization of profits so that dividends can be increased at the expense of long-term strategies. They can also opt to pay higher dividends at the expense of lower re-investment of profits which may compromise on the growth of the cooperation.

Strategy Alternative and Recommendations

Nestle holds a diversified competitive edge compared to most of competitors in the food industry. In policy on adoption and implementation of a successful environment strategy and has yet to take the lead in the corporate competition in term of green operations. Being a prominent corporation with networks all round the globe there is a failure to linking the company's business and environmental strategies Larsson and Finkelstein 23()

To be able to competitively participate in the food industry Nestle need to reconsider allowing decision concerning board members participating in trading in stock of the company. They would have a bigger bearing on the performance of the company is the board members consider perusing their own interest as opposed to the interest of the corporation. Strategy should be considered to employ contracted board members with a vision to enforce the company's missing on strategy. The board members in country branch representatives should also be considered as the lead informers to guide the corporation in embracing and teaching as well as incorporation the culture of the country in the region Barney J.B. And Hesely W.S 47()

In regards to market performance of its commodity, the corporation needs to consider keeping the original taste in as much as they innovative in products. This will in essence ensure customer loyalty and need to maintain the well-known products. Advertisements in the new markets need to be deep so that knowledge of existence of the product is felt. In their corporate social responsibility, the corporation should embrace contribution to the community and society at large Myers H. 56.

This will intentionally reduce negative attitude of foreign operation and also increase the products performance on top of increasing its sustainability. Pricing and place strategy of marketing should be kept in line with the corporations strategy and vision. The products should not lock out others or serve the need of a few.

Revision of strategy in line with recommendations given above will help Nestle to root down their performance in world over. Using the TOWS matrix, Nestle should be able to further evaluate aspects that will propel it further to growth. TOWS Matrix looks at the Threats, opportunities (both in the external and internal environment), Weaknesses and strengths, TOWS matrix is more of situational analysis which is systematic and this affords it an advantage Barney J.B. And Hesely W.S 36()

At Nestle the threat is growth in competition in the food industry. Further to this there is the threat of environmental concerns owing to overexploitation of the natural resources. Failure to ensure environmental protection will lead to unsustainable source markets for raw material. Nestle needs to consider having a follow-up mechanism additional to the policy to controls put to farmers and other producers Larsson and Finkelstein 76.