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Case Study: Nestle

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Abstract

Nestle is a Swiss organization that until the 1900s only sold products outside of its home market

through sales agents. Its venture into the American market was first initiated when war increased the

demand for dairy products. According to the text, “a feeling of isolation in Switzerland led to the

transfer of many executives to the United States” during the the Second World War (Turbin 109).

Today, Nestle is considered the world's largest food company, with some 500 hundred factories

operating in 80 countries. Nestle USA consists of 25 manufacturing facilities, 24 distribution centers

and nearly nearly 25,000 employees, sales totaling 10.4 billion, while worldwide sales in 2009 totaled

$99 billion (www.nestleusa.com/PubOurBrands/Overview.aspx). Through divestitures and and

strategic acquisitions, former CEO Helmut Maucher focused on improving the organization's financial

position. Nestle also has a long history of developing its employees and promoting from within the

organization; this too has been vital to its success.

Key Words: Nestle, Swiss organization, dairy products, distribution centers, worldwide sales, employee

development, promotion from within.

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Key and Underlying Issues

As mentioned previously, Nestle has been successful in strategically acquiring facilities in

almost every county in the world. Former CEO Helmut Maucher was instrumental in assisting the

organization to penetrate these culturally diverse markets and become profitable through strategic

divestitures as well as acquisitions. He was highly skilled at identifying markets and products that

were not sustainable and/or that he thought would not remain profitable. This too contributed to

Nestle's success.

Although Nestle's current CEO Brabeck-Letmathe completely overhauled his executive board,

his business philosophy is that while drastic change may be necessary in the face of crisis, it is not

warranted when a company is doing well. Instead, he focuses on change that supports longevity and he

retains managers who he has been able to steep in Nestle's corporate culture. One of Brabeck-

Letmathe's beliefs is to reinforce and sustain strengths rather than change them. He has developed and

maintained a culture of gradual, continuous change, but only as the market demands. Furthermore, he

believes that the companies successes in the past are crucial to its future. Another aspect of his culture

is fostering “...sustainable, long-term relationships with highly competent people and with communities

where they operate to enhance their ability to make consistent profits” (http://www.bzu.edu.pk/).

Nestle's overarching principle is founded on the belief that every employee should have the opportunity

to maximize his or her potential; Nestle provides each employee with the opportunity to upgrade their

skills.

With a 140-year history, operations in nearly every country in the world, and a reputation

second to none as the world's leading food company, Nestle is challenged with not only maintaining its

market position, but in finding ways to continue to grow. Key to their success in this area stems from a

corporate culture and organization-wide policy of developing human capacity; individual responsibility,
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strong leadership, and a commitment to life-long learning are also required characteristics of every

manager (http://www.bzu.edu.pk/). Nestle offers training programs and courses for all employees, at

every level of the organization. “A typical class contains 15-20 nationalities” (http://www.bzu.edu.pk/)

and interestingly, only about 25% of all training programs are provided by outside professionals, the

remainder are company employees who have been developed within the organization. Additionally,

“guiding and coaching is part of the responsibility of every manager and is crucial to make each

employee progress in his/her position” (http://www.shrm.org). Nestle's training programs also include

a great deal of basic education (literacy), “however, in a number of countries we have decided to offer

employees the opportunity to upgrade their essential literacy skills” (http://www.shrm.org). In several

countries around the world, Nestle has set up programs for employees who may have missed much of

their elementary education. “These programs are especially important as they introduce increasingly

sophisticated techniques into each country where they operate” (http://www.shrm.org). Apprenticeship

programs are also an integral part of Nestle's training where trainees spend three days a week at work

and two at school. Results have been positive, but not with out problems. At the end of training some

employees are hired away by other companies that provide little or no training of their own. Still,

Nestle's corporate culture and philosophy of developing its workforce from within has helped position

the organization in the top spot as a food company, if the CEO is correct in that the company's past is

key to its future, then it is heading in the right direction.

Facts, Tentative Solutions, and Potential Follow-up

Nestle's strengths include strong brands, brand loyalty, product innovation, product diversity,

global presence, cost-effective operations, reasonably price products, and a solid corporate culture and

strong workforce that is developed from within (http://www.bzu.edu.pk/). It also has a strong
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commitment to cultural competence and invests heavily in a culturally diverse workforce. Its

weaknesses include somewhat unpredictable business in certain volatile markets such as Russia, that

historically have accounted for a significant percentage of exports such as instant coffee. The company

also has complex supply chains that are particularly difficult to trace in certain parts of the world. The

nature of the food industry requires Nestle to monitor its edible inputs closely. The often fragmented

nature of the market place make this difficult at times. Additionally, “some of their products were

positioned as too scientific, and consumers did not understand” (http://www.bzu.edu.pk/).

Nestle faces increasing competition in almost every market around the globe. Additionally,

while its employee training programs have been hugely successful, it continues to lose competent

employees who are lured away by competitors. Nestle might consider implementing non-compete

contracts with employees in key, difficult to fill positions, particularly in situations in which the

company has invested in developing these people.

Additionally, while Nestle provides extensive training programs and has invested heavily in

developing its employees literacy and basic skills, the organization would be well served to evaluate

how well its workforce is prepared to adapt to modern technology. Advances in computers,

microprocessors and software have led to automation of processes that were formerly performed by

hand. These systems require a more technologically savvy workforce.

Finally, “Nestle has been successful in adjusting to the ever-changing environment of the last

140 years since its inception in 1866 with out losing its fundamental beliefs and core values”

(http://www.bzu.edu.pk/). The company prides itself on managing change that drives sustainable and

profitable growth by following a strict policy of making gradual changes, rather than knee-jerk

reactions / drastic shifts that can put it at risk. While this business strategy has worked historically,

advancements in technology and corresponding economic growth in countries such as India and China
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for instance, place new demands on Nestle. Modern consumers are Internet savvy and there exists a

younger generation that expects immediate satisfaction. Consequently, Nestle would be wise to adjust

its business strategy to enable to it to respond more rapidly to the changing demands of today's

markets.
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References

SHRM Online - Society for Human Resource Management. (n.d.). Project Report of SHRM at

Nestle. Retrieved December 6, 2010, from http://shrm.org

Institute of Management Sciences. (n.d.). Bahauddin Zakariya University, Multan, Pakistan. Retrieved

December 4, 2010, from http://www.bzu.edu.pk/

Nestlé USA | Brands Overview. (n.d.). Nestlé USA | Home Page - Good Food, Good Life.

Retrieved December 6, 2010, from http://www.nestleusa.com/PubOurBrands/Overview.aspx

Palmer, I., Dunford, R., & Akin, G. (2009). Managing organizational change: a multiple

perspectives approach (2nd ed.). Boston: McGraw-Hill Irwin.