Magdi Batato At Nestlé Malaysia Case Solution
Nestle S.A started in 1860s, when a German pharmacist developed a formula for babies who were not getting breastfed. After the success of this formula in the European market; by the end of 2005; Nestle became the world’s largest manufacturer of food, with the global revenue of 86.6 billion. Nestle is among the large food companies around the globe. In was established in 1866 by Henri. Overall, Nestle has 413 plants in 85 countries(Nestle, 2019a). Nestle is based on different segments and product lines, such as:Nestle waters, Nestle health care, Nestle Nespresso, and Nestle Pet care.(Nestle, 2019b).
Magdi Batato is the current Executive Director of Nestle Malaysia. Batato has covered a long path in Nestle,providing 50 years of his services to the company. He started his career with Nestle at Cairo’s headquarter as a Corporate Advisor for environmental issues, and he was famous for his leading and innovative qualities. He was famous for his innovative ideas and initiatives. After getting transferred to South Africa (Estcourt); he analyzed the situations and came up with the idea of working as Semi-autonomous teams, and that concept increased the productivity of the employees and the entire company’s operations had improved, i.e. Quality, process and services’ efficiency. After the success of SWAT in Estcourt; Batato had expected to implement the same strategy in other factories in Malaysia, so this case would discuss the issues and hurdles which he faced during this process.
As we discussed that after Magdi got transferred to Malaysia; he was supposed to work on the operations’ efficiency as well as on the overall business’s improvement. For this, he wanted to implement the same semi-autonomous work team concept in all other seven factories, because it was a successful strategy in Est-court factory. Change is not-easy to implement and same goes for Batato, as the production management committee members was opposing this concept because it was comfortable with the operational process. Production committee was concerned that this might not work in Malaysia because it was a diversified working place and there was no need of this strategy. Production Committee had a view that due to the diversified cultures and religions; it was not possible for the employees to work in teams.
Organizational Issues and Model
The country achieved a GDP growth rate of 4.7% in 2018, and the major revenue generating sectors was service industry. (Global Edge, 2019) Malaysia is a religiously diversified country, comprising of 62% Muslims, and religious & cultural differences are always used for creating political unrest in the country. (Ewelina U.Ochab, 2019)
Out of seven Nestle factories in Malaysia; five factories performed smoothly and achieved their KPI targets of 75%-90%; whereas two factories were shut down due to the production constraints.
Nestlé’s strategyis to improve the quality of life and promote healthier culture. It is implementing its strategy by innovating products, following differentiation strategy and improving the operational efficiency (Nestle, 2019). Magdi’s strategic goal is to ensure the long term sustainability of Nestlé’s operations.
Cultural Issues of Company
Nestle Malaysia follows Hierarchy Culture as the work environment is structured and controlled, a proper hierarchy exists between the supervisors and subordinates. Authority is not delegated as employees have to wait for their supervisor’s orders before making any decision.
Magdi wants to implement the strategy of working in semi-autonomous teams in Nestle Malaysia factories. He wants to promote the idea of collaborative working and giving soft rewards in order to improve the operational efficiency, and for the long term sustainability of Nestle.
Task and People Issues
The Malaysian society comprises of people from various religions, cultures and strongly believes in collectivism. The rural population is said to be conservative and almost every citizen follows the Malaysian traditions due to their strong rural roots.
Despite issues being witnessed by Magdi during his factory visits; the production committee members were against the idea of implementing SAWTs. The lack of authority delegation to subordinates led to these issues as they had to wait for the supervisor’s approval. If the subordinates had the authority to make decisions, these issues would have been resolved on time.
The concept of Semi-Autonomous work teams
The concept of Semi-autonomous work teams is used to increase the operations’ efficiency and to encourage team work in the division. Under this working concept, production Staff is asked to analyze their potential, set their own goals and work on self-improvement concept. In this way, employees would be responsible for their own set goals and their performance will be evaluated based on the goals and their performance. Team leader’s role changed here, because under this concept; the team members encourage the employees and play their role as a coach. This concept helps the company in improving the division’s operations. Employees have partial autonomy in the group, to perform technical work. Teams were allocated at different production line and set KPI’s. The team members regularly monitor those KPIs and their performance. They regularly track the performance and identify the issues in indicators. In return, the company offers public recognition and soft rewards to its employees.
Decision of Magdi
After the opposition of production committee; it is up to Magdi to convince the production committee and implement the Semi-autonomous work team system in the company. There are several factors that can affect the production committee’s decision. Batato can work on the factory performance reports and identify the issues in the company. Further, Batato can arrange meetings with production committee to communicate the factory issues and to discuss the plan of implementing teamwork in the diversified work environment.
After analyzing the whole situation; Magdi is recommended to implement the SAWT strategy in those factories which have issues in operations. There are two factories in Malaysia which are facing performance issues, decrease in investments and production constraints. So to mitigate the performance gap and to reduce the performance constraints; Magdi should implement SAWT in these two companies. The success of SAWT in these two factories will help Magdi in-convincing the production committee for the implementation of the SAWT strategy.
Now Magdi has two options, first to implement SAWT in two factories and ensure the success of the strategy. He canuse the performance of SAWT strategy to convince the production committee. Second option available to Magdi is the implementation of SAWT strategy in other five factories as well, through convincing the production committee and showing them full confidence that there will not be any cultural issues in the factories. Magdi should communicate to production committee about the change process and the advantages of implementing the SAWT strategy. The advantages and disadvantages of implementing the strategy are given below:…………………..
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