Nestle S.A: International Marketing Case SolutionÂ
Linkage between environmental change, strategic change, and structural change
Increased competition has allowed companies to target their consumers more effectively due to which companies have become more consumer oriented and has empowered their lower management and their country organization to make their own decisions to meet end consumerâ€™s needs. Therefore, the market force which is considered as an environmental change occurred and the major steps taken by Nestle to make strategic changes by transferring powers to the lower management is the linkage between environmental and strategic change. The structural change is the change that occurs in the chain of command for a company. However, the chain in command for Nestle favors the top-down approach as a presence of many middle level managers which does not allow the information to flow freely from bottom-up approach, but it is very much feasible for the decision to flow from top to bottom.
Questions for Analysis
Arguments for Decentralization at Nestle
The market forces are amongst the top environmental forces that continuously pressurizes Nestle to implement strategies that caters the needs of the end consumers. A decentralized approach allows the lower management to make proposals to the top management because they are directly in contact with the end consumers. The technological forces allow companies to understand the updates of new product enhancement and keep an eye upon its competitors. Knorr introduced a better packaging idea than Maggi for 5 minutes noodle product concept because Maggi made its own decision to implement the concept without conducting a thorough research on its packaging in each market.
The localization strategy has always been emphasized by Nestle because it considers the local taste and preferences over the standardized policies. The company hires the local staff and managers so that it shall be easier for them to target the market because they are aware of their end consumersâ€™ needs and preferences. The company has only 3% Swiss staff out of the total number of employees. There is a close proximity and contact between the local managers and the country managers that resolves a problem before it goes to the Center.
Arguments for Centralization at Nestle
Amongst market forces, mergers and acquisition are the most common tool that have been applied by Nestle since its inception. The company has a long history of acquiring new companies when it enters a new market. Therefore, this particular strategy requires steps from the Center in order to centralize its process.
It is in the power of the company to introduce new product concepts through a complex chain of command model which highlights a top-down approach. The company can introduce new product concepts without consulting the lower management. However, certain small changes can be made regarding the local taste of end consumers. The goals of each country organization is set by the Center which reveals the centralized approach from the company.
Is Nestle decentralized as it appears?
Nestle S.A acknowledges autonomy is necessary against their profit responsibility within a country. The Center admires that the taste and preferences, changes across national boundaries, therefore the decision making power shall be authorized to the local country managers. However, the main role of the Center is to infuse certain policies, divide goals to the regional managers for their respective zones, maintain the standards, worldwide, and to adopt a â€˜uniquely Swiss and neutral philosophyâ€™. In this particular concept, the Center is responsible to provide most of the product concepts and suggest names of the brands while maintaining high quality standards. Many examples could be found related to the Center, which has authorized the country managers to make their decisions. Nestle approves the decentralized approach utilized in its company and favors the particular system, but the chain of command for Nestle is more inclined towards a top-down management approach instead of bottom-up approach where information flows from the lower to the top management………………
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