Sunday, June 21, 2009

Chapter 15 Case Study: Nestle Tries for All-for-One Global Strategy

Question #2: What type of global business and systems strategy did Nestle adopt? Was this strategy appropriate for Nestle's business model?

Based on the case study, it appears that Nestle initially adopted a multinational decentralized strategy that concentrates financial management and control out of a central home base while decentralized production, sales, and marketing options to business units in other countries. The products and services on sale in different countries are adapted to suit local market conditions. However, this strategy was not appropriate for Nestle's business model because the inconsistencies and inefficiencies of 14 countries using an older enterprise resource planning software resulted in diminishing profits for the company.

Question #3: What management, organization, and technology challenges did Nestle have to deal with to standardize its business process and systems?

Management determined that a decentralized strategy of 80 different information technology units running multiple midrange computers created inefficiencies and extra costs that prevented the company to compete effectively in electronic commerce. Facilities in 14 countries all ran software differently using different schemes for formatting data and management forms. The challenge was to was to launch a $2.4 billion initiative to compel market heads around the world to adopt a single set of business processes and systems for procurement, distribution, and sales management. As a result, Nestle launched the Global Business Excellence (GLOBE)that would harmonize processes, standardize data, and standardize systems. All of Nestle's worldwide business units were to use the same processes for making sales, commitments, establishing factory production schedules, billing customers, compiling management reports, and reporting financial units. The greatest challenge of GLOBE was more personal in implementing a policy that would be accepted by highest-ranking executives. Managers resisted the idea of giving up control of their business processes to participate in a centralized solution.

Question #4: What strategies did Nestle management use to deal with these challenges? How successful were these strategies? Explain your answer.

Chris Johnson, who was charge of Nestle's Taiwan market was asked to lead the GLOBE initiative. In July 2000, Johnson formulated a team 12 senior executives with various backgrounds to help establish a GLOBE policy of converting 70 percent of the business to a common set of practices and systems by December 2003. However, the schedule was changed to establish a GLOBE-enabled organization by the end of 2005 rather than 2003. Johnson expanded his team to 400 executives with diverse backgrounds at Nestle covering 40 different countries. The core group formulated a GLOBE Best Practices Library and documented the best way to perform their core processes based on their initial weaknesses.

The biggest challenge was not a technical one, but a personal one because many of the high ranking executives were reluctant to give up their decision making authority. Johnson met with executives and market heads several times until the managers eventually endorsed the benefits of GLOBE. To help the rollouts, Johnson asked each country to name a GLOBE manager who would facilitate the operation and adoption. There were some technical challenges along the way and by the end of 2005, Nestle have converted 30 percent of its business to GLOBE. Each country has a data manager to ensure that data entering GLOBE's streamlined data centers are accurate and complete. Challenges, Nestle has successfully implemented its goal of standardizing all processes, data, and systems so as to better serve its customers. I think that the strategies implemented were successful because Johnson succeeded in changing the culture of the various business units. The benefits of applying GLOBE at Nestle have provided a more efficient business model, reduced maintenance costs, and gained profits. This strategic approach has resulted in a better use of global supply chain management.

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