A presentation on the

Structural options,
Cultural challenges & the
Use of Information and
knowledge management in
Nestlé Group

By
Tom Jacob
Aniz Yusuf
Ali Tanveer
Jasmeet Singh Liverpool John Moores University
Kaushik Sutradhar MBA - International Management - Presentation – Oct, 2008
 World of Nestlé
 Largest food and beverage company in the world.
 One of the oldest of all multinational companies.
 Have an estimated 8,500 brands, manufactures around
10,000 different products in nearly 500 factories in 83
countries and employs some 250,000 people.
 Markets its products in 130 countries across the world,
with annual revenue of more than £71 billion(2007).
 Invests around £750million in R&D every year.

Source: Nestlé (2008)

 Functional Relationship
Line Relationship
Board
Present Structure
Staff Relationship
Chairman
of Nestlé
C.E.O. (Complex 3D Matrix)

General GLOBE & Corporate Human

Secretariat I.T. Systems Governance Resources

Finance & R &D and Marketing &

Operations Control Technology Sales
Core Marketing Units
•Nutrition
Nestlé Pharma Nestlé Nestlé Nestlé Nestlé •Chocolate& Conf.
& Cosmetics Nutrition Waters Professional Agriculture •Dairy
•Coffee &Beverages
•Food
Zone: Zone: Africa/ Zone: •Shelf Stables
Europe Asia/Oceania Americas •Pet Care

Purchasing Purchasing Purchasing

Production Production Production

Distribution Distribution Distribution

` ` `
Quality Check Quality Check Quality Check
Source: Nestlé (2008)
Critical review of present structure
 Advantages of this structure for Nestlé :
1. Ability to react quickly to the market conditions.
E.g.: Nestlé was able to quickly reintroduce old formula for
Maggi Noodles in 1999 in India.
2. Ability to tailor the products according to the market.
E.g.: All Nestlé products in middle east countries are ‘halal’
certified.
3. Standardisation of products & practises.
E.g.: All Nestlé managers are expected to follow ‘The Basic
Nestlé Management and Leadership Principles’ document
issued by Head office.
4. Good coordination between various divisions resulting in
more efficient use of resources.
E.g.: Nestlé(UK) was able to use Nestlé(India)’s expertise when
they introduced ‘ready to use’ curry products in UK.
Critical review of present structure
 Disadvantages of this structure for Nestlé :
1. High administrative costs.
E.g.: Nestlé is trying to cut off 250 jobs by 2009 in two
of their French plants due to high administrative costs.
2. Lack of effective communication.
E.g.: Nestlé America used to pay 20 different prices for
vanilla from the same supplier due to incompatible
systems used in different factories.
3. Potential conflict of interest due to role ambiguity
E.g.: Nestle have managers dealing with the same things
in zones, SBUs and headquarters.
 Functional Relationship
Line Relationship
Board
Optional Structure
Staff Relationship (Divisional)
Chairman

C.E.O.

Zone: Zone: Africa/ Zone:

Europe Asia/Oceania Americas
Finance & Finance & Finance &
Control Control Control
R &D R &D R &D
Marketing & Marketing & Marketing &
Sales Sales Sales
S. B. U.s S. B. U.s S. B. U.s

Communications Communications Communications

Human Human Human
Resources Resources Resources
Corporate Corporate Corporate
Governance Governance Governance
Operations Operations Operations

Purchasing Distribution Purchasing Distribution Purchasing Distribution

Production Quality Check Production Quality Check Production Quality Check

Structural Options - Divisional

 Advantages of this structure for Nestlé :

1. Increased accountability & result oriented.
2. More flexible to market conditions.
3. Easily analysis performance.
 Disadvantages of this structure for Nestlé :
1. Lack of unity creates unhealthy interdivisional competition.
2. Loss of resources & efficiency due to lack of coordination.
3. Product standardization is difficult to achieve.
Structural Options - Functional

 Functional Structure will not work, because Nestlé is

a global organization:
1. Lack of coordination & communication.

2. Slow down the response time(Long Chain of command).

3. Communication through the functional managers.

4. Conflict between functional departments.

Recommendations on structure
 Continue with the current structure, but with some
modifications:
1. Start a sub division for Environmental & Social Responsibility
under Corporate Governance.
2. Start a separate centralized training division under HRD so
that higher level of cross cultural competence can be
achieved.
3. Purchasing decisions should be centralized under operations
which will help in cost effectiveness & standardization.
4. GLOBE System should be completed & commissioned as
soon as possible to facilitate better interdivisional
communication.
Present Culture of Nestlé -
Adapt, Absorb & Collaborate
 Adaptive
1. Becomes a local company.
2. Tolerant to different cultures & value sets.
3. Puts the consumer first.
 Absorptive
1. Continuous learning.
2. Willingness to change.
3. Principles not rules.
 Collaborative
1. Team work.
2. Open, Transparent & Sharing.
3. Pioneers & Innovators.
4. Creating long term sustainable shared value.
Source: Nestlé (2008)
 Cultural challenges facing Nestlé-
Internal
 Workforce try to resist changes in the working system.
E.g.: Many local managers tried to resist the implementation
of GLOBE system.
 Cross-cultural communication & knowledge management.
E.g.: Nestlé struggle to successfully implement its own quality
control checks in China.
 ‘Hands on’ corporate parenting create tension between
corporate and local managers.
E.g.: Problems in Nestlé’s Perrier production sites in France.
Cultural challenges facing Nestlé-
External
 Struggle to find the right balance between it’s
homogeneous culture and various national cultures.
E.g.: Backlash it received while promoting breast milk
substitutes in some countries.

 Product standardization problems - struggle to

maintain consistency in quality, labelling, packaging,
ingredients etc in different parts of the world.
E.g.: Deceptive labelling of powdered milk in
Colombia.
Cultural challenges facing Nestlé-
External
 Laws of the lands in which Nestlé operate will
provide challenges.
E.g.: Nestlé was forced to withdraw its takeover bids of
Hershey Company by Pennsylvanian government.

 Customer preferences are changing quickly around

the globe, forcing Nestlé to rethink its product
placements.
E.g.: Indian consumers with more disposable income are
demanding better quality products.
Cultural challenges facing Nestlé-
External

Source: Nestlé India (2007)

Possible actions on
Cultural challenges
 Start a centralized training division under HRD so that
higher level of cross cultural competence can be
achieved.
 Quicker implementation of GLOBE system will facilitate
better cross-cultural communication & knowledge
management. It will also help in standardizing products.
 Inspire, Motivate & Compensate - This will ease
tensions between managers, facilitate better knowledge
flow and win over the workforce.
 Better knowledge management practices of GLOBE
system will help in increasing the awareness of laws of
the land.
Current Information &
Knowledge Management Procedure
 How Nestlé collects information:
1. Executive Information System(EIS) department gathers
data from the firm’s subsidiaries & reporting units.
2. HR (personal & performance) data is collected.
3. EIS department checks, validates and consolidates
these data, storing them in EIS databases.
4. GLOBE when fully operational will absorb EIS and
together will replace all other legacy informational
management systems, providing standardization.

Source: Oggier, Fragnière & Stuby (2005)

Current Information &
Knowledge Management Procedure
 How Nestlé manages knowledge:
1. Nestlé’s open communications(collaborative) culture
facilitate knowledge-sharing thus facilitating
innovation & creativity.
2. Nestlé uses team-based working system to assist
knowledge-sharing.
3. Standardize practices with in the company.
4. Nestlé offers tailored training and mentoring programs
& in-house socialization opportunities to it’s workforce.

Source: Nestlé (2008)

Current Information &
Knowledge Management Procedure
 SECI model of dynamic organizational
knowledge creation (Spiral)

Source: Nonaka & Takeuchi (1995)

Areas of concern in current
I. & K. Management

 Cross-cultural communication issues.

E.g.: Language barrier hinders effective communication.
 Workforce try to resist changes.
E.g.: Many local managers tried to resist the implementation of
GLOBE system.
 Problems with standardization of information &
procedure.
E.g.: GLOBE system is still years away from being 100%

Source: Nestlé (2008)

Opportunities for improvement in
current I. & K. Management
 Quicker implementation of GLOBE system will
facilitate better cross-cultural communication &
knowledge management. It will also help in
standardizing practices.
 Start a centralized training division under HRD so that
higher level of cross cultural competence can be
achieved.
 Inspire, Motivate & Compensate - This will ease
tensions between personnel, facilitate better
knowledge flow and win over the workforce.
Conclusion
 Continue with the current structure, but with some
modifications.
 Start a centralized training division under HRD so that
higher level of cross cultural competence can be
achieved.
 Quicker implementation of GLOBE system will facilitate
better cross-cultural communication & knowledge
management. It will also help in standardizing products.
 Ultimately, evolution rather than revolution in all areas
will lead Nestlé closer to their stated goals .
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