Organizational Changes that Nestle has Undergone
Nestle is the largest and most successful consumer packaged goods company in the world, founded and headquartered in Vevey Switzerland. Nestle successfully introduced many new products into many different parts of the food and beverage industry. The Nestle Company was established in 1867 by Henri Nestle.
In the beginning, Nestle Company specialized in selling infant milk; which provided alternative for mothers who could not breast feed their infant. The value of the product was soon recognized, as it saved many children’s life. Today, Nestle is the world’s largest and most diversified food company, with nearly 500 factories around the world, producing healthy, enjoyable food products for every stage of life. Nestle underwent many organizational changes. In 1905 Nestle Company merged with the Anglo Swiss Milk Company by the Page Brothers.
The merger provided the company with a wide range of product line. According to Palmaer, I. , Dunford, R. , & Akin, G. , 2009, “Nestle changed its approach to global expansion and began purchasing global subsidiaries in foreign markets. ” During the World War I Nestle purchased several factories in the United States to keep up with the increasing demand for condensed milk and dairy products via government contracts. When fresh milk became available again after the war, Nestle financial status suffered which caused a tremendous amount of debt.
The price of ingredients was increasing, the economy slowed down and exchange rates deteriorated because of the war. During World War II many “executive offices offshore were transferred to the United States. These moves into the offshore markets were part of Nestle’s commitment to changing the company in order to increase efficiency and productivity” (Palmaer, I. , Dunford, R. , & Akin, G. , 2009, para 2, pg. 109). After the war ended, consumer started switching to the type of favorite milk they liked with reference. Nestle was able to respond quickly to the change of demand; thus giving them a very high advantage to stay competitive in the market. In 1920, the company decided to enter the chocolate market as their second most important production. Nestle also did am unrelated diversification through their shareholding in L’Oreal in 1974. Later, Nestle made a second diversification which was outside of the food industry, the purchase of a pharmaceutical and ophthalmic company known as Alcon Laboratories Inc.
As the years progress Nestle continue to its diversified strategic in acquiring many acquisitions: 1985 Carnation, 1988 Buitoni-Perugina, 1988 Rowntree, 1990 Cereal Partners Worldwide, 1991 Beverage Partners Worldwide (formerly CCNR), 1992 Perrier, 1998 San Pellegrino and Spillers Pet foods, and in 2000 the acquisition of Power Bar (http://hubpages. com/hub/nestle). Whether changes were first-order and/or second-order changes
It went through second-order change. Second- order, discontinuous change is “transformational, radical, and fundamentally alters the organization at its core. Second- order change entails not developing but transforming the nature of the organization” (Palmaer, I. , Dunford, R. , & Akin, G. , 2009, para 3, pg. 86).
- “Nestle sold its products through sales agents to countries outside of its home market.
- Its launch into the American market was initiated when the First World War increased demand for dairy products.
- Nestle took this opportunity to establish its presence in the United States by acquiring several existing factories.
- In 1974 Nestle diversified for the first time out-side the food industry in order to promote growth.
- It became a major shareholder in the cosmetic giant L’Oreal.
- Nestle later made a second foray outside the food industry with the purchase of Alcon Laboratories Inc. ,” (Palmaer, I. , Dunford, R. , & Akin, G. , 2009, para 3, pg. 86).
My rationale:
Nestle transformed the nature of its organization Nestle fine tuned its organization and transferred its executive offices from Switzerland to the United States which allowed an improved and enhanced organizational stability.
Brabeck-Letmathe stated “why should we manufacture dramatic change? Just for changes sake? To follow some sort of fad with-out logical thinking behind it? We are very skeptical of any kind of fad” (Palmaer, I. , Dunford, R. , & Akin, G. , 2009, para 7, pg. 109). He initiated a complete overhaul of the executive board, replacing it with 10 new executives. He claims that change is incremental; however he is making a radical change. Three examples of lessons from the front line
Three examples of lessons from the front line that were evident in the Nestle case are:
- There is a dramatic pace of change in Nestle. This to be slowed down.
- There is a high risk in its investments; the firm has to hedge its risks
- There is a wrong policy in technology.
Care needs to be taken in assuming that types of organizational changes can be neatly categorized as small, adaptive, and incremental compared to those that are large and transformational. Mental frameworks, individual perspectives, the extent to which a change is directly relevant to a person and his or her activities, and the degree to which he or she accepts the need for change.
References
- Bikashkumarsha. (2010). Nestle’s brand management strategies. Retrieved from http://hubpages. com/hub/nestle.
- Palmer, I. , Dunford, R. , & Akin, G. (2009). Managing organizational change: A multiple perspectives approach (2nd ed. ). New York: McGraw-Hill.
