Nestle Case Study
1. The company of Nestle had undergone both the first order change and second order change. In a first order change, the company underwent some changes in terms of transactional and organizational climate change. On the other hand, Nestle also underwent second order change wherein there are changes in terms of transformational change. This order second-order type of change is more evident. Below are the snippets organizational change that occurred at Nestle according to its order: First Order
Nestle began expanding globally and begun to purchase local subsidiaries in local markets. Offshore transfer of Executive from Switzerland to United States Strengthening/Centralization of its IT department
Diversification of market through entering in cosmetics and pharmaceutical market. Complete overhaul of executive board with 10 executives replaced Acquisition and Mergers
Discussing more on the second-order change, a transformational change happened when the organization switched from entrepreneurial to become a wider and more professional management kind of structure when they begun to purchase local subsidiaries in foreign market in order for their sales agent (new position) to introduce their product outside of Switzerland. Another transformational change that happen involves the visionary changes that make the organization change in terms of involving in other fields of business through product d1versification through: i. Production of chocolate with the ingredients of Swiss General Chocolate Factory ; ii. Created new product like malted milk, powdered beverage and powdered bottled milk ; iii. Production of coffee products ;
iv. Merged with Maggi seasoning and soup manufacturers ;
v. Entered cosmetic arena thus becoming the major shareholder of L’Oreal ; vi. Involved in producing pharmaceutical and ophthalmic products.
During the course change, the company applied some “mid-management change theory” without destroying employee’s loyalty, impression, motivation, self belongingness and positive behaviours.
Lastly, acquisitions and mergers was also a big part of Nestlé’s second order type of change. This provided them accelerated growth (but other critics had viewed it as negative), increase in popularity and maintained organizational reputation.
2. Peter Brabeck-Letmathe line of thought regarding incremental change that occurred in Nestle is based primarily in his leadership mindset whose focus is on substance over style which includes a strong dedication to discipline and long-term approach to growing a business. Peter, according to literatures, took a conservative approach than his predecessor to improve Nestlé’s business. During the early days of his tenure, he slashed cost by increasing the efficiency of manufacturing operations, got rid of mature businesses with little potential for profit growth, and focused investment on fast-growing fields. Contradicting to Peter’s concept of incremental change on Nestlé’s overall business, incremental change (as what he thought it was be), is not incremental after all. The aggressive acquisition of a number of food/beverage industry (Ralston Purina, Chef America and Dreyer’s) expanded its market. In addition, the direction of the company to spend over $1B to automate and integrate all of its worldwide operation, from procurement through production to distribution including the revamping of Nestlé’s research and development unit to facilitate better coordinating among the group’s different businesses is an aggressive strategic move. This centralization allowed him to unify the company’s wide ranging negotiation and contracts with suppliers, and as a result, better centralize production. The move had closed 38 factories and cut $1.6 billion in cost while improving the company’s ability to obtain volume discounts.
3. Listed are the following specific implications that manager’s from Nestle had encountered:
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