Decentralized And Strategic Business Unit Of Nestle Management Essay

Decentralized And Strategic Business Unit Of Nestle Management EssayBased in Switzerland, Nestle operates in 86 countries across the globe. The company has products that cross more b straddles than a professional diplomat, including Nescafe coffee, Purina and Friskies pet food, Kit Kat candy, Buitoni pastas and its flagship chocolate.Although there are many exceptions, food tends to be inherently topical anaesthetic, both(prenominal) because of its perishable nature and because of the regional nature of many food preferences. For Nestle, success has meant finding the right balance between localization and globoseization. Packaging has played a severalize role in this successful balancing act, which is why Nestle is Food Drug Packagings 2004 Food/Beverage Packager of the Year.Nestle can earn greater return from its distinctive competencies, like unique strengths that every(prenominal)ow a company to achieve superior efficiency, quality, innovation and customer responsiveness. B y applying those competencies, and the products they produce, to foreign markets where indigenous competitors privation similar competencies and products, Nestle can realize enormous returns.Furthermore, Nestle can take advantage of location economies. Location economies arise from performing a cling to universe of discourse activity in the optimal location for that activity, anywhere in the creation. The optimal location for a value creating activity lowers the costs of value creation therefore helping the company achieve a low-cost position.4.1 International strategyNestl is a global organization. Their competitive strategies are associated mainly with foreign point investment in dairy and separate food businesses. Nestl aims to balance sales between low risk but low growth countries of the developed human being and high risk and potentially high growth markets of Africa and Latin America. Nestl recognizes the profitability possibilities in these high-risk countries, but pl edges not to take unnecessary risks for the sake of growth. This butt against of hedging keeps growth steady and shareholders happy.When operating in a developed market, Nestl strives to grow and gain economies of scale through foreign direct investment in big companies. Recently, Nestl licensed the LC1 brand to Mller (a large German dairy producer) in Germany and Austria. In the developing markets, Nestl grows by manipulating ingredients or processing technology for local conditions, and employ the appropriate brand. For example, in many European countries most chilled dairy products contain sometimes two to three times the fat content of American Nestl products and are released under the Sveltesse brand name.Another strategy that has been successful for Nestl involves striking strategic partnerships with other large companies. In the early 1990s, Nestl entered into an alliance with Coca cola in ready-to-drink teas and coffees in order to benefit from Coca Colas worldwide bottlin g system and expertise in prepared beverages.European and American food markets are seen by Nestl to be flat and fiercely competitive. Therefore, Nestl is setting its sights on new markets and new business for growth.4.1.1 Asia marketNestls strategy has been to acquire local companies in order to form a group of autonomous regional managers who know more about the culture of the local markets than Americans or Europeans. Nestls strong cash pass and comfortable debt-equity ratio leave it with ample muscle for takeovers. Recently, Nestl acquired Indofood, Indonesias largest noodle producer. Their focus will be primarily on expanding sales in the Indonesian market, and in time will look to export Indonesian food products to other countries.Nestl has employed a wide-area strategy for Asia that involves producing different products in each country to tot the region with a given product from one country. For example, Nestl produces soy milk in Indonesia, coffee creamers in Thailand, soy bean flour in Singapore, candy in Malaysia, and cereal in the Philippines, all for regional distribution.Nestls overall strategic postures make sense because the company has developed a consistent strategic program line and vision. The company has determined its strategic direction in advance and then implemented it on a global scale. Knowing that innovation and quality were key determinants, Nestle transferred these distinctive competencies to foreign markets.4.2 Decentralized and Strategic Business UnitNestle is a decentralized organization where responsibility for operating decisions is delegated to local units, which bedevil a high degree of autonomy concerning pricing, distribution, marketing, etc.Nestle is one of the worlds largest food company and has successfully grown and additiond its market share since its base in 1866. This already indicates that Nestls overall strategic posture makes sense given the markets and countries Nestle participates in.Nestle is organized in to seven different worldwide strategic business units (SBUs). These have responsibility for high-level strategic decisions and engage in overall strategic business development, including acquisitions and market entry strategy. Parallel to this structure, there is a regional organization that divides the world into five major geographical zones, such as Europe, North America, etc. The regional organizations are responsible for developing regional strategies and assist in the overall strategy development process. However, neither SBU nor regional managers get involved in local operating decisions.http//articles.castelarhost.com/nestle_competitive_strategy.htm4.3 ChallengesAs a global company, Nestle faces many challenges. They are varied in nature, spanning social, environmental and economic issues, and range from local to global in scale. Some of the challenges as below4.3.1 The effigy burden of malnutritionWhile nutrition has largely improved worldwide over the past 50 years, new n utrition-related problems have emerged, ranging from under-nutrition in developing countries through to change magnitude rates of obesity in both developing and developed countries. Both contribute to increasing rates of chronic disease around the world.184.3.2 The global weewee crisisIn recent years, water has been increasingly recognized as equal to climate change as a pressing environmental issue. With approximately two-thirds of all water being withdrawn by agriculture, the future of agriculture and food security is at stake if we are not able to solve the world water crisis. We have adopted rigorous standards to reduce water consumption at our plants and facilities, and help farmers to become better stewards of water, support water resource consciousness and education programmes, and participates in global dialogue with leading experts and policymakers.194.3.3 Renewable energyIn addition to operational efficiency improvements and energy-saving equipment, we continue to explo re the industrial feasibility of switching to more renewable energy sources to reduce our reliance on fossil fuels. A number of projects have come on-stream in 2009 which will increase our overall proportion of energy derived from renewable resources, including a landfill gas project in Ohio, USA that recovers methane, the generation of energy from spent coffee grounds at a factory in Colombia and solar panels on the roof of our Purina factory in Denver.204.3.4 Sustainable palm oilWe share the concern about the secure environmental threat to rainforests and peat fields caused by palm oil plantations, and participate in multi-stakeholder solutions to this complex problem. We only buy processed palm oil and processed oil mixes, we do not use crude palm oil and we have no direct link with plantations. We have also undertaken an in-depth review of our translate chain and committed to using only Certified Sustainable Palm Oil (CSPO) by 2015. Nestle recently joined the Round table on Sustainable Palm Oil (RSPO) and has repeatedly spoken out against the production of palm oil for a bio-fuel.214.3.5 Child labour in the agricultural areaAs a founding participant in the International Cocoa Initiative, set up specifically to eradicate the worst forms of child labour, Nestle and other industry players are improving access to education and addressing all forms of exploitation of children, forced labour and its causes.22http//www2.nestle.com/CSV/CreatingSharedValueAtNestle/Challenges/Pages/Challenges.aspx