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Nestle: Sustaining Growth

Introduction

Nestle company was founded in 1866 by Henri Nestle in Switzerland and is currently one of the nutrition, health and wellness company in the world. It is the largest Switzerland’s industrial company and also the largest world’s food company according to Malik, Ali, Rana, Ilyas, & Khan (n.d.). The company has had robust performance recording CHF 109.9 billion in sales in 2008 with a net profit of CHF 18.0 billion (At a glance, n.d). The company has a huge workforce of about 283, 000 workers across the globe. It has widely dominated in the sale of coffee, milk products, confectionery, ophthalmics and dehydrated cooking aids which account to 60% of the company sales and more than 75% of the operating profits.

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The current competitive landscape

On coming to the helm of leadership as the CEO of the company, Peter Brabeck-Letmathe embarked on an ambitious project to transform the company from a European based manufacturer with a limited proposition to a global food company. The firm’s foray into the global market exposed it to fierce competition in the international market from among others the Kraft, Master foods and Unilever (Strategic Management: Competitiveness and Globalization). With its strong financial clout, the journey to establishing a global brand has largely been a successful one. This has been supplemented with diversification through takeovers across the globe. The acquisition has enabled the firm to gain new market segments and to reduce its dependence in the mainly traditional coffee segment. This has seen the company lead in most of its products segments. This venture has positioned the company at number 8 among the world’s top 12 packaged food companies in terms of capital returns as at 1997.

Technology-wise the company has a vibrant research and development division. Their discoveries and inventions have led to development of useful applications for the company and a couple of innovative products to the consumer (About us, n.d.). The diverse range of scientists has introduced a range of management programs in order to reduce the cost of operations and also to streamline business functions. These have ranged from MH97 that had been introduced to cut cost of raw materials and to optimize production processes. Target 2004+ was later brought in after MH97 to improve operating performance by creating a regional manufacturing network. It laid emphasis on establishing benchmarks and transfer of best practices across the network. This program succeeded in raking out savings of more than CHF 3 billion between 2002 and 2004. The latter program was succeeded by Operation Excellence 2007 which was aimed at improving the supply chain productivity, optimizing planning processes, getting of production overheads and reducing product complexity. A program called FitNes was also employed to boost efficiency in the group’s administration efficiency. This is projected to have netted about CHF 1 billion in savings. The greatest reap for the company was however the integration of The GLOBE initiative which was designed to improve among others operation efficiency, to establish the best practices in business processes, aligning data standards and to synchronize information systems.

Owing to its vast experience in the food industry, the group has amassed enormous knowledge of the market which gives it a key advantage over its competitors. Its high ability and efficiency in integrating new business acquisitions into its mainstream operations gives it a higher leverage as compared to its competitors. By diversifying its products and integrating business processing systems, the company has proven to be highly strategically flexible. Of late the group has taken into adapting the current best management practice in order to streamline its functions across the globe and also to improve efficiency and effectiveness in the production processes.

Over the years the company has also remained committed to production of high quality goods which has ensured it remains highly profitable. To demonstrate good financial performance of the group, it made sales worth CHF 60 billion and a net income of CHF 3.4 billion 3.4 billion in 1996. This has steadily been rising up to a level of CHF 109.9 billion in sales in 2008 with a net profit of CHF 18.0 billion (At a glance, n.d.).

Vision and mission of Nestle

Nestles vision is to be the leading food and beverage company in the world providing customers with healthy food at affordable rates. Through out her operations, the Company has remained true to their vision. This is demonstrated the virtue of being the best food and beverage company in the world. The Nestles’ mission is to provide the best food to people throughout her day and her lives. This is to be achieved through her unique experience of anticipating a consumer’s needs and creating solutions which enables Nestle to contribute to the wellbeing and enhancement of people’s lives (Malik et, al., (n.d). This is a restatement of the availability of their products in almost all of the countries of the world. It implies that at whatever location of the world only Nestle can be relied upon to provide the best food and beverages to meet their needs throughout the day and throughout their life. This statement emphasizes on convenience of the service. For example, people on transit require assurance over availability of commodities at any given time and location. The statement also emphasizes on her commitment to offer high quality products in their chains. Their success is attributable to over a century’s experience in delivery of quality products and services which has ensured loyalty by customers. The firm also affirms her capability to anticipate consumer needs and offer timely solutions. This is proven by her ability to introduce new products when demanded by the consumer. Responsiveness to consumer needs was evident in Pakistan where the need for provision of safe and healthy drinking water prompted them to introduce Nestle Pure life.

Some of the guiding principles of the company include manufacturing and marketing the company’s products in a sustainable manner over the long term on behalf of the stakeholders. Their second principle asserts that the company does not give emphasis to short term benefits at the expense of successful long term business development. Nestle also recognizes that the customer is concerned with the companies character behind her trusted brand and thus values customers, whom they depend on. The company believes in the importance and effectiveness of legislation to safeguard responsible conduct although it also appreciates guidance of staff to ensure adherence to the highest standards. Another important guiding principle is professionalism, conduct and responsible attitude of its management and employees which emphasizes on the recruitment of the right people and ongoing training and development. Their last principle lays emphasis on commitment to follow and respect the local regulatory framework of any market.

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Relationship with primary stakeholders

Nestlé’s key stakeholders include but not limited to customers, distributors, supermarkets, hotels, shopkeepers and the consumer. The company recognizes that they all have different requirements which must all be satisfied in order to retain them. Customers everywhere will always demand for excellent service, timely delivery and accurate information while consumers will always consider taste, appearance and price when making their buying decisions. The company’s responsibility is usually to identify these needs and respond appropriately and effectively. Nestle commits itself to give its customers value for their money through delivery of quality products at reasonable prices. It also shares with the society the need to maintain environmental quality. The societal concerns are central to their business and therefore the firm commits to respect their needs and preferences.

Leadership

Nestles able leadership has been largely instrumental to her success. The leadership’s strategic management skills have borne fruits in ensuring that the company remains highly profitable and relevant in the highly competitive industry. Under Brabecks tenure as the chief executive, he oversaw divestures from low yielding business activities and those that indicated very limited growth opportunities. These minimized closes in the firm’s operations. He also managed to transform the firm from commodity food processes which included raw material conversion towards the consumer and added value products. This meant that the company had to divest from manufacturing and related processing. He reinvested the proceeds towards greater acquisitions and product development which bore generous fruits. The leadership also believes in retention of the employees of the acquired businesses which helps smoothen the tradition and maintain some distinct cultures.

Reference

About Us. (n.d.). Welcome to the Nestlé Research Center. 2009. Web.

At a glance. (n.d.). Introduction.Web.

Malik, M., Ali, A., Rana, A., Ilyas, M., Khan, S. (n.d.). Nestle. 2009. Web.

Raisch, S., Ferlic, F. (2008). Strategic Management: Competitiveness and Globalization, Cases, 8th Edition, South-Western College.

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StudyCorgi. (2021, November 9). Nestle: Sustaining Growth. Retrieved from https://studycorgi.com/nestle-sustaining-growth/

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