Reference no: EM133600

QUESTION 1

Case study: Nestle

Almost 150 years pioneering nutrition and health. Nestle.s roots (source) date back to 1849 when an supporter pharmacist called Henri Nestle set up his laboratory in the small Swiss town of Vevey on the shores of Lake Geneva. It was here, in 1867, that he build up the invention that was to make him world-well-known. To help nurture (look after) and indeed save the lives of young babies, he created Farina Lactee, the worlds' first infant food. Henri Nestles prime apprehension was a healthy life for local newborn babies.
But he realised that he could help even more mothers and their babies by sell overseas his successful new product to other countries. So he built a complex of agents and importers to deal out it, first in Europe but also in Australia and South America. By the 1870s it was put up for sale in places as far afield as Egypt, Russia, Mexico, and Indonesia. Henri Nestle set a good illustration, both as a pioneer of nutritional food produce, and as an industrialist. His principles are still pursued to this day, almost 150 years later.
Henri Nestle, was a life-saving chemist but also an pioneering marketer. He used scientific knowledge to develop products that met consumer needs. He used his name to brand his creations in a distinctive way. And he set up systems to deal out his products quickly and effectively.

The new version of Nestles concern Business standards will be handed over to each of the 280.000 employees by the end of 2010 and accompanied by basic learning and training instruments. Nestle have built its business on the conviction that to have long-term success for investors, they not only have to comply with all applicable legal requirements and ensure that all activities are sustainable, but adding up they have to create significant value for society. The Nestle Corporate Business Principles are at the basis of the companys' culture, which has been developed over the span of 140 years. Nestle markets its produce in 130 countries across the world. Nestlé produces around 10,000 different products. Nestlé is more than just the largest food and everage company in the world. Nestlé is becoming the world's leader in nutrition, health and wellness. From the begning, nutrition has been at the mainstay of Nestlé?s business. However, today Nestlé place far greater emphasis on it - and on health and wellness. Nestlé Corporate Wellness Unit and the individual business units are driving forces in bringing Good Food, Good Life to all consumers. Nutrition: the core of the Nestlé business. The global population has grown to over six billion. Populace are living longer. Living standards have improved. Life styles have altered. These, and other demographic aspects, have had a considerable pressure on Nestlé - both in terms of the products they make and the way the commerce is ran. Nestlé science-based nutritional examination and expertise are driving nutritional innovations. One example is our "Branded Active Benefits" (BABs). The main purpose of a BAB is to add a specific health benefit to an existing product in a way that is meaningful and relevant to the shopper. In this way, the nutritional content of the product is enhanced so that consumers can enjoy even more health benefits - for instance, improving digestive fitness and contributing to healthy physical growth. But simply giving purchasers nutritional information's isn't very helpful. Nestlé go further. The Nestlé Nutritional Compass which is being included on all their packaging is user-friendly, simple to read and puts nutrition into a wider context. It encompass three elements:

1. Good to know - gives factual information on nutritional content(facts).

2. Good to remember - gives tips for healthy lifestyle, cooking and diet (food).

3. Good to talk - invites the shopper to call Consumer Services teams or log on to Nestlé websites.

Nestlé Nutrition is a stand-alone establishment within the Nestlé Group. It is activated in more than 100 countries. Of its 10,500 workers, some 3,000 are trained medical delegates. They put effort (work) closely with health care professionals such as doctors, nurses and dieticians to offer them with relevant information as well as products and services to help their patients.
The Nestlé Nutrition Council and the Nestlé Nutrition Institute The Nestlé Nutrition Council was founded in 1978. The council is composed of ten globally renowned nutritional scientists with a spread of nationalities and specialities. Its intention is to review current and developing nutritional issues, and provide the Company with significant information and continuous advice related to its commerce, policies and strategy.

The Nestlé Nutrition Institute operates as a medical and scientific network to provide health professionals with the most current and appropriate nutritional learning, information and tools. It works in partnership with many leading health and nutrition institutes around the world, and promotes sound nutrition research and education in the fields of paediatric, clinical and performance nutrition. The world largest corporate publisher for nutritional science investigation and information. Its workshops have been running since 1982, bringing in concert leading scientists and clinicians from around the world.

Nestlé is committed to the following Business Principles in all nations, taking into account local legislation, cultural and religious traditions. As from 2011, a modular training programme will be rolled out on the various components of the Corporate Business Principles. The depth and spotlight of the trainings will be established in accordance with the materiality for the different functions within the company. The Corporate Business Principles will continue to evolve and adapt to a changing world. However, the basic foundation is unchanged from the time of the origins of the Company, and reflects the essential ideas of fairness, honesty, and a universal concern for people:

1. Nutrition, Health and Wellness

2. Quality Assurance and product safety

3. Consumer Communication

4. Human rights in its business activities

5. Leadership and personal responsibility

6. Safety and health at work

7. Supplier and customer relations

8. Agriculture and rural development

9. Environmental sustainability

10. Water

Research and Development is a key (chief) competitive advantage for Nestle.

Around 5000 people from over 50 countries work in Nestle.s worldwide network of 29 research, development, product testing centres and technology facilities worldwide.

The Nestle Research Center in Switzerland is the major think-tank. Its a constant source of new ideas and scientific knowledge that feeds the pipeline for all Nestle products. It cover ups over 100 different professional areas . including nutritional science, the life sciences, raw materials, components and manufacture processes.

Nestle further strengthens its R&D capability through Innovation Partnerships at each stage of the product development process . from early stage collaborations with start up and biotech companies to late stage partnerships with its key suppliers.
By bringing together all of its global R&D resources, Nestle is able to supply high quality, safe food solutions to consumers worldwide . Whether this is in terms of nutrition, health, wellness, taste, texture or expediency. Above all, Nestle conveys to consumers products that are of the highest superiority. And safety is non-negotiable.

R&D is also critical in ensuring regulatory compliance of all Nestle products. Nestle is able to launch new produces quickly and powerfully, in countries all over the globe, by integrating authoritarian affairs in all its R&D activities, from start off to end.
Putting the consumer first The whole company is dependent on consumer choosing Nestle products in preference to competitors. products. Every day Nestle sells over a billion products.

These individual consumer transactions give the Company total annual sales of more than CHF 90 billion. For triumph and growth, Nestle has to build the greatest possible consumer trust in both the Company and its products. One way is to get as close to the shopper as possible. This is quite a challenge. It means understanding people of all ages, babies, kids, growing children, and grown-ups from youngster to old people; and being aware and appreciative of all their needs and motivations. The aim of Nestlé is to achieve better consumer understanding than its opponents. "The consumer at the heart of all Nestlé do" is therefore a maxim that is followed with great determination throughout Nestlé. Workers work hard to put themselves in the shoes of the consumer at every step - from product concept to the writing on the pack. Executives spend days observing consumers in their homes and in the shops.
Over and over again this type of hands-on research is more rewarding than huge quantitative studies.

Nestlé - a company built on brands The Nestlé brand portfolio covers practically all food and beverage categories: milk and dairy products, nutrition (infant, healthcare, performance and weight (diet) management), ice cream, breakfast cereals, coffee and beverages, culinary products (organized dishes, cooking aids, sauces etc.), chocolate and confectionery, petcare, bottled water. Many varieties have category leadership, both globally and in local marketplaces. Many have existed for several decades. Some, like S.Pellegrino - the mineral water from Italy - and Nestlé Moça in Brazil, are on outward appearance over 100 years old. The best-known global brands include Nescafé, Nestea, Maggi, Buitoni, Purina in addition to of course Nestlé itself. Former brands also sell in many countries - for instance, Milo, Nesquik, Nespresso, Kit Kat, Smarties, Polo, Friskies, Perrier and Vittel. The entirety number of brands - including local names - reaches into several thousands.

Even though less than 2% of our sales are generated in Switzerland, Nestlé is a Swiss company. Several Swiss characteristics are perceptible in the way the business is run.

The establishment is effective, reliable, hard working and pragmatic. But Nestlé is also a very human company. Above all, at Nestlé we care about our people.

Principles, not rules Two fundamental documents (The Nestlé Corporate Business Principles and the Nestlé Management and Leadership Principles) put down down principles that permeate the whole Nestlé Group. They rule policies and strategies. They affect everyone who works at Nestlé. They also impact everyone with whom Nestlé do business. In effect, they form a code of conduct. That is lived out by each one at Nestlé. The Nestlé Corporate Business Principles outline the Nestlé way of doing business. They include sections on Infant Health and Nutrition, Human Rights, Child Labour and the Protection of the Environment, as well as a set of Consumer Communication Principles. They include all ten principles of the United Nations Global Compact, as well as the International WHO Code of Marketing of Breast-milk substitutes. The Nestlé Corporate Business Principles have been translated into more than 40 languages and distributed to our organization around the world. They are built on key beliefs that include: Nestlés commerce objective is to manufacture and market its products in a way that creates value that can be sustained over the long term for shareholders, employees, shoppers, business partners and the national economies in which Nestlé operates. Nestlé does not favour short-term profit at the expense of successful long-term business development. Nestlé recognizes that its consumers have a sincere and legitimate interest in the behaviour, beliefs and actions of the concern behind the brands in which they place their trust.

A multi-cultural business The Nestlé Management (administration) and Leadership Principles are based on the many experiences that have led to the companys success throughout its long history. They relate mainly to the human facets of management and stress the multi-cultural nature of the Company. Nestlé cuddles cultural and social diversity and does not discriminate on the basis of origin, nationality, belief, race, gender or age. Nor does Nestlé have any political association. Nestlé operates in many countries and in many cultures throughout the world. This rich diversity is an invaluable source for leadership, and also for broadening employees? experiences. A key theme of the Management and Leadership Principles is that Nestlé puts priority on people rather than systems. This results in a structure that is as flat as possible, rather than hierarchical, and gives individuals plenty of opportunities to advance their careers.

Looking after the environment

Nestlé invest an average of CHF 100 million1 each year for the protection of the environment in its factories. The aim is to maximise the production of goods while minimising consumption of resources and at the same time reduce waste and emissions. Over many years, these investments - and also efforts from employees?- have led to continuous improvements. A rigorous system of surveys and audits monitors progress. At the heart of the successful environmental strategy is Nestlés persistence in ensuring that environmental factors are built in to all its activities. This starts with the purchase of raw materials, their shipping, their transformation during the manufacturing process and their packaging; and ends with their distribution to retail channels. Even then, the process continues: recycling of waste materials and packaging also plays its role in protecting the environment.

Nestlé pioneered the Clean Development Mechanism which is part of the Kyoto Protocol - an agreement to control CO2 emissions to combat global warming. While industrialised nations have legally binding targets to reduce releases, the developing countries are encouraged to invest in clean technologies. The Clean Development Mechanism assists them to do this. For instance, one of Nestlé?s factories in Chile converted its air heaters and boilers from oil and coal to natural gas, resulting in annual greenhouse gas reserves of 19,000 tonnes CO2. Nestlé was the first company in Europe to introduce a new biodegradable alternative to plastic for manufactured food produce. Made from renewable resources, it dissolves when it get in touch with with water, and disintegrates inside three months. Environmental education encourages the full commitment of Nestlé?s employees to bring about the best environmental results.
Sourcing of the raw materials Nestlé source its agricultural- principally milk, coffee, cocoa, cereals, vegetables, fruit, herbs, sugar and spices - either through trade channels or through farmers. It supports sustainability in the supply of agricultural raw materials and agricultural best rehearsals. To put these words into action, Nestlé have over 800 of its own agronomists, technological advisers and field technicians. Their job is to offer technical assistance to more than 400,000 farmers right the way through the world to improve their production quality, as well as their productivity and efficiency. They do this on a on a daily basis basis in as many as 40 countries including Inner Mongolia, China, Pakistan, Ethiopia and Colombia. This professional team has pioneered the development of sustainable local fresh milk and coffee production. For instance, coffee farmers in the Yunan Province of China are getting better yields and quality as a direct result of these advisors? expertise, as are farmers in Indonesia, Mexico, the Philippines and Thailand.
In the same way, hundreds of thousands of milk farmers are benefiting from Nestlé animal husbandry assistance and milk collection initiatives in countries as far afield as Chile, India, Mexico and Pakistan.

Benefiting local economies "Investments have to be good for the country as well as superior for the concern". This has been a fundamental Nestlé belief since the start of the company. It has been found that creating long-term value for the countries where they operate also creates long-term value for Nestlés' investors. By taking a far-sighted view of business development - especially in developing countries - and managing responsibly, it is probable to make acceptable profits and at the same time stimulate significant local communal, environmental and economic development. Long-term investment, transfer of know-how, and training in agriculture are just three ways in which Nestlé is a force for good around the world.
Growth is based on the Nestlé Model of strong organic growth - between 5% and 6% - combined with consistent improvement in EBIT margin. (EBIT = Earnings before Interest and Taxes.) Nestlé?s policy of decentralisation has been fundamental in sustaining then growth strategy. Where on earth probable Nestlé use local raw materials and produce its produces locally. In this way, Nestlé contributes to local economies, not only as an excise payer, but also as a buyer and employer.

People are Nestlé's greatest asset Perhaps it?s because food is such a fundamental individual need. Perhaps it?s because Nestlé has to be extraordinarily close to our consumers and understand their physical and emotional desires. Whatever the cause, Nestlé is a very human corporation. "We care about our people. We encourage and bring out the best in them. We work hard to ensure that they assistance as much as they can from their work at Nestlé" - The result is a very close-knit company - even though more than 250,000 people are spread around the orb. What bind them together is a common culture and a high degree of loyalty - to the Company and to each other. The Nestlé traditions or Nestlé spirit is difficult to describe. What partly to do with openness to ideas and thoughts and a willingness to learn from one another. But also to do with giving individuals the opportunity to add value in whatever way they can. Each year a thousand people from all over the world come to Nestlé?s Training Centre in Switzerland.

How the business is organised Nestlé has its own local companies in most countries. The Head Office in Switzerland works very closely with them, and sets on the whole strategy which is directed via Zone Management and the Strategic Business Units (SBUs). Geographically, Nestlé?s three Zones (Europe; the Americas; Asia, Oceania, Africa and the Middle East) work closely with the local markets and the SBUs. Their primary role is that of enablers, acting as the voice of the centre to the marketplaces, and the voice of the markets to the centre. They share Nestlé?s vision so that everyone around the world understands the direction to take - and how to get there with common tools, widespread strategies and common values. This ensures that all employees around the world know how to act, and have a very strong framework of values and a clear reference point for fast decision-making. The SBUs specialise in a particular category, for example Coffee and Beverages, or PetCare, or Chocolate and Confectionery. They work with Research and Development (R&D) to ensure that everything the company produces is led by consumer insights and relevant improvement; and they help the markets to achieve their business and brand objectives. To make it all happen, there are just 500 factories in 80 countries, and 17 Research centres.

Other Nestlé Group companies there are a number of separate corporations within the Group such as Nestlé Waters and Nestlé Nutrition. Nestlé also owns Alcon, a pharmaceutical business that is the world leader in eye care, preventing vision loss from glaucoma, treating eye infections and restoring vision through cataract surgery. Nestlé also has a significant share of L?Oréal, the world head (leader) in cosmetics.

(a) Using information gathered in the text, identify and comment the potency and core growth strategies of Nestle.

(b) The challenge of many firms today is not how to build competitive benefit, but rather to sustain it over time. Evaluate the capacity of Nestlé to build and sustain competitive benefit in its core SBU?s.

QUESTION 2:

According to Michael Porter (1996), the essence of Strategy is choosing to perform activities diversely than rivals do. Confer.

QUESTION 3

Give details how combinations of competences and resources can be developed, deployed, and protected. Appraise how these dimensions of firm-specific capabilities can be sources of benefit?

QUESTION 4:

Concerns that enjoy enduring success have core values and a core purpose that remain fixed while their business strategies and practices endlessly adapt to a changing world. Converse how Core ideology provides the glue that holds an organization together through time.