What are the environmental and internal forces that argue for Decentralization Vs Centralization at Nestle? The “Nestlé way” is to dominate its markets. Its overall strategy can be summarized in four points: * think and plan long term
* stick to what you know
* Adapt to local tastes
For many companies, such a long-term strategy would not be profitable, but it works for Nestlé because the company relies on local ingredients and markets products that consumers can afford. It's a global company living mostly on local brands. Company prefers to be local and people regional. Nestle grabs a lot of its growth simply by getting on the plane, and into new markets, first. Centralized: The degree to which HQ has decision making authority. Decentralized: The degree to which each country has decision making authority. As every coin has two sides both of them have certain advantages and disadvantage as well. Nestle has been successful in centralizing as well as decentralizing few of its processes which has been proved to be cost effective and has helped the firm to improve its overall performance.
Marketing functions had to be more decentralized than the financial and technical functions. Marketing processes like Branding and Packaging were centralized so that the Brand had a same identity all across the globe even identical Packaging would help the firm to distinguish its products from its competitors. Brand recall would be much easier for the customers. As far as Product is concerned it had to be centralized as well as localized in order to meet local taste and requirements. Same goes with the Price it needs to match up its local competitors as well. Nestle is effective enough in managing its pricing policy in various countries it’s operating. For ex: Pricing for Kit Kat has remained remarkably stable over the last sixty years which helps the firm to gain customer confidence. Advertising and promotion policies were established worldwide or regional goals. Once they were approved by top management the guidelines were transmitted to the regional managers who would if justified adapt the strategies to local market conditions. The advertising and promotion manager worked with the local markets primarily on enhancing the quality, execution and tone of their advertising which would be acceptable in the local markets. Additional Points:
As far as standardization is concerned GLOBE, or the Global Business Excellence program, was aimed at getting far-flung operations to use a single system to predict demand, purchase. Global Business Excellence program, a worldwide initiative to implement a single set of procurement, distribution and sales management systems. The point was to find ways to streamline Nestlé's myriad and vast supply chains, for everything from paper to powders to chocolate to water; to eliminate wasteful purchasing practices; and to take the best administrative practices and spread them throughout the company's operations. A common set of processes, in factory and in administration, backed by a single way of formatting and storing data; and a single set of information systems, to help it run its businesses. Nestlé had 14 different enterprise planning systems from SAP AG of Germany in place in different countries. It would not meld them into one. It would replace them all with a new one, based on new Internet-based software known as mySAP.com For Nestlé, this wasn't an everyday project. When it built a factory to make coffee, infant formula, water or noodles, it was used to spending $30 million or $40 million. The idea of any initiative consuming billions in up-front capital was unheard of. The company made chocolate chips, not electronic ones. Chief executive Brabeck had bet his reputation on the initiative's success. He wanted not just to control...