This paper provides a case analysis and case solution to a Harvard Business School strategic management case study on Swiss-based Nestle, the world’s largest food and beverage company with 2007 sales exceeding CHF100 billion or about US$112 billion(Bell & Shelman, 2009, p. 1). While extensive background information dating to Nestle’s 1867 founding is provided, the primary time setting for the case is April 2008, shortly after 29-year Nestle veteran Paul Bulcke advances to the position of CEO, replacing Brabeck, who retired after a highly successful 12 year reign as CEO. The case focuses on Bulcke’s efforts to formulate plans for advancing his strategic vision at Nestle.
Nestle is a huge, highly successful, cash-rich global corporation with hundreds of “billionaire brands”, a strong culture, and a history of producing innovative products and customizing products and services to meet local tastes. Looking around at Nestle, scanning the environment, and appraising the future, new CEO Bulcke sees little room for alarm. Looking towards the future, Bulcke’s only worry is “that we become complacent” (Bell & Shelman, 2009, p. 1).
Bulcke’s predecessor, Brabeck, had set Nestle on the path of achieving worldwide sustainable competitiveness through four strategic pillars: 1) low-cost, highly efficient operations; 2) renovation and innovation of the Nestle product line; 3) universal availability; and 4) improved communication with consumers through better branding (Bell & Shelman, 2009, p. 3). Brabeck believed – and indeed was proven – that adherence to these four strategic pillars would allow achievement of the “Nestle Model”, a term which referred to Nestle’s long term objectives of “organic growth between 4% and 6% each year; continued year-after-hear improvements in earnings before interest and tax – EBIT margin; and improved capital management” (Bell & Shelman, 2009, p. 3).
Brabeck launched a number of important initiatives during his twelve year tenure, including restructuring of the R&D department to be more responsive to consumers, drive renovation and innovation and support organic growth; launching a 60/40 preference rating system for products; and developing GLOBE (Global Business Excellence), a comprehensive information system designed to tie all of Nestle’s businesses together under a common technology infrastructure. Brabeck, who saw sales grow 78% and EBIT grow 142% during his tenure, also made several critical acquisitions in bottled water, pet food, coffee, and ice cream; championed Nestle’s culture as the critical glue of the corporation; and pioneering the way for the beginning of Nestle’s shift from being a technology and processing-driven food and beverage company “toward a broader vision of nutrition, health, and wellness” (Bell & Shelman, 2009, p. 4).
Bulcke succeeded Brabeck as Nestle’s CEO in April of 2008, following two years of careful succession planning. Bulcke appears to share Brabeck’s basic philosophy of leadership (which emphasizes empowerment) as well as his views on the importance of culture in Nestle’s long term performance. Bulcke has also reaffirmed Brabeck’s commitment to GLOBE (which Bulcke sees as an important vehicle for continuous improvement (Bell & Shelman, 2009, p. 10). Despite these basic commonalities, Bulcke has made it clear that his vision for Nestle is not identical to that of his predecessor’s. Bulcke wants all of Nestle’s future growth to come as a result of internal growth, not acquisition. Bulcke strongly supports a rapid transition to the health, nutrition and wellness strategy and indeed, envisions this strategy as one leg of four complementary platforms which Bulcke believes could double the company’s sales over the next ten years. Besides health, nutrition and wellness, the three other platforms are “emerging markets”; “out of home consumption” and “premiumization of existing products” (developing exclusive,...
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