Nestle and Its Global Strategy

2) Nestle decided to transform itself from implementing a multinational strategy to implementing a transnational strategy, so instead of each facility in each nation tending to the needs of the culture around it, all facilities around the world would format and store data identically and use the same set of information systems. There would be no more adhering to local customs, unless legal matters arise. In this way, all the value-adding activities are managed from a global perspective, without reference to national borders. This strategy optimizes the sources of supply and demand, and leaves room to take advantage of any local competitive advantages. Nestle essentially will now take the globe as its management frame of reference, as opposed to the home country or multinational facilities. This strategy is highly appropriate for Nestle’s business model because it desires to eliminate that inconsistency of having its various facilities use the same suppliers at different times for different needs, all of which only serves to increase costs and prevent the electronic side of the firm’s business from emerging. Transnational firms are truly globally managed firms that represent a larger part of international business, and Nestle has made an excellent choice to pursue such a goal.

3) The major technological challenge facing Nestle was the fact that all the global facilities were using the SAP R/2 ERP software, but they each ran it differently and used different schemes for formatting data and managing forms. This resulted in increased maintenance costs and made the compilation of financial reports to gain company-wide views of performance that much more tedious. The management and organizational challenge was that the different global facilities largely ignored this initiative for a unified corporate culture. The Asian market managers developed a common system for managing their supply chains, and the American division had its own system, different from the Asian one. Managers resisted the idea of giving up control over their business processes to participate in this centralized solution. They feared losing decision-making power and felt the initiative was impractical. Standardization would be acceptable to them, but only if their particular practices were the ones being implemented globally. Thus, it was nearly impossible to satisfy these managers, who would pinpoint every problem that would come up in the execution of the GLOBE standards.

4) To improve the technological challenge, Nestle adopted the newer SAP R/3 ERP software for its divisions to help integrate material, distribution, and accounting applications into a single-minded e-business. Nestle initiated its GLOBE team experts to challenge its processes, find its weaknesses, and configure a list of the best practices to use for each process. This information was gathered into a Best Practices Library, which is an online database of step-by-step guidelines for processes and solutions. During meetings to convince the market managers to participate in the centralization process, one of the market managers stated that the system would be implemented regardless, and after several arguments and problems, the system itself proved to show its benefits for the firm. Unfortunately, costs rose as well, so the project was revised to maintain a spending cap to protect the company’s profits. Each country was also asked to appoint a GLOBE manager who would help facilitate the adoption of the new system. A steering committee at the headquarters would schedule and manage rollouts. These strategies were pretty successful in that about 30% of the business had converted to GLOBE, but there still remains a great percentage that has resisted the change. Results have not been up to par with the firm’s expectations, but Nestle is still working towards its goal of operating as a single unit on a global scale. This type of transnational business strategy is the hardest to achieve, but also yields the greatest results. So, Nestle has not been too successful in terms of profits, but it has been tremendously successful in implementing such a tough strategy in even 30%of its facilities.