2. Nestle was founded in 1867, by Henri
Nestle and merged with Anglo-Swiss
Condensed milk Company in 1905
Nestle grew rapidly through mergers,
geographical expansion and entry into
new product categories
By 1982, Nestle was the 25th largest
international company
In 2011, consolidated sales were CHF
107.6 billion and net profit was CHF
10.43 billion.
3. Nestle expanded through creation of Local Operation
Companies with their own local management.
Nestle had a hybrid structure of centralization and
decentralization, with the Centre allowing its units a
significant degree of autonomy.
75 Operating companies were run by country managers:
◦ Responsibility for Profits and losses
◦ Marketing. Manufacturing, Financial and Administrative Functions.
Personnel Transfers across Boundaries had become
increasingly difficult
4. Jean Robin, marketing – suggest change in marketing strategy
emerging markets –Centrally Coordinated
◦ Greater coordination
◦ Economies of Scale
◦ Effective Implementation of Ideas
Level of Coordination between Country Head & HQ will support
cross fertilization of ideas & experiences
Net After Tax Profit was declining and fell below 4% of sales
between 1978-1981
From Table A we see that Sales of Dairy Products Infant Food
and Culinary fell between 1982 and 1983.
5. What factors influence our decision to centralize?
How will the current organization facilitate or adapt to a
change in structure?
Should Centralization be based on:
◦ Marketing Mix
◦ Product Categories
◦ Geographical location
6. Internal / External Centralization Decentralization
Internal Factors Economies of Scale Customization – Local
Markets
Interrelation / Cross over of New Ideas – local
successful ideas managers(Mouseline in
France), brand names
(Bollino in France)
Simplification of Better relationship with
Organization Structure local stake holders
External Factors Demographic convergence Product Differentiation
between countries
Cultural convergence Customization –
advertizing , branding
Spill Over Effect Customization – as per
consumer taste & cultural
sensitivities
7. Regional and Country managers had significant control
over all elements of marketing mix, except Branding
Branding was centrally controlled and standardized
A license fee was charged to countries operating
companies for the use of brands and brand names
Product Positioning, Distribution, Trade Promotion,
Consumer Protection and Media advertising decentralized
8. HQ Promotes HQ Persuasion
Cross for HQ Decision HQ Enforced
Elements No HQ Initiative Fertilization Standardization Making Standardization
Marketing Strategy
Product Positioning
Product Charecteristics
Branding
Packaging
Distribution
Trade Promotion
Consumer Promotion
Media Advertising
Primary Function
Secondary Function
9. Product:
Low degree of Centralization is desirable in this area so as to cater to local
preferences
Price:
Price points are sensitive to local market competition, consumer’s
purchasing power and brand value. Decision on Centralization is
contextual and dependent on the extent of achievable economies of Scale
Place:
Because of the scale of operations and the diversity of consumer groups
across the globe, decentralization is recommended
Promotion:
It is easier to manage resources locally and to understand what works for
the target segment
10. Push products if more centrally coordinated will
increase profits by more sales and reduced
operations cost
Taste based products should be less centrally
regulated
Products already having high sales are assumed
to be performing well because of higher degree of
centralization
11. Country Satellite TV
• centralized coordination
• Cross Cultural Understanding between
planned to break down cultural
different Countries
barriers
• Demographic and cultural Trends • Offer same type of Advertising
• Consumer Tastes and Preferences Cost effectiveness in Europe as
• Family size, Population growth , away in US.
from food consumption and standard of • Harmonized Product
living.
Positioning, Packaging,
• Spill Over National Boundaries Promotion and Pricing.
• Contribute to conflicts in product • Can be adopted for (Breakeven
positioning. Volume)Cost/unit > Fixed Costs
• 65% of the programming watched in of$200million/Satellite and other
French Speaking pat of Switzerland government hindrance issues.
emanated from France.
