CAse StUdy

Submitted by
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Mougel Alric Daniel Brethones
El Hamraoui Sara
Vincent Agathe
Pontet Léa
Thongsavath Déborah
Management Information System
NESTLE Case Study
November 12th 2012

Question 1: Analyze Nestlé using the competitive forces and value chain models. What
challenges did Nestlé face?
Nestlé, shortly
Nestlé is the largest food and beverage company in the world. His turnover is around
$70billions and nearly 250,000 employees all over the world.
Forces and Value Chain Model

His mains forces are principally that Nestlé try and do, to be the more adapted to his market,
anywhere they implant a branch, they sell products, adapted to the local consumption!
Secondly, as a main force, is that they adapted themselves, however, they did a different
approach for the adaptation, even they design new product for new market, they adapted
already existent products in order to avoid some expenditures of development.
Thirdly, they begin, early, from 1994, to develop common software: SAP, and, in 1995, 14
countries shared the same software!
After faced to the issue to set up GLOBE project: They reduced supplier from 600,000 to
170,000!
Challenge did it faced

In the beginning of 2000, Brabeck had had enough of the internal complexity of the different
ERP, software, and data chain, that he took Johnson, in charge of Taiwan Market, to set up
new common software, named GLOBE (Global Business Excellence).
The objectives are:
Launched and set up with, as deadline, end of 2003, GLOBE, into, at leat, 70% of the
countries they are settled. To make it, Johnson nominated in each country, a GLOBE
manager.
Of course, they were some issue, as:
- The USA market that got his own software and did not want to let it
- As Brabeck said, the customer doesn’t have to feel what happened in the middle office
rearrangement.
Question 2: What type of global business and systems strategy did Nestlé adopt? Was
this strategy appropriate for Nestlé’s business model?
Traditionally, Nestlé adopted decentralized strategy that allows local organization to manage
its own business strategy according to the region. Indeed, products and services on sales in
different countries were adapted to suit local market conditions. That can be explain by the
fact that Nestlé didn’t necessarily believe in the concept of the global consumer (except
Nescafe of which 100 million cup are served around the world each year).
However this strategy cost extra funds and caused issues between its branches all over the
world. Thus this strategy was not appropriate for Nestlé’s business model because of the
inefficient coordination in different countries which used an older resource planning system
which prevent the development of the company.
When Nestlé realize that this system was not working, it decide to centralize the company’s
operation : production, sale and marketing, finance… First, this new system, GLOBE, was not
considered appropriate for Nestlé business model because of the particularity of each region’s
culture and local market preferences and considered as too expensive. But, at the end of the
implementation, this global system shows is efficiency working well with the firm budgeting
and data streams allowing Nestlé to make savings in buy raw material, to have information
available quicker and make better decisions. Now, Nestlé remains the leading food and
beverage company in the word so its strategy is effective, centralized system was a good
choice.
Question 3: What management, organization, and technology challenges did Nestlé have
to deal with to standardize its business process and systems?
Several years ago Nestle embarked on a program to standardize and coordinate its information
systems and business processes. There have been many challenges with the new
standardization process. At first they installed SAP's R/3 in an attempt to coordinate
Information System and the business processes. All of Nestle's worldwide business units were
to use the same processes for making sales, commitments, establishing factory production
schedules, billing customers, compiling management reports, and reporting financial units.
This coordination leads to many issues because of the gathering of 14 countries that ran the
software. They did not work in harmony, it was being ran differently in the different locations
: the cost of the maintenance increased. Upon discovering this issue they rolled out the
GLOBE initiative. Personal challenges were becoming apparent, many managers viewed this
system as a nuisance and a work creator. Johnson realized that he had some major challenges
ahead, but he put his excellent leadership skills to the test an ended up coming out ahead in
the end. He also tried to build his team from a diverse group of business managers who had
experience in a variety of business sectors including manufacturing, finance, marketing, and
human resources. Once managers saw that the system was helping in operations they started
to come around and embrace the system, which has lead to increased efficiency in the
operations department.
Question 4: What strategies did Nestlé management use to deal with these challenges?
How successful were these strategies? Explain your answer?
Nestlé launched a $2.4 billion initiative to compel its market heads around the world to adopt
a single set of business processes and systems for procurement, distribution and sales
management. This initiative started in year 2000 was known as Global Business Excellence
(GLOBE).
The strategy encountered both technical and personal challenges:
The strategy was that all of Nestlé worldwide business units use the same processes for
making sales commitments, establishing factory production schedules, billing customers,
compiling management reports and reporting financial results. Every Nestlé facility would
format and store data identically, using the same set of information systems.
Nestlé wanted to bring in 70 % of the company’s global markets to adhere to GLOBE strategy
within a span of three and a half years.
Nestlé also wanted to bring in operational efficiencies by reducing its number of suppliers
from 600,000 to 167,000 and save millions of dollars in this process.
The greatest challenge that the GLOBE team had was that managers resisted the idea of
giving up control over their business processes to participate in a centralized solution.
What about the success of these strategies?

MySAP ERP could not accommodate localized overrides so Nestlé worked with SAP to allow
differences for specific countries that had different promotional strategies.
The short timelines to implement GLOBE strategy did not provide sufficient training time for
end users using the new ERP nor did they have the time to perfect the processes.
The initial rollout in the spring of 2003 show caused to many managers the improvement in
operational efficiencies with better demand forecast and better financial reporting.
By the end of 2005 only 30 % of its business adhered to GLOBE standards which was way
below the ambitious target of 70%.Although GLOBE proved to be beneficial its project costs
overran the initial budgeted amount and also eat into the firm’s profits.

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Management Information System

NESTLE Case Study

November 12th 2012

Forces and Value Chain Model

Challenge did it faced

The strategy encountered both technical and personal challenges:

What about the success of these strategies?

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