Organizational Structure of Nestlé
Organizational structures vary from corporation to corporation. Every type of organizational structure has its advantages and drawbacks. Multinational corporations face more challenges compared to companies operating within one national market. This can be explained with the fact that they have to manage two or more cultures; that is the organizational culture and the national ones. The success of multinational corporations largely depends on proper management of the diverse cultures of the different nations in which the company is operating. Thus it is necessary for such companies to consider cultural issues in order to achieve their organizational goals (Dartey-Baah, 2013). Nestlé, as a multinational corporation, faces the same challenges as every other MNC.
Nestlé is one of the oldest multinational corporations in the world. Founded in 1866 in Switzerland by Heinrich Nestlé, the company was established to distribute ‘milk food’, which was invented by its founder Heinrich. The milk food was made from bakery, powdered milk, and sugar. From the early days of the company, it explored new markets in other countries. It established its offices in London in 1868 and since then the corporation has continued to expand into new countries. As such, by late 1990s the company had over 500 factories in over 75 countries. Its products were sold to over 190 nations all over the world. This accounts to almost every country in the world (Schwarz, 2002).
Organizational structure of any company defines the way allocation, supervision, and coordination of tasks is done in order to achieve the goals of the company (McFarlin & Sweene, 2013). Nestlé uses decentralized system of organization where the operating responsibility decisions are made in the local units. This means that the local units enjoy a great extent of autonomy in relation to decisions involving marketing, pricing, and human resource. The company also consists of seven strategic business units. They have the duty to make high level strategic and business development decisions. Each of these seven business units are assigned with responsibility of making decisions in specific areas of the company. For example, there is a unit dealing with coffee and beverages, and another one which focuses on ice cream and confectionery. These strategic business units (SBUs) are engaged in overall development of strategy including market entry strategy and acquisition. Acquisition is a critical function of the company as more than half of the company’s growth has come from it in the recent years.
Parallel with the above mentioned structure, there is a regional organization. It categorizes the company into five geographic zones. For example Europe, Asia, North America. These regional divisions help in overall strategy development process and also have duty to develop regional strategies. Neither the regional managers nor the strategic business units, however, get themselves involved in operating or strategic decisions at the local level (Schwarz, 2002).
As much as Nestlé uses local managers to manage the diverse operations worldwide, it has its ‘expatriate armies’ that it also depends on. It consists of approximately 700 managers who spend most of their career life on foreign assignments. They move from one nation to another ensuring that operations of the company run smoothly across all the nations to which the company supplies its products. These managers are selected on the basis of their ability, drive, and willingness to live life that involves always being on the move. They work in a half dozen nations during their entire careers in the company.
Nestlé also has management development programs which act as strategic tool in building unity and togetherness among the managers. The company has a training center in Switzerland where managers from all over the world are brought at different stages of their career life for specific development programs. Each of them takes from two to three weeks. These programs aim at giving the employees a better understanding of the Nestlé culture. It also gives them access to top management of the company (Schwarz, 2002).
Nestlé also has a research and development section. It comprises of 18 different groups which operate in 11 countries around the world. The company spends approximately 1% of its annual revenues on research and development. Additionally, the corporation has over 3000 employees who are dedicated to the research and development part of the company (Hitt, Ireland, & Hoskisson, 2009).
In Nestlé, there is low power distance. There is minimal hierarchical authority and less centralization. According to Dartey-Baah (2013), this tends to promote employee interaction, lays less emphasis on rules, and provides lateral communication. This is what has largely contributed to the success of Nestlé as employees are accorded more power.
In conclusion, the organizational structure of Nestlé Corporation has been working well over the past decades. However, the company needs to concentrate more efforts on customizing its products to suit different cultures around the world. It has to abandon using success strategy from one market in another. It has to ensure that the culture aspect of the different nations is incorporated in its products. This can be made possible by ensuring that the subsidiaries in different countries are managed by individuals from that nation.