Submitted by : Submitted to :

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.