MANAGING ORGANISATIONAL ECOSYSTEMS: ASSIGNMENT 1
Describe any one organization where the company has introduced or was forced to introduce some changes very recently.
Headquartered in Vevey, Vaud, Switzerland, Nestle is the largest food company in the world since 2014. Ranked No. 72 on the Fortune Global 500 in 2014, t was also ranked No. 33 on the 2016 edition of the Forbes Global 2000 list of largest public companies.
Nestle deals in a plethora of products, like Baby food, medical food, bottled water, breakfast cereals, coffee and tea, confectionery, dairy products, ice cream, frozen food, pet foods, and snacks.
Nestle owns 29 brands that have yearly sales of US$1.1 billion, which are Nespresso, Nescafe, Kit Kat, Smarties, Nesquik, and Maggi. The company has 447 factories, spread across 194 nations, and employs 339,000 people. L'Oreal, one of the world's largest cosmetics company, has Nestle as its major shareholder.
Nestle was established in 1866 by Charles and George Page, and Henri Nestle. The company grew immensely during World War 1, and expanded its product offerings post World War 2. Over the years, Nestle has made a considerable buyouts like Crosse and Blackwell, Gerber, Libby's etc.
ABOUT NESTLE INDIA LIMITED
NESTLÉ India is a subsidiary of NESTLÉ Switzerland. It has 8 factories and thousands of co-packers in them. They believe in providing products of global standards and quality to all the Indians, with commitment towards sustainable growth and satisfaction of the shareholders.
Acknowledged amongst India's 'Most Respected Companies' and amongst the 'Top Wealth Creators of India', Nestle backs on its honesty, integrity and fairness, and looks forward to the same things from its relationships.
The NESTLE Corporate Business Principles are at the basis of our Company's culture, developed over 150 years, which reflects the ideas of fairness, honesty and long-term thinking.
The Nestle Corporate Business Principles, form the base of the company's culture, reflecting fairness, honesty and long-term thinking.
The company swears by its global ambitions, made for a better future, to be accomplished by 2020. These are:
PART A: CHANGE IN ORGANISATIONAL HIERARCHY
A hierarchical organization is a structure where every entity in the company, except one, is a subordinate to a single other entity.
In early 2015, Nestle India Limited was seeing a lot of changes in the business environment, in which it was once thriving. All the departments of the company were looking to cut costs and streamline efforts, while the legal teams were fighting it out against the authorities of the country, who said that the noodles were harmful for one and all.
Amidst all this confusion, Nestle had lost a considerable market share, which costed the company crores of rupees and a huge percentage of sales loss. The HR thence decided to change the management hierarchy of India, a process they called “Business Focus Streamlining”.
This part of the assignment will focus on the before and after structures in the company, and how this change impacted performance in the subsequent year.
A General Manager for every category had 3 heads under him/her, in the entire scheme of things.
• CENTER OF EXPERTISE
• CENTER OF OPERATIONS
• CENTER OF TRADE MARKETING
CENTER OF EXPERTISE
A center of expertise or excellence is a team, or an entity that provides leadership, research, support, optimal practices and training and development for any key focus department. Focus area can be any, a technology, strategy, operations, skills etc.
A center of expertise had 3 sub-divisions under it, which were
⇒ Brand marketing
Brand marketing literally means building awareness for your company, creating campaigns that drive interest and influence acquisition.
The brand marketing team at Nestle was responsible for making new products felt in the market, handling their image, and capitalizing on that to increase sales.
The term “Innovation” refers to coming up with new ideas (product ideas in this context), and helping an idea take shape of something concrete.
The innovation team at Nestle identified consumer needs, and developed quality products accordingly, that met their demands and satisfied the needs.
Activation in this respect means the initial days of a brand or a product, when it has just come to life, the on-ground activities, activations, sampling etc., for which Nestle use to have a separate team.
CENTER OF OPERATIONS
Center of operations took care of all day-to-day activities relating to production, sales, marketing etc., which were the key activities that Nestle products had to witness. The team ensured that things were smooth and without any obstacles of any sort, so that business was not affected. They also had a small 5-member contingency squad that used to periodically make plans for the future emergency situations, if any would arise.
A center of operations had only one sub-division under it, which was:
• A BRAND MANAGER FOR ALL 4 BUSINESS LINES
The main job of brand managers is to make a long-lasting impression among the target groups and increasing sales and share of the company in the market it operates in. he/she monitors trends in the market and also looks at marketing and advertising activities being done by the company for that particular product. All of this is done to ensure that the right message is delivered with respect to their product or service.
Brand managers in Nestle worked at the same thing, for 4 different business lines that the company had demarcated.
CENTER OF TRADE MARKETING
Trade marketing by the books is a discipline relating to increasing supply chain partners as compared to working at the consumer levels. Supply chain partners of the company include distributors, wholesalers and retailers. It is just a complementary process to brand marketing, an add-on that increases the fluency of the entire process of ensuring that products are available to the right consumer at the right time, in correct quality and quantity.
The center of trade marketing was further divided into:
⇒ Channel Management
⇒ Trade Spends Management
This widely used term in the sale s and marketing world. It is simply a process where the company develops the marketing tactics and sales strategies to reach as many probable customers as possible. The channel management team at Nestle focused a lot on the backend of things like distribution cycles, returns, merchandising, point of purchase strategies etc.
TRADE SPENDS MANAGEMENT
This is a challenge that a lot of companies are facing these days. Most of them being FMCG, they look at how much and how frequent they spend their money on activities that support trade (sales). This includes promotions with retailers and strategies that are designed to boost revenue and sales.
Jobs are nicely demarcated and specified, there is no mixing or duplication of work whatsoever.
Focus on your own competence
Employees can focus on what they know best, and thus perform to the optimal level, thereby contributing to the organizational goals and objectives.
Single brand is handled by 3 people
For each brand, there are 3 people responsible, which sometimes makes it confusing and difficult to hold someone accountable or give orders to.
Difficulty in locating problems
Since Point of contacts are more than 1, it tends to get a bit confusing and complicated to figure out where a problem is arising from.
Sales team working on Traditional system
The sales department follows certain old practices that the company has adopted long back, and they still work by that. Those rules and policies are not in line with this structure, which makes it very difficult to coordinate.
After the revamping of the organizational structure, the hierarchy looked somewhat like this:
The general manager had 4 departments under him, which were:
• MAINSTREAM BUSINESS
• YOUTH BRANDS
• PREMIUM AND GIFITNG
• TRADE MARKETING
This department took care of AtoZ of all SKU's that were priced below Rs.10.
The reason to club these together was the similarity of the business models and hence more convenience to monitor them.
EXAMPLES are Polo, Toffees, Nescafe sachets, Milk Whitener etc.
The mainstream businesses are run by a Brand Manager and an Assistant Brand Manager, that ensure continuous product survival and focus on short and long term success in the market.
Brands that hit the major population chunk come under youth brands. These target people in the age bracket of 15-35, and make product offerings accordingly.
EXAMPLES of Nestle's youth brands are Kit Kat, Munch, Bar one etc.
The logic behind these youth brands is also geographical synergy, and mass products, something an FMCG would always love to get into and tap optimally.
PREMIUM AND GIFITNG
Nestle's premium products are sold only in high end stores like Supermarkets, Airports, Petrol Pumps, 24X7 shops etc. These include modern trade products and highly priced products that an average middle class would think thrice before buying.
EXAMPLES are After Eight, Kit Kat Chunky etc.
Gifting team comes into the action especially during festivals, a time when Indians splurge on gifts. The team assorts products and prices them psychologically to hit the price sensitive Indian consumer.
Premium and gifting categories are an untapped potential according to the top management of the company. The company sees a need to expand these product lines in the near future.
Trade marketing being an inseparable component, stays the same as it was from earlier.
Better focus on categories
The hierarchy is now divided business wise, and hence the company can easily focus on each and every category, and check for discrepancies if any.
Strategy within portfolio (Trying to make 1+1=3)
The company can now make strategies, plans and tactics portfolio wise
PART B: COST CUTTING THROUGH LOCATION CHANGE OF BRANCH OFFICE
In September 2017, the lease contract of Nestle's branch office: M-5A, Connaught Place, Delhi-110001, came to end, after a long tenure. The company, instead of renewing the lease, chose to relocate the employees near the head office in Gurgaon.
REASONS FOR RELOCATING:
• Lease lapse
• Cost cutting
• Nearness of new office to head office
There are many more reasons for the same, which will be taken up as I move forward with the details.
BASIC BACKGROUND AND DETAILS: COMPARED
Nestle India Private Limited had been operating from M-5A, Connaught Circus, NewDelhi-110001 for the past 41 years. The building had made constructed in 1972, and was occupied by Nestle 4 years later.
It served as a Sales office for North India, as well as the registered office (all products of Nestle India limited that were being sold in the market had this address at the back label)
The office was spread across 16800 square feet total area, out of the ground floor 2000 square feet area was unutilized. It served as a parking lot earlier, but due to NDMC's (New Delhi Municipal Corporation) orders, the height of the path to enter the parking lot was increased, to not allow the employees from parking inside the premises, according to their new guidelines. This happened in 2013.
Coming to the new office space, Nestle India Limited, Chimes, Plot Number 142P, Sector 44, Institutional Area, Near Luminous and Railtel, Gurgaon-122003, is a 15088 square feet area, with 100% space utilization. It operates as the Sales Branch Office for North India. The office became operational in the first week of September 2017, a year after construction had started, which was in August 2016.
ACCESSIBILITY TO PEERS AND OTHER STAFF MEMBERS: COMPARED
The old office was divided into 6 parts: A basement, An unutilized ground floor (except the reception and dispatch room), and 4 floors.
The new office has all the employees on one single floor, and are easily accessible and reachable, through intercoms as well as physically.
BASIC COSTINGS: COMPARED
FIND A NICE WAY TO DEPICT THIS SHIT
BUILDING DIVISION: COMPARED
The old building had lots and lots of departments, spread across floors, which was as follows:
BASEMENT: Staff welfare canteen and a small get-together area for approximately 50 people, with a 100-inch TV screen for matches etc.
GROUND FLOOR: Dispatch department and reception, with the main gate for entry
1st floor: Shared services for payments, salary, PF, direct tax
2nd floor: Finance and control department for the sales division
3rd floor: Cubicles for the top management employees of the sales department
4th floor: Support function for activities like media planning, operations detailing, events etc.
The new office space, on the other hand, has all the people on the same floor, separated by small, negligible partitions, irrespective of the level in the hierarchy (except branch manager and top-most level employee).
There is a common canteen in the building, where everyone can meet up and socialize.
ANOTHER MAJOR REASON FOR SHFITING
In the old office, there was only one emergency exit, from the basement till the 4th floor, which was the stair case.
The new office has 4 emergency exits, one that one floor of operations, which is a much more convenient and a safer option.
The basement of the old office was unsafe from a fire perspective. This question was raised during a safety audit last year, which had basically been kept for the emergency exit inspection. The building owner did not permit making changes to the building, and hence the company had to make a move (geographically).
A consequence of the above was that one company employee and one external agency employee left the organization in the last 2 months.
In the new building, since there is only one floor is under the control of the company, the owner of the building has set a particular timing, which is Monday to Saturday, 8am to 8pm.
On Sunday, there are charges of Rs.15000 per employee levied by the building owner.
This results in improved work-life balance of all the employees, and they end up spending their weekends at home instead of completing pending work in the office.
ROOMS FOR MEETINGS AND CONFERENCES: COMPARED
In the earlier office space, there were only 2 meeting rooms, with seating capacity of 25 each. Also, 16 cabins in all had to be occupied by the 30 top management people. This resulted in a lot of reluctance in the minds of juniors and subordinates prior to entering the cubicle, which seemed to be a major communication barrier.
In the new office, there different sizes conference rooms available for the employees, which are:
a) For 4 people: 2 rooms
b) For 8 people: 1
c) For 20 people: 2
d) For 70 people: 1
There are only 3 cabins for the top management personnel.
The reluctance of juniors and subordinates has thus decreased, since the rest of the top management (30-3=27) personnel sit out in the open, and hence are easily accessible, since the distance between all of them has decreased.
REFERENCES AND ACKNOWLEDGEMENTS
It gives me immense pleasure to thank Mr. D.H.Kotak
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