1

Develop a knowledge Management Strategy

for Nestle

Executive Summary

The purpose of this report is to develop a knowledge management strategy for Nestle. Secondary

sources of information such as internet, journals and articles were used to find the knowledge

gap in the company. The current knowledge management strategy being used has been

mentioned, and what the company wants to achieve has also been specifies in the report.

The company has several areas that have been criticized due to lack of knowledge transfer in the

company and these areas have been identified and recommendations are provided in the report.

Background

Nestle is known as nutrition, health and wellness company, it is one of the largest food and

beverage company in the world and has dominated the food industry since almost 150 years.

The Nestle Company was founded in Vevey, Switzerland in the year 1866 by Henri Nestle with

the Main aim of producing high quality milk food for babies and is today the world's leading

food and beverage company. The Nestle Company had aimed to build a business as the world's

leading nutrition, health and wellness based on human values and principles. This goal was

achieved through various well known brands that come under Nestle.

The company has grown significantly and has achieved quite a respect and trust by its consumers

in the market. The company's products are growing through innovation while maintaining a

balance between geographic activities and product lines. The company prioritizes in producing

and distributing the best products to its customers.

 2

Objectives

The company has certain objectives to the following Business Principles:

One of the objectives of Nestle is to make better food for their customers. There is a very clear

relationship between the objectives and the company logo. As the company strives to provide

there consumers with food that would be safe, of high quality and has optimal nutrition.

Nestle's corporate objective is to be the world's largest and best branded food manufacturer,

whilst ensuring that the Nestle name is synonymous with products of the highest quality (Nestle

Corporate Objective, 2009). It shows that Nestle has already achieved a part of objective that is

to be the largest food production company. This objective is related to another objective of Nestle

which is the company wants to make sure that the product creates value that can be sustained

over the long term for shareholders, employees, consumers, business partners and the national

economies in which Nestle operates.

Nestle main objective is to follow and respect all applicable local laws in each of its

markets.
The company aims to be as decentralized as possible within the framework imposed.
Nestls objective is to maintain the team work and the levels of organizational

culture where networking and communication shall be encouraged.

Structure

Nestle has over 500 factories in 76 countries, and sells its products in 193 nations. The company

employs around 280 000 people and have factories or operations in almost every country in the

world. The following is Nestls organizational chart, as of January 2010. This is organizational

chart at the Executive Level.

Methodology
 3

The method of knowledge management approach is Zacks approach proposed by Michael Zack

in which he suggests that the framework which helps an organisation make an explicit

connection between its competitive situation and a knowledge management strategy to help the

organisation maintain or (re-)establish its competitive advantage. (Zack, 1999) This would help

to find the link between knowledge and strategy.

In this approach, analysis is done with the help of SWOT (Strengths, Weaknesses, Opportunities

and Threats) that helps identifying the gaps in an organization's knowledge. This would help the

organization to find out where the knowledge which can be used and where can it be used to

improve its competitive position.

This is achieved by analyzing the organizations knowledge position along two dimensions:

Exploration vs. Exploitation

It refers to the area where the organization needs to improve and develop its knowledge in vs. the

opportunity it may have to use the unused knowledge unexploited resources.

Internal vs. External Knowledge

This refers to if the knowledge is within the organization or outside. Some organizations are

more externally-oriented, drawing on publications, universities, consultants, customers, etc.

Others are more internally-oriented, building up unique knowledge and experience which is

difficult for competitors to imitate.

The information collected for the research was done with the help of an employee at Nestle

Middle East (UAE) as well as literature review based on secondary resources that were found on

the internet, journals, case studies and articles.

SWOT Analysis
 4

Gap Analysis

Strategic Gap

1. Lack of direction in marketing strategy (Over diversification) of General Mill (a

Nestle based product) which was aggressively marketed by the Nestle group in

almost all the sectors. Over diversion led to unclear organizational mission and poor

financial result.
2. Prioritize markets and determine competition focus. For instance, the introduction

product LC-1(pro biotic yogurt) in the market where pro biotic food was already

popular and the consumers knew the health benefits of it such as European countries

like Germany and France. Instead the product was introduced in Latin America

where there was no much knowledge amongst public. Another issue was the product

was introduced as a individual scientific product, which should have been introduced

through Nestle's Dairy.

3. To develop attack over competitor's weaknesses. It is always beneficial to launch a

product as first or second movers where Nestle made many mistakes. In case of

releasing products, it should make quick move and enter the market as quickly as

possible to gain the market share. For example when Nestle released its cereals much

later after Kelloggs was already ruling the market.

4. Deception and Foreknowledge: Nestls first step should be to educate its consumers

about the product to be introduced and its benefits before launching. The education

campaign should be backed by scientific support and with example of success from

the market situation

5. To focus on the Right market: The company focuses on it big market such as

America's and European country, whereas it should have a wider focus on emerging
 5

markets in Asian countries such as China, Russia and India as they were closed to

foreign market in the past because of their political systems.

Knowledge Gaps

1. The objective of food being safe is not very clear to management. There were certain

failures with regards to the safety of the food products such as the Food

contamination of Pet food in 2007 and Toll's Cookie dough food contamination case

that took place in 2009. This led to recalling of products from the market
2. Nestle has been alleged of breaking the local law, in case of cutting down of rain

forest. This shows lack of External knowledge in the company.

3. The organization has different levels of management and follows a formal culture.

Hence there is not much communication between the levels which leads to lack of

knowledge sharing within the departments of the company. For instance A few years

ago Nestle UK realized the gap of knowledge was the teams of lean experts, there

was often a limited lean knowledge base that retained their knowledge within factory

management levels. While other managers, such as those in accountancy and

engineering, came with a specialist body of knowledge about the fundamentals of

their discipline that was gained from their initial professional education and on-going

development, the operations and manufacturing managers often did not have the

same focused training structure. As a result, many had just not had the opportunity

to develop a detailed grounding in modern manufacturing tools, techniques and

practices.
4. The company has not been able to achieve its goal with of being a completely

decentralized organization where delegating decisions and giving authorities to lower

levels are considered.

 6

I. People - People are the most important assets in a company. Members at all levels

of the organization are concerned to add value to the organization. The company

has a Hierarchical culture, where there are a few levels of management but has

broad spans of control and is rule based and formal. Hence, communication and

cooperation is restricted to the respective level to which the employee belongs to.
II. Process -In a large organization like Nestle, a process is a chain of actions taken

before presenting something to customer. It first starts at the Nestle Headquarters

in Switzerland, which plays an important role in development of new food

product. Experts are invited from all over the world to perform the following

steps based on their knowledge:

Develop products that are reliable and profitable

Develop and process the business model that will support the new product to avoid minimum

commercial risk.

Researching and analyzing consumer preferences and trends.

Launch the product (in a single region at first) and aggressive marketing to build a customer

demand.

The further process:

1. First, the review of the product from the market is studied.

2. After ensuring that the product is doing well in the market, the brand definition and

further development begins. Finally comprehensive market research is carried out for

making the final changes with the product

Technology

Technologies that are currently used by Nestle are the ERP (Enterprise Resource Planning), it is a

computer based system that is used to manage internal and external resources which includes
 7

tangible assets, financial resources, materials and human resources. The main purpose of the

software is to help the flow of information between all business functions within the organization

and also manage connections outside stake holders. Businesses use a large number of softwares

and processes and introducing an ERP system which is usually complicated impose some serious

changes in the staff work.

SAP is the kind of ERP system Nestle uses. In fact, Nestle uses five modules

of SAP namely,

Purchasing, financials, sales and distribution, accounts payable and accounts receivable. SAP

systems are used for accessing, distributing and sorting the information.

Manugistic's Supply Chain system is currently used by Nestle for automating its supply chain

operations.

Intranet is widely used technology by almost all the organizations in the world. Sharing

information amongst different departments is easier with the help of intranet. It is used in Nestle

for delivering tools and applications, e.g. collaboration (to facilitate working on groups or

teleconferencing)

Or corporate directories, sales and CRM tools, project management etc. to improve the

productivity.

CRM (Customer Relationship Management) Nestle Food service have adopted CRM. It is a tool

that is designed to help the customers to get closer to them

WANT

People: While maintaining the formal culture of the organization networking and communication

shoul be encouraged. The organization's structure should be assuring operational speed along
 8

with personal responsibilities with higher focus on results. Communication amongst different

levels of the organization should be encouraged.

Clear levels of responsibility and well defined objectives are a must to know

by the company's employees.

Process:

After the development process, research on the product should be done not only by preference

and trends but also by using the previous knowledge and comparing the previous trends and

preferences used in the target market.

Apart from this, before developing the product the nutritional value should be considered well, as

the society today getting more health conscious.

The marketing for the product should be prioritized rather than aggressive marketing in areas the

product would not be used.

Technology:

The company is using Manugistic's Supply chain system which is limited to work on the Java

framework. The technology should be replaced by SAP's supply chain module, APO (Advance

Planner and Optimizer). Since the company uses SAP's other modules it would be easier for

Nestle to streamline and accelerate the entire development process at the same time support

boosting productivity.

Recommendations

People:

Training should be provided to the staff as a new technology is introduced by Nestls learning

and sharing program. A program called manufacturing improvement techniques program (MITP)
 9

provided by Small piece Enterprises should be introduced to train the managers. This kind of

program basically consists of softer management issues of change, how to handle resistance to

change, planning and running projects, leadership, and team building and communication skills.

This would help Nestle becoming a learning organization and would provide its staff the

confidence to deal with the changes in technology taking place. The course would also help

improve the culture of the company, teamwork and high performance by the staff. Moreover,

companies who have trained there staff with MITP course has seen significant and a wide

development in the Knowledge sector of their respective companies such as IBM.

Open communication and active cooperation must be encouraged where everyone in the

department at any level would get a chance to contribute their suggestions and views to improve

and enhance the company also result in personal development. Along with this it would lead to

knowledge transfer.

Enforce regular sharing views via blogs for the employees to stay connected and give their

opinions about the technology introduced.

Solutions and experiences based on the problems or changes in the organization posted on the

intranets for the employees to view at any time they want in need.

Process

As the product development process starts in the organization, previous tacit and explicit

knowledge should be used. As well as, external knowledge shall be well processed before the

development of the product.

Research should be carried out about the customer demands, also the region where the product is

to be launched; their cultural value should also be studied. It is necessary to understand the target

market before developing the product. The nutritional value of the product should also be
 10

considered at the time of research, otherwise the product might fail because of its low nutritional

value and quality.

Several quality checks should be done using Nestle's Quality Assurance program to maintain the

image of Nestle before the product is brought to the market.

Once the product is developed and is ready for distribution in the market, customers must be

briefed about the product.

Technologies

Technologies that should be used for knowledge sharing should be Data repositories A database

warehouse is one large Data Repository of all business related information including all

historical data of the business organization implementing the data warehouse. Data warehousing

is a complex process of building a data repository in the form of a relational database so that the

company can support web or text mining in order to leverage data and transform or aggregate

them into useful information.

In all cases, organizations use data warehousing to gain a competitive advantage, support for

decision making processes through comprehensive data analysis.

Some of the key components of data warehousing are Decision Support Systems (DSS) and Data

Mining (DM).

A content management system (CMS) is a collection of procedures used to manage work flow in

a collaborative environment. These procedures can be manual or computer-based. The

procedures are designed to:

Allow for a large number of people to contribute to and share stored data
Control access to data, based on user roles. User roles define what information each user

can view or edit

Aid in easy storage and retrieval of data
Reduce repetitive duplicate input
 11

Improve the ease of report writing

Improve communication between users