Nestle case study

Nestle 2006 changed its strategy and focused on providing healthier foods for its
customers. Nestle invested billions through mergers and acquisitions of health-related foods such
as Novartis (Henderson & Johnson, 2012). Nestle also invested more in Research and
development and committed to increasing the information it offered to customers on the
nutritional composition of its products.
The issue
The issue that affected Nestle was the contradictions in its product offerings. The
organization had invested in Research and development and acquisitions, yet it continued to offer
products that were not considered healthy such as ice cream, confectionery, chocolate and pizza
(Henderson & Johnson, 2012). The chairman attempted to justify the contradiction by stating
that the nutrition effort was meant to use healthy ingredients for the foods and provide better
nutritional information for its customers.
Internal and external issues
The organization invested heavily in Research and development to drive its agenda in
healthy nutrition. The organization also invested in acquisitions, and the investments took time to
return the value. By 2010, the organization had not met the targets set in 2006, and it was
operating at a lower operating margin than it had set (Henderson & Johnson, 2012). The
organization made investing blunders, such as selling a stake in an acquired company to finance
Research.

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The external issue was an attack on its reputation by food commentators and activists.
The activists questioned why the organization made such investments and yet continued to offer
products such as pizza.
Alternatives
The alternative for Nestle would have been to stick to a specialized product strategy
(Conti et al., 2019). The investment in acquisitions would have been used to spur development in
its primary product products. Nestle would have used R& D to boost its existing product and
avoid the attacks by food activists.
Recommendation
While acquisitions can be essential in strategic alliances, they can provide organizational
value when aligned to support the organization’s main product offering. Nestle should therefore
pursue the success of its product line before investing large sums in other products.

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References

Conti, R., Gambardella, A., & Novelli, E. (2019). Specializing in general purpose technologies
as a firm long-term strategy. Industrial and Corporate Change, 28(2), 351–364.
https://doi.org/10.1093/icc/dty069
Henderson, R., & Johnson, R. (2012). Nestlé SA: nutrition, health and wellness strategy. Harvard
Business Review.