Nestle came into inception in 1867, in Vevey Switzerland. It was pioneered by Henri Nestle, who was a German pharmacist. Its first product was FarineLactee, a cereal product. The organization was established with a mission of providing good life, through the consumption of good food among the consumers. Over the years, the organization has expanded significantly, becoming a global brand. The focus of this presentation is on the concept of creating shared value as employed in the organization, among other topics of strategic value to the operations of the organization.
CSV
Nestle has defined the concept of creating shared value as an approach to businesses whose focus is on the best interest of all significant stakeholders including the community. Shared value implies that the organization will not focus on generating value that benefits it alone. Rather, it will focus on operating in a manner that adds value to its shareholders, suppliers, customers as well as employees among other stakeholders. This was based on the understanding that while firms have been generating profits in the past years at the expense of the society, such an approach to business may not be sustainable in the long run. The need for corporate social responsibility is thus a key driver of the adoption of CSV in Nestle. By adopting approach to operations that embodies variety of community needs, legal and ethical standards, and the operations of the organization is enhanced. By preserving natural resources, the ability of the organization to ensure that even the future generations enjoys such benefits is high (Idowu, Schmidpeter,&Fifka, 2015).
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CSV is being distributed among its partners in the supply chain in various ways. The CEO of Nestle was tasked with supervising the sharing of this value along the supply chain. This is based on the fact that as a much as an organization has a good strategy, lack of someone to spear head such a strategy ends up reducing the efficacy of an organization in its implementation. The organization focused on employing green operations among its suppliers by moving from transactional model of supply chain to partnership model. To boost supplier sustainability, the organization invested in disease resistant crops for its suppliers. Among the coffee farmers in China, the organization not only view them as a source of raw materials, but also people who needed economic empowerment. The organization this focused on this mission in pursuit of triple bottom line. To its customers, the organization ensured that its coffee is fair trade certified. These are some of the efforts that the organization has been directing towards ensuring sustainability of its operations along the supply chain. This plays an important role in pursuing the organization’s triple bottom line.
CSV, marketing and supply chain
There are various ways through which the adoption of CSV may help in improving marketing as well as supply chain in an organization. For instance, customers are demanding products that are developed under fair trade practices. Nestle has significantly invested in fair trade practices. This implies that customers would be willing to purchase the organizations products as such products are fulfilling their demands. This implies that by adopting integrated marketing communication that show cases the investments that the organization has made in social responsibility, the willingness of customers to purchase their products would be enhanced. As more and more customers demand green products, it is clear that firms will be able to leverage on CSV not only as an aspect of social responsibility, but also on marketing its products. In regards to supply chain, it’s clear that the adoption of CSV will significantly enhance the entity’s supply chain. By working closely with suppliers, the organization has strengthened its relations with such suppliers. They trust the organization and may thus even issue their products to the organization when need be. This indicates the benefits that the organization is realizing as a result of operating in a socially sustainable manner. Moreover, by acting as an agent of improving the suppliers’ standard of living, it’s clear that the level of cooperation between the organization and its customers would be high (Idowu, Schmidpeter,&Fifka, 2015).
To boost nestle corporate strategy, CSV should be impact based. For instance, in the past the focus was on philanthropy. While this indicated that the organization was concerned about the well being of the society, it was not related to its operations. The need to ensure that the organization adopts CSR strategy that has impact on the lives of individuals in the society, while at the same time benefiting it is high. This would be the best alternative to CSV as opposed to direct philanthropy. The ability of the organization to align its shared value strategy with its corporate vision will also determine the value of the strategy to the organization. The traditional role of the firm is to maximize the shareholders wealth. This implies that as much as the organization would be incurring costs in an effort to improve the welfare of its stakeholders, there should be corresponding benefits that the organization should be deriving from such efforts
Green coffee strategy
Nestle is faced with a number of options in its green coffee strategy. The organization needs to choose between buying of coffee beans that are socially as well as environmentally certified or choose to work directly with the customers in countries such as China. Fair trade labeling was one of the best approaches that were established in 2002 for ascertaining that firms products has been developed in a fair manner. It ensured that farmers observed healthy production while at the same time maintaining price floors for the coffee farmers. On the other hand, the organization was working closely with farmers. It provided such farmers with disease resistant crops while at the same time providing them with a market for its products. In this case, both methods would significantly increase the willingness of consumers to purchase the organization’s products. In spite of this, it is clear that mere labeling could not be sufficient to convince consumers in the industry that the organization not only focused on profit maximization, but also on taking care of the environment. By focusing on working with suppliers, the organization would not only be providing customers with good products, but also empowering its suppliers (Idowu, Schmidpeter,&Fifka, 2015). This will significantly increase the willingness of suppliers to supply coffee while at the same time increasing the willingness of customers to purchase its products. This will be the most optimal option for the organization to undertake. Nevertheless, it will need to engage in extensive marketing communication. This will help in creating awareness in the market of the social responsibility that the organization is engaging in. Customers may not be aware of its efforts to promote sustainability unless the same is communicated in the market.This would be attainedthrough the adoption of an effective integrated marketing communication. This would increase the benefits that the organization would derive from working with suppliers directly in China.
Integration
In the long term, back ground integration in coffee farming would provide a better way of ensuring that sustainability is embedded in the entity’s sustainability model. This is based on the understanding that the organization would gain high level of control of the production process. This would ensure that accesses to such raw materials are guaranteed in the industry. This would also result to high level of employment of individuals in the production process, boosting the welfare of the society. Nevertheless, the social aspect of this act may be minimized if the organization is to initiate competition with the local firms. They may feel threatened by the presence of the organization in the market
There are potential costs as well as benefits associated with backward integration of operations in an organization. Some of the benefits include the fact that the organization will be in a position to have high control of technologies and healthy standards that are employed in production processes. This would significantly support its corporate mission of providing customers with healthy products that provide good life. Equally, the strategy would increase reliability of supply availability. Lack of access to raw materials hinders the ability of organizations to meet their goals and objectives. Costs associated with this strategy are that the organization would be forced to engage in extensive capital investment. This level of investment may not always be feasible especially in regards to the availability of cash resources in the organization. The organization has not been involved directly in coffee production in the past. This implies that it may have to incur huge costs taking its employees through training agreement. The move may also result to drastic loss of demand of coffee produced by farmers in China. This may be viewed as a non fair labor practice (Idowu, Schmidpeter, &Fifka, 2015).
I do not recommend the strategy of backward integration to the organization. If the organization is to engage in production, it should be indirectly through supporting of farmers as opposed to engaging in direct production. This would help in avoiding huge initial capital that it may require in investing in coffee in the industry. It will also ensure that coffee farmers ion China retains their jobs instead of rendering their products market less through competing with them.
Nestle inputs are mainly the raw coffee. It is such coffee that is used in development of ready to use coffee within the organization. In dealing with these elements, the organization has focused on sustainability. In regards to outputs, the organization has ensured that they are produced in healthy conditions and the production process contributes to the improvement of standard of living of farmers. At the same time, the organization ensures that its coffee is healthy and customers can thus derive benefits from its consumption. This is how the organization has ensured that value is generated in the supply chain from procurement of raw materials, production as well as consumption of its products. These sustainability efforts have been embedded on the entity’s corporate model. The mission of nestle is to provide its customers with healthy products. By focusing on using safe raw materials and development of healthy products, the organization is aligning its corporate goals with its sustainability objectives in an effective manner (Idowu, Schmidpeter,&Fifka, 2015).
Impact based CSR
To boost sustainability in Nestle, there would be a need for nestle to adopt impact based social responsibility. This implies that for any activity that it engages in as part of its social responsibility, it can easily identify the benefits and costs that are associated with such actions in the market. At the same time, it would also help in identifying the positive impacts that the same is having on the other stakeholders in the industry and the society. This would eliminate instances of managers in the organization from engaging in green washing when nothing tangible is being carried out in the organization.
A lean operation is a theme that is gaining popularity in modern organizations as firms seek to cut cost of their operations. It involves the efficient use of resources in the industry. Through high level of efficiency, firms are in a position to boost their profit margins. It also ensures that there is efficient utilization of resources. This ensures that raw materials are not misused increasing sustainability of production. Moreover, it ensures that time and financial resources wastage is reduced. This helps in preventing the depletion of natural resources in line with triple bottom line goals where firms not only focus on growing profits but also take care of the environment and the society. Lean operations results to adoption of elimination of wastages in operations of the organization. There are many elements associated with lean production.Through lean operations, organizations focus on reducing lead times as well as cost of obsolete inventories (Idowu, Schmidpeter,&Fifka, 2015). This is mainly attained through development of optimal stock levels where demand matches supply.
Alignment and collaboration
The organization needs to align its corporate social responsibility in the industry in a manner that boosts collaboration. In the supply chain, firms do not operate in isolation. They depend on each there as well as stakeholders to deliver their raw materials to the production centers as well as to deliver quality final products to customers. Forward collaboration with customers in the market is necessary. By collaborating with customers, firms will be in a position to ensure that it delivers its products as per consumer needs. Different customers have different coffee demands. They demand variety of tastes. There are equally particular price levels that some customers would be willing to pay for a product as compared to others. This indicates that there is a need for the organization to collaborate with customers in setting the coffee tastes that it will be presenting to the market as well as in setting prices (Idowu, Schmidpeter, &Fifka, 2015).As long as the collaboration will result to maximization of shareholders wealth while at the same time securing the interests of the organization’s significant stakeholders, the move will be important for the organization.
Implementation
After strategy development, it is always important to have a clear approach through which such strategy would be implemented. Implementation requires that all the resources required for implementation be identified as well as the timeline for implementation. This helps in reducing a big strategy to action plans. Action plans are important in ensuring that the players in the organization understand what is expected of them, when and how. By having a clear date when Nestle would steer forward the collaboration with farmers and extensive liaising with such suppliers, it would be easy for all the stake holders in the industry to have a clear understanding of the entire process. During implementation, there would be a need for proper coordination as well as monitoring on the manner in which creation of shared values will be executed. There would ensure that variances as they occur within the organization are handled in time. This would ensure that there is minimal deviation of the implementation process from what is projected. In particular, nestle would need to identify the quantity of raw materials that it would be in need of per annum. It should then identify a coffee production zone from which it would liaise with farmers in such locations. This is important since the organization may not have sufficient resources to deal with all the farmers producing coffee in china. Moreover, there would be a need for the organization to develop a budget on the costs that would be incurred in pursuing collaboration with suppliers (Idowu, Schmidpeter, &Fifka, 2015). Some of the costs may involve provision of credit facilities to such farmers, farm inputs as well as better seeds of coffee. The organization may also liaise with agricultural officers in ensuring that such farmers have access to guidance on the best way to take care of their crops. Such costs including the supply chain costs of moving coffee beans from farms to processing and roasting centers should be identified. This would increase chances of implementation of the strategy
Real life example
Today, many customers are insisting on purchasing goods and services from companies that are socially responsible. This implies that if a firm is deemed as being socially irresponsible, the demand of its products would decline. This would force the organization to get out of the market. Last year, I witnessed increasing criticism of Coca Cola Company. This was mainly based on the argument that its products are not healthy enough. There was linking of regular intake of cola with osteoporosis among old women. At the same time, increasing awareness of diabetes and the effect that saturated sugar may have on influencing its emergence informed these campaigns. This is not the fast time that people have called for the boycott of coca cola products. In 2000, the organization had to pay $192.5 million in the United States of America, where it was accused of discriminating against blacks in the country. This indicates a need for firms to ensure that they adopt operating mechanisms that are socially responsible if they are to operate sustainably in the long run. This would avoid such product boycotts while at the same time ensuring that significant stakeholders in the organization are satisfied. The same underscores the importance of triple bottom line. For instance, Coca cola is likely to generate high amount of profits from sale of sodas. On the other hand, if they are unhealthy, the customers would end up seek and probably lose their lives. The organization would lose market for its goods. The organization should thus invest in product transparency and ensure that only health ingredients are included in development of its products
From the above presentation, it is clear that nestle has invested significantly in shared value creation. Through sound corporate social responsibility, the organization has been in a position to not only focus on maximizing its profits, but also on improving the welfare of the society. From the presentation, the social responsibility of the organization will be interfered with if the organization engages in full backward integration. Direct investment on coffee growing would result to the organization having to incur high level of costs while at the same time eliminating market for coffee by farmers. Farmers have been selling coffee to the organization, an opportunity that they would lose through backward integration. The organization should thus focus on supporting farmers in primary production and procure coffee from such farmers. By collaborating them in terms of provision of the right seeds quality and in boosting healthy standards in coffee production, the organization will attain its traditional goal of wealth maximization while at the same time serving the interests of the society and the environment. Nevertheless, the efforts by the organization in promoting corporate social responsibility in the case are notable. Aligning it with the profit maximization goals of the farm would significantly increase sustainability of the organization while at the same time increasing satisfaction among diverse stakeholders in the organization
Reference
Idowu, S. O., Schmidpeter, R., &Fifka, M. S. (2015). Corporate social responsibility in Europe: United in sustainable diversity . New York: McGraw Hills
