Innovation and globalisation strategy

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Literature review

The lifeblood of our business is that R&D spend. There's nothing that flows through a pipe or down a wire or anything else. We have to continuously create new innovation that lets people do something they didn't think they could do the day before.

" According to the words of JAMES M. UTTERBACK innovations is viewed as a function of three sets of factors 1 characteristics of the firm's environment, 2 ) the internal characteristics of the firm itself and 3 ) flows between the firm and environment. Internal factors which affect the synthesis of information into ideas and solutions to development problems are viewed as influencing the effectiveness of the firm in response to its environment. These include the diversity in task assignments and the organizational relationships between technical and administrative personnel. Similarly barriers to communication between the firm and its environment, for a set of given internal characteristics, are viewed as limiting the firm's response. both external and internal consulting relations are discussed in this relation "

The current project talks about innovation Nestle's history , innovations in Nestle and its growth and we also deal with references from journals.

Sources of innovation

Innovations refers to the ideas that lead to the commercialization of a product. A firm needs several factors apart from invention of product such as different types of skills , knowledge, capacity and resources. The firm might also need various production knowledge, skills and facilities market know

History and chrological innovations at Nestle

Henri Nestle was the founder of Nestle in the mid 1860's. He came up with a product called Farine Lactee which was a blend of cow's milk , flour and sugar. It was a healthy and economical for mothers who could not breastfeed their infants and lost their children to malnutrition, A infant which was given up by the doctors because it didn't breastfeed was given with the Nestle and the infant got nourished and survived. Later Nestle was launched in Europe.

Jules monert took over Nestle in 1874. There was a competitor for Nestle and it was Anglo-Swiss condensed milk company so Nestle manufactured its own condensed milk. The two companies later merged in 1905. The production took place in United States and mainly in Europe. It had full fledged manufacturing in Austalia and Nestle had warehouses were located in Singapore, Hong Kong and Bombay.

There was a great demand for milk in Europe during the World War I and the Nestle's factories had to sell their milk to public. The need for condensed milk and many diary products increased in United States and Nestle acquired a lot of companies in United States. Nestle's profit doubled that year. Nestle suffered debts in the United States after the war because the ingrediats price was increasing and economic slowed down and exchange rates fell.

Nestle was helped by an expert banker. Nestle came with with new chocolates and powdered beverage products.Nescafe was developed by Nestle in 1930. Due to the neutrality of Switzerland in World War II it was isolated from Europe . Nestle was faced with distribution problems in Asia and Europe and so many executives were transferred to the United States. The profits of nestle increased by 125 million inbetween 1935 to 1945 when United States entered the war because the American servicemen in Europe and Asia consumed Nestle mainly.

Nestle later merged with Alimentanna in 1947. Later Neslte acquired many companies like Crosse&Blackwell, Findus frozen foods, Libby's fruit juices and Stouffer's frozen food. Nestle's profit increased by fourfold from 1960 to 1974. The new freeze-drying was used by the company to create a new kind of coffee called the Taster's choice.

Nestle then became a major stakeholder in L'Oreal and soon Nestle was faced with many problems like increasing oil prices, slow growth of industrial countries , decrease in foreign exchange rates in pound , euro sterling and dollars. Nestle then acquired Alcon Laboratories inc to enter into pharmaceutical industry.

Nestle was boycotted in developing countries by many organized groups because mothers in these country were illiterate and poor and they used washed down method to process food which took away the vital nutrients required for the infants and these food were sometimes mixed with contaminated water and this caused death in infants. The Nestle had clearly stated the reasons which caused death for infants in developing countries.

The World Health Organisation did not make any statement relating malnutrition and death of infants with baby formulaes. Nestle commented on this issue by saying that they never denied breastfeeding and they also stated few other reasons of death of infants were due to feeding of cow's milk , tea ,cornstarch, rice water or a mixture of flour and water. Nestle agreed to follow International Code in developing countries in 1984 and the boycott was released. Nestle also said it only sent its formula to developing countries where breast milk was not available for orphans and multi births.

Nestle was expanding and acquired Carnation for 3 billion and when international trade barriers were removed in 1990 it started to trade with China and Europe. San Pellegrino, and Spillers Petfoods of the UK were acquired by the Nestle in 1990's. It also entered the pet care industry with its association with Ralston Purina called as Nestle Ralston Purina in 2002. Nestle has 470 factories and earns 80 billion in sales and the policy of nestle is long time potential over short-term performance. It also closely focused on the R&D

Nestle's market was wide ranged which included beverages,ice creams , baby food, soup. Frozen food pet food and candies. The brands included under Nestle are Kit Kat, Butterfinger, Smarties , Cruch , Quality street, Milkybar / Galak ,Tollhouse

Nestea, Nescafe , Taster's Choice , Nesquick , Carnation , Libby's , Stouffer's. Lean Cuisine , Hot Pockets, Buitoni,Powerbar, Purina, Friskies, Fancy Feast, Dog & Cat Chow, Tidy Cats, Deer Park, Ice Mountain, Pure Life, Arrowhead, Good Start, Nan , Lactogen and Beba.

Internal innovation in nestle.

Nestle identified that through strategic partnering it can increase its internal capacity and its growth through open innovation which can mutually help in creating new markets and products. Nestle has a well organized structure to screen new opportunities in association to nutrition, compliance , taste and quality which come under target benefit areas.

Sharing is winning is the principle of Nestle and also trust and goodwill among its partners to create big oppurtunities.

Nestle also clearly explains how IP sharing will be done during the discussion stage so there is no gap in communication. The capable firms may own some physical solutions like ingredients and technologies. Nestle's partners know the evaluation process in the best manner

External innovations at Nestle

Due to economic unstability the CEO and CFO'S of Nestle are trying to lower risks and make strict budgets for adopting open innovation. The CTO'S want to strengthen external innovation by 40 percent The R&D organizations must make open innovations more efficient than their competitors.

The mechanics of open innovation are Partnership/Acquisition selection and Relationship and Execution

The various factors determining the relationship and execution are inducing the partners to give special privilages to access the technologies they develop to take care of copyright agreements, retaining partnership in over time finding specimen sources of external technology, reliably exhibiting the organization to pertinent external technology incorporating the external technologies into the continuing production process finding out the external technologies that makes perfect differentiation in business capabilities also the skills of R&D staff must be developed so they can identify business related to the external environment

The root cause

The means of approach to new ideas has increased the number of companies by getting into these ideas.

The external markets have been packed with many competitors getting approaches for new ideas alone is not enough the R&D organizations have to find out rare ways to give their business firms advantage over their competitors.

The conventional wisdom

The companies try to create a structured process for finding out and using the external environment. A committed process can be indicative investment also it does not drive for a competitive advantage of the company.

Open innovation has often been dealt as a separate part of innovation with tools and processes which can retard the growth and innovation . The CTO OF NESTLE S.A Dr. Warner Bauer feels that the company instead of developing rare ideas that are inaccordance with the company strengths by alternating their open innovations with changing innovation and business strategy.

Key invest in house or acquire.

The source strategy decision is divided based on venture capital, in licensing , acquisition , internal department and partnership.

The leadership is further like CTO, Operations leadership , technical intellectual property , business leadership , R&D leadership

The first generation of innovation which was called the technology push model consisted of processes with scientific discovery , then going through industrial R&D and skillful production functions that resulted in new products in the market. Nestle even started their first generation of innovation process with Farine Lactee which was a blend of cow's milk , flour and sugar which had resulted in a new substitute for breast feeding milk and many infants survived from malnutrition deaths.

The second generation of innovations which was called demand push model or market- pull model or need- pull model was popular during the 1960- 1970's .Innovations arose mainly because of the clearly recognized customer needs and the main focus had been R&D which led to introduction of new products in the market. Nestle had merged with Anglo-Swiss condensed milk company which also produced condensed milk and then entered the European market after seeing the enormous demand for milk and earned good profits.

The third generation of innovation which was called linear push technology model . the connection process between science, technology and market place was general in nature. This model was over simplified and it was called as interactive model. Rothwell and Zegveld (1985) regarded it as Pertaining to subsequent process which is distinguishes as interacting and interdependent stages. The innovation process is thought as a compound process of communication course of both internal and external organization combining the various in house and combing the firm's broader scientific and technological company and market place. Freeman 1974 depicts innovation as technical , design , manufacturing management and commercial activities. The technological innovations can be associated by organizational innovation , management innovation inter functional liason system production innovations and commercial/ marketing innovation. Nestle also in their third stage of innovation had acquired many firms in frozen foods segment and later freeze drying machine was used by Nestle to create a new coffee called as Taster's choice which became an instant hit.

The fourth generation of innovation was known as the integrated model .This model mainly was based on the Japanese organizations like Nissan which had joint research projects, joint ventures or cooperations between the different firms in the same industry . likewise Nestle also went to horizontal alliances with the Anglo-Swiss condensed milk company to increase its market share before it expanded into the european market.

The fifth generation of innovation was known as the network model where the many players like users, suppliers and competitors help in the innovation of products. The external actors are known as co-developers or co- generators. Nestle identified through strategic partnership and increased its internal capacity and its growth through open innovation which can mutually help in creating new markets and products. Sharing is winning is the motto of Nestle which creates big oppurtunities for them.


Nestle was found in 1860 and it came with Farine Lactee which was blend of cow milk flour and sugar, it helped to save infants who could not be breastfed and infants died due to malnutrition. It merged with Anglo-Swiss condensed milk company in 1874. It produced in U.S and Europe and demend in Europe was great. It suffered a huge debts in U.S due to ingredients price rise, economic slowdown, exchange rate fall. Nescafe was introduced in 1930. It faced distribution problem in Asia and Europe.

Nestle then expanded in the field of fruit juices and frozen food sector. Tasters coffee was developed using the new freeze-drying method. Nestle got boycotted in doping countries and it gave clear reasons which caused death of infants as illiterate and poor mothers washed the food which took away vital nutrients and sometimes contaminated water is used.

World health organization did not make any comment. Nestle said, it never denied breastfeeding and stated other reasons for death. Also nestle agreed to follow international code in 1984 and boycott was released. Nestle was started in China in 1990 after international trade barriers were removed. Nestle has 470 factories and 80 billions in sales. Nestle segment consisted of ice creams, baby food, frozen food and candies.

Nestle went in for strategic partnering so the internal capacity and growth could be increased through open innovation and help create new markets and products. 'Sharing is Winning'is the policy of Nestle. The IP sharing between Nestle and its partners will be done and there is no gap in communication. CEO and CFO are trying to make strict budgets and lower risks for adopting open innovation. The mechanics of open innovations are partnership, acquisition selection and execution. It wanted special privilege from its partners to access the technology they develop.

The innovations of nestle has been similar to the five generations of innovations in the conceptualizing the innovation process chapter. We have ealier discussed the innovations at Nestle with the stages of innovations that has taken place from the first to the fifth stage in Nestle.

The process of technological innovation within the firm

JM Utterback - The Academy of Management Journal, 1971 - ... concept of an innova- tion, second, identify the phases or subprocesses involved in achieving an innovation as defined, and third, consider the particular aspects of the environment which are related through direct inputs or outputs to each of these subprocesses. ...

History of Nestlé

  • History of Nestlé - History of Nestlé Nestlé began in Switzerland in the mid 1860s when founder Henri Nestlé created one of the first baby formulas.