“Think global, act local”Jacobs Suchard

Presented by:Asmita Gupta Harsha MulchandaniJaishri RaiParth AroraPranjal Singh

Towards a global organisationWhere we are?

Background:• Swiss based manufacturer of coffee, chocolate and confectionary• Leading market share in confectionary across EECOrganizational Structure:•19 business units autonomously catering to local markets • Each business unit producing the entire basket of products, customized according to local needs and standards• Flat organizational structure Philosophy: Entrepreneurial culture

‘People are the structure’

Where we aspire to be?

• Repositioning its brands in a global perspective• Avail the first mover advantage in changed contexts• Leveraging economies of scale by cutting down primary factories from 19 to 6• Each business unit produces one brand and sells it globally• Expect to maintain core philosophy sustaining bottom up decision making approach

Changing ContextGeo-political:Unified EEC : removed customs, frontier controls and import restrictionsImpact: possibility to create a global strategy for the company across EuropeSocial: Consumer preference becoming uniform due to increased movement across bordersImpact: Increased acceptance for standardized productsEconomic:Integrated market with 320 million potential consumersImpact: Optimal utilization of available resources to maximize outputTechnology:Standardized technical requirements for products Impact: Uniform overall process contributes towards cost optimization and creation of

a global brand

Current Organizational Structure

ChairmanChief Executive officer(Jacob)

Business unit 1-5

Global Sponser

General Manager

Consumer Marketing

Trade Marketing

IMC

IMC Manager(Hermann Pohl)

Business unit 6- 15

General Manager

Consumer Marketing

Trade Marketing

Confectionary (Zinser)

Systemic loopholes

Incentive to coordinate?1. General ManagerThe general managers still were responsible for profit in their business units, and so when the IMC’s wanted do

something that would affect their bottom line, the general managers fought it. The global brand sponsors understood the strong incentive their peers (general managers) had to maximize

profits, which would make them balk at standardization if it hurt local sales.

2. International Manufacturing Centre

Incentive – Sales maximization

(local)Coordination with

Global Brand Sponsors and IMCs (global)

Incentive – Volume maximization, cost

reduction via standardization

Coordination with GM’s pushing for distinctive

packaging

Incentive misalignment

Hazy financial structure

Who pays and how much?

• Sometimes a GBS and a GM would agree on a European advertising strategy but when the time came to share costs some GM’s would refuse.

Product development, advertising, marketing costs for a global brand

• The IMC’s have good ideas, but they don’t care where the profit is.

IMC’s don’t care about profits and don’t share in the risks/volatilities of the business

• How would IMC’s charge the general managers ; who would bear the risk of volatile price swings?

Compensation of the IMC’s unclear

Blurred lines of authorityIndependence or confusion? -

The unwritten rule here is ‘Help yourself’. There is no formal decision structure.

Neither the Chief Executive Office nor Zinser specified what the job of the global brand sponsor would be.

• Conflict in authority of GM’s and GBS’s - GBS held futile meetings with consumer marketing managers(CMM’s) of different business units as the CMM’s decisions with overruled by the GM’s they reported to.

• Inherent conflict in the role of GBS’s

• Manufacturing aspect of business not integrated well with company management

• Company objectives overriding core values of entrepreneurship and decentralization

Owner to employee?!

• Core manufacturing decisions taken away from GM’s - resistance to loss of THE position

• Increased layers between GM’s and top management - GM becoming less independent and more accountable

Issenmann Task Force• Creation of Independent IMC:

Costs : Could act against the profit goals of the GM Benefits: Manufacturing standardized, increasing possibility of developing global product

• General managers functioning as Global brand sponsors too: Costs: Inherent conflict in role, increased work load (“ Too much work”) Benefits: Lesser conflicts as GBS is also a party to risk, GBS understands local constraints better

• Clearer role definition Costs: Clearer role/incentive structure for the GM’s and IMC’s Benefits: GBS measured only upto the level of GM

Cost Benefit Analysis

Harvard Task Force• Separation of roles of GBS and GM

Costs : Further diminishing the role and say of GM in marketing decisions Benefits: Division of work would lead to reduced workload on GBS w.r.t Issenmann’s proposal

• Hierarchy levels increased Costs: Increased conflicts, no organizational link between core factory managers and sales managers Benefits: Functional speciality in sales

The road ahead…What can be done?

• Selective centralization - decentralization scheme (drawing from Dashman case)– GBS and General Manager to be the same person in the short term

• Incentive alignment for General Managers– Higher weightage to overall corporate performance than status quo – encourage a global outlook

• Pull in IMCs closer to GM body through job rotation – induction of people with sales experience in IMCs – IMCs do not solely focus on profits and do not share risks – People with a wholesome idea of the business to be present in IMCs

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