Portfolio Project: A Case of Nestle

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Table of Contents

Introduction
The Management Issues
Handling of the Issues: International Theory of Management
Conclusion
References

Introduction

Nestle is the largest food company in the world, with its presence stretching to more than 80 countries and manufacturing facilities numbering about 450. The company has registered great success that is showcased in its elaborate structure and physical establishments across six continents of the globe. Nestle has dealt with one controversy after another in its course of operation. The most pronounced controversy involved the marketing of infant formula, mainly in third world nations.

The company’s bottled water brand also faced controversies over its alleged purity in some developing countries. This paper analyzes the company’s controversies and the corrective measures undertaken to rectify the situation, making a comparison of international management theories. The paper also includes a personal opinion on how the organization managed the issues through. The paper finally reflects on how managers can prevent similar issues in the future.

The Management Issues

Infant formula marketing controversy

Nestle Corporation was embroiled in controversy in 1977 when the company’s management sought to increase the sale of infant formula brand within the developing nations. Groups in opposition to Nestlé’s plan raised concerns over the firm’s idea to offer breastfeeding mothers the infant formula to act as a substitute to the breast milk.

A global call for a boycott of the company and its products, mainly the infant formula, was organized by groups that argued that substituting breast milk with the infant formula led to suffering and even deaths of babies, particularly in the developing countries (Boyd, 2012).

The anti-Nestle groups, including Save the Children and International Baby Food Action Network, insisted on the unrivaled benefits of breast milk to babies. They accused Nestle of cheating mothers to make huge profits. Several other prominent organizations and bodies in the world, including the World Health Organization (WHO) (Heath, 1997), joined the activist groups in rallying for the global boycott of Nestlé’s infant formula. These bodies termed the milk a baby killer.

Ethical management issue

Nestlé’s management failed to consider the ethical question when it sanctioned the questionable marketing of its infant formula. The least developed countries, compared to the developed world, still suffer from many infrastructural and developmental challenges.

These countries lack sufficient refrigeration services, suffer from lack of sanitary conditions, and experience impure water supplies. The management ignored ethical practice and consideration by insisting on bottle-feeding as the best alternative for mothers and babies living in such countries (Carroll & Buchholtz, 2012).

Lack of adequate sanitary standards meant that the mothers were more likely going to use dirty water to prepare the infant formula mix. Mothers were also more likely to dilute the infant formula in their bid to have it last for long because of the high poverty levels (Carroll & Buchholtz, 2012). This would, in turn, put the babies at risk because it was more likely to increase cases of diarrhea, while also leading to malnutrition because of the over diluting of the infant formula.

Nestlé’s marketing of the alternative baby feeding also brought about the danger of diminishing mothers’ capacity to breast-feed because of the continued use of bottles (Carroll & Buchholtz, 2012). It also increased the danger of mothers feeding their babies with less nutritional food substitutes because of the biting poverty levels. These mothers would have found it easy to stock the bottles with any kind of food without considering the nutritional value because of the availability of the bottles (Carroll & Buchholtz, 2012).

Nestlé’s management showed total lack of care for the dangers that its feeding bottles posed to the babies born in the developing countries. While this would not have been a big issue in the developed world because of the high standards of living and improved infrastructure, it was dangerous for the less developed world.

What the aggressive marketing of the infant formula by Nestle highlighted was its high concern for higher revenues and profits (Carroll & Buchholtz, 2012). The management did not care about the health of its consumers; instead, it cared a lot about the company making more profits throughout its global market.

The management further sanctioned one of the most unethical marketing practices; ‘milk nurses’ visited mothers while still in the maternity wards and urged them to feed their babies on the formula (Carroll & Buchholtz, 2012). The ‘milk nurses’ were actually not true nurses, but they were sales representatives working for Nestle who disguised their identity by wearing nurses’ uniforms.

Such a practice underscores the unethical management decisions that were being put into practice by Nestle. The company knew that it was lying to its customers. That is why it had to conceal the practice of its sales representatives by disguising them as nurses (Carroll & Buchholtz, 2012).

The controversy involving ‘Nestle Pure Life’ water

The Nestlé’s portfolio has expanded to the water industry where the company acquires top brands like Perrier. In the 1990s, the company embarked on selling relatively cheaper water under the brand ‘Nestle Pure Life’, targeting mainly the less developed countries (Crane et al., 2008). A controversy ensued, whereby concerns about the purity of the water were brought up. These concerns were documented by ActionAid and the ‘Swiss Coalition of Development Organizations’ in 2005.

There was also another controversy in 2003 involving extraction of water from McCloud, California. Nestle intended to build a large bottling company in McCloud, but controversies ruined the plans. However, the project was strongly opposed by groups of activists and individuals in the country.

The strong opposition that the company faced over its plans mainly focused on many other historical controversies that had by then plagued its bottled water business (Crane et al., 2008). Nestle eventually bowed out to pressure and abandoned the water plant project in McCloud altogether.

Handling of the Issues: International Theory of Management

Ethical management and practice

Ethical management and practice is an important consideration for application by international companies. It is important for international companies consider ethics before making management decisions because of variation in cultures, beliefs, development levels and standards, and social practices across the different countries of the world. While a particular practice may be considered to be morally sound in one society, the same practice may be viewed as immoral or unethical in a different society.

Putting ethics in marketing practice into consideration would have helped Nestle to avoid the controversy that faced its marketing campaign on infant formula. The company did not consider any ethical repercussions before it sanctioned the move, but it only looked at it as an easy and sure way of making quick money.

In the case of its bottled water controversy, Nestle once again failed to take into consideration the importance of ethical marketing practices. Its marketing practices portray the company as one that is determined to make profits at whatever cost, including lying to its potential customers.

Opinion regarding the Organization’s Management of Issues

Although Nestlé’s management has worked toward effectively managing the issues that afflict its business operations and activities, these efforts are not enough. In the case of its controversy over the infant formula, Nestle instituted adequate corrective measures that included formulation of new policies geared towards improving its corporate performance and not combating critics. The company focused on empowering the top management to solve the problem fully (Heath, 1997).

Nestle also realized the importance of changing its corporate policy prior to rushing into communicating to the world that it had rectified the problem. All the management levels in the company were instructed to offer support to the campaign, while the issues manager was to work in cooperation with the operations manager to help with advice. Nestle even went ahead to produce a business ethics code in conjunction with the World Health Organization to ensure that similar mistakes and controversies were avoided (Heath, 1997).

However, Nestle has not been effective in its efforts to address and rectify issues related to its business and marketing, despite the comprehensive resolution framework. Many years after it suffered the business-damaging controversy with its infant formula, the company is once again courting controversy with its bottled water brand.

Like in the previous case, Nestle has gone to the extent of using unsubstantiated claims on its bottled water to enhance revenue and profit. The company overlooked the important aspect of ethical marketing by claiming that its bottled water marketed in Pakistan was pure. Instead, it promoted an unethical practice that does not necessarily take into consideration the safety of its customers, but one that focuses on business and profit.

A Reflection on How Management can conclude the Issue

With the globalization phenomenon taking center stage, international management is increasingly growing in importance. The world is transformed into a small village where events taking place in one location or continent would easily get known in another continent.

In the 1970s when the infant formula controversy was born, the globalization phenomenon was by far less developed compared to the situation at present. Had the same controversy existed today, the repercussions would be so immense to Nestle such that the company could probably fold its operations. Information today travels faster and more people access information compared to the situation in the past.

Nestlé’s management can effectively deal with this situation by constantly informing the public about its reformed business practice and policy. Although the boycott was ended in the early 1980s, the negative reputation of the company continues to affect its operations and image in the public eye. Thus, the company will be working toward building the confidence of the market and public by constantly informing the public about its new policies and marketing activities that focus on ethics.

Nestlé’s management can also help in eliminating the company’s negative image by engaging in many corporate social responsibilities (CSR) (Davidson, 2009). Specifically, Nestle should focus most of its CSR activities in countries where it was widely accused of promoting unethical practices.

These include all the developing countries where the infant formula was marketed back in the 1970s, as well as in Pakistan where its bottled water brand was found to be impure. These activities will help a great deal in rebuilding the confidence of the general public towards the company (Davidson, 2009).

Although the company has already established new policies and code of ethics that seek to address such controversies in the future, their implementation seems to be poor. Nestle would not be facing similar ethical problems, like in 2003 where its bottled water was found to be impure, had the implementation of the new policies and code of ethics been effective.

The fact that the company still finds itself in the same ethical quagmire as it did in the 1970s means the corrective measures are not being implemented fully. Thus, the management must ensure that the new policies are reviewed to ascertain their effectiveness and those found to be valuable should be fully implemented.

Conclusion

Nestle has been embroiled in several controversies affecting its activities and products. Despite its great success in the business front as the largest food company in the world, these controversies have had serious implications for its general public image. In the 1970’s, the company embarked on a serious marketing exercise that sought to increase the sale of its infant formula. This raised several unethical questions regarding the authenticity of the company and its claim that an alternative to breastfeeding was good for babies.

Its bottled water product has also been embroiled in controversy following revelations that it was not pure as opposed to contrary claims by the company. The company must seriously consider the aspect of ethics in its operations to avert similar controversies in the future. New policies and code of ethics must be formulated and strictly followed in their implementation to avert any similar occurrences in future.

References

Boyd, C. (2012). The Nestlé Infant Formula controversy and a strange web of subsequent business scandals. Journal of Business Ethics, 106(3), 283-293

Carroll, A. B., & Buchholtz, A. K. (2012). Business and society: Ethics. Mason, OH: South-Western Cengage.

Crane, A., McWilliams, A., Matten, D, Moon, J., & Siegel, D. (2008). The Oxford handbook of corporate social responsibility. New York, NY: Oxford University Press.

Davidson, K. (2009). Ethical concerns at the bottom of the pyramid: where CSR meets BOP. Journal of International Business Ethics, 2(1), 22-32.

Heath, R. L. (1997). Strategic issues management: organizations and public policy challenges. Thousand Oaks, CA: SAGE

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