Overview of Nestle
Nestle is one of the swiss transnational drink and food organization that is headquartered in Vevey, Vaud, Switzerland. It is one of the largest food organization in the entire world and is measured by revenue along with other metrics as well since the year 2014 (Nestle.com 2018).
It has been ranked number 64 Fortune Global 500 in 2017 among the list of largest companies. It was formed in the year 1905 and it falls under the food processing companies and there are more than 335,000 employees who are working under them (ZME Science, 2018).
The product includes baby food, breakfast cereals along with dairy products and snacks. It is operating in more than 194 countries and it has more than 445 factories as well. It is one of the major shareholders of L’Oréal which is one of the largest cosmetics organization.
Overview of current operations
The operational strategy of Nestle is highly contributed towards the application of wellness, growth and health strategy. It is trying to produce different types of frozen foods along with infant formula products in the entire market. In the present scenario, the respective organization has made few number of acquisitions with Gerber in the year 2007. In March 2017, they have announced they will be lowering the content in Aero and Kit Kat chocolate bars by 10% by the year 2018 (TAY, 2018).
Identification of ethical issue in Nestle
The controversy between the formula feeding and breast feeding has tried to gain attention over the last thirty years when it is about them. In the year 1977, the campaigners have called for the boycott of the respective brand due to the aggressive along with deceptive kind of marketing for the different infant formula to the Third World Organizations. Furthermore, it has been seen that the infants feeding formula has allegedly caused mass deaths of the babies in the Third World. The company has affected the different stakeholders hugely along with the revenues of the company that got affected negatively (Adebamowo et al. 2014).
It was generally originated in the 70s when nestle and Bristol Myers marketed Third World in exchanging the breast feeding for formulas (Singh, Quamina and Kalafatis 2017). Due to the formula, the rates of breastfeeding during the year 1960s in expanding the activities into developing countries. With the help of different reports, it has been seen that in Singapore in the year 1951, more than 80% of the three-month-old babies were breastfed, however it was reduced to 5% in the year 1971.
With the help of different reports, it has been seen that the Swiss multinational is violating the different codes of advertisements along with misleading the customers with nutritional claims. It has been seen in the reports that they have been accused of violating the different ethical marketing codes and manipulating the customers with misleading type of nutritional claims as well (Neuman 2016). A report in the newspaper by the Changing Markets Foundation has found that they are marketing different infant milk formula products despite of the prohibition by UN’s World Health organizations.
This respective issue of Nestle has come into the limelight when they adopted different tactics of sales using the mothers and milk nurses to go into the different hospitals, home and clinics and they tried to instruct the mothers to use the specific formulas and benefits of using the same as well (Wilkins 2015). With such advertisements, more than 90% of the mothers started providing their infants with such formulas and the breastfeeding had reduced to a huge extent.
From the above report, it can be analysed that the most far reaching unethical international practice of business in which Nestle has been involved is during the marketing and sale of the infant milk formula and it has resulted in several premature infant deaths. These has affected the poor regions and states in different developing countries. With the help of misleading advertising wherein the representatives wore the uniforms of nurses along with pushing formula and goodies with free samples (nutraingredients.com, 2018).
Impact of ethical dilemma on Nestle
The ethical dilemma that has been faced by Nestle in the last few years due to the misuse of the baby milk formulas in an ineffective manner (Darrow et al. 2017). With the usage of the different baby milk products, they have been criticised to a huge extent and this has affected their reputation as well in the entire market (Khan et al. 2018). It has been under fire for the different marketing claims on different formulas of baby milk products. In 1981, WHO has adopted strict code of banning the different advertisements on the promotion of baby milk products of the organization and it affected their brand image. Furthermore, faced international boycott that was sustained officially till the year 1984 and therefore, they tried to reform the different practices as well in an appropriate manner.
However, furthermore violated the different labelling laws and their promises as well in the market and the activists took up the cause and the controversy rages on. With these issues with them, the company has suffered huge losses in the last few years and this affected their sales and revenues as well. However, this kind of ethical issue did not affect the motive of the company and they tried to constantly trying to create new marketing strategies for the baby formula products.
Nevertheless, regardless of the different boycott in the company, they are trying to produce the very high-quality products along with infant formula healthier in nature than different other alternatives (Tricarico 2015). These products were marketed in North America, parts of Asia and Europe. However, it was seen that nestle officials failed to take into account the economic and cultural differences that included the following:
- Formula milk techniques has to be normally mixed with water that is often polluted in different in different poor countries leading to disease in vulnerable infants. Because of the literacy rates is low in nature, there are different mothers are not aware of the different methods of sanitation in preparation of the bottles (Antognelli and Vizzari 2017). It has been seen that there are mothers who are illiterate in which the directions for sterilization has been written.
- Furthermore, there are few mothers who understands the standards of sanitation, however they do not have the means to perform the same. UNICEF has estimated that formula led child living in unhygienic conditions is between 7 to 26 times more likely to die of diarrhoea(Cascio 2018).
- There are different mothers who are poor use less kind of formula powder than is necessary in nature in order to make the entire container of formula and due to such inadequate solutions, this has taken huge lives of many infants in the different states.
It has been seen that it is one of the largest food consuming companies in the world and due to this ethical issue, it has affected the brand image of the company in a negative manner. However, they tried to cope up with different ethical issue relating to the baby food formulas and this caused exploitation of the entire brand as well. There were many reports that has claimed that the language that is written on the different products produced and sold by them has misled the customers in a wrong manner.
Identification of impacts of ethical issue on stakeholders of Nestle
The different stakeholders of Nestle has faced different kind of issues due to the consumption of different kind of products. There are different products of the company that has been banned as it caused huge life risks to the different individuals in the developing states. The main impact was felt by the mothers along with their infants. The impacts have created huge issues in the business as there was banning of different products of Nestle.
Due to the misleading advertisements, it has reduced the breastfeeding among the mothers and this is affected the lives of many infants and it has killed the infants as well. The ethical dilemma faced by them has affected both internal and external stakeholders negatively. Both stakeholders are essential and important in nature as they mean and provide the different positivity in the organization (Ruggiero 2014). The Human Relation Theory has to be adopted by them in managing the perfect kind of relationships among them.
The different consumers all over the world stopped purchasing the different kind of products of them from the market. The poor mothers in different developing countries were affected the most along with employees and shareholders. The poor mothers were the main target by the brand wherein they have misled the customers by dressing women with no such specialized training to them as the nurses. In order to gain profit for themselves, nestle exploited the poor customers and they ignored the WHO code.
Furthermore, the shareholders of the company were affected the most as the price of their shares were dropped down. It was seen the goodwill of the company was affected and it led to fall in the revenues and profits of the company as well. Furthermore, there were huge amount of litigation in the market for them and this created negative impact on the company. On the other hand, the ethical issues of the company had affected the employees as they started to feel demotivated and they did not know how to overcome such issues.
The local communities and the government of the country banned the different milk formula products of the company. The corporate culture of the company was affected in a negative manner as the laws were not followed by them and this led to banned of the products of the company by the officials in a rigorous manner. With such implementation of the management theory by Elton Mayo, the company can create positive relationships with stakeholders and the government officials, this can reduce the ethical dilemmas by integrating strategic and ethical decision-making process effectively.
Theories on CSR
The stakeholder theory described by Edward Freeman is the proper mirror image of the corporate social responsibility. The stakeholder theory helps in understanding the effects of the ethical dilemmas on the different kind of tasks performed by the organization (Hurlimann et al. 2017). The legitimate claims on the business will be judged and reduce such ethical issues in the possible manner (Herman 2016). In the particular theory, the different views of the stakeholders of the company has to be viewed positively as to provide importance to them and follow the ethical principles as well.
It is true that they do not have any such stocks in the business, however they have every possible right and moral claim to participate in the business and the decisions taken in the business. The corporate decisions of the company are ethical and legal in nature when the voice of the stakeholders is taken into actions. With the implementation of the stakeholder theory, the company has to implement the WHO codes delivered by the government and implement the same effectually to reduce the issues and gain competitive advantage (James, Zhang and Williams 2017).
With the stakeholder theory, the company can gain creative shared values and build back up the confidence and trust among the products of the company with the target customers. The rules and regulations of the government has to be followed to provide and create trust among the individuals to gain the same confidence as previously it was to enhance the different practices effectively (Sahoo, Mishra and Sahoo 2015). Due to boycott, the company has faced different dilemmas that were unethical and this created lot of questions in the minds of the customers as well.
Similarly, the triple bottom approach is the other form of the corporate social responsibility that dictates the corporate leaders with respect to environment, economic and social terms. The economic sustainability values the long-term solidity of the financial stability of the companies. As per the triple bottom approach, the different large organizations create different business plans allowing prolonged and stable action.
The social sustainability values the balance in the lives of people and the way they live in the society. The fair-trade movement helps in fitting ethical imperative that is shared to opportunity along with growth. In case of Nestle, the social sustainability was not up to the mark and the company did not follow any such ethical standards. The Corporate Social Responsibility practices of the respective company is lowered in nature and it do not provides human respects (Biller-Andorno and Capron 2016).
Lastly, the environmental sustainability values are essential and this helps the organizations in maintaining the rules and regulations of the environment effectually. The different organizations need to maintain environmental sustainability and maintain the different standards accordingly (Harriss and Atkinson 2015).
With the help of these two theories of corporate social responsibility, it can be analysed that maintenance of corporate social responsibility in the business is appropriate for all kind of companies and their businesses. The stakeholder theory stated that Nestle needs to follow the principles of adopting the presence of all the stakeholders in the decision-making process of the company to get their views and they needs to be valued as well. The decision-making approach is required and responsible in the company to avoid the ethical dilemma and engage the people and debate the moral choices as well (Yang, Wang and Jin 2014).
Lastly, after the massive incident that was suffered by the company, they need to produce and sell such products that is ethical and legal in nature and this will be acceptable by the entire economy effectually. With the adoption of the CSR programs, nestle can overcome such issues and adopt the economic and social strategies to improve their conditions in the near future along with the increase in the revenues of the company without much litigation in the market. Proper engagement of the individuals up and down the hierarchy is important to improve the dilemma and gain alternative perspective.
Reflective Practice to prevent CSR disaster
From the above scenario and analysis of the case of nestle, I have learnt that the managers in the company needs to look into different aspects before selling and delivering the products to the customers. In order to prevent the CSR disaster, it is important in nature for the company officials to understand the main impacts of the production of the materials on the consumers (Pozgar 2014). The officials need to be careful in identifying the ethical issues in a broader sense wherein the one’s actions effect the others in the organization. From the above scenario, it has been noticed that Nestle did not take care of the stakeholders of the company and the mothers and infants were the main targets of them (Pridmore 2014).
While selling any products in the entire market, the instruction and warnings need to be included in the labelling. The entire organization needs to share common goal along with getting through various aspects of development of product and influences the manufacturing of products. The benefits that can be gained by the customers and the knowledge to create shared values for the customers. The debating of the moral choices is required to be done by the company as I feel this may help them in taking decisions with proper research along with the different unknown aspects.
The integration of the ethical decision-making into the strategic management is necessary to gain alternative perspective rather than traditional employee orientation. All the stakeholder’s decisions are to be taken into consideration that will assist in maximising the profit of the company and enhance the kind of services provided to the customers. This is responsible for the company to understand the requirements of the customers in such a manner that they are the god and they have to be treated in a proper manner (Rucker and Rucker 2014).
With the implementation of the reflective learning developed by David Kolb about the experimental learning that is necessary in analysing the different features of the emotional practice. Proper reflective observation has to be provided focus as this will help the company in managing the ethical issues and resolving it effectively as well. The managers in the organization needs to identify the interests of the stakeholders specially the employees and the customers as a whole to prevent the CSR related disaster appropriately.
The management thinking is essential to understand and analyse both the external and internal environment within the business sectors. With the help of management tools, the company officials i.e.; the management needs to critically think on specific aspects along with soft skills assessment required by the managers.
From the negative aspects and other issues faced by nestle, I need to look firstly the ethical issues and challenges that can be faced by our company and solve them with implementation of different laws and rules along with policies. The CSR programs needs to be adopted that focuses on environmental, social and economic aspects in triple bottom approach to reduce such issues (Theguardian.com, 2018). Lastly, I feel that the company has to adopt the marketing and labelling strategies of the product to understand the pros and cons of the decisions of all stakeholders and sort out the different issues effectively.
Therefore, it can be inferred from the above scenarios that ethical decision making is essential in all the businesses as to gain proper view on the possible aspects of the issues that can faced by the organization. In case scenario of nestle, it was the entire responsibility and duty of the company in educating the poor mothers about the baby milk formulas along with sanitation procedures. The company was supposed to include different notifications and warnings on baby formula powders to promote the same in the different countries that are developing in nature. The ethical decision-making approach was required to be adopted by Nestle in managing the ethical issues appropriately. The banning of the baby powder formulas has affected the brand image and this led to negative impacts on the consumers.
Furthermore, the different applications of WHO laws had to be implemented by them along with providing information to the poor mothers in different languages. Besides that, they can promote the strategy of promotion for the different products and telling different information to the customers and enable the organization to answer the questions of the customers about different ambiguous details. Therefore, the consumers know more about the product and turn confidence and trust towards the company and this has enhanced the reputation of the company as well
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