Business Ethics (Nestle Company) Essay

Introduction Nestle is the world’s dominating health and nutrition company which is still now committing their promises to the people every day, everywhere by promising ‘Good Food, Good Life’ to their consumers to enhance lives with good foods and beverages. The development of Nestle was formed in the 1905 through the mergers and acquisitions of the Anglo-Swiss Milk Company, by the brothers George Page and Charles Page, and Farine Lactee Henri Nestle, by Henri Nestle. The company was then named after Henri Nestle in the year of 1866. The constant growing and developing of Nestle have successfully made them a famous brand and most people do recognize the existence of them in today’s world. Nestle’s portfolio has literally cover most of the foods and beverages category for instance, baby foods, bottled water, cereals, chocolate and confectionery, coffee, culinary, chilled and frozen foods, dairy, drinks, food service, healthcare nutrition, ice cream, petcare, sport nutrition and weight management. Identification Stakeholders Nestle’s engagement of stakeholders is based on their Creating Shared Value (CSV), which is allowing them to identify and determine emerging issues, to share the responses among the stakeholders and to continue to drive performance improvements. Nestle’s stakeholders can be categorized into three major groups. First group is the group of political which consists of Global Business Leaders, Non-profit Organizations (NGOs), Academics, International Organization, and Government Official. This particular group serves the common interests with Nestle which is in sharing the fresh thoughts and ideas on behalf of how the NGOs, governments and businesses can work closely together in order to eliminate the barrier between developments goals and commercial needs. Second group is the group of experts in social and environmental area that is relevant to Nestle’s field. This group is to communicate Nestle’s approaches towards the people and environment and collect and examine feedbacks based on CSV efforts and plans. Last group is the group of farmers, traders and key processors that contribute help in agriculture resources of Nestle. This interest in this group is to give the supports to farmers and  encourage sustainable development in agriculture worldwide. In addition to this, the stakeholders of Nestle are also relatively supportive to the CSV and were also highly corresponding about the issues, interests and specific areas of concern for example, the growing importance of climate change, the uprising challenges of both under-nutrition and obesity, the reduction of biodiversity from deprived land management, the competition between agriculture land and water resources from biofuels, child labour and also insufficient opportunity and attention given to support the vital role of women in agriculture. Ethical Issues Despite of being a well-known company, however, the Nestle Company has been boycotted and been listed one of the companies that is doing unethical acts which cause harm towards the consumers or their workers. Based on studies and researches, several cases and incidents have been investigated in regards of Nestle doing unethically. Marketing Strategy According to press releases and also Baby Milk Action (2012), one of the Nestle’s present marketing strategies are to discourage the ‘breastfeeding’ of mother to child. In additional to this, Nestle is also adding several logos and labels in the support of advertising reflect to consuming their products, in this case which is baby foods, is more ‘healthy’ and ‘effective’ than consuming mother’s breast milk and this leads to a moral issues for the mothers. On top of that, Nestle is also by this advertisement generalizing that babies who are being breastfed, therefore, are more likely to become sick due to the poor condition of the mother. These advertisements can be misled to exaggeration which is by marking facts with unsupported evidences. Besides that, the unethical act in exaggerating of the advertising continues where the Nestle Company is targeting on health workers with the claims of their newly formulated formula ‘The Gold’ in their foods and beverages which could possibly reduce diarrhea, cure brain and eye development and also strengthen the immune system. Several investigations was required by the World Health Assembly in order to examine the ‘effectiveness’ of ‘The Gold’ formula, however, been rejected by Nestle Company due to the reason of their research and  development is strictly private and confidential. Last but not least, the Baby Milk Action is also questioning about the false reporting that Nestle has been reported towards their baby food products. The United Reformed Church has spotted Nestle have violated several International Codes of Marketing Breast-Milk Substitutes, unfortunately, it was being false reported in their policy statements and reports saying the acts of Nestle doing has no harm towards their consumers, however, it does actually harms health. The investigation is still on going, but it has been dismissed constantly. ‘Nestle has gone to great lengths to enhance its corporate image but its disdain for the International Code’, says Yeong Joo Kean, legal advisor of International Code Documentation Centre. This supports that Nestle, in the desperation of enhancing brand images, however, violates several to exchange the success of its company by putting harm towards their consumers. Major Factors That Impact the Issue There are many factors that impact the ethical issue of Nestle, from social, economic and legal side. In another word, the unethical issues and actions of a company is always caused by the impacts from outside. Firstly, social factors affected the ethical issue of Nestle’s exaggeration advertising on its products. There are 3 reasons why Nestle exaggerate their advertisements and they are the market dominate, effectiveness of advertising and lack of consumers knowledge. Advertisements are effective because the range of advertising is very wide in the areas such as television, radio and online. An advertisement is easier to reach people in many different ways and easier to catch up people’s attention by using emotion and over exaggeration (Simmons, 2012). Besides that, according to Euromonitor International Plc (2010), Nestle is dominating in foods and beverages market. The effective of Nestle’s brand name and the consumer loyalty is high; therefore, consumers are easier to believe the products from Nestle without any rational judgments. At the same time, there are lack of knowledge on the ingredient and the effects of the products from Nestle because those ingredients used are not be able for people to see and only based on the verification. However, those verifications can only be forged by Nestle. Based on the factors above, Nestle exaggerate their advertisement by saying that their baby milk is better than breastfeeding in order to encourage people consume  more on their products. Another major factor is economy and it is explained by the ethical issues of Nestle is due to the demand of their product and also the desires of increase market share and revenues. Nestle aimed to maximize their profits and ignore the social responsibility of provide the truth of their products to their stakeholders (Shaw & Berry, 2010). The needs from economy growth on Nestle drove them into ethical issue which exaggerate their products and attract people to consume and increase the interest of the shareholders. Legal factor also impacted on the ethical issues of Nestle. As mentioned before, several investigations was required by the World Health Assembly in order to examine the ‘effectiveness’ of ‘The Gold’ formula† but has been rejected by Nestle because they said the formula is private and confidential. Nestle protected their formula by legal system and this resulted in unjudged of the effectiveness of their products. The real effects of â€Å"The Gold Formula† are covered by Nestle and encouraged the ethical issue of exaggeration advertising. Relevant Ethical Theories and Concepts As from the case regarding the boycott towards Nestle that were raised by the baby milk action organization, Nestle were said to be an unethical company as they used deceptive advertising to target the 3rd world countries while they are having language and literally barriers. (Kinnaird, 2011) Corporate Social Responsibility (CSR) has the twin effects of improving both short term and long-term corporate performance, furthermore, helps improve financial performance, enhance brand image and an increases the ability to attract and retain the best workforce. For a business to be successful in the long term it has to create value, not only for its shareholders but also for society. As mentioned by Nestle, the organizations’ approach is based on a long-term view, creating significant value to the society and also to maximizes the shareholder’s value as well as profit (Nestlà ©Ã¢â‚¬â„¢s Corporate Business Principles, 2012) but as a matter of fact, in 1974, Nestle started to sell infant formula at developing countries and has a result of malnutrition and caused death of babies. Nestle did not fulfilled the  responsibility to have an obligation to benefit the society at large. (Kinnaird, 2011) Kenneth Arrow mentioned that â€Å"there are two types of situation in which the simple rule of maximizing profit is socially inefficient: the case in which the costs are not paid for, as in pollution, and the case in which the seller has considerably more knowledge about his product than the buyer.† From the view of business, Ne stle were said supported by this statement as they are providing a wider range of choices to their customers. However, in the case where Nestle used deceptive advertising towards the market had led their consumer to a harmful situation. Hence they were then boycotted by the baby milk action organization. An organization with ethical responsibility is more likely to build a good reputation, which is more likely to bring financial rewards over the long term, and since Nestle’s view is aiming for long term, they should stop the trend of decreasing breastfeeding and advertising exaggerated formula to their customer. In the 3rd world countries, most of the citizens are not educated and aware of the knowledge of bottle-feeding as compared to breast-feeding. Thus advertisement promoted by Nestle might seem very deceiving to them and tend to believe that the formula product is beneficial to their children. From the theory of Post MacPherson (Shaw, 2011) that clarify the liability of manufacturers as well as the retailers, â€Å"due-care† concept which is â€Å"idea that consumers and sellers equal and that the consumer’s interests are particularly vulnerable to being harmed by the manufacturer, who has knowledge and expertise the consumer does not have.† At the same time, manufacturers bear the heaviest responsibility to prevent the customer from being injured by defective products. Analysis of the available Options In the world of business, it is always the decision between narrow and broad view. Milton Friedman argued that business has no social responsibilities other than to maximize profit. (Shaw, 2011) Nestle by then were boycott by the baby milk organization is due to their turning point in their business as they aimed to create significant value to the society but apparently they are only focusing on maximizing the organization and the shareholder’s profit and marched towards the narrow view aspect and abandoned the obligation of bringing positive value to the society. As a matter of fact,  Nestle had come out with a framework that look into the CSR in terms of creating shared value with developments by Mark Kramer together with Professor Michael Porter of Harvard Business School. In short, creating social and environmental benefit is the key of making an organization’s competitive over other organization in the long-term, says Kramer (2006) Recommendation and Conclusions As mentioned above, Nestle has arisen social problems whereas the babies who fed on the baby milk powder are tend to become sick, in serious case of poverty, babies are dying compared to those breastfed babies. In order to defuse these social problems, Nestle should give more attention to these problems. With the issues mentioned as the deceptive advertising, society’s benefits are being reduced. They are not understanding about how the product is really providing the benefits that offered to the product users. In some case, they are lack of knowledgeable about what the advertisement is proposing due to different conditions which experienced by some countries such as the language and culture barriers. Therefore, Nestle should work against the deceptive advertising and provide more accurate information for the customers. They need to share a common goal and to get through the various aspects of the product development, manufacturing influences, customer’s benefits and the knowledge in order to link between the Nestle’s approach of Creating Shared Values. Apart from that, Nestle need has a need to build up back its company’s confidence and the trust among the company’s products with the customers. Due to the deceive advertising and defective products that brings harm to the infant, customer are becoming less trust on the company’s products and even the brands. In order to rebuild the customer’s perceptions towards the company, Nestle can come out with some new marketing strategies to promote their products. As an example, they can improve their product strategy where the ambiguous details shown on the packaging. They can improve the labels and packaging to provide more information about the baby milk powder, even in more different language based on the market country accordingly. Besides that, they can practices on their promotion strategy to promote the products itself as telling more information to the customers, publics and enable the company to answer the customers’ questions about the ambiguous details that they receive. Therefore, customer can know more about the product, in turn, confidence and trust towards the company is being enhanced. To cut a long story short, boycotts are often lead a company to face problems in earning their profits and position themselves in the market as well as maintain a good relationship with the customers who are purchasing the certain products. At the same time, they do face ethical dilemma which are bringing negative impacts to the society and in turn, it brings harm to the company. In the eyes of others, they are making priority in profit maximization; however, they have ignored the corporate social responsibility which is playing an important role in the business. In order to retain the company’s reputation, several strategies as to reduce the ethical dilemma situations, needed to be done for longer-term effects, no matter to the company or the society. Companies must not only focus on the boycott, but also work into the path of changing the rules in the product development. Bibliography Action, B. M. (2012, April 24). Protecting Breastfeeding. Retrieved October 16, 2012, from Why target Nestlà © with the boycott?: http://info.babymilkaction.org/nestlebriefing Kean, Y. J. (2005). NESTLÉ AND THE INTERNATIONAL CODE:. An analysis by the International Code Documentation Centre. Klein. J. G., Smith. N. C. & John. A. (2002). Why We Boycott: Consumer Motivations for Boycott Participation and Marketer Responses. Centre for Marketing Working Paper. No (2). 701 Nestlà ©. (2012). Nestlà © Good Foods, Good Life . Retrieved October 16, 2012, from http://www.nestle.com/Pages/Nestle.aspx Kinnaird, E. (2011 Ð ¹Ã ¸Ã » 22-March ). Nestle Infant Formula Case. From Prezi: Make Your Presentation Zoom: http://prezi.com/r2gtyqwc1gmn/copy-of-nestle-infant-formula-case/ Nestlà ©Ã¢â‚¬â„¢s Corporate Business Principles. (2012). Retrieved from Nestlà ©: http://www.nestle.com/AboutUs/BusinessPrinciples/Pages/BusinessPrinciplesHome.aspx Shaw, W. H. (2011). Business Ethics. Boston, Uni ted States of America: Wadsworth, Cencage Learning. Simmons, L. (2012). Why Advertising Is So Effective. Retrieved October 16, 2012, from Netplaces.com: http://www.netplaces.com/addiction-recovery/cultural-lures-and-addiction/why-advertising-is-so-effective.htm YUNIKA Corp. (2010). Reasons Why Advertising