Business Ethics: Nestle and the Ongoing Infant Formula Controversy - Case Study Example

Business Ethics: Nestlé and the Ongoing Infant Formula Controversy Table of Contents Introduction 3 Ethical Criticisms of Nestlé’s Marketing Of Infant Formula 4 Targeted Marketing to Vulnerable Customers 5 Unreliable Practice of Promotion 6 2. Criticism of Nestlé’s Practices Stem from the Argument That Consumers in the Developing World Are ‘Vulnerable’ - Argument 7 3. Arguments For and Against Continuing the Nestlé Boycott 8 For Continuation of Boycott 9 Against Continuation of Boycott 10 4. Nestlé’s Apparent Failure in Pacifying Its Critics and Suggestions 11 Conclusion 13 References 14 Bibliography 16 Introduction Ethical consideration is a crucial factor to be adapted by every company. According to Crane and Matten, “Ethical consideration includes no stress and harassment to the customers, no harm to people or individuals, avoidance of public and customers safety for personal benefit should be excluded from ethical consideration by a company” (Crane & Matten, 2007). However, companies at times forget to ethically consider the impacts of the promotion of the company’s products. The impact of promotion on consumers can be negative or positive. The paper deals with Switzerland based multinational company Nestle. Nestle, one of the largest food and beverage companies, introduced Infant formula in 1920’s as a substitute to breast milk. However, Nestle faced much ethical criticism on the marketing of Infant formula such as the promotion of it created many health problems among infants especially in inadequately developed countries. The study is about the marketing strategies adopted by Nestle for the promotion and advertisement of Infant formula. The marketing strategy adopted was against the International Penal Code as well as the strategy did not consider the ethical approach. Thus, the study includes the argument for and against the boycott of Nestle in light of such unethical actions (Nestle, 2007). 1. Ethical Criticisms of Nestlé’s Marketing Of Infant Formula The marketing strategies of an organization are crucial components in presenting it in front of the consumers. Marketing strategies can have both positive as well as negative impact upon an organization’s fortune and success in both short as well as long term contexts. Therefore, for any organization a well constructed and ethically adhered marketing approach can play a crucial part in long-term sustainability. The normative approach of ethical consideration is a crucial aspect that should be adhered by an organization in its activities. Normative approach is the method of making decision in provisions of moral standards. An organization while considering the marketing strategies evaluates two basic perspectives of normative ethical approach or perspective- utilitarian and deontological perspective. Utilitarian perspective denotes the strategies that consider the happiness of the people to a greater extent. Deontological perspective includes the activities that consider the particular action’s morality complying it with the universal laws and rules. However, the marketing strategies for Infant formula of Nestle included none of the mentioned perspectives of ethical consideration. Hence, Nestle faced high criticism during the marketing of Infant formula (Griseri & Seppala, 2010). The promotion of infant formula by Nestle failed to consider certain practices which are mentioned below: Targeted Marketing to Vulnerable Customers The mentioned point will clearly signify the way Nestle failed to consider utilitarian approach in its marketing strategy as it wrongly utilized the innocence of the vulnerable consumers and made them suffer due to use of Infant formula. The marketing problem of Infant formula was found to be larger in the financially under-developed countries in comparison to developed countries. The promotion was done aggressively to vulnerable customers. It is said that workers and nurses were provided with incentives for enhancing bottle feeding. The promotion and marketing activities conducted by Nestle were highly unethical as their actions had an adverse effect on the rights of the consumers. As stated by Crane & Matten (2007) “Vulnerable customers are generally found to face health problem due to lack of knowledge. However, Policies should be formulated to meet the problem of vulnerability among people”. The formula led to many health diseases to infants because the promotion of formula was targeted to illiterate mothers of developing nations who had very less idea of the quantity of water to mix with the formula nor they could understand the mentioned directions to use. At times, it thus happened that the formula used by the poor mothers was found to be less than the required that eventually led to weakness among the infants. Indeed, the consumption of Infant formula led to many health problems like diarrhea, respiratory infection and infection in ears among others (Griseri & Seppala, 2010). Unreliable Practice of Promotion Nestle failed to consider deontological approach in its marketing strategy. Nestle did not comply with the laws set by International Penal Code. Rather Nestle considered using irrelevant and unethical practices for the marketing of Infant formula. Nestle generally used and distributed pamphlets that conveyed the message of no side effects of Infant formula. Nestle has been found to get engaged with such unethical and misleading practices. Infant formula was promoted and marketed speciously. Indeed, the consumption of formula by infants were found to be opposite of what the promotion said. In fact, formula was more likely to cause problems like diarrhea and also had led to many side effects on infants. Customers have a full right of availing true information of a product before coming to a buying decision however such fake and illegal promotions from Nestle harmed and adversely affected the consumer right (MacDonald, 2006). 2. Criticism of Nestlé’s Practices Stem from the Argument That Consumers in the Developing World Are ‘Vulnerable’ - Argument Nestle’s marketing and promotional strategies utilize the aspect that the consumers in the developing world are vulnerable as they are not provided with better education, proper sanitation and thus there is a greater chance of misuse of products because of less literacy. In contrast with the developed countries where people are highly educated, so they have less chance in misusing and misunderstanding the products (Crane & Matten, 2007). This depicts that the marketing strategies of Nestle have excluded the consideration of normative ethical approach. The promotional activities done by Nestle failed to take into consideration and judge the moral hazards created by it on the consumers. Consumers in the developing world are considered to be vulnerable. The people in developing countries at times do not have sufficient knowledge about the products’ use and so fail to understand the consequences after the usage of the products and thus they get very conveniently manipulated. The people in developing countries are not much competent in making the buying decisions (Crane & Matten, 2007). According to Crane and Matten (2007) “Increased health problems are more frequently found in vulnerable customers and people. However, policies have to be prepared by company and government to meet the problem of vulnerability among people”. According to Baron (2003), consumers in the developed countries are less vulnerable compared to the consumers in the developing countries. It refers that the rate of vulnerability is higher in developing countries because there is inadequate safety standards in these countries that can provide information and create awareness among the consumers about the hazards. Similarly, Rossouw (1994) stated that the establishment of business ethics is considered to be more in developed countries in comparison to developing countries. Developing countries are often found to face business immorality (Crane & Matten, 2007). ‘Corporate citizenship’ as stated by Crane is a very significant and prominent term that deals with the social role of the company or business (Crane & Matten, 2007). Nestle should also consider its political obligation towards the society as well beyond its business interests. The well being of children is directly or indirectly depends on the condition of their parents and families. Poor and weak families cannot provide much comfortable life to their children. However, Nestle could help the developing countries in this situation. The company if follows the rules formulated by the International Penal Code for Infant formula, can enhance the safety to kids from life-taking diseases. In developing countries, Nestle can engage the unemployed people in their daily operations for which they will be provided wages and eventually help in raising their standard of living staying within the framework of law and policies of government. Indeed, Nestle can also help in enhancing the well being of children by obeying national laws, respect voluntary commitments, harmonize their working style with the economical, social and political aims of the country also by paying regards to national standards (Crane & Matten, 2007). 3. Arguments For and Against Continuing the Nestlé Boycott The boycott against Nestle Infant formula promotion was initiated on 7th July, 1977. The promotion of Infant formula was found to negatively affect the infants especially in less developed countries. Thus, it led to the formulation and the launch of boycott against the marketing of formula. However, it has been observed that the concept of boycott was accepted only by a segment of the populace. It signifies that some people support continuation of boycott and some others are found to be against the boycott of Infant formula (Fridell, 2007). For Continuation of Boycott Consumers view that for the well being of people in developing countries, the boycott should continue. Nestle uses fake practices to advertise and promote the sale of the formula. The mothers in developing countries get easily convinced to their promotion and ultimately nourish the baby with the Infant formula. Eventually, the consumption of it causes various kinds of diseases such as respiratory infection, gastric problem, and diarrhea among others. Nestle uses unethical practice for the promotion of the product. If the boycott gets eradicated then the company will get more liberty to use malpractices in its marketing strategies. The mothers in developing countries are found to be less literate and thus they get influenced very conveniently. The poor mothers are unaware of the manipulation undertaken by the company to enhance the growth and eventually it effects and ruins the life of children. Boycott may help in preventing from such harmful consumptions and purchases by infants and poor mothers respectively. Thus, the critics support the boycott continuation for the enhancement of wellbeing of the infants (Fridell, 2007). Against Continuation of Boycott People are found to be against the continuation of boycott as well. It has been observed that the practice of boycott might make negative influence on Nestle. It has been identified that Nestle renders a number of social activities for kids such as sponsoring the ‘club of kids’ among others. The company also thinks about the well being of people. The boycott would not be a solution rather the boycott would influence Nestle negatively in their endeavor of contributing towards the social wellbeing of customers. Therefore, the boycott should not be persuaded with as it cannot lead to long term solution for both the organization in question as well as the boycotting people (Fridell, 2007). 4. Nestlé’s Apparent Failure in Pacifying Its Critics and Suggestions There are various reasons for failure of Nestle in pacifying its critics. The critics observe that Nestle undertakes unauthorized malpractices to enhance the promotion of the products. It was found that the company takes advantages of financially weak families. Indeed, the critics view that the promotion of most of its products are fake. Nestle often makes unfaithful promises to its customers. There are charges that the company tries to ruin the consumer and their families by compelling to buy the product which might actually adversely affect the consumer. The milk products such as infant formula has not only affected immorally but also gave birth to several of diseases among kids. Nestle is very much aware about the literacy rate of the people of developing countries but even then they used such types of promotion that either gave the people incomplete information about the product or produced manipulated information (Crane & Matten, 2007). Until and unless, Nestle comes out of the scenario with providing proper solution, the company will not be able to pacify the critics. Precisely, Nestle has to comply with the rules formulated by the International Panel Code in developing countries. Nestle has often tried to innovate positive ideas such as ‘Action for Baby Milk’ but somehow these all have been proved to be unsuccessful. The company has to make attempts to make it successful. Nestle should try to take more direct initiatives. Nestle should try to align and support the practice of its business with International Penal Code. It has to engage itself in direct and innovative actions to prevent the company from the negative feeling towards its brand. Nestle has to try to engage more with developing countries as the image of the brand has hampered less developed countries to a greater extent. The company should try to run some voluntary programs as an additional effort of enhancing the consumers feeling for the brand. The company has to focus more on its marketing strategies that primarily considers ethical approach. Any brand has to make lot of efforts and innovative ideas to cover the negative image of it. Similarly, Nestle should consider all other activities like organizing literacy programs and education to poor families which are actually not directly related to business but can aid in eradicating the unenthusiastic picture for the brand. Nestle should consider consumer loyalty and consumer satisfaction more in its marketing strategies. At times, it has been observed that the marketing strategies are not as strong as the production of a product. It has been observed that if a company faces such situation of criticism on it brand, then getting engaged with corporate social responsibility can help the company in overcoming such critics. Thus, Nestle has to consider all the factors either direct or indirect to enhance its brand loyalty, pacify the critics and end the boycott (Crane & Matten, 2007). Conclusion Nestle is considered to be one of the largest companies in food and beverages but even after that some activities initiated by the brand has considered to harm the consumer directly as well as indirectly. The study dealt with the ignorance of ethical consideration in the promotional strategies of Nestle. The company in order to enhance the sale of Infant formula engaged itself in various malpractices and fake advertisements. The promotion made by Nestle negatively influenced the people especially mothers and their kids in less developed countries. Promotions are done to convey the product features to its customers but in Nestle, promotion was undertaken to provide wrong and fake information to its customers as per critics’ observations. Indeed, they compelled the nurses and health workers to use the free samples of Infant formula for feeding the kids and the children with the Infant formula. Nestle has taken advantage of the illiteracy of weak families. These activities have degraded the brand image. However, the company can resolve this problem by rendering true and faithful activities towards consumers (Crane & Matten, 2007). References Baron, D. P. (2003). Business and its Environment. (4th Edition). Upper Saddle River/NJ: Prentice Hall Crane, A. & Matten, D. (2007). Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization. Oxford University Press. Fridell, G., (2007). Fair Trade Coffee: The Prospects and Pitfalls of Market-Driven Social Justice. University of Toronto Press. Griseri, P. & Seppala, N., (2010). Business Ethics. Cengage Learning EMEA. MacDonald, T. H., (2006). Health, Trade, and Human Rights. Radcliffe Publishing. Nestle, M., (2007). Food Politics: How The Food Industry Influences Nutrition And Health. University of California Press. Rossouw, G. J., (1994) ‘Business Ethics in Developing Countries’, Business Ethics Quarterly, Vol.4 (1), pp43-51 Bibliography Crane, A. & Kazmi, B. 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