Nestle's Ethical Dilemma in Marketing Management: A Detailed Report

This report provides an in-depth analysis of the ethical dilemma faced by Nestle concerning its marketing practices related to baby formula. The report examines the controversy surrounding Nestle's aggressive and deceptive marketing strategies in developing countries, which allegedly contributed to infant deaths. It delves into Nestle's current operations, the identification of the ethical issue, and its impact on the company and its stakeholders, including mothers, infants, and shareholders. The report discusses Corporate Social Responsibility (CSR) theories and their relevance to the case, specifically the stakeholder theory. It concludes with a reflective analysis, offering recommendations for preventing similar CSR disasters in the future. The report highlights the importance of ethical marketing practices, particularly in the context of vulnerable populations, and emphasizes the need for companies to consider the potential consequences of their actions on all stakeholders.

Running head: MARKETING MANAGEMENT
Marketing Management
Name of the Student
Name of the University
Author note

1MARKETING MANAGEMENT
Executive Summary
The report has helped in analysis of the ethical dilemma that was faced by Nestle in previous
years. The analysis was relating to the ethical dilemma in the food products or formulas of
the product that were consumed by different infants. The ethical issue was a huge crime in
the eyes of the law and they banned different baby milk formula powders in the market. The
different overview of the current operations of Nestle along with the ethical theories has been
used in the report to understand the importance of theories to resolve such issues effectively.
Lastly, the reflective analysis has been provided to understand the situation and provide
recommendations to resolve the same in the future.

2MARKETING MANAGEMENT
Table of Contents
Introduction................................................................................................................................3
Overview of Nestle................................................................................................................3
Overview of current operations..............................................................................................3
Identification of ethical issue in Nestle......................................................................................3
Impact of ethical dilemma on Nestle.....................................................................................5
Identification of impacts of ethical issue on stakeholders of Nestle......................................6
Theories on CSR................................................................................................................7
Reflective Practice to prevent CSR disaster...........................................................................8
Conclusion................................................................................................................................10
References................................................................................................................................12

3MARKETING MANAGEMENT
Introduction
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).

4MARKETING MANAGEMENT
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.

5MARKETING MANAGEMENT
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

6MARKETING MANAGEMENT
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.

7MARKETING MANAGEMENT
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.

8MARKETING MANAGEMENT
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

9MARKETING MANAGEMENT
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

10MARKETING MANAGEMENT
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.

11MARKETING MANAGEMENT
Conclusion
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.

12MARKETING MANAGEMENT
References
Adebamowo, C., Bah-Sow, O., Binka, F., Bruzzone, R., Caplan, A., Delfraissy, J.F.,
Heymann, D., Horby, P., Kaleebu, P., Tamfum, J.J.M. and Olliaro, P., 2014. Randomised
controlled trials for Ebola: practical and ethical issues. Lancet, 384(9952), p.1423.
Antognelli, S. and Vizzari, M., 2017. Landscape liveability spatial assessment integrating
ecosystem and urban services with their perceived importance by stakeholders. Ecological
indicators, 72, pp.703-725.
Biller-Andorno, N. and Capron, A.M., 2016. Ethical issues in governing biobanks: global
perspectives. Routledge.
Cascio, W., 2018. Managing human resources. McGraw-Hill Education.
Darrow, J.J., Sarpatwari, A., Avorn, J. and Kesselheim, A.S., 2015. Practical, legal, and
ethical issues in expanded access to investigational drugs.
Harriss, D.J. and Atkinson, G., 2015. Ethical standards in sport and exercise science research:
2016 update. Int J Sports Med, 36(14), pp.1121-1124.
Herman, L., 2016. Ethical Issues in Science Communication: A Theory Based Approach
(Proceedings of the Iowa State University Summer Symposia on Science Communication).
Hurlimann, T., Peña-Rosas, J.P., Saxena, A., Zamora, G. and Godard, B., 2017. Ethical issues
in the development and implementation of nutrition-related public health policies and
interventions: A scoping review. PloS one, 12(10), p.e0186897.

13MARKETING MANAGEMENT
James, J.P., Zhang, M. and Williams, J.D., 2017. Ethics and Policy Issues for Internet
Advertising: Targeting Multicultural Consumers in the Digital Marketing Era. Journal of
Management Policy and Practice, 18(4), pp.93-106.
Khan, S., Babar, M., Khan, F., Arif, F. and Tahir, M., 2016. Collaboration Methodology for
Integrating Non-Functional Requirements in Architecture. the Journal of Applied
Environmental and Biological Sciences (JAEBS), 6, pp.63-67.
Nestle.com 2018. Home. [online] Available at: https://www.nestle.in/ [Accessed 2 May
2018].
Neuman, W.L., 2016. Understanding research. Pearson.
nutraingredients.com. (2018). Nestlé under scrutiny for its infant formula marketing
approach. [online] Available at:
https://www.nutraingredients.com/Article/2018/02/02/Nestle-under-scrutiny-for-its-infant-
formula-marketing-approach [Accessed 2 May 2018].
Pozgar, G.D., 2014. Legal and ethical issues for health professionals. Jones & Bartlett
Publishers.
Pridmore, P., 2014. Reaching and teaching marginalised children in Malawi and Lesotho: the
importance of stakeholders sharing common values and attitudes.
Rucker, R.B. and Rucker, M.R., 2016. Nutrition: ethical issues and challenges. Nutrition
Research, 36(11), pp.1183-1192.
Ruggiero, V., 2014. Thinking critically about ethical issues. McGraw-Hill Higher Education.
Sahoo, S.K., Mishra, U.S. and Sahoo, S., 2016. KEYWORDS Maggi Noodles, Nestle, Legal
& Ethical Issues, FSSAI, MSG & Lead Component in Noodles. MAGGI SAGA IN INDIA:
AN ETHICAL ISSUE OR UNCONTROLLED VIRAL MARKETING!, (119).

14MARKETING MANAGEMENT
Singh, J., Quamina, L. and Kalafatis, S., 2017. Under a Cloud: The Impact of Corporate
Reputation Harm on Brand Equity and Consumer Value Perceptions (An Abstract).
In Marketing at the Confluence between Entertainment and Analytics (pp. 467-468).
Springer, Cham.
TAY, T. 2018. Aggressive marketing of 'premium' formulas driving rise in baby milk powder
prices in Singapore. [online] The Straits Times. Available at:
https://www.straitstimes.com/singapore/aggressive-marketing-about-premium-formulas-
driving-rise-in-baby-milk-powder-prices-in [Accessed 2 May 2018].
Theguardian.com. 2018. [online] Available at:
https://www.theguardian.com/lifeandstyle/2018/feb/27/formula-milk-companies-target-poor-
mothers-breastfeeding [Accessed 2 May 2018].
Tricarico, D., 2015. Expanding lionfish outreach and interpretation in Miami-Dade and
Monroe counties: Informing key stakeholders on the significance of the invasion and
importance of their removal using various outreach methods.
Wilkins, L., 2015. Advertising Ethics: Applying Theory to Core Issues and Defining Practical
Excellence. In Persuasion Ethics Today (pp. 43-57). Routledge.
Yang, R.J., Wang, Y. and Jin, X.H., 2014. Stakeholders’ attributes, behaviors, and decision‐
making strategies in construction projects: importance and correlations in practice. Project
Management Journal, 45(3), pp.74-90.
ZME Science. 2018. Why Nestle is one of the most hated companies in the world. [online]
Available at: https://www.zmescience.com/science/nestle-company-pollution-children/
[Accessed 2 May 2018].