Nestle has been in the news a lot due to their unethical business practices. While not all of their products, services, or practices are unethical, some of the scandals that will be discussed throughout the paper include baby formula, bottled water, forced labor, pollution, price-fixing, and mislabeling.
The company claims to follow the ethical values of fairness, honesty, accountability, and respect. According to its website, ‘Nestle’s goal is to improve life quality and lead to a healthier world.’ However, the ethical values of AMA do not cover the harm they have caused in the examples mentioned above.
For example, Nestle’s baby formula marketing practices, stating that the formula was comparable to breast milk. It is immoral and unethical for an organization to intentionally deceive or misdirect its clients in a way that would encourage them not to breastfeed. (Dee, 2019)
Through their statements, and for whom their intended audience was, which was, not only caused harm but it also fell out of line with fostering the trust as well as not embracing ethical values.
The Nestle Annual Report 2018 highlights their goal of providing safe and high-quality nutrition for non-breast-fed or partially breastfed infants. They claim that the WHO Code is an expression of respect for which all their employees are accountable.
It would appear from this report that Nestle is compliant with the law and internal regulations, thus compliant with the WHO Code; however, in this study, Nestle did not take responsibility for its previous mistakes, as their claims for the formula were not based on empirical evidence.
Nestle claims that they value the trust of their consumers’ place in them and that it is their responsibility to always respect this trust by acting in their best interests.
Unethical marketing strategies included strategic intelligence, pricing, and product protection or lack thereof. Examples of unethical practices with baby formula, bottled water, forced labor, pollution, price-fixing, and mislabeling have been identified, all of which have fallen out of line with the ethical guidelines.
For instance, ‘As an ethical norm defined by the AMA,’ embraces ethical values. This implies building relationships and increasing consumer confidence in the integrity of marketing by affirming these core values: honesty, responsibility, fairness , respect, transparency and citizenship. (AMA)
Nestlé priced products higher because they knew their reputation would allow them to be the best known and claimed to be the best, and they failed to mention that the products were unsafe with dirty water, which was difficult to access for those living in poverty.
The decisions they made while selling and marketing their products were incredibly insensitive, uninformative, and disrespectful. They may have looked at competition at a professional level in order to compare rates and the market, but they did not do so ethically and, in the long run, they were affected. They now need to implement changes to fix it and win back their respect from their consumers.
Current Strategy Analysis:
Competitive intelligence is used to learn about your competitor’s products, customers, and any other information that might be of use to your company. Nestle has competitors like Cadbury, Mars, Hersey, etc.
Nestle does not specifically use competitive intelligence; however, it could use competitive intelligence to help enhance its product selection and prevent incidents such as prior incidents.
According to an article in the Harvard Business Review, ‘companies must use the intelligence team specifically to manage insights, not to search for information — and distribute functions. At the very least, the main role of institutional intelligence should be to promote change in perspective.
It will foster an organizational culture that thrives on ambiguity, outsmarting competitors seeking stability.” (Gilad & Hoppe, 2016) To Nestle, this is a pragmatic way to continue business and keep up with their competition, while preventing unethical business practices.
Pricing is critical both in terms of promotions and revenue. (Pratrap, 2019) Nestle implemented a varied pricing strategy. This introduced goods at various price points, ranging from affordable to premium and super-premium.
While the key target market for Nestle is the middle-class customer, it has introduced several higher-end products into the market as well. Nestle used competitive pricing in 2013 to help boost revenue growth in Europe’s developing markets, based on a similar pricing by their competitors. (Koltrowitz, 2013)
Lower prices enabled Nestle to gain market share in European markets, demonstrating that the company was receptive to the needs of its customers. As far as their pricing policy is concerned, Nestle was included in a five-year inquiry into the fixed price conflict in Canada.
The argument was that the confectionery firms sought parallel price rises alongside Canada to raise prices in the United States; however, the case was later dismissed.
Nestle settled the Canadian civil price-fixing claim on the chocolate industry with Nestle promising to pay about US$ 7.1 million while continuing to dispute any negligence.
Nestle has used different types of advertising to attract its customers, such as TV commercials, sales reps, magazines and advertisements, and/or television programs. Each product they have is marketed differently and can either increase sales or decrease based on how well it is promoted.
For example, KitKat focuses on ‘take a break,’ a popular slogan for the brand, and encourages consumers to break and enjoy a KitKat. Nestle may be ethical in advertising for some of its products, but they are not in line with ethical guidelines when it comes to marketing and advertising to children.
The organization says it wants all children to start a healthier life and does not market to children under six years of age.
Root Cause Analysis
The key explanation for their recent unethical marketing activities was the study of Nestle’s marketing tactics, which concentrated on preserving their income rather than the well-being of infants.
Nestle’s marketing tactics were first revealed in the 1970s, when its deceptive marketing strategies were first revealed, causing those who would otherwise breastfeed to assume that formula was a superior alternative.
The Nestle scandals also appear to focus on price and product safety. For example, Nestle took exorbitant quantities of water from California during the worst drought. CEO Tim Brown admitted that Nestle waste some 30% of California’s 700 m gallons of water a year.
Brown said if he could, he would increase water bottling operations, even though Nestle has been operating without a permit since 1998. In another case involving Nestle water, the State of Michigan approved the permit that allows Nestle to considerably increase the volume of freshwater it can pump in a state of emergency in which there is no clean water at no additional cost.
A few days after the acceptance of the permit, Flint was informed that they would no longer receive bottled water from the government. Nestle was also charging more for bottles of water in the Flint than in other areas. Nestle’s unethical behavior was more about pricing strategies in both cases.
The organization has taken vital resources from places that needed them and have sought to sell them at exorbitant prices. Their actions are harmful, dishonest, and do not lead to consumer relations, which are not part of AMA ethical practice guidelines.
