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Nestle Infant Formula Case

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by

Sara Norris

on 26 January 2011

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Transcript of Nestle Infant Formula Case

Nestle Facts Players Motivations Issues/ Dilemmas Application of Ethical Framework Analysis Conclusion Questions Nestle Company Infant Formula Action Coalition (INFACT) Dr. Benjamin Spock Commissioned
Salespersons Marketing and the Vulnerable Vulnerability Social Responsiblity Sold infant formula in developing countries, resulting in malnutrition and deaths of babies Began a boycott against Nestle, charging them with inappropriate marketing techniques in the Third World. Signed promotional letters urging U.S. consumers to support the boycott. Were sent to the homes of mothers of newborns in Third World countries. Free samples of infant formula were provided. Once a new mother chooses to bottle-feed her infant rather than breastfeed, breastfeeding becomes biologically impossible. Susceptibility: being capable of being affected, especially easily, either in a positive or negative way, by something or someone Vulnerability: being susceptible to being negatively affected by someone or something Specially vulnerable consumers: individuals who "are particularly susceptible to harm to their interests because the qualitatively different experiences and conditions that characterize them and on account of which they are harmed) derive from factors (largely) beyond their control." 'Social responsibility is an ethical ideology or theory that an entity, be it an organization or individual, has an obligation to act to benefit society at large. This responsibility can be passive, by avoiding engaging in socially harmful acts, or active, by performing activities that directly advance social goals." Managing for Stakeholders States that the goal of the firm is to maximize shareholder value/ profit. Edward Freeman disagrees:

The Responsibility Principle: "Most people, most of the time, want to, actually do, and should accept responsibility for the effects of their actions on others. 1) Should Nestle change its promotion practices? If so, how? If not, why not?
2) Could nestle have avoided the accusations and the boycott and still effectively marketed infant formula in the Third World? How might they have better done this?
3) Should Nestle be considered to be responsible for the killing of babies in the Third World?
4) What are the responsibilities of companies in this or similar situations? Of Nestle and the Salespersons Of Dr. Benjamin Spock and INFACT Money/ Profits Increasing shareholder wealth Entering another market Ethical responsiblity Stop the trend of decreasing breastfeeding Decrease infant mortality rates due to malnutrition Educate U.S. citizens about Nestle's unethical practices Third World citizens were not knowledgeable and did not understand the ramifications for changing to bottle-feeding. Promotions implied that more women were routinely using formula as a substitute for breastfeeding. Attempt to Westernize Third World Culture Stakeholder management Nestle wanted to raise money for their stakeholders. This theory states that the company cannot use deception or fraud-- Nestle did. Entering into the foreign market
is a way for Nestle to increase shareholder
profits by increasing earnings. Third world citizens were specially vulnerable. They were not knowledgeable about the ramifications of switching to bottle-feeding from breastfeeding. Objections: It was the citizen's choice to switch; they were not forced to.

Reply to objection: The third world mothers were deceived into believing that this was better for their children. By giving free samples, Nestle made the mothers dependent on the formula. Objection: Nestle gave the citizens the facts needed to determine what was more beneficial to their children.

Reply to objection: Nestle alleged that the formula was more beneficial than breast-milk. Also, the first pamphlets were deceiving. They were only had pictures of bottle-feeding instead of both. This was used to deceive since there were language barriers. Social responsiblity Nestle has an obligation to act to benefit society at large. This responsibility could have been fulfilled by avoiding engaging in formula sales in the Third World countries. Harming the Babies Water used to mix formula was contaminated The family didn't have enough money to pay for formula after the free samples were given to them. Parents had to dilute the formula with contaminated water to feed their baby. Loss or Respect and Revenues Nestle will lose revenues due to the boycott They will also lose respect of their consumers for taking part in this unethical practice that caused harm to many children in Third World countries. In 1974, Nestle was selling infant formula in developing countries, resulting in malnutrition and deaths of babies. In 1977, Infant Formula Action Coalition
(INFACT) began a boycott against Nestle. Because of the unsanitary water, babies were getting sick.

For example: In the Amazon jungle in Peru, mothers were mixing the formula with water from rivers which also served as the local laundry and toilet. Many parents diluted the formula to make it last longer.

Some even believed that the bottle itself had nutritional value and just filled it with water. Nestle was reaching mothers in a wide variety of situations, including many who could not afford the formula or did not have suitable water supplies and sanitary conditions for preparing the formula.
These practices led to an increased possibility of diarrhea and other disease. Nestle knew that it was targeting vulnerable consumers due to their lack of education.

This is one of the most unethical practices in this case. However, the most unethical practice was that Nestle used deceptive advertising to target the language and literacy barriers in the Third World. Nestle sent sales people (often working on commission) to the homes of mothers of newborns. Of Nestle and the Salespersons Of Dr. Benjamin Spock and INFACT Acting unethically because of the following reasons:

1) Deceptive advertising
2) Targeting specially vulnerable citizens
3) Causing social harm by selling to a sector which the company knew had little/ no extra money to pay for such an item. Acting ethically for the following reasons:

1) Preventing future harm through deception and taking advantage of the low economic status of families in Third World countries.
2) Demanding reparation for wrongdoings of Nestle
3) Prevented false advertising by Nestle to mothers about the benefits of bottle feeding. Objection: Nestle was trying to help the Third World citizens by giving them more options to feed their children.

Reply to Objection: The advertising was deceptive, and although it may have helped some families, the overwhelming majority of families were harmed due to the fraud and deception Nestle used. References
Ang Lecture Notes

Winsted, K. (). Nestle infant formula. Retrieved November 29,
2010 from Pace University, Marketing Web site:
http://webpage.pace.edu/kwinsted/nestl250.html

Beauchamp, T.L., Bowie, N.E. & Arnold, D.G. (2009). Ethical Theory
and Business (8th Edition). Upper Saddle River, NJ: Pearson
Prentice Hall.
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