In the current era, the companies are obliged to follow the ethical behaviour for the business practice and the failure of the same can affect the business practice and brand value of the company. The report is related to the failure of the ethical behaviour of the Nestle Company who is one of the leading consumer food companies. In the current era, the large company are not able to meet the ethical behaviour.
The background includes the company on which this report is prepared which is Nestle. Nestle is a multi-national company who is offering the wide range of products with the services in the different areas of the world. This is the fact that with the operations at different areas it is hard for the company to manage the ethical practices in every area across the world. This is the reason the company faced numerous failure in the ethical behaviour.
The aim of the report is to through the light on the ethical behaviour failure of Nestle Company and their impact on the economic performance as well as on the long-term value of the company.
The scope of the report is laminated to the events that the report talks about which are health threats to the customers, Nestle and water, the deal of company with Mugabe, Ethiopian debt, and promotion by the company for the unethical food and mislabelling and child labour, abuse and trafficking.
The methodology that has been used for collecting the data is secondary sources which mainly include internet, news, website and many others.
Nestle company is well-recognised German Pharmacist company that was founded by Henri Nestle in the year 1867 with the headquarters in Switzerland. “Farine Lactee”, a known baby product was launched by Henri Nestle which helped the company to rapid expand their business in the market of America and Europe. This leads to the expansion of the company in different areas across the world and presently it is operating its business operations in 194 countries with 468 factories (Nestle, 2012). The company is able to offer the wide range of products with the help of its research and development centres as the company has 34 research and development centres in 4 continents.
Nestle company offers a wide range of products to their target segment with this they have more than 2000 brands. These brands offer the different products with their brand name in the market. The major categories of the products that are offered by the company include coffee, bottled water, beverages, cereals, healthcare nutrition, infant foods, milkshakes, frozen and refrigerated food, seasoning and pet food and soups with sauces (Nestle, 2012).
The wide range of the products with the quality is able to support the company in generating the high revenue in the market. The revenue of the company which was registered in the year 2017 was equal to CHF 89.791 billion. Further, the operating income of the company was CHF10.112 billion with the net income of CHF 7.538 Billion in the year 2017 (Nestle, 2012). In addition to this, the equity and total assets of the company was registered as CHF 62,777 million and CHF130, 380 million in 2017.
Nestle company faced the criticism due to the numerous events which show that the company were not able to meet their ethical behaviour. Some of the events include health threats to the customers, Nestle and water, the deal of company with Mugabe, Ethiopian debt, promotion by the company for the unethical food and mislabelling and child labour, abuse and trafficking. All these events show that the company was not able to meet their ethical obligations towards their stakeholders and society.
Health threats
The health threat to the consumer is one of the major failures of the ethical behaviour. Food and drug administration (FAD) and centres for the disease control (CDC) warned the customers of Nestle to prevent pre-packaged Nestle Tollhouse refrigerated cookie dough. This is not safe for customer’s health and the administration has suggested customers not to consume the same due to the risk of the contamination with E.coli O157: H7. This is a foodborne bacterium that leads to the illness in the body. In addition, the melamine was found in the Chinese made nestle milk product in the 2008 September. Apart from this, Nestle Maggie was also in highlight because there was monosodium glutamate in Maggie which is beyond the safe limit of customers (Brunk, 2010).
Impacts
The impact of this health threats was on more than 50 American people in 30 states of America. This shows that the event has directly affected the people due to which they got hospitalized. Further, due to the Chinese made nestle milk 860 babies were hospitalized and 6 infants died due to milk that was produced by the company. The produced milk created the impact on the kidney which leads to the damage of the kidney. In the research, the Taiwan health ministry declared that 6 types of milk that are manufactured in China by the company contain low-level traces of melamine in 2008 October.
The rise in the number of affected people has damaged the image of the company and also affected the economic performance of the company as people stop making a purchase of the product not only in America but also in the different areas across the world where the operations of the company was conducted (Choudhary and Mitra, 2015). Nestle Maggie issues made the New Delhi government banned Maggi due to which the share of the company decreased by 11%. This results in the low profit to the company due to the failure of the ethical behaviour.
Nestle and water
This is another event in which the failure of ethical behaviour took place because of the drought in California. The drinking water was affected in drought due to which it became the need to sell the water instead of the selling the right water. This made the company to source the water without the permit from San Bernardino forest (Archer and Bezdecny, 2016).
The consequences of the event were clear when the village of Bhati Dalwan started suffering from the crises related to the water. In addition, Nestle faced the allegation which is related to the false labelling water bottles which they are selling as clean water. This hampered the image of the company but also affected sales of the company.
Promotion of mislabelling and unhealthy food
Nestle ethical behaviour gets fail when they started to step to promote the unhealthy food and mislabelling of the products in the market. According to the UK consumer association, 7 out of 15 the breakfast cereals that are offered by the company offer the high levels of sugar fat and salt (Andrei, 2017).
This event has forced the police due to which they ordered Nestle Colombia to decommission 200 tons of falsely relabelled imported powdered milk in November 2002. This directly affected the sales of the company in the market and affected the economic performance of the company (Balasubramanian, Gopal and Reefana, 2016).
Child labour, abuse, and trafficking
The Dark Side of Chocolate is documentary film 2010 that shows the exploitation and slave trading of children’s that are present in Africa who performs the activity of harvesting chocolate. The harvested chocolate is also used by the Nestle Company for selling it further in the market.
Nestle didn’t carry out any actions against the child labour due to which they have exploited their image in the market. In addition, the international labour rights fund has filed a lawsuit against the company. This has affected the image due to which the sales of the products also get affected and people start shifted towards the other brands.
Ethiopian debt
The company claimed US$G million from the famine-hit country that is Ethiopia. This shows that the company is not considering the present condition of the government of the world’s poorest state.
This will impact the image of the company in the market that they are aware of the condition of the state and still they are asking for the debt from the Ethiopia who is dealing with famine-hit.
A deal with Mugabe
The deal which was made by Nestle with an infamous dictator from Zimbabwe Robert Mugabe’s wife was one of the evidence for the failure of the ethical behaviour. Mugabe has taken 6 of Zimbabwe most valuable white-owned farm since 2002 (Smith, 2009).
Nestle Buys Milk from farms which were seized by Mugabe because the company has broken the deal with the Mugabe of making the purchase of milk. This has directly impacted the working of the company in the market.
All this failure of the ethical behaviour has affected the long-term value of the company because the trust of customers shakes when they find that their company is not following the ethical obligations (Korthals, 2015). This makes the company suffer from the loss of the goodwill and profits as a customer don’t make the purchase of products on a frequent basis.
Conclusion
In the end, it can be concluded at present all the large companies are facing the incidents, accidents and scandals. Nestle also shows that by the time they are dealing with some or other ethical issues. They also have little interest in the real social responsibility. The concepts related to the ethics in the organisation are considered the essential aspect of the management duty. The report includes the details related to the products, revenue and the ownership of the company. Further, the discussion related to the events of Nestle company are discussed which are being criticised for the failure of the ethical behaviours. This failure in the ethical behaviour events leads to the impact on the economic performance of the company which is a thing that needs to be considered by them. In addition, it is must for the company to resolve the events which are discussed the impact of these events on the long-term value of the Nestle.
References
Andrei, M. (2017). Why Nestle is one of the most hated companies in the world [Online]. Available from: https://www.zmescience.com/science/nestle-company-pollution-children/ [Accessed on 27th September 2018]
Archer, K. and Bezdecny, K. eds. (2016) Handbook of Cities and the Environment. Edward Elgar Publishing.
Balasubramanian, P., Gopal, A.V. and Reefana, S. (2016) A Case Study on Misleading Celebrity Endorsements and its Impact on Consumer Behavior. Bonfring International Journal of Industrial Engineering and Management Science, 6(3), pp.93-95.
Brunk, K.H. (2010) Exploring origins of ethical company/brand perceptions—A consumer perspective of corporate ethics. Journal of Business Research, 63(3), pp.255-262.
Choudhary, V. and Mitra, S. (2015) Nestlé pushes chocolates, dairy products in Maggi’s absence [Online]. Available from: https://www.livemint.com/Consumer/L6fSrlClhkmVpuj3j1yk1N/Nestl-pushes-chocolates-dairy-products-in-Maggis-absence.html [Accessed on 27th September 2018]
Korthals, M. (2015) Ethics of food production and consumption. The Oxford Handbook of Food, Politics, and Society, pp.1-15.
Nestle (2012) All about Nestle [Online]. Available from: https://www.nestle.in/aboutus/allaboutnestl%C3%A9 [Accessed on 27th September 2018]
Nestle (2012) Brands [Online]. Available from: https://www.nestle.in/brands [Accessed on 27th September 2018]
Smith, D. (2009) Nestlé scraps trading agreement with Grace Mugabe farm [Online]. Available from: https://www.theguardian.com/world/2009/oct/02/nestle-grace-mugabe-farm [Accessed on 27th September 2018]
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