The mothers of the infants living in Third World countries were uneducated on proper use of infant formula. Often the mothers could not read the directions on the container about how to mix the formula correctly so that their children would receive the necessary nutrients. In one case, a mother made one tin of formula last for two weeks to feed both her children, resulting in extreme malnutrition. If she were able to read the directions, she would have realized that the formula tin should only have lasted less than three days for just one child. Also, mothers’ lack of education led them to believe myths relating to infant formula. Many women believed that the formula would make the baby “grow and glow” because it was a “white man’s powder.” They also believed that feeding their babies the formula was the “fashionable thing” to do. Some even thought that the bottle itself contained nutrients if it was filled with water.
Because mothers living in Third World countries were poor and living in poverty, many would dilute the formula to stretch its supply because they simply could not afford to buy a new tin every few days. Also, the mothers of the infants were often malnourished themselves. This led to less production of breast milk, forcing them to use the infant formula instead.
Horrible living conditions also had major implications as to why the infant formula was unsuccessful. The drinking water in Third World countries was contaminated and unsafe because it was also the same water used for laundry and toilet. To dilute the formula, mothers used this dirty water. As a result, babies that were fed formula often had persistent diarrhea and vomiting.
There was also little government regulation with products in Third World countries. The promotion and advertising of infant formula was not controlled or examined to determine its implications. Also, the doctors and nurses in such Third World countries are paid low wages. Therefore, they are willing to supplement their income by supporting or promoting such products, like infant formula, if paid to do so.
Describe the Action
Despite all the factors of the general and task environments working against them, Nestle still decided to make an ugly move by introducing baby formula into Third World countries. Nestle’s advertising and marketing of their infant formula in Third World countries was believed to have discouraged breastfeeding among mothers and have led to misuse of the product. This misuse contributed to infant malnutrition and death. In rural Mexico, the Philippines, Central America, and all of Africa, there was a dramatic decrease in women who breastfeed their infants. Critics of Nestle blamed this decrease mainly on the intensive advertising and promotion of infant formula. Using corrupt ways to advertise to naïve consumers, was a tactic that Nestle used. The company also had “milk nurses” visit nursing mothers in hospitals and their homes to provide them with free samples of formula. By handing out free samples, mothers would become dependent on the formula, stop nursing, stop producing milk, and therefore they were forced to use the product.
A doctor in the rural area of a Third World country reported that one newborn male weighted seven pounds at birth, but at the age of four months he weighed only five pounds. His sister, who was 18 months, weighed 12 pounds which is the weight one would expect for a four month baby. These children had never been breastfed, and since their birth and the introduction of baby formula, their diets were basically bottle feeding.
Nestle argued that they never advocated bottle feeding instead of breastfeeding and that all of its products have a statement that breastfeeding is best. The company does believe, however, that infant formula is important for proper nutrition as a supplement or a substitute for breast milk when a mother cannot or chooses not to breastfeed. According to doctors, “economically deprived and thus dietarily deprived mothers who give their children only breast milk are raising infants whose growth rates begin to slow noticeably at about the age of three months. These mothers then turn to supplemental feedings that are often harmful to children. These include herbal teas, and concoctions of rice water or corn water and sweetened, condensed milk. These feedings can also be prepared with contaminated water and are served in unsanitary conditions.” Nestle believes that a mother’s use of their baby formula is a better alternative for the health and wellbeing of the infant as opposed to these other alternatives that Third World mothers have used in the past.
The real nutritional problem in these Third World countries is not whether to give infants breast milk or formula; it is how to supplement the mothers’ milk with nutritionally adequate foods when they are needed. Although this is the underlying problem, the way Nestle came into the country and promoted their infant formula to uneducated mothers, was what made this such an ugly issue. As a result, the misuse of the formula was said to be a contributing factor to the deaths of many Third World infants whose mothers were incapable of using them properly. However, Nestle denied the accusations of their unethical and immoral behavior after the company came under fire.
Evaluate Action and its Impact
In terms of the ramifications for the Nestle Corporation, this incident caused negative consequences for several facets of the organization. The image of the company was tarnished, stakeholders in the organization were angered, and internal management was regarded as poor.
The infant formula incident captured the attention of the world. The situation, even if Nestle was not entirely to blame, indicated to people that they were greedy and unethical. The “intensive advertising and promotion of instant formula” in Third World countries was evidence of this. The public perceived Nestle as an insensitive and irresponsible company that wanted profit so badly, they would do anything for it.
Due to this highly visible and negatively charged case against Nestle, stakeholders became angered. The public lost trust in the company, and Nestle lost its goodwill. Decreased sales and stock price were inevitable. Both inside and outside the company, feelings of resentment, distress, and regret were common. Since Nestle is the parent company to many other brands, those companies and their stakeholders were also affected.
Finally, the incident overseas signaled that internal management was unacceptable and unfit for the global marketplace. Whether it was intentional or unintentional, it was apparent that decisions along the way were overlooked. The intended consumers were inadequately educated about the product and its correct use, and this indicated that Nestle did not take the proper steps to introduce this product to the global market. Nestle’s culture promoted its employees and managers to drive for new sales. The competitive nature of some companies often justifies any means as long as they produce the end result. The communication flow of the organization was probably inadequate. The structure of the organization may have inhibited information from penetrating to all sectors of the company. The managements’ lack of knowledge triggered ill-advised decisions. Nestle also may have been facing a state known as “escalation of commitment.” This occurs when an organization adheres to an unsuccessful course of action due to their increasing commitment of resources. Nestle had spent a lot of time, money, and effort to introduce the infant formula in the global marketplace. They could see that there was money to be made, but ignored the potential negative outcomes that could result.
Recommendations
Nestle should have introduced their product differently into the Third World countries. One main recommendation is they should have understood this new environment better by conducting more thorough research. A second recommendation is that they should not have just transplanted their United States marketing strategy to the Third World countries but rather adapted and localized their strategy to fit the environment better. Third, they should have foreseen how their marketing activities would have an impact on the behavior of many people. Since they were introducing a new product, Nestle could be considered a cultural change agent in countries where the functional or dysfunctional changes occurred as a result of the new product introduction. Therefore, it was their responsibility to make more ethical, thought-out decisions regarding the introduction and promotion.
In order to understand where Nestle’s strengths lie and how this can help them when entering a new market, they should have used a process called Self Referencing Criteria (SRC). This process can provide a basis for the decision of whether or not to introduce a product or make a strategic move in a market other than your home country. It helps to establish a company’s own cultural values, experiences, and knowledge. The four-step process is as follows:
- Define the business problem or goal in the home country. This includes cultural traits, habits, or norms.
- Define the business problem or goal in foreign cultural traits, habits, or norms. Make no value judgments.
- Isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem.
- Redefine the problem without the SRC influence and solve for the optimum business goal situation.
If they had followed this process they could have better understood that the United States and the Third World countries needed two different strategic plans. They would have understood that Americans had already established a habit of nursing with formula and that its usage was a cultural norm. Therefore no education was needed for these consumers. On the other hand, there were many factors in the Third World countries that should have been red flags in telling Nestle that this culture had no background knowledge as to how to use this product. Also, it did not take much research to discover that Third World country mothers were malnourished and poor. It could then have been reasonably assumed that they would not use the product correctly and try to make it last longer by diluting it. These consumers needed to be educated and by following the SRC process, Nestle could have figured out how to localize their product and not face the consequences that inevitably occurred.
Even if this process was followed, a company still has to make a conscious decision of how and if to introduce their product. This creates an ethical dilemma for the company. In Nestle’s case, there was a lack of government regulations, and the company neglected to conduct thorough research about the environment but probably could foresee some of the consequences. They also knew that the introduction of baby formula would contribute to their bottom line. In the end they took advantage of the situation and the innocent people involved and decided to make a poor choice, which to them contributed to their bottom line and was profitable. Ultimately, it did not matter how much money they made because their reputation was ruined as a result. Not every outcome could have been predicted, but with a little more research, strategic thinking, SRC analysis, and organizational analysis, many of the adverse effects could have been prevented.
