Nestle Strategic Marketing Failure | Crisis | Business Ethics | MBA case study example with solution

Summary

This video script addresses the historical and ongoing controversy surrounding infant formula marketing in developing countries. It highlights how incorrect use of formula can increase infant mortality and the role of multinational corporations in promoting formula over breastfeeding. The script discusses the creation of the World Health Organization's marketing guidelines, the challenges of enforcing these guidelines, and Nestle's controversial marketing practices. It concludes with the importance of effective regulation and the need for multinational corporations to prioritize infant safety over profits.

Takeaways

• 🌐 The script discusses the global impact of infant formula marketing and its consequences, particularly in developing countries.
• 🍼 Historically, breastfeeding has been the norm, but the introduction of infant formula has changed feeding practices, especially with aggressive marketing by multinational corporations.
• 📉 Incorrect use of infant formula has been linked to increased infant mortality and morbidity rates in developing countries due to factors like poverty, unsanitary conditions, and illiteracy.
• 🏥 Hospitals have played a role in promoting formula feeding by separating mothers and infants at birth and providing free formula samples, which can lead to a preference for bottle feeding over breastfeeding.
• 💼 Multinational corporations (MNCs) have been criticized for their marketing strategies that encourage the use of breast milk substitutes, often at the expense of breastfeeding.
• 📜 The World Health Organization (WHO) developed marketing guidelines for breast milk substitutes to address the issue, but their effectiveness has been limited due to controversy and lack of enforcement.
• 🚫 Nestlé, a major player in the infant formula industry, faced an international boycott due to its marketing practices, which were seen as irresponsible and harmful.
• 🔄 In response to criticism, Nestlé made changes such as stopping mass media advertising of infant formula and working with UNICEF to develop educational materials and labels.
• 🏛️ The WHO code is not legally enforceable, relying on individual countries to adopt and implement it, which has been a challenge in ensuring its effectiveness.
• 🌱 The script highlights the need for third-world governments to take a strong stance against MNCs to protect the health of infants and promote breastfeeding as the optimal feeding method.

Q & A

What is the main issue discussed in the video script?

The main issue discussed is the controversy surrounding the marketing and use of infant formula in developing countries, which has led to increased infant mortality and morbidity rates due to improper use.

Why did formula feeding begin to spread in third-world countries?

Formula feeding spread in third-world countries due to promotional campaigns by multinational corporations, which made it more difficult to control the use of potentially dangerous infant formula.

What role did the World Health Organization play in addressing the infant formula issue?

The World Health Organization created the International Code of Marketing of Breast-milk Substitutes to regulate the marketing of infant formula and protect breastfeeding practices.

What are the key problems with the WHO code mentioned in the script?

The key problems with the WHO code are its lack of legal enforceability and ambiguity in its provisions, which has led to disagreements and controversies over its implementation.

How did Nestle's marketing practices contribute to the controversy?

Nestle's marketing practices, including mass advertising and free samples, were seen as promoting infant formula over breastfeeding, leading to health risks for babies in developing countries.

What was the international response to Nestle's marketing practices?

An international boycott of Nestle was initiated in 1977 by consumer groups, urging people to boycott Nestle products until the company stopped promoting infant formula.

What steps did Nestle take to address the controversy?

Nestle agreed to work with UNICEF, limit gifts for health workers, and make supplies free or low cost for mothers who needed to bottle feed. They also promised to include statements declaring the superiority of breastfeeding with their products.

What was the outcome of the Nestle boycott?

The seven-year boycott against Nestle officially ended in 1984 with Nestle and NGOs declaring a truce after clarification conferences, leading to Nestle committing to not engage in certain marketing practices and to support educational materials for breastfeeding.

Why is it important for third-world governments to enforce an effective code regarding infant formula?

Enforcing an effective code is crucial for third-world governments to ensure the safety of infants and to promote breastfeeding, which is vital for the health and development of babies.

What is the underlying message of the video script regarding product safety and multinational corporations?

The underlying message is that product safety is context-dependent and that multinational corporations must be held accountable for their marketing practices, especially in developing countries where the consequences can be severe.

Outlines

00:00

👶 The Controversy of Infant Formula Marketing

This paragraph discusses the historical shift from breastfeeding to formula feeding, which began with the advent of modern technology. It highlights the dangers of incorrect formula feeding in developing countries, leading to increased infant mortality and morbidity. The paragraph emphasizes the role of multinational corporations (MNCs) in promoting infant formula through aggressive marketing campaigns, which have been criticized for making it difficult for mothers to breastfeed. The World Health Organization's code of marketing guidelines for breast milk substitutes was introduced to address these issues, but its effectiveness is limited due to controversies and ambiguous provisions. The paragraph also details the marketing strategies of MNCs, such as donating free formula to hospitals and promoting it through healthcare staff, which have contributed to a preference for formula over breast milk.

05:01

🌐 Nestle's Response to Infant Formula Controversy

The second paragraph delves into Nestle's specific role in the infant formula controversy, focusing on the company's initial denial of marketing malpractice and the subsequent international boycott that led to significant financial losses. It outlines the steps taken by Nestle to address the concerns, including participating in the development of the World Health Organization's regulatory code, redesigning formula labels, and forming the Nestle Infant Formula Commission. The paragraph also discusses the company's efforts to work with UNICEF on educational materials and labels, and its agreement to limit gifts for health workers. Despite these steps, the controversy persisted, leading to Nestle's promise in 1984 to provide supplies free or at low cost only to mothers who needed to bottle feed. The paragraph concludes with the end of the boycott against Nestle in 1984, following a series of clarification conferences and agreements with NGOs.

10:02

📢 Call to Action for Safe Infant Feeding Practices

The final paragraph serves as a call to action, urging viewers to subscribe to the YouTube channel for updates on case study videos. It emphasizes the importance of breastfeeding for the health of third-world babies and the need for effective enforcement of marketing codes to combat the dangers of improper infant formula use. The paragraph concludes with a reminder of the responsibility of third-world governments to take a stand against MNCs that do not follow the rules, ensuring that product safety is upheld and that the social and economic development of their nations is not hindered by preventable health issues related to infant feeding.

Keywords

💡Breastfeeding

Breastfeeding is the natural method of feeding infants with milk produced by the mother's body. It is a traditional practice that has been carried out for centuries. In the context of the video, breastfeeding is contrasted with formula feeding, emphasizing its importance and the risks associated with the latter, especially in developing countries where improper use of infant formula can lead to increased infant mortality and morbidity.

💡Infant Formula

Infant formula is a manufactured product designed to substitute for breast milk when breastfeeding is not possible. The video discusses how the use of infant formula has been promoted by multinational corporations, leading to its widespread adoption even in situations where it may not be safe or appropriate. The script highlights the dangers of formula feeding when not used correctly, particularly in developing countries with poor sanitation and lack of education on proper use.

💡Multinational Corporations (MNCs)

Multinational corporations are large companies that operate in multiple countries. In the video, MNCs are criticized for their aggressive marketing of infant formula in developing nations, which has contributed to a decline in breastfeeding rates and an increase in health risks for infants. The script specifically mentions Nestlé, a major player in the infant formula industry, and its controversial marketing practices.

💡World Health Organization (WHO)

The World Health Organization is a specialized agency of the United Nations responsible for international public health. The video discusses the WHO's role in addressing the issue of inappropriate marketing of infant formula. It mentions the creation of the WHO code of breast milk substitute marketing guidelines, which aimed to regulate the promotion and sale of infant formula to protect the health of infants in developing countries.

💡Marketing Strategies

Marketing strategies refer to the methods used by companies to promote their products. The video describes how MNCs have employed various marketing strategies to encourage the use of infant formula over breastfeeding. These include advertising, providing free samples, and influencing healthcare professionals to recommend formula. The script criticizes these strategies for potentially misleading mothers and healthcare providers about the safety and necessity of formula feeding.

💡Infant Mortality

Infant mortality refers to the death of infants before their first birthday. The video connects the improper use of infant formula to increased infant mortality rates in developing countries. It emphasizes the importance of proper education and regulation to ensure that infant formula is used safely and does not contribute to unnecessary infant deaths.

💡Code of Breast Milk Substitute Marketing

The Code of Breast Milk Substitute Marketing is a set of guidelines established by the WHO to regulate the promotion and sale of breast milk substitutes, such as infant formula. The video discusses the creation of this code in response to concerns about the marketing practices of MNCs and the negative health impacts on infants in developing countries. However, the script also points out the limitations of the code due to its non-binding nature and ambiguities within it.

💡Nestlé Infant Formula Commission (NIFAC)

NIFAC was a commission formed by Nestlé in response to the controversy surrounding its marketing practices. The video mentions that Nestlé used NIFAC to redesign infant formula labels, eliminate old marketing materials, and release reports to reassure the public about its compliance with the WHO code. However, critics viewed NIFAC as a public relations tool rather than an objective body, questioning its independence due to its funding by Nestlé.

💡Boycott

A boycott is an act of protest in which individuals or groups refuse to buy or use a product to express disapproval or to achieve a specific goal. The video recounts how an international boycott against Nestlé was initiated in 1977 due to its marketing practices. The boycott pressured Nestlé to change its approach and eventually led to a truce and agreement with NGOs in 1984.

💡Third World

The term 'Third World' historically referred to countries that were neither aligned with NATO nor the Warsaw Pact during the Cold War, often characterized by their economic and political challenges. In the video, 'Third World' is used to describe countries where the marketing of infant formula has had particularly detrimental effects due to factors like poverty, unsanitary conditions, and illiteracy, leading to high rates of infant mortality related to improper formula use.

Highlights

Learning organizational strategies through case studies

Breastfeeding has been the norm throughout history

Introduction of infant formula in the 20th century

Formula feeding increases infant mortality if used incorrectly

Multinational corporations' promotional campaigns complicate control of infant formula

Infant formula industry resists control over its promotion

World Health Organization code created to regulate breast milk substitute marketing

Controversy over ambiguous provisions in the WHO code

Infant formula MNCs use marketing to tempt mothers away from breastfeeding

Hospitals encourage bottle feeding over breastfeeding

Free samples can cause babies to become dependent on formula

Marketing techniques influence healthcare systems to support formula feeding

Nestle's controversial promotional practices in developing nations

UN awareness of infant formula advertising problems

WHO urged member nations to introduce restrictive advertising codes

International boycott of Nestle initiated in 1977

Nestle's announcement to stop mass media advertising of infant formula

Adoption of the WHO code by the 34th World Health Assembly in 1981

The WHO code is only a recommendation and not legally enforceable

Nestle's compliance with the code and redesign of infant formula labels

Criticism of Nestle's infant formula commission as a PR tool

Nestle's agreement with UNICEF to develop educational materials

End of the Nestle boycott in 1984 after clarification conferences

Misuse of infant formula has led to the death of millions of babies

The importance of third-world governments taking a stand against MNCs

Encouraging breastfeeding for the best chance of infant health

Transcripts

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throughout history women have

successfully breastfed their children it

has only been a century since modern

technology enabled women to feed

manufactured infant formula to their

babies

formula feeding began in developed

countries and quickly spread to the

third world

when formula feeding is used incorrectly

it directly increases infant mortality

and morbidity rates in developing

countries

through promotional campaigns

multinational corporations have made it

more difficult to control the use of

this potentially dangerous product

the infant formula industry which makes

healthy profits in the third world has

resisted outside attempts to control the

promotion of its product

the problem of infant formula was

brought to light by concerned citizens

in the third world

as a result the World Health

Organization code of breast milk

substitute marketing guidelines was

created

the effectiveness of this code is

severely limited by controversy over

ambiguous provisions

this disagreement has not been settled

as long as such legislation does not

exist the consequences of product misuse

will continue to plague developing

countries

infant formula mncs spend their money on

marketing and advertising strategies

that tempt mothers away from

breastfeeding and toward breast milk

substitutes

these strategies encourage lactating

mothers to use formula instead of breast

milk during her Hospital stay the

medical staff recommends formula feeding

for the mother

in addition manufacturers sell infant

formula by donating free supplies to

hospitals which encourages mothers to

choose bottle feeding over breastfeeding

many hospitals routinely separate mother

and child at Birth and administer

newborn formula which manufactures

supply to the institution at no or low

cost

from the initial feeding the infant and

mother are introduced to the bottle

as a result the hospital creates the

illusion that doctors prefer formula and

that milk substitutes are necessary to

maintain healthy infants

offering free samples as not only

psychologically effective for the mother

but it can also cause the baby to become

physiologically dependent on formula

furthermore marketing techniques aimed

at gaining the confidence and support of

Health Care Systems have led doctors in

the third world to support this shift

away from breastfeeding

formula must be carefully marketed in

developing countries due to the many

dangers involved

it'll make sure moms are aware of the

dangers of using it and can make

informed decisions

in the past years Nestle's promotional

practices have been problematic Nestle's

Mass advertising campaigns to Market

formulas in developing nations sparked

controversy in 1968.

through billboard ads and pictorials

Nestle made people think infant formula

was safe and easy to use in the third

world

the United Nations became aware of the

problem with infant formula advertising

in 1970.

the UN protein calorie Advisory Group

warned that poverty unsanitary

conditions and illiteracy could lead to

the misuse of infant formula

the pag recommended careful regulation

and supervision of the marketing and use

of breast milk substitutes

until 1974 infant formula marketing

remained and regulated despite a clear

link between misleading formula

promotions and infant mortality

Additionally the who

urged member nations to review infant

formula marketing and introduce

restrictive advertising codes

while Nestle denied any marketing

malpractice the industry was worried an

international boycott of nestle was

initiated in 1977 after Nestle's

marketing practices were repeatedly

ignored by Active consumer groups

they urged people everywhere to boycott

Nestle products until the company

stopped promoting infant formula it

includes all direct advertising to

Consumers free samples milk nurses and

health workers promoting the product

Nestle announced in 1978 that it was

planning to stop advertising infant

formula in the mass media

as a means of resolving the conflict

industry Representatives requested a

World Health Organization meeting

in collaboration with the United Nations

Children's Fund and who the UN organized

and sponsored an international Forum on

infant health and breast milk

substitutes

to control the inappropriate marketing

practices of infant formula suppliers a

regulatory code was needed

after rejecting four drafts the World

Health assembly considered the final

version

it was adapted as a recommendation by

the 34th World Health assembly on May 21

1981.

there's one big problem with the who

code it's only a recommendation

it's not legally enforceable or binding

due to the fact that wha recommendations

don't have any legal Force without

ratification by individual countries

affected governments have been urged to

implement legislation adopting the

international code

another problem with the code as its

inherent ambiguity in addition the code

allowed free supplies to be given to

institutions and whether hospitals were

considered institutions became a

controversy

as a result of these discrepancies the

wha launched an international effort to

clarify these terms

according to Nestle since the code was a

recommendation for governments the

industry wasn't obligated to enforce it

in spite of that Nestle promised to

support the objectives of the code while

doing its part to interpret its

ambiguous terms

Nestle says the code shouldn't restrict

specific industry behavior in response

to alleged marketing violations in the

third world Nestle formed the Nestle

infant formula Commission

in compliance with the code Nestle

redesigned infant formula labels and got

rid of old marketing materials

Nestle released reports reassuring the

public that its code specs were followed

since nifac relies completely on Nestle

for funding critics questioned the

commission's objectivity despite the

chair's assurances

rather than reveal the company's flaws

the public saw the commission as a

public relations tool

the boycott cost Nestle a lot of money

and forced the company to take firmer

steps towards resolving the issues

the company agreed to work with UNICEF

to develop and test upcoming educational

materials and labels that incorporate

the code

in addition it agreed to limit gifts for

health workers to inexpensive utility

items

Nestle couldn't resolve the controversy

over article despite their best efforts

Nestle finally promised in 1984 that it

would make supplies free or low cost

only for those mothers who needed to

bottle feed their babies

Nestle would use its own definition of

need until who or UNICEF clarified it

the seven-year boycott against Nestle

officially ended in 1984 with Nestle and

the ngos declaring a truce after the

Nestle and UNICEF clarification

conferences

Nestle specifically said the company

would not engage in advertising or give

free samples to mothers

Nestle assured the ngos that it would

include statements with its products

declaring the superiority of

breastfeeding

finally Nestle promised to make

educational materials for doctors to use

with patients

although all parties hailed this

agreement as a success ngos and who

Representatives continued to disagree

with Nestle

the misuse of infant formula in

developing countries has led to the

death of millions of babies and slowed

down their social and economic

development

using infant formula improperly as a

human-made problem because modern infant

feeding Innovations have been pushed too

quickly onto Nations that aren't ready

despite more than 20 years of

controversy the infant formula problem

reminds industrialized nations that

product safety depends directly on where

the product is used

to combat the dangers inherent in this

product third world governments need to

take an effective stand against mncs

if multinationals don't follow the rules

they'll be threatened with serious

penalties

by enforcing an effective code third

world babies will have the best chance

of being breastfed

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