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Posted on October 12th, 2012, by

“Business ethics is a form of applied ethics that examines ethical principles and moral or ethical problems that arise in a business environment”ť (Machan 1999). In general, business ethics denotes the principles that serve as the basis for an individual or a company in the process of taking business decisions. Lots of conflicts and lawsuits have taken place because of different ethical principles. Therefore, the creation of common ethical environment and generally accepted rules and principles of ethical conduct is important for efficient economical activity. Nowadays business ethics issues become extremely important due to globalization and international cooperation; when companies originating from different cultures start interacting or when a company enters foreign market, the understanding of ethical principles is crucial for business success. This essay is dedicated to analyzing historical development of a case related with global ethical issues ”“ the story of NestlĂ© and its sales of breath-milk substitutes. The aim of the essay is to analyze the case, compare ethical perceptions in different countries and regard risks and consequences caused by the dilemma.

1. Nestlé ethical issues

Nestlé is a leading producer of infant formula and is selling the formulas in many countries, both developed and developing ones. The usefulness of such products is ambiguous itself: on one hand, there is nothing better for children than natural milk feeding, but if, for example, the mother gets a critical disease during feeding or has AIDS, the child cannot be fed naturally; the same relates to mothers who lose milk for some reasons. In these cases the products offered by Nestlé and some of its competitors are vitally important.

The history of the ethical case goes up to early 1970s when NestlĂ© was accused by the UK and the US because of aggressive marketing and offering samples of formula to mothers in maternity homes. Such strategy led to the increasing number of mothers who did not want to feed their babies naturally and preferred NestlĂ© feeding; also, these samples contained ingredients that might cause kind of addiction for children. Both countries boycotted NestlĂ©’s production. Finally, in 1981 the United Nations Children’s Fund (UNICEF) and the World Health Organization (WHO) elaborated an International Code of Marketing of Breast-milk Substitutes. The main points of the Code are listed below (Megone 2001):

1. No advertising of breast-milk substitutes.
2. No free samples or supplies are to be given to mothers.
3. No promotion of products through health care facilities.
4. No contact between company marketing personnel and mothers.
5. No gifts or personal samples to health workers.
6. Information to health workers should be scientific and factual only.
7. All information on artificial feeding, including the labels, should explain the benefits of breastfeeding and the costs and hazards of artificial feeding.
8. Unsuitable products should not be promoted for babies.
9. Babies should not be depicted on infant formula packaging.
10. Labels should be set out in local indigenous languages.

In 1984 Nestlé accepted the Code and adjusted its marketing strategy with it, therefore ending the boycotts. However, there were consequent problems in developing countries with infant formula.

2. Globalization influence

Concerning NestlĂ©’s marketing campaign in developing countries, new ethical questions have emerged. Though NestlĂ© acted with the Code of Marketing limitations, it appeared that due to lack of pure water bottles and equipment could not be adequately sterilized, and as a result the infant formula produced in those countries could cause stomach infections. This factor led to further amendments to the Code of Marketing and limitation on selling NestlĂ©’s products in South Africa and other developing countries.

However, one more issue related to infant formulas production and distribution created ethical dilemma ”“ it is the fact that in sub-Saharan Africa 90% of mothers are HIV-positive and there is 20% probability that a child can get infection due to breastfeeding (Megone 2001).

After a period of arguments in the beginning of 2000, in 2001 the World Health Assembly adopted a resolution which allowed recommending and offering breast-milk substitutes.

3. Different ethical perceptions

As we can see, the difference of perceptions and priorities lead to the dilemma between needs of mothers in developing countries and demands created by developed countries. On one hand, unexpected conditions such as lack of clean water in African countries can be regarded as additional reasons for restricting the use of breath-milk substitutes. On the other hand, the extremely high level of ill mothers, especially those with AIDS infection, and other factors that result in infection for mothers and babies create a high necessity for developing countries concerning the substitutes of natural feeding. In the case with Nestlé the issue has been solved with editing and amending the Code of Marketing, but this fact took place solely due to the fact that there were organizations dealing exactly with these business issues. In other cases, such different perceptions to business needs would lead to conflicts and both sides might suffer. Therefore, it is important to establish a common ethical environment when operating in a foreign country, especially is the standards of living and problems of home country and host country are totally different.

4. Risks and Consequences

In this case Nestlé has lost more than gained; besides the international boycotts and growing restrictions on marketing strategy, the company has significantly damaged its public image and lost in popularity. This fact gave advantage to competitors of Nestlé, such as US company named Wyeth (Fritzsche 2004). Therefore, the risks related with business ethics and violation of its principles are rather high and the long-term results of such violations are so significant, that even in case of large revenues the companies should better comply with common sense and common ethical perception.

Conclusion

The problems of business ethics are only arising due to the increase of globalization. In my opinion, international institutions should be created which will regulate and form new ”“ globalised ”“ principles of business ethics. The example of such institutions can be WHO and UNICEF. Each company, especially those operating internationally, should have a written code of ethics and employees should be trained properly concerning ethical issues. In general, we are witnessing the process of creation of general ethical environment and it’s natural that the unification of business stereotypes of different cultures and countries is not an easy process.

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