Integrated Capstone Project

“Integrated Capstone Project”

Executive Summary

In context to this report, it can be mentioned that its objective is to provide the deep insight about the ethical issues as well as its core values. According to the findings of this report, it can be described that Nestle has to face various issues due to lack of ethics, core values as well as corporate social responsibilities within the organization.

This report’s findings defines that three major issues that faced by the Nestle such as expensive water bottle and lack of quality of water issue, child labor in cocoa business chain issue and last but not the least high amount of lead in Maggie noodles.  Further, in this report, it also explains about the corporate social responsibility theories which are helpful to measure or evaluate these identified issues.

Beside from this, the findings of this report also determined the appropriate solution and recommendations that are needed by Nestle to overcome the issues related to corporate ethics, organizational core values and its corporate social responsibilities.

In this way, from the findings of this report, it is identified that these recommendations and suggestions will play crucial role in order to overcome organizational issues as well as increase its damaged reputation. At the same time, it can be mentioned with the help of report’s findings that the all over study of this report provides the deep insight of Nestle Company’s ethics, values and CSRs.

Background of company

Nestle is considered as largest food company which deals in global market. It includes the baby food, medical food, bottled food, breakfast cereals, coffee & tea and many more. The mission of the company is promoting “Good Food, Good Life”. It means that company offers the product which is best in taste and provide nutrition through its product (Nestle, 2018).

However, company believes in enhancing the value by compliances the law into business. Likewise, company follow the standard in their quality check. This practice of company supports in terms to satisfy the customers and society.

In regards to business product line, company currently deals in more than twenty-nine products in which, infant baby, food bottled, water breakfast, cereals, confectionary, dairy product products are included.

However, the annual sales of company is around US $ 1.1 billion by including the Nespresso, Nescafe, Kit Kat, Smarties, Nesquik, Stouffer’s and Maggie (Smith, 2012). Among these products, Maggie is one of the most recognised merchandise on global platform. This product provides maximum benefit to Nestle in the form of 60% market share to the company.

In recent scenario, Nestle has 447 factories and it operates in 194 countries. In order to perform such operations, it employs around 339000 people which share great passion for work. At the same time, company has small organisational hierarchy which includes the national manager, Zonal manager, regional manager etc.

Furthermore, the BCG Matrix indicates that the Nestle Mineral water brands are in the star stage as in this aspect, company can earn more profit in future. On the other hand, power bar chocolates and lean cuisine are the weak points as company fails to attract the customer in these segments. So, company is planning to eradicate these product lines in order to reduce the losses.

Thus, this way company take its decision and prepare strategy accordingly (Sojamo and Larson, 2012). Therefore, these actions of company makes it sustain for longer duration and company offers new product line to target group in this changing business environment.

Analyse of issues/problems

Nestle is the company which is recognised for its value system and quality product. But, currently Nestle faced the issue related to consumer Boycott. This is because of Nestle ill-practices in regards to ignore the society values and ethics (Strandvik et al., 2013).

Based on this study, it can be stated that company is facing an ethical issue due to not following the value in the manufacturing of product and avoid the responsibility towards the society.

However, Nestle face three ethical issues such as charge excessive price of bottled water and the quality of water is similar to the tap water. This practice does not show the value of the company as such actions are unethical and it can harm the health of individuals.

This issue raise the concern related to environment and human rights that water should be free of charge. But, other expenditure is come in manufacturing the product such as bottling, packaging, labelling and marketing and others etc and it increase the total cost of bottle.

This practice is unsatisfactory in the situation of under-developed countries as the population has lack of basic sanitation like clean water and that’s makes nestle to not consider to charging the natural resources. Therefore, the similar quality of tap water has dropped the sales of nestle in 2008 to 2009 (Lee et al., 2013).

Other than that, child labours in cocoa supply chain are the biggest example of unethical action as company tends to use the child of below 5 for the hard job tasks with low wages (Korthals, 2015).

For instances, the cocoa is called as an agricultural business in which labour needs are high to harvest the crop. So, at that time, company hire the child workforces to perform the work but according to international labour rights fund, this exercise shows the exploitation of children’s which is considered as an unethical in the eyes of laws and legislation.

Besides that, powered breast-milk foundation is also covered the ethical issue as this practice leads to number of infant death in poor countries. This action reveals the issues of company in regards to fails to adhere the legislations and laws.

Additionally, the Nestle Maggie issue tend to be biggest ethical issue which affect the company market share. It is justified through the scenario which has happened in India.

Uttar Pradesh government Food Safety and Drug Administration found that Maggie has claimed of “no addition of MSG” (Monosodium glutamate) on the yellow packet of Maggie noodles. In reality, the sample of laboratory shows that Maggie noodles have an MSG.

It means that the amount of lead found was over 1000 times more than what nestle has claimed especially in India. In regards to this, the authorities of shahjanhanpur, Uttar Pradesh have imposed the fine of Rs 45 Lakh to the Nestle India for higher than permissible ash content in samples of Maggie Noodles.

This news breaks the customer faith or loyalty towards the brand as youngest and children’s are like more Maggie so after the spread of negative word of mouth, individuals deny to accepting the product. This practice directly affects the company market share and profits (Kiran and Sharma, 2011).

Moreover, the controversy of Maggie is also proved to be failure for the company as food and drug administration in UP asked the question to the Nestle Maggie that how the lead found more than 1000 times in the Maggie Masala and the company doesn’t respond in regards to this situation. Thus, these actions clearly reflect the company unethical Behaviour towards the society and general public.

Detail discussion of the identified issues in regards to use theoretical framework

This section addresses the ethical issue of Nestle with the help of theories or model of professional authors. Likewise, different researchers indicates that CSR, ethics and value system, all are the areas supports the company to contribute efficiency and productivity in the business and gaining the high recognition in society.

According to Nikolaeva and Bicho (2011), stated that corporate social responsibility is the ethical practice within which company work for the welfare of society and CSR activities does not include any action which is against to the society norms. At the same time, CSR also protect the interest of different shareholders.

Thus, these all actions are considered while prepare the CSR for the company. In context to Nestle, Eberle et al. (2013) analysed that Nestle failed to adopt the CSR activities properly as company is used the child for performing the hazardous work which is unethical. But, company mentions that its intention behind this is to give employment to children and reduce poverty. The authority does not found this respond valid.

It leaves a bad impression on the company sales. Based on this study, Ioannou and Serafeim (2015) applied the virtue ethical theory which mentions that individual ethical value is determined by his/her character and it defines the people intension, virtue to act ethically.

In a similar manner, the question is raised on the Nestle that “Is company feel guilty about the unethical practices?” Due to having an intension of benefitting sole profit of itself, the company action is put in unethical area.

From the finding of Kim et al. (2012), it is identified that every company or organisation to prepare the CSR activities, there is need to follow three stages such as economic responsibility, legal responsibility and ethical responsibility etc. The economic responsibility mentions the obligations to fulfil the needs of society.

Likewise, the company needs to focus on the areas like provide employment, reduce the pollution and promote the health awareness among the individuals. Moreover, legal responsibility of company is to perform the activities by adhering the legislation and laws. For instance, company needs to adhere the law while manufacture the product.

Lastly, the ethical responsibility stated that the company intention needs to be right when it comes to perform an activity. This practice will give rise to the ethical consideration. In regards to these three areas, it is analysed that Nestle has failed to achieve the CSR activities properly as company does not address the economic, law and ethical areas.

The best example of this is the controversy of Maggie where company has performed the unethical practice by increasing the lead more than 1000 by knowing that this can affect the people health adversely (Aguinis and Glavas, 2012). At the same time, company does not respond on this controversy which is also given the sign of ill behaviour.

Therefore, this action of company clearly shows the unethical practice. Other than that, high priced of bottled water is also tending to be unethical as company offer the water which is equivalent to the tap water. So, it is false action which company is performing on the name of brand.

The theory of CSR and ethics make a clear understanding about the requirements for adding value. Based on such theoretical framework, it is analysed that Nestle fails to perform the ethical practice and incorporate CSR into the business.

Due to this, the company lost the faith and loyalty of customers and this affects the company competitive advantage against the competitors. In concern to such issue, there is need to provide possible solutions for addressing the issue in an effective manner.

Recommended the solution/suggestions

On the basis of these issues, it can be suggested to Nestle that it needs to focus on its values in order to improve its products quality as described in first ethical issue of this report. According to first ethical issue, it can be determined that some health related standards and principles are not used by it. So it has to face various problems.

In context to issue such as charge excessive price of bottled water and the quality of water that is similar to the tap water, it can be advised to Nestle that it should use less expensive manufacturing process so that it can ne reduced the price of water bottle as well as it should provide quality in its products (Porter and Kramer, 2019).

Due to these practices, the prices of the water bottle will be reducing and the sale of its product that has dropped due to lack of quality of its products would increase.

Further, it can also be suggested that it should work with World Health Organization’s code. So that it can maintain its values as well as ethics and it can also contribute in corporate social responsibilities towards the society.

Nestle should follow some other methods that can improve its damaged reputation due to boycott that comes under the knowledge of utilitarianism theories contain giving support of local government in context to provide clean water.

At the same time, it is Nestle’s responsibility too that shows values it its activities in terms of environment and human rights because which water is used by it, is free of cost.

In addition to its ethical issues, it is facing another issue such as child labor who are used in its cocoa business. This is unethical practice that was done by Nestle in its business. In context to this issue, it can be recommend to Nestle that it should not hire under age labor for its cocoa business supply chain (Johnson, 2017).  In terms of this, it should follow all the standards related to human rights. Furthermore,

it can also be suggested that it should organized some programmes in order to protect the interest of children from work into high quality education. Nestle should also seek the commitment from its outside suppliers worried that they shall end the hiring of children and is should also follow the complete compliance with the base code of ETI.

Moreover, in respect to child labour, it should follow entire rules and standards that have passed by the International Labour Organization (ILO), else Nestle will have to face various problems such as heavy penalty or stopped business operations for temporarily as well as permanently.

Other than that, it’s another issue that was big ethical issues in order to its all issues. In context to its Maggie issues, it can be recommended to Nestle that it should approve its products lot after ensuring that whether its product’s lot is properly checked by following all quality standards or not (Hopkins, 2017).

Further, it can also advised to Nestle that it should be more focused in context to its product of Maggie noodles because it has already faced problem like penalty in terms of money in respect to Maggie noodles. Nestle should also concentrate to guide its employee as well as it workers in order to manufacturing process of Maggie noodles.

It can provide the written standards and limitations in order to use of chemicals to its employees (Grayson and Hodges, 2017). So they can follow these standards as well as limitations in process of manufacturing of Maggie noodles and the quality can be managed by them.

Thus, in context to these ethical issues, it can be suggested to Nestle collectively that, it needs to maintain its values system as well as organizational ethics so that it can again maintain its damaged reputation.

Further, it should also contribute in its corporate social responsibilities for the society because it also has the responsibility to do something for public or society. It uses natural resources like water, workforce etc that is why it is responsible for ethical and CSR practices (Crane et al., 2014).

It can organize various educational programme, training sessions, and events and so on in order to educate its employees about the ethics, its core values and CSR. So that, they can perform with ethical behaviour within the organization.

Reflection

This section reflects the learning which is achieved from the study of Nestle. Likewise, I have learned various aspects of ethical practices and CSR activities. From the above study, I gained an understanding about the ethics, value and corporate responsibility towards the society.

However, this report also helped me to get knowledge about the Nestle issues which it faces in its business operations. The study showed that company is facing ethical issues in the form of failing in fulfilling the economic, social and legal responsibility. Such practice affects the company in a negative manner as Nestle get decline in its profit and revenue generation.

These areas indicate the importance’s of ethical framework for the business in regards to stay in competition over the longer duration (Carroll, 2015). Moreover, ethical practice also helps in enhancing the goodwill and achieving the recognition of company.

Additionally, I also learnt the Nestle critical controversial issue which is Maggie where it is found that company does not follow the legislation and increase the level of lead beyond the 1000. This can influence the health of individual. This example shows that how much it is important to consider the ethical framework in order to retain the customers.

Besides that, I also develop an understanding about different companies CSR activities through learn the CSR models and virtual ethical theory. This theory clearly signifies that ethical practices not only prove to be helpful for the society but it also support the company. This is because CSR activities help the company to get the recognition in market and make healthy relationship with suppliers, distributors etc.

at the same time, CSR activities also proves to be helpful for creating a faith and trust of individuals over the company. These areas enhance the customer base and profit margin of the company. Therefore, it can be stated that CSR contribute efficiency for both company and society.

The above mention study helps me to understand the concept of ethics, CSR and it also provide an understanding related to how such practices is applied in reality. It means how companies incorporate the CSR and ethical values (Crossan et al., 2013).

At the same time, I also learnt the consequences of CSR if it is not followed properly. Thus, these learning will help me in future career when I work with any reputed organisation. Additionally, this study also supports me to both perform both personal and professional lives ethically.

Likewise, I can able to perform the actions in my personal life with a positive intension and try to not harm to anyone. Similarly, this learning will also help me when I start my own business then with the ethical practices, I can develop large customer base (Audi, 2012). This will helps to achieve the desired results and outcome.

References

Aguinis, H. and Glavas, A., 2012. What we know and don’t know about corporate social responsibility: A review and research agenda. Journal of management, 38(4), pp.932-968.

Audi, R., 2012. Virtue ethics as a resource in business. Business Ethics Quarterly, 22(2), pp.273-291.

Carroll, A.B., 2015. Corporate social responsibility. Organizational dynamics, 44(2), pp.87-96.

Crane, A., Palazzo, G., Spence, L.J. and Matten, D., 2014. Contesting the value of “creating shared value”. California management review56(2), pp.130-153.

Crossan, M., Mazutis, D. and Seijts, G., 2013. In search of virtue: The role of virtues, values and character strengths in ethical decision making. Journal of Business Ethics, 113(4), pp.567-581.

Eberle, D., Berens, G. and Li, T., 2013. The impact of interactive corporate social responsibility communication on corporate reputation. Journal of Business Ethics, 118(4), pp.731-746.

Grayson, D. and Hodges, A., 2017. Corporate social opportunity!: Seven steps to make corporate social responsibility work for your business. UK: Routledge.

Hopkins, M., 2017. Introduction. In CSR and Sustainability(pp. 30-58). UK: Routledge.

Ioannou, I. and Serafeim, G., 2015. The impact of corporate social responsibility on investment recommendations: Analysts’ perceptions and shifting institutional logics. Strategic Management Journal, 36(7), pp.1053-1081.

Johnson, C.E., 2017. Meeting the ethical challenges of leadership: Casting light or shadow. US: Sage Publications.

Kim, Y., Park, M.S. and Wier, B., 2012. Is earnings quality associated with corporate social responsibility?. The Accounting Review, 87(3), pp.761-796.

Kiran, R. and Sharma, A., 2011. Corporate social responsibility: a corporate strategy for new business opportunities. Journal of international business ethics, 4(1), p.10.

Korthals, M., 2015. Ethics of food production and consumption. The Oxford Handbook of Food, Politics, and Society, pp.1-15.

Lee, H.H.M., Van Dolen, W. and Kolk, A., 2013. On the role of social media in the ‘responsible’food business: Blogger buzz on health and obesity issues. Journal of business ethics, 118(4), pp.695-707.

Nestle., 2018. Company Profile. [Online] Available at: https://www.nestle.in/ (Accessed on: 16-05-2018)

Nikolaeva, R. and Bicho, M., 2011. The role of institutional and reputational factors in the voluntary adoption of corporate social responsibility reporting standards. Journal of the Academy of Marketing Science, 39(1), pp.136-157.

Porter, M.E. and Kramer, M.R., 2019. Creating shared value. In Managing Sustainable Business (pp. 327-350). Springer, Dordrecht.

Smith, E., 2012. Corporate image and public health: an analysis of the Philip Morris, Kraft, and Nestle websites. Journal of health communication, 17(5), pp.582-600.

Sojamo, S. and Larson, E.A., 2012. Investigating Food and Agribusiness Corporations as Global Water Security, Management and Governance Agents: The Case of Nestlé, Bunge and Cargill. Water Alternatives, 5(3).

Strandvik, T., Rindell, A. and Wilén, K., 2013. Ethical consumers’ brand avoidance. Journal of Product & Brand Management, 22(7), pp.484-490.

 

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