Nestlé Boycott
Final Exam Case Study

Business Ethics

The arguments for continuing the Nestle boycott from the viewpoint of consumers is that in the last 30 years, there has been significant amounts of change that have resulted from the boycott. Nestle not only agreed to abide by the WHO code but Nestle also stepped up their efforts to develop new ways of managing this baby milk issue. As stated in the article, the company introduced an ‘ombudsman system’ to encourage employees to confidentially report violations without fear of retribution — this shows their efforts to change. Another example is that they are being open and transparent with their marketing by allowing Bureau Veritas, the global auditing firm to complete an internal and independent assessment. We can see that the efforts of the boycott are not being ignored in that Nestle went to great lengths to release dedicated reports on its economic and social impacts in Africa and Latin America for the first time. On the other hand, there are also arguments against continuing the boycott. Infant formula products account for less than 1% of Nestlé’s profits, yet this 30-year boycott and issue is still present today and if anything the media coverage of this issue for the last 30 years has caused anything but harm to Nestle. If anything, they are receiving more publicity than ever. Seeing as Nestle has wilfully accepted each demand by the boycott and has abided by every code of conduct presented by the WHO and other similar health organizations around the world, we can see that they are not phased whatsoever. Releasing confidential reports and agreeing to an independent audit are risky for a multinational company the size of Nestle. If anything, Nestle has more than simply complied with the requests of everyone. The main argument against the boycott is Nestlé’s increased publicity in the media, which is doing the exact opposite of the boycott’s intentions. This increased publicity has also caused Nestlé’s share price to increase almost 1600 percent in the last 30 years.
According to Crane and Matten, “under perfect competition, consumers drive the market”. (Crane and Matten, 2010) By definition consumer sovereignty is essentially the power consumers have to determine what goods and services are produced. The theory suggests that consumers, not producers, are the best judge of what products benefit them the most. Due to the fact that consumer markets depend so heavily on demand, producers must monitor the needs of these individuals if they want their products to have any chance at success. The implication Nestlé’s case has for notions of consumer sovereignty is that Nestle is full and well aware of their customers needs and wants and they are abiding by it. They know that if they were to do otherwise, their chances at success would be very slim. From the case, we can conclude that as soon as the issues of the boycott rose, Nestle did not put up much of a fight. They rather embraced it and complied accordingly. This can be seen in CEO, Peter Brabek’s comments, "we also carry out annual audits on WHO Code compliance with a sample of Nestlé companies, and we investigate any substantiated claims made by those who believe we have broken the Code.... If we find that the Code has been deliberately violated, we take disciplinary action." (Brabeck-Letmathe, 2007) From his comments, we can see that Nestle has put consumer sovereignty as their highest priority as they continue to abide by the WHO code. To further evaluate whether or not Nestle truly is embedding consumer sovereignty into their practices with the rise of this boycott, we would have to use the Consumer Sovereignty Test (CST) proposed by Smith. This test is comprised of three factors: * Consumer capability—the degree of freedom from limitations in rational decision making enjoyed by the customer. * Information—the availability and quality of relevant data pertaining to a purchase decision. * Choice—the extent of opportunity to freely switch suppliers.
(Crane and Matten, 2010)
In conclusion, the implications of the boycott have led Nestle down the path to embed consumer sovereignty into their business model and everyday practices.

References

Brabeck-Letmathe, Peter. "Addressing the Water Challenge." The Huffington Post. TheHuffingtonPost.com, 25 Apr. 2013. Web. 4 Dec. 2014. <http://www.huffingtonpost.com/peter-brabeckletmathe/addressing-the-water-chal_b_3152926.html>.

Crane, A., & Matten, D. (2010). Introducing Business Ethics. Business Ethics. New York: Oxford University Press Inc. (Original work published 2004)