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Executive Summary
International marketing has become more important to companies as the world shifts from distinct national markets to global markets. Globalization brings homogenization of consumer needs, liberalization of trade, and competitive advantages of operating in international markets. Companies are now forced to think and act globally in order to survive in such a dynamic environment. In today's global market many companies are finding that there are great opportunities abroad. Companies are challenged to design new marketing programs/strategies that will work across many countries with different economic, political, social, and cultural characteristics.
Nestle was found by Henri Nestle in 1867 had become the world's largest food processing company that had revenues of more than $10 billion in 177 and with sales greater than Coco-Cola and Pepsi combined. One of these products that generated so many sales for Nestle was its infant formula. These infant formulas were in high demands by mothers; it gave them an alternative feeding method for mothers who cannot, or choose not to breastfeed. But the idea behind the baby formula is to acts as a supplement for babies experiencing a "nutrition gap".
Nestle started marketing its infant formula in the 170's to many underdeveloped countries. They had imagined that profits would be greatly in countries such as Africa, the Philippines, Mexico and other underdeveloped countries; due to the infants who are missing that "nutritional gap" and for mother who chose not to or cannot breastfeed. But its dreams of making such profit failed terribly when their methods of marketing the products were criticized.
Cheap University Papers on Nestle Baby Formula
Nestle' s marketing techniques were later accused of bribing doctors, nurses, and many other medical officials to help promote the infant formulas. "Milk nurses" who were professional salespeople often dressed in white went from door to door selling and "educating" the new mothers about the infant formula. In these underdeveloped countries, professionals in uniforms are highly respected. For these "milk nurses" to imitate as professionals, proves that Nestles' misleads and uses unethical marketing techniques to promote its infant formula.
The real problem in these Third World countries was being nutritional. It became a debate whether not to give infants breast milk or formula; how to supplement the mothers' milk with adequate nutritional foods when needed. Although this is the primary problem, the way Nestle approached a country and promoted its infant formula to uneducated mothers, was what made this a horrid 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 incompetent of using them properly. However, Nestle denied the accusations of their unethical and immoral behavior after the company came under fire. One recommendation should have research the target market in which its products will be introduced. They should not have just transfer their marketing strategy in the United States to Third World countries but adapted and focus their strategy to fit the targeted environment better. Since Nestle was introducing a new product, they could be more considerate of the cultural factors in countries where the practical 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 Nestl''s strengths lie and how this can help them when entering a new market, they should have used the Self Referencing Criteria (SRC) process. This process can determine a decision whether or not to introduce a product in a foreign market. It helps to establish a company's own cultural values, experiences, and knowledge.
1. Define the business problem in the home country which includes cultural traits, habits, and norms.
. Define the business problem in foreign cultural traits, habits, and norms.
. Isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem.
4. Redefine the problem without the SRC influence and solve for the optimum business goal situation.
If Nestle had followed this process they would have understood that the United States and the Third World countries need to use two different strategic plans. They would have understood that Americans already established a habit of nursing with formula and becoming a cultural norm. On the other hand, there were many red flags that should indicate to Nestle that Third World cultures have no knowledge background to read or write. It could then have been reasonably assumed that with a low literacy rate in these countries that they would not use the product correctly.
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 Nestl''s case, there was a lack of government regulations, and the company neglected to conduct thorough research about the environment. With research of the environment and regulations, they could foresee some of the consequences. In the end they took advantage of the situation and the innocent people involved and decided to make a poor choice. Ultimately, it did not matter how much money they made because their reputation was ruined as a result. With more research, strategic thinking, SRC analysis, and organizational analysis, many of the adverse effects could have been prevented.
To some extent the marketing problems was combining a highly-educated, mechanized, free-enterprise western culture with cultures that are poor, less literate, and less adjusted to the "Sakes Fifth Avenue" style of advertising techniques. When infant formula companies were first informed of the risks created by their products, they denied they were responsible and refused to change their practices. As the party with greater awareness of the problem they had a responsibility to avoid creating harm for those who were less able to fend for themselves. After numerous unsuccessful efforts to persuade Nestl' and other companies to change their policies, several religious groups boycott Nestl' products, in hopes that the loss of revenues would persuade the company that it should change its promotional policies.
Marketing Strategy
In 18, Nestle under immense pressure by the World Health Organization (WHO) stated a new policy for their worldwide promotions of their infant baby formula. Nestle guidelines, which was created specifically for developing countries states publicly their support for breastfeeding as best start of life, cautions mothers of consequences of incorrect use of their baby formula, and ensures infant formula marketing practices would be ethically followed stated by the International Code. But what Nestle doesn't admit publicly is that their change of their marketing strategy had to do with heavy criticism of their mass media advertising, which unethically persuaded new mothers to use bottle-feeding milk as best for new babies, which consequently provoked the rejection of breast-feed and the dependence on baby formula
Nestles support of the WHO led to the initiation of the following practices Nestle was not to advertise to general public, no sampling to mothers, no incentives to its staff for sales, no use of pictures on infant formula packs, no financial endorsements to health professionals to promote product, no donations of infant formula to physicians except in specific situations, and no educational material relating to the use of infant formula to be displayed in hospitals and clinics. All these were frequent marketing strategies used by Nestle and its competitors.
Even though overall profit margins were low for Nestle they stayed committed in the production of their baby formula. Reason for this was that mothers in underdeveloped countries (target market) stubbornly continued to breast-feed their babies. That's why the turnover for Nestle was less than 10%, while other product sales for the company were growing exponentially.
Nestle new international marketing strategy is of a decentralized system which consists of specifically molded facilities which are made to fit in to that country's culture, habits, and conditions. They now support all WHO code (mention previously) in all the countries of Africa, Middle East, Asia, Latin America, the Caribbean nations, and the Pacific nations except Japan, Republic of Korea, Singapore, and Taiwan. The company also promotes an understanding of the proper way on how to use the product, and educates consumers on considerations that need to be made before using the product.
Environment
Nestle was discovered by Henri Nestle in 1867, it has become the world's largest food processing company that had revenues of more than $10 billion in 177 and with sales greater than Coco-Cola and Pepsi combined. One of the products that generated so many sales for Nestle was its infant formula. In the 170's, Nestle decided to go international to market its new infant formula, the baby formula was to acts as a supplement for babies experiencing a "nutrition gap". Its purpose was to save millions of malnourished babies in underdeveloped countries and provide mothers an alternative feeding method for those who cannot, or choose not to breastfeed. Nestle' targeted its infant formulas in underdeveloped countries such as Mexico, Philippines, Central America and Africa where the majority of its population are illiterate, living conditions are terrible and the average salary is less than a dollar a day. Nestle' intentions of going abroad was to gain a competitive advantage over its competitors and to educate the illiterate mothers on how to use its new infant formula products.
Cultural and social values of these Third World countries affected Nestle' ability to market the infant formula successfully. Nestle' marketing techniques may have worked to getting its product recognized, but it did not communicate efficiently, users of the infant formula failed to understand that suitable water supply and sanitary conditions must be used to prepare the formula properly. Demographics, income and language barriers have caused major issues for Nestle' in the Third World countries.
Nestle' sent sales people, often working on commissions to the homes of mothers of newborns to advertise the most modernized product for babies. These sales people wore white hospital uniforms and were commonly referred to as "milk nurses." Free samples of Nestle' infant formula was distributed in hospitals and doctors were encouraged to give to new mothers using the argument that the formula has nutritional benefits. Pamphlets were also distributed in hospitals and clinics it described and discussed the proper way to bottle feed a baby. Other forms of marketing techniques were also used to promote the infant formula. Advertising was placed on television, radios, in magazines, on posters in hospitals, clinics and billboards.
Nestle used these form of communication to advertise its infant formula, but didn't realize that its communication was not effective. Eventually the bad connection cost Nestle heavily in the Third World countries.
Industry
Among Nestle, there are two other companies who are large producers of infant formulas who may become a threat to Nestle. Included in the production of infant formula, Ross, a division of Abbott Laboratories produces a wide variety of Similac Isomil formulas, PediaSure, and Pedialyte for infants with feeding problems such as fussiness, gas, and spit-up. Abbott Laboratories has been working to advance health care for people around the world. Founded by a Chicago physician, Dr. Wallace Calvin Abbott, in 1888, Abbott Laboratories has evolved into a diversified health care company that "discovers, develops, manufactures and markets innovative products and services that span the continuum of care." Headquartered in north suburban Chicago, Abbott helps people around the world in the more than 10 countries. They believe that their products will
1. Promote overall growth in weight, length, and head circumference.
. Nutritionally balanced carbohydrate, protein, and fat.
. Well tolerated.
4. Specifically formulated to mix easily with human milk.
Abbott Laboratories has been developing products to meet the needs of children for more than 40 years. Their research focuses on nutrients for growth and development, and diagnostics that help detect dangerous childhood diseases.
The other major infant formula company that produces Enfamil formulas is Mead Johnson it's a nutritional division of a two billion-dollar Bristol-Myers Squibb. In recent years it has also been classified as a world leader in nutrition that manufactures more than 60 brand name products and markets them in more than 100 countries. In the United States and Taiwan, they are the infant formula market leaders. Mead Johnson's "commitment to world leadership" in nutrition is confirmed not merely by a geographic presence, "but by a set of ethics, standards and practices" that they are proud to uphold. Their sale in 17 was over $17 billion dollars, and has 54,000 employees worldwide. Its intent is to become a common household name by families around the world.
Even though, Nestle is one of the world's leading manufactures of the infant formula, its reputation has been smeared due to the infant formula incident in the Third World countries. Nestle competitors used Nestle as a role model not to make the same "unethical" marketing mistakes. Nestles' situation gave other companies such as Abbott- Ross and Mead Johnson the opportunities to produce and market its infant formula products in ways different from Nestle.
A threat to the company is the increased competition as other companies find ways to catch up to Nestle. Because of its wide range of businesses Nestle is involved in, these competitors include many of the world's top companies such as Proctor and Gamble, Pepsi, Kellogg and Kraft Foods. Other large threats came from negative public opinion regarding Nestl''s marketing techniques of their breast milk substitutes in the past, which led to the inappropriate use of the product in Third World countries.
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