Nestle's ethical challenges and strategic recommendations for profitability

Nestle Analysis and Recommendations

Nestle is one of the world's leaders in the packaged food industry, with products ranging from candy to bottled water to -- due to a relatively recent acquisition from Kraft -- frozen pizzas.

The company's stability and profitability can be seen as somewhat questionable, however, due to a combination of different factors and events including a reduction in profits for the bottled water industry -- one of Nestle's major endeavors and several ethical problems the company has faced in recent years.

An analysis of the company reveals certain strategic changes that should be implemented.

ECONOMIC ENVIRONMENTS

The economic crisis and global recession that the business world has been experiencing for the past year-and-a-half or so has had an impact on every major international company, and Nestle is no exception. Some indicators suggest that the company has actually benefited slightly from the economic downturn in terms if its industry share, yet other measures of the company's value show the company's reduced profitability and growth potential in the current economic environment, as well as its reduced potential to raise capital through investment (Appendix 1). The sales per share of Nestle stock were cut almost in half from 2008 to 2009, yet at the same time sales did not actually take as huge a tumble as might have been expected, as many of Nestle's products and subsidiaries are not engaged in the production of luxury items but rather produce food items viewed as necessities or budget-conscious alternatives.

(Appendix 2).

Recommendations

Nestle's leadership must make the organization's ethical stance clear and unequivocal, committing the company to better stewardship and cooperation with consumer and world health agencies. Moving away from bottled water will actually solve many of the current ethical quandaries as well as freeing up capital for more profitable and sustainable pursuits; divestment of the bottled water subsidiaries or their slow dismantlement is recommended. Finally, Nestle must focus efforts more intensively on emerging markets.

CONCLUSION

Nestle is definitely poised to regain what stature and profitability it has lost in the current economic crisis, through intensive marketing campaigns in emerging markets, a reorganization of its operations and subsidiaries to maximize profitability while shedding less profitable enterprises, and through a commitment to ethical practices and policies that has never been a strong suit of the company. Accomplishing these specific tasks will allow Nestle to build a stronger image and a stronger position for itself in the global food industry, poising Nestle to capitalize on the rebounding economy as the overall global economic situation improves. A failure to address the problems the company is currently facing, on the other hand, will leave Nestle more vulnerable to outside economic and consumer forces, which would serve to further damage the company's reputation and profitability.

Appendix 1

Appendix 2

Appemdix 3

-Pre 1980s: Long-standing boycott of Nestle products for the company's continued advertising and distribution of baby formula despite World Health Orgnization codes calling for a return to breast feeding in order to promote health

-1984: nestle agrees to adhere to the code and the boycott is lifted, only to be reinstated less than a decade later when the company is deemed untrustworthy and questionable in its adherence to the code

-Mid 90s to present: Nestle is accused of using genetically modified ingredients in some of its products without proper labeling, and of dumping products unwanted in Europe for various reasons -- including health concerns -- into Asia and other developing markets

-1998: Nestle prices its bottled water so high in certain countries that it becomes a luxury entirely unaffordable to the lower classes, making potable water even harder to come by -2002: Nestle's labor practices, especially in the cocoa fields on the Ivory Coast that supply the company with much of its chocalte, are exposed as a major humanitarian issue, including slave-like conditions and child labor

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