beech nut case study
TRANSCRIPT
BOGUS APPLE JUICE
PRESENTED BY— AKSHITA CHAMARIA AKRUTI PATHAK ASHISH KUMAR
GOYAL SOURABH MITTAL NEHA NATANI
ETHICS: THE KEYSTONEEthics is defined as the “discipline dealing with what is
good and what is bad, and right and wrong or with moral duty and obligation”
Business ethics “is the application of general ethical principles and standards to business behavior”.
There are three Domains of human action:Domain of Codified Law (legal standard)Domain of Free Choice (personal standard)Domain of Ethics (social standard)
AMOUNT OF EXPLICIT CONTROL
AMOUNT OF EXPLICIT CONTROL
Ethic
s
Ethic
s
HIGH LOW
CO
DIF
IED
LA
W
FR
EE
CH
OIC
E
DRIVERS OF UNETHICAL BEHAVIOUR Overzealous pursuit of personal gain, wealth and
other selfish interest Heavy pressures on company to meet the earning’s target
Company culture that puts profitability ahead of ethical behaviour
The caseBEECH-NUT2ND in Baby Food Industry behind Gerber15% Market Share1972, bought by Frank Nicholas and his partners Financial Trouble1979, take over by Nestlé
1981, Lars Hoyvald joined as PresidentAim “aggressively marketing top quality product”
In June 1982, he found:1. Strong evidence that Beech-Nut Apple Juice for babies was made from concentrate that include NO APPLE.2. Since 1977 the company had been purchasing low cost apple concentrate from Universal Juice Company.3. John Lavery the vice president in charge of operation, brushed aside tests that showed the presence of corn syrup
COMPANY’S DILEMMA
To switch on the suppliers and recall the product already
sold in the market To carry the business as it is,
continue selling their bogus apple juice in the market.
Issues that Hoyvald took into consideration while arriving to this decision:
1. His promise to nestle superior that he would return a profit of $7 million for the year
2. The cost involved in switching the suppliers which amounted as $4.25 million loss to the company for the first year n $.75 million each year
3. The company’s position to take such decision
Hoyvald decided to continue selling the bogus apple juice Fear of that federal investigator might seize the stock of apple juice Aggressive foreign sales campaign Managed to sell the bogus apple juice until march 1983 1988 both Hoyvald and Lavery were convicted on charges of consumer fraud Received a sentence of one year and one day and fined $100000
New owners in 1972, Frank Nicholas and his partners, Undercapitalized & Overloaded with Debt
New owners in 1979, Nestlé, invested $60 million in capital improvements and marketing
Supplier to be Universal Juice
Switch to another supplier could well have tipped the scales toward insolvency
Juice adulterated but NOT HARMFUL
ETHICAL
JUSTIFICATION
Recall not feasible
Dumping product into foreign market justified
Avoid negative publicity
The corporate culture of nestle values and praises above everything else competitive aggressiveness
The influence of corporate culture can explain mitigate one's unethical behaviour
Ethics - against beech-nut
Baby Product
Hoyvald’s claims of selling high quality product
Lavery’s indifference to unpleasant discoveries about the raw material
Justification by the company
Foreign Sales campaign in fear of TOTAL recall
Lack of Value Based Decision Making
Alternate ethical strategy
conclusion Hoyvald and Lavery tried and convicted
Each sentenced for 1 year and 1 day
Fined $ 100,000
Company settled a suit bought by consumers for $ 7.5 million
Hoyvald’s Lawyer seeked proposal for his client to give lectures in B-schools
Proposal rejected
Utilitarianism- theory given by Jeremy Bentham and later discussed by John Stuart Mills Sum of total benefits accruing from that action less the sum of cost from that action is Maximum-choose that alternative Utilitarianism also maintains that an ethical act produces the “greatest possible good for the greatest number of people.” A decision which was acceptable by Utilitarian standards- Stockholders, suppliers were also stake holders Kantian ethics- (treated them as means) Deemed unjust by critics who argued that Beech-Nut sacrificed consumers for the company’s long-term economic viability.
Questions???