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Week 8: Case Study -- Nestle

Free Market economics vs consumer protection Who acts on the consumers’ behalf? Who should?

The buyer/seller relationship

What can cause breaches? Broken trust Competitive pressures

Substandard materials Inadequate research, testing or quality control Improper packaging Overstated claims of product benedits or capabilities Faulty instructions

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Baby formula issues

Contributed to malnutrition in 3rd world Increased in mortality rate Why / how?

Hygiene / unclean water Inadequate training High cost of powered formula Use of “milk nurses” Record profits for both Nestle and Bristol-Myers

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Escalation

Protein Calorie Group of the United Nations 27th World Health Assembly In the US…

Four years later! Interfaith Center for Corporate Responsibility

(ICCR) filed shareholder resolutions Ford Foundation & Rockefeller Foundation

supported them

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Bristol-Myers responds

The Infant Formula Marketing Practices of Bristol-Myers Company in Countries Outside the United States

Proxy statement – “… totally responsive to [ICCR] concerns.”

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Further escalation

Sisters of the Precious Blood sue Security & Exchange Commission supports them

Congressional resolutions Support responsible behavior by companies

selling overseas Nestle forms International Council on Infant

Food Industries (ICIFI) Bristol-Myers doesn’t join

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INFACT (Infant Formula Action Coalition) initiates nationwide boycott of Nestle products

Beech-Nut execs get one year in jail and $100,000 fine

Assorted word bombs and initiatives from both sides

Boycott is still going on today

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Analysis

What caused the crisis? What did Nestle and Bristol-Myers do wrong?

What did they do right? What is the real issue? How do they fix it now?

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Corporate Communications

Involves aspects of interpersonal, organizational and mass communication

Still about communicating effectively with your target audiences Customers Shareholders Employees Vendors and suppliers The community The media (local, national and business)

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Typical corporate organization

President / CEO Board of Directors

Product Division #1

Product Manufacturing

Corporate Finance

Distribution / Supply Chain

Human Resources

Community Affairs

Corporate Communications

Corporate / Brand Advertising

Product Development

Product Marketing

Product Advertising

Worldwide Marketing & Sales

Product Sales

Corporate Legal

Outside counsel

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Outside agencies can provide PR and advertising support

Compensation can be Flat fee Monthly retainer with fixed hours Minimum retainer plus actual hours Straight hourly charge, based on position or expertise

Covers service hours, fees (like media) and out-of-pocket expenses (like travel)

Working with management

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Commitment to and participation in PR Retention of competent PR counsel Incorporation of PR perspectives in policy

making Two-way communication with both internal and

external publics Coordination of what is done with what is said Clearly defined goals and objectives

Public Relations staff

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Loyalty Counsel on the PR aspects of decisions Skill in articulating principles and in enhancing

public understanding of the organization Inspiration to help all members do their best Influence in restraining other members from

saying or doing anything detrimental to the organization’s welfare

Character – honesty, trustworthiness, discretion

Internal PR department

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Advantages: Team knowledge Knowledge of the organization Economy to the organization of many ongoing

programs Availability to associates

Internal PR department

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Disadvantages: Loss of objectivity Domination and subservience Burnout Confused mission and roles

Advantages of outside counsel

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Lack of management experience in PR HQ far from financial and communication

centers The firm has wide-ranging up-do-date contacts Access to experienced executives and creative

specialists from distant lands Need for specialized or infrequently used

services Need for independent judgment of an outsider

Career opportunities

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Corporate Communications Media Relations Employee / Internal Communications Financial Communications

For next week:

Read: JC -- 10.2 (Nestle case study) JC -- 3.4 (Kodak case study) CCB – Chap 3

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