nestle bangladesh
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Nestlé and the problems it’s facing
Prepared For:
Mr. Mohammad Ariful Gani
Faculty, MGT-372
Section: 02
School of Business
North South University
Prepared By:
Name: ID:
Rakibul Hasan 071177030
Ahmed Imran Kabir 1030698030
Faisal Khaled Jamil 0930667530
Shafat Ahmed Jamil 1010317030
Toufique Ahmed Shishir 1020291030
Letter of Transmittal:
6th December, 2012
Mr. Mohammad Ariful Gani
Faculty, MGT-372
School of Business
North South University
Dear Sir,
In this report of “Nestle Bangladesh”, we have tried to implement our learning from this course
and tried to figure out the problems Nestle Bangladesh is confronting. We would like to thank
you for offering the opportunity to work on our desired topic. Despite many limitations, we have
tried our best to make this report accurate and reliable.
If you have any further enquiry concerning any additional information, we would be very
pleased to clarify that. Thank you.
Sincerely yours,
_________________ _________________ _________________
Rakibul Hasan Ahmed Imran Kabir Faisal Khaled Ahmed
_______________________ _________________________
Shafat Ahmed Jamil Toufique Ahmed Shishir
Acknowledgement:
One of the most pleasant parts of submitting a report is the opportunity to thank those
who have contributed to it. Unfortunately, the list of expression of thanks, no matter how
extensive is always incomplete and inadequate. These acknowledgements are no exception.
Our first thank goes to the almighty Allah for bestowing us the patience and courage to
finish this huge task within its deadline.
Thanks must go to the team members, whose unflagging patience and astounding
capacity for creative work, and long hours made the project both possible and successful under
the pressure of knocking deadline.
In addition, thanks to those sources who has given us important information and various
advises about our product.
At last, we sincerely acknowledge our debt to Mr. Mohammad Ariful Gani, our honorable
faculty, for his valuable counseling towards the improvement of the project. Without his guiding,
support and encouragement, this would have been possible.
Executive Summary:
Nestle is world’s largest health, nutrition and wellness company. Although globally it is twice in
size of its nearest FMCG (fast moving consumer goods) competitors, in Bangladesh its journey
is relatively new. But recent times it has experienced an organic growth of 40% and this trend
predicted to continue in the coming few years. Nestlé Bangladesh focus on continues excellence
of their employees for their better performance in the work at Nestlé and for the betterment of
their career. In this paper there is a complete discussion about problems Nestle Bangladesh is
confronting in its managerial styles and practices. In this term paper we found out many problem
that Nestle Bangladesh faced or facing or will face in near future. The problems that we found
out are the infant formula controversy, Environment and product safety, Palm oil and global
warming, falling under child labor, far fewer staff than actually required in terms of tasks to be
completed, significantly less customer support services than is required in terms of the number of
customers and the complexity of the services offered, The Guardians investigation of Nestlé in
Bangladesh etc. These problems are the main problems that Nestle Company is facing worldwide
as well as in Bangladesh. And in this term paper we discussed about how Nestle Company
handled those problems and what should be the other necessary steps to prevent these problems.
And we found out these problems are mainly because of the fault of managerial styles and
practices. However in these coming days Nestle Bangladesh is fixing these problems regarding
to its managerial styles and practices by taking some steps that are good for the company.
Table of Content:
Item: Page no.
1. Introduction
2. Background of Nestle and Nestle Bangladesh
3. Problems Nestle is facing
4. Problems in Nestlé’s Human Resource Management
5. The Nestle boycott.
6. Environment and product safety.
7. Human rights and Spying on critics.
8. Conclusion.
9. References.
10. Appendices.
Introduction:
Today’s Nestlé, the world's largest food and Nutrition Company, founded by the Henri Nestlé
(10 August 1814 – 7 July 1890); a German confectioner in Vevey, Switzerland in 1866. In the
food Industry Nestlé is the most trusted name with high quality products. ―Good food Good
Life‖ is the mission of Nestlé, which drives the company to provide consumers with the best
tasting and most nutritious choices in a wide range of food and beverage categories and eating
occasions. The vision of ―creating shared value‖ and the very own ―Corporate Business
Principles‖ shaped the company culture and made them a reliable investor over 86 countries of
the world. Today Nestlé employs around 280000 people and have factories or operations in
almost every country of the world with a total equity of CHF 62.60 billion. The company seems
determined to feed the entire human race. It likes to call itself the “world’s leading nutrition,
health and wellness company.” It is also one of the world’s most controversial corporations. For
more than two decades the Nestlé name was widely associated with a controversy, including a
longstanding boycott, over its marketing of infant formula in poor countries. More recently, the
company has been one of the primary targets of the global movement against the bottled water
industry.
Background of Nestle:
Nestlé Company had started off from a single man's idea, and developed into a giant corporation.
In 1866 Henri Nestlé, a pharmacist, developed a milk food formula for infants who were unable
to tolerate their mother milk (Nestle.com). His product became a success, and it created a
demand throughout Europe. As Nestlé’s popularity grew more businesses wanted to merge and
become partners with Henri Nestlé's business. From 1866 to 1947 the Nestlé Company had gone
through several name changes. In 1905, Anglo-Swiss Condensed Milk Co. and Farine Lactee
Henri Nestlé merged, and the company’s name became Nestlé & Anglo-Swiss Condensed Milk
Co. Then in 1929, Peter-Cailler-Kohler Chocolats Suisses S.A. merged with the company. The
name was then changed to Nestlé & Anglo-Swiss Holding Co. Ltd, on November 27, 1936. In
December 1947, Co. acquired all the shares capital of the Alimentana S.A. company in exchange
for fifteen Nestlé shares and fifteen Unilac shares for each of Alimentana S.A. share, so this
point the name was at Nestlé Alimentana S.A. And then finally, the last name change that the
company would endure was in 1977, where it adopted the name Nestlé SA (Mergent Online).
Along the way Nestlé’s company remain successful, which allowed them expand to new region
and territories throughout the world, making them the world’s biggest food and beverage
company. Nestlé’s headquarters are located in Vevey, Switzerland, but the Nestlé Company has
factories or operation in almost every country in the world. Since the Nestlé case was published
in 1998, it stated that Nestlé had employed 230,000 people worldwide, with $71.7 billion in sales
(Rodgers, 2000). Now moving forward to 2003, Nestlé has increased the amount of employees to
253,000 people, with $88 billion in sales (Nestle.com). Nestlé is increasing the size of their
company year by year. In addition, to the increase in the size of the Nestlé Company; Nestlé also
has increased the variety in the different products they offer. In Nestlé’s business strategy they
encourage product growth through innovation and renovation (Nestle.com). This strategy has
allowed Nestlé to develop many different products in the various fields: baby foods, dairy
products, breakfast cereals, ice creams, chocolates and confectionery, prepared foods, beverages,
food services, bottled water, and pet care. This brings us to the main focus of our case analysis,
the dairy division, and the yogurt product LC1 that lies within that division.
Nestle in Bangladesh
Popular Nestlé brands started entering this part of the sub-continent during the British rule and
the trend continued during the pre-independence days of Bangladesh. After the independence in
1971, Nestlé World Trade Corporation, the trading wing of Nestlé S.A, sent regular dispatch of
Nestlé brands to Bangladesh through an array of indentures and agents and some of the brands
such as NESPRAY, CERELAC, LACTOGEN, and BLUE CROSS etc. became some very
common products.
Nestlé Bangladesh Limited started its commercial operation in Bangladesh in 1994. Its total
authorized capital is TK1.5 billion and total paid up capital is TK 1.1 billion. The only factory of
the company in Bangladesh is situated at Sreepur, 55 km north of Dhaka. The factory produces
the instant noodles and cereals and repacks milks, soups, beverages and infant nutrition products.
Today Nestlé Bangladesh Ltd. is a strongly positioned organization. The Company is
continuously growing through the policy of constant innovation, concentrating on its core
competencies and its commitment to high quality food to the people of Bangladesh.
Since the beginning of Nestlé’s operation in Bangladesh, the chairman of the company has been
Mr. LatifurRahman, one of the top industrialists of the country, his firm Transcom used to import
the products of Nestlé. His business house Transcom is still involved in wide range of business
like beverage, pharmaceutical, electronics, newspaper, tea export, fast food franchises etc. Still
he remains as an honorary chairman of the company although his group Transcom does not
capture any share today as Nestlé S.A. holds 100% share of this company.
In Bangladesh Nestlé’s vision is-to be recognized as the most successful food and drink company
in Bangladesh, generating sustainable, profitable growth and continuously improving results to
the benefit of shareholders and employees.
Problems Nestle is facing:
The company seems determined to feed the entire human race. It likes to call itself the “world’s
leading nutrition, health and wellness company.” It is also one of the world’s most controversial
corporations. For more than two decades the Nestlé name was widely associated with a
controversy, including a longstanding boycott, over its marketing of infant formula in poor
countries. More recently, the company has been one of the primary targets of the global
movement against the bottled water industry. The main problems Nestle is facing worldwide as
well as in Bangladesh. The problems are:
1. Problems in Human resource management of Nestle Bangladesh.
2. The Nestle boycott.
3. Environment and product safety.
4. Human rights and Spying on critics.
Problems in Human Resource management
of Nestle:
Aging workforce and retirements
As most of the upper level positions are filled with aged personnel and each year some of
them are going to retirement, Nestle has to go for continuous recruitment process to fill those
positions when succession is not possible and finding the right person is also a challenge as well.
Less experienced and smaller younger generations
Our current job market is filled with new graduates who lack experience which Nestle seeks
to maintain the standard in their workplace.
Lack of investment in training and education
Still most of the companies are reluctant to invest on training and development sectors to
increase the efficiency of the employees. Even though Nestle is offering its own training and
education program to its employees but to be competitive in the market and increase efficiency,
more focus on this field is mandatory.
Mismatch between training and education outputs vs. business skill needs
There is not enough capacity at educational institutions to keep up with corporate and student
demands, and this will only worsen as technology and innovation increase the rate at which
knowledge and skills become obsolete.
Lack of appropriate succession planning
It is not always possible to fill up all the positions internally but when Nestle go for
headhunting, they face challenge in finding qualified managerial talent and skilled workers.
Recruiting from a narrow pool of potential talent
Because of rigid job descriptions and hiring requirements, Nestle recruit talent from a narrow
pool of potential talent. It may make it difficult to select the best talent from the market.
Nestle boycott:
The Nestle boycott was launched in July 7, 1977 In U.S.A in against Nestle. It then expanded
into Europe in the 1980’s. Nestle launched an infant formula which were breast milk substitutes,
particularly in poor and economically less developed countries. The formula caused suffering
and deaths to a huge population of babies. Professor Derek and his wife Patrice had a great
influence in boycotting Nestle as they established WABA (World Alliance for Breastfeeding
action).
There are four problems when poor mothers are using the formula:
The formula must normally be mixed with water; the water is often contaminated in poor
a country, which leads to disease. Due to the high illiteracy many mothers are unaware of
the sanitation needed to prepare the bottles.
Although some mothers are aware of the sanitation needs, they often don’t have the
means to perform them: fuel to boil water, electric light to enable sterilization at night.
Many mothers use less formula powder than necessary, to make the container last longer,
which creates weak solutions and inadequate nutrition.
Breast milk has many natural benefits which the formula lacks. The breastfed babies are
protected from many diseases like diarrhea, bacterial meningitis, gastroenteritis, ear
infection, and respiratory infection.
History of the boycott
Henri Nestle, the creator of the Nestle, the largest food company in the world, invented the
formula milk. They are first found guilty for undermining breast feeders. They said the
formula was as healthy as breast milk, they sampled and targeted woman. Some targeted
countries did not have clean water to mix up the formula. There was a pamphlet released
called ‘The Baby Killer’, Nestle filed a lawsuit and received a small fine.
In 1977, there was boycott for all Nestle products in US and then expanded in Europe in
1980. The world health assembly adopted the international code which Nestle agreed upon
and stopped the boycott. The Ibfan(International baby food action network) resumed the
boycott as Nestle was flooding health facilities in developing countries.
Current status of the boycott
As of 2012, the Nestle boycott is coordinated by the International Nestle boycott committee.
The international baby food action network monitors action practices. Around 60 countries
have implemented laws on it. Many universities, schools, colleges have banned sale of Nestle
products from their shops. Nestle claims that is complying with the international codes.
According to the CEO, they take good care about codes and takes disciplinary actions against
violation. They claim the allegations to be outdated or unsubstantial. Still today many
companies are aware of the ethical principles like save the children, Oxfam etc. The debate
of the infant formula still continues.
To summarize, this was a really serious issue for Nestle in international business. They
provided formula to replace breast milk killing millions of infants. The poor and developing
countries could not take it, and suffered. Nestle should comply with the International code
and not undermine breast feeding, as it vital for a baby.
Environment and product safety:
Water Controversies
After entering the bottled water business by acquiring upscale brands such as Perrier and San
Pellegrino, Nestlé began selling less expensive water in poor countries in the late 1990s. From
the start, critics charged that the ready availability of bottled water, which the company sold
under the name Nestlé Pure Life, would make the governments of those countries less inclined to
invest in the infrastructure needed for reliable public water systems. A 2005 report published by
the Swiss Coalition of Development Organizations and Action Aid raised questions about the
purity of the Pure Life water sold by the company in Pakistan.
Product Safety
In June 2009 an outbreak of E.coli food poisoning in the United States was linked to Toll House
refrigerated cookie dough produced by Nestlé at a plant in Danville, Virginia. The
company recalled all Toll House products in the country, but it came to light that the plant had
previously refused to give inspectors from the federal Food and Drug Administration (FDA)
access to internal records relating to matters such as pest control and consumer complaints.
In December 2009 the FDA sent a warning letter to Nestlé alleging that the labels on some of the
company's children's beverages contained unauthorized nutritional claims. In March 2010 Nestle
received another warning letter from the FDA.
Human rights and spying on critics:
Human rights:
In 2005 the International Labor Rights Fund (ILRF) brought suit against Nestlé and several other
companies in U.S. federal court under the Alien Tort Claims Act, charging that they were
involved in the abuse and forced labor of child workers in the West African cocoa supply chain.
(In December 2009 Nestlé announced that it’s Kit Kat chocolate products in Britain would start
to be sold with certification from the Fair-trade Foundation.)
In 2006 ILRF sued Nestlé again in U.S. court, accusing the company with complicity in the
torture and murder of a Colombian trade union leader by paramilitary forces with which it
allegedly had a long-standing relationship.
Spying on Critics:
In 2008 a Swiss investigative news program reported that five years earlier Nestlé had used a
private security company to infiltrate the anti-globalization group Attack. The undercover agent
reportedly monitored the group’s research work on the company that led to the 2004 publication
of a critical book entitled Attac Contre L’Empire Nestlé.
Conclusion:
People have been boycotting Nestle for one reason or another ever since. They are the company
everyone loves to hate. Today, Nestle is the largest food company in the world, with more than
450 factories in more than 80 countries. They are one of a handful of companies with a presence
in every country in the world. Finally it can be said that that Nestlé Bangladesh Limited is using
and developing their strategy perfectly. By using valuable marketing tools they are creating
competitive advantage for themselves which ultimately helping them to reach their market as
well as organizational objectives. Again their continuous renovation are making them leader into
the market which leads to profit as well as customer base for their company.
References:
1. Scot Kersgaard . (2010). Nestle soaked in water controversy around the world. Available:
http://coloradoindependent.com/59935/nestle-soaked-in-water-controversy-around-the-
world . Last accessed 6th Dec 2012.
2. Unknown. (2005). Nestlé LC1 Company Case Analysis. Available:
http://articles.castelarhost.com/nestle_background.htm . Last accessed 4th Dec 2012.
3. Phil Mattera. (2010). Company profile: Nestle. Available:
http://www.crocodyl.org/wiki/nestle . Last accessed 4th Dec 2012.
4. Joanna Moorhead. (2007). Milking it. Available:
http://www.guardian.co.uk/business/2007/may/15/medicineandhealth.lifeandhealth . Last
accessed 6th Dec 2012.
5. Alif Al Mohammed Shalahuddin. (2012). LOCAL BUSINESS POLICIES OF NESTLÉ
BANGLADESH LTD. Available:
http://dspace.bracu.ac.bd/bitstream/handle/10361/1621/Shihan%20Sazid.pdf?
sequence=1. Last accessed 4th Dec 2012.
6. Aiman. (2011). Nestle Problems and Challenges. Available:
http://www.studymode.com/essays/Nestle-Problems-And-Challenges-663837.html. Last
accessed 1st Dec 2012.
7. Mike Brady . (2007). Boycott Nestle - and other action to protect infant
health. Available: http://boycottnestle.blogspot.com/2007/05/guardian-investigates-nestl-
in.html. Last accessed 1st Dec 2012.
8. Unknown. (2012). Nestle. Available: http://en.wikipedia.org/wiki/Nestl%C3%A9. Last accessed 1st Dec 2012.
9. Unknown. (2012). Nestlé boycott. Available: http://en.wikipedia.org/wiki/Nestl%C3%A9_boycott. Last accessed 28th Nov 2012.
10. Heather. (2010). The Nestle Boycott – what’s that all about then?.Available: http://www.notefromlapland.com/2010/08/the-nestle-boycott-whats-that-all-about-then.html. Last accessed 28th Nov 2012.
Appendices:
Fig 1: The Nestle Boycott: Are you Booing Nestle this Halloween?
Fig 2: Nestle Waters First Half Bottled Water Sales Decline a Startling 38%
Fig 3: Nestle Sales jobs decreased21%
Fig 4: Peter Brabeck, CEO and board chairman at Nestlé
Fig 5: A poster against Nestle.
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