Internet use by consumers in other countries, specially Japan (49 million users), the United Kingdom (29 million), Germany (36 million), Brazil (25 million) and France (31 million), has escalated rapidly. (Farrell, Throne, & Farrell, 2012). The increasing number of Internet users warrant firms’ closer attention to and effective management of paradises. In particular, Nestles case in 2010 exemplifies the need to respond pro-actively to social media attack initiated by Greenback rather than by not acknowledging the challenge or fighting back against the challenge.
If not properly and timely addressed, this may result to a web of chaos for Nestle. Greenback is a global campaigning organization that enhances to change attitudes and behavior of people in order to protect and conserve the environment. (About Greenback, n. D. ) The reputation threat instigated by Greenback stemmed from Nestles weak stakeholder/customer relations which is a factor in selling products/services, one of the seven basic functions of marketing.
Though it is true that supplier contracts including one with Sinai Mass Group should have been reviewed at the onset to check if these are aligned to the company’s social responsibility mandate, the parasitic could have en immediately addressed should management responded to every single complaint in its social media. Based on my analysis, in general, Nestles performance in individual functional areas of business is strong.
Financial performance is outstanding as group sales and earnings before income tax (BIT) per its 2010 Annual Report are increasing from CHEF 107,618 million to CHEF 109,722 million and CHEF 15,699 million to CHEF 16,194 million in 2009 to 2010. It was also able to manage company’s debt as net financial debt was reduced to CHEF 18,085 million to CHEF 3,854 million which now only comprised 6. Percent of equity from the staggering 37 percent in 2009. On the marketing side, Nestle is a well-known brand all over the world, in fact, number 1 in the food industry offering diverse products.
Other functional areas of Nestle including operations, research and development, information systems per my research and analysis, are performing effectively. My analysis of the company’s major strengths and weaknesses is presented in tabular form below: Table 1. Internal Strategic Factor Evaluation Key Internal Factors Weight Rating Weighted Score Comments (Rating Values) Strengths: 1. Stellar operating/financial performance 2. Global presence and leadership in the food industry 3. Diversified products 4 3 1. 2 1. 6 0. 3 1- Major weakness 2- Minor weakness 3- Minor strength 4- Major strength Weakness: 1.
Weak customer/stakeholder relations 2. Failure to uphold its doctrine of social responsibility by contracting with suppliers like Sinai Mass Group, alleged to be destroying the rain forests and orangutan habitats. 1 0. 1 0. 1 Overall Rating 100% 3. 3 Conclusion: Firm’s internal position is strong. 0 > 2. 5 – strong internal position 2. 5 – average internal position 0 < 2. 5 - weak internal position On the external factor aspect, based on my analysis, firm's strategies take advantage of the existing opportunities and minimize potential adverse effects of threats.
First, food (and beverage) industry is observed to be resilient visa-Г-visa other industries during and immediately after the global economic crisis in 2008. The economic value has had an opposite impact on food and beverage industry. The major concern of these industries is increasing transportation costs for which people have to spend. Nevertheless, the food and beverage industry has been relatively less affected when compared to other industries. This is mainly attributed to the fact that food products continue to be essential to consumers in spite of the slowdown.
A comparison between the S&P 500 and the DOD Jones US Food and Beverage Index in 2008 is testimony to the resilient nature of this industry. In 2008, the S&P 500 declined 37. 6 percent against a fall of 22. 9 percent by the DOD Jones US Food and Beverage Index. (MAP, 2010). Second, people are becoming more health-conscious and are now demanding nutritious products in which Nestle has the capability to produce. Company’s response to these major opportunities is superior. However, reputation attack initiated by Greenback could damage Nestles franchise value and could result in loss of business and consumer trust.
My analysis of the surrounding opportunities and threats is presented in tabular form below: Table 2. External Strategic Factor Evaluation Key External Factors Weight Rating Weighted Score Comments Opportunities: 1. Resilient food (and beverage) industry 2. Increasing importance of health and nutrition 0. 8 1 -poor response 2 -average response 3 -above average response 4 -superior response Threats: 1. Reputation attack from across social media sites 40% 1 0. Total 100% 2. 8 Conclusion: Firm’s strategies take advantage of existing opportunities and minimize potential adverse effects of threats. > 2. 5 – strong internal position Though Nestle could have adopted the following mutually exclusive strategies to respond to parasitic – repentance, refutation and refusal, it is apparent that repentance, a reform strategy will create a harmonious relationship with its stakeholders, hence, the best or the only feasible parasitic strategy response. Damage to franchise value caused by increasing trajectory of the parasitic outweighs the cost of changing organizational practices (change supplier) to reflect the demands of Greenback.
The combined effect of the voices not only from Greenback but also from specialist media and mainstream media and commentary on multiple blobs will be damaged reputation and loss of business. Adopting the refutation and refusal strategies will only create organizational hiatus and worst, crisis. Now that repentance is deemed most feasible, the following independent courses of actions could be employed by the crisis management team at the point of view of marketing communications and public relations: 1 .
Filter pressing and critical issues for appropriate action of Board of Directors and/or Senior Management while attending to minor issues; 2. Resolve all issues – critical or not at their level and respond to these issues through social media in an appropriate and timely fashion; 3. Respond only to issues deemed critical. The first alternative course of action is deemed most feasible. Critical issues could be discussed at the top level of the organization giving the Board and Senior Management the opportunity to carefully review them and adjust company strategies, if necessary.
Board and Senior Management sets the tone at the top and has the ultimate responsibility in running the business, hence, they should be fully aware of these critical issues. The crisis management team, on the other hand, should timely and appropriately respond to all issues – critical or not, with an end of assuring its stakeholders that these issues are being resolved by the company. Minor issues can then be resolved at their level. The public should be made aware, implied or expressed, that the company is taking actions and is responsive to customer/stakeholders’ concerns.
My recommendation to dress the company’s central problem as mentioned in the above paragraph should be complemented by medium to long-term action plans which includes strengthening its stakeholder relations program; and annual or periodic review of company’s adherence to its mission and vision statements, strategies and business principles. First, stakeholder relations program should be strengthened by keeping community relations at the highest level, improving the customer climate, and maintaining good public image. The “Be redundant and sprawl” rule is highly applicable to prevent a crisis from happening in this particular case of Nestle.
Posting articles on its commitment to social responsibility on different sites including its own website will help the company to vindicate itself from any gross reputation attack. Nestle should as well develop a comprehensive and effective communication and marketing strategy. Second, conducting an annual or periodic review of principles will save the company from dealings that may taint company’s reputation. Nestle is committed to its business principles in all countries, taking into account local legislation, cultural and religious practices which include supplier and customer elation’s.
Nestle require its suppliers, agents, subcontractors and their employees to demonstrate honesty, integrity and fairness and to adhere to its non-negotiable standards. In the same way, Nestle is committed towards its own customers. (Nestles Corporate Business Principles, n. D. ). These business principles, more particularly supplier and customer relations, should be reviewed not only on first dealings but on a continuous basis. Nestles objective is to be the recognized leader in nutrition, health and wellness and the industry reference for financial performance. (Nestle
Annual Report, 2010) Remaining at the number 1 spot in the food industry busily catering to customer orders and demands while projecting mounting sales and profits could have prevented Nestle from responding to social media campaigns against irresponsible sourcing of palm oil. Apparently, Nestle failed to live by its dogma of social responsibility. Notwithstanding its desire to be viewed as socially responsible, it was not the actual picture then. Nestle was callous to people’s call for reform until it grew and became a sensation. Nestle should have an effective management team to manage paradises or reputation threats.