Question 6 (11 Marks)

In the 1970s, Nestle the Swiss based MNC manufacturer and distributor of food and beverage products, was accused of 'hooking' mothers of Africa onto the use of infant formula powdered milk for their babies rather than mothers' breast milk. Given the powder had to be mixed with water and African water was impure many babies died.

The structure of the Nestle organisation in Africa contained separate product, marketing and sales functions. It was a standalone business entity. So, the sales and product executives in Switzerland were not aware that the infant powdered milk was being 'mis-sold' and 'mis-represented' leading to dead African babies. Many commentators believed that it was the structure of the African business that was to blame as it had no oversight from Switzerland.

It is fair to say that Nestle made significant and profound changes to its governance structure after this event.

1. Explain what you believe could have been lacking in the Nestle Africa business. Did they make an unsafe product to meet a need which did not really exist? (4 Marks)
2. Consider whether Nestle was responsible for setting up a standalone subsidiary in Africa with little oversight. Define what you would consider to be a more appropriate structure. Think of the need for strong product support from a well-resourced head office. (7 Marks)