Nestlé is a Swiss multinational corporation headquartered in Vaud. It is currently the largest food company in the world in terms of revenues. Furthermore, in 2015, Fortune 500 ranked it at the 70th position. The main products manufactured and processed by the company include medical and baby food, bottled water, tea and coffee, ice cream and other dairy products. During the First World War, the company grew and expanded significantly. Moreover, the trend continued during and after the World War II. Nestlé’s product portfolio has expanded significantly in addition to providing instant formula and milk products. Despite the long period of expansion and growth, the company nearly reached the stagnation point under the leadership of Brabeck regardless of the CEO’s unique campaign for a profitable growth.
Significant Stakeholder to Be Considered When Making Strategic Decisions
In any organization, strategic decision makers are usually the members of the board of management. One of their roles is to formulate strategies for the organization from the relevant perspective. The law often controls the board in terms of the composition and diversity in order to consider it as impartial and effective in making decisions that are favorable to everyone (Sharma & Starik 2004). The diversity of the board allows members to introduce different expertise, experiences and perspectives in the organization’s management in order to aid the strategic decision making process.
Participative planning is an approach that requires all stakeholders to be involved in the major decision making process. It includes identifying the concerns and values of the public and then developing a wide consensus on the planned initiatives. The managers are also required to utilize the vast amount of knowledge and information that are held by the stakeholders for efficient, workable and sustainable solutions. Stakeholders play a vital role in setting objectives and priorities in a company to ensure that the adopted strategies are relevant and appropriate. It is essential for all stakeholders to be involved in developing the company’s vision, running projects and not just be directly benefitting from the initiatives. A stakeholders’ analysis is the process of categorizing and analyzing stakeholders in terms of the respective plans and their participation in decision making (Carroll & Buchholtz 2012).
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Despite the significant success realized by the company during the Brabeck’s leadership, Nestlé’s CEO should have considered the effect that most of his decisions had on the other people involved. Being an international company, Nestlé enjoyed a network of vast stakeholders ranging from academicians, communities, customers, general public, government, shareholders, employees, trade unions, intergovernmental agencies, NGOs, and reporting agencies. Some of the decisions made by Brabeck affected some of the stakeholders in a substantially negative manner. For example, shutting down the operation of some industries in various countries affected the lives of the employees involved, governments of particular countries as well as customers who relied on the products made by the closed plants.
Stakeholder mapping is the second step towards the approach of the stakeholders’ engagement. Mapping helps the management of an organization in identifying who the key stakeholders are, their sources, the interests they represent and what they seek in their relationship with the business. Mapping is a collaborative process, where a debate, research and discussion are used to determine the key list of stakeholders across the spectrum. In order to do this, it is essential for the Nestlé’s management to follow a simple procedure of identifying, analyzing, mapping and then prioritizing (Sharma & Starik 2004). The process of stakeholder mapping is of paramount significance for the company. Thus, the quality and fairness of the decisions that have been made since 1997 are highly inclined to the knowledge of stakeholder’s participation as follows.
|Internal stakeholders||External stakeholders||Stakeholders with other Interests|
The local community
The general public
Table 1: Nestlé’s Potential stakeholders
After identifying the abovementioned groups, the company should also be required to identify and prioritize the correct individual stakeholders within particular organizations. The following is a sample map that would have helped Nestlé Company to block or advance in involving them in key decision making of the business.
Therefore, a sample of the stakeholder mapping diagram of Nestlé Company should resemble Table 2 that is displayed above. The idea is to classify each stakeholder in the power and interest position that they hold within the organization and match it with a respective strategy. Those stakeholders with too much power and interest to the company, like the owners, shareholders, governments and regulators, should be managed closely, because this group requires a considerable amount of efforts to keep them satisfied. Those with a high power but with fewer interests require a specific approach and management in order to incorporate them enough, yet to avoid being importunate or boring. Meanwhile, low power individuals with a substantial interest must be maintained with an adequate information to ensure that no major issue arises as they can be highly useful in regard to the details of the projects. Lastly, those with a low power and interest are required to be monitored without giving them too much information that can be unpleasant to them.
Stakeholder’s Appeasement from 1997 to 2006 by Nestlé Top Management
Based on the information provided in the extract, Bradeck considered appeasing the major stakeholders with the financial interest and power in the organization as the primary strategy, while ignoring the majority. The main idea of making the rushed decisions was to maximize the overall profit through the expansion of lines and minimization of costs, while closing non performing plants in various regions.
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Discrepancy in Stakeholder Involvement
In terms of the stakeholders’ involvement, discrepancy implies a situation where the management opts to ignore the results of stakeholder mapping in engaging them in the organization’s activities. The management chooses not to follow the specified strategy when engaging each group of stakeholders based on the amount of interest and power they have as provided in the power/interest map (Carroll 2014). The decisions made through the consultation with the wrong set of individuals may result in negative consequences to the business, community, environment and government as illustrated below.
Consequences of the Discrepancy between Stakeholder Mapping and Actual Decisions Made
Decision making is a complex task for organizations operating in the modern world. The management of an organization needs to know the available options of actions, their respective consequences and the presence of uncertain events that may influence the results of the certain decision. Taking the concerns of stakeholders into account can help in improving the relationship and enhancing the company’s operations. In its turn, it will lead to the emergence of ideas for products that can help in improving of their needs, reducing risks for the organization and maximizing the company’s and shareholder’s value. The following are the potential problems that an organization can encounter by ignoring its stakeholders in making key decisions for the business.
Economic and Labor Unrests
Economic and labor unrests are a form of response to changes that are made by the management without involving and consulting with the key stakeholders like employees, trade unions, suppliers, distributors, lenders and creditors. For example, if a company makes a decision that affects the working program or remuneration, the trade unions and employees may decide to boycott the work which may lead to the loss of working hours and, subsequently, profit to the company (Carroll & Buchholtz 2012). If Nestlé decides to shut down some of the production units in overseas countries without consulting with the interested and powerful stakeholders, a sanction may be imposed on the company for the economic damage caused to the people and country affected. The lenders may decide to stop investing into the firm, and the government of the affected country may also decide to ban the consumption of Nestlé products on its territory among other measures. This may lead to a substantial loss of the market share, revenues and increase in the competition to the company.
Cases have been reported of how the management has colluded to fleece an organization of its resources, while reporting erroneous figures in the books of account. A failure to involve the shareholders, owners, government regulators, auditors has led to the collapse of companies, like Enron, due to the scandalous deals made by the management. In every organization, there are powerful independent stakeholders, like auditors, government entities and the press, who are influential in determining the future of the company (Carroll 2014). Government entities ensure that the organization operates within the confines of the law; auditors ensure that the reports provided in the books of account represent a fair view of the company’s operations, and the press is responsible for informing the public about the organization. Therefore, a failure to involve such stakeholders provides a way for the corruption, bribery, embezzlement and scandal to take place.
Unethical Business Practices
Unethical actions happen when the business fails to comply with the regulations such as neglecting to labor laws, environmental protection, tax evasion, engaging in illegal trade among others. The workers’ exploitation is a substantial common form of the unethical practice, in which a business can engage. Some managers seek to generate revenues and profits for the owner at the expense of the workers. The managers change the rules of engagement at will, provided that they do not favor the well-being of the employees and are never concerned about the labor turnover. In addition, the worker’s safety may also be enhanced as labor unions are never allowed to thrive.
Poor Environmental and CSR Policies
Waste management also becomes another problem leading to the increased health risk to the community living around the organization. Waste water, garbage and exhaust gases may be exposed to the environment endangering humans, animals and plants. This situation is mostly contributed by the lack of cooperation between the government agencies and industrial regulators.
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Illegal Activities and Tax Evasion
An organization that totally ignores other stakeholders may be operating under the impunity and may engage in illegal activities that can endanger the existence of people. Illegal activities, like importing and exporting outlawed goods, weapon trade, abuse of drugs, may thrive in terms of such conditions. A company, like Nestlé, may manufacture and sell products that are unfit for the human consumption. However, even if the company engages in legal business, there may also be situations of the tax evasion and avoidance, thus reducing the country’s national income.
Stakeholders’ involvement is a highly significant element in the sound management and decision making within an organization. In order for a company to achieve a considerable success, it needs to embrace stakeholders as a strategy of increasing the diversity through operating an organization based on the society’s trust. Furthermore, there is a necessity to establish effective corporate values. Therefore, the correct engagement strategy in terms of the relationship with stakeholders requires identifying of a legitimate stakeholder’s interest, engaging in the mutual partnership and enhancing the principles of an effective corporate governance. With the interest of stakeholders in mind, the management is able to prepare the goals, strategies and tactics to lead the organization, while making everyone satisfied.