74
GLOBAL FINANCE
substitutes. The World Health Assembly, the official governing body
of WHO, produced a code which NestlŽ
e signed in 1984, restricting
advertising, requiring labeling information on the hazards of use, and
prohibiting companies from giving free samples, promoting the prod-
ucts in hospitals and clinics or employing nurses to advise mothers. The
consumer groups agreed to suspend the boycott of NestlŽ
e products
that began in 1977.
Today, NestlŽ
e endorses the code of practice, and states that it ``does
encourage and support exclusive breastfeeding as the best choice for
babies during the first months of life'' and ``does warn mothers of the
consequences of incorrect or inappropriate use of infant formula''. It
also says that it believes that ``there is a legitimate market for infant
formula when a safe alternative to breast milk is needed.''
The code itself is not enforceable. In the 1980s and 1990s various
countries, including the Philippines, Thailand, Kenya, Malaysia, Costa
Rica, and Brazil, introduced controls over the marketing of baby milk.
Consumer groups revived the boycott, claiming that NestlŽ
e, along with
industry competitors, were violating the spirit of the code, in particular
by making donations of baby formula to hospitals. Ironically, increasing
HIV infection in Africa has created a new demand for baby formula to
prevent the spread of the disease, and there is now a dilemma for both
companies and regulators over how to respond.
KEY INSIGHTS
» Firms with small home markets have to seek growth abroad.
Like Nokia, the mobile phone maker (featured in Chapter 7
of the ExpressExec book Valuation), NestlŽ
e took this leap in
the late 1800s, merging with the Anglo-Swiss Condensed Milk
Company, controlled by American Charles Page in 1878. With
its broad diversity of products and decentralized management
system, the company is one of the very few MNCs that could be
described as ``transnational.'' It is market-focused, concentrating
on horizontal expansion, both geographically and by acquiring
new products.
» Regional management of operations has enabled NestlŽ
e to take
advantage of local cultural biases and preferences to enhance
