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CASE 1-2 Nestlé:

The Infant Formula Controversy


Dr. Nadeen Gamal

Group 2 Case Study International Marketing


Arab Academy for Science, Technology and Maritime Transport
Graduate School of Business
Master of Business Administration Program
International Marketing Course
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NO. DISCRIPTION PAGE


NO.
1 INTODUCTION 2
2 What could Nestlé have done to have avoided the accusations of “killing Third World babies” 3
And still market its product?
3 Assess Nestlé's crisis management strategies during the international boycott. 4
What steps did the company take to address the allegations, and were they effective?
4 After Nestlé’s experience, 7
discuss how did the boycott impact Nestlé's reputation, and what lessons
Can be drawn for other multinational corporations facing similar challenges.
5 What advice would you give to Nestlé now in light of the new problem of HIV 9
Infection being spread via mothers’ milk?
6 Discuss Nestlé's role as a cultural change agent. How did the company's 11
Marketing activities influence cultural behaviors, particularly in relation to breastfeeding
practices?
What implications does this have for multinational corporations entering diverse markets?
7 Discuss the importance of adapting products to fit the cultural norms and preferences of diverse 14
markets.
Provide examples, if any, of how Nestle adapts its products to align better with the cultural
practices
8 Consider the differences in management styles between Western and Eastern cultures. 16
How can multinational corporations
like Nestlé adapt their management styles to effectively operate in culturally diverse regions?
Compare between two countries of your choice.( Use the Geert Hofstede Index and Edward Hall
as a Guide)
9 How can multinational corporations uphold ethical standards when operating in culturally diverse 21
markets?
Support with examples
10 There is currently a campaign to boycott Western products in the Middle East. Has this impacted 23
Nestle?
(check its stock market and sales during the last two month). Why or why not has it been
impacted? Explain
11 CONCLUSION 24

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International Marketing Course
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TABLE OF CONTENTS:
Created by:

1 Mohamed Sobhy
2 Noha Salim
3 Nourhan Salim
4 Alyaa El Saied

Introduction:
Nestle Alimentana, a big food processing firm situated in Vevey, Switzerland, with global
sales of more than $100 billion, has been targeted for an international boycott. Nestle
has been accused of being directly or indirectly involved in the deaths of neonates in the
Third World for more than 20 years, beginning with an allegation made by the Pan
American Health Organization. The claims revolve around the sale of baby formula,
which is blamed for the Third World's infant mortality issue.

The allegations concentrate on whether marketing and promotion discouraged


breastfeeding among mothers in underdeveloped nations and led to product misuse,
resulting in infant mortality and malnourishment. Critics blame intensive infant formula
marketing and promotion for the drop in breastfeeding rates in rural Mexico, the
Philippines, Central America, and Africa. Nestle claims that it has never advocated
bottle feeding over breastfeeding and so supports the commercialization of baby
formula in Third World countries and Finding enough locally made, nutritionally

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adequate supplements for mothers' diets so now we are going to discuss this issue from
marketing view.

1-What could Nestle have done to have avoided the accusations of "killing
Third World babies" and still market its product?
Nestle should promote accurate information about HIV and infant feeding, aligning with
WHO and UNAIDS guidelines.

Support programs that provide access to ART and other interventions to reduce
mother-to-child transmission through breastfeeding. Engage in responsible marketing

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practices that do not discourage breastfeeding or promote unnecessary formula use,


particularly in areas with high HIV prevalence and limited resources.

Invest in research and development on improving the safety and affordability of infant
formula in resource-limited settings, considering the specific needs of HIV-positive
mothers.

Address underlying issues like poverty, lack of access to clean water and sanitation,
and inadequate healthcare to reduce overall infant mortality and morbidity.

Building trust with communities and public health organizations is vital for responsible
interventions. Nestle's commitment to ethical business practices, public health, and the
well-being of mothers and children in developing countries will depend on its
commitment to ethical business practices, public health, and the well-being of mothers
and children.

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2-Assess Nestle's crisis management strategies during the international boycott. What steps
did the company take to address the allegations, and were they effective?

The international boycott against Nestle in the 1970s stemmed from accusations of
aggressive marketing of infant formula in developing countries, potentially leading to
mothers abandoning breastfeeding and harming their babies. Here's an assessment of
Nestle's crisis management strategies:

Steps Taken:

 Initially denied wrongdoing:

Nestle initially denied the accusations and defended their marketing practices. This
defensive stance fueled public anger and accusations of a lack of empathy.

Increased public relations efforts: The company hired PR firms to improve their public
image and counter negative media coverage. However, these efforts often came across
as inauthentic and further damaged trust.

 Focused on scientific evidence:

Nestle attempted to counter claims by highlighting scientific studies supporting the


safety and benefits of formula. This approach, while factually accurate, did not address
the ethical concerns about aggressive marketing tactics.

 Implemented changes to marketing practices:

Eventually, Nestle introduced changes to their marketing practices in developing


countries, such as stopping free formula distribution and providing clearer information
about breastfeeding benefits. However, these changes were criticized for being slow
and inconsistent.

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 Engaged in dialogue with NGOs and activists:

Nestle later opened dialogue with NGOs and activists involved in the boycott. While this
was a positive step, it felt reactive and lacked genuine engagement with the underlying
concerns.

 Effectiveness:

Limited success in ending the boycott: The boycott lasted for several years and
significantly damaged Nestle's reputation. While it eventually tapered off, it left a lasting
legacy of skepticism towards the company's practices.

Failure to address ethical concerns: Nestle's focus on defending their actions and
scientific evidence fell short of addressing the core ethical concerns about exploitative
marketing tactics and prioritizing profit over public health.

Damage to brand reputation: The boycott and its aftermath dealt a significant blow to
Nestle's brand image and trust, particularly among consumers concerned about social
justice and corporate responsibility.

Overall:

Nestle's crisis management strategies during the boycott were largely ineffective. While
they took some steps to address the concerns, they came across as reactive,
defensive, and lacked genuine engagement with the underlying ethical issues. This
resulted in limited success in ending the boycott and long-term damage to their
reputation.

Lessons Learned:

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Early acknowledgment and apology: Responding to criticism with empathy and an


open-minded approach could have mitigated the crisis.

Transparent and accountable practices: Adopting ethical marketing practices and


demonstrating genuine commitment to public health would have built trust and
credibility.

Constructive dialogue with stakeholders: Open and transparent engagement with


NGOs, activists, and affected communities could have helped find solutions and rebuild
trust.

The Nestle boycott serves as a stark reminder for companies to prioritize ethical
business practices, transparency, and a genuine commitment to social responsibility. In
today's globalized world, consumer awareness and scrutiny are high, and companies
need to proactively address concerns if they want to build sustainable trust and
reputation.

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After Nestlé’s experience, discuss how did the boycott impact Nestlé's reputation, and
what lessons

can be drawn for other multinational corporations facing similar challenges.

A global boycott against Nestlé, sparked by U.S. campaigners due to perceived


unethical marketing practices, gained widespread attention. Notably, Nusa Urbancic
from the Changing Markets Foundation highlighted the manipulation of consumers'
emotions, particularly concerning vulnerable infants. Nestlé, once praised for
collaborations with NGOs and doctors, faced ongoing complexities with medical and
humanitarian communities despite resolution.

The boycott's negative repercussions prompted Nestlé to address concerns and drew
valuable lessons for multinational corporations facing similar challenges:

1. Cultural and Socioeconomic Understanding:

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 Recognizing cultural and socioeconomic intricacies is vital to avoid


inappropriate practices globally.

 Example: Strategies effective in Western cultures may be perceived


differently in Eastern societies.

2. Ethical Marketing Prioritization:

 In sensitive sectors like healthcare and nutrition, prioritizing ethical


marketing is crucial to prevent harm.

 Example: Transparent labeling builds consumer trust in the food and


beverage industry.

3. Stakeholder Engagement:

 Actively engaging with stakeholders and addressing concerns is


imperative.

 Example: Responsiveness to environmental concerns by modifying supply


chain practices.

4. Corporate Social Responsibility (CSR):

 Demonstrating a commitment to CSR involves contributing to community


well-being and aligning with ethical standards.

 Example: Investing in educational initiatives in regions of operation.

5. Adaptability and Continuous Improvement:

 Adapting to evolving markets and societal expectations is critical to avoid


reputational risks.

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 Example: Adjusting sourcing practices in response to changing consumer


preferences.

6. Transparency and Crisis Communication:

 Transparent communication during crises is crucial for maintaining trust.

 Example: Openly addressing safety concerns related to a product.

7. Compliance with International Standards:

 Ensuring compliance with international standards is non-negotiable,


especially in impactful industries.

 Example: Aligning with international environmental standards, as seen in


automotive manufacturing.

4-What advice would you give to Nestle now in light of the new problem of
HIV infection being spread via mothers' milk?
While HIV can be transmitted through breast milk, breastfeeding is still the gold
standard for baby feeding in most circumstances due to the multiple benefits it provides
for both mother and child.

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Breastfeeding transmission risk can be considerably reduced by measures such as


antiretroviral medication (ART) for mothers, appropriate hygiene practices, and
exclusive breastfeeding for the first six months.

Unsafe formula feeding practices represent a high risk of illness and mortality for infants
in resource-limited settings, much greater than the risk of HIV transmission through
nursing.

Nestle might take the following actions:

Promote accurate and balanced information regarding HIV and newborn feeding, in
accordance with World Health Organization (WHO) and Joint United Nations
Programmed on HIV/AIDS (UNAIDS) recommendations.

Support and advocate for programmers that give access to ART and other measures
that lower the risk of transmission from mother to child through nursing.

Engage in appropriate marketing strategies that do not discourage breastfeeding or


encourage the use of unneeded formula, especially in communities with high HIV
prevalence and low resources.

Invest in research and development to improve the safety and cost of infant formula in
resource-limited settings, taking into account the unique needs of HIV-positive mothers.
Considerations and challenges:

To balance the dangers of HIV transmission with the advantages of breastfeeding, a


context-specific and nuanced strategy is required. Addressing root causes such as
poverty

Inadequate access to clean water and sanitation, as well as inadequate healthcare, are
critical for reducing infant mortality and morbidity. It is critical to establish trust with
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communities and public health organizations in order to provide responsible and


effective initiatives.

Nestle's ability to negotiate this difficult issue will ultimately be determined by its
commitment to ethical business operations, public health, and the well-being of women
and children.

It is critical to recognize that this is a difficult topic with significant ethical and societal
implications.

My goal is to share facts and alternative points of view, not to propose definite solutions
or to justify certain actions.

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5-Discuss Nestlé's role as a cultural change agent. How did the company's
marketing activities influence cultural behaviors, particularly in relation to
breastfeeding practices? What implications does this have for multinational
corporations entering diverse markets?

Nestlé's Contribution to Cultural Shift: A Complicated and Nuanced Matter

Nestlé's influence on the evolution of culture, especially with reference to nursing


practices, is a complicated and diverse topic with strong arguments on both sides. Here
is a summary to think about:

The marketing initiatives of Nestlé:

Infant formula is aggressively promoted: Nestlé heavily promotes its formula in


developing nations, frequently using strategies like: Giving away samples and gifts to
medical professionals This can result in recommendations for formula feeding that are
skewed.

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False statements regarding the advantages of the formula:

It may minimize the value of nursing if the benefits of formula were overstated.

Absence of assistance for nursing moms:

Breastfeeding moms may find it more difficult to continue if they don't have enough
resources and knowledge.

Possible Effects on Breastfeeding: Reduction in Breastfeeding Rates: Research


indicates that in certain regions, there is a link between vigorous formula promotion and
a decline in breastfeeding rates.

Adverse health effects: Babies who are only fed formula are more susceptible to
infections, malnourishment, and other health issues.

Cultural shift in perspectives: Overzealous marketing has the potential to normalize


formula feeding and diminish the importance that breastfeeding is held in society.

Repercussions for International Companies

Ethical considerations:

Businesses that operate in a variety of markets need to be aware of any potential harm
to regional customs and medical practices.

Cultural sensitivity:

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It's critical to respect prevailing cultural standards and tailor marketing methods to local
situations.

Put an emphasis on appropriate behavior:

It's critical to provide correct information top priority, assist nursing moms, and stay
away from deceptive advertising.

As mentioned above the Possible Effects on Breastfeeding:

Cultural shift in perspectives:

Overzealous marketing has the potential to normalize formula feeding and erode the
importance of culture.

It's crucial to remember:

The problem is multifaceted and encompasses more than just Nestlé's marketing.

There are other claims that formula may be helpful in some circumstances, such as
when moms are ill or do not have access to adequate nursing assistance.

The World Health Organization (WHO) suggests nursing a baby exclusively for the first
six months of life, then continuing to nurse the baby while eating supplementary foods
for up to two years or more.

In the end, the debate around Nestlé and cultural shift emphasizes the importance of
ethical and responsible business operations, especially when it comes to delicate topics

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like cultural norms and baby health. It is the duty of multinational companies to operate
with cultural awareness and give the communities they serve first priority.

6-Discuss the importance of adapting products to fit the cultural norms and
preferences of diverse markets. Provide examples, if any, of how Nestle adapts
its products to align better with the cultural practices

Businesses that wish to flourish internationally in the linked globe of today must
comprehend and adjust to the distinct cultural norms and preferences of other markets.

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This involves more than just translating marketing copy and packaging; it also entails
customizing the product to suit regional preferences.

Why does it matter?

Customer satisfaction:

Customers are more likely to be happy and make repeat purchases of products when
they match local preferences. This increases sales and fosters brand loyalty.

Respect for local culture: A company's ability to comprehend and value the local market
is demonstrated by its consideration for cultural sensitivities. With customers and
communities, this fosters trust and goodwill.

Maintaining competitiveness:

Businesses can set themselves apart from rivals who take a one-size-fits-all stance by
having a thorough understanding of local needs.

Illustrations of Nestle

KitKat: KitKats are believed to be lucky charms for passing exams in Japan. During test
season, Nestle took advantage of this by releasing limited-edition KitKat flavors and
packaging.

Maggi: This well-known seasoning comes in more than 70 countries and has distinct
flavor profiles catered to regional preferences. For instance, Maggi in India has more
spice than the European variety.

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Nescafé: Depending on regional tastes in coffee, Nestle provides various coffee


strengths and formats (instant, ground, etc.) in various areas.

It's not only about the components:

Product adaptation involves more than just flavor or component substitutions.


Businesses must also take into account:

Packaging: Fonts, colors, and designs can all have cultural connotations.

Marketing campaigns: Local audiences should be able to relate to the messaging and
visuals.

Distribution channels: Goods should be accessible where customers anticipate finding


them.

Recall:

Product market adaptation is a challenging process that calls for in-depth analysis and
tact. Businesses may create beloved worldwide brands by comprehending and
honoring local cultures.

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7-Consider the differences in management styles between Western and


Eastern cultures. How can multinational corporations like Nestlé adapt their
management styles to effectively operate in culturally diverse regions?
Compare between two countries of your choice.( Use the Geert Hofstede Index
and Edward Hall as a Guide)

Managing Across Cultures: Nestlé in China and Brazil


Nestlé, the Swiss food and beverage giant, operates in over 190 countries,
necessitating a nuanced approach to management across diverse cultures. Let's
compare how Nestlé might adapt its styles in China and Brazil, using Geert Hofstede's
cultural dimensions and Edward Hall's proxemics theory.

China:

 Power Distance (high): Respect for authority and hierarchical structures is ingrained in
Chinese culture. Nestlé could empower local managers, invest in training programs, and
foster a culture of open communication within a defined hierarchy.

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Geert Hofstede's Power Distance Index

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 Individualism vs. Collectivism (collectivistic): Group harmony and loyalty are


paramount. Nestlé could emphasize teamwork, collective goal-setting, and decision-
making that considers the team's well-being.

 Uncertainty Avoidance (high): Preference for order and stability. Nestlé could provide
clear procedures, detailed instructions, and a predictable work environment.

Geert Hofstede's Uncertainty Avoidance Index

 Masculinity Hofstede Index:


 Score: 67 - This is a high score on the Masculinity scale, indicating a
strong emphasis on traditional masculine values like achievement,
assertiveness, and competition.
 Characteristics:
 Focus on work and material success.

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 Emphasis on strong leadership figures.


 Preference for direct communication and decisiveness.
 Importance of hierarchy and status.

Brazil:

 Power Distance (moderate): Hierarchical structures exist but are less rigid. Nestlé could
empower employees, encourage open communication across levels, and foster a
participative decision-making culture.

Geert Hofstede's Power Distance Index

 Individualism vs. Collectivism (individualistic): Individual achievement and self-


expression are valued. Nestlé could recognize and reward individual contributions, offer
flexible work arrangements, and promote personal growth opportunities.

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Geert Hofstede's Individualism vs. Collectivism Index

 Uncertainty Avoidance (moderate): Openness to change and improvisation. Nestlé


could embrace a dynamic work environment, encourage risk-taking within
boundaries, and be adaptable to changing market conditions.
 Masculinity Hofstede Index :
 Score: 49 - This is a moderate score, placing Brazil somewhere between
masculine and feminine cultures.
 Characteristics:
 Balance between achievement and relationships.
 Importance of emotional expression and warmth.
 Preference for indirect communication and building consensus.
 More emphasis on family and social connections.

Key Takeaways:

 Contextualize management styles: Understanding cultural dimensions and proxemics


helps tailor approaches for each market.

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 Balance global consistency with local adaptation: Maintain core values while adapting
communication, decision-making, and work styles to the local context.
 Invest in cross-cultural training: Equipping employees with cultural awareness fosters
effective collaboration and reduces misunderstandings.
 Build trust and relationships: Long-term commitment and genuine partnerships are
crucial for success in diverse markets.
 Achievement: China prioritizes individual achievement and ambition more strongly
than Brazil, which balances achievement with social connections.
 Communication: China favors direct and assertive communication, while Brazil
prefers indirect and relationship-based communication.
 Hierarchy: China has a more pronounced hierarchical structure in society and
organizations, while Brazil is more egalitarian.
 It's important to note:

 These are generalizations and individual experiences may vary within each country.
 The Hofstede Index scores are averages and don't capture the full complexity of
cultural values.
 Other cultural dimensions, besides masculinity, also influence behavior
and interactions.

By understanding and adapting to cultural differences, multinational corporations like


Nestlé can navigate the complexities of operating in a globalized world.

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8- multinational companies must uphold ethical standards when operating in


culturally diverse markets.
They can uphold ethical standards through a combination of policies, cultural awareness, and
adaptability. To achieve that the following strategies shall be followed:

- Develop a comprehensive global code of conduct that outlines ethical principles and standards
applicable across all regions. This provides a consistent framework for ethical behavior while
allowing for some cultural adaptability. For example, Procter & Gamble (P&G) has a Global Code
of Conduct that outlines ethical principles for its employees worldwide. This includes guidelines
on issues like bribery, conflicts of interest, and fair competition, providing a consistent ethical
framework across diverse cultures.

- Provide employees with cultural sensitivity training to enhance their understanding of diverse
cultural norms and values for example, IBM conducts cultural sensitivity training for its
employees working across various regions. The training includes insights into communication
styles, business etiquette, and social customs to help employees navigate cultural differences
and make informed, culturally sensitive decisions.

- Establish local ethics committees or points of contact in each region. These committees can help
interpret the global code of conduct in the context of local cultures and address any ethical
concerns or dilemmas that may arise. For example, Microsoft has established local ethics
committees in different countries. These committees review and provide guidance on ethical

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considerations in line with Microsoft's global policies, adapting them to local cultural nuances
and legal requirements.

- Adaption of policies to local laws. for example, Google adapts its data protection and privacy
policies to comply with the General Data Protection Regulation (GDPR) in the European Union.
This adaptation ensures that the company's practices align with local laws while maintaining
global ethical standards.

- Engage with local stakeholders, including customers, suppliers, and communities, to understand
their needs and expectations. for example, Unilever engages with local communities to identify
and address specific needs. In India, Unilever's Project Shakti empowers rural women as
entrepreneurs, aligning its CSR efforts with local priorities and contributing positively to the
community.

- Implement CSR programs that address specific needs in each region for example Nestlé has CSR
initiatives tailored to different regions. In Pakistan, Nestlé's Rural Development Program focuses
on water conservation and agricultural development, addressing local needs and demonstrating
a commitment to sustainable practices.

- Maintain open and transparent communication about corporate practices and decision-making.
Transparency. For example Johnson & Johnson communicates transparently about its
pharmaceutical manufacturing practices. By openly sharing information about quality control
and safety measures, the company builds trust with global stakeholders and assures them of its
commitment to ethical standards.

By combining a global code of conduct with cultural awareness, adaptability, and engagement with local
stakeholders, multinational companies can foster an ethical corporate culture that is applicable across
different cultures while respecting local nuances.

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9-There is currently a campaign to boycott the western products in middle


east due to Israeli war against Palestine.
This campaign has impacted Nestle, according to its stock market and sales, the price of stocks declined
from 107 CHF in September to 98.63 CHF in December. The graph explained how much the company has
been impacted by the current boycotting.

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Many countries of middle east boycotted nestle, most of their restaurants and coffee shops remove it
from their menu and replace it with local brands. Due to their alleged support for Israel amid the conflict
with Palestine. Also, the global food giant Nestle's intricate ties with Israel through its ownership of
Osem, an Israeli food manufacturer operating in Occupied Palestine, have sparked widespread
controversy and calls for consumer action. It holds a controlling stake in Osem and has invested
significantly in Israel, including the establishment of an R&D center in the country.

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Conclusion:
Multinational companies can protect their reputation from boycotts by prioritizing ethical practices,
ensuring that compliance with laws and regulations helps build trust, transparent communication to
mitigate misunderstanding, and responsiveness to societal concerns.

Also, Engaging in corporate social responsibility to demonstrates a commitment to social and


environmental concerns, enhancing the company's reputation, addressing environmental impact,
actively participating in community initiatives can also help build a positive image and resilience against
potential boycotts, adapting to Changing Values Being responsive to evolving societal values and
expectations helps companies stay aligned with public sentiment and demonstrating a commitment to
innovation and adaptability can showcase the company's ability to evolve with changing circumstances.

Additionally, proactively addressing issues, listening to customer feedback, and adapting policies in line
with evolving social values contribute to reputation management.

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