VIETNAM NATIONAL UNIVERSITY IN HO CHI MINH CITY

University of natural Science

Itec

THE CASE STUDY OF MEAD

JOHNSON VIETNAM COMPANY

Group : FAITH

Advisor : NGUYEN HUU DANG KHOA

Ho Chi Minh City, Vietnam

2013

TABLE OF CONTENTS

CHAPTER I : INTRODUCTION..................................1

a) Research background ..................................................................................................1

b) Reason ..........................................................................................................................2

c) Research question ........................................................................................................3

CHAPTER II : METHODOLOGY...............................4

a) Secondary data & References ....................................................................................4

b) Framework ..................................................................................................................5

CHAPTER III : ANALYSIS/DISCUSSION.................6

a) Internal ....................................................................................................................6

i. Raw material ........................................................................................................6

ii. Business Pressure .................................................................................................8

b) External ..................................................................................................................11

i. Social ........ ..........................................................................................................11

ii. Law ......................................................................................................................12

CHAPTER IV : CONCLUSION..................................14

ii

CHAPTER I

a) Research background :

- We all know milk is good for people's health. In the market today, there are countless types

of milk for all age, such as Dutch Lady, Vinamilk, Abbott..., and the most common is milk for

children, but with the current economic situation and competition between brands, there are

some companies report the wrong concentration of the components in box, such as the Mead

Johnson milk company with Enfagrow A+.

- Mead Johnson has been known by product line Enfa A + , such as EnfaMama A +, Enfalac

A +, EnfaPro A +, EnfaGrow A +, EnfaKid A +. In addition, the company has also developed

specialized products to meet the special nutritional needs of children (Enfalac Lactose Free for

children with diarrhea caused by lactose intolerance; Enfalac Premature for children who was

born prematurely, low weight; Prosobee for baby who can't tolerate cow's milk , and Pregestimil

for baby has just undergone surgery or are allergic to animal protein (protein) from cow's milk,

soy milkor even breast milk). At the end of June,2008, after the Ministry of Planning and

Investment of Ho Chi Minh City grant a permit for Vietnam BMS Company, the parent company

1

of Mead Johnson Nutritionals, Mead Johnson Nutritionals Vietnam officially became a 100%

foreign capital.

b) Reasons :

- The reason why we choose this company because this is one of many famous milk

companies in Vietnam. There're many many mothers who did not hesitate to put a large amount

of money to buy milk for there children because they believe in the function parameters of milk.

The majority of mothers believe this milk and think it good for their children. But in recent

times, this company was having a lot of trouble, such as milk with "super profits" when the price

of milk is nearly 2.5 times the price of capital; arbitrary ad listing price , the appearence of

imitation, ... And, most recently, the company is accused that they were published wrong

concentration of the components

- Milk is an important food for young children. For infants, in addition to breast milk or with

young children, in addition to the main meal, milk powder can say is that the side dishes, provide

more essential for your baby. But for action warping function of the company's milk is an

unacceptable action and it may affect a baby's health.

2

c) Reasearch question :

- So what is the reason of this action? And what is the result of this action? And how did

they answer the customers about this problem?

3

C HAPTER II

- To solve this problem, we refer to a lot of documents. And here are some

Wrong concentration

Internal Raw material

Business pressure

apparatus business

labor and wages

corporate finance

facilities

External

Community

Law

4

links we've read :

http://vietbao.vn/Kinh-te/Mead-Johnson-Nutritionals-thanh-lap-cong-ty-sua-100-von-nuoc-

ngoai-tai-Viet-Nam/55199246/88/

http://www.baomoi.com/Sua-Enfagrow-bi-to-venh-ham-luong-dinh-duong-so-voi-nhan/

82/2968255.epi

http://www.tin247.com/nhung_nhang_viec_tu_kiem_nghiem_chat_luong_sua-3-21474295.html

http://vietbao.vn/Kinh-te/Sua-Enfagrow-bi-to-venh-ham-luong-dinh-duong-so-voi-nhan/

20859456/88/

http://www.chiasetinhthuong.org/diendan/showthread.php/1569-Các-Mẹ-có-con-dùng-sữa-Enfa-

chú-ý-thông-tin-này-nhé

http://www.webtretho.com/forum/f106/khi-sua-khong-nhu-chung-ta-tuong-phan-1-a-306595/

http://m.tin247.com/mead_johnson_len_tieng_ve_vu_sua_sieu_loi_nhuan-3-21447559.html

http://m.tin.247.com/sua_bot_tre_em_quang_cao_tuy_tien%2C_khong_niem_yet_gia-3-

21787206.html

h ttp://nld.com.vn/52519p0c1050/yeu-cau-ngung-ban-sua-enfagrow-ghi-ham-luong-acid-folic-

7300-mcg.htm

http://www.vietlaw.gov.vn/LAWNET/docView.do?docid=23426&type-html

http://www.doanhnhan360.com/Desktop.aspx/thi-truong-360/Phap-luat-360/

Doanh_nhan_va_phap_luat/

5

CHAPTER III

a) INTERNAL :

i. Raw material :

- This is raw material after be checked

Label Reality

Calcium 560 1.640

Protein 17 2.54

Fat 16 2.72

Fibre 3 0

- As you see, calcium content is too high to the parameter which has been published in the

box, and the parameter of protein, fat is wrong, too, especially fibre. So what is the reason of this

difference? In our opinion, is has many reasons :

6

+ because depend on resource, high investment

+ quantity, quality, price, kind, structure of material

+ cut material to reduce capital, save material to reduce density in business cost

+ reduce high price material and increase low price material

+ excess or shortage of raw materials in the production of

+ material in Vietnam does not meet the terms of quantity as well as quality

- As we know , when business, not all products has 100% quality as recorded on the

packaging. We can accept the loss in the product, because this is the way that every company do,

but in some case, the loss could be allowed. So if the amount of loss that is too much, it will lead

to consequences for companies and consumers?

about customer's health : if enough calcium absorption, baby 's bone will be strong,

but if too much calcium in the body, the body will not be absorbed as well as to excreted

completely, so will cause kidney stones in user.

people will no longer trust, reputable companies will decline

- The only way to solve this problem is balance the concentration of components in the milk

properly in the box to regain the trust of customers. They should flexible in finding suppliers to

ensure quality and quantity of raw materials required for production, not to happen stagnant or

shortages of raw materials, and shall minimize the cost of doing business use of raw materials.

7

ii. Pressure in the business:

- There are many things that cause a severe pressure for the business and production:

Structure of corporate governance:

- The machinery of corporate governance plays an important role for the survival and

development of enterprises. They have to perform many different tasks, build a business strategy

and development, make sure that their business isn't going in the wrong direction, does not cost

too much invested in unnecessary products, increase the maximum profit for the company.

Wage labor:

- Labor is one of the important factors, the direct effect on productivity, quality of products,

affecting the speed of consumption. Thus, we can say this directly affect the company's business.

In addition, the salary is equally important, because this is what affects the cost of production of

the company's business. If high wages will affect the productivity, the profitability of the

company, but on the contrary, if the cut in the salaries of the workers, the company earned profits

will be higher. Therefore, the balance between wages and workers should be considered carefully

and rationally.

8

Business finance:

- If the financial strength, not only to ensure that the company's production activities

ongoing and stable, but also improve productivity and product quality.

Facilities, engineering and production technology:

- This is an important foundation in the manufacturing process. Technical facilities are

arranged logically how much more contribute to high performance. Moreover, it also reduces the

amount of labor in the company, rather than having to hire more people, they just need to hire a

small team to ensure the production by machinery place strict procedures. This is a way to cut

costs and profit.

- But what consequences ? They will do everything to meet all that. Cut money to reduce

capital costs, competition, based on customer trust to deceive them, and sell for theim low-

quality products, not required. Do everything to off set capital, improve the financial situation of

enterprises. In the long run, their reputation in the market will be affected, and the amount the

consumer will be reduced.

- Solution of the group that is on the quality assurance of the production. Can cut costs by

reducing the amount of product to ensure quality. So they will have enough merit to compete

with other dairy companies in the market. In addition, we need to improve the popular ideology

of foreign goods than domestic goods of the people to relieve pressure on the company. We need

9

a method reasonably calculated so as most effective is determined by economic output and cost

of inputs in the business.

10

b) EXTERNAL :

i. Social :

- In recent years, the demand for Vietnam's milk market rising higher by the effects of

income, not only that, the population and the high rate of infant has created a huge milk market.

But while demand is so big that the supply does not meet the expectations of consumers and the

economy difficult. Moreover, the idea favored foreign over domestic goods has caused a high

disparity between domestic and foreign goods, causing pressure on the company.

- Not only that, unemployment, education, style, culture and lifestyle also affect the

production process. If people have the choice to choose the job, the money which is paid for the

workers will be high, but it will reduce the efficiency of production. But if there are too many

unemployed will lead to source reduction, reducing production efficiency. Education is also a

major problem, affecting the ability to train and acquire. Culture also contributed. If overseas,

people focus on work attitudes, they take care of product quality. But in Vietnam, people often

wait for the time to go home, company image and product quality is the superior manage. In

addition, as a fear of losing their jobs, they do not dare to tell the public the company's unethical

actions.

- Beside that, the state's economic policies, economic growth, inflation and the GDP are the

factors which leading to the production process violations in business.

11

- We think that if you want to solve this problem, the company should open online programs

in order to solve all the problems of their customers. Not only that, they ought to notice the

newspapers to apologize and regain the trust of customers. The company shoul create an

opportunities to improve the ability and knowledge of the staffs and employees and should

courage the action telling the truth of some company's unethical actions, but ensure that the

company has a written specific and clear, make sure after the announcement, they still have a job

if they do not do immoral and have enough evidence to accuse the company's action is wrong.

- Moreover, people's thoughts on the foreign goods should be changed. Vietnam State should

reduce the burden and pressure in business by encouraging consumers to use Vietnamese goods,

promote domestic industry, balancing the weight of domestic and foreign goods.

- Economically, the policy of the Government to encourage businesses to expand capital,

curbing the inflation rate at a reasonable level will create conditions for enterprises in general

and Mead Johnson particular company developing and improve production efficiency in the

business.

ii. Law :

- Business should aim to profit, but more important is to ensure about law and legal.

Business and law always go together. In principle, the business should be fair and transparent,

the law should be clear and strict. But in fact, Vietnam is soft law, not written clearly, no criminal

12

sanctions and the punishment is not hard enough to warn for unethical business object and often

changing . Although they had written the decrees on sanctioning of administrative violations in

the field of standards, metrology and quality of goods (ND 54/2009/BD-CP and issued 5/6/2009)

but the penalty is too low, is not hard enough to affect the company. Not only that, the

understanding of law in the business is limited. Outside of the case, although they have known

well about the law, but for the sake of the company, they are willing to break the law, despite

causing severe consequences for consumers, the economy, and even for the company itself.

When uncovered, prosecutors ethical violations, they remain silent and refused to explain their

mistakes.

- We should develop consumer protection associations in order to protect the rights and

create a voice for customers. It would be useful to increase the fine, can not go easy on the

unethical actions of the company.

13

CHAPTER IV

- So, why the Mead Johnson Vietnam, a company with 100% foreign investment capital to

has this action? It's all for profit. Even though this is a 100% foreign owned company, but the

account that the company must pay when doing business in Vietnam, such as operating costs,

distribution costs (buildings, transport, etc.), advertising costsreports and special taxes: VAT,

corporate income tax, significantly reduced profit. Not only that, many dairy products are

competing in the market Viet Nam. So the company has chosen to cut the high cost of raw

materials, instead promoting the raw material cost lower to higher profits.

- The warping content in milk Enfagrow A + shows unethical behavior in the business of

Mead Johnson Vietnam. There are many reasons for this action of the company, objective as well

as subjective.But this action also makes us see the serious consequences it has caused.

CONSEQUENCES:

- This action not only affect the company's consumers but also affect the economy and the

Vietnamese dairy market.

14

+ On consumers: most people consume milk Enfagrow A + are infants and young children,

this action will be effect badly to these people. This is the object consumer consumption in a

passive way. Moreover, the amount of calcium is too high, if one day a child drinks three glasses

of milk, calcium intake will be very large, while the human body calcium consumption is very

low. Thus, the child's body would not be able to absorb all waste such high amounts of calcium,

as well as all out, residual calcium deposition in the body and can cause kidney stones, adversely

affect child health.

+ For buyers: they will lose their trust in this milk company, and boycott companies

+ To the company: because of the profit, the company has violated the health of the

consumer, especially the child. But that side of the company for the explanation after a long

period of silence, but almost all the company's explanation is not clear, transparent and thorough,

not to convince people and very general. Thus, the actions of the company will gradually lose the

trust of the customers and will lose their image on the Vietnamese market.

+ To the law: the error here also belongs to product testing functions of state companies as

cover for this product on the Vietnamese market. This will make people worry about the laws

that protect people's health and business law in the country.

RESOLUTION

- About the company : should have the meeting to explain clearly about this issue more and

more obvious, not only to consolidate people's belief in the product, but also ensure that the

company will not do this unethical action again. Do not remain silent or get too general reasons

15

that explain a problem which is serious and affects people's health. In addition, the company

should call back all products of administrative violations in the field of standards, metrology and

quality products to make sure that a serious consequences don't happen after. Companies more

flexibility in choosing investments, calculated that between capital and profits, output as well as

in a reasonable way, not to exceed the difference.

- On the other hand, the State should have a law which is more clearly on sanctioning this

behavior, the fines should be raise to punish the unethical actions of the company. They need to

reduce the pressure on business by reducing the pressure, encourage the useres to use a domestic

goods, try to invest and develop the quality of domestic products, balance the energy

consumption of domestic goods and imported, keeping inflation in the reasonable way.

16