The coca-cola Company struggles with Ethical Crises - Case Study Example

? Ethical Crisis at Coca Cola Company: A Case Study Introduction The business environment is characterized by the need for a business to operate profitably while adopting practices, which are environmentally sustainable and ethical. Every business operating in whichever field is faced with a number of ethical challenges and issues that affects their image before the stakeholders and the public. Coca cola Company, one of the most revered and common soft drink manufacturers in the world has had to deal with a number of ethical complaints against it. The company has had a number of influential business people serving various positions within its ranks, including Warren Buffet who served in the company’s board. In this paper, one out of a number of the ethical misdeeds raised against Coca Cola Company will be analyzed. In this analysis, the company’s response to the issues raised by the company and how it affected the success and operations of the business will be discussed. The economic and social impacts of the complaints against the company will also be discussed in line with differential business practices and response to ethical concerns (Jennings, 2011). Ethical concerns Just like any manufacturing company, coca cola has had a number of ethical challenges especially on their manufacturing and package practices. In 1999, the company was faced with one of the most dreaded ethical concern that arose after the safety of its products was questioned. The source of this questioning arose after thirty Belgian children developed health complications after consuming a wide range of the company’s products. This forced the company to react immediately by recalling its Belgian based products to enable them conduct tests to confirm the source of the illnesses (Jennings, 2011). This did not save the company from further media and public glare as other countries including Netherlands and Luxembourg recalled all other products manufactured by the company. Laboratory examination on the products revealed that the illnesses were caused as results of negligent processing practices, which resulted into poorly processed carbon dioxide batch. When this condition was first reported, the company’s response was inadequate as it viewed the hiccups as minor. This created a major public outcry with the media giving the company a lot of negative publicity. These developments forced the company’s management to give a detailed apology to enable them gain the public confidence that was forced fading. This was the end of the company ethical manufacturing practices as France followed suit and banned all products from the company after a number of coca cola consumers developed complications. Other products from the company like the coca cola water that was being supplied to Poland reported the presence of mould, fungi that are harmful to human health (Jennings, 2011). Coca Cola Company and the community Organizations today have more roles, not just to the stakeholders and the consumers but to the general population and the society. In this regard, Coca Cola Company has not been left behind in developing proper community based projects and serving in different roles as part of its corporate social responsibility. To enable the company regain the trust of the community as a whole and recapture the mass consumers, especially those who migrated to other brands like Pepsi, the coca cola company have developed a number of programs that targets the community (Kesler, 2012). These projects are supported and coordinated by its philanthropic and community based wing known as the coca cola foundation. Through this foundation, the company is engaged in community development and environmental programs in different parts of the world, especially in countries where it operates its subsidiaries. It funded the education on wheel program in Singapore in which students were allowed to learn different historical developments in the country through interactive mobile visits. This program has been lauded for its ability to improve the creativity and artistic skills of different students most of who are engaged in creative and communication intensive classes. In the United States, the company has launched a massive educational support program that targets university students through the provision of grants and scholarships. These scholarships target the minority and disabled students within the country who are unable to pay for their college fees. Through this project, the public image of the company has significantly improved thus making it possible for it to win back their confidence and trust (Jennings, 2011). As a company with massive global operation scale, most of the works and programs currently funded and supported by coca cola are global and target different parts of the world. Some of the global projects initiated and operated by the company seek to ensure environmental conservation and the reduction of carbon emission. This has enabled the company to earn more carbon credits for its role in curbing global warming and its impacts. Health and nutritional challenges also strives in different parts of Africa and the developing countries, a fact the company is conscious of. As a result, the company, through the partnership with the help of UNAIDS has funded a number of HIV/AIDS projects across the globe (Ferrell et al, 2011). Solutions to ethical concerns and issues A report published by the auditing house PriceWaterHouseCoopers after the ethical crisis that faced coca cola highlighted the level of public confidence that the multinational still enjoyed. Analyst has attributed this to the strategic approach that the company adopted in responding to the issues raised and working towards eliminating the health concerns. This positive result in the face of negative adversities that faced the company is attributed to the company’s response and cooperation with the authorities. Following the incident Belgian that resulted into a number of ethical questions on the company production and plant life, the country launched a series of investigations to ascertain the cause of the problem (Rendtorff, 2009). Initial reactions by the company indicated that the illness was because of inappropriate levels of carbon dioxide. To shade the light into this issue and eliminate any traces of doubts, which had consequences on the company’s publicity, it cooperated with the Belgian investigative authorities. The final report produced from the investigation did not implicate the company of any wrongdoing or failing to comply with the structural requirements. The investigation also found no negligent practice within the company’s manufacturing process, results which compelled the Belgian government to withdraw charges against it (Kesler, 2012). Other coca cola products that were suspended were allowed into the country and the company allowed mounting a major publicity campaign to redeem its image before the public. Change of leadership within the company also provided new impetus and blood into the management and manufacturing structures of the company (Ferrell et al, 2011). Apart from the direct response and approaches to counter the ethical challenges facing the company, coca cola adopted a number of strategies aimed at increasing its market presence across the world. This has enhanced the presence of its products in different parts of the world despite the public media assault against the company since 1999. In Belgian, the main ethical issues revolved around the safety of its carbonated products and soft, most of which were found to have inappropriate levels of carbon dioxide (Jennings, 2011). Following the conclusive investigative conclusions by the Belgian government that failed to put the blame on the company, coca cola has launched a massive strategic move aimed at increasing the production, marketing and sales of carbonated soft drinks in the world. The company that targets both the existing and new markets has enhanced this through comprehensive and thorough marketing approaches. Apart from the production of the carbonated products, the company has continually increased its products by introducing new ones into the market. Among those added to a long list of the company’s products is bottled water, ready to drink coffee, fruit juices and energy sports drinks (Ferrell et al, 2011). This has resulted into increased market base controlled by the company in different sectors of the world including new markets in Africa and Asia. The company has also developed fresh methods to ensure that it invest brightly to ensure market growth, shift of competitive advantage and growth in product sales. With the current advances in information technology and newer approaches of production and manufacturing, the company has developed highly advanced, efficient and cost effective methods of production. This has enabled the company to develop new quality analysis and control measures, which has assisted it to produce quality products thus reducing ethical challenges associated with product quality and safety (Ferrell et al, 2011). Current ranking of Coca Cola Company Coca Cola Company has remained steadfast in its resolve to grow and remain the main soft drink manufacture in the world despite the numerous challenges. The company has developed different approach and measures to respond to different allegation against it, thus improving its ranking and position before the customers and stakeholders. However, the company is currently struggling to deal with a number of lawsuits logged against it by the distributors. When the company launched its energy drink PowerAde, the company decided to market it directly to consumers, a step which resulted into resistance by the distributors. Analyst also questioned the ethical viability of this boardroom decision that was made by the company in regards to the marketing of the product. Apart from the problems with the distributors, the company is also grappling with new problems which have arose from the failure to adequately develop and manage ethically conscious decisions affecting staffing and stakeholders like the distributors (Jennings, 2011). However, the company’s current approach to its corporate social responsibility strategy has improved the public rating of the company. This has significantly improved the public confidence and trust, attracting more investors into the company and increasing the dividends earned by shareholders. Isdell, the current CEO of the company who develop comprehensive turnaround strategic plan for the company, adopted these approaches. As a result, Coca Cola Company introduced a number of products for its existing and new markets thus increasing its market influence and control significantly (Ferrell et al, 2011). From a company that faced significant number of challenges in early 2000, coca cola has grown to be among the few companies who profit margins continue to rise despite the dwindling economic position. The company recorded a significant 6% increase in profits this year that translated into 50% increase in share value. The operating cost of the company also reduced by 3%, a development that analyst’s attribute to weaker international currencies and the hedging policies of the company (Kesler, 2012). The current position occupied by the company is attributed to the change in corporate governance and leadership style. Corporate governance in multinational corporations like coca cola plays a major role in shaping the behavior of other employees and largely the development of a positive culture. Good corporate governance influences the behavior of other employees in an organization, a fact that has been attributed to the current position and image of the company. At the time when ethical issues surrounded the management and operation of the company, corporate greed and misconduct was the major contributing factor. Integrity failures arising from unethical behaviors by the senior management of the company created significant image and publicity lapse in the company, a situation that resulted into significant loss to the company (Ferrell et al, 2011). Today, coca cola has high profile stakeholders who have much expectation thus pushing the company senior managers and executives to develop positive policies and adopt ethical behaviors. Coca cola Company according to the chief executive officer, the company has pledged full commitment to sound corporate governance practices that seeks to benefit the stakeholders. Through these approaches, the company has been able to strengthen its position in the market and improve their public image after years of ethical concerns (Jennings, 2011). Leadership behavior change Leadership behavior within the company influenced in a significant way to the ethical challenges that the company faced from 1999. Most the leaders adopted unethical practices, which allowed for the growth of racial discrimination, adoption of improper marketing approaches and lapse in the production and product safety systems. However, the adoption of a number of strategic changes, which included the change in leadership and management approaches, changed the fortunes of the company. As Isdell alluded in one of his interviews with the wall street journal, significant changes in leadership behaviors affected the later performance of the company. The chief executive asserts that once they recognized the role played by the corporate center, they resolved to ensure significant changes in the attitude and behavior of the leaders (Ferrell et al, 2011). Because of the current behavior change in the organization, different leaders with varying levels of management within the company are empowered to make administrative and leadership decision. Such decisions are adopted by the organization without questioning and judgment, believing that behavior change in the organization empowered all the employees and managers. Among the changes made by the company to enhance its management processes include the narrowing and implementing of a lean executive team, which is empowered through positive behavior change (Rendtorff, 2009). Coca cola has also adopted a new leadership recruitment strategy that involves leadership coaching and training to enable every incoming leader to understand the need for an ethical and open approach. Through this, the company has ensured that it develops a positive leadership culture that seeks to serve both the interest of the stakeholders, consumers and the society as a whole. This has worked significantly bin ensuring that succession is not only achieved in the leadership but also in the behavior of the management (Jennings, 2011). As a company faced by ethical behavior challenges, the management has been at the forefront to regain the lost glory and the trust of the consumers. Which gaining the consumers and their trust may be an easy endeavor, retaining this for a long time through the adoption of proper business behavior may be a significant challenge? The major challenge to the organization is thus to develop a culture of positive behavior and the adoption of policies that enhance proper management behavior (Ferrell et al, 2011). 1. Why do you think Coca-Cola has had one ethical issue to resolve after another over the last decade or so? Coca cola has been faced with significant ethical challenges and issues, most of which have revolved around the marketing and manufacturing practices. Other ethical complaints against the company included racial discrimination staffing approaches adopted by the company and ethical marketing approaches. A company with an operation scale as big as Coca Cola Company engages in a range of events and manufacturing processes. This makes it possible for the company to encounter a number of challenges, some of which may be attributed to ethical lapse. The market covered by the company is also massive, including Asian; African and European markets, which have different, market related problems and issues. When a business operates in such an environment, challenges and issues, most of which are ethical in form are thus prevalent (Ferrell et al, 2011). 2. A news analyst said that Coca-Cola could become the next Enron. Do you think this is possible and defend your answer? Enron, a corporation that operated within the energy industry from its headquarters in Houston was faced with a major scandal that was known as the Enron scandal. The company was declared bankrupt in 2001 after a comprehensive audit revealed that the company was unable to service its credit obligations. From this analysis of coca cola, I disagree that the company has the potential of following the Enron way and ending up in dissolution (Jennings, 2011). The reason for taking this position arises from the current business decisions and approaches that the current chief executive have adopted. The leadership has been at the forefront in developing proper business approaches in the face of the challenges facing the company. Despite all these, the company has not been faced with financial challenges as was witnessed by Enron, a situation that led to its ultimate dissolution in 2001. Coca cola with its massive market control, market capitalization and loyal consumer base cannot therefore follow into the footsteps of Enron (Jennings, 2011). 3. What should Coca-Cola do to restore its reputation and eliminate future ethical dilemmas with stakeholders? Primarily, the organization must ensure that they recruit and retain leaders with high morals and practices that will positively influence the behavior of other employees. Ethical training also significantly impacts on the general behaviors of the people especially the leaders tasked with different roles and responsibilities. Through the organization of comprehensive training schedules, the company will develop proper business and ethical behaviors among the leaders. Apart from ethical practices, the company’s manufacturing and production standards failed to meet the manufacturing standards of different countries including Belgian. Proper manufacturing, safety and quality practices must be adopted by the company to ensure that products that do not meet the laid down requirements do not reach the market (Kesler, 2012). Conclusion The approaches adopted by coca cola so far have posted significant positive results which have been attributed to the positive image and reputation by the company. Despite the challenges facing the organization, it has remained steadfast in developing consumer conscious approaches especially when responding to ethical question and allegations against it. This has enabled the company to rise above the challenges facing it since 1999 and maintain its profit margin and market control (Kesler, 2012). References Ferrell, O. C., Fraedrich, J., Ferrell, L., & Ferrell. (2011). Business ethics, 8th ed.: Ethical decision making and cases. Stamford: Cengage Learning. Jennings, M. M. (2011). Business ethics: Case studies and selected readings: Case studies and selected readings. Stamford: Cengage Learning. Kesler, G. (2012). How coke’s CEO aligned strategy and people to re-charge growth: An interview with Neville Isdell. People and strategy, 31(2), 18-21. Rendtorff, J. D. (2009). Responsibility, ethics and legitimacy of corporations. Copenhagen: Copenhagen Business School Press Dk. Read More