Global Business Environment and Ethical Conduct Coca Cola, PepsiCo and Nestle - Term Paper Example

Global Business Environment and Ethical Conduct– Coca Cola, PepsiCo and Nestle Global Business Environment and Ethical Conduct – Coca Cola, PepsiCo and Nestle Coca-Cola, products/ services & Code of ethical conduct Coca-Cola is the most powerful firm in the beverage industry worldwide. The firm’s brands, about 500 in total, are available in more than 200 countries (Coca-Cola, Organizational Website, Our Company). Coca-Cola’s presence in the market is estimated to 128 years and has been characterized by strong growth; in 2012 the company’s net income reached the $9 billion (Coca-Cola, Organizational Website, Our Company). The products of the company are numerous, more than 3,500 around the world (Coca-Cola, Organizational Website, Our Company). Certain of the most popular brands of the global beverage industry belong to Coca-Cola company: ‘Coke, Fanta, Sprite, Dasani, Powerade, Schweppes, Fuze Tea and so on’ (Coca-Cola, Organizational Website, Our Company, Brands). In other words, all products of Coca-Cola are refreshment drinks being differentiated as of their ingredients. Coca-Cola has published a Code of Conduct on which the activities of the firm in the global market are based. Among the issues addressed in the particular Code emphasis should be given to three, being considered as having a critical role in business success: ‘Anti-Bribery, Dealing with Customers, Suppliers and Consumers and Dealing with Competitors’ (Coca-Cola, Code of Conduct, p.1). These issues have been chosen for the following reasons: a) Anti-Bribery reflects the opposition of the company to any attempt for securing the support of the government by offering money or other benefits, such as the use of the company’s assets and so on; Bribery is a severe problem for business activities worldwide; the response of the company to this phenomenon should be reviewed in order to understand whether Coca-Cola promotes the respect of its Code of Conduct in practice or not, b) Stakeholders, especially Customers and Suppliers, are of high value for the success of a business; if the interests of stakeholders are not adequately addressed by a firm, then this firm’s profits would be threatened, c) Competition; many firms worldwide have been accused that their success has been resulted because of the violation of the laws related to Competition; it would be important to check the response of Coca-Cola to this issue in order to understand whether the firm’s success has been favored by unethical practices or not. Nestle & PepsiCo – Code of conduct - Comparison In Nestle’s Code of Conduct the treatment by the firm of its Customers, Suppliers and Consumers is explained in Section No.7 where the alignment of the firm’s activities with the rules of Competition is also explained (Nestle, Code of Conduct, p.5). In the section No. 10 of its Code of Conduct the firm states clearly its opposition to Bribery; the obligations of the firm’s employees in the context of the firm’s Anti-Bribery policy are included in the same section (Section No.10, Nestle, Code of Conduct, p.6). For PepsiCo integrity when dealing with Customers and Suppliers is vital. Indeed, the firm treats its customers and suppliers with ‘fairness and according to ethics and the law’ (PepsiCo, Code of Conduct, p.17). The alignment of the firm with the Competition laws is secured by emphasizing on the promotion of ‘a free enterprise system and by respecting all relevant laws’ (PepsiCo, Code of Conduct, p.18). Emphasis has been also given by the firm on the use of marketing messages that reflect the actual status/ quality of the firm’s products; these messages are made known to the public through marketing practices that are fully aligned with ethics and relevant laws (PepsiCo, Code of Conduct, p.16). In addition to the above, the firm has introduced a series of restrictions for its employees so that no chance of Bribery can exist (PepsiCo, Code of Conduct, p. 23). Among the two firms, PepsiCo explains more clearly its policies in regard to the three issues discussed above. For this reason, PepsiCo could be characterized as better organized in facing these issues. Performance of Nestle & PepsiCo in regard to specific ethical issues In practice, both companies seem to be unable to respond to their responsibilities in regard to the three issues discussed above, i.e. Relations with Customers, Suppliers & Consumers, Competition law and Anti-Bribery. More specifically, in 2013 the opposition of Nestle to the right of people to have access to free water has been made published in news (Samsor 2013). In addition, in 2012 the severe risks in regard to the ingredients of the Infant Formula used by Nestle were revealed (Krasny 2012). The decision of Nestle to sue the government of Ethiopian claiming a quite high compensation because of the cancellation of acquisition of a public company (Nayab 2013) and the efforts of the firm to spy a non-governmental organization that was opposed to the firm’s practices (Nayab 2013) are examples of Nestle’s failure to address the issues mentioned above. Figure 1 – Oxfam’s Scorecard on the performance of Food Giants in regard to ethics (source: The Huffington Post 2013) The problems of Nestle in regard to the promotion of ethics can be derived through the Scorecard of Oxfam in Figure 1. It is clear that among the two firms, PepsiCo is at quite lower position in regard to the promotion of ethics. Specifically in relation to the three issues mentioned above, i.e. Relations with Customers, Suppliers & Consumers, Competition law and Anti-Bribery, PepsiCo’s performance can be characterized as low, especially in regard to the first two issues. For example, in 2013 PepsiCo faced allegations for quite high amount of sugar, as an ingredient, in its products, an allegation also made against Coke (Bouckley 2013). Also, in 2011 the marketing practices of the firm had caused numerous complaints from consumer groups (Mehra 2010). In addition, the firm’s marketing policy has been found to be against CSR, as a framework based on ethics (Mehra 2010). The methods used by the firm for monitoring consumers’ preferences have been also resulted to complaints from individuals and organizations (Martinez 2011). If Nestle addresses the three issues discussed above effectively, then it could expect to have the following benefits: a) it could increase its profits, i.e. its market share; b) it could attract more brands, since the respect of consumers for the company would be significantly increased. Otherwise, i.e. if the firm would fail in addressing these issues the following negative outcomes would be expected: a) loss of license for the firm’s brands in certain markets and b) decrease of the firm’s profits worldwide. For PepsiCo, similar consequences would be expected. Indeed, if the firm would manage to face the above three issues effectively, then the following benefits would result: a) expansion of the firm’s customer base worldwide, a fact that would help the firm to improve its position in the global market, b) the firm would be able to enter new markets internationally. In different case the firm would have to face two problems: a) decrease of its sales and b) loss of strategic alliances, such as the one with the company Starbucks or the Water Org., an organization that aims to secure water quality worldwide. Techniques that Coca-Cola could use in order to ensure that its code of conduct will remain relevant through years of changing economic, political, social, cultural, and technological forces on business and society – Methods used by the firm to manage environment issues Coca-Cola could ensure that its code of conduct will remain relevant in the long term by adopting the following two techniques: a) by reviewing its code of conduct regularly, i.e. every six months; the current code of conduct of the firm was published in 2009, b) by introducing seminars, as part of its HR strategy, for keeping its employees informed on the rules including in the code of conduct and on changes made. Coca-Cola has employed various methods for ensuring the alignment of its strategies with the principles of sustainability. Reference can be made, as an example, to the following two methods: a) water stewardship; the water used in the production of the firm’s products has been reduced, compared to the past, using appropriate water stewardship practices (Coca-Cola, Organizational website, 2011/2012 Sustainability Report, p.68). The reduction in the amount of water used by the firm between 2005 and 2011 is presented in Figure 2 below. Figure 2 – The water used by Coca-Cola between 2005 and 2011 (source: 2011/2012 Sustainability Report, p.70) b) Sustainable Packaging is the second method used by Coca-Cola for protecting environment; Sustainable Packaging, as used by Coca-Cola, has been based on various techniques, such as decrease of the weight of the firm’s bottles and b) replacing plastic with eco-friendly materials, as possible, in regard to the bottles used by the firm (2011/2012 Sustainability Report, p.88). Approaches that Coca-Cola has taken in order to embrace technological advancements for innovation and thus improve business offerings. Technological challenges that Coca-Cola could face in the future. Coca-Cola has used two approaches for embracing technological advancements for innovation: a) it has developed new products based on healthy ingredients, so that it can address the needs of people who seek for healthy products; the Coca-Cola Life, a beverage based on the combination of sugar and stevia, is an example (Coca Cola, Organizational Website, Innovation stories), b) waste from the firm’s products, such as empty cans, are used for the development of various products, including ‘headphones and jeans’ (Coca Cola, Organizational Website, Innovation stories). It should be noted that in the future the company would be expected to face three critical technological challenges: a) the technology used for cleaning water would be no more effective in the future; indeed, pollution in water would be radically increased in case that military conflicts worldwide would be expanded. For example, it could be quite difficult to clean water exposed to high radiation; the company should increase its investment on the development of technology that could make the cleaning of water feasible no matter the pollution involved, b) plastic, as a material of packaging, may be prohibited in the future; the firm should identify alternative materials that could be able to fully replace plastic in the packaging of water and c) in the future water resources may be significantly decreased; then, the need for the use of reuse water in the beverage industry would be quite high. The firm should be sure that in such case it would have the necessary technology for securing the quality of such water, as an ingredient in its products. A lobbying strategy that Coca-Cola has used in an effort to influence national or local government decisions in its favor In 2013 Coca-Cola faced allegations for trying to persuade the US government to ‘include soda and candy among the products eligible to be bought by food stamps’ (Rosiak 2013). The complaints caused were severe and were based on the following argument: the food bought through food stamps should be of a particular type; for example, milk, bread and fruits would be food products that could be included in the relevant list. Therefore, the oppositions caused against the above effort of Coca-Cola could be characterized as justified. Analysis of two global corporate citizenship efforts of Coca-Cola, and assess the extent to which these efforts are effective in accomplishing the companys goals The participation of Coca-Cola in the Corporate Citizenship Forum, as developed in the context of the World Economic Forum, in January of 2014, led to the presentation of two of the firm’s corporate citizenship efforts at global level. In that forum the firm explained its strategies for promoting sustainability; emphasis was given on the limitation of sugar in the firm’s products and ‘the installment of about one million drink coolers supported by natural refrigerants’ (Shayon 2014). It should be also noted that in 2006 Coca-Cola ‘joined the UN Global Compact’ (UN 2006), an initiative that aims to promote corporate responsibility worldwide. ’The above efforts can be considered as quite important since they would allow the company to achieve its goals, which are based on ‘the adding of value and the creation of difference’ (Coca-Cola, Organizational Website, Mission and Values). Also these efforts would help the firm to promote its sustainable development as the latter is based on ‘the use of citizens for creating sustainable communities’ (Coca-Cola, Organizational Website, Mission and Values). References Bouckley, B. (2013) “Oxfam tackles PepsiCo, Coke over ‘disastrous impact’ of sugar land grabbing.” Oct 2, 2013. Beverage Daily. Retrieved from http://www.beveragedaily.com/Ingredients/Oxfam-tackles-PepsiCo-Coke-over-disastrous-impact-of-sugar-land-grabbing Coca-Cola (2014) Organizational website. Retrieved from http://us.coca-cola.com/home/ Coca-Cola (2009) Code of Business Conduct. Retrieved from http://assets.coca-colacompany.com/45/59/f85d53a84ec597f74c754003450c/COBC_English.pdf Krasny, J. (2012) “Every Parent Should Know The Scandalous History of Infant Formula.” Jun 25, 2012. Business Insider. Retrieved from http://www.businessinsider.com/nestles-infant-formula-scandal-2012-6?op=1 Martinez, D. (2011) “Privacy organizations file FTC complaint against PepsiCo.” Oct 19, 2011. Direct Marketing. Retrieved from http://www.dmnews.com/privacy-organizations-file-ftc-complaint-against-pepsico/article/214732/ Mehra, A. (2010) “Pepsi Refresh Is Not PepsiCos True CSR Effort.” Oct 19, 2010. Forbes. Retrieved from http://www.forbes.com/sites/csr/2010/10/19/pepsi-refresh-is-not-pepsicos-true-csr-effort/ Nayab, N. (2013) “Real-World Examples of Bad Business Ethics.” Apr 3, 2013. Bright Hub. Retrieved from http://www.brighthub.com/office/entrepreneurs/articles/115557.aspx Nestle (2014) Code of Conduct. Retrieved from http://www.nestle.com/asset-library/Documents/Library/Documents/Corporate_Governance/Code_of_Business_Conduct_EN.pdf PepsiCo (2014) Code of Conduct. Retrieved from http://www.pepsico.com/Company/Global-Code-Of-Conduct Rosiak, L. (2013) “Coca-Cola’s food-stamp lobbying effort falls flat, conservative group says.” Apr 24, 2013. The Washington Times. Retrieved from http://www.washingtontimes.com/news/2013/apr/24/coca-cola-called-out-food-stamp-lobbying/ Samsor, K. (2013) “The Privatization of Water: Nestlé Denies that Water is a Fundamental Human Right.” Sep 14, 2013. Global Research. Retrieved from http://www.globalresearch.ca/the-privatisation-of-water-nestle-denies-that-water-is-a-fundamental-human-right/5332238 Scott, C. (2011) “Consumer groups file complaint over ‘stealth’ PepsiCo ads” Oct 25, 2011. Food Navigator USA. Retrieved from http://www.foodnavigator-usa.com/Regulation/Consumer-groups-file-complaint-over-stealth-PepsiCo-ads Shayon, S. (2014) “Nike, Coca-Cola talk climate change, Corporate Citizenship at Davos.” Jan 27, 2014. Brand Channel. Retrieved from http://www.brandchannel.com/home/post/140127-Nike-Coke-Climate-Change.aspx The Huffington Post (2013) “Oxfam Says Food Giants Are Not Ethical Enough.” Feb 26, 2013. Retrieved from http://www.huffingtonpost.co.uk/2013/02/25/oxfam-food-report_n_2759039.html UN (2006) “The Coca-Cola Company Joins UN Global Compact.” Mar 8, 2006. Retrieved from http://www.unglobalcompact.org/newsandevents/news_archives/2006_03_08.html Read More