Identification of Activities Area of Coca-Cola - Assignment Example

Identification of Area of Activities and Corporate Social Responsibility Issue of Coca Cola Contents Part 2 – Engaging with Stakeholders  3 Part 3 – Stakeholder Analysis  5 References 9 Part 1 –Mapping the Situation The Coca Cola Company is a global leader in the beverages industry. It is a well known American Multinational Corporation that manufactures and sells non alcoholic beverages and concentrated syrups across the globe. The company has its headquarters in Atlanta, Georgia. The most popular product of the Coca Cola Company is Coca Cola, the flagship product of the company. This is a soft drink invented and formulated by John Stith Pemberton, a pharmacist in the year 1886 in Columbus, Georgia. The Coca Cola Company mainly operates through a global franchisee based distribution system in which the company manufactures the drinks and the syrup concentrates and sells them through various bottlers across the world in their own exclusive regions. Also, the company owns a single anchor bottling company in North America known as Coca Cola Refreshments. The current Chief Executive Officer of the company is Muhtar Kent. The stocks of the Coca Cola Company are listed in reputed stock exchanges like the New York Stock Exchange (NYSE) and are major components of popular market indices like Standard & Poor 500, DJIA, the Russell 1000 Growth Stock Index and the Russell 1000 index. The Coca Cola Company has strived to attain an adequate amount of sustainability in its operations across the world. However, the company has been involved with a number of lawsuits and criticisms related to many unethical practices and human rights violation over the years of its operations. The company has been alleged with discriminatory and monopolistic practices by many social activist groups, governments and other stakeholder groups. The lawsuits filed against the Coca Cola Company regarding these discriminatory and unethical practices have resulted in the company being forced to alter many of its business practices, indulge more into different kinds of Corporate Social Responsibility (CSR) activities and introduce new concepts and practices related to the business processes of the company across the world. There have been continuous criticisms against the relation of the Coca Cola Company with the United Sates and Middle East foreign policies. A major area in which the Coca Cola Company has faced severe allegations and criticisms is in its operations in the developed countries like India. The allegations like presence of pesticide residues in the beverages manufactured by Coca Cola and water wastage in the operations of the company led to the drop in sales of Coca Cola products in India by more than 11%. The company has always faced a number of criticisms related to the environmental harms of its business activities. However, the issue with the presence of pesticides in groundwater in the year 2003 led to serious repercussions for the business when an Indian non-profit based organization, Centre for Science and Environment claimed that it has identified the presence of chemicals and pesticide residues in Coca Cola that may lead to terminal illnesses like cancer. In response to this problem, the Coca Cola Company tried to save its goodwill through the introduction of new Corporate Social Responsibility projects in the area like the Water Neutrality Project in India (Coca Cola Corporate Website, 2012). Nonetheless, these attempts of Coca Cola to save its image through the CSR activities like the water neutrality project backfired because of a perceived mismanagement of the stakeholder groups associated with the area of activity. Part 2 – Engaging with Stakeholders  Stakeholder classifications can be done based on the type of influence and the level of influence that a stakeholder group has on the company, including its management, corporate and business decisions and activities. According to Freeman, stakeholder classification can be ideally done on the basis of the principle of what and who really impact the business. In line with this, stakeholder classifications are often reflective of the criteria which represent the ability of the individual stakeholder groups to influence the direction, processes, behaviour and outcomes of a corporation. The main stakeholder groups related to the Coca Cola scam in India are the regional farmers who have been directly impacted by the water scarcity, the local communities, the government of India, the non-profit based organizations operating in India as well as some other globally functional organizations and environmentalist groups. According to the stakeholder classification framework developed by Mitchell (1997), stakeholders can be segregated according to whether they possess or are perceived to possess any one or more than one of the following attributes: legitimacy of claim, power to influence and the urgency of their claims (Mitchell, Agle and Wood, 1997). Mitchell suggests that stakeholder power is evident in a situation where one stakeholder can influence another stakeholder to perform any action that would not have been otherwise performed. The legitimacy of stakeholders represents the view that the actions of any stakeholder or stakeholder group are necessary and desirable within the accepted values and norms of a company. Stakeholder urgency refers to the time urgency as well as the criticality associated with a stakeholder claim. In the case of the water neutrality project, it can be identified that the claims of the stakeholders like the farmers, government authorities and NGOs are extremely legitimate and urgent. A stakeholder claim can be considered to be urgent both in cases when the claim is critical and when a delay in the response is unacceptable. The power of stakeholders exists when they can influence the core business activities and processes of a company or disrupt the normal business model of a company. The power of the stakeholders in the case of the Coca Cola water neutrality CSR activity is medium as the concerned stakeholder groups were outraged and wanted to ban all the operations of Coca Cola in the country. However, due to the high level of penetration of Coca Cola in the Indian market, the power of the stakeholders was limited because they could not control the sale of the beverage in many developed urban areas of the country. The Coca Cola case involved a high level of urgency and influence from the side of the associated stakeholders which limited the operations of the company in the rural areas of the country like villages in Kerala and Rajasthan to an impactful extent. As defined by this framework, stakeholder salience mirrors the different combinations of urgency, legitimacy and power attributes and acts as the base for the classification of the stakeholders according to their level of influence and importance. The influence of the regional farmers and the local communities are found to be medium to high because their non cooperation led to the close down of the factories. The impact of the government as a stakeholder is very high because the final decision of the continuation of operations in the country is made by the governing authority of that country. The impact of the non-profit organizations, social activists, environmentalist groups etc. are also high because they are able to influence the public decisions and thereby create much external pressure on the management of the company (Agle, Mitchell and Sonnenfield, 2002). Part 3 – Stakeholder Analysis  Coca Cola has suffered a major loss of reputation in the Indian as well as the global markets due to the serious allegations and lawsuits filed against the company regarding the presence of harmful pesticide residues in the coca cola beverage and regarding the water wastage done by the company in its operations in India. The Corporate Social Responsibility activities of Coca Cola in India were aimed at recovering the tarnished image of the company as well as at nullifying the accusations made by the local stakeholders groups that the business has overused the water supply in the local areas (Atkinson, Waterhouse and Wells, 2007). Initially the company failed to recognize the fact that the powerful stakeholders are significant entities for consideration by all the companies while starting up and conducting any business operation. Often some stakeholder groups are not powerful but despite that they are influential because they have legitimate claims which make it obligatory for the company to act upon these clams. On the other hand, some legitimate and powerful stakeholder groups may not have considerable influence on the business functions when their claims are not resolved or acted upon immediately due to the absence of urgency on the claims raised (Kochan and Rubinstein, 2000). In the case of Coca cola, the CSR activities done in India were not sufficient to make the company recover from the harmful image that it had created on the minds of the local stakeholder groups. Instead these moves of the organization were alleged to be the efforts of the company to mislead the local communities through the creation of a project that actually added no value to the communities of India and the regional farmer groups that have been severely affected by the overuse of water in the rural areas of India. The approach taken up by Coca Cola towards the relevant stakeholder groups was much carefully planned but it had some major loopholes that led to increased problems regarding the company’s operations in the rural areas of India and later caused the close-down of many manufacturing plants in areas where the problem of water scarcity was arising (Seitel, 2010). If the pyramid of corporate responsibility formulated by Carroll is followed, it can be seen that there are four basic dimensions of corporate social responsibility activities of a company as perceived by the stakeholder groups. These are economic responsibilities, legal responsibilities, ethical responsibilities and philanthropic responsibilities (Schwartz and Carroll, 2003). Figure1: The pyramid of CSR (Source: Schwartz and Carroll, 2003). In the case of Coca Cola, the focus of the stakeholder groups on the philanthropic and ethical perspectives appeared to have more influence on the goodwill of the business (Van Marrewijk, 2003). In contrast, Coca Cola focused more on the economic profits that it could gain through the socially responsible projects. This was identified to be a main reason of the repercussion of the stakeholder groups with respect to the initiatives taken up in India. Even when, the company was facing with criticisms for its irresponsible behaviour towards the local communities, Coca Cola only concentrated on creating an ethical image for itself. The company introduced the new projects based on the aim of avoiding any future harm to the society and community of its operation. These approaches were mainly driven by the obligation faced by the company to conduct its business in a justified, fair and non harmful manner. However, the dimension of philanthropic responsibility of the Corporate Social Responsibility initiatives was largely missing. The organization did not take up any full proof ways of contributing to the society or adding value to the lives of the local people. The CRS initiatives like the Water Neutrality project did nothing to correct the damages and neither did they add resources to the community. According to the primary stakeholders in this area of activity like the regional communities and the local and government authorities, the organization was putting forward the projects only as a way to cover up its negative impacts and that the projects were basically acting in terms of helping the communities to recover the damages done. While from the perspective of corporate social responsibility, the legitimacy of stakeholders is of utmost importance, from the perspective of management efficiency, power of the stakeholders is of more influence (Moon, 2002). Nonetheless, the management of Coca Cola focused on the amoral management of the social responsibility concerns so as to concentrate on the power of the stakeholders rather than the legitimacy and urgency of the stakeholder claims. The amoral management perspective takes into consideration the interests of the business rather than that of the primary stakeholder groups. As such, the ethical considerations in this management are low which severely restrained the effectiveness of the CSR activities of Coca Cola. Instead, if Coca Cola would have taken up a moral management approach towards the management of the stakeholder issues and the social responsibility concerns, then the company would have been more successful in creating a philanthropic and ethical image for itself among the local as well as global stakeholder groups (Wheeler, Colbert and Freeman, 2003). References Agle, B. R., Mitchell, R. K. & Sonnenfield, J. A. 2002. Who matters to CEOs? An investigation into stakeholder attributes and salience, corporate performance and CEO values. Academy of Management Journal, 42(5), pp.170-172. Atkinson, A. A., Waterhouse, J. H. & Wells, R. B. 2007. A Stakeholder Approach to Strategic Performance Measurement. Management Review, 38(3), pp.482-483. Coca Cola Corporate Website. 2012. Corporate Social Responsibility Report. [Pdf]. Available at http://assets.coca-olacompany.com/51/be/fa1c9a664de5bb38e0304d6ce2af/CCI_CSR_2011.pdf. [Accessed on 21 October 2014]. Kochan, T. A. & Rubinstein, S. A. 2000. Toward a Stakeholder Theory of the Firm: The   Saturn Partnership. Organization Science, 11(4), pp.101-104. Mitchell, R., Agle, B. & Wood, D. 1997. Towards a theory of stakeholder identification:  defining the principle of who and what really counts. Academy of Management Review, 22(4), pp.280-285. Moon, J. 2002. Corporate social responsibility: An overview in International Directory of Corporate Philanthropy. New York: Europa Publications. Schwartz, M. & Carroll, A. B. 2003. Corporate social responsibility: a three-domain approach. Business Ethics Quarterly, 13(4), p.503. Seitel, F. P. 2010. The Practice of Public Relations, 11th edition. New Jersey: Pearson Prentice Hall. Van Marrewijk, M. 2003. Concepts and definitions of CSR and corporate sustainability: Between agency and communion. Journal of Business Ethics, 44(1), pp. 95-105. Wheeler, D., Colbert, B. & Freeman, R. E. 2003. Focusing on value: Corporate social responsibility, sustainability and a stakeholder approach in a network world. Journal of General Management, 28(3), pp. 1-28. Read More