PepsiCo Inc Business Ethics - Case Study Example

Student Professor Course Degree program Semester Date Table of contents 1.0 PepsiCo Inc. business ethics………………………………………………..3 1.1 To shareholders……………………………………………………………..3 1.2 To customers………………………………………………………………...4 1.3 To special interest groups…………………………………………………...5 2.0 Responding to stakeholder concern about nutrition and sustainability …….6 3.0 AMP Up before you Score mobile app oversight…………………………..8 References………………………………………………………………………10 1.0 PepsiCo Inc. Business Ethics Introduction Pepsi has continued to shake off major tests to its survival and profitability for many decades. The story has been one of heroic decisions and sometimes costly mistakes that threatened to make the brand Pepsi extinct. In recent years however Pepsi has been doing great to please each and every segment of its stakeholders in equal measure although some stakeholders still feel more needs to be done by the company in order to improve its stakeholder relations. Pepsi has taken great deal to balance between the interests of all stakeholders as discussed in the following sub-headings. 1.1 To Shareholders Shareholders are the contributors of capital in a business, they might be concerned about other aspects of a business but their chief concern is the profitability and stability of a company (Sharp, 2005). PepsiCo has been on a growth momentum at least for the better part of the past 3 decades. Pepsi has engaged in major acquisitions of performing brands in the United States and other parts of the world. These acquisitions have increased its market share and consequently shareholders value through the increased asset base of the company and profitability as well. In the year 1997 Pepsi acquired merged with Frito-Lay Inc. to become PepsiCo Inc. there has been other major acquisitions such as the acquisition of Tropicana Products, Taco Bell and Pizza Hut Inc and also partnerships with world recognize brands like Starbucks. All these combined with the continuous improvement of existing brands and introduction of other brands has ensured that the company remains as profitable enough to roll out major advertising campaigns to compete with other players in the industry to give its shareholders value for their investments. 1.2 To Customers Without customer concern a business will not thrive. It will only make profit in the short run but will not be able to sustain sales in the future and guarantee the perpetuity of the business concern (Mohan & Vilcox, 2007). A good entrepreneur is always aware of this fact. Getting to satisfy the utility desires of a customer while still satisfying the share yield desire of a shareholder can be difficult. The balance is between giving quality and quantity and a price good enough to take care of expenses and still post healthy profits for the shareholders. Over the years Pepsi has strived to give the best of soft6 drinks to its consumers. Judging from the success of brands such as morning dew, Pepsi light, sierra mist and Aquafina beverages, it can be deduced that Pepsi has succeeded at giving its customers what they want. Innovation being a continuous process to solve dynamic concerns from the customers, Pepsi has maintained a record of innovation to maintain profitability in the wake of growing health concern amongst its consumers. With the key being appealing to the masses while maintain profitability and minimizing operational and material cost as much as possible. Some of the healthy drinks include Muscle milk, honest tea and vitamin tea. The company is intending to continue its research on healthy snacks and drinks to ensure it makes profits only from healthy and sweet food and beverages. 1.3 To Special interest groups and Regulators This group is more concerned on the health aspect of the drinks and foodstuff prepared and distributed by PepsiCo. This group is always a headache to any top CEO if the issues that interest them are not well addressed before hand and also how the handling of any conflict between a company and the two. Some special interest groups are interested in gaining popularity and influence by taking on a big well known business like Pepsi. Pepsi has had its share of confrontation with special interest groups such as the free Burma coalition that insisted PepsiCo pulls out of Burma. The management made the right decision to protect the image of the company and bow to pressure. In 2007 the company was reported by corporate accountability international to be using tap water to fill bottles for sale as purified spring Aquafina water (CNN, 2007). PepsiCo had no otherwise but to comply with the regulations which demanded it puts the words “public water source” on the bottled water label in order not to appear deceptive to the consumers. In India the company has been fighting allegations of pesticide intoxicated drinks capable of causing cancer and environmental pollution and degradation from its production. In some state such as Karela PepsiCo has received temporary operation and distribution ban (Majumder, 2010). To satisfy the regulators, and the consumers as well as the shareholders, the company has employed some health experts and researchers from reputable organizations like the World Health Organizations to come up with healthy production practices as well as healthy end products. From which point it can challenge the legitimacy of the bans and go ahead to market itself as a leader in healthy practices and products. 2.0 Responding to stakeholder concern about nutrition and sustainability PepsiCo is a big company which cannot escape stakeholder scrutiny regarding its operations and products. In recent years there have been a number of concerns expressed by various stakeholders on issues such as advertisements, product content and corporate practices. As expected the company has had to get the best possible outcome from the concerns expressed by its stakeholders, you win by loosing in these scenarios (Carroll & Buchholtz, 2011). In the year 1991, PepsiCo partnered with Thein Tun to enter the Burma market. The deal was good as Thein Tun was well established in the Burma market. The problem was that Thein Tun was in support of the Burmese military junta accused of gross human rights violations. The international community was united to see democracy back in Burma. One of the ways of ensuring this was to totally boycott any company doing business in Burma. As such there was widespread uproar concerning the PepsiCo entry into Burma pressure mounted and PepsiCo was forced to reconsider its entry in 1997. This was a very good decision to react to community concerns. According to Ferrell & Fraedrich (2012), such a decision portrays the company image as a campaigner for human rights whose brand is was respecting the other effect was to protect against sales drop. Americans are becoming more concerned about the health aspect of the Pepsi drinks and foods they consume. They desire fewer calories, less sugar and salt and no artificial contents in their food and drinks. Pepsi has effectively reacted to this by introducing a range of healthy alternatives for customers to choose from. The problem is that its popular brand remains to be Pepsi-cola which still has considerable amounts of calories to increase obesity and acids to accelerate tooth decay and weaker bones. The reaction to these concern by PepsiCo has been to introduce drinks with low sugar and calories which have just reduced the obesity risk but still capable of causing tooth decay. The Pepsi snacks too have been hit by the health concern with the Frito-Lay company trying to come up with healthy alternatives like Baked Lays and Sunchips. More needs to be done in reacting to this major concern from consumers and special interest groups including regulators such as the Indian states banning the company on grounds of using water to produce drinks that is highly contaminated with pesticides capable of causing cancer. The company has however gone beyond what is expected of them by the stakeholder to roll out a high impact corporate social responsibility program that has been mainstreamed even in its promotional strategies. This was captured in its Pepsi refresh project which was a cause related marketing intended to get consumers into solving social problems while still marketing Pepsis products through the online platform which has saved the company a lot of money in advertising expenses. There are also other corporate social responsibility projects by the company such as the “We inspire women campaign”, the Pepsi foundation which focuses on philanthropic causes like contributing to helping disaster stricken communities all over the world and supporting non-profit foundations in their causes (PepsiCo., 2010). The company also merged with Waste Management Inc. in support of the Dream Machine recycling initiative. To recycle plastic bottles in an innovative idea of rewarding consumers for collecting bottles for recycle at the dream Machine kiosks (PepsiCo, 2009). This is not the best that Pepsi can do in responding to stakeholder concerns but it is on the right track in addressing the issues expressed by the stakeholders. 3.0 AMP Up before you Score mobile app oversight. The idea of this app was to appear trendy and appealing especially to the young tech-savvy generation. How it got distributed without proper oversight, is the big question. It was a creative marketing app that was intended to be fun but ended up causing disapproval from people in social networks and in the mainstream media. The idea of men categorizing women and getting clues of “scoring” on the women and going ahead to upload a “brag” list on twitter and facebook did not sit down well with many conservative Americans (Heussner & Berkowitz.L, 2009). This can only be blamed on delegation of authority to people who don’t know their job well enough such that they can allow controversial adverts to get approved in such a big company. It is also a case of lack of lack of thorough analysis of advertisements on the sales and marketing departments of the company to advice on the sensitivity aspects of an advert before it gets to the audiences. The management needs to delegate authority to competent and intelligent individuals who can be able to gauge the reaction of audiences regarding what is expressed in an advert (Kalb, 2002). However according to Kalb (2002), it is common to cause controversies with adverts since all the sensitive issues in a particular society cannot be well known to every marketing team. Sometimes it is a matter to do with culture and preferences. References Carroll.A.B., Buchholtz.A.K., (2011) Business and society: Ethics and stakeholder management, Cengage learning CNN., (2007) “Aquafina lebels to spell out source-tap water”, article available online at http://www.cnn.com/2007/HEALTH/07/27/pepsico.aquafina. [Accessed on 6 Dec 2012] Ferrell.O.C., Fraedrich.J., (2012) Business Ethics: Ethical Decision Making & Cases, Cengage Learning Heussner.K.M., Berkowitz.L., (2009) “Is Pepsi’s New Iphone App in Poor Taste?” ABC News, Available online at http://abcnews.go.com/Technology/AheadoftheCurve/pepsis-iphone-app-poor-taste/story?id=8817417 [Accessed on 6 Dec 2012] Kalb.I.S., (2002) E-Marketing: What went wrong and how to do it right, K&A Press Majumder.S, (2010) Indian state bans Pepsi and Coke, BBC News, available online from http://news.bbc.co.uk/2/hi/south_asia/4776623.stm [Accessed on 6 Dec 2012] Mohan.t, Vilcox.M., Eds., (2007) Contemporary issues in business ethics, Nova publishers PepsiCo., (2010) “PepsiCo Foundation”, article available online at http://www.pepsico.com/Purpose/PepsiCo-Foundation.html [Accessed online on 6 Dec 2012] PepsiCo., (2009) Annual Report, available online at http://www.pepsico.com/annual09/environmental_sustainability.html [Accessed on 6 Dec 2012] Sharp.D., (2005) Cases in business ethics, SAGE Read More