Contemporary Issues of Coca-Cola - Case Study Example

CONTEMPORARY ISSUES-COCA COLA CASE STUDY Name: Course: Tutor: Institution: Date: Contemporary Issues-Coca Cola Case Study Introduction One of the significant Contemporary management issues is related to business ethics. In the emerging contemporary complex business environment, many corporations face many ethical concerns. The fundamental ethical issues often includes such concepts as trust and integrity, however, the more complex concerns include the accommodation of diversity, compliance, governance, and decision making (Murray, Poole and Jones, 2006). Across the globe, disparate industries are faced with myriads of ethical dilemmas including such issues as poor labor practices, questionable quality of products, misleading advertisement, and many others (Murray, Poole and Jones, 2006). The contemporary issues that the coca-cola company has been involved with over the last several decades have elicited questions regarding organizations responsibility towards the environment consumers, and employees. Whereas organizations have dealt with many ethical issues throughout history, Coca-Cola has faced some challenging ethical issues including contamination of products leading to product recall or the product being banned in some areas, racial discrimination, and evasion of tax (Daniels ethics, 2014). The aim of this essay is to discuss some of the contemporary ethical issues the Coca Cola Company has faced in the last few decades. Contemporary Business Ethic Issues Contemporary economic thought is, to a large extent, based on the notion that individuals and enterprises in the society often pursue material interests, consequently, it is assumed that businesses must maximize their profits (Selart, 2011). The business managers must, therefore, work towards the achievement of the profit objective at all cost. It is notable; however, contemporary economic analysis does not seem to consider the benefits of ethical considerations in business (Selart, 2011). Nevertheless, there is considerable evidence of unethical organization behaviors. Coca Cola Company Background Coca-cola is one of the largest soft drink manufacturers in the world. The company’s product portfolio includes over 500 still and sparkling brands. Some of the company’s products include Coke, Diet Coke, Sprite, and Fanta (Daniels Ethics, 2014). The history of Coca-Cola began with the production of Coke soft drink. The product was made with flavored syrup which was mixed with carbonated water. It was sold as a soda fountain. Initially, the drink was sold in glasses and sold an average of 9 serving per day. Today, however, the soft drink sells over 1.9 million bottles across the globe (Daniels Ethics, 2014). The Coca-Cola Company currently has over 500 different products which are sold in over 200 countries across the world. The Coca-Cola products contain high concentration of sugar which is suspected of contributing or causing obesity, diabetes, and tooth decay. Up until Mid-Twentieth century, the Coca-Cola Company had concentrated on building the United States market, however, after the Second World War, the organization started to recognize the vast opportunities that existed in global sales (Daniels Ethics, 2014). Today, the organization has extended the global push by exploiting the international revenue opportunities in an effort to attaining global domination of the growing soft drink industry. It is estimated that by late 1990s, the company had in excess of 50 percent market share in the soft drink industry worldwide (Daniels ethics, 2014). It can be noted that the largest contribution of the company’s revenue is drawn from outside of the United States of America. Coca-Cola Reputation Coca-cola is one of the most recognizable brands globally today with its trademark valued at about $25 billion (Ferrell, 2008). The organization has always shown a market orientation. The company is known for taking strategic decisions with a focus on attracting, satisfying, and retaining customers. For instance, during the Second World War, the organization committed to selling the soda to the United States of America soldiers for only a nickel as way of supporting the War effort (Daniels Ethics, 2014). The effort and the philosophy behind it helped make Coke a global brand. The consequent advance of the coca-cola products into almost all the countries demonstrated the organization’s global market orientation and enhanced its brand recognition. The company promise is to benefit and refresh everybody who gets touched by the business. The company has achieved the promise by continually enhancing its market share. The company has become the most recognizable brand globally. Because the organization is well known in a pervasive industry, and has a history of focusing on the market orientation, it has designed and developed several social responsibilities initiatives aimed at enhancing its trademark and strong market presence (Daniels Ethics, 2014). The initiatives are driven by the enterprise core beliefs in a healthy market place, community, workplace, and environment. For instance, the company desires to inspire moments of optimum happiness through the products while creating value and ultimately making a difference wherever they are found. In essence, the organization aspires to be a responsible global organization that makes a difference and maximizes the returns to shareholders but still minding their overall responsibilities. Social Responsibility Focus Coca-cola has supported education initiative in many local communities through the coca-cola foundation’s “support the promise of a better life for people and their communities” initiative. For instance, the organization is involved in a highly publicized education program dubbed as “Education on Wheels” in Singapore (Ferrell, 2008). The initiative involves the use of a bus as a classroom where the students are engaged in drama. The initiative challenges the children creativity and promotes communication skills while discovering new insights in life. The company is known for supporting many colleges and universities in the United States of America and abroad with grants. Coca-cola also provides scholarship to over 170 education institution including 30 tribal and Hispanic colleges (Ferrell, 2008). These efforts are aimed at giving back to the communities especially the vulnerable ones. Beside education, the company is proactive on social issues including support of HIV/AIDS initiative support in Africa through the partnership with UNAIDS and other organizations involved in programs that seek to combat the scourge (Ferrell, 2008). Health Issues In a news broadcast by BBC on 18 November 2005, Coca-Cola was reported as coming under attack amidst concern regarding obesity and the harmful effect of the fizzy drinks on the health of the consumers. Mark Sexton, a teacher at St. Ilan School was reported to have complained of the copious amount of Coke that was being consumed by the students (Petrie, 2005). According Petrie (2005), the teacher claimed that the students were consuming over three cans a day which amounts to one and a half the recommended daily sugar intake for a child. The teacher further noted that the drinks induce some accelerated levels of energy which is often accompanied by hyper activity which could be disruptive in an education set up (Petrie, 2005). Consequently, the deputy head teacher decided to take action and joined other schools in Britain who had withdrawn Coca-Cola products from the vending machines located within the school. The teachers were supported by the Education Secretary who announced plans to ban vending machines dispensing fizzy drinks (Petrie, 2005). The reporter also noted that the ban was not only in Great Britain but also in the United States of America with the fight being led by the Governor of California, Arnold Schwarzenegger. The pressure was meant to make Coca-Cola rethink their strategies and provide healthier products alternatives to the carbonated drinks if they wanted the school markets. Coca-Cola was viewed as being slow in diversifying to healthier products unlike their rival Pepsi who had an established portfolio of healthy juice products (Sewell, n. d). Nevertheless, Coca-Cola, albeit playing catch up, the company managed to launch a fruit juice-minute Maid aimed at competing with Pepsi’s Tropicana. It can, therefore, be argued that Coca-Cola executives are faced by a daunting high stake game. The managers have to face these contemporary issues a clear mind. They cannot afford to go wrong when many people are concerned, not only with the sugar levels in the products, but also threatening to boycott the products over the company’s ethical practices in the developing world (Ferrell, 2008). Ethical Issues Coca cola is one of the highly valued brands in the world and the company has excelled as a business during its long history. Nevertheless, in the last few decades the organization has faced difficulties in achieving its financial objectives (Ferrell, 2008). The company has also been associated with several ethical issues. Consequently, some investors have lost faith with the organization (Ferrell, 2008). Since the early 1990s, the company has been accused of undertaking unethical behavior in several areas including the safety of the products, anti-competitiveness, channel stuffing, racial discrimination, distributor conflicts, pollution, and health concerns. The organization has sorted out the issues through private settlements and others through the courts (Sewell, n. d.). At the same time, there are issues that are still pending. The company, nevertheless, has responded by seeking ways to improve the detection of issues and compliance systems. It remains, however, to be seen if the organization can permanently overcome its ethical issues, make the appropriate changes, and maintain its leadership of the beverage industry. One of the most damaging corporate crises that faced the company began in 1999. Some thirty Belgium children were taken ill after drinking some Coca-Cola products. Ferrell (n. d.), opine that although the organization recalled the offending product, the issue nevertheless, soon escalated with the Belgium government ordering for the recall of all coca-cola products in the market. The organization eventually determined that the product that the children had consumed was from a poorly processed batch (Sewell, n. d.). However, the issue was taken up by the media when the company took a while to respond calling the company reaction as a slow response. The company had initially thought the incidence to be minor and never imagined that the issue was a health hazard, however, the incidence became a public relations nightmare. Before the issue could die down, France reported that over a hundred people had fallen sick after the consumption of Coca-Cola products (Sewell, n. d.). The French government immediately banned the sale of all coca-cola products until Coca-Cola had sorted out the problem. Just as France was banning the sale of Coca-Cola products, a shipment of a new water product, Bonaqua, to Poland was found to be contaminated with mold (Ferrell, n. d.). In all the incidences, the slow in response to the problems coupled with the failure acknowledge the seriousness of the incidences harmed the organization’s reputation. As the coca-cola senior managements were fumbling with inept responses to the contamination issues, the Belgium government ordered the company to stop the “Restore” marketing campaign which the company had launched as a way of regaining consumer confidence and improve sales in Belgium. According to Sewell (n. d.), a rival company had claimed that the Coca-Cola campaign strategy was unlawful. The campaign had included free give away of the product, wholesalers’ discounts, and added promotional staff (Ferrell, n. d). The claim was upheld by the court under Belgium antitrust laws. The company was forced to abandon the “restore” campaign. The net effect of the court decision, in addition to the various crises, was to reduce Coca-Cola market share in the European market (Ferrell, n. d). Channel Stuffing Channel stuffing is often the practice of supplying extra inventory to distributors or wholesalers. The practice is occurs mostly towards the end of a financial period. The extra products are counted as sales. However, the products often are kept at the warehouse and may end up being shipped back to the manufacturers (Doyle, 2003). The practice is used to create the appearance of a strong product demand which result in hugely inflated financial statement. The inflated financials are used to hoodwink or mislead the investors that the company is thriving. Channel stuffing is also used to conceal declining demands for similar purpose of misleading the existing shareholders and potential investors. Between 1997 and 1999, Coca-Cola was found to have sent extra concentrates to the Japan bottlers in an attempt to inflate revenue. In 2004, the company was found to have inflated the earnings in the financial statements by sending extra concentrate to the Japanese bottlers (Doyle, 2003). While the company settled the claims, the Securities and Exchange Commission did confirm that serious channel stuffing had occurred. According to Doyle (2003), the ruse that the company had used was to offer extended credit to the bottlers, a business transaction that is considered technically legitimate. In settling the misdemeanor with the Securities and Exchange Commission, Coca-Cola promised to avoid the practice in future. The organization was also required to set up an ethic and compliance office which would verify each quarter financial reports. The verification was on whether the company had changed terms of payment or inadvertently extended the special credit terms. Conclusion For over a decade, Coca-Cola has battled allegations on the lack of safety of its products, channel stuffing, and unlawful competitive practices. These unethical practices are the result of poor managerial decision making and the company has suffered for it. The management actions have also affected the shareholders confidence leading to their varied reactions. Nevertheless, the company has managed to retain a significant loyal base. Although Coca-Cola has tried to sanitize its image and reputation through the offering of quality products and the myriads social responsibility programs, the organization has failed to effectively manage the ethical decision making when dealing with crisis and the various stakeholders. It can only be speculated that the emphasis on social responsibility efforts, especially the enhanced philanthropic as well as the environmental engagement, can sanitize the company’s reputation when faced with highly publicized ethical crisis. Given the ethical crisis, The Company can only hope that its present leadership has the abilities to move the organization past the ethical scandals and into better prospects in the future. References Ferrell, F. n. d. Business ethics: ethical decision making and cases. [Online] Available at: [Accessed on 17 February 2017] Ferrell, O. 2008. Business ethics: Ethical decision making and cases, Boston: Houghton Mifflin Company. Selart, M. 2011. Ethical decision making in organizations: the role of leadership stress, journal of business ethics, 99 (2), p. 129-143. Sewell, D. n. d. Analysis of the Ethical Behavior of Coca-Cola Inc. [Online] Available at: (accessed on 17 February 2017). Murray, P., Poole, D. and Jones, G. 2006. Contemporary Issues in Management and Organisational Behaviour, South Melbourne: Cengage Learning Australia. Daniels ethics. 2014. The Coca-Cola Company Struggles with Ethical Crises. [Online] Available at: (accessed on 17 February 2017). Doyle, T. 2003. “Channel Stuffing Rears Its Ugly Head,” CRN, May 6, 2003, [Online] Available at: (accessed on 17 February 2017). Petrie, E. 2005. Coke on the Rocks? BBC Money Programme 18 November 2005. [Online] Available at: (accessed on 17 February 2017). Read More