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Pepsi-Cola Products Philippines Inc. Essay

1. Stakeholders

1.1. The five-year girl and the injured: – as because of this incident a five year girl lost her life and nothing is more precious that life.

1.2. Customers: – because people were resting their futures in the hands of this number fever promotion campaign.

1.3. Victoria Angelo, her family and families like hers: – these people who didn’t have enough money to eat were buying Pepsi in the hope of changing their whole life. The rich company Pepsi was making money by making these people believe that they might win a lot of money. Instead of using their scarce resources for something more real, these people spent it on Pepsi building up dreams of getting rich and leading a good life.

1.4. Pepsi-Cola Products Philippines Inc.:- as the campaign was launched by Pepsi-cola, it is responsible for the outcomes like deaths, lawsuits, injured etc.

1.5. Pepsi-Cola International: – as Pepsi-Cola Products Philippines Inc. is a part of the multinational firm with branches all over the world, this incident might negatively effect the sales in other countries.

1.6. PepsiCo Inc.:- as it owns 19% of the company.

1.7. Insurance companies: – The insurance companies are affected by this incident as a lot of the Pepsi-cola cars, trucks and wagons were destroyed by the angry public and these companies might have to pay for it.

1.8. Competitors especially Coca-Cola:- as a result of this incident coca-cola might be able to snatch away a huge chunk of the market from Pepsi.

1.9. Government: – It has to make sure that companies follow the laws and they have to protect the innocent consumers. The government has to make sure illegal and unethical activities do not happen. It has to make sure that the laws are implemented without any exceptions.

1.10. Judicial system in Philippines: – as it is responsible for making sure that no violations of laws and regulations happen and people who do it are dealt with in the proper manner.

1.11. Company Employees: – they might lose their jobs as a result of the riots and losses that Pepsi had to face.

1.12. People who ran the computer or made the computer program:- as they have a significant role to play in the misprinting of the numbers.

1.13. Banks and financial institutions: – although not very clear from the case Pepsi-cola might haven taken loans form other banks.

1.14. Share and Stockholders: – although not very clear from the case, the value of the shares and stock of Pepsi-cola Company might have fallen.

2. Ethical Issues

2.1. Trust: – A climate of trust provides improved communication, greater predictability, dependability and confidence among the customer’s, employees and the company. The people trusted Pepsi to pay them the money if they would win. But Pepsi dining do that hence breaking customer trust, something once broken is very difficult to regain.

2.2. Egoism: – the company was just thinking about its own interests when it launched the campaign. It didn’t consider the poor people who might be lured by this number fever and spend the little money they had on Pepsi-cola instead of saving it and using for food, medicines, education etc, hence harming the innocent customers.

2.3. Deception: – With the winning numbers pre-selected by computer and only ten 1-million-peso prizes available, the chance of anyone becoming a peso millionaire was one in 28.8 million. But Pepsi drinkers didn’t know that. The few winners got saturation media coverage, and entire families spent inordinate time and effort collecting bottle caps.

2.4. Theft: – these people who didn’t have enough money to eat were buying Pepsi in the hope of changing their whole life. The rich company Pepsi was making money by making these people believe that they might win a lot of money. Instead of using their scarce resources for something more real, these people spent it on Pepsi building up dreams of getting rich and leading a good life. When Pepsi refused to pay the rightful winners their rightful money, the company robbed these people of their dreams, hopes and financial resources.

3. The shaping of Public happiness

a. There was maybe a little collaboration of private welfare and public good. The company was giving out prises valuing up to 1 million to people. Although the company intended to gain more market share through this action, it also helped people get more money and live a better life. On the other hand it was also private welfare as only a handful people really profited from this action. Only these few were able to lead a better life and the majority was left out

b. Yes I think it is an appropriate good as one cannot always do stuff for the public good. It is not always possible to do good for all on a large scale. You need a lot of resources, power to carry out actions on such a large scale. Instead it would be better to help groups, families and individual. This is relatively easier to do and consequently a lot of people will benefit from such actions.

c. What should have been differently

i. Truth: – the company should have told the truth in the advertisements, that the chance to win the game is extremely small. This would help especially the poor people in making the more sensible and invert their money in things what they really need.

ii. Trust: – the company should have tried to regain trust of the people by explaining to them that the mistake was not on purpose and that they never intended to hurt people’s feelings.

iii. Consequences: – The Company should have also tried to explain to the people that if Pepsi would pay the $18 billion to the people, then the company would go broke and would have to close. This would result in thousands of people loosing their jobs.

iv. Government: – it should make sure that people understand such campaigns and don’t get seduced by such empty promises through better control over what the companies exactly advertise and what they do.

d. Yes Pepsi was justified in not paying the full 1 million pesos: Doing that would mean that Pepsi would have to pay a total of more than $18 billion, a sum that would definitely lead to the company getting bankrupt. As a result of this thousands of people would lose their jobs not only in Philippines but also in other parts of the world where Pepsi operates as the Whole Pepsi organisation would be affected by this huge loss. The share and stock holder might lose a lot of money as a result of this loss at Pepsi. Thus it is a very complicated and damaging chain reaction that would be set of into action if Pepsi paid the money. Pepsi made a mistake in printing the numbers, something it did not intend to do. It kept its promise of giving out the 1 million to people who had the numbers but now you can’t expect the company to pay $18 billion because of an honest mistake. Everyone makes mistakes.

e. Europe: – The response would have been different as the people in Europe are not that poor and live a good life. They are not that desperate. They are also well educated and understand such campaigns.

South America and Africa: – the response might have been similar to that in Philippines as the people are poor and are desperate to have money. Most of the people are not well educated and hence don’t really understand such campaigns.

Asia: – the response here might be not that aggressive as in Philippine as the people are well educated and although also being poor they live in highly developing countries for example India ,China etc, that are constantly attractive huge investments from around the world. Multinational companies are building huge factories here and are outsourcing their functions in these countries. As such the people are not that desperate.

f. The firms offer was OK, it could have offered some more money, but whatever it might have offered it would have never been enough for the people. The company had to think about all its shareholders and paying the full amount would have damaged lot of them for example Insurance companies, Company Employees, Banks and financial institutions, Share and Stockholders etc. It was in the best interest of everyone for the company to pay 500 pesos and not the full 1 million.

4. What would I do?

Likely the ethical principles violated have to do with trust that they would keep their word, (pay for winners) even if it weren’t profitable. I don’t think the ads said anything about conditions of payment are only if they ‘choose the correct, low probability number to ensure low payoff’. It seems also that they need their customers, particularly since Coke customers will not be affected by Pepsi-Philippines decision not to pay off. I would make sure that the advertisements would mention the risks and possibilities of winning. The people would be aware of the fact that it is very difficult to win. This would help a person not to invest all his hopes and resources in something that is itself a dream. I would also try to explain to the people that if Pepsi would pay the $18 billion to the people, then the company would go broke and would have to close. This would result in thousands of people loosing their jobs.

I would try to maintain the good will of the customers. The projected $ loss from loss in reputation may be worse than paying the prizes. Simply from a business and ethical perspective, I would have done something very quickly to maintain the good will of the customers once I knew of the mistake. I would have tried to regain trust of the people by explaining to them that the mistake was not on purpose and that the company never intended to hurt people’s feelings. Maybe in Hong Kong the results would have been less radical or violent. However that wouldn’t mean that the company wasn’t just as wrong for their short-sightedness and carelessness. Their carelessness led to violence and death. Something should have been done differently. Yes.

5. Application of to case

5.1. Personal Traits:-

Business decisions are made by individuals or by committees, thus the ethics of business in reality is the ethics of the individuals making up the business. A series of factors influence a persons ethics: personal values, stage of moral development and moral approbation. The extent to which a decision maker’s behaviour reflects personal values depends to some extent on the decision maker’s ego strength, field dependence and locus of control. There the Pepsi-cola company is a big player with a lot of power which can lead to high ego strength and locus of control. This might cause the company to go its own way and set wrong standards and use questionable methods. Stages of development depict the type of rationale used to select options. Moral approbation characterizes the internal need for approval something that is scarcely present in big companies. Each of these traits either supports ethical or unethical behaviour.

5.2. Stakeholders :-

A stakeholder is someone who has a stake in an organization or a program. Stakeholders either affect the organization/program or are affected by it. Stakeholders include people who staff a program (e.g., management, staff); people who are affected by a program (e.g., clients, their families, and the community); people who contribute to a program in other ways (e.g., contributors, funding agencies and foundations, volunteers, partner organizations, board members, etc.); and people with a vested interest in the program (e.g., politicians, neighbors, etc.), competitors, suppliers etc. The company did not take into consideration the effects of this campaign on particularly its consumers. The Stakeholders influence decisions in both ethical and unethical directions.

5.3. Organizational Culture and Traits

It might be referred to as the common set of assumptions, beliefs and values that has developed within the organisation to cope with the external and internal environment and that is passed on to new members to guide their actions within these environments. It provides a sense of identity among members and promotes a commitment of the members to something larger than self. It also provides for stability of the organisational social system and rationale and direction for behaviour. While organisational culture serves as the overall glue of the organisation specific aspects of its culture are influenced by the organisational traits for e.g. organisational climate and organisational goals etc.

3.4. Dimensions of Decision Making

The Decision Processes help to explain the types of ethical decision making behaviour that occur in business. Managers indicate there are specific actions that they will not countenance – thus, the minimum performance rule. Once a set of decision alternatives has been established, each one is evaluated on the bases of the Decision dimensions like economic, political, technological, social and ethical issues. These issues are responsible at the end about the ethical nature of the decision.

3.5. Moral Intensity

The degree of moral intensity influences the decision maker’s decisions. A person with a high moral intensity is tend to consider moral and ethical issues more deeply than a person who’s moral intensity lies very low.

3.6. Minimum Performance Level/ Total Benefit Test

The decision maker applies a minimum performance rule to each of the decisions that specifies the minimum acceptable performance level for each of the decision dimensions. Any alternative that creates a conflict of interest will be dropped from consideration. The minimum performance level might be less than the desired level and when considered by itself would lead to rejection of the alternative.

Decisions Alternatives that survive the Minimum Performance Level rule test may then be subjected to the second phase, total benefit yielding the overall value of each alternative. After the benefit for each decision variable has being considered has been derived, one would expect that the decision maker would select the alternative with the highest benefit.

6. Lessons

Critical for organizations that are striving to gain or maintain a competitive advantage and that are in the process of re-structuring for the new century. Decision-making is an important factor for growing organizational memory with newly created knowledge and a broader base of perspectives to use in subsequent decision-making situations. Given a particular decision context and a decision maker with a set of personal values, it may be very difficult to see all sides of the issue.

Individual, managerial and organisational success all depend on making the right decisions at the right times.1 However, decision-making is just one component of the problem-solving process. Unless a problem has been defined and its root causes identified, managers are unlikely to be able to make an appropriate decision about how to solve it. Effective managers know how to gather and evaluate information that clarifies a problem. They know the value of generating more than one action alternative and weighing all the implications of a plan before deciding to implement


A major responsibility for all managers is to maintain a constant lookout for actual or potential problems. Managers do this by keeping channels of communication open and monitoring. When a problem involves others, they need to feel understood and accepted; they must have confidence that the problem can be resolved; they must trust management to see the problem as a learning experience and not as an excuse to punish someone.

Whether blameworthy or not, the use of the cloak of social responsibility, and the nonsense spoken in its name by influential and prestigious businessmen, does clearly harm the foundations of a free society. I have been impressed time and again by the schizophrenic character of many businessmen. They are capable of being extremely far-sighted and clear-headed in matters that are internal to their businesses. They are incredibly short-sighted and muddle-headed in matters that are outside their businesses but affect the possible survival of business in general.

But the doctrine of “social responsibility” taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collective doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. The social responsibility of business is to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

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