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The Coca-Coca Company Struggles with Ethical Crises Essay

Abstract

Since the late nineteenth century Coca-Cola has been a successful company. Coco-Cola went to war with its competitor PepsiCo throughout the 1990s as Coca-Cola expanded its market overseas. Its overseas sales increased to the point where over 85 percent of its sales came from outside of the United States (Ferrell, Fraedrich and Ferrell, 2011). As a consequence, the Coca-Cola brand and trademark is the most recognized in the world and worth an estimated $25 billion. Yet, by 2000 Coca-Cola failed to make Fortune’s list of most admired American companies because in part of its serious ethics violations like charges of racial discrimination, contractual disputes with distributors, problems with long-term contracts and that Coca-Cola misrepresented market tests (Ferrell, Fraedrich and Ferrell, 2011). This paper will examine the ethical issues Coca-Cola encountered to argue that its response to the crisis was handled well but nonetheless deeply affected the company’s bottom line.

Delineate the ethical issues and dilemmas (as found in Chapter 3) the company faced. Coca-Cola is one of the largest international beverage companies. It is renowned by its brand name and working in more than 200 countries. Coca-Cola has different brands under its name along with PowerAde, Minute Maid, and Dasani water. This company has excelled over the last ten years; however, in recent decades the company struggled to meet its financial objectives and has encountered a number of ethical crises (Ferrell, 2011). An ethical dilemma occurs when an organization or its people are faced with selection one option from two highly undesirable alternatives. The basic reason for occurrence of such issues is the difference between the moral values or ethics and actual organization goals. A personal failure of character is also one of the major reasons behind arising of such problems. Such ethical dilemmas mostly occurs in two situations when it has a deep impact on the profitability of the company or on the stakeholder (Coca-Cola Struggles with Ethical Dilemma Researchomatic, 2012).

Apparently, it seems that the company is working fine, but it has run into numerous difficulties and, in short, has had ethical issues one after another, even with international recognition. The company’s problem began at the executive level where many areas of the organization lacked quality leadership that was lacking a series of ethical crises. Coca-Cola had a weak leadership and was not strong enough to resolve the ethical issues. Due to the weaknesses within the organization, ethical issues kept arising. Many board members lost faith in the company. Employees resigned from the company after it failed to conquer its challenges. According to Ferrell (2011), when Doug Ivester became CEO of the company, he was groomed for the position by a former CEO, and his tenure did not last long in the company. Ivester was faced with many challenges and issues and unfortunately he was not equipped to handle the competition from others in the industry. There have been several CEO’s whose tenure did not last long and have also decided to resign from the organization after years of frustration over these ethical issues.

Coca-Cola however, had shown that they could not handle disputes or incidents whenever they occurred, there were slow responses, and failure to acknowledge the severity of situations that harmed the company’s reputation and management’s unprofessionalism. The company should have developed compliance and ethics programs before problems were reported. In order to improve upon their image, and permanently rise above its ethical problems, the company cannot focus on dominating the global market, but make necessary changes to avoid further problems in the future. Determine which of the issues/dilemmas you identified was the most significant. Explain your reasoning. Coca-Cola has begun to take necessary measures toward improving its image. The leadership managed much different than other companies that had ethical issues (i.e. Enron) and the company focused more on the financial aspect of the company while other areas of the company crumbled.

Even though, Enron was the biggest business scandals of all time, and Coca-Cola displayed a leadership that is entrenched in helping the company maintain its global position, and its employees have shown strong interest in success. The company resolved its ethical issues and recovered from those issues. Determine what steps Coca-Cola should have taken to prevent the issues you identified from arising in the first place. Three steps Coca-Cola should take to restore its reputation are the removal of racial discrimination in the organization, producing good quality products free from all contamination and a management team that follow rules, regulation and laws of the country. Although Coca-Cola center its reputation mostly on the global impact of the company name, to restore its reputation and eliminate future ethical dilemmas with stakeholders, the leadership issue has to change along with poor financial performance, adoption of good ethical competitive strategy for the company and low turnover in top management. Coca-Cola seems to be trying to institute its reputation based on quality products and socially responsible activities, the company has failed to manage ethical decision making in dealing with various stakeholders.

According to Donaldson, stakeholders are individual groups and even communities that can directly or indirectly affect a company activity (Donaldson & Preston, 2006). The failure to consider all significant stakeholders can lead to ethical descend and future dilemmas with stakeholders also have a potential impact on employees, suppliers, regulators, and the media that can lead to regrettable consequences (Morsing, 2006). The action that has the best long term outcome for Coca-Cola is producing good quality products free from all contamination. Since the company is known for the most valuable brand name in the world and one of the most visible companies worldwide, it is important to maintain its standards for quality product (Ferrell, 2011). The company is always striving to maintain quality products and maximizing customer satisfaction. Analyze how Coca-Cola responded to the crisis and determine if this was the best possible response or not. Branding is a set of activities designed to create a brand and position it in the minds of consumers, according to Thomas O’Guinn (O’Guinn, Allen, & Semenik, 2012).

The Coca-Cola Company aims to lead by example and to learn from experience. They set high standards for their people at all levels and strive to consistently meet them (Coca-Cola Company, 2014). Coca-Cola has always been a social brand people love to share with others, and one that brings people together on a number of occasions. Brand names are important to the company because the consumers use them to make various choices. Making sure that consumers and stakeholders are satisfied will help the company in the long run, but producing products that are contaminated can give the company negative advertising, impact the company’s brand, lose the trust of the consumer that could decline the company products from various governmental agencies and could impact the growth in the international markets. Although the company still struggles with ethical crises they have developed a vision and a clear goal for the stakeholders, employees, and consumers by making sure the brand recognition is high and quality products are promoted.

References

Coca-Cola Company (2014). Retrieved from http://www.coca-colacompany.com/our-company/governance-ethics/governance-ethics .Coca Cola Struggles With Ethical Dilemma Researchomatic (2012).Retrieved from http://www.researchomatic.com/Coca-Cola-Struggles-With-Ethical-Dilemma-141662.html . Donaldson, T., & Preston, L.E., 2006. The stakeholder theory of the corporation: Concepts evidence, and implications. Academy of Management Review, 20: 65-91 Ferrell, O.C., Fraedrich, J., & Ferrell, L. (2011). Business Ethics: Ethical Decision Making and Cases (8th edition). Mason, OH: South-Western Cengage Learning. Morsing, M. (2006). Corporate social responsibility as strategic auto-communication: On the role of external stakeholders for member identification. Business Ethics: A European Review, 15: 171–182. O’Guinn, T., Allen, C., Semenik, R.J. (2012). Advertising and Integrated Brand Promotion (6th Edition). Mason, OH: South-Western Cengage Learning.


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