Ethical Issue at Coca-Cola Ethics in Management – PHL/323 Derrek Choy 12/21/2009 Ethical Issue at Coca-Cola The Coca-Cola Bottling Company is a well-recognized brand and they have a chance to do extremely well in different aspects of business performance. However, this drink giant has experienced thoughtless ethical troubles with its affiliation amid their stakeholders. Although they engage in philanthropic contributions to learning and neighborhood programs, several stakeholders began losing confidence in the legendary bottling company.
Europeans’ and government organizations’ confidence went astray with Coca-Cola once they observed the slow response to beverage pollution occurrences in 1999.
Belgium even prohibited a marketing campaign for new products. Competitive problems, plus a harmful image following the contamination incidents, encouraged European’s distrustful mind-set. Countless business methods in France and Italy infringed on European’s regular business practices along with traditions, therefore supporting the patrons’ lack of enthusiasm in the company.
In 2002, the company defrauded the fast-food chain Burger King by hampering the marketing research results of a frozen drink dispensed through Burger King.
Coca-cola had to repay damages in the millions to Burger King and this occurrence lowered shareholders’ outlook. They also committed accounting fraud through inflating sales figures by forcing more products through distribution channels, or channel stuffing. Ethical change, Deficiency, or Conflict The Coca-Cola Company made different errors in dealing with the problems that surfaced over the last decade.
During the Belgium crisis, their lack of disclosure ultimately hurt the credibility of Coca-Cola. Coca-Cola was aware of the contamination a week before people began to complain of illness, and when confronted by the press, Coca-Cola denied resposiblity for the contamination. They also denied the actual problem, and denounced the severity of the problem (Coca-Cola- Ethical Issues :The recall, 2002). At that same time, Coca-Cola was under scrutiny for an exclusive deal made with school districts around the country.
The school distric would get up front money and residual payments; in return Coca-Cola would be allowed to add up to four vending machines in high schools, three in middle schools and at least one at the elementry level of the schools. Studies were done and proved that this was harmful to the students. When legislature was put into place, Coca-Cola removed the vending machines inspite of the harmful effects. When a decrease in sales was noticed, letters went out asking the principals of these schools to encourge the consuption of the products (Coca-Cola- Ethical Issues :The recall, 2002).
The incident with Burger King showed different levels of fraud and unethical behavior. Coca-Cola, in a marketing study, paid people to go in and buy the product they were studying (Maryanne Jennings JD, 2006). Padding the outcome of the research, Coca-Cola withheld this information from Burger King until they were forced to disclose it. An auditor that worked for the company for many years questioned the amount of money that was paid for the study. He recommended firing the empolyees that took part in this fraudulant study, but instead he was terminated.
Although the company claims the termination was the result of restructuring the company, they later settled a lawsuit with the auditor for over $400,000 (Maryanne Jennings JD, 2006). Burger king was paid well over nine million dollars in fountain drink relief, and the person in charge of the marketing department was promoted. Organizational Leadership The Coca-Cola Company has overcome adversity by establishing a core of well-trained and well-rounded leadership throughout the organization. Leadership incorporated the Coca-Cola system, which consists of the company, the bottlers, and the customers.
Coca-Cola is the world’s leading beverage company and operates in over 200 countries (Coca-Cola Company, 2009). Coca-Cola currently has a portfolio of more than 3,000 beverage products, so the bottlers play a critical role in product distribution. Worldwide the Coca-Cola company ranks #1 in the sales of sparkling beverages. Coca-Cola customers are the reason the company remains a colossal success. The Coca-Cola Company has had their fair share of adversity. The company faced beverage pollution in Coca-Cola products in 1999, and was in a controversial spin with Burger King in 2002.
Leadership has been able to overcome these obstacles, because the Coca-Cola Company focuses on the needs of their customers, consumers, and franchise partners. Coca-Cola has developed into a marketable and well-known company. Organizational leadership frequently goes out into the market to listen and observe. Leadership encourages all company employees to have a worldview and pushes for new innovative ideas on how to carry on company growth. For 113 years, Coca-Cola has maintained the sacred trust of the customers that drink their product.
In 1999, the trust of the company dropped when over 100 people in Belgium complained of headaches and dizziness, due to contamination from the bottling. The Coca-Cola bottling company in Antwerp, Belgium used the wrong type of carbon dioxide to give the cola its fizz, causing fungicide contamination (BBC News, 1999). Coca-Cola’s leadership has now tightened up on their health and safety inspections in all bottling centers. In 2002, the Coca-Cola Company made a deal with Burger King to create a frozen Coca-Cola drink which flopped and cost the company millions, due to lack of market research.
Recommendation “When serious attention is not paid to ethical issues…the outcome may lead to a negative reaction by stakeholders” (Polk, 2009, p. 67). Coca-Cola is well aware, and has dealt with a loss of profits, loss of trust in foreign markets, and the dire need for an ethics overhaul. Polk (2009), states “organizations who act without researching the potential negative results, are more interested in the innovation’s promise for technical improvements, organizational growth, and economic benefits” (p. 66).
But business is not only about the bottom line, as the company has learned. Their new 2020 Vision reveals that while obviously still interested in a profit, the company is also committed to “being mindful of our overall responsibilities” (Mission, Vision & Values, 2009). Having solid ethical standards is the best way for any company to show the world they are serious about ethics. Simple catch phrases are not enough, the company must adhere to the standards they set forth and hold every employee accountable. “In order for organizations to be successful they must employ great leaders.
Ethical behavior from leaders in an organization can help create an ethical and moral culture among employees throughout the organization” (Polk, 2009, pp. 73-74). Communicating the ethical standard should begin during the interview process, before hiring the individual. The standard should be communicated again during the orientation and training, and during every company meeting. Keeping ethics at the forefront will remind employees just how important ethics are in business. Conclusion In “Does Your Company Need a Culture Audit? , Louis Rubin illustrates how an enhanced organizational culture, taken as a whole, will develop the company’s general performance. “Culture permeates everything: from the way staffers dress, to the office decor, to the company’s training program, to the advertising, to what the company chairman says on CNBC, to promises made in service agreements and whether they’re fulfilled” (Rubin, p. 12). Truly the sort of optimistic transformation Coca-Cola desires. References BBC News. (1999). World: Europe “Coca-Cola Regrets Contamination. Retrieved from http://news. bbc. co. uk/2/hi/europe/371300. stm Coca-Cola Company. (2009). Our Company and the Mission, Value, and Goals. Retrieved from http://www. thecoca-colacompany. com/ourcompany/mission_vision_values. html 2009 Coca-Cola- Ethical Issues :The recall. (2002). Retrieved December 12, 2009, from Coca-Cola- Ethical issues: http://www. icmrindia. org/free%20resources/casestudies/Coca-Cola%20Ethical%20Issues1. htm Maryanne Jennings JD. (2006). THe Seven Signs of Ethical Collapse How to spot Moral meltdowns befor its to late. In M. ennings, The seven sings of ethical Collapes How to spot a moral meltdown before its to late (pp. 260,261). new york: St. Martin’s Press. Mission, Vision & Values. (2009). Retrieved December 15, 2009, from http://www. thecoca-colacompany. com/ourcompany/mission_vision_values. html Polk, X. (2009). Coca-Cola: Long term innovation (a case study). Consortium Journal of Hospitality & Tourism, 13(2), 61-78. Retrieved December 16, 2009, from Hospitality & Tourism Complete database. Rubin, L. A. (2006, August). Does Your Company Need A Culture Audit?. B to B.
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