Introduction
Coca-Cola is a well-known international brand. With a considerable profit, it has become one of the leading beverage producers worldwide. However, a great scope of the business does not exclude some failures. Ethical concerns that emerged during the last decades have caused considerable losses for the Coca-Cola. The aim of this paper is to use the example of Coca-Cola to prove that ethical decisions have a crucial role for any business and make a tremendous impact on its financial success.
History of Coca-Cola
Coca-Cola was founded in 1886 by John Pemberton (Pendergrast 1). Given limited finances and advertisement ideas, Pemberton’s project had little chance for success (Pendergrast 10). However, Frank Robinson gave a considerable support for the inventor. Consequently, joint efforts of Pemberton, Robinson and Asa Griggs Candler made Coca-Cola business prosper. Till the mid-twentieth century, the company operated solely on the territory of the US. However, after the World War II went global (Pendergrast 177). The company’s international sales constantly grew. In 1990, the company possessed 50% share of the international beverage market while its biggest competitor PepsiCo had only 15-20% (Ferrell, Fraedrich, and Ferrell 454). Consequently, Coca-Cola became more concentrated on international sales than on domestic ones. It became a very strong brand on the international market, but since the mid 1990s, it has encountered a number of problems. With Doug Ivester as a CEO, Coca-Cola’s competitive superiority over PepsiCo as well as its reputation suffered considerably (Ferrell et al. 455). In the early 2000s, under Doug Raft’s management, the company’s problems exacerbated (Ferrell et al. 455). The reputation was improved in 2004 thanks to Neville Isdell’s efforts, but the ethical crisis did not end (Ferrell et al. 455). After 2008, Muhtar Kent’s succeeded in solving this problem (Ferrell et al. 456). However, even nowadays experts argue that the company has a lot to do to improve the situation.
Reputation
According to statistical data, Coca-Cola market value in 2013 was $ 173 billion (Ferrell et al. 457). Therefore, it is still one of the most recognized brands worldwide. Its main characteristics since the very appearance have been strong market orientation, effective strategic decision and means to attract and retain consumers. Nevertheless, the end of the 20th century was very unfavorable for the reputation of the company. Mismanagement and misconduct have become serious obstacles to retaining the position of the ten most admired companies, best business ethics and corporate citizenship examples (Ferrell et al. 457). However, after the ethical crisis, in 2013, the company started to strengthen its positions.
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Social Responsibility Focus
Being an international brand, the company’s social responsibility initiatives are reflected in its Mission and Vision & Values statements. Thus, the company’s aims include inspiring optimism, creating value among countries and contributing to the Muslim-US relations based on respect (Ferrell et al. 462). In addition, Coca-Cola scholarship foundation is a solid support for students and young talents. Moreover, recycling and climate change is also a matter of the company’s concern (Ferrell et al. 462). Finally, empowerment of women, improvement of the communities through courts restoration and activity on HIV/AIDS issues earn the company consumers’ respect and trust (Ferrell et al. 463).
Crisis Situations
Ethical crisis of Coca-Cola was predetermined by a number of factors discussed below. Contamination in the late 1990s was one of the most serious issues due to which consumption of the drink was reported as a serious threat for human health (Ferrell et al. 456). In fact, improper processing of carbon dioxide became the cause of Belgium children poisoning and death. However, due to the fact that it took the company too long to report about the case in the media, the problem exacerbated and caused new instances of contamination with Cola in France and Poland (Ferrell et al. 456).
Competition issues contributed to the crisis due to Coca-Cola’s failure to implement proper tactics in the end of the 20th century. The French government refused Coca-Cola in favor of the French Orangina (Ferrell et al. 456). Italian court case against Coca-Cola in 1999 was successful to prove its anticompetitive prices. At the same time, PepsiCo and Virgin Cola accused Coca-Cola of inappropriate strategies and proved violation of the European laws (Ferrell et al. 457).
Racial discrimination allegations became another serious blow to the company’s reputation. In 1999, accusations of payment and promotion-related racial discrimination of 1500 African Americans cost Coca-Cola $93 million (Ferrell et al. 458). In the early 2000s, channel stuffing accusation became another issue that needed effective solution (Ferrell et al. 458). In addition, instances of sending unrequested inventories to Japanese companies in 1997-1999 and usage of other inappropriate practices and fraud within the company occurred. However, the company managed to refute the allegations.
Problems with distributors took place in 2006 when 54 bottlers filed lawsuits against the company due to its decision to expand the goods to Walmart warehouses instead of individual stores (Ferrell et al. 458). Although such policies were considered as a violation of the agreement with bottlers, they reflected the aim of Coca-Cola to break old traditions. Finally, the conflict was resolved in 2007 but remained undisclosed to public (Ferrell et al. 458).
Some more serious problems of Coca-Cola were related to Columbia and Guatemala. Protests against the company on these territories were predetermined by killing unionized employees. In response, Coca-Cola emphasized connection of their deaths to the Columbian civil war (Ferrell et al. 459). In 2007, the activists protested against Coca-Cola in New York. In addition, violence in Guatemalan plants was another problem.
In addition to the above mentioned aspects, unethical behavior of the company’s workers become another issue. The workers of Coca-Cola were arrested because of their attempts to sell the secret of the drink to the company’s biggest competitor PepsiCo (Ryder and Madhavan 189). Such theft cannot be tolerated and obviously makes customers doubt about the ethical and corporate responsibility within the company.
Ethical Recovery Efforts
The company is recovering from the ethical crisis. Firstly, Belgium reports have denied toxicity of the Coke bottles and the company’s fault in the previously discussed event (Ferrell et al. 461). Racial discrimination lawsuit was settled and followed by the donation of $50 million to the minorities (Ferrell et al. 461). The channel stuffing accusations were followed by the creation of ethics and compliance office. As for the violence issue, the Columbian court has justified the company. In India, environment safety measures were taken in order to avoid possible challenges. Moreover, the company responded to health issues and reviewed sugar level in its beverages. Encouraging people to be more active and providing nutritional education have become important elements of Coca-Cola public policies (Ferrell et al. 462).
Current Situation
Even though Coca-Cola profits declined in 2009, the company is aimed to restore growth. The company’s report for 2013-2014 shows expansion to the African territory (Coca-Cola 14). Moreover, the company’s financial statistics shows improvements as well. As for the health issues, the company tries not only to encourage consumers to lead a healthy lifestyle but also provides educational resources for health professionals (Coca-Cola 15). As for the product safety index, it reached 95 in 2010 (Coca-Cola 16).
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Discussion
To my mind, the fact that Coca-Cola had to resolve a number of social issues since the end of the twentieth century is related to weak ethical and social responsibility within the company. Such issues as racial discrimination, environment contamination, disloyal workers and unlawful competition were predetermined by the wrong choices of the leaders, who were not able to manage the company of such a great scope. Starting with Doug Ivester, the company suffered from ethical failures; therefore, due to a great scope and number of the problems, they could not be tackled immediately but needed some time for their solution. In such a way, it becomes obvious that ethical responsibility is predetermined by the leaders’ choices and has a long-term impact on the entire work of the company and the final profits. At the same time, the leader’s choices should be considered as an example to be followed by the workers. While Coca-Cola’s behavior was unethical on the global level, the company’s workers adopted a common model of behavior and stole the company’s secrets afterwards.
Coca-Cola could have become a second Enron; however, the new leaders have implemented timely changes and focused on tackling the existing problems. Moreover, the greediness and desire to win by any cost can be defined as the main characteristics of the Enron leaders. It is obvious that such choice cannot let the employees be different. To a great extent, the leader set an example for the workers. Hence, the worries about ethical issues and changes for the better lead to the common behavior of the workers and unite the team around some common values.
In order to store reputation, some of the efforts have already been made by the management of Coca-Cola. Helping women, donation to minority communities and uniting the workers are the main tasks of the Coca-Cola leaders. In the future, it is important not only to overcome the existing negative issues but avoid new ones. Therefore, the main tasks of the company are ensuring common values among the employees, making all team members feel valued, promoting a healthy lifestyle and providing clear and rapid responses to media in some disputable cases.
Conclusion
Coca-Cola example emphasizes a great role of reputation and ethical issues for a company. Regardless of how great the success of a company is, in order to keep the company development in the proper direction, it is necessary to unite the team by means of sharing common values and responding to common global issues related to the environment and health. In such a situation, the role of the leader is crucial. Hence, wrong management practices even during a small period can lead to a number of serious problems in the future. Ethical problems lead to customers’ distrust and a subsequent considerable profit decline. Hence, ethical responsibility is an irreplaceable component of any successful company.
