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  • THE COCA COLA COMPANY STRUGGLES WITH ETHICAL CRISES.

    INTRODUCTION

    Coca Cola Company was invented in 1886 by Dr. John Pemberson. The pharmacist from Atlanta, Georgia made up the formula for Coca Cola in his backyard and introduced it to the market in the same year. The product was sold as a toxic until 1887 when another pharmacist called Candler bought the idea from John. Candler engaged in aggressive promotion of the product and it gained fame as a fountain drink by the late 1890s. The product gained a huge market share that led to the rise of bottled companies. The fountain drinks were then supplied to the licensed bottled companies. A new coke formula was introduced in 1985 that has made the product to be widely used in the modern community (Coca Cola Company, 2011).

    The company has been engaging in community activities that continue to boost its reputation in many countries. It has engaged in health campaigns such as AIDS initiatives so as to identify itself in the community. The company improves the education of a given area by granting fees and finances to different educational facilities. Coca Cola Company eradicates poverty in the society by creating employment opportunities to people in the society. The company focuses on customer satisfaction through the development and production of quality products and services. They also focus on their employee satisfaction by providing a favorable environment for them and providing benefit packages for the employees and their dependants.

    Coca Cola Company currently distributes beverage products globally in over two hundred countries. The company has been experiencing many ethical issues over the past decade. These issues are racial discrimination, pollution on the environment, employee malpractices, moral hazards and competition malpractices. The company has been solving one ethical issue over the other because of problems in management, economic problem, leadership issues and social upheavals.

    ETHICAL ISSUES

    Coca Cola Company has been solving a lot of ethical issues in the past decades. This has lead to the slowing down of its business activities and loss of profits due to reduction in market facilities. These issues have affected the company drastically by creating loss of reputation and poor economic performance.

    The company has been accused of causing pollution in the environment. Villages in India accused the company of using up local ground water that would lead to water problems in future. The residents claimed that the Company also emitted other types of pollution such as land and air pollution. The company was ordered to close the facility by the pollution control board of Kerara, India (Pride, Hughes & Kapoor, 2010).

    Another ethical issue was found in Belgium where school children became ill after drinking Coca Cola products in 1999. The company considered this as a minor issue which led to withdraw of the company’s products from Belgium. The company sold the banned cans to Africa and no harm was reported. The media learned about this act of selling banned cans to Africa and reported it to the public. Consumers received this news with a lot of bitterness arguing that it was not human for the company to sell contaminated products to Africa. They considered this act as racial discrimination and they withdrew their shares from the company. The company lost 50% of its value of shares (Kidd, 2007). The company’s brand deteriorated as consumers argued that cans make up ten percent of the product while brand made 90% of the product. The company lost its brand by selling contaminated cans to Africa.

    REASONS FOR ETHICAL ISSUES

    Coca Cola Company has been experiencing a number of ethical issues due to poor leadership, ineffectiveness in the system, uncooperative employees, competition and poor economic performance.

    POOR LEADERSHIP AND MANAGEMENT

    Poor leadership has been evident in the organization as the top management is not strong enough to lead the organization through tough times. The company has poor management systems that do not react effectively to emergencies. The company responded to the Belgium case slowly and they did not portray the urgency and severity of the matter. The company also sold contaminated cans to Africa without thinking about their safety. They should have considered the possibility of the cans causing other incidences of death before selling the products Hodgetts & Hegar, 2007). The concept of the company reacting slowly to the problems meant that they had poor management skills.

    NON- COOPERATIVE PERSONNELS.

    There are incidences where the employees are not loyal to the organization. Schaller & Lynch (2010) narrates the incidence where Coca Cola’s employee tried to sell the company’s trade secrets. The high level executive assistant called her friend complaining that the company was treating her unfairly and that she had some confidential information about the company that she wanted to sell to anyone who was willing to buy it. The Executive assistant had stolen confidential documents that contained information on new products that were not yet introduced to the market. The executive assistant, her friend and a second accomplice contacted various organizations including PepsiCo claiming to sell the confidential information to the highest bidder. Pepsi forwarded the letter to the company who involved the federal bureau of investigations. The Executive assistant was sentenced to eight years imprisonment. This incident shows that Coca Cola Company has been experiencing problems from employees who are not loyal. This leads to more expenses for the company especially when they have to face law suits or recover from theft of goods and information.

    Some staff is resigning from the company instead of giving full support during its hardships. Noon (2006, Feb. 14) reports of Buffett resigning from the board of directors due to frustrations. Other staffs were reported to have sued the company for racial discrimination. They claimed that they received poor wages and poor treatments due to their races.

    COMPETITIVE MALPRACTICES.

    The company has been engaging in unethical marketing activities. They have been offering extensive discounts to their customers and rebates to retailers and wholesalers with the aim of achieving higher market coverage. They even gave free cases to customers through aggressive promotion with the aim of taking over. The company bends rules in the urge of gaining more customers. They are reported to have supplied their products to warehouses which were against the rules in the markets. They claimed to have been satisfying the needs of the client by bending the rules to supply products to the companies. Businesses should follow the correct rules and procedures even when they aim at satisfying the needs of the consumers. They also forced the Japanese to purchase more shipments of their products in exchange of extended periods of recovering credit.

    POOR ECONOMIC PERFORMANCE

    The company’s economic performance leads to the company having to engage in unethical issues to obtain more finances. The company is reported to have sold excess shipments to bottled companies and forcing them to buy the excess supply with the promise of being given an extensive credit. There are other incidences where the Company presented false economic reports to clients and stakeholders so as to show a favorable financial position of the organization. Shareholders withdraw their investments when they learn about these incidences.

    1. 1.      A news analyst said that coca-cola could become the next Enron. Do you think
      this is possible and defend your answer?

    Enron was an energy company based in Houston. United States. It was widely known and had large number of employees in the organization. The company was found out to be engaging in marketing malpractices that led to them acquiring much share of the market. The company was involved in a variety of scandals that include: Misrepresentation of reports regarding the financial position of the organization in order to continue from benefiting from the investments provided by the stakeholders. The company announced a false energy crisis so as to gain more money from investors. The executives of the company embezzled money from unsuspecting investors which led to the bankruptcy of the company (Finance Laws, 2010). Customers and investors withdrew form the company when they learnt about the scandal. The company was later shut down and its executives arrested when the scandals came in the open. This company is presently used as the mark for corruption and malpractices in the organization.

    In my opinion Coca Cola can not be another Enron. Enron was not able to recover from the ethical issues it faced during its scandal. Coke is a global brand and it cannot fail in improving on its ethical issues. The company has been trying to build back its reputation by providing quality goods and services to its customers and engaging in aggressive promotion of its products. The company has developed more products such as powerade sports drink and Dasani bottled water to widen its market. This act has yielded better results as the company has been able to maintain existing customers and attracted more customers. Curtlin, Hayman & Husein (2005) argue that Coca Cola Company can rely on its brand to overcome the crises it faces.

    The company has been regaining its brand even after the impacts of the ethical issues that are facing it. The company was announced as the leading company in the Interbrand top one hundred companies. The company has been able to hold that position for eleven years in a raw (National Ranch, 2010 Sept. 17).

    1. What should coca-cola do to restore its reputation and eliminate future ethical
      dilemmas with stakeholders
      ?

    Coca Cola Company should aim at regaining the trust of customers and stake holders through the assurance of quality products and services (Asongu, 2007). The company should provide correct statements that show the financial position of the organization as per a stated period of time. Competent staff should be employed in order to be able to make effective and efficient decision making. Curtlin, Hayman & Husein, (2005) show of the company launching an exercise on public relation so as to gain more customers. The company engages in social activities so as to regain its reputation. They provide fees for needy students in various colleges and universities. They should also engage more on activities that discourage pollution of the environment. The company should also engage in such initiatives as building schools, bore holes and planting of trees for the betterment of the society.

    The company has set code of conducts that govern employees and managers in the conduct of their business. These codes will help the organization in dealing with the organization in dealing with ethical issues in future. The company has innovated new products to attract more customers. It should pose corrective actions to those who do not follow the set laws and procedures. The company should also develop reward and performance appraisal systems to motivate employees on quality productivity. The appraisal systems should be fair and transparent.

    CONCLUSION

    Coca Cola Company has been experiencing ethical crises due to lack of leadership skills, poor economic performance, lack of corporation by employees and competitive malpractices. The company has been trying to solve these issues by engaging in community development and forming public relations exercise. The company has assured customers of better and quality products and services.

    The company cannot become the next Enron because it is managing its crises by trying to regain customer trust and improving on the product and services. The company is still ranked as the best branded company in the world despite the ethical issues that surround it. Its brand image is enough to assist the company through the crisis.

    The company should try and regain its reputation by providing quality goods and services. It should assure its stakeholders on presenting true and fair financial status of the company. They should not engage in competitive malpractices that would lower their level of fame. The company should set strict rules and procedures that will guide the actions of executives and employees in order to prevent ethical crisis in future.

    REFERENCES

    Asongu, J. J. (2007). Strategic Corporate Social Responsibility in Practice. United Kingdom:

    Greenview Publishing Co.

    Curtlin, T., Hayman, D. & Husein, N. (2005). Managing A Crisis: A Practical Guide. United

    Kingdom: palgrave Macmillan

    Coca Cola Company. 2011. http://www.thecoca-colacompany.com/ourcompany/index.html

    Finance Laws. (2010). Easy Guide to Understanding ENRON Scandal Summary. Retrieved

    from: http://finance.laws.com/enron-scandal-summary

    Hodgetts, M. R, & Hegar, W. K. (2007). Modern Human Relations at Work. United Kingdom:

    Cengage Learning.

    Kidd, T. P. (2007). European Visions for the Knowledge Age: A Quest for New Horizons in the

    Information Society. United Kingdom: Cheshire Henbury.

    National Ranch. (2010, Sept. 17). Coca-Cola World’s Top Brand…Again. Retrieved from:

    http://nationranch.com/2010/09/17/coca-cola-worlds-top-brand-again/

    Noon, C. (2006 Feb. 14). Buffett to Quit Coke Board. Retrieved from: http://www.forbes.com/2006/02/14/buffett-berkshire-coke-cx_cn_0214autofacescan06.html

    Pride, M. W., Hughes, J. R. & Kapoor, R. J. (2010). Foundations of Business. 2nd Edition. United Kingdom: Cengage Learning.

    Schaller & Lynch, W. (2010). Secrets of the Trade: Tactical and Legal Considerations from the Trade Secret Plaintiff’s Perspectives. The Review of Litigation. Vol. 29(4), pp 729-858.

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