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Coca Cola's Ethical Crises


									         MKTG 414: Ethics & Social Issues in Administration

                       Fall ’09 – CRN # 14521

Group 1: Case 2 – The Coca-Cola Company Struggles with Ethical Crises

                          Lujain Alwazzan

                            Steph Backof

                            Kevin Barber

                            Sarah Bryson
The Facts of the Case

Ethical Issues

Legal Issues

       Coca-Cola has had to deal with several legal issues over the past ten years. The most

concerning was the contamination of their products that are sold internationally. A problem like

this can cause various lawsuits, especially if a person or persons get sick or die. Something of

this magnitude can hurt the company finically, not only to cover the lawsuit expenses, but can

cause stakeholders to go away from the corporation. Other types of lawsuits that have occurred

are those involving racial discrimination and unions declaring that workers were being hurt or

killed or disappeared. Several other cresses involve international relations. This includes making

sure the products are kept at a competitive prices. Coca-Cola has already had to deal with this in

and out of court in countries, like Italy and France. The next international dilemma is channel

stuffing. This has not been a problem with Coca-Cola in the United States, but could become one

if the company does not take the proper precautions. If the wholesalers get tired of this practices

they could make the decision to no longer sell the product, which will affect Coca-Cola’s

revenue and image.

Case Questions

       Coca-Cola has had one ethical issue to resolve after another over the last decade or so for

a couple of reasons. The most common explanation people believe is what is known as the

domino effect. Once one concern occurs another is right behind it. A second perspective is when

a problem arises in a company it is important to deal with it as quickly and successfully as

possible. In this situation a majority of management is focused on the current issue at hand and
others can slip through the cracks. The longer an issue is ignored the larger it can become and

harder to keep quiet.

       There is no current evidence to suggest that Coca-Cola could become the next Enron.

Both companies have had to deal with issues with employees not having loyalty to the business.

What differs between the two is Enron had accounting numbers that did not add up correctly.

The reason behind this was later discovered that company money was being transferred to off

shore bank accounts. This was later proven to have been done to make the company look

financially better to their stakeholders and to avoid paying United States taxes. Issues like this

can not only damage a company’s image, but financially as well, which was proven by it being a

factor in the bankruptcy of Enron. Coca-Cola has not had to deal with a problem as large as this

and probably will not have to because management keeps a close eye on how the company is

run. The main two main concerns they have had to deal with was trouble with international

policies and employees offering trade secrets. Both did have some damaging effects to their

image, but both incidents were damaging to their relationship with their stakeholders in the short

term. The reason behind it not affecting the company long term is brand and company loyalty.

Their stakeholders had been a large part of the corporation for an extended period of time that

they trusted in Coca-Colas judgment and their promises to solve the problem.

There are several steps Coca-Cola can do to restore its reputation and eliminate future ethical

dilemmas with their stakeholders. The main solution is for there to be a checks and balances

system set up within the corporation itself. This arrangement will make sure that everyone’s

work is supervised to prevent an employee from going behind the company’s back. This will put

a stop to problems like wrongful international business practices, harassment, product

contamination, financials not adding up, and so much more. The second key to avert
predicaments is to deal with issues quickly and successfully after they have occurred. In order to

do this correctly there should be a group established to figure out what the solution should be and

a public relations team to keep the media bliss down. A combination between the two will help

keep the relationship between Coca-Cola and their stakeholders in good standing.

Stakeholder Analysis

       After conducting a teleological stakeholder analysis the top management in the coca-cola

company are enlightened egotists. For instance Robert Woodruff’s decision to sell the coke to

the armed services for a nickel a bottle was a purely egotist action. He looked at the big picture

standpoint that if he sold the product for that little money he will not only gain the customer

loyalty from the armed services, but also support from the patriotic community and this in return

will inflate the company’s sales and reputation and Robert Woodruff’s decision and what he

gains and benefits from it.

       The whistle blower is also an enlightened egotist when he came forward with the coca-

colas intent to scam Burger King. He saw that his job was in danger and that he might benefit

someway in reporting the misconduct. He was awarded $540,000.

Regardless of the misconduct and unethical problems coca-cola has been faced with. One can

argue that despite the fact that coca-cola has suffered in terms of reputation and sales in some

areas of the world it still generates the greatest amount of good for the greatest amount of people

as a whole. By “Benefiting and refreshing everyone who is touched by out business” through

their products and their social responsibility focus.

       A deontological analysis shows that coca-cola is an unethical company that has taken

advantage of people and abused certain situations, Coca-cola company did not conform to

general moral principles. By racially discriminating against their workers, Coca-Cola has
violated the nonconsequentialist perspective that governs the rights of individuals as human


Alternatives for the Case Characters and Evaluation of how a Significant Group

          Coca-Cola Company should have made sure that their broad of directors and its top

management team was made of qualified, ethical, responsible employees who’s main concern

was to uphold Coca-Coal’s company in compliance with the company’s vision and mission, and

to maintain the company to satisfy its business partners, consumers, society and its environment.

The company will review this alterative to be beneficial to the company’s long-term goals and its

continuous productivity on a long-range run. Even though this might be a lot of work on the

company’s side because it requires a lot of investment and commitment to its employees it will

produce a great return on its investment in a long-term standpoint. Society will feel reassured

that Coca-cola is a company that holds itself responsible for the people they employ, and assure

that they will only higher the best people to produce its good and provide services to the

consumer. Good management equals good business and that’s what society looks for in


          With bad management leading the company forward, Coca-Cola continued to neglect the

problems the company generated where it interacted with the public and where it conducted its

business. The company’s production facilities lacked proper productions management to ensure

defective free products. They need an efficient inspection operation to ensure that each product

meets the established parameters and is in compliance with product specifications and standards.

And when mistakes are made, the company needs a public relations department to handle the

situation, so it can respond in a timely and proper fashion and generate a statement to the public

with regard to its mistakes. Even though an inspections operations is a tedious task, and a lot of
the companies workers will not be happy with someone looking over their shoulders and might

want to fight change, this step will ensure error-free processes in the production operation. Also

with a public relations department the company can handle their unfortunate situations without

letting them spiral out of control. Seeing that the company is committed to ensuring good quality

and safe products consumers are more likely to purchase the product and enjoy it without

worrying about product defects. Also society will appreciate being updated on any news related

to the company they interact with in terms of good and bad codes of conduct.

       In addition, Coca-colas research and developments department failed to educate its other

departments on European anti-trust laws, or the company chose to disregard them in general.

Coca-cola needs to reevaluate its market strategy and tailor its marketing and sales plans to

cultural, economical and social differences of other countries. Cola-cola made the mistake of

making profits and number of sales be its main purpose as a company, they did not adhere to

their own stated vision and mission. It said one thing and did another, all for the cash and glory.

The company will appreciate this alternatives, since its an international country and deals with

business in different demographic populations that have variances in culture, economy, society

and much more. Profits are not the only important factor to a company’s success but also how it

interacts with its local markets can have a good or bad impact on its reputation and stronghold.

Society dislikes feeling as if they are a number on a companies accounting book. But when a

company acknowledges their needs and wants society feels more appreciative towards the


       Equality and fairness in employee salaries must be upheld and adjusted for in each

demographic location relative to the economy of they country Coca-cola is conducting business

in. Racial discrimination is not a means to cut down production costs and generate more profits.
They should have cut down costs by making their production plants more efficient, allocating

resources and using them a competent manner as to not be wasteful. They can automate most

their business transactions through the use of technology if manual labor cost was an issue to the

company. Due to its past business behavior, the company might not appreciate this alternative

since its not a fast and easy solution, but requires good research and effective implementation

and allocation of its resources in order for this to work. Society approves of companies with

good business conduct, which promotes equality and fairness to all its subordinates. Otherwise,

strikes and boycotts can be used as a act by society to defend itself against the money seeking


       The company should not engage in any bad practices like channel stuffing and scamming

companies to endorse and ensure their strong hold in the market. This can be gained through

customer and brand loyalty thus achieving customer retention, unique and high quality products,

promote themselves through social responsibility and their care for the environment. This gives

the company good reputation and better sales, as they don’t have to settle in court with money

damages, which are costs in time, money and can affect the company’s stature where it conducts

its business. Short cuts only yield to short-term solutions, this alternative protects the company

from long-term damages and problems that generate from taking the easy way out.

If society likes the product well enough, regardless of the company’s errors and mistakes in the

past, they will still continue to purchase the product.

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