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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 beings. 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 companies. 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 company. 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 industries. 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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