CASE STUDY: THE COLA CONUNDRUM

North South University

Assignment: 1 Case Study: The Cola Conundrum

Prepared for

Barrister Ishtiaque Ahmed

Course: Bus 401

Prepared by: Md. Kaderi Kibria

ID: 091 0727 030

Section: 06

Submission Date: 16/07/2012

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CASE STUDY: THE COLA CONUNDRUM

Identification of facts: The case is about the unethical practices of Coca-Cola in less developed or developing country mainly India. The case is mainly focuses on the differentiated moral practices in developed country and developing country. The associated facts are the violation of the code of the business conduct by Coca-Cola. According to their code of conduct they are supposed to protect the core values of Honesty, Integrity, Diversity, Quality, Respect, Responsibility, and Accountability. But in India they are indifferent to these practices. Breaking of the environment policy is also an important fact of the case. They are supposed to operate at eKOsystem which guides the company to protect the environment. But some of their actions like extracting ground water at a larger amount, providing toxic water residual to the land etc. lead to the environmental degradation. Coca-Cola is supposed give highest importance to ensure the quality. But foreign particles (a dead lizard) in sealed bottle and tobacco pouch in unopened bottle indicate their failure in quality management. Another fact is the harm done to the communities by extracting a huge amount of ground water keeping no water for villagers where water is a scarce resource. Besides Coca-Cola is accused for human rights abused India and Colombia, attacking the general mass by police in peaceful strike. Besides, Coca-Cola underpays their employee and laying them off at its will and dismissing those who dare to unionize. Offering products against the broader interest of society, discrimination in pricing, making tall claim in advertising, deceptive sales promotion, targeting the inappropriate audience i.e. children in advertising etc reflect their lack of ethics in marketing. Though they have share holders through private placement, they do not disclose their financial information to public as they are not listed in the stock market which put a question in their transparency and accountability.

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CASE STUDY: THE COLA CONUNDRUM

Pesticide controversy raised in 2003 and 2006 is a dreadful violation of morality. The pesticides like lindane, DDT, malathion and chloropyrifos and other dangerous chemicals are more than the permissible level in Coca-Cola.

Issues/ Direction:

Main issue: The main issue of this case is whether the practice of discrimination between the developed and developing countries is ethically justified or not.

Sub issue: We have to find that the activities of Coca-Cola in India like the violation of their policy and code of conduct, denying the environment policy, violation of labor policy and workplace practice, offering low wages and benefits, violation of supplier guiding principle, hindering collective bargaining, lack of transparency and accountability, failure in quality control are morally right or wrong.

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CASE STUDY: THE COLA CONUNDRUM

Assumptions: Assumption of general public: General public assume that Coca-Cola is extracting ground water in huge amount for their production where as the villagers are not getting the water for drinking and other daily uses. People think Coca-Cola is responsible for the failure in quality control Coca-Cola is deceiving people about their revenues and profits by not disclosing the financial information Unethical marketing by targeting the inappropriate audiences like children, making tall claims in adverting, discriminatory pricing rather than unit pricing should not be done by Coca-Cola. The pesticide found in Coca-Cola is harmful for the consumers body.

Assumption from my perspective: Coca-Cola has to extract the ground water even though it unethical to extract the water where villagers do not get it. The reason behind that is the requirement of huge water for production of Coca-Cola and cleaning of the bottles. Besides, Coca-Cola is in Cola-War with Pepsi and In this situation if they do not extract water according to requirement their production will hamper and it might lead to lose of market share. Coca-Cola is responsible for poor quality control. This happened because they had poor management of the suppliers of bottle. This happened as they choose their bottle suppliers randomly rather than guided by their suppliers guiding principles. Though it seems they are deceiving people by not disclosing their financial information, but it might not be the real fact. The reason for this assumption can be stated as they are in intense competition where pricing is considered as one of the supreme advantages, the disclosure of the financial information might hamper their competition competitive strategy.

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CASE STUDY: THE COLA CONUNDRUM

Targeting the inappropriate audiences is unethical. Thus Coca-Cola should not target the children who are not the actual buyer. The reasons include the thinking of parents who care about their children and do not wish to buy those cola for them as these might cause damage to the health of the children. But, due to advertisement the children influence the parent which is unethical. Mixing of pesticides as ingredient in Coca-Cola is unethical. Though the level of pesticide in Coca-Cola is permissible and less than the pesticide levels of vegetables and milk available in the market, it is still unethical as the pesticide is hazardous for human health.

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CASE STUDY: THE COLA CONUNDRUM

Identification of Stakeholders: Stakeholders of a firm are divided into primary and secondary stakeholders. Primary stakeholders are whom the survival of firm depends on i.e. Stockholders, Employees, Suppliers (suppliers of bottles), Creditors, and Customers. Secondary stakeholders are those who affect or are affected by the firm i.e. Media, Consumers, Government (A new Janata Government who kicked out Coca-Cola from India) , Judiciary (Foreign exchange Regulation Act (FERA), Competitors (cola war with PepsiCo), General Public (habitants of Kerala, Mharastra, Uttar Pradesh, Tamil Nadu, Rajasthan or people suffering for the scarcity of water) Political groups, Activist groups, Trade union, Customer advisory groups, trade associations, Financial community , Local community, Environment .

Responsibility: According to stakeholders theory Coca-Cola should work for the interest of all stakeholders. It has core responsibility to the owners but at the same time it should protect the interest of other stakeholders like customers, community, environment, employees, general public etc.

Actions: The actions of Coca-Cola are confined in commitment and policy making. Their policies are hardly implemented in India. After being accused for unethical practice Coca-Cola responded to it and denied the liability for all the facts. Besides that Coca-Cola take different initiative like reserve rainwater project for irrigation where water is scarce. This compensation is very low compare to ground water depletion because the rate of rainfall is very low in this area. Instead of correcting own self Coca-Cola denied all the responsibilities for which they were accused and impeded the peace strike of the general people by force using the police.

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CASE STUDY: THE COLA CONUNDRUM

Evaluation Based on Theory: The Utilitarian view: Utilitarian theory holds that an action is right if it produces, or if it tends to produce, the greatest amount of good for the greatest number of people affected by the action. Otherwise, the action is wrong. So according to utilitarianism, we should evaluate an action by looking at its consequences, weighing the good effects against the bad effects on all the people affected by it. If the good outweighs the bad, it tends to be a good action; if the bad outweighs the good, it tends to be a bad action. This good can be measured in pleasure or pain (hedonistic utilitarianism), happiness (eudemonistic utilitarianism), or by intrinsically valuable human goods like friendship, knowledge etc. (ideal utilitarianism).

If we consider the first fact, the depleting of ground water converted to Coca-Cola then the refreshment by the consumers of Coca-Cola, profit making by the stock holders of Coca-Cola, tax revenue by the government which is used for general public might be considered as pleasure. In contrast, scarcity o drinking water and irrigation water is considered as pain. Definitely, the overall pain is higher than the total pleasure because, the pain of forgoing the drinking of water and agricultural production what is their livelihood is obviously severe than the pleasure by taking Coca-Cola. The pesticide issue is also unethical because the pleasure getting by the refreshment of the CocaCola is much lesser than the bad impact on health. Failure in quality management is also unethical. Because there is no pleasure at all but it creates pain for the consumers by having unhygienic product.

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CASE STUDY: THE COLA CONUNDRUM

The Kantian theory of Categorical imperative: An action or a principle to be moral , it must be possible for it to be made universal., it must be respect rational beings as ends in themselves and it must demonstrate its respect for the autonomy of rational being.

If we consider the fact of violation of principle a code of business conduct, universalizing of this practice might be contradictory. If everybody violates the principle of business conduct, there is no logic to make policy for a company. So it is failed in the first test of Kantian Theory. Deceptive sales promotion, targeting inappropriate audience, discrimination in price is obviously present disrespect for human. Thus it is unethical as it failed in second test of Kantian. Providing pesticides in human food is definitely against the human dignity. So this action is also unethical according to Kant.

RAWLSISM /Theory of Justice: Each person is to have an equal right to the most extensive basic liberty compatible with similar liberty for others. Social and economic inequalities are so arranged that they are both a) reasonably expected to be everyones advantage and b) these are attached to the position and offices which are open to all.

The most important fact of this case i.e. the differentiation of people of developed and developing country is unethical according to Rawlsism, because, by Rawls theory every person should be treated equally as human. The attack by police on the peacefully protesting people was initiated by Coca-Cola; which is an unethical as it hinders the human liberty.

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