Ethical Business For Globally Managed Organization - Essay.

Discuss about the Ethical Business for Globally Managed Organization.

In today’s competitive environment, culture is one of the essential elements in a globally managed organization. According to Amstutz (2013), management of the differences in culture, behaviors and attitudes show support to the cross-cultural framework in an organization. Due to cultural varieties, several problems and misunderstandings can occur at the workplace for diverse beliefs, values, backgrounds, and perspectives. But, to be a successful global organization, it should facilitate diverse people from miscellaneous cultures and backgrounds to work together. Cultural differences need to be prioritized by the organizations as an ethical issue. As opined by Barak (2013), it is ethical for a global organization to support cross-cultural management and treating its international stakeholders equally. It will be a moralistic and principled approach of the organization towards the global citizens.

This report will be dealing with Coca-Cola, a global giant beverage company having its operations and stores across European, American, African, Australia and Asiatic continents. Due to global operations, Coca-Cola has to face several ethical issues regarding cultural differences. Either Coca-Cola fails to understand the ethics or moral values of foreign customers or the quality of its products are not satisfying the foreign patrons. This assignment will discuss several evidence-based and argumentative responses from several examples about the failure of cross-cultural dimensions and ethical approaches to solving it.

It is the aim of every organization to succeed in a global operation. There are certain problems and potential barriers that international business has to face due to cultural diversity. Burke & Noumair (2015) commented that an awareness and ethical approach helps global business to sustain in this competitive environment. Better communication and lenient approach towards supporting cross-cultural framework help organizations in growing its business globally. Coca-Cola while operating in several different countries had to face diverse cultural problems that led to either shutting down of the organization or undergo a complete change management. As mentioned by Caligiuri & Tarique (2012), one of the ethical issues that Coca-Cola faced was racial discrimination allegations. The African American employees sued the company due to discrimination in pays scale. These African American people were put at the bottom of the pay scale, though they had the same experience, qualification and doing the same job as the Americans. An estimation of nearly $26,000 amount was made less every year by the African Americans. The massive divergence in the pay scale was due to color discrimination. Hough the top management was well aware of the problem; they didn’t take any steps to stop it. Later, when the public has a negative reaction to this discrimination, Coca-Cola was bound to take effective measures against this discrimination for rebuilding its image. It, therefore, resulted in a settlement of nearly $ 193 million as per racial discrimination lawsuit (Foucault, 2013).

Explanation of the Relevancy of Selected Ethical Theories

Chell et al. (2016) commented that Coca-Cola also landed down with a problem with Burger King. A mid-level executive of Coca-Cola revealed that Coca-Cola made a fraud market study on behalf of Burger King. At 2002, when Coca-Cola paired up with Burger King to increase its sales amount. Coca-Cola thought of launching a frozen Coke with the value meal of Burger King. Before, launching it, Burger King thought of testing the product n the market. A three-week trial run was launched to see whether customers are interested in having free Frozen Coke long with Value Meal (Ciegis, Ramanauskiene & Martinkus, 2015). But, the sales figure was not satisfactory enough to launch the product. So, Coca-Cola thought of bribing an individual of nearly $10,000 to take children for purchasing Value Meals along with frozen Coke to Burger King. But, the fraud was discovered and was investigated.  It resulted in the payment of nearly $ 21 million, $540,000 and $9 million to Burger King, the whistle-blower ad pre-tax write off respectively (Ghemawat, 2013). This, however, earned negative publicity and loss of millions of dollars to Coca-Cola.

As opined by Cummings & Worley (2014), Coca-Cola’s failure was due to its unethical approaches such as discrimination or bribing people to increase its sales. It is essential for an organization doing business globally in pursuing a good quality knowledge and respect towards all culture and race. Steps should be taken in minimizing the cultural and behavior differences that make the organization more goal-oriented and realistic in their approach. It, therefore, helps in maintaining and managing the hierarchical relationships and levels within the organization. Daim et al. (2012) did not comment that from the ethical perspective, the home country nor foreign country have committed in mistake either in doing business or not accepting it. It is due to a misunderstanding of each other’s traditional beliefs and culture. So, the company needs to adopt convincing communication, respect, and trust on multi-racism for establishing a friendly relationship with one another and create a sustainable environment in the foreign land (Shaw & Barry, 2016).

As mentioned by De Mooij (2013), one of the ethical ways that can be adopted to mitigate cultural differences and understand it is through the adoption of Collective Culture. It is because, in collectivism, the shared values within a group are more emphasized rather than individual interests. It makes organizations more focused towards the process and is quite relationship oriented. Moreover, when an organization adopts Collective Culture approach, it emphasizes more on the long-term and sustainable relationship between the people. Ferraro & Brody (2015) commented that cultural differences could also be measured through Hofstede’s basic model. They are precisely Individualism/Collectivism, Power-Distance, Uncertainty Avoidance and Masculinity/Femininity. In the 1^st dimension, it says that organizations’ extent of preference individual behavior over collective one. In Power-Distance, it measures the extent of employees’ involvement in the management and decision-making process. The Uncertainty Avoidance dimension reflects employees’ level of tolerance towards avoidance of uncertainty in the organization. The Masculinity/Femininity dimension reflects whether an organization is dominant by masculine or feminine culture as the value focus is different for both aspects (Eldredge et al. 2016). Through these strategic analyses, both managers and high authorities come across an in-depth understanding of the differences and try to overcome these through ethical approaches.

Analysis and Evaluation

Hofstede’s theory of cultural dimension is a framework that helps in understanding cross-cultural differences and its effects on both culture and values of the organization. Based on these values those related to behavior, a structural framework is constructed. There are six dimensions of Hofstede’s theory: Power Distance Index, Individualism vs. Collectivism, Uncertainty Avoidance Index, and Masculinity vs. Femininity, Long Term vs. Short term orientation and Indulgence vs. Restraint. As mentioned by Shaw, Barry & Sansbury, (2009), in Power Distance Index (PDI) dimension, defines the extent of acceptance to the hierarchy within an organization. A high PDI notification shows that the organization has an established and well-structured hierarchy that the stakeholders are bound to follow and adhere to. On the contrary, a lower PDI indication reflects an unstable authority where the organization attempts to distribute its power. Coca-Cola tried to have a high PDI, but due to the cultural differences, it didn’t have that much impact on global customers. Crane & Matten (2010) commented that in Individualism vs. Collectivism (IDV), this theory explores the extent to which the people are integrated into their groups. It describes the integrated relationships that support each other in supporting each other and reducing conflicts. In this case, Coca-Cola has to follow a collective culture that helps in emphasizing on context and is interdependent in making group decisions rather than focusing on personal interests. It is quite a flexible approach that reduces biases to the maximum extent.

See Yetmar (2008) commented that in Uncertainty Avoidance Index (UAI), it measures the extent that helps in understanding tolerance of the society towards ambiguity. A high degree of UAI denotes strong guidelines and laws, and the society is bound to accept its ways. But, in this case, Coca-Cola’s UAI in the US is high, that denotes fewer acceptances of different ideas, culture, and thoughts. On the other hand, Hartman & DesJardins (2011) explained that in Masculinity vs. Femininity (MAS), Masculinity in an organization reflects assertiveness, heroism and materialistic rewards regarding its success. On contrary to this, Femininity dominating an organizational culture denotes balancing between both the cultures. Women dominating cultures are more competitive and open towards cultural differences. Coca-Cola was operating as a Masculine culture. It is less flexible and aimed towards sticking to its laid-down structure rather than understanding the foreign culture and customer’s outlook (Wicks et al. 2010). So, if Coca-Cola adheres to Femininity culture, then it would be more open and flexible towards multi-racism and less inclination towards frauding. 

Jones, Parker & ten Bos (2005) commented that in Long-term vs. Short-term orientation (LTO) dimension, it connects or associates connection between the past, current as well as future challenges and actions. A lower degree of the short-term index reflects the honor of traditions along with steadiness is also valued. On the other hand, a high degree shows that organizations need some serious adaptation and practical problem-solving steps for its rectification. As mentioned by Caligiuri & Tarique (2012), “Indulgence vs. Restraint (IND)”dimension measures happiness and its extent of getting fulfilled. In indulgence, it is the society that shows relative freedom in getting pleasure from life and enjoying the fun. The entire globe being a mixture of indulgence and restraint; Coca-Cola needs to understand the international laws of ethical operations to operate successfully among global customers. So, it should adhere to multicultural, multilinguistic and multi-racism for having a successful business across the globe.

While I was conducting this assignment, I learned a lot of innovative things regarding cultural differences and ways of handling the diversity in an ethical way. I learned that managing cross-cultural differences is a big challenge to every international organization. It is because every region differs from one another in one aspect or the other. There are cultural, linguistic, traditional and ethical differences between people that make cultural diversity deep-rooted in international business. Moreover, I have learned that Coca-Cola, an international beverage company is working across diverse countries finds it difficult to do business globally. It is due to the difference in buying habits, cultural beliefs, the different mentality of customers and eating habits. I have seen that though Coca-Cola fell into many allegations beforehand, but is still trying to adopt international laws of ethics to carry out its activities in a moralistic way. These adoptions will certainly fail in restoring the lost image of Coca-cola that was ruined due to several proven ethical issued allegations against it.

In addition to his, I have also learned that global organizations adopt ethical considerations that help in mitigating cultural differences and do business ethically. So, I have discussed Hofstede’s Cultural Dimension theory that discusses the effect and impact of society’s culture and values on the organizational behavior. Moreover, it helped me driving all the values from the factor analysis. I have learned to relate these values to the organizational and stakeholder’s behavior. Along with this, I have also learned that using Hofstede’s Cultural Dimension; the organizations can estimate their approach, make decisions based on the approaches and therefore, make actions about it. This also explained that none of the societies are uniform, and none of them are less from one another in any aspect. The difference lies in their perspectives’ and outlooks that need a confidence boost and in-depth market research for sustaining successfully in global countries.

Conclusion

This assignment deals with the responsibility of a global citizen in response to ethical approaches taken by every organization to have a successful business globally. It is the responsibility of the organizations to explore foreign culture, traditions, and perceptions of the customers before starting off business over there. In this context, examples of Coca-Cola’s ethical failures are discussed vividly. Through linguistic barrier was not a problem, but customers’ perspective towards choosing and buying products was different. Even more, in this context, vivid discussion regarding ethical approaches like Hofstede’s Cultural Dimension Theory is also done. It helped in understanding an organization’s approach towards global market research for chalking out effective and efficient strategies to handle cultural differences and sustain successfully.

References

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