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Ethical Dilemmas Faced By Coca Cola In This Current Market

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Question: 

Discuss about Ethical dilemmas faced by Coca Cola in this current market.

 

Answer:

Introduction

Ethical dilemma is a common trait found in the business organization and this has the clear linkage with moral dilemmas. The perfect world of business includes the right thing, but the ethical dilemmas have become much prominent in this complex world of business. According to Van Auken (2016), the ethical dilemmas lead the human being to undertake the wrong decisions due to the difficulties. More specifically, the ethical dilemma arises when a person has to differentiate between the moral and the immoral act. The personal temptation is one of the significant ways to improve such ethical dilemmas (Shapiro & Stefkovich, 2016). It is necessary to find the conscience while undertaking any important decision based on some of the crucial aspects in business. Many of the organizations face diversified forms of ethical dilemmas, which create the significant impact on organizational reputation as well as the business practices.

Purpose of the Study           

The purpose of the study is to focus on the ethical dilemmas faced by Coca Cola in this current market. The news of ethical corruptions against the business practices of Coca Cola has created the buzz both in social life and in the business market. The study will be focusing on such ethical dilemma found in the external and the internal organizational scenario of Coca Cola. The study will also be associated with the theoretical concept based on the ethical dilemma that has been influencing the managerial practices in Coca Cola. The assimilation of these segments would be concluding the study at the end.

Background of the Organization

Coca Cola has been capturing the largest position in the beverage market with the largest distribution system all over the world. This position is allowing the company to serve almost one billion products to the customers worldwide and introducing new flavors as well as promoting other brands. In keeping concentration on the marketing strategy undertaken by Coca Cola, it is seen that the company has been promoting the world famous brands like Fanta, Coke, Diet Coke, and Sprite (Icmrindia.org. 2016). Such of these marketing strategies have been influencing the strengthened customer relationship aspects, which are the keys to get the business opportunities for the company. The establishment of such effective customer relationship is therefore serving as the major driving force for acquiring the customer base. The recognizable competition between Pepsi and Coca Cola has been holding the dominant share of the soft drink market worldwide (Standard.co.uk, 2013). In order to expand the business, the company has been focusing on growing the share market across the United States. In fact, the internationalization strategy is also much commendable for the future growth. The major goal of the company is to increase the market share in the international market. However, it is to be stated that due to the direct competition with Pepsi, Coca Cola has been concentrating on the innovative organizational practices to ensure the sustainability in this market. Therefore, it is seen that the company is getting involved with several unethical business practices that are harmful for the business. Generating more benefits within a short span of time is forcing the managers take several ethical discrepancies that have been broadcasted to the news channels. The study will be specifying some of these ethical dilemmas featured in the managerial practices and accordingly some of the theoretical perspectives will be analyzed. 

 

Ethical Dilemma

Coca Cola is considered as the most valuable beverage brand in the international market. More specifically, the company has captured the significant position among the companies, which are always visible in the news. The company even got the effective opportunity to present their skilful performance in the business market. However, besides achieving such significant position in the business market, Coca Cola has been even facing some of the ethical issues in the recent times (Icmrindia.org. 2016). It has been seen that the leadership changes in last few years is inviting the ethical challenges in a very prominent manner. It is to be seen, the managerial practices involved with the ethical issues like misinterpretation, disrupting long term contract-based agreements, and racial discrimination. It is to be noted that Coca Cola has been in news for quite a long time due to their ethical business practices. Due to such ethical and legal issues the stock price of the company remains the same what it used to be few years back.

One of the most critical ethical issues was found when many of the people fell ill after drinking Coke and other soft drinks of Coca Cola. The incident caused the huge loss of the company reputation and people lost the respect for the company. Many of the investors started selling their stocks in Coca Cola. The issue became hazardous when the managers remained unresponsive towards the questions of the media (Icmrindia.org. 2016). However, when they completed the entire research and found the root cause of such problem, they decided to announce it publically. However, the time was too late to be broadcasted, as media found it too slow to make any story about Coca Cola. Even though the company is much focused on maintaining the corporate social responsibilities as well as the ethical concerns, the incidents created the negative impact on the organizational reputation (DiStaso & Bortree, 2014). Unresponsiveness is one of the major mistakes that the managers would commit to maintain their reputation. It may create the reverse effects in the situational crisis. However, after such situation, the managerial practices of Coca Cola got involved with another unethical concern (Standard.co.uk, 2013). The agreement signed with the European countries was actually based on the anti-trust laws, which affected the management in a very significant manner. The overaggressive attitude towards dealing with the French company was the major issue for the company (Strandvik et al. 2013). Moreover, the foreign countries did not appreciate their strong-arm tactics, which crossed the limits of discrepancies for achieving the competitive advantage. The legal case against Coca Cola was presented to the court and the company even proved to be the looser in this case. Apart from these unethical issues, some of the allegations regarding the racial discrimination, falsified market tests, inflated earnings, and distributors were put against Coca Cola.

Theoretical Perspective of Managerial Ethics

According to Hair Jr et al. (2015), the ethical concern is an area that helps the business companies to grow and is considered as the science of human concerns. The managers of the company have to maintain the responsibility to educate the employees these business ethics that is necessary for the business sustainability. On the other hand, Cavusgil et al. (2014) argued that some of the managerial practices may create the hazardous scenario for the company, which affect the sustainability management. However, in considering the theoretical perspectives, the managerial ethics are divided into different classifications. Some of these categories are Utilitarian theory, Principle of Rights, ethics of care, and Aristotle’s Virtue Ethics. In this section of the study, the description of these theories would be analyzed.

Utilitarian Theory: According to Black (2015), the utilitarian theory is based on several principles. It is to be noted that the utilitarian theory has been specifying the ethical actions that prove less harm for the individual by considering the good outcomes. The judgments related to this ethical concern, as mentioned in this theory, is always depending on the analysis of the cost benefits. In such cases, the focuses are needed to be on the actions to get the best outcome instead of focusing on the ways of achieving the results. Similarly, the managers of Coca Cola need to concentrate on the organizational activities and the ethical practices by providing the effective products to the customers that are less harmful for their lives.

The utilitarian includes the good or the bad consequences while making any organizational decision. The actions depend either on the after performance or during the performance time (Alon et al. 2013). It is to be indicated that the Utilitarian does not deal with the moral issues. The actions performed during such phase are being judged whether it is right or wrong. Hence, the focus on the dependable consequences is essential during the application of the utilitarian theory. This normative ethics theory is generally maximizing the utility, which is a form of making the individual happy or unhappy (Sheng, 2012). In case of Coca Cola business ethics, it has been seen that the managerial practices are involved with racial discrimination. The internal employees have been facing such scenario, which is affecting their performance attributes. Moreover, the unethical behavior related to their business dealings and the falsified market tests are also going against the utilitarian theory.

Principle of Rights: The Principle of Justice is also termed as Categorical Imperative. In specifying such theory, it can be stated that the ethical actions of the managers are needed to be based on the moral rights that influence the organizational practices. In this area, the right has got the entitlement that intends to protect the interests perceived by others. The managers need to be more conscious about their action before taking it. If the actions are justified and appreciated by the others, it would turn out to be beneficial for the company itself. The aggressive behavior of the managers to achieve the competitive advantage can sometimes is too risky, which may affect the organizational reputation in case of failure.

Ethics of Care:  As opined by Stathopoulou & Balabanis (2014), the principles of ethics of care usually deal with the morally correct actions, which serve care and concerns to the other individuals. The moral obligations of a person are usually focusing on the care they have been receiving from any particular source rather than following the impartial principles. The application of such theory is quite effective for the managers within an organization, as it helps in building the transparent relationships with their stakeholders. In case of Coca Cola, the managers need to be much attentive towards the cares provided to their stakeholders. Especially, in time of the situational crises, the managers are needed to be responsive to manage the reputation of the company (Jones & Felps, 2013). More specifically, both the internal and external stakeholders thus get the assurance from the managers, which make them feel secure to deal with this company in future.

Virtue Ethics: The specification of virtue ethics is including different approaches, which have been making the theory much confusing to understand. The very first approach to ethics is considering the theoretical orientation, which is pointing out the dispositional characteristics or attributes (Van Hooft, 2014). These traits are praiseworthy in general and perform the particular role. Furthermore, the formulation of virtue ethics is stated as “a systematic formulation of the traits of character that make human behavior praiseworthy or blameworthy” (Winter, 2013). It generally means, if any character trait can be beneficial for an individual, it will be appreciated and similarly, if it is harmful for others, it will be blamed. However, the second approach to virtue ethics is highlighting the virtuous significance as well as the “practical wisdom”. According to Donnelly (2013), ‘practical wisdom’ generally refers to describe one’s capability of selecting the patterns of desirable actions. The patterns usually have been concentrating on the engaged habits of emotional experiences or virtues. However, such of these patterns of actions are also analyzing the in-depth experiences in the social life. Hence, it is important for the business companies to keep the concentration on the moral values in order to maintain the corporate social responsibilities.

Theory of Moral Behavior: In discussing the theoretical perspectives based on the business ethics, the development theory of moral behavior is also very much significant. The famous psychologist Lawrence Kohlberg developed the Jean Piaget’s theory of moral reasoning. As per this theory specification, it is to be indicated that the morality starts from the childhood times and this can be affected by diversified reasons. Barnes et al. (2015) suggested that morality can be developed in both positive and negative ways. Mostly it depends on the individual who can use several ways to accomplish the goals during the moral development of his life (Opp, 2013). However, while elaborating the theory of moral development, it can be stated that the theory suggests of diversified levels or stages. The first level is dealing with the pre-conventional morality, which have been focusing on different stages. The second level is dealing with conventional morality, which includes two different stages, such as interpersonal relationship phases and law and order orientation phases. The third level is dealing with the post-conventional morality, which includes the social contract orientation and universal ethical principle orientation. These stages are explained further:

Stage 1: Punishment- Obedience Orientation: This particular stage is concerned with the punishments provided to people after refraining from their performance (Jayawickreme et al. 2014). People in this stage start obeying the rules since they know if the rules are not being followed, they can be penalized.

Stage 2: Instrumental Relativist Orientation: In this particular stage, the judge of morality is based on the actions, which have been satisfying the needs of the people. The theory of Kohlberg is considering such actions engaged with the moral rights due to the serious needs of the order. 

Stage 3: Interpersonal Relationship Phases: In this particular stage, the action is judged in keeping focus on the societal roles (Grappi et al. 2013). The interpersonal relationship has been highlighted in this particular stage, which has the significant impact on people from the very childhood.

Stage 4: Law and Order Orientation: This particular stage is conveying respect to the authority by following rules, norms, and responsibilities. In this particular stage, the major concern is society. The focus on the responsibilities towards the society is the most required criteria in such aspect.

Stage 5: Social Contract Orientation: The stage has been dealing with the particular focus on the values and opinions received from diversified people (Hoffman et al. 2014). It is to be noted that this particular decision has to be depended on the morality of actions.

Stage 6: Universal Ethical Principle Orientation: The last and final stage of this particular stage is depended on the universally accepted ethical principles. In some of the cases, the judgment may cause the violations or breaching of laws since the person is much focused on the self-principles of justice.

Stakeholder Theory: The business ethics and the organizational management have been addressing another fruitful theory, which is termed as “stakeholder’s theory”. This particular theory is mainly promoting the moral values, which are essential for managing the organizational practices. As per this theory specification, it has been implied that the organization needs to provide the stakeholders as much value as possible in order to achieve the sustainable business position (Shaw, 2016).  The executives have to be much concentrated on the key stakeholders both internal and external. The framework of the stakeholders’ management is provided further:


Figure 1: Business Stakeholders

It is to be indicated that the stakeholders are the major assets for a company. The influence of the stakeholders ensures the sustainability of the company. The group of stakeholders is divided into two different classifications, such as internal stakeholders and the external stakeholders. The internal stakeholders are the people who are associated with the internal business practices. These internal stakeholders are the investors, employees, and the business partners. The company has to be much concerned about the internal business practices. The help of the internal stakeholders, the business practices will be skilful to provide the recognizable benefits to the external stakeholders (Harrison & Wicks, 2013). The external stakeholders, such as customers, suppliers, media, and government are needed to be satisfied with the skilful business approaches. More specifically, the business ethics should be based on the fulfillment of customers’ requirements. In case of Coca Cola, the allegations are much focused on the unethical business practices that are harmful for both the internal and the external stakeholders (Verbeke & Tung, 2013). Hence, the management of the stakeholders’ approaches is essentially needed for the future existence of the company.

Role of leadership in ethical decision making

It is to be noted that the role of the leadership attributes on the ethical decision making process is much significant. The different typologies of the leadership attributes have been concerning the different types of the decision-making process. For example, the authoritarian leaders assume that their decisions and the way of working are the best practices for facilitating progress in the organizational context. On the other hand, the democratic leaders usually gather the responses form the other associates to make any ethical decisions. In case of the autocratic leaders, it has been seen that the decisions are based on the one consequence, which may even harm the other sectors of the business. Similarly, the suggestions derived from the other associates are based on the different segments of the business practices. Hence, usually it has been seen that the autocratic decisions are mostly involved with diversified ethical dilemmas whereas there is the complete chance of the democratic decision to be fair and fruitful. However, as suggested by (), the major focus should be fixed on the code of conduct in undertaking any relevant decision regarding the business practices. The fixation of the aim at the code of conduct can make any of the decisions fruitful by eliminating the unethical business practices. 

 

Conclusion

The study has been featuring the different allegations against the Coca Cola regarding their unethical behavior in last few years. The issues specifications have been concerning the different moral values that are essential for the business sustainability. The theoretical perspectives have been analyzing the stakeholders’ approaches, utilitarianism, justice forms, and character virtues that have been associated with the business practices. It is to be noted that the maintenance of the ethical concerns while dealing with the internal and stakeholders is the major driving force for the long term sustainability of the company. The effects of the managerial leadership attributes are also focusing on the code of conduct, which is necessary for the business companies. The managers of Coca Cola thus need to be focus on such essentials to make the future progress.  

 

References

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Barnes, M., Conradi, E., & Vosman, F. (2015). Deliberation and Transformation from the Ethics of Care. Ethics and Social Welfare, 9(2), 109-112

Black, S. (2015). CEOs and Top Leaders: Solutions to Solve Ethical Dilemmas and Decision Making. In 5th International Conference on Engaged Management Scholarship: Baltimore, Maryland.

Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia.

DiStaso, M. W., & Bortree, D. S. (2014). Ethical practice of social media in public relations. Routledge.

Donnelly, J. (2013). Universal human rights in theory and practice. Cornell University Press.

Grappi, S., Romani, S., & Bagozzi, R. P. (2013). Consumer response to corporate irresponsible behavior: Moral emotions and virtues. Journal of business research, 66(10), 1814-1821.

Hair Jr, J. F., Wolfinbarger, M., Money, A. H., Samouel, P., & Page, M. J. (2015). Essentials of business research methods. Routledge.

Harrison, J. S., & Wicks, A. C. (2013). Stakeholder theory, value, and firm performance. Business ethics quarterly, 23(01), 97-124.

Hoffman, W. M., Frederick, R. E., & Schwartz, M. S. (2014).Business ethics: Readings and cases in corporate morality. John Wiley & Sons.

Icmrindia.org. (2016). Coke: Ethical Issues|Business Ethics|Case Study|Case Studies. 

Jayawickreme, E., Meindl, P., Helzer, E. G., Furr, R. M., & Fleeson, W. (2014). Virtuous states and virtuous traits: How the empirical evidence regarding the existance of broad traits saves virtue ethics from the situationist critique. Theory and Research in Education,.

Jones, T. M., & Felps, W. (2013). Stakeholder happiness enhancement: A neo-utilitarian objective for the modern corporation. Business Ethics Quarterly, 23(03), 349-379.

Opp, K. D. (2013). Norms and rationality. Is moral behavior a form of rational action?. Theory and decision, 74(3), 383-409.

Shapiro, J. P., & Stefkovich, J. A. (2016). Ethical leadership and decision making in education: Applying theoretical perspectives to complex dilemmas. Routledge.

Shaw, W. (2016). Business ethics: A textbook with cases. Cengage Learning.

Sheng, C. L. (2012). A new approach to utilitarianism: A unified utilitarian theory and its application to distributive justice (Vol. 5). Springer Science & Business Media.

Standard.co.uk, (2013). Mars, Coca-Cola and other big brands 'failing ethical standards'.

Stathopoulou, A., & Balabanis, G. (2014). Extended theory of planned behaviour in service relationships: hedonic and utilitarian services. In 2014 Global Marketing Conference at Singapore (pp. 2036-2037).

Strandvik, T., Rindell, A., & Wilén, K. (2013). Ethical consumers' brand avoidance. Journal of Product & Brand Management, 22(7), 484-490.

Van Auken, S. (2016). Assessing the role of business faculty values and background in the recognition of an ethical dilemma. Journal of Education for Business, 91(4), 211-218.

Van Hooft, S. (2014). Understanding virtue ethics. Routledge

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