Coke ethical issues the recall

Running head: ETHICAL ISSUES IN BUSINESS REPORT PART 1 – BACKGROUND 1

ETHICAL ISSUES IN BUSINESS REPORT PART 1 - BACKGROUND 2

Ethical Issues in Business Report Part 1 - Background

Tracey Butler

BUS-340

September 11, 2016

Steve Wynne

Ethical Issues in Business Report Part 1 - Background

The summary of information regarding the business and its history

The Coca-Cola Company is the world’s largest American-based manufacturer, marketer and distributor of carbonated beverages. It is headquartered in Atlanta, Georgia and currently sells over 1.5 billion bottled beverage drinks daily in many places around the global. Isdell & Beasley (2012) noted that Coca-Cola Company is known for its flagship brand product, Coca-Cola that was invented by pharmacist John Stith Pemberton in Columbus, Georgia in 1886. Asa Griggs Candler bought the brand and Coca-Cola formula in 1889 and incorporated the Coca-Cola Company in 1892. The company has managed to stay strong against the competition from other beverage manufacturing companies because of its strong global marketing strategy and the secret of the beverage formula that has been kept. Bodden (2009) stated that the beverage formula is only known by few top officials and is passed by word of mouth only and this has come to be known as the most guarded secret in American corporate industry.

According to Lopez (2013) Coca-Cola Company manufactures four of the top 5 soft drinks that are sold around the world. Coca-Cola product is at number one with Diet Coke, Fanta and Sprite at numbers three, four and five respectively. The company operates world’s largest pervasive distribution network, distributing approximately 400 soft drinks products in over 200 countries around the world. The company has registered high and growing profits over years. However, Coca-Cola Company like any other company has had highs and lows in its progress to maintain in market share in the global market of soft drinks and beverages. Ferrell et al. (2010) stated that there are crises that the company has faced along the way that made it to loss sales and drop in revenue in some financial quarters. In the mid of 1999, Coca-Cola company was faced with a crisis in its Belgian market.

The summary of the Coca-Cola Company Crisis in 1999

It was on 8th of June, 1999 when many school children fell ill after consuming Coca-Cola beverages. This made the Belgian Health Ministry to announce a ban of Coca-Cola drinks when it was suspected to have made over 100 school children to be ill in preceding six days. Most of these students complained of headaches, dizziness, nausea and discomfort and a few vomited and were sent home. The management of the school made efforts to investigate what was making their students to fall ill. According to Ferrell et al. (2013), the inquiry was able to reveal that the students had drunk Coke before they began complaining of their illness shortly after. The Coke, product of Coca-Cola Company packed in cases of 20- centiliter bottles had arrived at the school. They were shipped from a Coca-Cola plant that is situated in Antwerp, Belgium. On that day, the plant managers were called and briefed about the case. They came and assessed the situation but failed to take the remaining stock of Coke with them.

According to Mitroff & Silvers (2010), the announcement to ban Coca-Cola drinks made the Coca-Cola company to recall over 15 million containers of soft drinks and before the end of that month the company has recalled over 30 million cans and bottles of soft drinks making it the largest product recall in its history which has lasted for over a century. The sales of Coca-Cola products and brands in Belguim, Europe and also around the world were greatly affected by this news and the company registered a great drop 3rd quarter of 1999 and annually great drop in profits and sales that year (Ferrell et al., 2013).

The stakeholders involved, actions take and the results of the actions

The stakeholders who were involved in this case included the following: the Antwerp plant management, Belgium Health Ministry, the school administration and consumers (which include the students who got ill after drinking Coke). All these stakeholders had a say in this case and they were involved in one way or other in trying to explain the situation and find a solution to it.

The first action taken was from the ministry of Health in Belgium. They quickly responded by banning the sale of Coke in the country. This was after the school management had engaged the distributors and the ministry officials. The plant management responded by recalling over 15 million bottles and started investigations on the cause of change of color and the strange smell in the drinks that called the children to experience physical illness.

There are results that followed the actions that were taken. These include the public announcement of the Coca-Cola about the cause of the change in color of the drinks. They attributed this to “off quality” carbon dioxide which is used as a preservation in the drink. For the strange smell, they attributed this to the vendor machines that they were bought out of. According to Ferrell et al. (2010), the CEO of Coca-Cola also made a public apology for the disappointment caused to its consumers in Belgium. After the ban was lifted, they started campaigns which included the Coca-Cola Beach Party, Coca-Cola Summer Tour, Prize awards and other promotions that were staged around the world in order to attract back the consumers who were now scared of the contamination of Coca-Cola drinks.

The legal and ethical issues surrounding the crisis

There are legal and ethical issues that are attached to this crisis. It is legally wrong to supply substandard or contaminated products to the consumers (Ferrell et al., 2010). There are laws that have been enacted by nations in order to protect the rights of consumers. It was legally wrong for Coca-Cola to supply its products with defects to consumers. It shows that someone was negligent until it lead to the use of “off quality” carbon dioxide as a preservation and the use of vendor machines that cause contamination to the drinks. It was also unethical to supply a product that causes harm to consumers. It actually showed that someone wasn’t concerned about the wellbeing of the consumers. Ethical codes of conducts and ethical business practices should be upheld in every situation in order to avoid cause harm to humanity.

In conclusion, it is important to note that Coca-Cola Company responded to the crisis using an effective crisis communications and it has always had lessons to learn from the crises it has gone through over decades. According to Elmore (2015), this has helped the company to build one of the strongest public relations in the corporate world. Currently, the company communicates well with its employees, consumers and the public to ensure that they deliver quality products at all times. Morley & Palgrave Connect (2002) argued that this strategy has enabled the company to remain a top manufacturer and distributor of soft drinks globally over several decades, with strong product loyalty.

References

Bodden, V. (2009). The story of Coca-Cola. Mankato, MN: Creative Education.

Elmore, B. J. (2015). Citizen Coke: The making of Coca-Cola capitalism.

Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2010). Business ethics: Ethical decision making and cases: 2009 update. Mason, OH: South-Western Cengage Learning.

Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2013). Business ethics: Ethical decision making and cases. Mason, OH: South-Western/Cengage Learning.

Isdell, E. N., & Beasley, D. (2012). Inside Coca-Cola: A CEO's life story of building the world's most popular brand. New York: St. martin's Griffin.

Lopez, D. (2013). Brand development of Coca-Cola company (uk). Place of publication not identified: Grin Verlag.

Mitroff, I. I., & Silvers, A. (2010). Dirty rotten strategies: How we trick ourselves and others into solving the wrong problems precisely. Stanford, Calif: Stanford Business Books.

Morley, M., & Palgrave Connect (Online service). (2002). How to manage your global reputation: A guide to the dynamics of international public relations. Basingstoke: Palgrave.

PROFESSOR’S FEEDBACK:

Thanks so much for your efforts in the week 3 paper where we asked you to research a business that has had an ethical crisis. We asked you to write a background summary report of 1,000 to 1,500 words. Your report should accomplish the following: Summarize relevant information regarding the business and its history. Summarize the crisis. What stakeholders were involved? What actions did they take? What were the results of those actions? Explain the legal and ethical issues surrounding the crisis. Include a minimum of four academic citations. You did some great work on the introduction where you summarized the issue the streak holders and the actions or results of the issue presented. You also identified the basic tenets of Business Law surrounding the crisis and explained whether the company acted within the boundaries of the Law as well as the decision making process in handling the situation when it was discovered. The paper flowed well was well constructed and presented some great analysis. The paper was structurally sound formatted well the citation and referencing was quite good. The submission addressed all of the areas we require and it was well written and persuasive. The analysis was also quite good but could have gone a bit more in-depth on the legal and ethical issues and different ways of resolving them with a more fully developed conclusion with more recommendations so you did lose a few points please see the rubric from more information. Great work overall and if you have any questions on how to improve the analysis please let me know.