Case Study Analysis of Coke and Pepsi in India
Ongoing issues in the case
Crisis management is the most critical issue faced by the companies as it threatened their survival in the market. It escalates the situation, making it hard for the companies to survive in the market (Muchlinski 420). In this case, the companies were accused of misusing water, which has a spiritual meaning to the community. Coke’s request to expand its operations in the country was denied as a result of claims that it was misusing water. Pepsi faced issues with water usage where the Indian authorities claimed that it was dishonest with the amount of water it used by using flawed techniques of water balance accounting. Issue management for Pepsi is also similar to Coke as the company loses a lot of market share that reduces its profitability.
The issues relating to global ethics management included the allegations by Indian authorities that the Coke was supplying unsafe fertilizer to the citizens, terming it as inappropriate disposal of toxic waste. For the Pepsi Company, the issue was its lack of concern for the citizens by establishing a plant in a zone where there was scarce water. Concerning stakeholder management, Pepsi Company was required to shut down the plants it set up in zones that had scarce water to ensure that the communities did not lack water. Coke was required to clean up the water it had contaminated with the company`s toxic waste.
Corporate social responsibility of the companies in India
The extent to which the company upholds its corporate social responsibility can be understood better by examining the economic and philanthropic aspects (Jamali and Mirshak 250). Coke Company met its economic responsibilities to the society by providing more than 20,000 job opportunities. (Fraedrich 612). Pepsi on the other hand fulfilled its economic responsibility by contributing to the $12 billion invested in the country (Fraedrich 612). The ethical or philanthropic responsibility of the company was indicated by its concern for human health. Coke invited the public to its plant to prove to them that the products used in the company were fit for their consumption. Pepsi showed its concern for the community by implementing a water project where it harvests rainwater for its activities. It also sponsored other water projects in the community.
Company responsibilities to the country
As multinational companies, Coke and Pepsi were obliged to observe the country’s regulations in economic and social aspects. The companies observed the economic regulations because they did not fail in tax payments but they failed on social responsibilities to the government. By using the country’s scarce water resources, the companies did not consider that they were against the government’s commitment to provide clean water. Coke was accused of unsafe disposal of toxic waste that violated the environmental regulations in the country.
Coke as a bigger target than Pepsi in the conflict
The fact that one of the Pepsi’s senior employees is an Indian did not play part in the case. The company addressed the main issue of water shortage better than Coke. Unlike Coke that resorted to drilling water, Pepsi used rainwater, which reduced its conflicts with the authorities. Coke was also more careless in environmental issues compared to Pepsi as it lacked a proper method of disposing waste.
The issues raised by special interest groups in the companies have the potential to affect its productivity negatively. The complaints of the interest groups to the media have a negative impact on the company’s growth due to the negative publicity. Stakeholder management may work positively to reduce the negative impact of the allegations that the special interest groups may have against the company but this is not the only solution. The most suitable solution is for the companies to form organizations that regulate their activities.
IRC’s recommendations for Coke
The organization required Coke to fulfill some conditions for its smooth operations in the country. Among the requirements was that the company compensates the employees it had laid off as a result of its losses in the country by ensuring that they secure jobs in other companies (Fraedrich 613). Although the IRC was committed to protect the employees in the country, it pressed the company too hard. The company can only compensate the employees if the initial contract has such a provision. The reason that it had to lay off some of the employees is the losses it incurred due to reduced market share. Forcing the company to compensate the employees exposes it to more financial challenges.
Lessons learnt from the case study
It is important for the MNCs to understand the cultural and social factors in a country before starting its operations. The companies were not aware that water was a valuable and scarce resource in the country. This cost them huge financial losses in trying to look for alternative ways to provide water.
The relationship between a company and various stakeholders is crucial to its success. The companies were careful with the image that the stakeholders had about their operations. They invested in some corporate social responsibility initiatives to restore the image.
The failure by companies to meet the corporate social responsibilities may lead to loss of market share. The conditions that Coke was required to fulfill would have been avoided if the company had exercised more corporate social responsibilities.
Fraedrich, John. “Business & Society: Ethics, Sustainability, and Stakeholder Management.” (2011).
Jamali, Dima, and Ramez Mirshak. “Corporate social responsibility (CSR): Theory and practice in a developing country context.” Journal of business ethics 72.3 (2007): 243-262.
Muchlinski, Peter. “Regulating Multinationals: Foreign Investment, Development, and the Balance of Corporate and Home Country Rights and Responsibilities in a Globalizing World.” Unpublished manuscript, School of Oriental and African Studies, University of London (2007).
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