Business Vkontakte (known as VK, equivalent to

 

 

 

 

 

Business Ethics for
negotiation:

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Unhappy New Year for
Coca-Cola

     

 

KUO, Fan Chi (Charlene)

[email protected]

 

 

 

 

IESEG School of
Management

MNG- MSc of
International Business Negotiation

Dr. DE COLLE Simone

Introduction of Coca-Cola

 

The Coca-Cola Company, which is based in
Atlanta, Georgia, is the world’s largest beverage company with almost 500
brands. The brand was founded in late 1800s after John Stith Pemberton invented
the world’s best-known beverage, Coca-Cola or Coke. In 1889, the Coca-Cola
formula and brand was bought Asa Griggs Candler who incorporated The Coca-Cola
Company in 1892 (The Coca-Cola Company, n.d.).

 

Description

 

On December 30th,
2015, Coca-Cola Russia launch an iconic advertising campaign. They use the
typical “coke red” on a holiday greeting message along with a map of the
country dotted with Christmas tree which was posted on Vkontakte (known as VK,
equivalent to Facebook) and tried to represent the harmony based on how coke
brings people together. However, this idea unexpectedly triggered the
controversial geopolitical issues between Ukraine and Russia while Coca-Cola Russia
excluded Ukraine’s Crimean Peninsula (The Guardian, 2016)

 

To give a brief
introduction of the political background, the Crimean status referendum in 2014
will be introduced. In February and March 2014, Crimean and Russian authority
used the internal conflict in Ukraine to deprive the Ukrainian government of
its control over Crimea to hold a referendum and to declare Crimea’s
independence. About 95.5% of voters in Crimea have supported joining Russia (Morris, 2014). Even though it was
a disputed referendum, on the day after the declaration of independence, Russia
officially recognized Crimea as an independent state. The Crimean parliament
then requested Crimea to be admitted to Russia. Within a few days, the
constitutional requirements for an accession of Crimea and Russia were
fulfilled (Marxsen, 2014).

 

An apology along
with the second version of the map that included Crimea and the other two territories
missing in the earlier version were issued on its official VK page on January 5th,
2016. Unfortunately, this move was not the end of the storm. In an opposite
way, it generated a wave of outrage from Ukrainians and a new hashtag for
Coca-Cola was created, #Bancocacla. Ukrainians even called for a boycott of
Coca-Cola (BBC News, 2016). The boycott was
supported amongst some regional politicians. Ukraine’s U.S. Embassy wrote in an
online-statement,” Coca-Cola’s actions violate the official U.S. position
condemning Russia’s illegal occupation of Crimea, which is and has always been
an integral part of Ukraine (Makortoff, 2016).” Afterward,
Coca-Cola Russia removed the post and apologized. The spokesperson for the
company claimed that the map was changed by a hired agency without the
company’s acknowledge or approval and said “We, as a company, do not take
political positions unrelated to our business, and we apologize for the post (Makortoff, 2016).”

 

Stakeholder Map

 

To do a stakeholder mapping, some internal and external stakeholders will
be identified and listed. As Coca-Cola addressed, “We define stakeholders as
people or entities that are directly or indirectly impacted by our operations,
and who in turn also affect our ability to grow our business sustainably (The Coca-Cola Company, n.d.).”

 

Coca Cola identifies their stakeholders as employees,
customers, consumers, suppliers, government, regulatory bodies, communities and
also NGOs, who represent the interests of their stakeholders (The Coca-Cola Company, n.d.).

 

In this case, the stakeholders were identified as employees, customers,
consumers, suppliers, government, communities and regional politicians.

The model of
Stakeholder mapping is:

COC: Coca-Cola
GOV: Government
EMP: Employees
SUP: Suppliers
CUS: Customers
CON: Consumers
REG: Regional Politicians
COM: Communities

: Boycott

: Relations

: Forces of public opinion

: Financial Impact

: Taxes

Government vs.
Coca-Cola:

The financial impact through boycott may lead to a significant decrease
of taxes which might raise the attention of the government

Employees vs.
Coca-Cola:

Along with the financial impact, the force of public
opinion thump the employee morale.

Suppliers vs. Coca-Cola:

While Coca-Cola is
put under microscope, its suppliers may also be examined by the public. The
force of public opinion may bring pressure to them.

Customers/ Consumers vs. Coca-Cola:

Calling for a
boycott was a quasi-social activity. At this point, the relationship between
Coca-Cola and its customer and consumer has already damaged.

Regional Politicians
vs. Coca-Cola:

In this case, one of the Russian regional politicians, Oleg Mikheyev
asked prosecutors to list Coca-Cola company as an “undesirable organizations.”
The classification would make it illegal for Russian citizens and
companies to maintain any contacts with the corporation—or be heavily fined (Swerdloff, 2016). A Ukrainian leading
politician called for a nationwide ban as well. The prosecutor
of Ukraine’s regional government in exile in Crimea even launched a criminal
probe against officials of the Coca-Cola company (Sharkov, 2016).

Communities vs.
Coca-Cola:

As claimed, “we recognize that we cannot have a healthy and growing
business unless the communities we serve are healthy and sustainable (The Coca-Cola Company,
n.d.).”
The relations that has been established between Coca-Cola and the communities
might be damaged through the boycott.

 

Ethical Discussion

 

There are four stages in ethical decision-making: recognize moral issue,
make moral judgement, establish moral intent and engage in moral behavior, and
two factors that influence all stages: individual and situational factors (Crane & Matten, 2016).

 

Moral Framing is an issue-related situational factor. As Coca-Cola’s
spokesperson blamed a marketing agency for using the controversial map which
drew protests and threats of a boycott from angry Ukrainian, people perceived it
as a behavior of shirking responsibility (Reuters, 2016). By a false way of framing, Coca-Cola did not deescalate the tension but
escalate in another opposite way.

 

Another situational
factor is organizational norms and culture. Being a leading giant in the world,
Coca-Cola’s unique selling point is their secret formula, which is
irreplaceable and makes it undefeatable. Even you stop drinking coke today,
there are still tons of oversea customers. This shows how powerful the company
is.

 

National
and cultural characteristic, one of the individual factors, could be seen on
the company’s stakeholders. How does the Coca-Cola company, an American based
company in Russia, survive in Russia? A brief view of comparison of the 6
cultural dimensions between the U.S. and Russia:

In
Russian market, the company should be more prudent in every single detail. Along
with high power distance and high long-term orientation in Russia, the
Coca-Cola company as an American company with a low power distance and low
long-term orientation would need to adapt to the characteristics of Russian
which the company may not be familiar with.

 

As
a leading company in the industry, the Coca-Cola company tends to have a high internal
locus of control. Everything seems to be easily twisted around its fingers.
Being put into the hot water of Crimea issues was unexpected and irreversible.

Corporate Ethics

 

Over the years, Coca-Cola has faced several moral crises. The company has
evolved and changed their perspective. The ethical framework of the company was
ego-centric without any concern of social responsibilities. Currently, the new
ethic framework includes the company’s vision statement, code of ethics,
corporate responsibility, sustainable policies and increased governance. To
ensure the implementation of new ethic framework, the Code of Business Conduct,
Coca-Cola established an Ethics and Compliance Committee (Sewell, n.d.).  

A good code of ethics should contain four functions, moral legitimisation
function, cognitive function, governance & strategic management function
and incentive function (www.qres.it, n.d.).

The Coca-Cola company has its own code of ethics which is recognized as “the
Code of Business Conduct.” In this case, the Code of Business Conduct for
Coca-Cola France, refreshment services and Coca-Cola midi will be referred. It
contains the same guideline as the Code but with slightly modification to adapt
to French law.

It is divided into four parts: acting with integrity around the globe,
integrity in the company, conflicts of interest and integrity with others.
“Integrity” is fundamental to the Coca-Cola company. What does it mean? It
means “doing what is right.” The Code of Business Conduct is the guideline for
the entire company. The Code addresses its responsibilities to the Company, to
employees, to its customers, suppliers, consumers, and government.

There are five questions listed to ask while it comes to a dilemma:

1.     Is it consistent with the Code?

2.     Is it ethical?

3.     Is it legal?

4.     Will it reflect well on me and the company?

5.     Would I want to read about it on the newspaper?

If after questioning yourself, you are still uncertain. The guidance also
tells you who to go and who to talk to: your manager or Department Director, your
Legal or Finance Director, your Local Ethics Officer and the Ethics &
Compliance Office (The Coca-Cola Company,
2008).

 

There are seven criteria to examine whether the Coca-Cola company has an
effective ethics program:

1.     Compliance Standard and Procedure: The Code of Business Conduct

2.     High Level Oversight: The Ethics & Compliance Office

3.     Careful Delegation

4.     Effective Communication: the Coca-Cola company does offer ethical
training to its employees

5.     Monitoring System: Local Ethics Officer

6.     Consistent Discipline: It is required in the Code

7.     Process Modification: According to different countries, the Coca-Cola
company offers different versions of the Code of Business Conduct and even
translates into different languages

(De
Colle, 2017)

 

Issue Analysis

 

It was a right versus wrong situation. Politics is always an issue that
corporates want to avoid since it might create new segments and divide the
customers. By including Crimea in the map in the second move, Coca-Cola Russia
didn’t successfully escape from the crisis. Instead, Coca-Cola Russia
brought themselves into the fresh anger from Ukrainian which led to the
boycott.

 

There are two
options for Coca-Cola Russia, either to remove the map and apologize or to
directly launch a new advertising campaign. A possible and more rational
decision is to remove the map and issue an apology because as a corporate, the
company would not take political position that unrelated to their business as
their spokesperson already claimed. Through the official apology to public,
they might be able to save their image and reputation in Russian and Ukrainian
market. Directly launching a new advertising campaign to get rid of the scandal
is an avoiding behavior which may escalate the tension of the boycott and
worsen the relations between Coca-Cola and their customers.

 

The spokesperson
addressed that the map was changed without company’s approval and acknowledge
but still it was posted by Coca-Cola. This statement would be translated as an
excuse and damaged the company even worse.

Personal View

 

It was not a clever
move to declare the liability by blaming its partner publicly. The Coca-Cola
Company claimed that it was a map without approval and acknowledgment but it
was posted through the Coca-Cola’s official account in Vkontakte. Once it was
posted under the Company’s name, the Company’s should be responsible for it. If
what was posted through the official account was not credible, what should
customers trust?  Social media is
becoming one of the main platforms that companies interact with its customers.
The credibility will directly influence the image and the reputation of the
companies. This is not the first time that the Coca-Cola company is doubted and
challenged.

 

An apology was
necessary at this situation. As a multinational company, it should never take
positions on politics and religion. The latest version of the Code of Business
Conduct was edited in 2008. Although it included much more dimensions than the
earlier version, I would suggest that the Code must be updated at least every
ten years and include the controversial issues that happens to the company. By
updating in accordance with what happens in the real-world, the Code would be
more precise and useful.

 

Removing the map is
not enough to appease Russian and Ukrainian especially with such a delicate
topic that even the political position of the White House was referred, so an
apology is inevitable. However, from the business perspective, to make up the
loss, a new marketing campaign may be a good approach but it could not be done
in a short time. If it is done in a short time, it may ignite people’s anger
again. Time may be the cure for the pain. Wait for a little while and then make
a new move will be smarter for the Coca-Cola Company. And the new move would be
the last chance to save its image, reputation and its relations with its
customers, consumers, suppliers and government.

Bibliography

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