BUILDING CASE “COCACOLA”
BUSINESS ETHICS
BILINGUAL CLASS
MID TEST - BUILDING CASE
“COCACOLA”
BASED ON CHAPTER 6
BY :
FELICIA MONIKA
1511011032
S1 MANAGEMENT
ECONOMICS AND BUSINESS FACULTY
UNIVERSITY OF LAMPUNG
2016/2017
ARTICLE
Coke products
recalled
LONDON (CNNfn) - A new health scare
confronted Europe Tuesday as several countries withdrew soft drinks made by
Coca-Cola Co. from store shelves just a day after the Belgium government
ordered a recall of the beverage giant's products.
Luxembourg and the Netherlands imposed blanket recalls on Coke products Tuesdays as officials at the company scrambled to isolate the source of a tainted batch of beverages believed responsible for the sudden illness of dozens of schoolchildren in Belgium.
The Belgian unit of the U.S.-based beverage giant recalled 2.5 million bottles of Coke (KO) last week after about 30 children became ill after drinking it. Altogether, more than 100 children have reportedly fallen ill with headaches, nausea and shivering symptoms after drinking Coke products.
Coca-Cola Belgium said last week it had withdrawn the 20-centiliter glass bottles in response to consumer complaints of an "off taste." The company said a subsequent analysis by an independent laboratory turned up no harmful substances.
A Coke official professed bewilderment Tuesday at the cause of the illness, though the company stressed it would comply with the order to withdraw its products.
"We are searching frantically and hope to have a definitive answer in the next few days," Maureen O'Sullivan, a Coke spokeswoman in Brussels, was quoted as telling the local VRT radio station.
O'Sullivan confirmed that Coke was complying with a Belgian government order to withdraw the company's products -- including the flagship Coke brands, Diet Coke, Fanta, Sprite and Nestea -- from store shelves.
In Luxembourg, sales of Coke products such as Minute Maid, Cherry Coke, Fanta and Sprite were banned. In France, meanwhile, a suspect batch of Coke products from a factory in Dunkirk was recalled, though sales of Coke products elsewhere were not believed to be affected.
German and Spanish health authorities played down the scare by insisting they do not import Coke products from Belgium. In the U.K., a Coke official maintained the company's products were made with ingredients from local suppliers.
The spate of recalls comes as Europe grapples with the fallout from a contaminated-feed scare, originating in Belgium, that affected large stocks of chicken, beef, eggs and pork. The incident forced two Belgian ministers to resign in disgrace amid allegations that they withheld information about the contamination from the public. The scandal has also sparked a stand-off with the European Commission, which accused the Belgians of failing to fully purge their markets of contaminated food.
Belgium's Health Ministry ordered a ban Monday on the sale of all Coke products after children at six Belgian schools developed headaches and nausea after drinking the company's beverages.
The ministry also advised citizens not to drink Coca-Cola products until the tainted source had been tracked definitively.
A European Union spokesman said the impact of the tainting appeared to be limited to a few countries. Belgium's health ministry said a toxicology test traced hemolysis, a blood disorder, in those who had ingested the suspect batch of Coke products.
Coke's withdrawal also seemed to be affecting sales of Nestle's Nestea soft drinks, which are bottled and distributed by Coca-Cola.
A Nestle spokesman told Reuters it was too early to tell how seriously the Coke recall in Belgium would affect company sales.
The latest series of food scares are the worst in Europe since Britain's "mad cow" beef scandal three years ago. The episode led to a blanket ban on British beef exports -- since lifted -- to other European Union member states.
--from staff and wire reports
Luxembourg and the Netherlands imposed blanket recalls on Coke products Tuesdays as officials at the company scrambled to isolate the source of a tainted batch of beverages believed responsible for the sudden illness of dozens of schoolchildren in Belgium.
The Belgian unit of the U.S.-based beverage giant recalled 2.5 million bottles of Coke (KO) last week after about 30 children became ill after drinking it. Altogether, more than 100 children have reportedly fallen ill with headaches, nausea and shivering symptoms after drinking Coke products.
Coca-Cola Belgium said last week it had withdrawn the 20-centiliter glass bottles in response to consumer complaints of an "off taste." The company said a subsequent analysis by an independent laboratory turned up no harmful substances.
A Coke official professed bewilderment Tuesday at the cause of the illness, though the company stressed it would comply with the order to withdraw its products.
"We are searching frantically and hope to have a definitive answer in the next few days," Maureen O'Sullivan, a Coke spokeswoman in Brussels, was quoted as telling the local VRT radio station.
O'Sullivan confirmed that Coke was complying with a Belgian government order to withdraw the company's products -- including the flagship Coke brands, Diet Coke, Fanta, Sprite and Nestea -- from store shelves.
In Luxembourg, sales of Coke products such as Minute Maid, Cherry Coke, Fanta and Sprite were banned. In France, meanwhile, a suspect batch of Coke products from a factory in Dunkirk was recalled, though sales of Coke products elsewhere were not believed to be affected.
German and Spanish health authorities played down the scare by insisting they do not import Coke products from Belgium. In the U.K., a Coke official maintained the company's products were made with ingredients from local suppliers.
The spate of recalls comes as Europe grapples with the fallout from a contaminated-feed scare, originating in Belgium, that affected large stocks of chicken, beef, eggs and pork. The incident forced two Belgian ministers to resign in disgrace amid allegations that they withheld information about the contamination from the public. The scandal has also sparked a stand-off with the European Commission, which accused the Belgians of failing to fully purge their markets of contaminated food.
Belgium's Health Ministry ordered a ban Monday on the sale of all Coke products after children at six Belgian schools developed headaches and nausea after drinking the company's beverages.
The ministry also advised citizens not to drink Coca-Cola products until the tainted source had been tracked definitively.
A European Union spokesman said the impact of the tainting appeared to be limited to a few countries. Belgium's health ministry said a toxicology test traced hemolysis, a blood disorder, in those who had ingested the suspect batch of Coke products.
Coke's withdrawal also seemed to be affecting sales of Nestle's Nestea soft drinks, which are bottled and distributed by Coca-Cola.
A Nestle spokesman told Reuters it was too early to tell how seriously the Coke recall in Belgium would affect company sales.
The latest series of food scares are the worst in Europe since Britain's "mad cow" beef scandal three years ago. The episode led to a blanket ban on British beef exports -- since lifted -- to other European Union member states.
--from staff and wire reports
ANALYSIS
COMPANY
PROFILE
The
Coca-Cola Company,
which is headquartered in Atlanta, Georgia, but incorporated in Wilmington,
Delaware, is an American multinational beverage
corporation, and
manufacturer, retailer, and marketer of nonalcoholic beverage concentrates and syrups.
The
company is best known for its flagship product Coca-Cola, invented in 1886 by pharmacist John Stith Pemberton in Columbus, Georgia. The Coca-Cola formula and brand were
bought in 1889 by Asa Griggs
Candler (December 30,
1851 – March 12, 1929), who incorporated The Coca-Cola Company in 1892.
The
company has operated a franchised distribution system since 1889,
wherein The Coca-Cola Company only produces syrup concentrate, which is then
sold to various bottlers throughout the world who hold
exclusive territories. The Coca-Cola Company owns its anchor bottler in North America, Coca-Cola Refreshments.
The
company's stock is listed on the NYSE (NYSE: KO) and is part of DJIA, the S&P 500 index, the Russell
1000 Index, and the
Russell 1000 Growth Stock Index. As of 2015, its chairman and its CEO is Muhtar Kent. In December 2016, it was announced
that James
Quincey, the chief
operating officer would replace Kent as CEO.[5][6]
Coca-Cola
Company is the world's leading manufacturer of soft drinks and syrup
concentrates that introduce consumers to one of the most popular soft drinks in
the world. At that time CCC has distributed over 230 other brands of CCC
trademark bearings sold worldwide. In addition, CCC provides advertising and
other promotional support for Coca-Cola brands. Meanwhile Coca-Cola Enterprises
(CCE), is the world's largest manufacturer and distributor of CCC
Trademark
Bearings products, including bottle making, syrup, and manufacturing and
distributing product. Europe is an important market for CCC and CCE with around
23 per cent of worldwide sales coming there. CCE is licensed solely in Belgium,
the United Kingdom, Luxembourg, the Netherlands, and most of France.
PRODUCT PROFILE
Coca-Cola
is a carbonated soft drink product sold in stores, restaurants and vending
machines in over 200 countries, including Belgium. The profile of the product
that in the crisis of 1999 in Belgium is prohibited to circulate among others
are as follows:
a) Coca-Cola Light, a sugar-free soft
drink commonly known as Diet Coke
b) Fanta, ie Coca-Cola soft drinks from
fruit carbonation
c) Sprite, a caffeine-free soft drink
with lemon flavor
d) Nestea, Nestle's Nestle tea beverage
which is a joint venture with Coca-Cola Company
e) Aquarius Lemon, sports drink
f) Bon Aqua, a grape flavored sports
drink
g) Kinley, a carbonated beverage with
many flavors such as apples, sodas, lemons, vanilla, oranges, etc.
h) Lilts, soft drinks are produced in
Europe with fruit flavors such as grapes, pineapple and bananas.
GENERAL PROBLEMS
When
the Coca-Cola case occurred, Belgium was experiencing a health crisis. Belgians
are still shaken by mad cow disease and from the news that carcinogens, dioxins
have been introduced accidentally into animal feed. Newsletters say that
carcinogens and dioxins are the cause of cancer of dioxins that direct the
attractiveness of certain meats and eggs from the super market.
Then,
from the same crisis, Coca-Cola emerged from the taste and smell in the
packaged soft drinks and by reports that more than 100 consumers had become ill
after seeing an odor outside of a soft drink can. As a result, Coca - Cola
Company, under the instructions of the Belgian Ministry of Health, pulled
products from the Belgian market. The impact of this crisis is felt not only in
Europe, but also in such distant countries as Japan and India.
This time is a soft drink which is a cause for
concern. On June 14, 1999, in a move that cost more than $ 200 million in lost
fees and profits and caused damage to the brand image of the product
trade-marked from The Coca-Cola. The Belgian health ministry ordered that coca cola
products be withdrawn from the market and warned Belgium not to drink any trade
of their Coca-Cola-marked products in their homes.
Then,
France, Luxembourg and the Netherlands are also prohibited or restricted sales
of Coca-Cola products. This incident resulted in substantial finances. Charges
for The Coca - Cola Company and sufficient damage to its image and global
reputation.
CCC,
with headquarters in Atlanta, Georgia, USA, is the world's leading manufacturer
of soft drinks and syrup concentrates that introduce consumers to one of the
world's most popular soft drinks. At that time CCC has distributed over 230
other brands of CCC trademark bearings sold throughout the world.
In
addition, CCC provides advertising and other promotions support for the
Coca-Cola brand. While Coca-Cola Enterprises (CCE) is the world's largest
producer and distributor of CCC Trademark Bearings products, including bottle
making, syrup, and manufacturing and distributing products. Europe is an
important market for CCC and CCE with around 23 per cent of worldwide sales
coming there. CCE is licensed solely in Belgium, the United Kingdom,
Luxembourg, The Netherlands, and most of France.
THE
RECALL
On
June 13, 1999, the US-based Coca-Cola Company (Coca-Cola), the
world’s largest carbonated beverages company, recalled over 15 million
containers of the soft drink after the Belgian Health Ministry announced a ban
on Coca-Cola’s drinks, which were suspected of making over 100 school children
ill in the preceding six days.
This
was in addition to the 2.5 million bottles already recalled in the previous
week. The company’s products namely Coke, Diet Coke and Fanta, were bottled
in Antwerp, Ghent and Wilrijk, Belgium, while some batches of Coke, Diet Coke,
Fanta and Sprite were produced in Dunkirk, France.
Children
at six schools in Belgium had complained of headache, nausea, vomiting and
shivering after drinking Coca-Cola’s beverages, leading to their
hospitalisation. Most of them reported an ‘unusual odour’ and an ‘off-taste’ in
the drink.
In a
statement to Reuters, Marc Pattin, a spokesman for the Belgian Health Ministry,
described the seriousness of the issue, “Another 44 children have become ill
with stomach pains, 42 of them at a school in Lochristi, near Ghent, northwest
Belgium.
We
have had five or six cases of poisoning of young people who had stomach pain
after drinking (the suspect beverages).”
The
same week, the governments of France, Netherlands and Luxembourg also banned
Coca-Cola’s products while the company’s Dutch arm recalled all products that
had come from its Belgium plant.
The entire episode left more than 240 Belgians and French, mostly school
children, ill after drinking Coke produced at Antwerp and Dunkirk. The company
had to assure its British customers that the products made in its UK factories
were safe.
REASON FOR RECALL
According
to Coca-Cola's Chief and CEO, Doug Invester issued on June 16, 1999 that
Coca-Cola Company in cooperation with Belgian health minister, withdraws its
products from the Belgian Store because:
1.
Unusual
coca-cola flavors such as those produced by coca-cola and the smell of bottled
beverages
2.
Over
100 consumers (students in 6 schools) get sick after reporting an unpleasant
odor from outside the Coca-Cola bottle
Symptoms
of the disease are headache, abdominal pain, chills and nausea, and severe
enough to cause students to be hospitalized. The recycled products are
Coca-Cola, Coca-Cola light (Fruit, European version for diet), Fanta, Sprite,
Nestea, Aquarius lemon, orange and wine, Bon Aqua, Kinley tonic and Lilt. There
are about 15 million bottles and cans that are recalled.
A
week after that, Ivester said that:
"The highest priority of Coca-Cola Company is product quality. For 113 years our success has been based on consumer confidence by having that quality. I want to convince consumers, customers and government officials in Europe that The Coca-Cola Company takes all necessary steps to ensure that all our products meet the highest quality standards.
"The highest priority of Coca-Cola Company is product quality. For 113 years our success has been based on consumer confidence by having that quality. I want to convince consumers, customers and government officials in Europe that The Coca-Cola Company takes all necessary steps to ensure that all our products meet the highest quality standards.
Nothing
less so acceptable to us and we will not stop until we make sure that this work
is done. We are deeply sorry for all the problems faced by European consumer in
the last few days. "
At that time, the Company identified two production and distribution issues:
At that time, the Company identified two production and distribution issues:
(1)
''
Off-quality '' carbon dioxide that affects the taste and smell of some bottled
drinks.
(2)
Bad
smell from outside of some canned drinks. The smell is more stinging when the
cans are stored in machine-vending.
On 22 June 1999, the Belgian Minister of Health
froze the CCC trademark product (except for products sold in vending machines,
pending further review) under CCC and CCE conditions using fresh ingredients,
plant-wide cleaning, increased security and some measures.
Ivester Response:
"We appreciate the government's policy to pay more attention to issues related to public health." Nothing is more important than that and we have to work intensively with the ministers again. We apologize for what happened to Belgian society and we will try to increase people's trust again. "
Ivester states that the CCC's Empowerment products
and products should improve the quality of its products and continue to improve
and destroy the smelly products that move in the community. The impact of this
crisis is felt not only in Europe, but also in such distant countries as Japan
and India. As a result of this crisis Coca-Cola had to swallow a loss of $ 200
million and cause damage to the brand image of Coca-Cola products. The recall
had a negative impact on Coca-Cola's overall net profit in the second quarter
of fiscal 1999, down by 21% to $ 942 million (icmrindia.org:2014).
Belgian health ministry for Coca-Cola products to
withdraw from the market and penetrate no products at any time-their Coca-Cola
products in their homes. Then, France, Luxembourg and the Netherlands also
started sales of Coca-Cola's sales of products. This incident applies
substantial finance. Charges for The Coca - Cola Company and quite damaging to
global image and reputation.
AGGRESSIVE
MARKETING BOLTERS IMAGE
Mid-July, Ivester and CFO Coca-Cola, James Chestnut met with 100 analysts to renew their business, crisis, and world economic conditions. Ivester reports that the CCC must be aggressive in marketing campaigns in Europe to gain consumer confidence again. Promotions such as "The Coca-Cola Beach Party" with California beach music, dancing, and 20 tons of "imported" sand: "Belgium's annual Coca-cola summer tour" in more than 90 locations in Europe and other campaigns.
Mass Hysteria?
Nearly four months after all the restrictions on distribution and sale of the CCC brand were stopped, four students in Tienen, Belgium were rushed to a local hospital and complained that they had consumed Coca-Cola products. Tests conducted on bottling products in Belgium and the United Kingdom say that the consumed coca - cola products are normal and of high quality. No action is taken against the CCC or CCE by the Ministry of Health.
Five months later and nine months after the real
case, Isy Pelc, head of the psychiatry and psychological medicine service at
Brugmann Hospital in Belgium stated that the cause of the student / childhood
illness was caused by a psychosomatic reaction caused by the unpleasant odor of
Coca -Cola consumed it. His research was based on 110 students who were said to
be sick after drinking coca - cola products and 40 people who did not become
victims.
Case Notes
Incidents aimed at demonstrating organizational issues and challenges that can threaten the company's short and long-term performance, as well as the implications of strategic decisions made by management. CCC and CCE websites provide additional information on finance and press release.
Incidents aimed at demonstrating organizational issues and challenges that can threaten the company's short and long-term performance, as well as the implications of strategic decisions made by management. CCC and CCE websites provide additional information on finance and press release.
Discussion
The crisis management plan should be part of the overall strategic management plan. If the planning process includes a SWOT analysis, which is the company's weaknesses should be identified. In instant communication and media coverage, response time is very important in reducing adverse impact on image / brand name. Contingency planning is very important in facing opportunities and threats to the company.
The crisis management plan should be part of the overall strategic management plan. If the planning process includes a SWOT analysis, which is the company's weaknesses should be identified. In instant communication and media coverage, response time is very important in reducing adverse impact on image / brand name. Contingency planning is very important in facing opportunities and threats to the company.
Moreover, since the case is influential in
different countries and cultures, it is important for companies to develop
response plans for each location and include from local management and public
officials.
For decades, Coca - Cola Company has measurable
management standards and leadership practices in areas such as quality
assurance, product development, manufacturing and distribution, brand
marketing, customer service, relationship stakeholders, and corporate social
responsiveness. So the case of the company in Belgium was a severe blow when
the health crisis erupted in Belgium.
Historically, companies have been skilled enough to
face the challenge of minimizing risk with little or no permanent financial or
financial damage. However, the impact of mad cow disease and the case of dioxin
contamination that has threatened the health and safety of Belgian citizens
raises suspicions of other products.
Therefore, a social approach should be made coca
cola during a management crisis. Response of an unprecedented product recall,
including identifying two very specific products and distribution problems that
seem to cause quality damage, take steps to eliminate problems, and rebuild
communities of trust and confidence.
The problem in this case. The situation is not
whether the Company is able to accomplish this task, but when and how it
actually does it. When the crisis started, the Company executives took several
days to create a top priority issue. The Company does not identify and openly
acknowledge that a manufacturing error has occurred. However, according to some
observers, Coca-Cola stumbles over and over, aggravating the situation.
For example an apology to consumers came more than
a week after the first public report of the disease. It took ten days after a
child became dizzy and nauseous for top executives to arrive in Belgium and
early Coca-Cola response who sought to minimize the number and severity of the
disease.
SOCIAL RESPONSIBILITY FOCUS
Many companies do not realize the importance of
having a connection with the community and to be seen in their eyes as a very
strong ethical company. Coca-Cola has taken up a few different social projects
that have given them a good amount of support from the public. For example,
they have done a philanthropy known as "Education On Wheels," in
which children are placed into a classroom that history is brought to life,
giving them a very rich learning environment.
They do different activities that really get the
children thinking and force them to develop critical thinking methods. This is
a huge thing for Coca-Cola and in our opinion for companies as a whole. The
first thing that you must engage in a customer is their emotions, the strongest
buying point that people act on. If people start recognizing that a company is
doing community based activities for children, they are going to be very prone
and likely to want to support and buy the products from the company.
The second thing that Coca-Cola has done is setup
multiple scholarship funds available for high-school seniors as they make their
way into college and the real world. "In addition to grants, Coca-Cola
provides scholarships to more than 170 colleges, and this number is expected to
grow to 287 over the next four years" (Ricci, 2010). Coca-Cola was very
smart when they went about setting up these different funds for students.
There is a huge market with kids graduating high
school and those who are currently in college, appealing to these kids will grow
a strong interest in their company and will build up their brand image more
than ever. It states in the book that it is beneficial to the shareholders by
doing this. This is so true with every company because shareholders and people
who are invested in the company want to make sure that they are involved in a
company that is making ethical decisions and who are giving back to the
community in some way, shape or form.
As long as Coca-Cola keeps being persistent with
how they give back into the community and monitor what they are doing on an
ethical standpoint, they will keep their customers and stakeholders happy.
SWOT
ANALYSIS
The following SWOT analysis of Coca-Cola Company
poisoning case:
1) Strength
a) Coca-Cola
Company has long been established and trusted by the community as a quality
product.
b) Coca
Cola is a company with a good reputation which has a trustworthy leadership
management
2) Weakness
a) Human
Error as the cause of the case.
b) Product
crisis in a country may affect other countries
c) Belgians
are very sensitive to rumors of product contamination that they consume
3) Opportunities
a) If
Coca-Cola Company is able to solve the crisis well, the Coca-Cola image will
get better.
b) Have
the opportunity to show concern to the consumer.
c) If
crisis management successfully done ccc will have a positive opinion on
business practices
4) Threat
a) Financial
losses
b) Competitors
seize the market
c) Crisis
of trust in Coca-Cola
ETHICAL RECOVERY
Even after all of these problems presents, the customers in
Europe said that they still feel like coke would behave correctly during these
times of crises. Even after all of this they are still ranked third in a
PricewaterhouseCoopers survey of the most respected companies in the world.
Coke then donated $50 million to a foundation to support programs in minority
programs, and hired an ombudsman who reports directly to the CEO in order to
settle the racial discrimination lawsuit shown above.
Coke is taking the initiative to fix their problems and the
international community is seeing that. It seems that since they are taking
these precautions to prevent further problems in the future, the European
nations, in addition to the United States will be more trusting of Coke in
their decisions in the future.
CONCLUSION
Coca-Cola is one of the most successful and
recognized brand in the world. These ethical problems that have been presented
in this paper were not just minor problems for the company, but it seems that
they have been able to keep the Coke name relatively untarnished. Coke today
strives to reduce their ethical issues to a minimum in order to focus on
reaching all around the world.
The issues presented to us were all problems that
could be fixed and while we gave examples of how they could have handled the problem
differently, Coke seems to have handled it in the way that they see fit, and
their name still stands as one of the top companies in the world. A company
this big has to be very careful with what they do in the public eye, one fatal
mistake can be the end of a very successful business.
BIBLIOGRAPHY
https://prpretaporter.wordpress.com/2012/09/07/case-study-coca-colas-belgian-crisis
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