Coca Cola is the largest soft drink manufacturer in the world as well as the most highly rated brand in the globe. In 1977, the company was forced out of the Indian market after the Junta government required the company to reveal its recipe and increase local ownership. By then, the company had been the leading manufacturer of soft drinks in India. It made its reentry in the Indian market in 1993 after the government had liberated the economy. Its re-entry strategy was based on intense marketing campaign and buying locally established soft drink brands. However, its biggest competitor Pepsi had already reentered the Indian market. The company faced a difficult task of winning back its consumers' loyalty, as well as new consumers in a potentially large market of nearlyone billion consumers.
In 2003, an announcement made by a local NGO, CSE, that the company’s soft drinks werefound to contain pesticides at levels thirty six times greater than what the European standards deem acceptable, curtailed its market growth. The company responded by issuing a statement from the region CEO Gupta in which it denied the allegation and termed them as inaccurate. There was a mass hysteria and boycotts of its products to the extent of its products being banned from schools by government officials. The company was, therefore, faced with a market share losses, products’ boycotts and ban imposition. In addition, the company that prided itself on halving one of the highest rated brand was at risk of losing its reputation (Chaturvedi & Chaturvedi, 2008). The crisis also had the potential of reducing its shareholders’ value, not to mention its international reputation. Thus, there was a massive drop in sales and large losses in terms of advertising cost that the company had incurred to win customers in one of potentially large expanding markets. This implies that the crisis had future market loss implication in one of the region the company had earmarked for future market growth.
The media or the fourth estate, as it is commonly referred to, is capable of hugely shaping the opinions of members of the public throughout the world. Media outlets are usually the most trusted source of information by the public, regardless of how true their stories are, and such that shape public opinions. The CSE chooses to release their damaging reports through the media creating a sensational story with enormous public interest. Such a report, therefore, coming from a reputable NGO and appearing in the media outlets was easily believed by the public causing the population to panic and boycott the company’s product (Hamilton, 2008). Media outlets have been known to be in pursuit of sensationalizing stories throughout the world. The constant appearance of a sensational story in the public domain through headlines and debates in media forums has the potential of damaging reputations. This is especially true when the finer details are normally not the point of focus. The public can, therefore, consume mostly sensational parts and believe what they hear without looking into all the details. In this case, this is exactly what happened to Coca Cola. What the majority of the Indian population and the rest of the world heard, is that a major foreign multinational company was poisoning the Indian population.
The amounts of pesticides in pesticide-laced soft drinks mattered only to the experts, and not the general public. The hysteria, mass boycotts and bans that followed after the report became public, is a true testimony of the power that media outlets wield in the world today. Companies, therefore, need to cultivate close relationships with media outlets, and when such reports appearthey should immediately address the issues. This should be done by providing factual information to dispel rumors or sensational reports, so that they can easily be trusted by the media, and win public trust in times of crisis.
Government rule and regulation are put in place to govern the conduct of the entire society. When the set rules and regulation are strictly followed, the interests of both the public and businesses are protected. The Indian government had no legislation governing the amounts of pesticide permissible in soft drinks. When releasing their report, CSE recognized this factor and based their reports on the amounts that are permissible in the European and American markets. It can be argued that lack of such standards created a vacuum that CSE was able to exploit. If there had been regulations stipulating the required standards, the case would have been a straightforward issue. However, without stipulated standards the whole issue was open to debate from all angles or more appropriately different perspectives. In that the question would have been whether the companies had met the required standards (Maureen, 2000). Without set standards, CSE could base their reports on any standard they saw fit ignoring other mitigating factors and leaving the soft drinks manufactures without straightforward defenses, just as it happened in this case. Had there been set laws governing the issue, CSE would have been legally required to show that the laws were violated before publishing their report.
Therefore, lack of laws governing the amount of permissible pesticides in soft drinks in India led to the crisis. It also left the soft manufacturers exposed to potentially damaging reports. If the problem is that there is a high concentration of pesticides in the county’s underground sources, stakeholders could easily be brought into action. This is by ensuring that the laws requiring a certain level to be exceeded corporations are not violated by the private enterprises or government agencies. In other words, tis would empower all the stakeholders to be in a position to petition the government to put in place rectifying measures for the good of the society.
When they heard about the CSE report, Coke India CEO did not immediately respond, and when they did, it was through a joint statement with the other soft drink manufacturers. This is a clear indication that he was completely unprepared. The CEO’s are usually the public faces of their corporation and, therefore, the public assumes that their stand represents that of their corporation. By failing to respond immediately, Coke India CEO gave the impression that he was not sure that the amount of pesticides present in their soft drinks. Although it is true that the Indian government has no set limits, there are international standards. One would assume that at least the CEO should have been aware of their levels, unlike the rest of the world. Coca Cola is well now due to its effective advertising campaigns (Chaturvedi & Chaturvedi, 2008). Indeed, in India their advertisement campaigns have easily won awards. Their campaigns are usually pricy, straightforward and direct to the point, yet, in this case, they failed to exploit the same strategies they employ in their advertising campaign.
By failing to quickly respond to the allegations laid by CSE, they were indirectly informing the media that they were not aware of what CSE was talking about. It does not matter how truthful the CSE statement was, but for such a corporation with highly experienced employees it should have occurred to them that this would send a wrong message or doubts to the public. Being completely unprepared or appearing to be unaware that such a crisis was brewing can be perceived to be an admission of guilt to the unforgiving public. Their initial response to the crisis can, therefore, be argued to have sealed their fate. Any other response through statements and facts only appeared as a face-saving strategy of a guilty corporation.
Prior to the CSE report crisis, Coke India enjoyed a solid reputation. Before the crisis, Coke India had remarkably strong corporate identity and image. Their aggressive advertising campaign strategies and communication strategies were largely responsible for this solid reputation. This also included the enormous market share the company enjoyed in the Indian soft drink market. The company’s advertisements campaigns had also resonated well with the country’s population through a differentiated campaign strategy which segmented the market into a varied consumption spectrum. The company was also heavily involved in community activities as part of their corporate social responsibility that involved different stakeholders (Maureen, 2000). This means that most of the company’s communication strategies were already well laid out even before their crisis. Their response to the crisis, however, did not win the public’s confidence for a number of reasons. They include a defensive stand against the company’s accuser.
In most parts of the world, populations are keen to believe the media more easily than any defense that a multinational corporation would mount. This is because the largest part of the population is comprised of the poor. Companies that make billions in profits are, therefore, perceived with a lot of skepticism, whereon matter what the truth is. They should, therefore, have responded by demonstrating their quality testing through the media to allay the public fears. This would have been beneficial to the poor majorities who have little or no understanding of technical issues. The technological savvy segment of the population statements indicating their quality assurance standards and the legal requirements that have been met can easily convince this segment of the company’s compliance. Both these groups trust the media outlets more than the corporations or their government (Maureen, 2000). This implies, therefore, that the large part of their strategy should have been assuring the media through tours and demonstrating the way they carry out their test.
Coca Cola failed in its response to the CSE report’s crisis. Part of their marketing strategy in India was largely based on a strong corporate responsibility reputation, and through this strategy they had earned the trust of the Indian society. When CSE released their report accusing them of selling potentially harmful products, this report was, therefore, a direct attack on their social responsibility to the Indian population. In simpler terms, an attack on their reputation, so the company should have a well-laid down strategy to protect its reputation. An attack on their products means that their quality is in question (Hamilton, 2008). Their first response should be, therefore, factual details on their quality assurance. This is not the first time that the company had it product quality assurance called into question.
There was a similar case in Belgium, meaning that the company should have been aware of such a potential occurrence. Thus, the first thing they should have in place is a strategy covering most of the likely damaging scenarios involving their products, especially since they produce consumption products. In the past, the company has involved communities, NGO’s governmental agencies and other stakeholders in their corporate social responsibility programs. In order to better handle such a crisis, the company should continue to strengthen its relationships with these stakeholders, and involve them in the quality assurance programs of their products. In addition, they should ensure that there is a mechanism in place to involve their employees in crisis management issues by continuously updating them on the progress. Most of their employees are drawn from the local communities. The company’s employees are capable of reassuring their neighbors, relatives and other general public members that they are in contact with on the quality of their products. Such a unique public winning opportunity should, therefore, not be overlooked.
The company’s website provides a lot of information, such as their financial statements, FAQ’s, policy and mission statements, their corporate responsibility activities and contact details among other revealing details (Coca Cola Company). This sort of transparency is capable of fostering close relations with a skeptical public. However, the website is for the entire organization and they should have a similar one for their Indian market. Corporate websites are primarily for investors and potential investors, and should, therefore, contain information that is meant to attract and retain their investors and other stakeholders rather than provide information on an unpredictable crisis. Therefore, when issues regarding a corporation appear in the public domain, a company’s website is not the first place that the public comes to searching for information. It should, therefore, be noted that a website alone cannot be used to help manage a crisis when it occurs. Instead of the general quality statements and product certification details, there should be information on how their products are made and quality testing procedures. .
The website today or in the future in its current state would do little to prevent a crisis such as the one they faced. This is not to say that their website is not effective, it is the first stop that anyone would go to if they needed some information about the company. However, in terms of crisis management when the reputation of the entire organization is called into question, it is possibly the last place members would go for reassurances.
According to Argenti, there are corporate communication steps to manage a crisis. These steps include corporate advertising, media relations, employee relations, government relations, identify and image communication, financial communication, community relation and crisis communication. Before the crisis, Coke India had remarkably clear identity and image communication strategies that can be attested to by the gigantic market share the company commanded in India. The company’s advertising campaigns had also resonated well with the country’s population through their differentiated campaign strategies which segmented the market into both ends of the consumption spectrum (Vedwan, 2007). The company was also heavily involved in community activities as part of their corporate social responsibility that involved different stakeholders. This means that most of Argenti corporate communication steps were already well laid out even before their crisis. They responded by issuing a statement together with the other accused companies advertised in media outlets to deny the CSE reports and remind the population of their image and solid reputation.
The Indian government responded by forming a committee to look into the issue. This implies that the government did not believe the allegations and wanted an independent review of CSE findings. The only problem that the company seemed to have run into was with the media and its crisis response communication. The company’s CEO had responded by attacking the credibility of the NGO. The strategy did not seem to have worked as it took a long time to reassure the hysterical public. The public was keen to believe the sensational media reports and a reputable NGO over a perceived foreign multinational. Their defensive response only appeared to give the CSE report credibility. The company’s crisis communication strategy was not effective. The resulting panic can be argued to have stemmed from their highly held image which made the public feel betrayed.
NGO activism has in the past few decades been on the rise. However, the strategies employed havechanged from attacking governments to focus on large multinational corporations. Coca Cola is one of the largest multinational corporations in the world. It is, therefore, inevitable that from time to time they will always be a target of NGO activists. In India, the company had earlier faced allegations of safety violation in Kerala region in India to which they successful responded (Vedwan, 2007). In addition, the company, which has plants in every corner of the globe, has had product safety issues in other parts of the world. Given its past experiences, they are likely from time to time to face accusations and other challenges. In India, the government had no set standards regarding permissible amount of pesticides in soft drinks, yet the country’s underground water is believed to have higher levels of pesticides compared to European and other developed countries. It was a matter of time, therefore, for scientists to conduct such tests and issue a report of their findings, as the CSE did.
Moreover, the company was not facing these allegations alone. Based on the policy gap, and the company’s experiences with product safety issue, it was, therefore, unavoidable that the question would arise one day. The media today are also known to aggressively peruse stories that are bound to capture global attention. The CSE report presented such an opportunity. Given that multinational corporations are often an easy target due to the billions of dollars they make in profits, the crisis was inevitable. The company should, through their experience in India and other parts of the globe, have a crisis response strategy for their products’ safety issues that may arise.
Related Economics essays
- The Airline Industry
- Globalization Tendencies to Negative Effect on Culture Diversity
- Perfectly and Imperfectly Competitive Markets
- A Case on Opportunity Cost with Budget Constraint
- Cost of Living in Hong Kong
- Social Calculation for Economists
- Accounting Career
- Data Work With Excel
- Persuasive Message and Analysis
- "Flat Tax" Rate