Ethical Issues In Global Business Coca Cola Business Essay

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According to (UK Essays, 2010) "Coca-Cola, also known as Coke, has the most valuable brand name in the world and, as one of the most visible companies worldwide, has a tremendous opportunity to excel in all dimensions of business performance" (Ferrell, Fraedrich, & Ferrell, 2008). However, given this case study, Coke has a lot at hand as the biggest brand name in the world. Ethical issues in the various aspects of the company, and with multiple leadership changes in the last decade, Coke has some a lot of work to do. The company has been involved in racial discrimination, misrepresenting market tests, manipulating earning and disrupting long-term contractual arrangements with distributors. The new president of the company, Neville Isdell, is currently working to improve their reputation caused by some of the ethical problems. However, this study intends to look at the impact ethics has had on both the reputation and profit of the organization.

These days the business world has gone global, which has intensified the ethics debate. Building a truly great global business requires business leaders to adopt a global standard of ethical practices. Business ethics is a branch of real ethics that deals with the relationship of what is good and right in business. Global business, on the other hand, consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organizations. These transactions take on various forms, which are often interrelated. A good example is Coca-Cola. This is a carbonated soft drink sell in stores, restaurants, and vending machines and very testy and popular in almost every country.

HISTORICAL BACKGROUND

Coca-Cola is the world's largest beverage company that operates the largest distribution system in the world. This allows them to serve more than 1 billion of its products to customers each day. The marketing strategy of the company is to promote four out of the five top selling soft drinks to earn sales such as Coke, Diet Coke, Fanta and Sprite. This process builds strong customer relationships, which gives the opportunity for these businesses to be identified and satisfied. With that in place, customers will be more willing to help Coca-Cola produce and grow.

According to (UK Essays, 2010), "Pepsi and Coca-Cola, between them, hold the dominant share of the world market" (soft drink market 2008). Even though Coca-Cola produces and sells big across the United States, in order for them to expand and grow, they had to build their global soft drink market by selling to customers internationally. For example, both companies continued to target international markets focusing on traditional soft drinks, new-age drinks and expanding into the snack-food businesses. According to the late Roberto Goizueta, "Coca-Cola used to be an American company with a large international business. Now we are a large international company with a sizable American business" (Ferrell, 2008).

Increasing market share is one of the most vital aims for a business such as Coca-Cola and Pepsi. However, Coca Cola's strategy of achieving goals such as the international mergers, big market shares, snack food production and overall performance allowed them to strive then and continue to succeed today. Today, most of coke sales are spread throughout the world (2004 Annual Report). This means that Coca Cola makes 70% of its profits from other countries. The company must remain vigilant to keep their brand untarnished and their ethical issues to a minimum; their brand is their main key to success.

BUSINESS ETHICS OF COCA-COLA COMPANY

Coca Cola Company has been solving a lot of ethical issues in the past decades. This has led to the slowing down of its business activities and loss of profits due to reduction in market facilities. These issues have affected the company drastically by creating loss of reputation and poor economic performance.

The company has been accused of causing pollution in the environment. Villages in India accused the company of using up local ground water that would lead to water problems in future. The company was ordered to close the facility by the pollution control board of Kerara, India (Pride, Hughes & Kapoor, 2010).

Another ethical issue was found in Belgium where school children became ill after drinking Coca Cola products in 1999. The company considered this as a minor issue which led to withdraw of the company's products from Belgium. The company sold the banned cans to Africa and no harm was reported. The media learned about this act of selling banned cans to Africa and reported it to the public. They considered this act as racial discrimination and they withdrew their shares from the company; thereby losing 50% of its value of shares (Kidd, 2007).

SUMMARY, CONCLUSION, RECOMMENDATION

Coca Cola Company has been experiencing ethical crises due to lack of leadership skills, poor economic performance, lack of corporation by employees and competitive malpractices. The company has been trying to solve these issues by engaging in community development and forming public relations exercise. The company has assured customers of better and quality products and services.

The company cannot become the next Enron because it is managing its crises by trying to regain customer trust and improving on the product and services. The company is still ranked as the best branded company in the world despite the ethical issues that surround it. Its brand image is enough to assist the company through the crisis.

The company should try and regain its reputation by providing quality goods and services. It should assure its stakeholders on presenting true and fair financial status of the company. They should not engage in competitive malpractices that would lower their level of fame. The company should set strict rules and procedures that will guide the actions of executives and employees in order to prevent ethical crisis in future.

TOPIC TWO

INTERNATIONAL FINANCIAL ENVIRONMENT ITS MANAGEMENT: Conclusion

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INTRODUCTION

Globalization, which has brought about the increasing economic integration of goods, services, and financial markets among nations, business firms, and individuals of the world, presents its opportunities and challenges to the stake-holders. Global production and distribution are imperative for the existence of the multinational corporations (MNCs). International Financial Management (IFM) is a well-known term in today's world and it is also known as international finance. It is different in the sense that it involves currency of different countries, different political atmospheres, market imperfection, diversified opportunity sets.

Now the question is; why do we need to study "international" financial management? The answer to this question is very straightforward: We now live in a highly globalized and integrated world economy. Which has resulted into multiple trade relations among countries and hence, the need to know the integral workings of this environment and how it can be strengthened.

EVALUATION

The economic, financial, trade, and communications integration of nations of the world is facilitated by globalization. This process has a significant impact on how the world operates and it's often times driven by the expansion of MNCs which is considered as the most potent and institutions in the world today. According to (Sloman and Sutcliffe, 2000) MNCs are a firm that owns a significant equity share, typically fifty percent or more of another company operating in a foreign country.

They also identified three classifications of MNCs, which are:

Horizontally Integrated Multinational - This involves multinational seeking to produce essentially the same product in different countries (p. 200).

Vertically Integrated Multinational - In this case, the multinational undertakes various stages of production in different countries (p. 200).

Conglomerate Multinational - This type of multinational produces a range of different products in different countries (p. 200).

Reasons behind the emergence of MNCs

Costs Reduction

Growth Strategy

Competitive Advantage

Benefits of Foreign Direct Investment (FDI)

            MNCs provide some form of assets to host countries if the host country can induce them to transfer their advantages in appropriate forms. Some of these benefits are:

1. Capital - FDI brings in investible financial resources to capital scarce countries. 

2. Technology - MNCs usually bring modern technologies into developing countries and raise the efficiency with which technologies are used.

3. Skills and Management - The bringing in of experts and setting up of training facilities by MNCs tend to transfer advanced skills to host countries.

4. Market Access - MNCs can provide access to export markets, both for existing and new activities.

INTERNATIONAL FLOW OF FUNDS

The different transactions arising from international business cause money flows from one country to another. This is why is it pertinent for financial managers of MNCs to monitor the balance of payments (BOPs) so that they can determine how the flow of international transactions is changing over time. The international flow of fund is as a result of international trade flows. This is where countries of the world depend on each other for trade. There are, however, several events that have either reduced or eliminated trade restrictions among countries. Some of whom are the removal of the Berlin wall, single European Act, inception of the Euro, etc. The different agencies that have strengthened the international flow of fund are International Monetary Fund (IMF), World Bank, World Trade Organization, to mention just a few.

International Financial Market

A financial market is a market in which people and entities can trade financial securities, commodities, and other tangible items of value at low transaction costs and at prices that reflect supply and demand (Wikipedia). The different types of IFM are as follows:

Foreign Exchange Market

International Money Market

International Credit Market

International Bond Market

International Stock Market

Going by the different markets available, each performs the specific function it was created for. This is to facilitate the smooth business transactions among stake-holders. Some of the vital roles that the financial markets play are:

The generation of capital (in the capital markets)

The transfer and reduction of risk in business operation (in the derivatives markets)

Price discovery and determination in business operation.

It promotes Global transactions with the integration of financial markets

The transfer of liquidity (in the money markets)

It stimulates International trade (in the currency markets)

EXCHANGE RATE DETERMINATION

The success of MNCs in their operations depend on how effectively they monitor the changes in exchange rate movements in which they have their cash flows dominated in a foreign currency of their interest. Movements in exchange rate are generally influenced by some key economic factors; which are interest rates income levels, inflation rate and government control.

SUMMARY, CONCLUSION, RECOMMENDATION

• Over the years, there has been a systematic effort to facilitate the free flow of goods and services across national boundaries. In spite of some difficulties, integration of the environment economies across nations is progressing and moving forward.

• The process of integration of the world economy has seen emergence of very large size business organization, called MNCs, and a very dynamic international financial market.

• Financial markets with innovative products present opportunities as well as varied risks. This required a very deep understanding of the products and market dynamics.

• Capital as a resource is no longer a monopoly of a nation state bound by geographical borders. It moves around the world. A typical MNC raises capital in several countries.

• An MNC moves its resources (money, technology, raw material and labour) globally to draw maximum advantage.

• Earlier, MNCs were largely US-based. Later on, European and Japanese MNCs also because important players. Now, some MNCs based in developing countries are also emerging.

• Internationalization of a business involves steps like exporting, setting up an international operations department, establishing a marketing subsidiary, entering into licensing agreements and eventually creating facilities, for manufacturing abroad.

• An MNC, while establishing production facility abroad, takes one of the two options: either to create its own affiliate or to acquire a going concern.

• A finance manager of an MNC aims at maximizing shareholder wealth. To be able to do so, he has to make sound financing and investment decisions.

• While taking financing and investment decisions in an MNC, the finance manager faces many challenges/risks apart from those that he may face in a purely domestic firm. These include political risk, exchange rate risk, interest rate risk, different inflation rates, different tax laws and multiple money markets etc.

• International finance manager has to balance the risks and advantages so as to optimize the gains from internationalization of business.

TOPIC THREE

REFLECTIVE REPORT

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Reflective report

What I have learnt from taking Global Business as a module?

I have been able to know, during the course of this module that the increase in competition amongst businesses makes it necessary to take proactive rather than preventive measures in order to have a competitive edge over its competitors. Globalizing markets are reshaping the way organizations are configured and the way that they conduct international business. Global competitiveness has become a major concern for organizations that increasingly need new knowledge and more specialized skills. The course has opened my eyes to be able to develop my knowledge of global business and the main areas involved in business management. This includes understanding the global business environment and the company responses to this; likewise examining the impact of risk on global companies. To also develop an understanding of the operational and strategic issues facing global businesses and the international management skills needed to evaluate global market opportunities. Finally, the module has been able to help me visualize and develop my practical skills in a real world setting, by way of business simulations and invitation of guest speakers.

Presentation exercise

The two presentation exercises were an eye opener for me. Though the process of the selection of each group members was very fair and known to all, but I wished I worked with another group. Being the group leader was a very rigorous experience. My group members were very difficult to work with. That being said, I have been able to now realise that, as a leader, there are so many different types of situations that could land you in a group leader position, it is difficult to give a sure-fire method to success. There are simple steps, however, that can have you prepared to lead a group, and a few exercises that will calm your nerves and better enhance your confidence should you find yourself acting as a group leader. I was able to note that the first step in presenting yourself as a strong group leader is preparedness. You always have to have your notes organized, any presentation materials ready and clearly presented, and any electronics -- such as computers -- set up in advance and ready to be used. Therefore, it is vital that you prepare well; if your group sees that you are not knowledgeable or unprepared, you may lose their attention, or worse -- their respect. It is also very necessary that you involve each member of the group in whatever activity you are facilitating. I also discovered that, you have to talk less as a group leader so as to draw the group members into the conversation and encourage them to express their opinions. To cap it all, you always have to remember that your group will look to you for answers. So you always have to be prepared enough to answer them when they come up. Leading by example is vital to becoming a strong group leader, and your attitudes and actions will reflect in what the rest of your group is doing or saying.

Doing the exercise

As the leader of the group, I was able to successfully co-ordinate the various activities that led to the completion of the presentations. Eventually, effective communication among the members and the zeal to quickly finish the work and move to other courses, led us to the completion of the tasks. However, there were a number of difficulties we encountered at the beginning of the work; this ranges from differences in opinion and the inability to make connections between ideas. This sometimes led to our inability to really focus on the major tasks, some members not contributing as a result of domineering attributes of some of the group members. But finally, I was able to put everything in order by gearing all the weaknesses of the group towards a better use so as to get the work going.

The feedbacks

The first presentation however, did not go well as we thought it would, as the feedback we got made us realise where we had some lapses in our work. The feedback session was very helpful as we were made to understand that actually it would have been nice to provide a greater justification of the topic - in particular why we choose Coca-Cola as our case study. The content of the slides could have been richer and we should have supported our descriptions with examples. The feedback for our second presentation was, however, better than the first one. This was due to our corrected efforts earlier. Only that the presentation was more like a lecture rather than a presentation meant to target a particular research question.

What skills and knowledge do I need to develop in order to be successful?

From the feedbacks I got while doing the presentation exercises I now know that if given the chance to do it again, I would give examples in our presentation of previous works we have done, and abide by the different corrections given so as to show that we are capable of doing a better work. As for my presentation skills, I have been able to reduce using notes while I present; which has made me to be a little more comfortable. However, I still tend to lose concentration while presenting but surely hope to improve on it as I progress academically.

Finally I believe that learning is an on-going process and doesn't stop after graduation. However, the key element for a successful businessman would be to undergo a constant development by absorbing the available knowledge through life experience and by keeping notice of the changing trends in global business. This would equip me with the means to survive under an increasingly competitive market.

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