ethical issues in indian beverage industry

Business Ethics group Assignment Topic-Ethical issues in Indian Beverages Industry

Submitted to: Prof. M.V.Lakshmi

DEFINITION OF ETHICS:

Investigation into the basic concepts and fundamental principles of human conduct. It

includes study of universal values such as the essential equality of all men and women, human or

natural rights, obedience to the law of land, concern for health and safety and, increasingly, also

for the natural environment.

It‟s not an easy word to define. Almost everyone wants to live an ethical life, but

knowing what that means is not as simple as it sounds! That's where the phrase “ethical

dilemma” comes from. In some situations, there are two contrasting ideas that may seem ethical,

but it is hard to determine which actually the right course of action is. Some common ethical

dilemmas have little consequence: for example, is it right to tell a fib when someone asks you if

they look fat or if their bad tasting dinner is delicious? The ethical dilemma there: which is more

ethical, lying or being unkind? Other ethical dilemmas become a big more complex: for example,

is it right to steal from the rich to give to the poor? Is it right to fight wars in the name of a good

cause, even if innocent people are injured? The answers to these ethical questions depend on

your definition of ethics! the psychological feature that arouses an organism to action toward a

desired goal; the reason for the action; that which gives purpose and direction to behavior; "we

did not understand his motivation"; "he acted with the best of motives"

DEFINITION OF BUSINESS ETHICS:

The examination of the variety of problems that can arise from the business environment,

and how employees, management, and the corporation can deal with them ethically. Problems

such as fiduciary responsibility, corporate social responsibility, corporate governance,

shareholder relations, insider trading, bribery and discrimination are examined in business ethics.

Business ethics can be defined as written and unwritten codes of principles and values

that govern decisions and actions within a company. In the business world, the organization's

culture sets standards for determining the difference between good and bad decision making and

behavior. In the most basic terms, a definition for business ethics boils down to knowing the

difference between right and wrong and choosing to do what is right. The phrase 'business ethics'

can be used to describe the actions of individuals within an organization, as well as the

organization as a whole.

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Shareholder Perspective

Those who approach ethical decision making from a shareholder perspective focus on making

decisions that are in the owners' best interest. Decisions are guided by a need to maximize return

on investment for the organization's shareholders. Individuals who approach ethics from this

perspective feel that ethical business practices are ones that make the most money.

Stakeholder Perspective

The phrase corporate social responsibility is often used in discussions of business ethics. The

idea behind this concept is the belief that companies should consider the needs and interests of

multiple stakeholder groups, not just those with a direct financial stake in the organization's

profits and losses. Organizations that approach business ethics from a stakeholder perspective

consider how decisions impact those inside and outside the organization. Stakeholders are

individuals and groups who affect or who are affected by a company's actions and decisions.

Shareholders are definitely stakeholders, but they are not the only ones who fall under the

definition of stakeholder.

Stakeholders may include: employees, suppliers, customers, competitors, government

agencies, the news media, community residents and others. The idea behind stakeholder based

ethical decision making is to make sound business decisions that work for the good of all

affected parties.

A company's managers play an important role in establishing its ethical tone. If managers behave

as if the only thing that matters is profit, employees are likely to act in a like manner. A

company's leaders are responsible for setting standards for what is and is not acceptable

employee behavior. It's vital for managers to play an active role in creating a working

environment where employees are encouraged and rewarded for acting in an ethical manner.

Managers who want employees to behave ethically must exhibit ethical decision making

practices themselves. They have to remember that leading by example is the first step in

fostering a culture of ethical behavior in their companies. No matter what the formal policies say

or what they are told to do, if employees see managers behaving unethically, they will believe

that the company wants them to act in a like manner.



Importance of Ethical Business Decisions

Companies and businesspeople who wish to thrive long-term must adopt sound ethical decision-

making practices. Companies and people who behave in a socially responsible manner are much

more likely to enjoy ultimate success than those whose actions are motivated solely by profits.

Knowing the difference between right and wrong and choosing what is right is the foundation for

ethical decision making. In many cases, doing the right thing often leads to the greatest financial,

social, and personal rewards in the long run.

Many factors impact ethical decisions employees and managers make on a daily basis, including:

Corporate culture

Existence and application of a written code of ethics

Formal and informal policies and rules

Norms for acceptable behavior

Financial reward system

System for recognizing accomplishment

Company attitude toward employees

How employees are selected for promotions

Hiring practices

Applications of legal behavior

Degree to which professionalism is emphasized

The company's decision making processes

Behaviors and attitudes of the organization's leaders



BEVERAGE INDUSTRY

The beverage industry comprises diverse products: processed and packaged

goods, dairy products, confectioneries, soft drinks, and beverages from breweries, wineries, and

distilleries. The food and beverage industry in the world scenario is highly concentrated, with a

small number of companies enjoying a large market share. The beverage industry is specially

concentrated in the carbonated drinks category; the two largest beverage manufacturers are

Coca-Cola, PepsiCo, and own the brands that enjoy as much as 89% of the total market share.

The non-alcoholic packaged beverage market comprises of few key components. The largest

sections are carbonated drinks (48%), bottled water (27%), fruit drinks (13%), sports drinks

(4.5%), ready-to-drink teas (2.8%), enhanced water (1.8%), and energy drinks (1%). In contrast

to many other sectors, the leading national companies in beverage industry have strong brand

recognition. These companies manage to garner manufacturing efficiencies and economies of

scale by focusing on large national and international brands. In particular, the packaged food and

beverage sector will provide good investment opportunities because of change in consumer

preferences. At the national level, the entry barriers in the food and beverage industry are very

high. The capital expenditure for production coupled with high marketing and distribution costs

can be prohibitive for new entrants.

The soft drink industry has undergone many changes with changing consumer needs,

wants and also changing Government policies. This formed the basis for different innovations in

packaging such as bottles, cans, tetra packs and pet bottles in a variety of flavors. Non-alcoholic

soft drink beverage market can be divided into fruit drinks and soft drinks. Soft drinks can be

further divided into carbonated and non-carbonated drinks. Cola, clear lemon and oranges come

under carbonated drinks while mango drinks and oranges juices come under non-carbonated

category. The soft drinks market till early 1990 were in the hands of domestic players like

Thumps Up, Limca, etc., but with the opening up of the economy and liberalization of economic

policies in India it is Pepsi and Coca-cola is the leader in carbonated drinks market in India it is

Coca-cola which scores over Pepsi but this difference is fast decreasing (courtesy huge ad-

spending by both the players).



Pepsi entered into the Indian market in 1991 and Coke re-entered (after they were thrown out

in 1977, by the Central Government) in 1993. Pepsi has been targeting its products towards the

youth and it has struck the right chord with the market and the sales have been doing well by

sticking to this youth bandwagon. Coke on the other hand struggled initially in establishing itself

in the market. In a span of 7 years of its operation in the country it changed its CEO 4 times but

finally they started understanding the pulse of the Indian consumers. Soft drinks are available in

glass bottles, aluminum cans and PET bottles for homes consumption. Fountains also dispense

them in disposable containers.

RESOURCES USED BY BEVERAGE INDUSTRY:

The important resource used by a beverage industry is water. For example to obtain 1

liter of cola drink it uses 9 liters of pure water. Its main resource is ground water.

For cleaning and bottling also they use water which is the main source for drinking.

The other resource is land where the factory is setup and it pollutes the surroundings

where harmful chemicals are released and mixed up with the soil.

This also pollutes the water resources in the surrounding areas of the factories.

All these can be overcome only if companies take effective steps to reduce the damage

towards the environment.

Take necessary steps to reduce the effect of the pollution and work effectively.

Corporate social responsibility:

Corporate social responsibility is a form of corporate self-regulation integrated into a business

model. CSR policy functions as a built-in, self-regulating mechanism whereby business monitors

and ensures its active compliance with the spirit of the law, ethical standards, and

international norms. The goal of CSR is to embrace responsibility for the company's actions and

encourage a positive impact through its activities on the environment, consumers, employees,

communities, stakeholders and all other members of the public sphere. Furthermore, CSR-

focused businesses would proactively promote the public interest by encouraging community

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growth and development, and voluntarily eliminating practices that harm the public sphere,

regardless of legality. CSR is the deliberate inclusion of public into corporate decision-making,

and the honoring of a triple bottom line: people, planet, profit.

The term "corporate social responsibility" came in to common use in the early 1970s, after many

multinational corporations formed. The term stakeholder, meaning those on whom an

organization's activities have an impact, was used to describe corporate owners

beyond shareholders as a result of an influential book by R. Edward Freeman, Strategic

management: a stakeholder approach in 1984. Proponents argue that corporations make more

long term profits by operating with a perspective, while critics argue that CSR distracts from the

economic role of businesses. Others argue CSR is merely window-dressing, or an attempt to pre-

empt the role of governments as a watchdog over powerful multinational corporations.

CSR is titled to aid an organization's mission as well as a guide to what the company stands for

and will uphold to its consumers. Development ethics is one of the forms of applied ethics that

examines ethical principles and moral or ethical problems that can arise in a business

environment. ISO 26000 is the recognized international standard for CSR. Public sector

organizations adhere to the triple (TBL). It is widely accepted that CSR adheres to similar

principles but with no formal act of legislation. The UN has developed the Principles for

Responsible Investment as guidelines for investing entities.

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Advantages of CSR

• A good company reputation makes it easier to recruit employees.

• Employees may stay longer, reducing the costs and disruption of recruitment and retraining.

Employees are better motivated are better motivated and more prolific.

• CSR assists in ensuring that you comply with regulatory requirements.

• Activities such as involvement with the local community are ideal opportunities to generate

positive press coverage

• A good relationship with local authorities helps business grow better.

• Understanding the wider impact of business can help the company develop new products and

services.

• CSR can make the company more competitive and lessens the risk of sudden damage to your

reputation. Investors may take notice of this and would be more willing to finance the company.

Corporate social responsibility and the beverage alcohol industry

The issue of corporate social responsibility is a complex one for any industry, not the least so for

the beverage alcohol industry. ICAP‟s sponsors believe that a systematic integration of CSR into

their business practices can make a positive impact on their economic, social, and environmental

performance. Furthermore, through their association with organizations such as ICAP, their

CSR activities contribute to a wider development of alcohol policies, promote

responsible drinking patterns, and target alcohol misuse.

As businesses, beverage alcohol companies must be accountable to their shareholders who,

among other legitimate objectives, seek a financial return on their investment. Companies

recognize that they are also accountable to a wider range of stakeholders, including consumers,

employees, communities, media, and critics. In short, stakeholders are those individuals and

groups with an interest in or affected by a company‟s products, operations, or the nature of its

business.

The idea that the measure of the overall performance of a company should be based on its

combined contribution to economic prosperity, environmental quality, and social wellbeing has

come to be called “the triple bottom line.” Companies, therefore, are deemed to be accountable

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for their actions, not just formally to their owners but also in less well-defined ways to this much

wider group of stakeholders. This view has become central to the management of social and

community issues. Businesses need to act honestly and ethically with regard to their internal

management and auditing, but corporate social responsibility also requires them to focus on their

wider responsibilities.

The beverage alcohol industry acknowledges that, although their products can offer considerable

personal pleasure and social benefit, they can also cause serious personal and social harm if

consumed irresponsibly. They also acknowledge that preventing misuse of their products is in

their long-term strategic interest and is therefore consistent with their economic objectives, while

turning a blind eye on misuse is ultimately bad for business. They recognize that long-term

growth is best built on an ethical and responsible foundation. Their social concern is also

founded on the realization that the misuse of alcohol can affect their business adversely.

Appropriately, the industry has initiated many programs to target alcohol misuse and related

harm, to encourage responsible drinking, and to educate consumers. Many of these initiatives

have been developed by the industry in partnership with others. ICAP believes that promoting

broad industry participation in CSR will advance responsible patterns of drinking, further

understanding about the role of alcohol in society, and enhance long-term economic value

through collective action.

With the accelerating pace of globalisation and increasing competition, it becomes inevitable for

companies to have clearly defined business practices with a sound focus on public interest. In

India, the world's largest beverage maker Coca-Cola Inc. (Coke) was engaged in a number of

community-focused CSR initiatives. These initiatives were further accelerated since 2003

following the various allegations and issues such as presence of pesticide residues in its

beverages and water resource contamination issues that the soft drink giant faced in India. To

address these issues and to rebuild its tarnished brand image in India, Coke engaged itself in a

number of environment-focused CSR initiatives, like executing the echo management system in

2003, under which it preserved local water resources. It also adopted measures to reduce water

consumption in its production processes. This case facilitates discussion on whether Coke used

CSR as a tool for its sustainability in India or only as a green washing effort to counter its

allegations. The case also helps to emphasize the need for adopting ethical values in the business

practices of multinationals operating in India.



A LEARNING ORGANIZATION:

A learning organization is a group of people who have woven a continuous, enhanced capacity to

learn into the corporate culture, an organization in which learning processes are analyzed,

monitored, developed, and aligned with competitive goals. A learning organization generates

knowledge and learning faster than competitors and turns that learning into a strategic advantage

to out market, out manage, and outsell competition. A learning organization moves beyond

simple employee training into organizational problem solving, innovation, and learning. For

instance, in a learning organization, when a product is bad, instead of just scrapping it, the

employees find the cause of the problem and develop solutions to prevent it from happening

again. In a learning organization, the focus is on a company's only appreciating asset-its people.



What are the Characteristics of a Learning Organization

A learning organization is one that is able to change its behaviors and mind-sets as a result of

experience. This may sound like an obvious statement, yet many organizations refuse to

acknowledge certain truths or facts and repeat dysfunctional behaviors over and again. Examples

include the number of times restructuring initiatives are repeated because the previous attempt

did not achieve the desired outcomes or the failure of mergers and acquisitions to meet initial

objectives. Although there may be some metrics that can gauge and evaluate learning in an

organization, this discussion will offer an alternative perspective, not about how to measure

outcomes, but more about how to create learning environments that facilitate the achievement of

specific or of multiple, related objectives. Such environments tend to promote learning and

leadership at all levels (distributed leadership) and they are likely to make the organization more



accountable for its actions as individuals tend to accept more readily responsibility for their

actions. Organizations, both in the private and public sectors that have adopted this approach find

that individual responsibility increases to a significant degree and accountability becomes clearer

and stronger. They also find that they develop true distributed leadership, as everyone is a

responsible agent working towards a shared vision, exploring possibilities and taking initiatives

that nevertheless fit well into the overall strategic direction. Learning organizations achieve this

through a strong network of relationships and peer support (rather than pressure). Enabling

learning environments inform business strategy by taking advantage of distributed intelligence

throughout the organization; they fully engage internal and external stakeholders by responding

to issues identified by stakeholders; they change the behavior of the organization through

mindset and attitude change in individuals within the organization; and, finally, they help to

integrate sustainability thinking into the culture of the organization. All human organizations are

complex and one way of understanding their characteristics is through complexity theory. The

following characteristics are those of complex learning organizations and are based on research

with companies in both the private and public sectors undertaken by the Complexity Group at the

London School of Economics, UK, over the past 12 years. Organizational learning (OL) is more

than individual learning and arises through the interaction of individuals in groups and teams of

different sizes. What is characteristic of OL is that it is an emergent process in the sense that its

outcome is not predictable and it is more than the separate contributions of individuals. OL needs

the right environment to thrive, one that allows time for reflection on past actions and outcomes

and is prepared to accept some unpalatable truths and one that is not a blame culture in the sense

that „mistakes‟ are unacceptable. Such an environment makes a distinction between „mistakes‟

that are the result of irresponsibility and lack of forethought and those that are genuine

explorations of a new idea or a new way of working. If individuals and teams are encouraged to

be innovative then they need to explore alternatives and to take thoughtful risks. But not all the

experiments will succeed. For one to succeed many need to be tried. The „failures‟ are not

„mistakes‟, they are legitimate explorations of the space of possibilities, as part of the search to

find new, innovative products, procedures, ways of working, etc.

During the learning process, individuals will influence each other and their ideas will co-evolve;

that is each idea will adapt and change in the context of other ideas, and once changed, it will, in



turn, have an influence on what happens next. The concept of co-evolution is a powerful one and

applies not only to internal organizational learning but also to strategy in relation to a changing

environment, as well as to sustainability understanding. Whatever actions or procedures are in

place at any one time regarding sustainability (whether organizational or environmental) they

cannot remain static. As the broader environment changes these actions and procedures, policies,

etc., need to change to respond to changes in the environment. Once changed, they will, in turn,

influence that broader environment. When the influence and change are reciprocal and not

unilateral then co-evolution has occurred. In terms of sustainability, the concept to work towards

is that of co-evolutionary sustainability – in other words the ability of an organization to

continuously and appropriately adapt to external changes in its broader environment. Another

relevant concept, inspired by biology, is the notion of the social ecosystem. This includes all

competitors, suppliers, customers, associates, legal and government bodies, etc. Complexity

theory sees systems as interacting wholes, influencing each other, in a co-evolutionary process.

Learning organizations encourage self-organization, so that groups can come together to explore

new ideas without being directed to do so by a manager outside that group. This is the process

that occurs naturally around the coffee machine or the water cooler, but learning organizations

actively encourage self-organization and do not see it as a waste of time. This is an essential part

of the innovative process which is also an integral part of creating an environment that facilitates

evolutionary sustainability. Organizations include multiple and intricate networks of

relationships, which are sustained through communication and other forms of feedback, with

varying degrees of inter-dependence. Although heavily influenced by their history and culture,

they can transcend both when necessary. When such organizations meet a constraint they are

able to explore the space of possibilities and find a different way of doing things, i.e., they are

creative and innovative and can create something new. This creation of new order is the

distinctive characteristic of complex (as distinct from complicated) systems. Unfortunately, this

innate source of innovation is often restricted. Understanding the characteristics of complex

systems and of complex learning organizations means that we can work with those

characteristics to achieve objectives, rather than against them.



A Non-Learning Organization:

The “non-learning” organization had clearly lower scores. The shape of the organizational

diamond was exceptional because management got very low points. The individual side was not

considerably different from other organizations. What is exceptional is that the element

evaluating had equally good scores as did the average in other organizations.

In this organization the flow of information will be down ward in most of the cases. Subordinates

do the work wherein boss takes the credit

Organizational flow would be like

Examples of learning organization:

Coca-cola

The beverage industry is specially concentrated in the carbonated drinks category; the two

largest beverage manufacturers are Coca-Cola, PepsiCo, and own the brands that enjoy as much

as 89% of the total market share. The Coca-Cola Company‟s decision making process fit into its



structure or mission, vision, and values. The Coca-Cola Company has a more organic structure

and their mission and values preach creativity and employee involvement.

ORGANIZATIONAL STRUCTURE OF THE SALES DEPARTMENT

AGM

Plant

Manager

Route

Manager

Human

Resource

Manager

General

Sales

Manager

Finance

Manager

Area Sales Channel

Manager

Area

Capability

Sales

Executive

Marketing Sales

Trainers

Marketing

Developer

Key

Accounts

Distributors

and

Salesmen



Recruiting

While recruiting the individuals in an organization, it is compulsory for each individual to work

as a marketing developer (low-level manager) at least for 1 year as part of its organizations

policy. This shows that the company wants each and every individual to know completely about

soft drink market.

Corporate member identity

Both low level managers (marketing developers) and high level managers (area sales mangers)

wear same Red color uniform as part of the organizations policy. This clearly shows there is no

discrimination between employees.

Periodic changing of departments

Here in coke, every manager after certain tenure will be changed from one department to other as

part of organization‟s policy. For example a marketing manager will be shifted to supply chain

department. The advantage because of this every individual will have scope to increase his

learning. Managers are thinking outside the box when making decisions. This will also enforce a

learning organization and instill the organic culture into everyone‟s mind frame. Because of this,

The Coca-Cola Company has the ability to solve large problems more quickly and become a

stronger community as a result. They are implementing an open door policy in which any

employee can go to their manager and suggest ideas for solving different problems. This will

allow the management to become aware of small problems before they become large ones.

Transparency of information

Here the information flow is Top- bottom; bottom-up and horizontal communication takes place.

This clearly shows a Project team kind of organization structure.

Delegation of authority

Here in coke, even the low-level managers have given certain authority in decision making. The

marketing developers have given authority in key decision areas like production, stock to be kept

at warehouses etc.



Adaptability

Coke has introduced certain concepts recently in 2009; the employees of the organization are

very well adaptable to the policies of the organization like for example coke has introduced pre-

sale concept and RED concept the employees are very well adaptable to these 2 concepts which

are very much difficult to implement.

i. Presale concept

The pre-selling concept was introduced by HCCBPL in 2009 in which marketing developer takes

order one day before by Black berry devices and immediately passes the message to the depot

and next day morning from depot stock is delivered to each outlet. The main advantage with Pre-

sale concept is that Company makes assure of more availability of product in market

ii. RED concept

RED stands for Right Execution Daily. It is a survey method for the company to know their

position in the market. It is mainly implemented to check the availability of the visicooler

provided by the company to the retail outlets for their products and also to check the activation in

various outlets. For right execution the company follows a scoring sheet. The scoring sheet is

mainly divided into three categories Via-Visicooler, Availability and Activation. The total

scoring sheet is for 100 (One Hundred) marks. And these 100 marks is distributed into 3 parts

like visicooler has 35 marks, Availability has 40 marks and Activation has 25 marks.In this way

individuals are very much adapted to the 2 concepts and increased the market share by 5%.

CORPORATE GOVERNANCE:

Corporate governance is an internal system that encompasses polices, processes, people, and

which makes sure the needs of shareholders and other stakeholders are met in full. This will be

accomplished by directing and controlling managing activities using good business practices,

objectivity, accountability and, of course, integrity. Effective corporate governance relies on

certain laws to be passed, as well as a certain commitment from the marketplace, and also a

healthy board culture, as this will make sure policies and processes remain constant.



Corporate governance must have safeguards in place to make sure it is always being carried out

at optimum levels. The company itself must see the governance as that of quality or else the

share price and revenue could plummet. By quality, we mean the financial markets, legislation,

and also outside market conditions that affect how certain policies and processes are put in place

and also how people are managed.

In corporate governance, outside forces are any powers over the company outside the board.

When it comes to the inside environment, the company can set itself apart from the competition

by the way the board is run. As of this writing, much of corporate governance‟s debate has been

centered around various legislation policies, to prevent fraudulent activities and for the need to

remain transparent in all dealings, and people claim all of this causes executives to try to treat the

symptoms while ignoring the main cause.

Then there are those that consider corporate governance to mean the acceptance by management

that shareholders are the true owners of the company or corporation, and that trustees work on

behalf of the shareholders. This would require a commitment to values, business ethics, and it

would require separating personal and corporate monies during the company‟s management.

CORPORATE GOVERNANCE IN INDIA

SOFT DRINKS INDUSTRY:

Social Issues

For the soft drinks industry the social concerns are numerous, ranging from associated disease as

well as health and safety impacts Soft drink companies are advised to anticipate government

regulations, particularly in relation to their marketing approaches to children. Companies need to

be innovative in creating healthier soft drink products as in the case of PepsiCo and Coca Cola

focusing on a low sugar, natural sweetener for their products and India and Chinese brands

tapping into the demand for alternatives to carbonated soft drinks.



Companies should assess their supply chain risks and put in place codes of conduct, monitoring

and capacity building initiatives to prevent these. As consumers become more aware of supply

chain issues, good supply chain management can create a competitive advantage.

Companies that rely on agricultural supply chains, particularly large numbers of small holding

farmers, should look to developing partnerships with government, local NGOs and international

agencies to better manage social risks.

Governance Issues

A typical challenge in the Indian beverage sector‟s fight against corruption is the complex

interrelationship between politics and the private sector. Strong governance is clearly vital for

companies to ensure the integrity of their organizations, relationships with consumers and

government authorities to avoid corrupt business practices.

Companies should look to providing more transparency and accountability in terms of the

selection of board members, remuneration, links between remuneration and performance,

diversity of the board and decision making processes. Soft drinks companies should ensure a

high level of transparency in terms of the financial support provided for industry groups that in

turn lobby national governments for changes in soft drinks policies

Companies should put in place initiatives and get involved in collective action to raise corporate

integrity, especially in relation to corruption and bribery.

Environmental Issues

Companies need to first assess to what extent they and their suppliers depend on water and the

associated risks. This should be done in consultation with key stakeholders. Companies should

measure their water footprint and look to how they can best manage water resources through

enhanced processes and infrastructure. Companies should implement rigorous water testing and

monitoring systems and install treating equipment. Water pollution and treatment is already a



focus of Asian listed companies and with the growing emphasis on regulation and enforcement

this looks set to increase.

Companies need to realize that global commitments to improve water efficiency can only be

implemented locally, requiring versatility and local management support. Companies should

disclose water performance and the initiatives that they are putting in place. Companies need to

assess their contribution to climate change, put in place measures to reduce emissions and waste

and report on progress.

The relationship between the shareholders and employees, suppliers should not be a principle

agent relationship. There should be a understanding between them. The ultimate aim of

shareholders and top management is to attain profits, and the ultimate aim of employees,

suppliers is to be recognized for their work. So we would see the best example of the coca cola

value chain process which is creating a good corporate governance between top management,

shareholders, employees and suppliers

Coca Cola markets nearly 2,400 beverages products in over 200 geographic locations. As a result

development of a superior value system is imperative to their operations. Throughout this paper

we will analyze their value system by using Michael Porterâ€™s value chain analysis model. In

an attempt to paint a current picture of the non-alcoholic beverage industry we will assess the

market activity by using mergers, acquisitions and IPO as our benchmarks to determine if

market is growing or contracting.

Value chain analysis:

A value chain is a model used to disaggregate a firm into its strategically relevant value

generating activities, in order to evaluate each activity's contribution to the firm's performance.

Through the analysis of this model we can gain insight as to how a firm creates their competitive

advantage and shareholder value.

The value chain of the non-alcoholic beverage industry contains five main activities. These

include inbound logistics (suppliers), operations, outbound logistics (buyers/ customers),

marketing and sales, and service.



Inbound Logistics (Suppliers):

Some of Coca Cola‟s most notable suppliers include Spherion, Jones Lang LaSalle, IBM, Ogilvy

and Mather, IMI Cornelius, and Prudential. These companies provide Coca Cola with materials

such as ingredients, packaging and machinery. In order to ensure that these materials are in

satisfactory condition, Coca-cola has put certain standards in place which these suppliers must

adhere to (The Supplier Guiding Principles). These include: compliance with laws and standards,

laws and regulations, freedom of association and collective bargaining, forced and child labor,

abuse of labor, discrimination, wages and benefits, work hours and overtime, health and safety,

environment, and demonstration of compliance

From time to time, Coca-Cola uses third parties to assess their suppliers by having interviews

with employers and contract workers. If a supplier has issues about the supplier guiding

principles, they are usually given a certain amount of time to take corrective measures; if not,

Coca-Cola has the right to terminate their contract with these suppliers.

Operations

Coca Cola‟s core operations consist of Company-owned concentrate and syrup production

According to their website, some of the main environmental impacts of their business occur

further along the value chain through system's bottling operations, distribution networks, and

sales and marketing activities. Management of these operations across the business value chain

tends to be more challenging outside of the core operations. According to Coca Cola, they

continue to address this by working with their partners to reduce the effects at every level of the

manufacturing process by enlarging their comprehension of the complete environmental impact

of their business through the entire lifecycle of their products from ingredient procurement to

production, delivery, sales and marketing, and post-consumer recycling.



Outbound Logistics (Buyers/Customers):

The activities required to get finished products to customers include warehousing, order

fulfilment, transportation, and distribution management. Coca Cola has the world‟s largest

distribution system. They own, lease, and operate in over 800 plants around the The 2,400

beverage products which they market reach consumers in more than 200 different geographic

locations Grocery stores such as Sobeys, fast food restaurants such as McDonalds and vending

machines are just a few of the distribution units used to ultimately reach consumers.

Coca Cola has over 300 bottling partners which range from publicly traded businesses to small

family owned operations (Coca Cola 2006). They have implemented the Coca Cola System in

which they work cohesively with their partners in order to develop strategies aimed to meet the

needs of all their customers.

Examples of their commitment to these strategies are seen in their plant in Indonesia, where

boats are used to transport the products between hundreds of islands throughout the Amazon.

This is often because waterways are often the main way to access these remote islands. In some

of the higher elevations of in the Andes, Coca Cola products are sometimes transported by four-

legged power. Across much of Africa, bottlers deliver to thousands of family-run kiosks and

home-based stores.

Marketing and Sales:

Out of approximately 2,400 products, Coca Cola markets four of the world‟s top sales drink

brands. Although the industry is relatively small and they only directly compete with two

companies, creativity is a vital marketing strategy to Coca Cola.

Coca Colas ultimate goal is to deepen their brand connection with consumers. As a result, they

have to constantly reinvent their product (Coca Cola 2006). The marketing strategy they use is

directly linked to the consumer; from advertising, to point of sale, to ultimately opening and

consuming a Coca Cola beverage. Techniques which they have used to achieve this include



developing new products and brands, changing the design of their packaging, and designing

various new advertising campaigns.

On October 19th, Coca Cola reported their earnings for the third quarter. Earnings per share are

up which results in higher benefits for shareholders. According to Neville Isdell, CEO of Coca

Cola, they have experienced a growth in sales of five percent compared to the same quarter last

year. This is as a result of balancing performance across their global markets and their product

portfolios

Service

Activities that maintain and enhance a products value include customer support, repair services,

installation and training.

Coca Colas customers range from large international retailers and restaurants to smaller

independent businesses and vendors. As a result, they provide services tailored to meet their

customer needs.

Coca Cola also supports their customers by providing them with the training necessary to help

their businesses become more effective and profitable. They have established Customer

Development and Training Centers which are available.

So by these major departments which work as a group would lead to a sustainable growth and

good corporate governance as there is no rationalized between shareholders, employees, top

management and suppliers.

Stakeholder Engagement (SHE)

Stakeholder engagement is the process by which a firm's stakeholders engage in dialog to

improve a firm's decision-making and accountability toward corporate social responsibility(CSR)

and achieving the triple bottom line. Stakeholder engagement works to take into account the

concerns and objectives of a firm's stakeholders in its decisions. Stakeholder engagement takes

into account the varying perspectives, priorities, and limitations of different stakeholders. The



practitioners in stakeholder engagement are often businesses, non-governmental

organizations (NGOs), labor organizations, trade and industry organizations, governments,

and financial institutions.

The company most often initiates open, two-way dialogue seeking understanding and solutions

to issues of mutual concern. Stakeholder engagement occurs when a company wants to consider

the views and involvement of someone or some group in making and implementing a business

decision. Stakeholder engagement must occur when a company truly wants input from groups

that will be affected by the company's decision. This is very different from when a company

wants to issue a message or influence groups to agree with a made decision.

Stakeholder Engagement in Soft Drinks Industry

Coca-Cola in Plachimada (Kerela)

In 2005-06 Coca cola plant in Placimada was forced to close down its operation because of its

harmful effects on the society and the environment. The plant operations needed enormous

amount of ground water, thus lowering down the water level drastically. Also they allegedly

digged more wells than what they were allowed to. The dumping system and effluent system

also was not proper, causing the damage to the environment. The locals were not getting

drinking water and the women had to travel miles to get the drinking water. Also the waste

dumped outside was polluting the aquifers. The company also used the maize as a sweetener in

their process rather than sugarcane and thus depriving the local people from the cheap food. All

these reasons forced the people of the society to raise voice against the company that lead to

closing of the unit.

But later the company realized and repented for their mistake. They adopted many measures so

that their operations do not cause any damage to the society. Then they were welcomed by the

people and the plant is operating there success full till date.

This example clearly shows what is the value of the stakeholder engagement in the fate of any

company. Now a day‟s society, consumers are well updated and aware. So the companies have

to align themselves according to this trend and involve their stake holders in their decision

making process as well.



Beverage Industry Environmental roundtable

Environmental stewardship requires that beverage companies look beyond their own operations

and engage with a wide-range of stakeholders. This engagement ensures a holistic understanding

of key environmental issues, the company‟s influence and impact on a given issue or situation,

and the range of potential opportunities for improvement. Stakeholder engagement is a key pillar

of achieving the objectives of BIER, including informing public policy, ensuring alignment and

avoiding duplication, and serving as a technical resource and knowledge base on industry-

specific environmental issues.

BIER is engaged with three primary external stakeholder groups:

Beverage Industry Trade Associations

Non-Governmental Organizations

Governmental Organizations



The Roundtable utilizes the following core approaches for conducting Stakeholder Engagement

activities:

Roundtable Meeting Participation

A portion of each Roundtable meeting is devoted to engaging and strengthening relationships

with select stakeholders of specific interest to our member companies. The session provides an

opportunity to exchange information on current initiatives and promote interactive dialogue on

topics of shared interest.

Technical Collaboration

As an industry coalition, BIER will explore complex technical issues and develop working

products that our members collectively feel best represent the interests of the beverage industry.

BIER will distribute these work products and actively pursue input and endorsement by key

external stakeholder groups. BIER also has an opportunity and desire to support external

stakeholders in their work to advance environmental issues and shape policy. In such situations,

BIER can serve as a technical resource and knowledge base for the beverage sector.

Direct Engagement

BIER engages directly with key stakeholders, including trade groups, non-governmental

organizations, and technical service providers, to leverage available knowledge, experience, and

advocacy support. The American Beverage Association (ABA), Ecolab, and JohnsonDiversey

have been active participants in the Roundtable since inception in 2006.



Stakeholder Engagement:



Structure of BIER

ethical issues in indian beverage industry

Documents