Coca-Cola Notes

Introduction

India

Teaching

The Coca-Cola India case offers students a unique opportunity to look inside a crisis for one of the worlds most important brands as it occurs inside a developing nation. The case focuses specifically on issues related to brand, reputation, and Corporate Social Responsibility (CSR), and the intersection of all three. History reveals that companies with the strongest brands, most proactive policies of social responsibility, and deepest relationships with their consumers are the most attractive targets for NGO attacks. The very assets that define these leading companies provide the fodder are looking for to further their agendas. Global Exchanges attacks on Starbucks NGOs over fair-trade coffee and against Nike over sweatshops in Asia, like the Center for Science and Environments (CSE) attack on Coca-Cola India, are all examples of NGOs using companies powerful reputations against them. Being an attractive target, however, need not imply vulnerability. Organizations and their leadership teams need to start thinking systematically, proactively, and strategically aboutreputational risk from crises concerning CSR (corporate social responsibility) and their take to mitigate these risks before they become reality. The CSEs allegations actions of pesticide-contaminated Coke and Coca-Cola Indias response provide an important example of the worlds most important brand under attack and the steps taken in the aftermath. This example highlights the importance of a strong reputation, a willingness to collaborate, and atrategic response to successfully weathering the crisis. s

Purpose of the Case Study

1. To give students the opportunity to apply a strategic framework to corporate communications, in a foreign context, with a global brand 2. To identify how, why, and where an organization is vulnerable to a crisis 3. To help students understand that: a. Successful and responsible companies are the most attractive targets for NGOs b. Prior credibility helps you weather a crisis c. Public perception not reality or truth matters most d. Anticipation and preparation for crises before they occur are critical

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e. Prior experience informs current crisis strategy f. Globalization and international markets make effective, relevant, and proactive Corporate Social Responsibility (CSR) strategy more important than ever g. Local problems quickly take on global significance if handled poorly h. Cultural context and norms make optimal strategies for crisis communication different in India versus the United management States

Key Business Issue

On August 5, 2003, The Center for Science and Environment (CSE), an NGO in India, the safety of Coca-Cola Indias products in a press release titled Twelve Major attacked Drink Brands Sold in and Around Delhi Contain a Deadly Cocktail of Pesticide Residues. Though Coke was well within the Indian governments legal limits for pesticide residue in beverages, the countrys standards were weak and full of loopholes, making them effectively meaningless . Coke India CEO Sanjiv Gupta and his team had to decide how to rebuild public trust and had to weigh a larger policy decision at the same time: should Coke take on a leadership role and create higher standards for food and beverage help safety?

Problems
1. The CSE attacked Coke for this same issue surrounding bottled water in February of the same year; they should have seen it coming and been prepared. 2. NGOs have automatic credibility while corporations, particularly large multinationals (MNCs) automatically lose credibility when under attack. How should this inform approach to the attack? Cokes 3. Coca-Cola is a socially responsible company that takes care of the communities in which operates yet India is a developing nation with a different set of standards; should it Coke be held to the same standards internationally as they are at home? Is this economicallyDoes a companys responsibility stop at following the sustainable? law? 4. Coca-Cola is the worlds most valuable brand and that value is largely driven by the image of the company and its products. How does a company that derives a isproportionate amount of its value from its image manage reputational risk? How d does importance of Cokes brand inform the best the strategy? 5. Consumers outside the US, particularly in developing nations, have a lovehaterelationship with MNCs. Can Coke do anything about this? Do they address the issue already?

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6. Coke seems to have a history of dealing ineffectively with crises. Have they learned their mistakes or are they likely to repeat their unwillingness to deal head-on from with problems ? 7. The Carbonated Soft Drink (CSD) market in India is fiercely competitive between Cokend Pepsi and the need for differentiation is important. Effective handling of this crisis a is opportunity to gain tremendous upside in the battle for market an leadership. 8. Parliament has banned Coke and Pepsi products and numerous schools and other rganizations have followed suit. Coke must deal effectively with all key o constituents sudden distribution problem in addition to its image and solve its woes. 9. The role of Coca-Cola Corporate Communications from Atlanta is not mentioned in the case. Is it a problem that they were not actively involved?

Communication Strateg y
A strategic communications model that incorporates an understanding of Coke Indias objectives, constituencies, and channels should be used to analyze this case. This framework allows students to appreciate that objectives drive both the right strategy and the best execution of that strategy. In addition, the communication strategy should incorporate aramework for managing reputational risk, underscoring the link between reputational f capital and corporate performance. In this case, Coca-Colas clear, primary objective is to regain the trust of consumers, the media, and the government but it has many secondary objectives as well. These include: Reassuring the global community, specifically global consumers of CocaCola products as well as investors in the Coca-Cola Company Leveraging the situation to gain competitive advantage and precious reputational capital through addressing the charges in a responsible and thoughtful way Resolving this issue thoroughly, beyond the hype of the moment, so that it does notarise in the future and hamper business in the critical Indian market After articulating the Companys objectives, students should explore the execution of aommunication plan. Who are the most important constituencies? How do they rank c and should you prioritize them? What are the best channels to use for each? What is how the timeline of the communication messages needed (ie which are short-term and which should be ongoing)? What are the opportunities for increasing reputational capital? What safety nets should be put in place to manage reputational risk?

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Solutions
1. Communicate openly with key constituents, including the public, the media, employees, franchisees, the trade/channel, state and national government, and suppliers. Open, communication is key to communicating a spirit of partnership and a honest willingness the issue in a way that benefits the Indian to resolve consumer. 2. Attempt to collaborate with the CSE, acknowledging that your goals may be closer together than you initially imagine. Take the time to discover their true motivation, ultimate goal, and ideal outcome. Recognize the enormous reputational benefits that come from such a partnership, or even a willingness to could partner. 3. Choose to differentiate as a more socially responsible company. Though a united front or Coke and Pepsi was a successful tactic when the crisis first broke, now is the time f to advantage of an opportunity to demonstrate leadership in a sphere that is take critically important to your key constituents. 4. Enhance your relationship with the government. Whether or not a relationship with the CSE is possible, the government will be closely involved in developing the new standards that Parliament has demanded. Strong government relations are important in India and give you an opportunity to communicate all the benefits and investments you provide to the economy. 5. Recognize the upsize for reputational risk on a corporate level if the situation can be turned into a positive. By correcting the pollution in India and alleviating tensions at the level, The Coca-Cola Company has made a deposit in its global reputational capital local account. 6. Launch a campaign (which they did: eKO) to educate the public, the government, and the media about environmental stewardship activities.

Application of the Page Principles

Tell the truth This case study allows students to push on the definition of truth for corporations. Did

Cokethe truth" by sticking to the facts, or does truth imply a greater responsibility? Is "tell truth sticking to the letter of the law or accountability to a higher standard? The Coca-Cola case blurs the distinction between truth and facts. The CSE, the government, and Coke also all different facts regarding the nature and degree of pesticides in soft drink products; had what a company do when the truth is not black and white and consumers form their does own truths on the basis of perception?
Prove it with action time of the case, Coke falls short of meeting this principle, which contributes to At the

the continued erosion of consumer confidence in the company and its products. Collaboratingaddress the issue was a good first step, but Coke falls short of actions that with Pepsi to

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demonstrate a commitment to problem resolution and product safety including collaboration or independent, transparent product testing. After the time of the case, with the CSE the Company launched Coca-Cola India eKO Management System, an initiative to translate environmental policy into action in daily operations. This action was important in the process of rebuilding reputational capital and regaining public trust.
Listen to the customer

Coke is forced to listen to the customer because they have spoken with their wallets. With down over 30% in less than two weeks, the company knows customers are concerned sales about this issue. At the same time, Coke needs to hear the customer's voice to motivate them next level of responsibility: even if the company is technically 'in compliance' to the with standards, customers demand and expect more from a company with Coca-Cola's legal reputation .
Manage for tomorrow

Coke missed this opportunity in the past by ignoring the Kinley bottled water crisis but can redeem itself by taking a long-term perspective on resolving the current situation. India is of the company's most important markets for the future and the company must take one this account when considering the investment needed to thoroughly resolve this crisis. into By taking a long-term perspective on its reputational capital, both in India and around the globe, response for Coca-Cola becomes clear. the best
Conduct public relations as if the whole company depends upon it Coke's case, with over half of its market value attributed to the brand, the whole In

company depend on PR and the company's image. Many would say that Coke is really does built exclusively on image, which implies an important focus on public almost relations.
A company's true character is expressed by its people

Sanjiv Gupta was an admired leader who knew the Indian consumer. He became the company's face during the crisis and was an important reminder that Coke in India was more just a faceless than MNC.
Remain calm, patient, and good-humored

This case gives students the opportunity to think about the importance of projecting calm confidence in the midst of a and crisis.

Teaching the case

Distribute the case prior to the session to allow students an opportunity to read the case thoroughly, meet in study groups to prepare their remarks, and tie case issues to readings for that particular day. Students should spend the first third of the class focusing on key problems as described
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earlier in this teaching note. Once all of the problems have been discussed, present key frameworks from either a textbook or reading that can help students to put the problems in context. We recommend focusing specifically on issues of corporate communication strategy reputational and risk. Allow students an opportunity to determine solutions given the problems and the frameworks for the last third of the class. You should also include information about how the company actually handled the situation as well as key takeaways based on the class session for that day.

Questions for discussion

A focus on these key questions will help students to thoroughly prepare the case: 1. What are the key problems that Gupta should focus on in the short term and in the longterm ? 2. How would you evaluate the crisis? 3. How well-prepared was Coke India to deal with the CSEs allegations? 4. What is your recommendation for Cokes communication strategy? Who are the key constituents ? 5. Could Coke India have avoided this crisis? 6. What should Gupta do now?

Key Takeaways
1. Don't underestimate the power of NGOs or antagonists in general 2. Realize that socially responsible companies are likely targets for NGOs but alsoattractive collaborators 3. Recognize the value of strategic communications 4. Understand your reputational risk and what you can do to build reputational capital 5. Prepare in advance for crises and then improvise from a strong foundation 6. Small regional problems can turn into big issues if you dont manage them 7. Transparency and action are key to rebuilding trust with constituents