How Pepsi Can Change Its Organizational Environment Case Study

Length: 5 pages Sources: 5 Subject: Government Type: Case Study Paper: #87602310 Related Topics: Bribery, Obesity In America, Endorsement, Political Cartoon
Excerpt from Case Study :

Organizational Ethical Dilemma

PepsiCo is a global provider of various drink and food products, from Pespi and Mountain Dew to Frito-Lay corn chips and Honest Tea. It has market share in diverse communities around the world. The main ethical challenge it faces is how to stay social responsible and culturally sensitive. This paper will use the Trevion, Nelson (1995) model of ethical decision making to focus on this issue, what it means, its impacts for stakeholders, and how it can be resolved.

The first step in Trevion and Nelson's (1995) model of ethical decision making is to gather the facts. The background of the case is this: since the 1960s Pepsi has been appealing to the youth generation both domestically and abroad. Its aim is to capture market share by endorsing activities and trends popular among the new generation: for example, in the 1960s it introduced Diet Pepsi to appeal to the new "fit" lifestyle of the young generation; in the 1980s it appealed to celebrity pop-stars like Michael Jackson in order to garner brand loyalty among the modern pop generation.

While Pepsi has solidified its image among the young, it has faced a number of ethical obstacles. In the 1960s, for example, it offended Mexican-Americans by its use of Frito Bandito, a cartoon character that robbed people at gunpoint of their Fritos corn chips, a product owned by Pepsi. In India, Pepsi has been accused of selling drinks with a high amount of toxins in the water (Ferrell, 2010). Likewise, in Burma in the 1990s Pepsi faced outrage from Free Burma activists who objected to the company's doing business with the military junta in Burma accused of human rights violations. A more recent ethical concern happened when Pepsi attempted to promote an AMP phone app that critics called misogynistic because of the user's goal of "scoring" with women. Other ethical concerns have been around the health of the company's products with critics claiming that Pepsi contributed to obesity in America, which has prompted the company to acquire more "health foods" (Ferrell, 2010, p. 8).

As part of an effort to meet these ethical challenges, Pepsi has adopted a strategy of social responsibility called "Performance with Purpose" that focuses on products, environment and employees (Ferrell, 2010, p. 9).

Ethical Issue

The second step is to identify the ethical issue. The ethical issue at the heart of the Pepsi case is its need to be more socially aware in terms of cultural sensitivity, political correctness, health of products, and environmental awareness. It is a multi-faceted ethical issue that stems from a multi-cultural global consumer base.

On the one hand, Pepsi wants to stay "hip" and at the fore of the generational trends (using, for example, the phone app and the "sexiness"-quality of other popular brands like AXE), but this desire has caused Pepsi to come across as culturally insensitive, politically incorrect, and un-"hip" as a result. Pepsi's challenge today is to be relevant among the young generation (which means finding out what is important to it) and maintaining a high degree of environmental and cultural awareness, sensitivity and social responsibility.


Identifying stakeholders is the third step. The main stakeholders are employees, consumers, and corporate leaders. Employees are affected by the ethical dilemma Pepsi is facing because they must deal with corporate rules while attempting to work within the confines of local districts. So, for example, bottlers of Pepsi may find access to pure water more difficult in India: thus, the high percentage of toxins in the product. But Pepsi wants employees to be protected from such


They are also health-conscious and want to avoid obesity, so how Pepsi handles health risks is important. Finally, corporate leaders are also affected because they are the ones who must make the decisions about how the company will meet these ethical decisions and it is their reputation and job that is on the line: the company is expected to grow but also to be respectable.


The consequentialist approach shows that the symbolic consequences of the different courses of action for each party are similar: there are negative and positive actions that can be taken. Pepsi's code of conduct is the main first step towards a positive course of action. It instructs employees to avoid bribery and to uphold the standards of the organization. It instructs consumers about the health benefits of its products and promotes cultural and environmental awareness through its "going green" campaign and "Performance with Purpose" campaign. And it allows corporate leaders to act ethically and responsibly in order to meet the demands of social activists, health groups, consumer watchdogs and cultures around the world.

The negative consequences of not adopting these measures would be that employees fail to follow the ethical priorities of the company, consumers distance themselves from Pepsi products (which causes Pepsi to lose market share), and corporate leaders shoulder the blame for the decline in sales, resulting in a blemish on their reputation and possibly the loss of their positions.

The adoption of a virtuous "tone at the top" (Lamberton, Mihalek, Smith, 2005, p. 37) of the corporate ladder would be advantageous for all because it would alleviate pressure on lower level employees to alter products in order to meet demand (as in India) or to come up with potentially offensive apps in order to appeal to a younger generation. By setting a positive and virtuous "tone" the leaders would benefit themselves because they would set the example of how to behave, how to show responsibility to the consumer base, and at the same time strengthen the corporate-consumer relationship and find the positive aspects of the brand loyalty.


The Golden Rule is to treat others as you would like to be treated and this applies perfectly to the case of Pepsi. According to a deontological approach, the morality of using toxic water in beverages or of creating sexist apps is clear and unethical. The company is obligated to avoid such behavior as a standard of "traditional moral principles" (Ciula, 2005, p. 326).

The Golden Rule would apply in the sense that Pepsi should cultivate a user base based on the goodness of its product rather than catchy marketing or questionable productions. It should cultivate its own image through its campaigns to show why and how it is caring and concerned about its consumers and own organizational environment.

Because our culture wants to see corporate responsibility it would be in everyone's best interest to see Pepsi reflect this desire and commit to giving back to communities. This could pay off more than it costs Pepsi to hire celebrities for endorsements: however, it has to be real -- not faked, as Jennings (2006) points out. Consumers are wary of corporate good will: they want real generosity not a mask that hides corruption underneath.

Character and Integrity

The relevant community standards that should guide the company's integrity are the universal laws of community because Pepsi is a global brand. The community obviously already evaluates the activities of Pepsi both domestically and abroad.

Thus, adhering to local standards as well as to standards of humanity (by not doing business with oppressive regimes, for instance) should be hallmarks of Pepsi's activity. These decisions should be newsworthy and by being on the front page of major newspapers it would show that Pepsi truly does care about character, ethics and virtue.

This is the best way to apply the virtue philosophy and to grow and lead the company into the next era. The new generation needs direction and responsible leaders to give an example of how to act. This example would help to foster the right consumer base.

Creative Actions

Because Pepsi is so big it is difficult to identify other solutions to this multi-faceted ethical dilemma. The main point is that Pepsi own up to mistakes in the past, learn from, and avoid them in the future.

By giving back to the community and upholding a standard of virtue ethics within its own ranks, Pepsi can show itself (employees and leaders) as well as communities around the world that it is dedicated to change, positive achievement, the production of healthy products, and environmental and social awareness.

Check Your Gut

The decisions with its campaigns such as "Performance with Purpose" are positive ones made by the campaign and I feel good about them. I think they indicate a good direction for Pepsi and its brand.

At the same time I would like to see more of an effort made to overhaul its overall image and rather than appealing to youth appeal to intelligence and virtue, which can be found in all peoples of all nations everywhere.…

Sources Used in Documents:


Ciulla, J. (2005). The state of leadership ethics and the work that lies before us. Business Ethics: A European Review, 14(4): 323-335.

Ferrell, O. (2010). PepsiCo's Journey Toward an Ethical and Socially Responsible Culture. University of New Mexico: Daniels Fund Ethics Institute.

Jennings, M. (2006). The Seven Signs of Ethical Collapse. European Business Forum, 25: 32-38.

Lamberton, B., Mihalek, P., Smith, C. (2005). The Tone at the Top and Ethical Conduct Connection. Strategic Finance, 3: 37-39.

Cite this Document:

"How Pepsi Can Change Its Organizational Environment" (2015, September 18) Retrieved January 16, 2022, from

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