Coca-Cola Corporate Social Responsibility: A Global Review

Introduction to CSR and Coca-Cola's Global Presence

In the age of multinational corporations, business ethics and corporate social responsibility (CSR) play an important role in establishing a company's image. Gaining information on companies' social responsibility is often not a priority for most people. In addition, depending on the stakes a person holds with the company, the information need can vary significantly (Dawkins, 2004). Recent financial misconduct by companies like Enron, WorldCom, and Arthur Andersen has brought to the forefront the need for corporate responsibility and business ethics. Companies operating in a region also have to be aware of the environmental, social, and cultural issues that exist there (Crane and Matten, 2004). A stricter global regulatory regime and an increased focus on enterprise risk management are also increasing the CSR demands that companies face (Berenbeim, 2005). As Wood (1991) states, "The basic idea of corporate social responsibility [CSR] is that business and society are interwoven rather than distinct entities; therefore, society has certain expectations for appropriate business behaviour and outcomes."

Coca-Cola has been in business for nearly 118 years. The company was initially founded in the United States. In 1906, the first bottling plants outside the U.S. were established in Canada, Cuba, and Panama. Today, the company operates in approximately 200 countries around the world, and global operations outside the U.S. constitute 70% of the company's income. The company enjoys tremendous brand recognition and markets about 400 different brands to the public. It also provides employment to a large number of people in every region in which it operates. For example, in the U.K. the company employs 5,000 people (Coca-Cola, Great Britain, 2005); in France, approximately 14,000 workers are employed directly and indirectly at production facilities and within distribution and marketing departments; and in Germany, the company's fifth-largest market, approximately 12,000 individuals are employed.

The company has also been constantly growing through internal means — developing new brands and products in-house — and by external means, such as acquiring certain Cadbury Schweppes beverage brands in the U.K. in 1999. Some of the major brands include Coca-Cola, Diet Coke, Cherry Coke, caffeine-free Diet Coke, Sprite®, Sprite Light, Fanta® Orange, Diet Fanta, Fanta Lemon, Lilt®, Dr. Pepper, Diet Dr. Pepper, Schweppes® Juices (six variants), Schweppes Cordials (three flavors), Schweppes Lemonade, Schweppes Diet Lemonade, Schweppes Lemonade Shandy, Schweppes Ginger Beer, Schweppes Indian Tonic Water, Schweppes Lemon Tonic Water, Schweppes Bitter Lemon, Schweppes Ginger Ale, Canada Dry® Ginger Ale, and Schweppes Soda Water.

Coca-Cola also develops brands unique to specific regions that satisfy local tastes. For example, in Germany, products like Mezzo Mix®, children's juice drink Qoo®, and Lift® Apfelsaftschorle (apple juice with carbonated water) are strong sellers (Coca-Cola, Germany, 2005). In France, products such as Minute Maid® (in multiple variants), Nestea®, POWERADE®, Aquarius®, Finley®, and Les Aventures de Mickey® enjoy great success (Coca-Cola, France, 2005).

The company has very well-defined markets at all locations in which it operates, and depending on legal requirements, operations may involve regional bottling plants and facilities. Recognizing the complexities of managing operations across different locations, the company has established an International Advisory Council (IAC) to help senior managers make effective decisions (Coca-Cola, International Advisory Council, 2005). The company recognizes that cultural, economic, and political dynamics affect the strategies it can employ. By better understanding the needs of local populations as well as government and legal requirements, senior management can plan more effective strategies for launching new brands or introducing existing ones.

Organizational Structure and Strategic Operations

Location-wise, the company operates through five strategic units: North America, Africa, Asia, Latin America, and Europe/Eurasia/Middle East (YahooFinance, 2005). Globally, the main competitors of the company are PepsiCo Inc. and Nestlé. Every organization, regardless of industry or region, requires some form of organizational structure. Structure is an entity made up of elements — such as people, resources, aspirations, market trends, levels of competence, reward systems, and departmental mandates — that affect one another through the relationships they form. A structural relationship is one in which the various parts act upon each other and consequently generate particular types of behavior (Fritz, 1996).

Alfred D. Chandler was a strong believer that growth without structural adjustment can only lead to economic inefficiency. Chandler postulated that a firm's structure is, in time, determined by its strategy, and that the common denominator of structure and strategy is the enterprise's matching of resources to market demand (Chandler, 1962). Organizational structures, rules, and regulations are generally viewed as instruments put in place to facilitate and aid task performance by all those involved in the organization (Morgan, 1997). An organization must be able to examine the entire picture — assessing both external and internal factors — to determine a strategy that works effectively across all dimensions.

Coca-Cola has grown tremendously since pharmacist John Styth Pemberton first invented his sweet soda in Atlanta in May 1886. Stakeholders for companies are identified as stockholders, suppliers, employees, and customers. The demands and requirements of these stakeholders have also evolved. The company states that it "will actively cultivate a diverse, rewarding culture that encourages our people to develop to their fullest potential, assuring enjoyment and satisfaction in the Coca-Cola workplace" (Coca-Cola, The Actions We Will Take, 2005).

Stakeholder Relationships and Market Strategy

The customer, in a market-driven economy, is the ultimate determinant of quality. Coca-Cola must therefore continuously improve its products and processes to capture and retain a sizeable market share. In the 1990s, many firms dealing in similar types of products consolidated and grew larger. This strategy ensured a greater market power and wider clientele for their products, which in turn increased their ability to streamline operations. Streamlining helped companies reduce buying prices and increase selling prices, thereby growing their market power and further expanding their market share. Companies also had to anticipate the needs and requirements of their clients and customers to ensure constant demand for their products.

Different strategies have been employed based on the type of product, the product's life cycle, and the manufacturing process involved throughout Coca-Cola's history. For example, during the World Wars, the inability to obtain raw materials for Coke in Germany encouraged the company to develop new products for that market. Product sales have been increasing in the U.S. as well as in other countries. The pricing and availability of a product ultimately determine its profitability.

Organizational design concepts have been constantly evolving over the past century. Most companies have undergone modifications as part of organizational change, generally initiated either by the customer or by the organization itself. Occasionally, a change in management style is forced — perhaps the result of unanticipated occurrences. The environment in which an organization operates is also constantly changing, and these environments, classified as external and internal, both have a significant impact on strategy.