Business Vkontakte (known as VK, equivalent to

     Business Ethics fornegotiation:Final Paper AssignmentUnhappy New Year forCoca-Cola       KUO, Fan Chi (Charlene)[email protected]    IESEG School ofManagementMNG- MSc ofInternational Business NegotiationDr. DE COLLE SimoneIntroduction of Coca-Cola The Coca-Cola Company, which is based inAtlanta, Georgia, is the world’s largest beverage company with almost 500brands.

The brand was founded in late 1800s after John Stith Pemberton inventedthe world’s best-known beverage, Coca-Cola or Coke. In 1889, the Coca-Colaformula and brand was bought Asa Griggs Candler who incorporated The Coca-ColaCompany in 1892 (The Coca-Cola Company, n.d.). Description  On December 30th,2015, Coca-Cola Russia launch an iconic advertising campaign. They use thetypical “coke red” on a holiday greeting message along with a map of thecountry dotted with Christmas tree which was posted on Vkontakte (known as VK,equivalent to Facebook) and tried to represent the harmony based on how cokebrings people together. However, this idea unexpectedly triggered thecontroversial geopolitical issues between Ukraine and Russia while Coca-Cola Russiaexcluded Ukraine’s Crimean Peninsula (The Guardian, 2016) To give a briefintroduction of the political background, the Crimean status referendum in 2014will be introduced. In February and March 2014, Crimean and Russian authorityused the internal conflict in Ukraine to deprive the Ukrainian government ofits control over Crimea to hold a referendum and to declare Crimea’sindependence.

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About 95.5% of voters in Crimea have supported joining Russia (Morris, 2014). Even though it wasa disputed referendum, on the day after the declaration of independence, Russiaofficially recognized Crimea as an independent state. The Crimean parliamentthen requested Crimea to be admitted to Russia.

Within a few days, theconstitutional requirements for an accession of Crimea and Russia werefulfilled (Marxsen, 2014).  An apology alongwith the second version of the map that included Crimea and the other two territoriesmissing in the earlier version were issued on its official VK page on January 5th,2016. Unfortunately, this move was not the end of the storm. In an oppositeway, it generated a wave of outrage from Ukrainians and a new hashtag forCoca-Cola was created, #Bancocacla.

Ukrainians even called for a boycott ofCoca-Cola (BBC News, 2016). The boycott wassupported amongst some regional politicians. Ukraine’s U.S. Embassy wrote in anonline-statement,” Coca-Cola’s actions violate the official U.S.

positioncondemning Russia’s illegal occupation of Crimea, which is and has always beenan integral part of Ukraine (Makortoff, 2016).” Afterward,Coca-Cola Russia removed the post and apologized. The spokesperson for thecompany claimed that the map was changed by a hired agency without thecompany’s acknowledge or approval and said “We, as a company, do not takepolitical positions unrelated to our business, and we apologize for the post (Makortoff, 2016).” Stakeholder Map To do a stakeholder mapping, some internal and external stakeholders willbe identified and listed. As Coca-Cola addressed, “We define stakeholders aspeople or entities that are directly or indirectly impacted by our operations,and who in turn also affect our ability to grow our business sustainably (The Coca-Cola Company, n.d.).” Coca Cola identifies their stakeholders as employees,customers, consumers, suppliers, government, regulatory bodies, communities andalso NGOs, who represent the interests of their stakeholders (The Coca-Cola Company, n.

d.). In this case, the stakeholders were identified as employees, customers,consumers, suppliers, government, communities and regional politicians. The model ofStakeholder mapping is: COC: Coca-Cola GOV: Government EMP: Employees SUP: Suppliers CUS: Customers CON: Consumers REG: Regional Politicians COM: Communities : Boycott : Relations : Forces of public opinion : Financial Impact : Taxes Government vs.Coca-Cola:The financial impact through boycott may lead to a significant decreaseof taxes which might raise the attention of the governmentEmployees vs.Coca-Cola:Along with the financial impact, the force of publicopinion thump the employee morale. Suppliers vs.

Coca-Cola:While Coca-Cola isput under microscope, its suppliers may also be examined by the public. Theforce of public opinion may bring pressure to them.Customers/ Consumers vs. Coca-Cola:Calling for aboycott was a quasi-social activity. At this point, the relationship betweenCoca-Cola and its customer and consumer has already damaged. Regional Politiciansvs.

Coca-Cola: In this case, one of the Russian regional politicians, Oleg Mikheyevasked prosecutors to list Coca-Cola company as an “undesirable organizations.”The classification would make it illegal for Russian citizens andcompanies to maintain any contacts with the corporation—or be heavily fined (Swerdloff, 2016). A Ukrainian leadingpolitician called for a nationwide ban as well.

The prosecutorof Ukraine’s regional government in exile in Crimea even launched a criminalprobe against officials of the Coca-Cola company (Sharkov, 2016).Communities vs.Coca-Cola: As claimed, “we recognize that we cannot have a healthy and growingbusiness unless the communities we serve are healthy and sustainable (The Coca-Cola Company, n.d.).”The relations that has been established between Coca-Cola and the communitiesmight be damaged through the boycott. Ethical Discussion  There are four stages in ethical decision-making: recognize moral issue,make moral judgement, establish moral intent and engage in moral behavior, andtwo factors that influence all stages: individual and situational factors (Crane & Matten, 2016). Moral Framing is an issue-related situational factor.

As Coca-Cola’sspokesperson blamed a marketing agency for using the controversial map whichdrew protests and threats of a boycott from angry Ukrainian, people perceived itas a behavior of shirking responsibility (Reuters, 2016). By a false way of framing, Coca-Cola did not deescalate the tension butescalate in another opposite way. Another situationalfactor is organizational norms and culture. Being a leading giant in the world,Coca-Cola’s unique selling point is their secret formula, which isirreplaceable and makes it undefeatable. Even you stop drinking coke today,there are still tons of oversea customers. This shows how powerful the companyis.

  Nationaland cultural characteristic, one of the individual factors, could be seen onthe company’s stakeholders. How does the Coca-Cola company, an American basedcompany in Russia, survive in Russia? A brief view of comparison of the 6cultural dimensions between the U.S. and Russia:InRussian market, the company should be more prudent in every single detail. Alongwith high power distance and high long-term orientation in Russia, theCoca-Cola company as an American company with a low power distance and lowlong-term orientation would need to adapt to the characteristics of Russianwhich the company may not be familiar with.  Asa leading company in the industry, the Coca-Cola company tends to have a high internallocus of control. Everything seems to be easily twisted around its fingers.Being put into the hot water of Crimea issues was unexpected and irreversible.

Corporate Ethics  Over the years, Coca-Cola has faced several moral crises. The company hasevolved and changed their perspective. The ethical framework of the company wasego-centric without any concern of social responsibilities. Currently, the newethic framework includes the company’s vision statement, code of ethics,corporate responsibility, sustainable policies and increased governance.

Toensure the implementation of new ethic framework, the Code of Business Conduct,Coca-Cola established an Ethics and Compliance Committee (Sewell, n.d.).  A good code of ethics should contain four functions, moral legitimisationfunction, cognitive function, governance & strategic management functionand incentive function (, n.d.).

The Coca-Cola company has its own code of ethics which is recognized as “theCode of Business Conduct.” In this case, the Code of Business Conduct forCoca-Cola France, refreshment services and Coca-Cola midi will be referred. Itcontains the same guideline as the Code but with slightly modification to adaptto French law.It is divided into four parts: acting with integrity around the globe,integrity in the company, conflicts of interest and integrity with others.

“Integrity” is fundamental to the Coca-Cola company. What does it mean? Itmeans “doing what is right.” The Code of Business Conduct is the guideline forthe entire company. The Code addresses its responsibilities to the Company, toemployees, to its customers, suppliers, consumers, and government.There are five questions listed to ask while it comes to a dilemma:1.     Is it consistent with the Code?2.     Is it ethical?3.     Is it legal?4.

     Will it reflect well on me and the company?5.     Would I want to read about it on the newspaper?If after questioning yourself, you are still uncertain. The guidance alsotells you who to go and who to talk to: your manager or Department Director, yourLegal or Finance Director, your Local Ethics Officer and the Ethics Office (The Coca-Cola Company, 2008). There are seven criteria to examine whether the Coca-Cola company has aneffective ethics program: 1.     Compliance Standard and Procedure: The Code of Business Conduct2.     High Level Oversight: The Ethics & Compliance Office3.

     Careful Delegation4.     Effective Communication: the Coca-Cola company does offer ethicaltraining to its employees5.     Monitoring System: Local Ethics Officer6.     Consistent Discipline: It is required in the Code7.     Process Modification: According to different countries, the Coca-Colacompany offers different versions of the Code of Business Conduct and eventranslates into different languages(De Colle, 2017) Issue Analysis It was a right versus wrong situation. Politics is always an issue thatcorporates want to avoid since it might create new segments and divide thecustomers. By including Crimea in the map in the second move, Coca-Cola Russiadidn’t successfully escape from the crisis.

Instead, Coca-Cola Russiabrought themselves into the fresh anger from Ukrainian which led to theboycott.  There are twooptions for Coca-Cola Russia, either to remove the map and apologize or todirectly launch a new advertising campaign. A possible and more rationaldecision is to remove the map and issue an apology because as a corporate, thecompany would not take political position that unrelated to their business astheir spokesperson already claimed.

Through the official apology to public,they might be able to save their image and reputation in Russian and Ukrainianmarket. Directly launching a new advertising campaign to get rid of the scandalis an avoiding behavior which may escalate the tension of the boycott andworsen the relations between Coca-Cola and their customers. The spokespersonaddressed that the map was changed without company’s approval and acknowledgebut still it was posted by Coca-Cola. This statement would be translated as anexcuse and damaged the company even worse.

Personal View  It was not a clevermove to declare the liability by blaming its partner publicly. The Coca-ColaCompany claimed that it was a map without approval and acknowledgment but itwas posted through the Coca-Cola’s official account in Vkontakte. Once it wasposted under the Company’s name, the Company’s should be responsible for it.

Ifwhat was posted through the official account was not credible, what shouldcustomers trust?  Social media isbecoming one of the main platforms that companies interact with its customers.The credibility will directly influence the image and the reputation of thecompanies. This is not the first time that the Coca-Cola company is doubted andchallenged. An apology wasnecessary at this situation. As a multinational company, it should never takepositions on politics and religion.

The latest version of the Code of BusinessConduct was edited in 2008. Although it included much more dimensions than theearlier version, I would suggest that the Code must be updated at least everyten years and include the controversial issues that happens to the company. Byupdating in accordance with what happens in the real-world, the Code would bemore precise and useful.

 Removing the map isnot enough to appease Russian and Ukrainian especially with such a delicatetopic that even the political position of the White House was referred, so anapology is inevitable. However, from the business perspective, to make up theloss, a new marketing campaign may be a good approach but it could not be donein a short time. If it is done in a short time, it may ignite people’s angeragain. Time may be the cure for the pain. Wait for a little while and then makea new move will be smarter for the Coca-Cola Company.

And the new move would bethe last chance to save its image, reputation and its relations with itscustomers, consumers, suppliers and government. Bibliography BBC News. (2016, January 6). Coca-Cola Crimea map move sparks Ukraine boycott calls. Retrieved from BBC News: http://www. Crane, A., & Matten, D. (2016).

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