Multinational Companies face challenges especially in developing countries or in early markets. Challenges emerge due to less or no corporate social responsibility in the MNCs. Multinational companies plunder the wealth and resources of developing nations and the developing markets. Due to inferior quality of technological and educational advances in developing nations, MNCs misuse the law and regulations to their own benefit by implementing sweatshops, polluting the environment, and causing social instability in local regions surrounded by the factories. MNCs are only interested in their sheer profits but not interested in the wellbeing and development of the people of developing nations. Coke and Pepsi are example of MNCs in India who exploited the resources with no proper corporate social responsibility. These both companies only saw the opportunity in developing market such as India with huge population of 1.27 billion, only to make money by providing less quality products to local consumers, which they wouldn't dare to perform in their own home country. Initial allegations were opened on Coke and Pepsi in 2003 by India's Center for Science and Environment (CES), by providing the details for proof of high level of pesticide content from both the company drinks, and later followed by India Resource Center (IRC) accusing the beverage companies of over-consuming scarce drinking water in the regions, and polluting the water sources.
Initially, both companies faced charges that their products contained unsafe amounts of pesticide which is 24 times more than permitted and also the companies were polluting India's drinking water. This is an issue to be managed by both companies that developed into a crisis when many Indian states, starting with Tamil Nadu started banning the sale of drinks manufactured by them. Furthermore, state-mandated warning labels contributed to the crisis.
The international focus was on Coke and Pepsi, whether the companies had less strict standards for their quality in India than other European countries. Clearing the crisis that developed in India became the companies first priority, as failure to manage this crisis could have resulted in the total ban of the companies' products. Managing the consumer and government stakeholders allowed the companies to address the issues raised by the special interest groups, including the allegations that the companies weren't meeting certain global safety standards. Firstly, Pepsi did it by issuing an advertisement in the front page of newspapers stating that their product is safe and put it through all the tests required and also helping the worker families of their company. And then Coca Cola replied to this by sending an invitation to all the neighborhood people and the stakeholders to visit its safe and clean factories and ensure themselves with how they make their products that they sell, boosting confidence among the people.
Both companies have lately accepted their economic, legal and ethical responsibilities in India. By entering into Indian market, both Coke and Pepsi have tapped new consumers to boost corporate profitability. The criticisms faced by the companies fall within the proper jurisdiction. Both companies faced allegations that their products contained high amounts of pesticide and that the companies were polluting water sources in the country. The map below indicates the bottling facilities of Pepsi and Coca Cola, these factories are using the water and polluting the source by which many people surrounded by it are getting affected. My personal experience was, when I studied in a school for just one year and had to transfer to a different branch due to nearby Pepsi bottling factory created lot of sound pollution.
However, both companies attempted to show that these allegations are false and have
created philanthropic activities to pursue clean water projects, in which companies said that they will replenish the used water through their purifying program and restore the quantity they used for bottling.
Both the companies have been attacked due to their foreign roots. As mentioned in the case, some Indian produced milk products and teas contain more pesticides than Coke and Pepsi products.
When the allegations were in rage, I would say that making an Indian-born as the CEO helped remove Pepsi from the focal point of criticism. Consumers are more likely to relate to “one of their own” and Indra Nooyi's visit to India, strengthen the product in her fellow citizens' eyes.
The steps taken by both companies to prevent further damage, seem to have met some success. The response in the media, the hiring of popular Indian-born spokespeople to support the products seem to work on some consumer concerns. Using grassroots efforts to determine consumer concerns and developing a targeted marketing campaign based on the information obtained in those efforts proved to be helpful in the improvement for Coke and Pepsi. Stakeholder management, specifically management of consumers and government, is key to addressing these issues. In fact, successful attempts to solve the allegations faced by Coke and Pepsi involved both companies identifying ways to manage the expectations of both these stakeholders.
MNCs must be prepared for resistance that they will meet in the global marketplace from special interest groups. This can be done successfully by proper research and Companies should be prepared to respond to these groups prior to entering a new country with Corporate social responsibility. If the companies anticipate the response by special-interest groups and addressed stakeholder management issues, including an importance on managing the consumer and the government as stakeholders, Coke and Pepsi may have been able to prevent the issue from developing into a crisis.
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