The Coca-Cola Company is one of the largest American beverage companies. The organization is having a market of 500 non-alcoholic beverage brands, usually sparkling beverages but also comprises a huge number of still beverages such as coffees, soft drinks, juices, waters, ready-to-drink teas and energy drinks. Their non-alcoholic beverage consists of Diet Coke, Sprite, and Fanta (Chmielarska, 2019).
The purpose of the study is to analyze the way a multinational organization has handled the crisis in the international background. The tainting disaster happened in Western Europe during the summer of 1999 when the school-going children in Belgium had been reported feeling ill after having Coca-Cola. The management of the organization, Coca-Cola was silent firstly and they denied to take the responsibility of the claims of illnesses (Chua et al., 2020). Coca-Cola’s crisis communication strategies have been based on the cultural norms of an American multinational organization that can eventually meet the demands of the Norwegian, Swedish, and Danish public, but their crisis communication strategies did not work out for French, Belgian, and Spanish consumers. In the end, Coca-Cola was forced to take a recall near about 30 million cans and bottles from the market and that was the first time when the total inventory of Coca-Cola production got stopped and banned for sale. On the initial day, the organization failed to recognize the problem, and acknowledging the serenity of the situation harmed the brand reputation.
The school children of Belgium had reported headache, nausea, vomiting, and shivering after having Coca-Cola and in some of the cases it went out of hand and they had to get hospitalized. According to the report, the drink was tasteless and of unusual color. Many of the children reported poisoning in their drinks (Phaewprayoon, 2020). As the situation was going out of their hand, the chief executive of Coca-Cola disclosed the situation, and according to his opinion that the experts had not found out that there are no toxic ingredients in the beverages and they were produced in the safest condition.
Following the background of the study, the purpose of the case study has several directions. The main purpose of the case study is to make an understanding of the public relations issues involved in Coca-Cola’s Belgian case. The analysis on the crisis management handled by Coca-Cola and the accountability of the upper management of Coca-Cola in this crisis. This discussion of the case study will also highlight the organizational behavior strategy that Coca-Cola should adopt to make alignment of the cultural complexities in the global business marketplace.
The organizational structure of Coca-Cola is has a unified and global value as it is flexible and the adaptable features make them aligned with the regional culture to understand the market sensibility. The structure of organizational behavior primarily depends on the internal and external factors of the organization (Brondoni, 2019). The huge recall that the company has faced in the 1999 Belgium crisis, the main reason behind the downfall of the organization is the communication gap in the organization. Immediately after the incident, the brand has denied the fault all of sudden and refused to take responsibility for the crisis.
Later Coca-Cola had been recovered from the crisis through several taken by Belgium government intervention in the case. The higher authority of Belgian officials had to close the charge on Coca-Cola and made the announcement that no charges would be filed against the brand. The Belgian health ministry report on the crisis of Coca-Cola indicated that there were no such traces of toxic contamination had been reported inside drinks of Coke bottles (Schwarz, 2019). The small traces of carbonyl sulfide, producing a rotten-egg smell has been found in most of the cans sold in the market, but there was no toxic reaction found in the products and the management of the Coca-Cola production plant has produced the report that shows no malfunctioning in the production plant.
From the study, it has been found that Coca-Cola faced a major financial setback from the Belgium crisis. The huge number of product recall has impacted their net income of the third quarter and the net revenue had been come down to 21% to $942 million (Jortikka, 2022). The company has been affected by the cost deduction in their operational field and the destruction of the recalled products cost the company was $103 million (£66 million). Further, the organization faced several repercation. This Belgium crisis recall led to a 5% decline in the revenues earned from the Coca-Cola bottling plants and also there was a sheer deduction in cash operation profit by nearly 6% (Aureen Taylor, 2000).
It was reported from the study that Coca-Cola has put extra effort into its promotional activities to regain the customer’s trust. The company has provided extra benefits such as huge discounts to the wholesalers and retailers and extra promotional offers. But these activities went against the Belgium antitrust law and the government forced them to take back promotion from the market.
From the case study of the Coca-Cola 1999 Belgium crisis case, it can be stated that several issues remained in the internal organizational structure. According to the management consultant and higher authority of Coca-Cola, has been reported that this Belgium crisis has caused sheer effects on the brand reputation in creating public relations. Here two aspects can be considered as power distance and uncertainty avoidance.
The power distance model in organizational behavior usually refers to the degree to which individuals, institutions, and societies accept injustice and inequalities in terms of status, wealth, and power. It can be described as the dissimilar dissemination of power in organizations in the business field (Ahmad & Gao, 2018). It directly hampers organizational structure. In terms of high power distance model organization, the higher authorities tend to micromanage institutional activities. In the case of the small decision-making process can transfer to the top management for higher resolution. Consequently, higher-level managers are engulfed with groove decisions.
Individuals in cultures where there is a high level of uncertainty avoidance aim to prevent the risk of uncertain and unexpected scenarios by establishing and enforcing norms, regulations, and restrictions (Ajala, 2021). Ambiguity minimization, according to Hofstede, focuses on how people of society strive to adapt to anxiousness by addressing issues.
Western Europe is considered a complex region from the point of view of cultural variation. Some nations critically have high uncertainty avoidance and power index and some of the nations have a low index. This case of the Belgium crisis of Coca-Cola has reflected how the cultural variation influences the public relations of the organization (Tóth, 2021). As Coca-Cola failed to respond to the issue promptly, it affects the customer’s loyalty. The company refused to take responsibility even after the illness of 200 people, this hampers the brand reputation and many consumers stopped consuming coke products. In Western Europe, Government plays an essential role in public and Government–business relationships can be considered as the crucial aspects of public relations in Western Europe.
Apart from that, Coca-Cola followed an organizational structure where they tend to use the empowerment model. The Coca-Cola Company tends to follow the organized structure that stimulates employee engagement in all the important aspects of the organization’s decisions which are considered to be a relatively inadequate decision-making practice in an international organization like Coca-Cola (Jones & Comfort, 2018). The company’s decision-making strategy doesn’t correlate with any of the company’s existing techniques; the company exclusively utilizes decentralized decision-making guidelines.
There are certain loopholes in the organizational structure of Coca-Cola’s business strategy. From the case study analysis, there can be certain suggestions that Coca-Cola could have applied in their organizational strategies so that they can prevent the risk associated with the crisis.
Conclusion
This Belgium crisis has impacted the revenue and brand reputation of the organization. CEO Ivester had failed to handle the situation and therefore he declared his resignation. A “Coke’s Back” advertising campaign had been implemented to regain the market share of the organization. Coca-Cola has tried with all their efforts through several marketing campaigns to earn the brand reputation and trust of the Western European public.
References
Ahmad, I., & Gao, Y. (2018). Ethical leadership and work engagement: The roles of psychological empowerment and power distance orientation. Management Decision. https://doi.org/10.1108/MD-02-2017-0107
Ajala, O. I. (2021). An examination of the use of culture by Coca-Cola (Doctoral dissertation, Dublin, National College of Ireland). https://norma.ncirl.ie/id/eprint/5509
Aureen Taylor (2000). Cultural variance as a challenge to global public relations: A case study of the Coca-Cola scare in Europe. , 26(3), 277–293. https://doi.org/10.1016/s0363-8111(00)00048-5
Brondoni, S. M. (2019). Shareowners, stakeholders & the global oversize economy. The coca-cola company case. Symphonya, (1), 16-27. https://doi.org/10.4468/2019.1.02brondoni
Chmielarska, M. (2019). A journey towards sustainability: the Coca-Cola company case study (Doctoral dissertation). https://run.unl.pt/handle/10362/69088
Chua, J. Y., Kee, D. M. H., Alhamlan, H. A., Lim, P. Y., Lim, Q. Y., Lim, X. Y., & Singh, N. (2020). Challenges and solutions: A case study of Coca-Cola company. Journal of the Community Development in Asia (JCDA), 3(2), 43-54. https://doi.org/10.32535
Hofstede, G. (2009). Geert Hofstede cultural dimensions. https://my.liuc.it/MatSup/2016/A86047/3%20Multicultural%20schools.pdf
Jones, P., & Comfort, D. (2018). The coca-cola brand and sustainability. Indonesian Journal of Applied Business and Economic Research, 1(1), 34-46. https://doi.org/10.32456/.v1i1.1
Jortikka, A. (2022). The effect of intangible asset intensity on analyst forecast accuracy. https://helda.helsinki.fi/dhanken/bitstream/handle/10227/467301/Jortikka_Atte.pdf?sequence=1
Phaewprayoon, P. (2020). ASEAN Journal of Management & Innovation Volume 1 Number 1, January-May 2014. ASEAN Journal of Management & Innovation, 1-74. 10.14456/ajmi.2014.5
Schwarz, A. (2019). The estate of strategic organizational crisis communication resesarch in the context of global and digital communication. RAEIC, Revista de la Asociación Española de Investigación de la Comunicación, 6(11), 279-310. https://doi.org/10.24137/raeic.6.11.15
Tóth, R. L. (2021). Does culture matter during a crisis?: The effects of cultural dimensions and image repair strategies on organizational reputation and word-of-mouth intentions (Master’s thesis, University of Twente). https://purl.utwente.nl/essays/87526
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