Honduras International case

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Honduras International Case Assignment

Fall 2020 - GLB/International Marketing (MKT-420-0… SK

Due at the end of Week 11.

Marketing Coca-Cola in Honduras: Corporate Social Responsibility Issues

By Mary Anne Doty, Texas A&M University - Commerce

Mission Trip Recap

“I know we’re doing a lot of good here, but I’m getting tired of holding children down

while we pull their teeth,” Alexa blurted. The group of 30 adult missioners visiting rural

Honduras was conducting the nightly “reflections” session as they looked back on the high

and low points of their day. “I’m glad we can relieve their pain, but it is so hard to come

back year after year and see these kids drinking heavily sugared soft drinks and continuing

the cycle”.

Most of the volunteers had made the trip to Honduras in previous years, so they knew

what to expect. To keep from getting intestinal diseases, the missioners took prescription

anti-biotics every day of the trip. They washed their hands frequently and after drying,

used hand sanitizer. Twice a day they took Pepto-Bismol to protect themselves, and

avoided any food that was washed with water, including salads, vegetables and fruit that

wasn’t peeled. The sponsoring church purchased cases of bottled water to keep the team

members hydrated and healthy during their visit.

As Americans, the team members were accustomed to having an ample supply of clean,

safe water, because for longer than their lifetimes, public water in the US was universally

disinfected. There was no familiarity with the radical improvement in public health when

chlorination of pubic, semi-public and even private water supplies occurred. For example,

death rates from typhoid, a waterborne disease, dropped from 36 per 100,00 in 1900 to

fewer than 20 people in the entire US in 1960. Even without industrial pollution, fresh

water may be contaminated by naturally-occurring micro-organisms. Aside from drinking

untreated water, people can become sick from bathing, preparing food, or washing with

contaminated water. Additionally, in the US, fluoride is an additive during the treatment

process, reducing tooth decay for millions.

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process, reducing tooth decay for millions.

The team included two physicians, a nurse-practitioner, two oral surgeons, an RN, and

many volunteers to set up a makeshift clinic and pharmacy in the basement of a church.

Sheets suspended by wires served as walls to separate the dental clinic from medical

examining rooms. Local bilingual high school students were hired to supplement the

Spanish-speaking skills in the clinic. The week-long clinic helped a medically underserved

village, and the pharmacy was stocked with the recognition that many patients would not

see a doctor or dentist until the next mission trip in a year. Almost 700 villagers were

treated in the course of a week. Children were often treated for intestinal parasites or

worms, and were given a six-month supply of vitamins to combat inadequate diets.

Pulling rotting teeth was the most common treatment in the dental clinic. Even young

children and teens lost permanent teeth to avoid the pain of severe cavities. A few

toddlers had baby teeth turning black from drinking cola drinks in their bottles after

weaning. A two-year old girl prompted Alexa’s worry about holding down screaming

children. Sadly, the volunteers were coming back to the same problems they had dealt

with in previous years. Is there nothing that can be done?

Living Conditions in Rural Honduras

Honduras is frequently cited as the second poorest country in the Western Hemisphere

(after Haiti), and it has the highest murder rate in the world. Only about 22% of the

country’s population live in the major cities, with the majority residing in rural areas and

villages. Most of the population lives in the mountainous region in the Western half of the

country.

The impact of poverty is considerable. Most Hondurans live in bahareques, which are huts

with dirt floors that are generally one or two rooms. The roofs are frequently made of

corrugated metal, although wealthier homes have tile roofs and electricity. If running

water is available, it is often contaminated with the microscopic parasite, Giardia, which

can cause fatigue, diarrhea, cramping and weight loss. Upscale hotels serve ice made with

purified water and warn patrons to use bottled water to brush their teeth and for other

needs.

Because there is little electricity, the average Honduran has no way to refrigerate food

and must cook over a wood fire. Hotels, businesses and wealthier homes have windows,

and electricity provides air conditioning, refrigeration and other appliances usually seen in

more developed countries; they also have generators. The government cannot produce

enough electrical power to reach every region, so planned blackouts occur once or twice

every week. Hotels, some businesses, and upscale homes rely on generators to power

their appliances and lights during blackouts.

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While agriculture is the main source of income, many people are malnourished, or don’t

have sufficient food. What they can afford is purchased from street vendors daily, as well

as local shops and restaurants. The average family subsists on corn, beans, rice and

occasionally, meat. Along the major highways, there are food stands painted with the

colors and logos of Coca-Cola or Pepsi about every mile. These two companies enjoy deep

market penetration in the rural regions and urban settings alike. Doctors and public health

officials complain that soda consumption contributes to malnutrition, dental disease and

soaring rates of diabetes and obesity as soda replaces water and other beverages. In some

places, soda is cheaper than pure water. Even in Mexico, a comparatively prosperous

neighbor, studies estimate that one in six diabetes cases is directly linked to soda

consumption and diabetes is the leading cause of death in Mexico, affecting 13 million

people.

Cultural Considerations

In addition to radically different economic environments, the cultures of the two countries

vary considerably. Before the mission began, some volunteers researched Honduran

cultural norms to better understand the people they were helping. Psychologist Geert

Hofstede identified descriptors for cultures around the world, allowing relative contrasts

between cultures. Only four of Hofstede’s six factors have been studied in Honduras, but

the differences between Honduran cultural norms and American ones are relevant.

Hofstede’s

Dimensions Scaled

1 to 100

Power Distance Individualism Masculinity Un

Av

Honduras 80 20 40 50

United States 40 91 62 46

Power Distance describes attitudes about the inequality of power in a society. Honduras,

with a score of 80, shows a culture that accepts inequality as a way of ife. Individuals

expect that the powerful (political and corporate) make the rules and there is little the

individual can do to change the status quo. Americans, on the other hand, are judged to

have a low power distance, meaning that American culture expects a more equal

treatment of all groups.

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treatment of all groups.

Individualism describes the degree of interdependence that members of a society have

with each other. American society has a score of 91, indicating that the freedom of

individuals is very important in the culture. Hondurans, with a score of 20, would be rated

a collectivistic society, where long-term commitment to the group (family, extended

family, village) is more important than individual success.

The contrast between the two cultures on the scale of masculinity is less intense but still

notable. A score above 50 (such as the US at 62) indicates a society driven by

achievement, competition and success. A score below 50 (such as Honduras at 40)

describes a more feminine society characterized by enjoying consensus, solidarity and

quality of life free from conflict.

Finally, comparison between the two cultures on the concept of uncertainty avoidance

shows little difference between the two cultures. Grappling with the inability to know

what will happen in the future, both Hondurans and Americans are willing to plan, take

risks, and be flexible. Neither culture feels overly threatened by new ideas or ways of

doing things like those in a culture with a very high uncertainty avoidance.

Coca-Cola and Pepsi Sales in Honduras

As the demand for cola beverages and other carbonated sodas matured in the United

States, both Coca-Cola and Pepsi-Cola sought out international markets to become global

corporations. By 2014, Brian Smith, President of Coca-Cola’s Latin American Group,

commented that nearly one-third of the company’s global volume in sales came from his

territory. The Latin American Group covers Mexico, Brazil, Central America (including

Honduras and neighboring Guatemala), South America and the Caribbean. Smith cites

huge growth in sales since 2000, in spite of challenges with infrastructure, bureaucracy

and economic conditions.

Producing and distributing beverages requires large amounts of drinkable water, leading to

criticism that the leading manufacturers are depleting the watershed in countries where

they produce sodas and other beverages. In 2007, Coca-Cola set a goal of replenishing the

water it uses by the year 2020. In 2016, Coca-Cola announced they had met this goal five

years ahead of schedule, although outside auditors concluded that the 191.9 billion liters

of water they returned were not necessarily in the same locations where the water had

been removed. Complaints about Coca-Cola’s water depletion were reported in Chiapas,

Mexico, where residents had to purchase water when the wells ran dry near the FEMSA

plant (the large Mexican Coca-Cola bottling affiliate).

Pepsi-Cola has responded by pledging to protect and restore watersheds in Latin

American countries where it operates. Beginning in early 2017, Pepsi has initiatives to

replace the water at the source from where it was taken, along with planting native trees

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replace the water at the source from where it was taken, along with planting native trees

and other plants to reduce soil erosion, and putting up fences to keep cattle out of

environmentally fragile areas.

In spite of these efforts, both companies face charges of greenwashing, or diverting

attention from other environmentally dangerous practices by highlighting other

improvements.

Coca-Cola’s Corporate Social Responsibility (CSR) Programs

Coca-Cola and Pepsi-Cola have both found ways to prosper in an impoverished country.

They have overcome challenges with pure water to manufacture large amounts of

beverages locally, providing a safe source of liquid and calories. They have provided jobs

for local citizens through the manufacture and distribution of their products. The firms

have extensive distribution networks that deliver products to the most remote villages in a

country with poor and sometimes inaccessible roads.

Coca-Cola has an extensive list of initiatives in the area of Corporate Social Responsibility

(CSR). The 2016 Sustainability Report describes efforts to protect agriculture with

sustainable sourcing, improvements in human and workplace rights, water stewardship,

responsible packaging and recycling, women’s economic empowerment, and donations of

over $106 Million dollars to help customers around the world. The company has pledged

to gradually reduce sugar to meet World Health Organization recommendations that

people take less than 10% of their total energy/calorie consumption from sugar. New

product lines focus on alternatives to soda, including organic tea, coconut water, juices,

purified water and ultra-filtered milk products that have higher protein and calcium and

longer shelf life than typical milk products. They also pledge not to target children under

12 in advertising, and to make nutritional information available to consumers.

Someone should to do something – Back to the Mission group

By the end of the week-long trip missioners were unified in wanting to attack the

problems of poverty, disease, tooth decay and unclean water, but the more they

researched causes of the problem, the harder it became to pin responsibility on any one

group. The people in a poverty-stricken nation are not in a position to solve the problem

alone. Their government is not able to supply basic infrastructure needs for the whole

country. Churches and nonprofit organizations are contributing help in many ways, but the

problems are entrenched and hard to solve. Many global corporations are also making

significant contributions to the welfare of people in Honduras and other Central American

countries.

There are several questions remaining to be answered. Who is responsible for the

problem? Who has the means to solve the problem? Are there unintended consequences

at work? If Coca-Cola and Pepsi stopped selling soft drinks in Honduras, would the people

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at work? If Coca Cola and Pepsi stopped selling soft drinks in Honduras, would the people

be better off? Are children drinking soda from a bottle better off drinking unsanitary

water that will make them sick? Are malnourished people better off if they still can’t

afford calories to fight hunger?

Alternatives

Members of the mission team brainstormed about possible interventions to reduce the

impact of tooth decay, diabetes and malnutrition. Some of the suggestions included: (1)

Encourage Coca-Cola to use some of the clean water produced and their intensive

distribution in the country to sell fluoridated water at affordable prices; (2) Encourage

Coca-Cola to partner with non-profit organizations, such as Rotary International, Water

for People, Water.org, etc. to fund clean water delivery systems to rural villages; and (3)

Encourage Coca-Cola to introduce healthier alternatives to soda, such as individually

packaged milk products with long shelf life that do not require refrigeration (similar to the

Fairlife brand sold in the United States) so that children could drink liquids safely while

gaining nutrients.

Conclusion

Each recommended alternative has an opportunity to make things better for Hondurans.

However, no one solution seems to address all the interconnected problems. At the end of

the day, the people of Honduras will still be living with poverty, unsanitary conditions, and

lack of medical care and infrastructure, regardless of efforts of global companies and

visiting missionaries. Will any of these solutions have any long-term impact?

Case Instructions

Read the above case and then demonstrate understanding of the key concepts from the

textbook (especially the noted chapters in some questions) in your written analysis of the

case. Your paper will be written as a Word Document (Ariel 10 point, single-spaced, with

double-spaces between paragraphs). Answer the questions as you follow the standard

format for cases:

Your name, title and date

I. Introduction

a. Incorporating questions 1 and 2

II. Situation Analysis – Global Business Environment Factors

a. Incorporating questions 3 and 4

III. Alternatives

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a. Incorporate questions 5 and 6 as you consider the corporate social

responsibilities of Coca-Cola.

IV. Recommendation

a. Incorporate question 7

V. Implementation

a. Incorporate question 8

Discussion Questions

1. What are the major issues the church mission group is concerned with?

2. Who are the major stakeholder groups that need to be considered when analyzing

the related problems of poverty, tooth decay, lack of pure water, and obligations of

global business partners in Honduras?

3. What global environmental issues does Coca-Cola need to consider for the market

in Central America? How is this different from the business environment in the

United States? (CH 2 and CH 3). Be sure to contrast political and legal issues,

economic issues and technology issues.

4. Discuss cultural diversity when comparing consumers in the United State and those

in Honduras? What cultural factors are at work that influence the problem or

possible solutions for a corporation doing business in Honduras? For example,

comparing Hofstede’s 6D model, are there cultural differences between consumers

in Honduras and the United States that need to be considered in forming plans? In

what ways is the culture of Honduras similar to the United States? In what ways is

it different? (CH 4)

5. Describe Coca-Cola’s social responsibility in Latin American dealings. What ethical

standards should they use? (CH 5)

6. Evaluate at least two feasible alternatives suggested by the mission team for

eliminating the problems.

7. Recommend one of the alternatives or propose and justify your own solution. What

would be the outcome of your recommendation?

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8. What would Coca-Cola have to do for this to work (implementation). What

resources and timeline would your solution take?