Geo-Political Environment Research Paper
Coca-Cola in Kerala, India
The conflict between Coca-Cola Company and the people of Kerala in India is a good example of how companies have to make stringent measures in their operations to adapt to geopolitical developments in their areas of business. Business realities dictate that apart from economic and financial factors, organizations which fail to respond favorably to geopolitical issues have a difficulty in their environment of operation. While Coca-Cola has performed above board in geopolitics, the Kerala case is an example of such a mismanagement that not only resulted in unending conflict with the community, but also the cancellation of their license, the shutdown of their company, and the tribulation of undergoing through expensive court processes. The overall effect of this conflict has been reputational damage of the company and also that of its products. This paper focuses on the reaction of Coca-Cola Company in its efforts to continue with their operations and clear their image in the face of hostility from the host community. Despite its concerted effort, the company’s damaged image as a result of its poor handling of geopolitics can not be regained.
Kerala is one of the states of southern India, which is purely inhabited by the Malaysian speaking people. Coca-Cola Beverage Private Ltd opened their factory at Plachimada district, Kerala after obtaining an operation license from the Perumatty Village Council. By 2000, the company had begun their operations and was using in excess of 510, 000 liters per day in wells and boreholes. It is also alleged that the company lost 2.75 liters of water for every single liter properly utilized. According to the community, this was excessive wastage that had been created by over-exploitation of water leading to drying of open wells and boreholes (Singh, 2011).
The operations of Coca-Cola in Kerala affected the water supply in the region and resulted in dissent among the residents. After only two years of operations, women in the area began complaining about the drying up of wells and boreholes. Actually, the women had to make long trips to distant places in search of water. Additionally, they claimed that the water obtained from the distant places was not clean enough for drinking and led to skin rashes and eye ailments when used for bathing (Singh, 2011). The Perumatty Village Council responded by canceling the Coca-Cola license of operation as an initial mechanism to protect its people and the entire Kerala region. Since the company had invested heavily in its Kerala plant, it resisted the cancellation and entered into litigation processes against the community in order to regain the license (Singh, 2011).
The main concerns in this matter were the protection of the company’s operations because of its huge investments in the area versus the need to preserve the natural resources of the community in order to protect their livelihood. Accordingly, it was a delicate balancing act by both the Coca-Cola Company and the licensing authority. In a bid to retain its operations, the company’s only option was to seek legal course (Munoz, 2013). Most often, the courts would interpret the India’s land law in relation to the terms and conditions of the license that guides a company’s operations. Since governments, which are often the issues of the licenses, have the mandate to protect their communities, it was impossibly difficult for Caca-Cola to win this case.
In the Kerala situation, Coca-Cola went to court to appeal against the revocation of a legally acquired operation permit from the licensing authority. It soon realized that there was little or no support from the government. As a result, it stopped its operations in the region in 2004. While litigation is usually the first action by companies that are faced by negative geopolitical events, it sometimes fails because of unfavorable rulings that are made to protect the government’s interests. This issue is especially common where the decisions of the courts have to be implemented by the executive, which is a political wing of the government. Naturally, the administration can be reluctant to implement decisions that can lead to it losing favor with the electorate (Dubey, 2013). In a move to protect their electorates, elected representatives in parliament are usually quick to enact legislation that can complicate the operations of companies. For example, the legislators passed a law that empowered the citizens to seek compensation from Coca-Cola even after it closed had closed its operations in Kerala in 2004.
Alternatively, companies react to geopolitics by increasing their budgets on corporate social responsibility. In Kerala, Coca-Cola Company created networks to support the community’s effort to harvest rainwater as well as rally support towards this endeavor. This method can only be effective in communities which have not suffered from a company’s activities. The method could not be applied in the Kerala case because the negative effects of water drilling were clear and severe. Therefore, no amount of corporate social responsibility could change the company’s image (Dittmer & Shar, 2014).
Corporate social responsibility can only lead to positive effects in communities that have embraced the company, its projects, and its products. This can be achieved when community leaders, the government, social activists, and all stakeholders support a company’s activities. Apparently, these conditions were missing in the Kerala case; therefore, the community social responsibility conducted by Coca-Cola was ineffective.
Right from the establishment of the company, the leadership of Coca-Cola Company was not prudent on how to handle the Kerala situation (Coca-Cola website, 2017). They were not diligent enough to identify the effects of such a huge project on the environment. Therefore, they were not able to develop an appropriate mechanism to avert the negative effects of the project. If the company had established appropriate measures on how to avoid massive water wastage, which led to excessive drilling, the project would have been sustainable. Additionally, Coca-Cola Company could have attracted the support of the community by either creating strategic water points in Kerala that residents would have used to fetch water or providing piped water to all homesteads. Although supplying water to homesteads would have come at an extra cost to the company, it would have gone a long way in earning the much-needed community support.
In conclusion, the geopolitical environment can break or make a corporation depending on the reaction of its leadership. Usually, companies will seek legal recourse in courts of law or increase their corporate social responsibilities as a reactionary measure to the changes in the geopolitical environment. In extreme cases, where the effects of a company’s operations are severely negative, then they have to stop their activities. The Kerala case in India is an example where mismanagement of the geopolitical issues resulted in the closure of the Coca-Cola Company.
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Dubey, M. (2013). India’s Foreign Policy: Coping with the Changing World. New Delhi:
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Singh, J. (2011, February 24). “India Coca-Cola compensation law is passed in Kerala.” The BBC, 148, 24-28.
Munoz, J.M. (2013). Handbook on the Geo-Politics of Business. Massachusetts, MA: Edward Elgar Publishing Limited.