Ethics in Business: A Case Study of PepsiCo

This article discusses the ethical considerations of PepsiCo, the multinational food, snack, and beverage company. It explores the different theories of ethics and how they can be applied to bring about positive change in the company's systems and performance. The article also examines the ethical problems faced by PepsiCo and the decisions made by its CEO, Indra Nooyi, on the basis of ethical theories.

Running head: ETHICS IN BUSINESS
ETHICS IN BUSINESS
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Introduction
The ethical considerations that are undertaken by the organizations help in maintaining
the sustainable approach of the business in the market. Identification of the different theories
helps in undertaking the smooth performance of the business through the maintenance of the
goodwill and the loyalty of the customers. Ethics play a major role in defining the key attributes
of sustainability of the business organizations while operating in the international markets. The
ethics of the organization is dependent on right action and the development of the virtues of risk
taking abilities, compassion, wisdom, and temperance (Tota & Shehu, 2012). The key elements
of the change in the structure of the organizations and the decisions that are taken by the
management help in identifying the ethics that are applied to bring forth positive outcomes.
The identification of the theories and frameworks of ethics like the Kantian theory,
virtue theory and the utilitarianism helps the organizations in identifying the key elements of the
change in the systems and the performance of the businesses while operating in the respective
markets. The application of the theories and the manner in which they can be implemented to
determine the ethical considerations of the organizations helps in maintaining the moral.
Pepsi.co has encountered an ethical dilemma that was found based on the utilization of
inappropriate packaging material, which is non- biodegradable in nature. On the other hand, the
content of the beverages are researched to have contents that cause obesity and diabetes. It also
causes lower bone density that affects the health of the customers who consume the beverages.
The dilemma that is faced by the organization is dependent on the identification of the manner in
which the company could not balance the profit levels through the delivery of quality products.
The purpose of the research is dependent on the identification of the different ethical
considerations that are undertaken by the organizations and the manner in which the different

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theories can be applied on the structure and the performance of the business to bring in
considerable levels of change in the systems of the Pepsico. The ethical considerations will be
helping the business to bring in sustenance in the markets and helps in identifying the ethical
issues and the manner in which they can be mitigated through certain recommended actions.
Company overview
The PepsiCo is a multinational food, snack, and beverage company which is
headquartered in in Purchase, New York. The company has undertaken steps to evaluate the
needs of the consumers and thereby develop FMCG as per the needs of the consumers in the
world market. The company was formed through a merger with the Pepsi-Cola
Company and Frito-Lay, Inc and expanded since its inception in the year 1965. The company
has undertaken sustainable development measures and thereby undertook ways to bring forth
modifications in the product offerings through continuous innovations in the market. The
different actions that are undertaken by the business in the market have helped in maintaining the
different levels of changes in the systems of the business. The ethical dilemma plays a major role
in identifying the issues that has affected the productivity of the organization in the market. The
revenue of the organization computed at the end of the fiscal year 2017 US$63.525 billion. On
the other hand, the operating income of the organization was estimated to be US$10.509 billion
(2017). The net income reflected an increase from the other fiscal years, which is estimated to be
US$4.908 billion (2017) (Stanford, 2012). However, apart from all the improvements in the
systems and the performance of the business in the markets, the organization faced an ethical
dilemma that affected the loyalty of the customers in the market. The rendition of poor
packaging material and the content that might cause health ailments has affected the ethical

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consideration of the organization while operating in the international markets it has also affected
the proper functioning of the business as per the objectives of the same.
Ethics in business
The ethics of the business is dependent on the CSR (Corporate Social Responsibility) of
the organization and the manner in which the company takes steps to bring in changes in the
systems and the performance of the business to delineate the different level of clean practices
rather than focusing on the profitability of the business. Gregory (2018) stated that the
profitability of the business is an capitalist approach that is supported through compromising the
ethical needs of the organization to according to the welfare of the people. The key elements of
the change in the functioning of the organization as per the goals of the organization is dependent
on the identification of the ethical issues that are faced by the company and the manner in which
the issues can be resolved to bring forth changes in the systems of the business. Dion (2012)
delineated that the utilitarian approach of the organization helps the same in identifying the
different issues that are faced by the organization relating to the ethical backdrop. The utilitarian
approach helps ion identifying the right and wrong actions of the business depending on the
outcomes that the actions will bore in the future. It depends on the futuristic predications of the
actions that are undertaken by the management of the business to bring forth changes in the
systems of the business in the market. The key elements of the change in the systems of the
business will be dependent on the functioning of the organization through the prediction of the
outcomes that might affect the functioning of the organizations.
On the other hand, the utilization of the virtue theory helps in mitigation of the issues as
the theory emphasizes on the duties and responsibilities that affects the functioning of the

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business in the market. Crane and Matten (2016) stated that the proper functioning of the
organization in the market is dependent on the ethical considerations and the manner in which
the organization brings in different levels of changes depending on the duties and responsibilities
of the organization that will bring forth positive outcomes. Hartman, DesJardins and MacDonald
( 2014) stated that the proper functioning of the organization is dependent on the adherence to
the ethics that governs the performance of the business in the market.
Ethical problems of Pepsi.co
The company, PepsiCo faced different ethical dilemmas based on the beverage quality
and the quality of the packaging material that was used by the business to cut the costs. The
higher sugar levels of the carbonated drinks have affected the health of the consumers adversely.
It has caused different health ailments like obesity, diabetes and the like which has affected the
general lifestyles of the people. On the other hand, the lower bone density and the other ailments
that are faced by the consumers who intake the carbonated flavored drinks was researched to be
growing in numbers (Hartman, DesJardins & MacDonald, 2014). The report caused serious
damage to the functioning of the organization and thereby affect the goodwill of the organization
in the market. The key elements of the change in the systems of the business is affected through
the compromise of the standards of the beverage quality that affected the functioning of the
business in the markets (The Search for Hidden Figures., 2018). On the other hand, the
utilization of the non-biodegradable plastic material has affected the ethics of the organization as
the impact of the over usage of the plastic would result to adverse outcomes on the environment.
It affected the CSR ratings of the organization while operating in the market depending on their
objectives to grow in the international markets. The different outcomes of the organizational

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undertakings are identified through the application of the utilitarian approach, which affected the
functioning of the business in the market.
The ethical considerations that are faced by PepsiCo are dependent on the quality of the
products and the manner in which it affects the health and the wellbeing of the consumers
largely. The different considerations of the business is dependent on the identification of the
issues and the manner in which the company might take actions to resolve the issues that are
faced by the same in the market. The compromise of the goodwill of the business is dependent
on the factors of the change in the systems and the performance of the business in the market.
The ethics of good work and the manner in which the ethics can be applied to the functions of
the business helps in maintaining the different levels of change in the performance of the
business.
Decisions made by Nooyi
The current CEO of the organization PepsiCo is not only famous not only for her
effective leadership style but also for the ethical decisions made by her. Many scholars are of the
opinion that the effective leadership style of Nooyi and the “ethical decision making” process
used by her are the key reasons for the considerable success gained by the organization under
discussion here in the recent times (Hartman, DesJardins & MacDonald, 2014). As already
mentioned the organization is one of the largest soft drink and beverage manufacturing
organization of the world (Hartman, DesJardins & MacDonald, 2014). However, it is generally
seen that the products as well as the services offered by the organization though very popular
among the customers from the different parts of the world poses a considerable amount of health
risks to the customers who take the help of these products and services (Crane & Matten, 2016).

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It is significant to note that “the number of people with diabetes has risen from 108 million in
1980 to 422 million in 2014” (Crane & Matten, 2016). Furthermore, currently more than 13% of
the population is suffering from the problem of obesity (Crane & Matten, 2016).
Many scholars are of the opinion that the soft drinks as well as the beverages provided by
the various beverage industries of the world are one of the main reasons for the increasingly
number of health risks faced by the various people of the world (Crane & Matten, 2016).
Therefore, it would be apt to say that this particular phenomenon acted as a kind of “non-market
risk” to the organization under discussion here. Therefore, the CEO of the organization PepsiCo,
Indra Nooyi took the decision in the 1990s decided to remove the products which posed a high
health to the customers who used to take the help of the products offered by them (PepsiCo,
2018). Therefore, with the objective to provide better quality healthy products to the customers
the CEO of the organization in the 2000s introduced new kinds of products, namely, “good-for-
you products, including Quaker Oats, Naked Juice, and Tropicana orange juice” apart from
removing the unhealthy ones (PepsiCo, 2018). In addition to these, Nooyi also reallocated the
priorities of the organization and it is a reflection of this particular fact the organization started
taking the help of recyclable materials for the process of the packing of the products as well as
the services offered by the to the customers (PepsiCo, 2018).
Justification on the basis of theories
The changing world of contemporary business has made it imperative for the various
organizations to reconsider the policies followed by them. A recent trend seen in the business
world is the fact that in addition to focusing on the means by which the various organizations can
enhance their profit the organizations also focus on the means by which they can make a positive

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contribution towards the cause of the environment as well as the community from which they
derive the majority of the resources needed for the process of their business (Tota & Shehu,
2012). It is a reflection of this particular fact that the strategies of “Sustainable approach” as well
as “Stakeholders approach” have gained a considerable amount of importance in the recent times
(Hartman, DesJardins & MacDonald, 2014).
The strategy of stakeholders approach focuses on maximizes or prioritizing the needs of
the various stakeholders who are reacted to the organization (Tota & Shehu, 2012). It is
generally seen that the top priority of the stakeholders related to a particular organization is make
a positive contribution towards the cause of the environment. Furthermore, the sustainable
approach focuses on the concept of gaining “sustainable competitive advantage” through ethical
means (Tota & Shehu, 2012). Therefore, it would be apt to say that the above mentioned factors
has made it imperative for the various organizations to take the help of various ethical theories.
The ethical decisions of Nooyi came under much criticized and many people even went to extent
of saying that the ethical decisions made by Nooyi would the reason for the failure of the
organization under discussion here (Gregory, 2018). It is significant to note that most of the
business organizations of the world including the organization PepsiCo follow the “concept of
Kantianism” which believes in the concept that the “end justifies the means which has been
taken to achieve that particular end” (Gregory, 2018). Thus, it is seen that the earlier leaders of
the organization used to justify the unethical practices of the organization on the basis of this
particular theory. However, in the present day business world it is seen that another ethical
theory has gained a considerable amount of significance (Friedersdorf, 2014). The “theory of
Utilitarianism”, on the other hand, believes in “taking the help of the kind of actions or activities

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which is likely to cause the maximum amount of benefit or utility to the maximum number of
people” (Friedersdorf, 2014).
The decision of Nooyi to remove the unhealthy products as well as services provided by
the organization can be explained on the basis of this particular theory of ethics. The decision of
Nooyi also finds adequate support from the “virtue theory of ethics” which articulates the need
for following a virtuous course of action (Friedersdorf, 2014). The decision of Nooyi when seen
in the present day context and especially in the light of the recent success attained by the
organization would seem to be a completely rational one. Many scholars are of the opinion that
the ethical decision of Nooyi not only helped the organization to mitigate the high amount of
“non-market risks” which the organization was facing at that particular point of time but also
helped in a significant manner to enhance the brand image of the concerned organization
(Stanford, 2012).
The decision of Nooyi can also be justified on the basis of the concept of ethical
consumerism. In the present times it is seen that the various customers have become much more
conscious about not only the product or the service which they take the help of but also about the
way that particular product or service has been manufactured (Dion, 2012). Therefore, it would
be pat to say that the ethical decisions made by the CEO of the organization Nooyi has
contributed in a significant towards the creation of a positive brand image for the organization
which indirectly has contributed in a significant manner towards the success which the
organization in the recent times (Dion, 2012).
Recommendations
The recommended actions that might be undertaken by the business are as follows:

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 The introduction of the fruit based drinks that help in bringing forth changes in the
product offerings of the organization. The fruit drinks with lower sugar and carbon
contents will be helping the organization to bring in changes in the situation of the
business in the market. This introduction of healthy drinks will be helping the
organization to target the health conscious consumers in the market. It will be helping the
organization to bring forth positive changes in the structure and the performance of the
business in the market.
 The company can also take steps to reproduce the containers, which are biodegradable in
nature as it will be helping the organization to adhere to the changes in the systems of the
business in the market. The biodegradable plastic materials will be helping the
organization to bring in rapid changes in the systems of the business depending on the
needs of the environment in the market.
Conclusion
Therefore, from the above analysis it can be stated that the proper functioning of the
organization can be initiated through the identification of the ethical considerations and the
manner in which they helps in making the organization grow in the international markets. The
key measures that are undertaken by the business help in maintaining the different levels of
change in the systems of the business in the market. The adherence of the organization to the
outcome of the processes and thereby planning the operations helps in maintaining the level of
ethics in the organizational structure.

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References
Crane, A., & Matten, D. (2016). Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.
Dion, M. (2012). Are ethical theories relevant for ethical leadership?. Leadership &
Organization Development Journal, 33(1), 4-24.
Friedersdorf, C. (2014). Why PepsiCo CEO Indra K. Nooyi Can't Have It All. Atlantic.
Gregory, J. R. (2018). Performance with purpose: ThePepsiCo challenge. Journal of Brand
Strategy, 6(4), 328-355.
Hartman, L. P., DesJardins, J. R., & MacDonald, C. (2014). Business ethics: Decision making
for personal integrity and social responsibility. New York: McGraw-Hill.
Stanford, D. (2012). Indra Nooyi rediscovers the joy of Pepsi. Bloomberg Business, 2.
The Search for Hidden Figures. (2018). PepsiCo. Retrieved from http://www.pepsico.com/
Tota, I., & Shehu, H. (2012). The dilemma of business ethics. Procedia Economics and
Finance, 3, 555-559.