Marketing Missteps: The Case of Pepsi and Kendall Jenner

The controversy surrounding Pepsi's 2017 advertisement featuring Kendall Jenner offers a significant case study in marketing ethics and its impact on brand image. The ad intended to depict a global peace movement but was criticized for trivializing serious protest movements, leading to widespread public backlash. This incident highlights the importance of ethical decision-making in advertising, as it can significantly affect consumer perception and corporate reputation. Pepsi's swift response to pull the advertisement underscores the challenges companies face in aligning marketing strategies with societal values and expectations. The case also illustrates how a misstep in advertising can prompt broader discussions about corporate social responsibility and the role of brands in addressing social issues.

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Ethical Dilemmas and Challenges of Managers
Name of the Student:
Name of the University:
Author Note:

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Table of Contents
Introduction:...............................................................................................................................2
The chosen organisation and its ethical dilemma:.....................................................................2
The chosen organisation: Pepsi Co........................................................................................2
The ethical dilemma:..............................................................................................................3
Two theoretical concepts from managerial ethics and critical analysis of the dilemma:...........3
Ethical dilemma:....................................................................................................................3
Analysis of the ethical dilemma in the light of the two theories:...........................................4
Influence of two ethical theories on managerial decision making process:...............................7
Decision-making:...................................................................................................................7
Market competitiveness:........................................................................................................7
Conclusion:................................................................................................................................8

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Introduction:
Ethics and ethical dilemmas have profound influences on the business operations of
multinational companies. Ethical dilemmas and failure to deal with them appropriately attract
controversies which prove fatal to their business both in short term and long term. The paper
would shed light on the topic by analysis of a piece of news revolving around a controversial
advertisement by Pepsi Co. featuring Kendal Jenner. The author would first introduce the
company and then go on to explore the controversial advertisement involving ethical
dilemma (pepsico.com, 2018). The advertisement and its impacts would be analysed on the
basis of two managerial ethical theories, namely, Utilitarianism and Kantian deontology.
This advertisement would be then analysed on the grounds of these two theories and their
impact on business generation of Pepsi Co. Then the author would go on to study how ethical
dilemmas impact business decisions and their importance in those decisions.
The chosen organisation and its ethical dilemma:
The chosen organisation: Pepsi Co
PepsiCo Limited is the second largest manufacturer and marketer of food and
beverages in the world and has its headquarters in the United States of America. The
company is listed on the NASDAQ in its home country and several other stock exchanges
around the word which accounts for its huge capital base (nasdaq.com, 2018). The global
giant uses aggressive business models like wholly owned subsidiaries and acquisition and
merger models to dominate the global beverage and snacks markets. PepsiCo owns some of
the top brands in the world like Pepsi, Tropicana and Lays. The company under the
leadership of its present CEO Mrs Indra Krishnamurthy Nooyi conducts business in over a
hundred countries around the world (pepsico.com, 2018). It is evident from the discussion

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that the multinational company comes under immense pressure to satisfy all its stakeholders
which creates ethical dilemmas which attracts interventions from the apex management.
The ethical dilemma:
PepsiCo was trapped in the ethical dilemma when it released an advertisement which
showed model and actress Kendal Jenner approaching a police officer with a can of Pepsi
with an angry crowd mostly consisting of black people marching in the background
(cnbc.com, 2018). The critics cited that Pepsi tried to show the democratic rights of the
people of Australia, especially the blacks in lighter sense. Moreover, the advertisement
showed Kendal Jenner, a white American offering Pepsi to a police officer. The Australian
media interpreted this feature of the advertisement as a marketing flaw of Pepsi and
showcasing of racism (Iphofen, R., 2016). The advertisement received such a huge criticism
from the Australian people and media that it attracted managerial action from Pepsi. The apex
management of the multinational company ultimately had to withdraw advertisement to
recover from the ethical dilemma. It can be argued that the ethical dilemma identified stems
from the company’s accountability to a large number of stakeholders simultaneously. The
next section would analyse this dilemma on the basis of two managerial theories namely,
ethical dilemmas and ethical relationship with stakeholders.
Two theoretical concepts from managerial ethics and critical analysis of the dilemma:
The Utilitarianism theory:
The Utilitarianism theory is the managerial ethical theory dealing with morality of the
outcomes of actions. As far as organisations are concerned, they face utilitarianism situations
due to the continuous compulsion of adapting the outcomes of their strategies to benefit the
changing macro environmental influences like technological and social changes over which
they have no control. The complex business situations require the top managers to take

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decisions to tackle these ethical dilemmas (Sharda et al., 2014). Thus, one can argue that
failure of the apex management bodies to confirm to utilitarianism theory by ensuring
benefits of the stakeholders by their business strategies lead to loss of goodwill and loss
of their support, thus weakening their business position.
Kantian deontology:
The theory Kantian deontology delves into the levels of ethical quality of an act rather
than the outcome of the act. This means that the theory tries to point how ethical and morally
strong an act is rather than merely looking into the outcome if the act like profits earned.
This is because the interests of the stakeholders often conflict and the business organisations
are required to meet both the interests to sustain in the market (Madueño et al., 2016).
Resentment from stakeholders like customers can attract legal actions from another
stakeholder, namely government. One can argue that the management of multinational
business organisation are compelled to consider protecting stakeholders’ interests in spite of
the ethical dilemmas because the stakeholders are capable of influencing the later and even
lead the latter to close operations. They must ensure that the methods and plans they take
are ethical and follow the Kantian theory.
Analysis of the ethical dilemma in the light of the two theories:
PepsiCo being a public limited company raises capital by issuing shares in the
securities market. The company is under ethical and legal compulsion to give high returns on
investments (ROI) to its shareholders. The company employs thousands of employees and is
responsible for providing them with legitimate compensation. PepsiCo is under continuous
pressure from governments to pay high taxes. These immense utilitarian pressures from
these stakeholders necessitate the company to promote its products to attract more customers
and generate higher revenue (Archer & Harrigan, 2016). Thus, one would consider the

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advertisement of Pepsi as an ethical strategy to generate revenue to give maximum return to
the shareholders and governments. The high revenue would also enable the company to raise
the compensation packages of the employees. Thus, one can argue from this discussion that
Pepsi had operated in a perfectly ethical manner by following the Kantian deontology by
advertising its products.
The theory of utilitarianism exposes PepsiCo before the other stakeholders like
customers, media and the society as a whole. The company is under ethical and legal
compulsion to fulfil their interests as well in order to operate in the international market as
per the utilitarianism theory. It is this need to satisfy this large number of stakeholders which
exposes the company to ethical dilemmas which invites prompt actions from middle and
upper level management (Salvioni, Astori & Cassano, 2015).
The advertisement of Pepsi featuring Kendal Jenner attracted criticisms from a wide
range of stakeholders like the Australian media, customers and the Australian society in
general (independent.co.uk, 2018). The blacks living in Australia are suffering oppression
and exploitation in the hands of their white counterparts. They often protest demanding for
their rights and dignity. The advertisement of Pepsi shows one such protest march in its
background. The police and the government of Australia treat the protestors strictly which
was evident by the showcasing of police officers in the advertisement. The showcasing of
Jenner approach of police officer ready to retaliate one such march and the subsequent
merriment of the protestors clearly shows that Pepsi has tried to show the plight of the
Australian blacks less seriously (Yukhymenko–Lescroart, Brown & Paskus, 2015). This
analysis shows that the advertisement which was designed to market Pepsi in the Australian
market to generate revenue to give high ROIs to investors, an important stakeholder of Pepsi,
did not protect the interests of the Australian society, another important stakeholder.

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The advertisement of Pepsi Co showcases its brand ambassador Kendall Jenner
handing a Pepsi can to a police officer ready to take on the protestors. The critics like Bernice
King, the daughter of Martin Luther King Junior opined that the advertisement demeaned the
black Australians (Hsu & Lawrence, 2016). It was also argued that the advertisement was
said to encourage racism because it showed Jenner, who is an American white more
prominently than the black Australians. Thus it can be argued that the advertisement was
unethical from the side of the customers and society of Australia though it apparently did not
have anything unethical as far as stakeholders and governments were concerned.
The above discussion apparently shows that stakeholder interests are conflicting and
lead multinational companies into ethical dilemmas. However, a closer look into the needs of
the stakeholders would reveal that in reality their interests are interlinked and interdependent.
The advertisement of Pepsi raised controversy in its Australian market that led to criticisms
from customers particularly, black customers. This led to fall in sale of Pepsi products in
Australia which is one of the important markets of the company which impacted its revenue
generation. The controversial advertisement according to market experts actually showed the
dwindling marketing prowess of the multinational company (cnbc.com, 2018). All these
controversies on the ethical grounds damaged the market goodwill of Pepsi considerably. The
shareholders interpreted this fall in revenue generation and market goodwill as the dwindling
power of Pepsi Co to pay its investors high ROI and dividends (dailymail.co.uk, 2018). This
loss of investors’ trust led to fall in the share price of Pepsi that in turn affected its capital
generation. Thus, in the first instance, Pepsi launched the advertisement in the Australian
market to market its products and generate revenue to give high ROI to shareholders and
taxes to governments, thus protecting interests of these two important stakeholders. However,
the company lost support of the shareholders when it failed to protect the interests of two
other important stakeholder groups namely, the media and the Australian society (Daboul,

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2016). Thus, it can be argued that the apex management bodies of multinational
corporations should maintain Kantian deontology (second theory) to deal with
utilitarianism dilemmas (first theory).
Influence of two ethical theories on managerial decision making process:
The following are the ways in which Utilitarianism and Kantian theories influences
managerial practices:
Decision-making:
Multinational business organisations like Pepsi Co. should take into account
utilitarian theory to ensure that the outcomes of their strategies are ethical and the
Kantian theory to ensure that the strategies taken are ethical while making decisions.
The analysis of the advertisement clearly shows that ethical dilemmas resulting from faulty
managerial decision making in crucial areas of business like marketing and consequent
dissatisfaction of stakeholders can lead to massive losses like dwindling of revenue and
weakening of market goodwill. A critical analysis of the devastating impact of the
controversial advertisement shows that breach of utilitarian and Kantian theory are capable
devastating both capital and revenue generation of companies. Thus, it can analysed that
ethical dilemmas and ethical stakeholder relationship should be given due consideration by
apex management while forming business decisions (Noval & Stahl, 2017).
Market competitiveness:
The utilitarianism and Kantian theories ensure that the strategies the companies
make are ethically strong in terms of outcomes and methods respectively which ensure
business growth and competitive advantage of companies in the market. The ethical
dilemmas and resultant controversies from different important stakeholders like media render
massive damage to the market images of the organisations involved. The discussion above

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shows that loss of goodwill reduces both capital and revenue generation of organisations, thus
impeding their business operations. This results in loss of competitive advantage in the
market to competitors (Fiksel, 2015). For example, Pepsi shares its market with its toughest
international competitor, Coca Cola. The products of Coca Cola Company like Coca Cola
and Pepsi Co like Pepsi are substitute of each other. This, ethical dilemmas due to breach of
these two theories and consequent controversies result in Pepsi in losing its customers to
Coca Cola. This means Pepsi would lose its market competitiveness to Coca Cola which
weakens its market position (Block et al., 2016). This shows that ethical dilemmas have very
strong impact on the market competitiveness of the multinational companies.
Conclusion:
One can reflect on the discussion above and point out light several important facts.
First, apparently conflicting interests of stakeholders lead multinational organisations into
ethical dilemmas. Second, failure of comply with interests of one of group of stakeholders
(Australian society in the example) lead the organisations to lose support of other groups of
stakeholders (shareholders) as well. Thirdly, this loss of stakeholder support leads to
reduction of revenue generation and capital generation power of the companies. Fourth and
finally, the ethical dilemmas are capable of damaging the goodwill of the business
organisations and leads to weakening of their competitive advantage. Thus, this critical
analysis of the importance of ethics in business operations makes it clear that business leaders
of multinational organisations should form decisions giving ethics due importance. They
should consider the implications of the business strategies like promotional strategies on the
various stakeholder groups like government, investors, the management, employees and the
society at large. They should ensure that their strategies are ethical according to the
Kantian theory and their outcomes are ethical as well as per the utilitarian theory. They

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should consider the crucial factors like social perceptions among customers in a particular
market while forming promotional strategies. These steps would enable business
organisations like Pepsi avoid ethical dilemma, resentment of stakeholders and
consequent business losses.

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