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PepsiCo's Burma Connection
Transcript of PepsiCo's Burma Connection
and Flow of Events
Human Rights Violation in Burma
Deals with the experiences of global cola major, PepsiCo in Burma, in the 1990's.
Brief profile of political,social and economic crisis during the rule of SLORC
The Burmese regime is termed to be one of the most oppressive in the world in terms of Basic Human Rights.
There exist numerous reports documenting and condemning the military junta , written by organisations like Amnesty International and the Human Rights Watch.
Hundreds of Thousands of people forced to work against their will.
Pepsi and other American Companies use a Counter Trade.
Since the farms belonged to the military, forced labour rampant.
What is PESTLE analysis?
PESTLE analysis (Political, Economic, Social, Technological Legal and Environmental analysis)
describes a framework of macro-environmental factors used in the environmental scanning component of strategic management.
factors are basically to what degree the government intervenes in the economy. Specifically, political factors include areas such as tax policy, labor law, environmental law, trade restrictions, tariffs, and political stability.
factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions.
factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law.
factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance.
for Pepsico's operations in Burma
PepsiCo's Burma Connection
A case study on
factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates.
factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change.
Freedom of Speech
Homes randomly searched, phone calls monitored,mail intercepted. Owning gadgets like computers and modems criminalized.
Media under heavy censorship.
Freedom of Religion, Ethnic Violence
Minority groups like the Karen, Karenni and Shan targeted.
Rohingya people denied Burmese citizenship.
Rakhine State Riots 2012, Rakhine Buddhists vs. Rohingya Muslims.
Mass violence and arrests.
Burma has been left untouched by development progress and prosperity
Long history of political and social instability
Why Burma opened its economy for international investors?
Why Pepsi rushed to do Business with Burma?
Role of MNC's in supporting the Burmese rulers in running their regime of terror
Rape and Torture of Women
Kidnapping of children on the pretext of "recruiting" them a common practice.
Multiple reports of widespread child labour.
Women belonging to ethnic minorities subjected to rape and brutal torture.
In some cases , bodies displayed in local communities to create fear.
Widespread global opposition by students,human right activists,governments against human rights violation
Suppression of right to speech,assembly
Detention of Political leaders
Human rights violation against ethnic minorities
Explores pepsi's partial pull out from Burma
Moral and ethical issues associated with the case
Situation in Burma Amanpreet
SWOT analysis Akshay
PESTEL analysis Sakshi
Human rights violation Radhika
Timeline and flow of events
that led Pepsi to invest in Advait
Human rights activists and students jump into action.
Cities, college campuses boycott Pepsi and other brands doing business in Burma.
Pepsi receives hundreds of letters.
Under pressure, many companies leave Burma.
PepsiCo follows suit in 1996, sells it's shares to Thein Tun, but continues supplying him with the necessary syrup.
Finally , cuts all ties with Burma in 1997.
: Burma gained its independence from British rule
: Burmese government tries to bring in several economic reforms to curb inflation and boost growth, though this renders almost 60-80% of the circulating money worthless. This leads to the first of a series of demonstrations against the Burmese Govt.
: Pro-democracy demonstrations break out all over Burma; government responds with brutal crackdown on demonstrators, imposing curfew in major cities, detaining hundreds of protestors.
US Senate unanimously passes resolution condemning Burmese government for its brutality, calling for restoration of democracy
: The army under General Maung replaced the Government with the State Law and Order Restoration Council (SLORC), a group of military officers
February 16-17, 1989
: Saw Maung announces that elections will be held in May 1990, believing that they had the confidence of the people and would gather a resounding victory.
1990 May 27
: The political opposition of Burma, the National League for Democracy (NLD) of Aung San Suu Kyi scored a victory in the country’s first free, multiparty elections in three decades. Even though the overwhelming majority of seats in the proposed new government (80%) were won by the civilian opposition party, the SLORC refused to turn over power to a civilian government, annulled the election, outlawed the opposition party, and arrested its leaders including Suu Kyi, placing them under house arrest.
: PepsiCo decided to enter a joint venture with Myanmar Golden Star Co., a Burmese company owned by a Burmese businessman named Thein Tun. Myanmar Golden Star would own 60 percent of the venture while PepsiCo would own 40 percent. The venture would set up a bottling plant with a 10- year license to bottle and distribute PepsiCo-owned products in Burma, including Pepsi Cola, 7 Up, and Miranda soft drinks
: In a press release announcing its withdrawal from Burma, US company Levi-Strauss states, "Under present conditions, it is not possible to do business in Myanmar without directly supporting the military government and its pervasive violations of human rights.“
February 28, 1995
: The town of Berkeley, CA, bans city contracts with companies that deal with the regime in Burma to protest Rangoon's human rights record
: One of Pepsi's major institutional customers in the US, Harvard University (Cambridge, MA), decided not to allow Pepsi to sell its products on its campus. This move came in the wake of protests by students against the company for conducting business in Burma.
: As a result of the widespread protests and international pressure to stop their operations on humanitarian grounds, Pepsi said it would withdraw from Burma. The company sold its holdings in the plant to its partner, Thein Tun. However, PepsiCo continued to sell its syrup concentrate to the bottler in Burma and continued to allow the bottler to sell Pepsi in Burma
31 May 1997
: Pepsi cut all ties with Burma, withdrawing completely from the country.
History Of Burma
The History Of Burma
Burma is a sovereign country in South East Asia.
On 4 January 1948, the nation became an independent republic called Union of Burma.
Till 1962, three general, multi-party elections were held in Burma.
On 2 March 1962, the military led by General Ne Win took control of Burma.
There were sporadic protests against military rule during the Ne Win years and these were almost always violently suppressed.
The 8888 Uprising
There was a widespread sense of unrest over economic mismanagement and political oppression by the government.
This led to pro democracy demonstrations throughout the country known as the 8888 Uprising.
Particularly on 8-Aug-1988 students and ethnic minorities like Buddhists, Muslims young and old protested.
Consequences of the 8888 Uprising
The military under General U.Saw Maung replaced the Government with the State Law and Order Restoration Council (SLORC), a group of military officers.
In order to curb the protests, the SLORC declared martial law.
Within a week's time, thousands of students, monks, women and children were killed by the military.
The Free Election
In the 1990’s Burma was undergoing social, economic and political crisis under the SLORC.
Confident of a win, the SLORC proposed a new government and allowed free elections.
But the party of Aung San Suu Kyi, won 392 out of a total 489 seats (i.e., 80% of the seats).
But it refused to turn over the power to the civilian government and continued to demonstrate power by arresting members of the party including Suu Kyi.
The Burmese Life
During the military rule, Burmese continued to live in fear and injustice.
They were subject to arbitrary and brutal dictates of the military.
Had no constitutional institution or rights like free speech, association and assembly.
Civilians were forced to resettle from farm lands and were made slave labourers.
Burma opens for Business
The SLORC invited foriegn investors to lift the social and political status of the country.
This meant an opening of a market with 60 million untapped consumers and a largely un- or underdeveloped natural resources.
Burma could provide very cheap, skilled and educated labour.
It had a very strategic location, ideal for mass distribution in many countries.
Because of military rule, the political envirnoment was stable and harsh policies could easily be implemented.
PepsiCo and several others enter the Burmese market.
Moral Issues in Burma
Ill treatment of the citizens by the military
No progress towards building a healthier nation
No freedom among the workers
Denied all basic rights
US dollar = 985.999 Burmese currency
Agricultural commodities produced and sold out of forced labour
Why did PepsiCo have to
divest from Burma?
Banning of Pepsi products, refusal of the contract
Hope of instituting democratic reforms
PepsiCo finally left Burma in 1996.
What is Corporate Social Responsibility?
To make decisions and take actions in order to enhance the welfare and interests of the society as well the organization.
Only social responsibility is to maximize profits and to operate the business in the best interests of the stakeholders.
Only social responsibility is to protect and improve society's welfare.
System or code of morals governing the behavior of an individual or an organization with respect to what is right or wrong.
Integrative social contracts theory
PepsiCo’s efforts to improve the social conditions in Burma
“Free trade leads to free societies”
Continued supply of the necessary syrup used to make Pepsi
There are two major questions that can be asked about the situation in Burma.
Did PepsiCo have a moral obligation to divest itself of all its Burmese assets? Which approach to ethics-utilitarianism, rights, justice, caring, or virtue- is most appropriate for analyzing the events in this case?
They were supporting the military who wanted dictatorship.
The military granted PepsiCo a monopoly in Burma in exchange for funds
That human rights are being grossly violated in Burma
The people of Burma are acting and living for the self-interest of the military.
In Burma, it is the military who determines who shall live and who shall have the right to freedom
Some of the human rights being violated are freedom of speech, freedom of choice, standard of living, right to individual welfare, child labor, forced labor etc.
Does PepsiCo have a moral obligation to now pull its products and brand name out of Burma?
They were supporting the military rule to strengthen their dominance through taxes and other means.
PepsiCo being involved in counter trade was promoting forced labor throughout the agriculture sector.
Being morally right in their conduct they could not do their business violating human rights
Their brand image was getting deteriorated which was not acceptable for a big company like PepsiCo
PepsiCo can prove to be beneficial for the citizens of Burma.
They can mount pressure over the Junta to bend towards democracy
International pressure from the UN or any Human Rights council will target the Junta
This will attract foreign investors and thus help in improving the economy of the country.
By pulling out PepsiCo will pave a path for Coca Cola to dominate.
The people of Burma need to be granted their basic rights and freedoms
Large corporations like PepsiCo have tremendous power and influence
They have given hope for change
Military has been put under pressure for a democratic reform to attract foreign investors back to Burma
Successful marketing and advertisement campaigns
Extensive distribution channel
Competency in mergers and acquisitions
Low profit margin
Strong rivalry from Coca-Cola
Decisions are open to scrutiny and criticism
Expected to make exemplary decisions
Burmese Government favourable to the entry
Stable political environment
Can flourish using Thein Tun's connections
Large potential market
Strategic location in Indian subcontinent
Tainted reputation of SLORC
Sensitive human rights scenario in Burma
Will have to resort to counter trade
Could face strong opposition on ethical grounds
Recommendations and Conclusion
History Of Pepsi
Created and developed in the year 1893
Calem Bradham in New Bern,North Carolina, USA
Pepsi cola in 1898
1903-shifted to ware house for large scale production
History of Pepsi
Entered bankruptcy in 1931 following WW1
Assets sold to Charles Guth
Reformulated the pepsi-cola formula
History of Pepsi
PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc.
PepsiCo has since expanded from its namesake product Pepsi to a broader range of food and beverage brands