An Analysis of Apples iPhone 4 Problems Using Stakeholder Management and Impression Management - Case Study Example

An Analysis of Apple’s iPhone 4 Problems Using Stakeholder Management and Impression Management The Apple iPhone 4 Timeline Apple Press Release Guardian Headline 7th June 2010 ‘Apple presents iPhone 4’ 16th June 2010 ‘Statement by Apple on iPhone 4 Pre-Orders’ ‘Demand for Apple’s iPhone 4 crashes ordering websites in US and UK’ 23rd June 2010 ‘Statement by Apple on White iPhone 4’ 24th June 2010 ‘iPhone 4 reception drops dramatically when held from below, users find’ ‘iPhone 4 snapped up as it hits British shores’ ‘iPhone 4 shortage to frustrate Apple fans’ 25th June 2010 ‘Steve Jobs solves iPhone 4 reception problems: “don’t hold it that way”’ 26th June 2010 ‘iPhone 4 users turn to nail polish to fix £499 gadget’ 28th June 2010 ‘iPhone 4 Sales Top 1-7million’ ‘Apple sells 1.7m iPhone 4s in three days’ 2nd July 2010 ‘Letter from Apple regarding iPhone 4’ ‘iPhone 4 signal: Apple confesses to ‘simple and surprising’ software slipup’ 14th July 2010 ‘Apple shares dip amid iPhone 4 recall uncertainty’ 15th July 2010 ‘Apple to address iPhone 4 issues at Friday press conference’ 16th July 2010 ‘iPhone Arrives in 17 More Countries This Friday’ ‘Apple iPhone 4 fix: a free “bumper”’ 21st July 2010 Apple to analysts: Supply issues “a good problem to have”’ 23rd July 2010 ‘Statement by Apple on White iPhone 4’ ‘Free iPhone 4 case? There’s an app for that – but not for the (delayed again) white version’ 25th July 2010 ‘If Apple wants to be a major player it needs to start behaving like one’ 8th August 2010 ‘Apple’s self-inflicted bruises take the shine off its untouchable brand’ 15th September 2010 ‘Apples AirPrint Wireless Printing for iPad iPhone and iPod touch coming to users in November’ Compiled from online sources, see pages 6-8 for full references The purpose of this essay is to examine the release of Apple’s iPhone 4 and subsequent problems, based upon the written communications issued by Apple over the period from 7th June 2010 to 15th September 2010. These communications will be analysed using stakeholder management and impression management concepts. Some essential communications were not made in writing and these will be identified and reasons for this explored. The essay will conclude with the results of the analysis. On 24th June 2010, Apple released the latest version of its mobile phone, the iPhone 4. Within hours, problems were reported with call reception. After initially denying there was a problem and advising users to hold the phone a certain way (Arthur, 2010h), Apple finally admitted that there was a design flaw and customers would be allowed to claim free bumpers to stop the problem (Arthur, 2010c). These problems affected both Apple’s image with customers and investors, resulting in a share price fall and some unwelcome publicity. For organisations to be perceived as legitimate, they must have “structures that are seen as appropriate” (Arndt and Bigelow 2000 p.494). Such structures include communications “aimed at influencing corporate images or reputations” (Hooghiemstra, 2000, p.59) which form part of impression management. Hooghiemstra (ibid p.60) defined impression management as trying to “influence people’s perceptions of the company by using self-presentational devices”. As such, press releases form part of an organisation’s impression management. The importance of impression management is related to the type of stakeholder under consideration. A stakeholder is one of “multiple and diverse constituencies and interests” (Susniene and Sargunas 2009 p.58) and each has their own power and influence as far as the organisation is concerned. Managing stakeholder relations is considered essential given the “interdependence between society and business” (Mullins 2007 p.549) and the need to balance their interests (ibid). Apple need to balance the interests of, among others, customers, suppliers, investors, government and society (Doyle 1998). Investors are considered to have the greatest influence with customers being fragmented and therefore unable to generate sufficient strength to influence matters. There is an inherent contradiction between the interests of investors and those of customers, with the former requiring high profits and dividends and the latter requiring quality products at a low price. Apple has a reputation for producing high quality goods that are over-priced and place form above substance (Lee et al, 2007). However, now they have overtaken Microsoft, they are discovering it is difficult to keep all of the people happy all of the time (Naughton 2010). The poorly managed launch of the iPhone 4 is unusual for Apple. Previous launches have run smoothly, but on this occasion, there were fundamental problems with reception meaning customers lost calls. A review of the press releases issued at this time proves interesting. In responding to the initial reports of reception problems, Apple behaved reactively (Alpaslan et al 2009) by “denying the possibility of a (particular) crisis” and “its potential effects on the firm and its stakeholders” (ibid, p.40). The first communication concerning the problem was issued on 2nd July. The “Letter from Apple regarding iPhone 4” was not only received badly by customers and the media, it was also factually incorrect. The problem was stated as being a software problem. Customer reports of “faulty antenna design” (Apple, 2010, press release 5) were reported but given no credence, while views of those customers who did not experience problems were praised for matching Apple’s test results (ibid). In the timeline of press releases (page 1) the only other press releases had dealt with supply issues (lack of stock and an inability to supply a white version of the phone). Subsequently, there were no further press releases about the issue. This behaviour appears to contradict the view of Hooghiemstra (2000 p56) that “the amount of ... social disclosures is particularly high when the organisation ... has to face a predicament”. The actions taken by Apple in denying the problem could be said to be “[an] organisation ...”protest[ing] too much” their legitimacy and produce the opposite effect of that desired” (Ashforth and Gibbs 1990 p.177). This can be ascertained by comparing the formal written press releases from Apple with the number of articles published by the Guardian newspaper about this issue. A review of the timeline indicates that, in marked contrast to Apple, the Guardian published 15 articles to 6 press releases in connection with the iPhone 4. All bar one of the press releases deal with information concerning the launch of the phone together with the logistical issues of a lack of supply and an inability to deliver a white handset. Only one press release deals specifically with the problem and that contains factually incorrect information. The Guardian published eight articles in respect of logistics, and seven in connection with the problem. Apple issued their press release on 2nd July, however, the Guardian were publishing articles from 24th June to 8th August, indicating that how Apple had dealt with the problem had not been as good as it could have been. Apple’s strategy for service recovery was found wanting by customers and investors alike. Investors were so concerned about a possible product recall that the share price fell (Arthur and Halliday, 2010). This news was reported on 14th July, nearly two weeks after Apple’s press release and two days before a press conference was held to announce problem resolution. News of the press conference was issued the day after the share price fell, implying that although it was customers who were suffering with a product that did not do what it should, it was shareholders who could compel the company to respond. This is contrary to stakeholder management theory, which advocates a holistic approach to stakeholders rather than focused attention of shareholders to the detriment of all other stakeholders (Shah and Bhaskar 2007). This approach would equate to the shareholder model of corporate governance (Alpaslan et al 2009) and confirms the response as being reactive (ibid). The consequences of this are likely to include groups of new customers who tried the iPhone 4 as their first Apple purchase and now have a negative impression of Apple where customer service is concerned (Muthukrishnan and Chattopadhyay 2007). Also, when focusing on those stakeholders looking for a financial return, Apple will find that it has to ignore other stakeholders’ interests (Scholtens and Zhou 2008) to achieve higher stock returns and keep investors happy. This indicates that the interests of customers and shareholders are diametrically opposite: in satisfying customers, investors lose out, and in focusing on share price, customers lose out. It also confirms the approach taken by Apple in its initial refuting of the allegations of faulty antenna design. It is curious that, rather than issue a press release to announce what the problem really was and what Apple would do to fix it, they used a press conference and one of their key players, Steve Jobs, to present it. Normally, Steve Jobs introduces new products to the public at such press conferences. He is known for his excellent presentation skills and for being one of the main reasons people buy Apple products. However, on this occasion, it is clear that he was not comfortable dealing with a problem situation. His reaction to the questions put by reporters was “hostile scepticism” (Naughton 2010) and it is reported that “he not only lost his cool, he lost his charm” (ibid). Such a reaction is inappropriate for any organisation, but for Jobs, this was a new experience that he handled badly. It is unclear, however, how much this issue will cost Apple. The fact that Apple issued a single press release and then went back to “business as usual”, while the Guardian followed the issue for a little over six weeks indicates that customer reaction was not favourable. There are rumours that the iPhone 5 is to be released early in the new year and customers who had problems with their iPhone 4 will not be provided with a free upgrade resolving their problems but will have to pay around £500 for a new handset. Many customers will not be happy with such a prospect. Apple has previously been perceived as a niche player. However, with an increased capitalisation and market presence, they are now a major force within their market. As such, they need to rethink their service recovery strategy to ensure that, in future, there is no reputational damage. Their communications have been focused on the Apple fans and the stock markets, rather than all potential customers and new customers from non-traditional sources. Considering their written communications strategy, they need to refocus their impression management activities to include these new and potential customers, who will not be as forgiving as the original customer base if things are not right. Carter (2006) identifies top management groups as being critical to reputation management, with some recognising that brand and reputation management are necessary and that active management is required to ensure that communications meet the needs of stakeholders within their particular context. It remains to be seen whether the next version of the iPhone is produced more professionally than version 4. (1,524 words, excluding comparison table and references) References Alpaslan, C. M., Green, S. E. and Mitroff, I. I. 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(2000) ‘Corporate Communication and Impression Management – New Perspectives Why Companies Engage in Corporate Social Reporting’ Journal of Business Ethics vol.27 pp.55-68 Lee, L., Burrows, P. and Woyke, E. (2007) ‘A Bruise or Two on Apple’s Reputation’ Blomberg Businessweek 22 October available online at http://www.businessweek.com/magazine/content/07_43/b4055070.htm [accessed 16th December 2010] Mullins, L. J. (2007) Management and Organisational Behaviour (8th edn.) FT Prentice Hall, Harlow Muthukrishnan, A. V. and Chattopadhyay, A. (2007) ‘Just Give Me Another Chance: The Strategies for Brand Recovery from a Bad First Impression’ Journal of Marketing Research, May, pp.334-345 Scholtens, B. and Zhou, Y. (2008) ‘Stakeholder Relations and Financial Performence’ Sustainable Development Vol. 16 pp.213-232 Shah, s. and Bhaskar, A. S. (2007) ‘Corporate Stakeholder Management Analysis Tools: a Review’ The ICFAI Journal of Business Strategy Vol.4 No.4 pp.7-21 Susniene, D. and Sargunas, G. (2009) ‘Prerequisites of Stakeholder Management in an Organisation’ Engineering Economics Vol.2 pp.58-64 Apple Press Releases: ‘Apple presents iPhone 4’ released 7th June 2010 available online at http://www.apple.com/pr/library/2010/06/07iphone.html [accessed 16th December 2010] ‘Apples AirPrint Wireless Printing for iPad iPhone and iPod touch coming to users in November’ released 15th September 2010 available at http://www.apple.com/pr/library/2010/09/15airprint.html [accessed 16th December 2010] ‘iPhone 4 Sales Top 1-7million’ released 28th June 2010 available online at http://www.apple.com/pr/library/2010/06/28iphone.html [accessed 16th December 2010] ‘iPhone Arrives in 17 More Countries This Friday’ released 16th July 2010 available online at http://www.apple.com/pr/library/2010/07/26iphone.html [accessed 16th December 2010] ‘Letter from Apple regarding iPhone 4’ released 2nd July 2010 available online at http://www.apple.com/pr/library/2010/07/02appleletter.html [accessed 16th December 2010] ‘Statement by Apple on iPhone 4 Pre-Orders’ released 16th June 2010 available online at http://www.apple.com/pr/library/2010/06/16iphone.html [accessed 16th December 2010] ‘Statement by Apple on White iPhone 4’ released 23rd June 2010 available online at http://www.apple.com/pr/library/2010/06/23iphonestatement.html [accessed 16th December 2010] ‘Statement by Apple on White iPhone 4’ released 23rd July 2010 available online at http://www.apple.com/pr/library/2010/07/23iphonestatement.html [accessed 16th December 2010] The Guardian Andrews, R. (2010a) ‘Apple to analysts: Supply issues “a good problem to have”’ 21 July available online at http://www.guardian.co.uk/technology/pda/2010/jul/21/apple-results [accessed 16th December 2010] Arthur, C. (2010b) ‘Apple sells 1.7m iPhone 4s in three days’ The Guardian 28 June available online at http://www.guardian.co.uk/technology/2010/jun/28/apple-iphone-4-sales [accessed 16december 2010] Arthur, C. (2010c) ‘Apple iPhone 4 fix: a free “bumper”’ The Guardian 16 July available online at http://www.guardian.co.uk/technology/2010/jul/16/apple-iphone-4-fix-free-bumper [accessed 16th December 2010] Arthur, C. (2010d) ‘Free iPhone 4 case? There’s an app for that – but not for the (delayed again) white version’ The Guardian 23 July available online at http://www.guardian.co.uk/technology/blog/2010/jul/23/iphone-free-bumper-app-white-delay [accessed 16th December 2010] Arthur, C. (2010e) ‘iPhone 4 reception drops dramatically when held from below, users find’ The Guardian 24 June available online at http://www.guardian.co.uk/technology/2010/jun/24/iphone-reception-problems-bottom-edge [accessed 16th December 2010] Arthur, C. (2010f) ‘iPhone 4 signal: Apple confesses to ‘simple and surprising’ software slipup’ The Guardian 2 July available online at http://www.guardian.co.uk/technology/2010/jul/02/iphone-4-signal-apple[accessed 16the December 2010] Arthur, C. (2010g) ‘iPhone 4 users turn to nail polish to fix £499 gadget’ The Guardian 26 June available online at http://www.guardian.co.uk/technology/2010/jun/26/iphone-4-nail-polish-fix [accessed 16 December 2010] Arthur, C. (2010h) ‘Steve Jobs solves iPhone 4 reception problems: “don’t hold it that way”’ The Guardian 25 June available online at http://www.guardian.co.uk/technology/blog/2010/jun/25/iphone-reception-problems-solved [accessed 16th December 2010] Arthur, C. and Halliday, J. (2010) ‘Apple shares dip amid iPhone 4 recall uncertainty’ The Guardian 14 July available online at http://www.guardian.co.uk/technology/2010/jul/14/apple-shares-dive-iphone4-criticism [accessed 16th December 2010] Arthur, C. and Kiss, J. (2010) ‘Demand for Apple’s iPhone 4 crashes ordering websites in US and UK’ The Guardian 16 June available online at http://www.guardian.co.uk/technology/2010/jun/16/apple-iphone-4-model-sales [accessed 16th December 2010] Halliday, J. (2010) ‘Apple to address iPhone 4 issues at Friday press conference’ The Guardian 15 July available at http://www.guardian.co.uk/technology/blog/2010/jul/15/apple-press-conference-iphone [accessed 16th December 2010] Meikle, J. (2010) ‘iPhone 4 snapped up as it hits British shores’ The Guardian 24 June available online at http://www.guardian.co.uk/technology/2010/jun/24/iphone-4-snapped-up-british [accessed 16th December 2010] Naughton, J. (2010) ‘If Apple wants to be a major player it needs to start behaving like one’ The Observer 25 July available online at http://www.guardian.co.uk/technology/2010/jul/25/apple-worth-more-than-microsoft [accessed 16th December 2010] Rogers, R. (2010) ‘Apple’s self-inflicted bruises take the shine off its untouchable brand’ The Observer 8 August available online at http://www.guardian.co.uk/technology/2010/aug/08/apple-iphone-ipad-mobiles [accessed 16th December 2010] Wray, R. and Arthur, C. (2010) ‘iPhone 4 shortage to frustrate Apple fans’ The Guardian 24 June available online at http://www.guardian.co.uk/technology/2010/jun/24/apple-iphone-4-shortage-handset [accessed 16th December 2010] Read More