Organisation-Public Relationships in relation to Coles Supermarkets - Case Study Example

Introduction Public relations strategy and activity in organisations should be the nexus that holds stakeholder relationships and corporate reputation together in order for the organisation to work towards corporate sustainability. These issues and expectations require strategic thinking in the context of the public relations section of an organisation, such that it will contribute to the much needed synergy, integration and placement of activities, systems and processes in the organisation. In some sense it is needful for public relations strategists to revisit the basics and remember that communication is the essence of sharing of meaning as well as the creation of understanding that can only be established between an organisation and the public. In helping an organisation to become more sustainable in creating and maintaining good stakeholder relationships – and in so doing – developing strong corporate reputations, public relations and practice as well as discipline, can also become better sustainable and more appropriate. This paper aims to define and discuss organisation-public relationships (OPRs) in relation to Coles Supermarkets, a giant Australian- based retail organisation. In recent times, the company has significantly and permanently reduced its prices on staple foods such as milk and bread. This has notable implications for consumers, suppliers, competitors, and the company itself. The paper takes into consideration various studies especially those conducted by Ledingham and Bruning (1998) to help explore and understand the nature and importance of OPRs. Along this line, it is important to review the importance of effective relationship management, which is defined as “the development, maintenance, growth, and nurturing of mutually beneficial relationships between organisations and their significant publics” (Jo, 2004). The Coles Supermarkets’ pricing strategy and how this affects its relation with its customers, suppliers, competitors and other stakeholders. Definition and relevance of organisation-public relationships Organisation-public relationships refer to the pattern of interaction, transaction, exchange and linkage between an organisation and its publics. These interactions have features that are dissimilar from the identities, attributes and insights of the individuals and social collectivities in the relationships. Although they are dynamic in nature, organisation-public relationships can be described at a specific time and tracked over time. For instance, it is possible to evaluate Coles’ pricing strategy and how this has affected the relationship between the organisation and its customers over time (L'Etang & Pieczka, 2006). In order to explain the organisation-public relationship, the relational elements or features that are deemed to be essential for a relationship must be considered (L'Etang & Pieczka, 2006). Relational characteristics are discussed in literature from related disciplines such as marketing, organisational theory, interpersonal communication, conflict resolution as well as public relations (L'Etang & Pieczka, 2006). Because the purpose of public relations is create, develop and maintain relationships, focusing public relations efforts on organisational actions and activities that enhance relationships should help to demonstrate the value of public relation both in terms of effective relationship building and in the context of public satisfaction and consumer purchasing behaviour. Along the same line, understanding the importance of organisation-key public relationships, their ramifications on key public behaviour, and their nature continues to be of vital importance to both practitioners and scholars (Ledingham & Bruning, 2001). Public relations is a two-way process through which organisations must focus on the relationship with their key publics and communicate involvement of those programmes or activities that build the organisation-public relationship with members of their key publics. It is under this process that the role of communication becomes clear as pertains to relationship building. The organisation must be involved in behaviours that benefit its publics and also serve the interests of the organisation. Essentially, communication should be utilised to inform key publics about the behaviours of the organisation. At Coles, communication is aimed at gaining and retaining acceptance from stakeholders as well as changing the attitudes of stakeholders towards the company. In this regard, effective communication is needed in respect of the permanently reduced prices offered by Coles Supermarkets. There is need for the company to communicate to customers why it sets its prices much below those set by competitors. It is worth noting that the prospect of lower prices can encourage selling which drives down prices further (The Economist, 2007), and this is the opportunity that Coles seems to have capitalised upon. It should also be put in mind that poor communication can damage the entire meaning of the strategy applied by Coles. As Grunig (1993) put it, “communication – a symbolic relationship – can improve a behavioural relationship, but a poor behavioural relationship can destroy attempts to use communication to build a symbolic relationship or to improve a behavioural relationship” (Ledingham & Bruning, 2001). The dimensions of organisation-pubic relationships as identified by Grunig, Grunig and Ehling (1992) [as cited by Ledingham, (2003)] include trust, reciprocity, mutual legitimacy, mutual satisfaction, openness and mutual understanding. But from these, Ledingham and Bruning developed five dimensions: trust, involvement, openness, investment and commitment (Ledingham, 2003). Hence, based on this, trust is reflected when an organisation does what it says it will do, and openness is embodied when the organisation plans for the future with public members. Further, involvement is illustrated through the organisation’s participation in the welfare of the community. In the same magnitude, investment refers to the organisation role in investing in the welfare of the community while commitment points to the organisation being committed to the welfare of the community (Ledingham, 2003). Coles has focused on attaining all the dimensions by fulfilling other requirements that go with the lower prices of its commodities to its key public- the customers. For instance, the company gives special attention to allergen management and labelling. The company also listens to what customers are asking about allergens, such as what can be done in case they are allergic to some food items, emerging allergens and so forth. In response, the company has offered an assurance that it is committed to providing safe food for its customer. Along this line, it adheres to proper allergen control procedures, labelling as well as compliance monitoring (McSkimming, 2008). Coles’ pricing strategy and strategic management Strategic management aims to maximise organisational efficiency and profitability by making decisions that are focused toward that goal. A number of studies have been done in this perspective. Grunig (1992) (cited by Bowen, 2007) proposed that linkages with publics could be utilised to facilitate decision making by an organisation in a balanced, symmetrical manner. The idea of symmetry here is that organisations accomplish more of their long term goals when they incorporate some of the publics they want, implying that management engages in an ongoing mutual relationship with publics. Further, Grunig and Grunig (1996) maintained that a strategic management approach is consistent with teleological moral philosophy, commonly referred to as utilitarianism, due to its emphasis on consequences. Both utilitarian philosophy and public relationships are perceived in regard to their consequences and potential outcomes. In utilitarianism the ethical decision is defined as that which maximises positive implications and minimises negative consequences. Strategic management also tries to predict probable consequences of management decisions and hence fits perfectly with utilitarian ethics (Bowen, 2007). According to the general systems theory, the organisation can be viewed as an open and interdependent system dependent on interactions with its environment for continued existence (Skyttner, 2001). In the same magnitude, publics are perceived to be part of the environment providing information inputs and feedback to management. It should be noted that maintaining a process of ethical decision making in management could help an organisation to have successful interactions with its environment (Bowen, 2007). As a routine component of the management system, ethical considerations need to be reviewed and be subjected to common examination than be left to chance. Hence, even as Coles engages in a low pricing strategy for its commodities, it should put into consideration the aspect of ethical decision making. Coles pricing strategy can be likened to penetration pricing. This is a pricing technique of setting a relatively low initial entry price (it should be noted however that Coles is not a new player in the Australian market). The price is often perceived to be lower than the eventual market price, but can be maintained as long as the organisation deems it to be appropriate and increasing its competitiveness. Penetration pricing is commonly associated with a marketing goal of increasing market share or sales volume, as opposed to short term profit maximisation. The advantages of such pricing as employed by Coles are as highlighted below (according to Talloo, 2007): The pricing can result in a fast diffusion and adoption which can in turn achieve market penetration rates quickly. This implies that competitors can be taken by surprise, and as such, they may not have adequate time to react. It can generate goodwill among the all-important early adopter segments. This may also create valuable word of mouth experiences that boost the organisation’s competitiveness. Importantly, it discourages entry of competitors as the lower prices set act as a barrier to market entry. It can generate high stock revenue throughout the supply channel. In turn, this can create critically significant enthusiasm and support in the channel. Setting low prices may be based on marginal cost pricing, which is economically efficient. The main drawback of setting prices low is that doing so establishes long-term price expectations for the products involved, as well as brand and company image preconceptions. In effect, this makes it difficult to raise prices in the long run. It may also be argued that low pricing only targets switchers (bargain hunters), and that such customers will eventually switch away as soon as the company increases the prices of its products. Hence, Coles should be cautious to ensure that its pricing policy serves to increase its strategic advantage. Here, the management accounting function of the organisation can help by attempting to assess each major competitor’s cost structure and then relate the same to their prices. Importantly, it may be possible to assess the cost-volume-profit relationship of competitors in order to predict their pricing responses. This is because competitor reactions can substantially impact the outcome of a price move. In addition, likely reactions may not be perceivable when each competitor faces a different cost-volume-profit situation as a result of relying on different suppliers. In essence, competitors may not follow a price lead nor even march in a perfect step as they each act to defend or develop their own positions (Drury, 2007). Grunig and Grunig (1996) (cited by Rhee, 2004) suggested ten generic principles that are vital for excellent organisation-public relationships, and two are very important for this paper. First is that public relations must be involved in strategic management. Here, an organisation that practices public relations tactically develops programmes to communicate with strategic publics; both internal and external offer the utmost threats to and opportunities for the organisation (Rhee, 2004). For instance when Coles introduced low prices for milk, butter and cream, it declared that the low prices for consumers would boost the dairy industry and indicated that overall milk sales had increased by two percent due to the consumer price cuts. But reactions from dairy farmers and the media lead to a five percent increase in price per litre of milk supplied by farmers so as to comfort them. Second, public relations must aim at increasing organisational excellence. Here excellent public relations are enhanced by participative as opposed to authoritarian cultures, activist pressures from the business environment, and organic rather than mechanical management structures (Rhee, 2004). Coles’ low pricing strategy has proved to be sustainable because the different stakeholders involved understand why the company has employed such a strategy. To the company, the aim is to increase market share and profitability over the long term. To suppliers, Coles hoped that lower prices for consumers would increase its intake capacity and increase farmers’ production capacity – even though it had to increase price of milk for suppliers. Competitors understand the impact of Coles’ low price – thus they have to respond by reviewing their supply chain positioning. Recommendations of alternatives Recommendation 1: Pricing and customer satisfaction Pricing is one of the strategies that companies use to improve customer satisfaction and retain customers. In order to compete in today’s competitive environment, companies have had to become more customers driven and make customer satisfaction a crucial priority. Customers are demanding ever-improving levels service in terms of cost, quality, reliability, delivery, as well as choice of innovative new products (Drury, 2007). In a nutshell, building a good relationship goes beyond attracting customers with low prices. According to Kim and Jo (not dated), for an organisation to create a meaningful organisation-public relationship, it must offer products and services that go beyond the required level of the public’s contentment to obtain continued instrumental benefits. Hence, in order to provide customer satisfaction an organisation must concentrate on those key success factors that directly affect it. This also implies getting involved with and understanding what other stakeholders want and what they are doing. For instance, Coles must understand the needs of suppliers, and be aware of what competitors are doing to counteract its market penetration strategies. Importantly, all these factors must be taken into consideration, with priority given to the fact that the organisation-public dimensions of trust, involvement, investment and commitment affect customer satisfaction (Ledingham & Bruning, 1998). Morgan and Hunt (1994) also point out that relationship components, attitudes and customer satisfaction are intimately related to one another. But of crucial importance is that once a relationship has been created, it should be sustained for it to have a long term meaning and implication to the organisation and its publics. This is where Coles should put is focus. Once the relationship between the organisation and the consumer begins, maintaining it becomes crucial. There are five strategies to do this according to Kim and Jo (not dated): positivity, assurances, openness, sharing tasks, creating social networks. Through these approaches, related parties try to retain shared relational features throughout the relationship. For instance, Coles should ensure that the quality of its products is not compromised despite offering the products at lower prices compared to the average market rate. By doing so, the company will establish exchange relationships with its customers; for they will be informed that the low prices still come with high quality products – and will therefore be encouraged to buy both in the present time and in the future. Recommendation 2: Dealing with suppliers An important alternative public for Coles is its suppliers. Coles should be able to create communal relationships with suppliers, as they will be willing to sell their products to the company because of its high reputation. Suppliers may not be able to get anything extra in return but the fact they are dealing with a reliable and trustworthy company will encourage them to maintain their transactions with Coles. Trust can be defined as the perception of “confidence in the exchange partner’s reliability and integrity” (Morgan & Hunt, 1994, p. 14 cited by Kim and Jo [not dated, p. 11]). Fundamentally, in the organisation-public relationship, trust is the underlying construct that leads to favourable relationships. A trustworthy reputation is significant in that it impacts public attitudes around the issues, services or products originated by an organisation (Kim & Jo, not dated). Hence, trust will result is a more pleasant relationship between Coles, its customers, suppliers, competitors and other stakeholders. Coles expects its suppliers to be committed to offering long-term support, engaging in research as development, ensuring prompt response, ensuring high quality, controlling increases in costs of operations, adhering to the terms and conditions of purchase, and ensuring correct and worthwhile labelling and packaging. According to the company’s website, the conventional relationship between it and its suppliers has been guided by these expectations as described in the table below. Commitment Description Long-term support Providing consistent long-term support to Coles Supermarkets at all times, irrespective of supply conditions or the level of competition Prompt response Responding quickly, competitively and flexibly to the ongoing services and goods requirements of Coles Supermarkets. Research and development Striving for continuous improvement and innovation in services and goods as required by Coles Supermarkets Statutory compliance Complying with all relevant statutory as well as legislative requirements Quality Ensuring that products meet or surpass standards and expectations set by Coles in terms of quality. Cost control Paying attention to maintaining market competitiveness Terms and conditions of purchase Signing and complying with the relevant terms and conditions of purchase stipulated by Coles Supermarkets Labelling and packaging Supplying products that are labelled, packaged and prepared in accordance with all pertinent standards and laws. Source: Coles To improve the relationship with suppliers and hence improve service delivery to customers, it is recommended that Coles ventures into supplier partnering. Supplier partnering means choosing to do business with a limited number of suppliers, with the objective of building relationships that improve quality, and reliability rather than just improve costs. Hence, rather than relying on competitive bids, Coles should aim to do business with few reliable partners. The advantage of doing this is that Coles can work with the known suppliers to build a cost-effective design. The reduction in cost associated with the supplier-Coles relationship is significant to the company as it is likely to be instrumental in ensuring that the company maintains its goal of setting lower retail prices for its commodities. Hence, it will important for strengthening customers’s expectation of both quality and low-priced products from Coles in the long-term. This is in line with Ledingham’s (2003) point that organisation-public relationships encompass an ongoing interchange of needs, expectations as well as fulfilment. Significance of the recommendations The recommendations suggested in this paper relate to the three clusters of organisation-public relationships: interpersonal, professional and community. The recommendation that Coles should focus on quality aims to boost both interpersonal and professional relationships with customers. According to Ferrell and Hartline (2008), building a relationship requires a firm to be able to fulfil the needs of customers better than its competitors. The organisation must also be able to fulfil those roles by offering high quality goads and services that are of a better value relative to the sacrifices that customer must make to acquire them. This means that the focus of Coles should not just be low prices for its gods, but ensuring that the quality of the goods it delivers is unrivalled. Ferrell and Hartline (2008) note further that when it comes to developing and maintaining customer relationships, quality is a double-edged sword. Thus, if the quality of a good or service is poor, the company obviously has little chance of satisfying customers of maintaining relationships with them. Thus, it will pay more for Coles to balance its attention to both ensuring high quality for its products and offering them at relatively lower prices. The second recommendation about Coles’ venturing in supplier partnering is meant to boost the professional dimension of organisation-public relationships. Supplier partnering is likely to bring about the characteristics identified by Hon and Grunig (1999) [cited by Grunig, Grunig and Dozier (2002)] as the indicators of a good relationship. These include control mutuality between Coles and suppliers, trust between the company and its suppliers, commitment and satisfaction (Grunig, Grunig & Dozier, 2002). Ethical response to potential challenges for Coles If Coles adheres to a quality scheme, customers will identify it with both low price and high quality – which will boost its participation in the market and interaction with customers. While doing this, the company should ensure that communication strategies and vehicles adhere to the organisational code and that customers recognise that the organisation’s behaviour is guided by such a code is the public relations’ major role (Parsons & Parsons,). Further, Coles should ensure that its relationship with customers emphasises mutual respect and a foundation of trust, which are a fundamental part of the public relations’ contribution to the companies ethics programme. On the part of suppliers, the challenge for the company will be how to identify the best suppliers to partner with. A network of supportive suppliers will be of great benefit if the company delivers programmes to a high standard, on time and within the stipulated budget (Beard, 2001). It is also important for the company to consider ethics in terms of utilitarianism in its approach. Going by utilitarianism, a decision is defined as that which maximises positive impacts and minimises negative outcomes (Bowen, 2007). Relying on a small number of reliable suppliers (partners) definitely has more positive consequences than being open to suppliers based on a bidding system. Conclusion In conclusion, effective communication is essential for developing effective organisation-public relationships. An organisation must understand what its employees want, what customers expect of it, what pleases its suppliers and how its competitors react to its business policies. Coles has done this by focusing on a low pricing strategy that is essential for increasing its market share. 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