Glaxo Smith Kline Strategies - Case Study Example

Case Study Analysis Name: Institution: Case Study Analysis A business-level strategy integrates and coordinates organisational actions and commitments towards competitive advantage. Managers use this strategy to support the corporate strategy and compete in a specific business area. The key success factors for a business-level strategy are to understand the customers’ wants and to achieve competitive advantage (Bamford & West 2010). It is important that managers are aware of the customers and their needs when formulating a business-level strategy for their brand (Berthon, Holbrook & Hulbert 2003). They also need to know the niche customer groups and distinctive competencies that separate their products and services from competitors. This awareness determines the choice of business level strategy: cost-leadership strategy, differentiation, focused differentiation and focused cost leadership. Glaxo Smith Kline (GSK) adopted differentiation strategy to set the Ribena brand apart from offerings of competitors. Ribena gained popularity over the years owing to its vitamin C content. This differentiated the brand from other beverages produced by competitors. However, a chemistry test by two New Zealand students found that Ribena ready to drink (RTD) had less vitamin C content than had been advertised. The company failed to respond to the student’s inquiries and was subsequently fined $NZ 227,500 for incorrect labelling and misleading advertisements (Jaques 2008, p.394). GSK was humiliated when the incident spread to the rest of the world and had to make an apology through advertisements in New Zealand and Australia. 2.0 Coherent Actions that GSK May Have taken to avoid the Legal and Reputational Risks GSK should have taken the following actions to avoid reputational and legal consequences arising from the case: recognized the problem, apply a strategic response to complaints, correct the product mistake and apologize where necessary. Firstly, GSK should have recognised the problem in time. This would have been at the point of receiving a letter from the two New Zealand students about the vitamin C content of pre-diluted Ribena. There are many other companies, which have ignored early warnings about product failure. Down Corning, ignored warning signs about silicon breast implant tissue while Firestone faced brand damage from the recall of ATX tyres (Jaques 2008).GSK should have recognised the problem in time through environmental scanning. The company should have scanned the consumer market and the product market for future risks arising from product failure. If the company managers had scanned the environment, they would have realised that the written approach used by the two Auckland students was an early warning of future product complaints. Timely response to the crisis would have reduced the risk of reputational damage. Furthermore, the exposure from the company’s television statement should also have been an early indicator of the seriousness of attacks against Ribena’s claim that its vitamin C was four times that of oranges. Early recognition of the crisis could have prevented further brand damage caused by UK Food Commission Journal reported that Ribena had high sugar content despite its claim of no sweetener or artificial flavour (Jaques 2008). Secondly, there should have been a strategic response plan for such complaints from customers. GSK ignored letters from the two students and did not seem to have a strategic response plan for complaints against its products. This is despite the fact that the students’ complaints were not the first time that the company had encountered claims against its product advertisements. GSK was accused of false advertising in 2005. The company used to advertise Ribena Toothkind on the claim that the drink did not cause tooth decay in children. The UK Advertising Standards Authority observed that the Ribena Toothkind brand did not meet the requirements of tooth decay elimination and took GSK to court against the advertisement. The high court ruled that the product claim was false and ordered the removal of the tooth decay assertion from Toothkind packaging. The company later replaced the brand with Ribena Really Light. GSK should have learned from past events and developed a strategic response plan to guide managers through product complaints. The managers could have used the industrial organisational model to survey their external environment and formulate strategies for responding to customer complaints. The strategic response plan would have articulated the decision approach to be used. A classical decision-making approach could have been adopted. The classical model of decision-making comprises of four key steps: defining the goal, analysing the situation, constructing alternatives and making a choice (Turpin & Marais 2004). The goal for GSK would have been to prevent any legal or reputational backlash from the students’ findings. The company would have analysed the situation by considering the strengths and weaknesses of the students’ finding as well as the role of government authorities, and how competitors would leverage the complaints for competitive advantage. Thirdly, the organisation should have taken corrective action to prevent further brand damage especially on social media. Gensler, Volckner, Liu-Thompkins and Wiertz (2013) observe that social media has changed the landscape for businesses due to its ubiquity, dynamism and real-time interaction. This change has the capacity to build or damage brand performance substantially. Consumers can now use social media to voice their brand stories especially when companies ignored their concerns in the past (Funk 2012). These firms are increasingly losing control of their brand management as consumers continue to be empowered to create their own brand stories and share across social networks. Initially, firms applied the information processing theory of consumer behaviour to control their brand stories so that marketing activities were centred on what the firms had created in the customers’ minds (Gensler et al. 2013). This firm-centred approach shows that GSK ignored the students because it believed it was the sole creator of the Ribena RTD brand stories. A more effective approach for GSK would have been to view the students as co-creators of the brand and negotiate with them a shared meaning of the brand. This would have reduced the degree of brand damage on social media and given the company more time to improve the quality of the Ribena brand. Secondly, the company should have used appropriate communication channels to avert the crisis. Video communication on the company website, social media and television would have been very effective in averting further damage. Grundy and Moxon (2013) observe that communication from the chief executive officer of a company is very effective for restoring the reputation of a brand. The visibility of the CEO would have assured the public and the organisation that the company was still in control of the crisis and was taking measures to address the students’ complaints. Brands are vulnerable to management practices. Management practices influence the values on which the brand is built. These values depict the image of the brand and can determine whether a brand can weather a crisis (Grundy & Moxon 2013). Although the Ribena brand seemed to have weathered the crisis, a number of problems arise from the proposed solutions. 1. The theory of image restoration posits that businesses communicate using one of five strategies to address a brand problem: denial, evading responsibility, reducing offensiveness, corrective action and mortification (Grundy & Moxon 2013). GSK could have recognized the problem on time but not responded appropriately to the crisis. Already the company had ignored the Auckland students’ queries and eventually paid for a TV advertisement to reduce the offensiveness of the ‘four times vitamin C’ claim (Jaques 2008). It did not deny or admit that Ribena RTD did not have the vitamin C content as claimed. A more effective strategy would have been to take corrective action immediately the students filed their claim with the company. The company should have quarantined the brand and offered an appropriate explanation for the low vitamin C content before government authorities got wind of the matter. 2. Adopting a strategic response plan presumes that the organisation understands its external environment and has adequate resources to respond to the reputational crisis (Triantis 2013). A resource-based understanding of the firm is therefore important in managing brands during crisis. The resource-based theory looks at the resources and capabilities of an organisation. The resources are inputs into the firm (such as employees and equipment) while the capabilities are the combination of resources needed to perform a certain manner. A combination of resources and capabilities are needed to help firms gain competitive advantage, formulate strategies and increase profitability (Berthon, Holbrook & Hulbert 2003). The problem with the proposed strategic response plan for GSK is that it does not consider the firm’s international capabilities and resources. Rather, it looks at the firm’s resources and capabilities in New Zealand where the crisis occurred. The proposed solution presumes that the firm has adequate capabilities and resources to contain the crisis in New Zealand, perform a sweep of all communication channels and re-modify advertisements and product labels to eliminate the words ‘four times’. 3. The paper proposes that the students could have been incorporated as co-creators of the brand and negotiated a shared meaning of the brand with GSK. The co-creation of brand stories between consumers and producers presumes that both stakeholders share similar goals once a crisis has occurred. However, this is not the case. GSK defended its claims as being correct while consumers felt that the brand’s advertising was misleading (Jaques 2008). The company also offered guarded apologies to avoid the legal repercussions of false advertising. Taking corrective action as soon as the students’ wrote to the company would have implied that the firm was culpable of false advertising. However, a strategic response plan for the firm would have outlined the procedure for communicating with the students and the public about the actions that the company had taken to resolve the vitamin C content. In addition, the plan would have emphasized the need for accurate information rather than the explanations and guarded apologies made by GSK. The television campaign was one step towards the right direction in as far as providing information about the Ribena RTD brand. However, the advertisement should have clearly communicated whether the students’ findings were true, who was responsible for the brand’s quality, whether the firm was intentional in hiding the vitamin C content of the RBD drink, whether the firm will repeat the mistake again and whether consumers can gain their trust in the brand again (Johar, Birk & Einwiller 2010). The implication of co-creating brand stories with the public is that the firm loses some control of brand creation and marketing. Consumers may create positive brand stories to encourage loyalty or create negative brand stories, which further damage the firm’s brand performance. The risk for GSK is that social media is ubiquitous so that negative stories about its brand can spread very quickly. The firm would have to not only listen to the stories generated by consumers but also monitor the brand’s stories across all social networks. Inability to listen to and monitor brand stories would have a negative impact on the brand’s performance especially when consumers create and share negative stories about the Ribena brand. Conclusion A business-level strategy is necessary to support the corporate strategy and compete in a specific business area. Managers must be aware of their customers and their needs when formulating a business-level strategy for their brand as one of the business success factors. Different businesses adopt diverse business level strategies including cost-leadership strategy, differentiation, focused differentiation and focused cost leadership. Glaxo Smith Kline (GSK) adopted differentiation strategy to set the Ribena brand apart from offerings of competitors. However, a chemistry test by two New Zealand students found that Ribena ready to drink (RTD) had less vitamin C content than had been advertised negatively affected the popularity and marketing of the brand in the market. The company attempted different strategies to reduce the impact of the findings on the brand but with little success. A strategic response plan for the firm would have outlined the procedure for communicating with the students and the public about the actions that the company had taken to resolve the vitamin C content. Taking corrective action as soon as the students’ wrote to the company would have implied that the firm was culpable of false advertising. The experience of the Ribena brand shows that inability to listen to and monitor brand stories would have a negative impact on the brand’s performance especially when consumers create and share negative stories about a brand. References Bamford, C & West, G 2010, Strategic management: value creation, sustaínability, and performance, Cengage Learning, Stamford, CT. Berthon, P, Holbrook, M, & Hulbert, J 2003, ‘Understanding and managing the brand space’, MIT Sloan Management Review, viewed 8 April 2014, http://sloanreview.mit.edu/article/understanding-and-managing-the-brand-space/ Funk, T 2012, Advanced social media marketing: how to lead, launch, and manage a successful social media program, Apress, New York. Gensler, S, Volckner, F, Liu-Thompkins, Y & Wiertz, C 2013, ‘Managing brands in the social media environment’, Journal of Interactive Marketing, vol.27, pp.242-256. Grundy, M & Moxon, R 2013, ‘The effectiveness of airline crisis management on brand protection: A case study of British Airways’, Journal of Air Transport Management, vol. 28, pp.55-61. Jaques, T 2008, ‘When an icon stumbles: The Ribena issue mismanaged’, Corporate Communications: An International Journal, vol.13, no.4, pp. 394-406. Funk, T 2012, Advanced social media marketing: how to lead, launch, and manage a successful social media program, Apress, New York. Johar, G, Birk, M & Einwiller, S 2010, ‘How to save your brand in the face of crisis’, MIT Sloan Management Review, viewed 8 April 2014 http://sloanreview.mit.edu/article/how-to-save-your-brand-in-the-face-of-crisis/ Triantics, J 2013, Navigating strategic decisions: the power of sound analysis and forecasting, CRC Press, New York. Turpin, S & Marais, M 2004, ‘Decision-making: Theory and practice’, Orion, vol. 20, pp. 143-160. Read More