Social and Communications Theories in Arla Foods - Case Study Example

cover page) Social and Communications Theories in the Arla Foods Case Study Introduction This essay will examine a number of social science and communications theories in the context of the crisis encountered in 2005 by Arla Foods, a Denmark-based multi-national dairy products firm, in its Arabian markets after the publication of a number of cartoons deemed offensive to Islam by a Danish newspaper. Even though Arla Foods of course had nothing to do with the newspaper’s actions, the company was the target of a boycott and suffered severe financial losses for the simple reason that it was a Danish company (Gaither & Curtin, 2008). The essay is organised as follows: A brief summary of the case is provided, with a focus on why the publication of the cartoons in the newspaper Jullands-Posten was offensive to the Muslim world, and how Arla Foods was connected to the offense. Following that, several social science theories that explain the crisis from both the perspective of the Muslim public and the perspective of the company are examined in detail. The essay concludes with some observations of what Arla Foods did correctly in using their public relations resources to overcome the crisis and what they might have done better in light of the theories presented. Denmark Insults the Muslim World On September 30, 2005, just months after Arla Foods embarked on a significant programme of expansion in its markets in Saudi Arabia and other Middle Eastern countries, the Danish newspaper Jullands-Posten published 12 cartoons depicting the Prophet Mohammed, infuriating the Muslim community. Citing free speech principles, the Danish government refused to sanction the newspaper, further angering the Muslim community and spreading the controversy to other parts of the Muslim world, particularly the Middle East (Gaither & Curtin, 2008, p. 121). The reason Muslims were offended by the cartoons is, first of all, images that depict the Prophet Mohammed are generally considered forbidden under Islamic law according to the prohibition against graven images and idols. The sacred texts of Islam actually do not specify that the Prophet should not be depicted, but the verse that is usually cited in support of the prohibition is “Those who paint pictures would be punished on the Day of Resurrection and it would be said to them: Breathe soul into what you have created.” (Hadith, Sahih Muslim Vol. 3, No. 5268) Over the centuries, many Islamic clerics have taken this to mean that the Prophet especially should not be depicted in any artistic form, and this has become a common taboo even if the images are respectful. Second, the cartoons were considered particularly offensive – for example, one of them depicted the Prophet wearing a turban in the shape of a bomb (Weiner, 2006). The case study does a good job of explaining the reaction of the Muslim world to the perceived offence and the response of the Danish government and Arla Foods in terms of Hofstede’s cultural dimensions (Gaither & Curtin, 2008, pp. 122-128). It also, however, notes that there are limitations to the Hofstede model, and that it does not necessarily suggest what actions can be taken in the face of a crisis, only a general way in which a particular culture is likely to respond (Ibid., pp. 130-131). Thus, there may be better theoretical frameworks that explain the crisis, responses, and best actions in this particular situation. Luhmann’s Social Systems Theory A social system by its simplest definition is a group of people who interact according to a mutually-understood set of guidelines; the two relevant social systems in the Arla Foods case are the Danish culture and the Islamic culture. The Social Systems Theory of Niklas Luhmann has several key characteristics that are both revealed by and explain the crisis detailed in the case study. According to Luhmann, two things make social systems theory applicable to particular areas of study: First the concept of system differentiation, which establishes a relationship between a system and its environment; and second, “the assumption that such differentiation is possible only through the establishment of a self-referential closedness in the systems becoming differentiated.” (Luhmann, 1989, p. 138) Luhmann was speaking about the law as a system within society’s larger system in this instance, but the same concept can be just as accurately applied to any other sub-system, such as business, religion, or politics (Luhmann, 1983, p. 992). Viewed in this context, the cultural dimensions of Hofstede that describe the very different Danish and Arabic cultures are actually the ‘self-references’ that cause the differentiation between the two social systems. Another important aspect of Luhmann’s concept of social systems is that he defined them as systems of communication rather than action (Hendry & Seidl, 2003, p. 178). He further defined communication as a complex unity of information, message – or to describe it a slightly different way, the act of passing the information – and understanding, which taken altogether as an entity described a social system (Leydesdorff, 2000, p. 277; Stichweh, 2000, p. 10). Quite obviously, the unpleasant interaction between the Danish and Arabic social systems in the Arla Foods case were interactions between systems of communication, each of which produced a single message to be understood by the other; the Muslim world understood a message from Denmark that was critical of Islam, and in response returned a message to Denmark that the message was highly offensive. But, one might argue, the offense was unintentional, at least on the part of Arla Foods and most of the Danish social system. Luhmann’s theory, however, does not consider thought, reflection, or intentions; it is not concerned with why communication occurs, only that it does, and in what manner (Hendry & Seidl, 2003: 176). The third important aspect of social system theory is autopoiesis, which means that the elements of a system are produced by the interaction of those elements, and the new elements created interact to produce even more new elements (Stichweh, 2000, pp. 10-11). This is an important characteristic that determines the self-reference of the system and distinguishes it from its environment (Luhmann, 1983, p. 993; Stichweh, 2000, p. 11). The key implication of this is that communications, which define social systems, are always changing and evolving in the social system (Leydesdorff, 2000: 284). This final aspect, the inevitability of change in a social system, was recognised by Luhmann who thought of changes as “episodes,” or a sequence of communications with an identifiable beginning and an end (Hendry & Seidl, 2003, pp. 176-179). The practical implication of this in the Arla Foods case is that, as Hendry and Seidl suggest (2003, pp. 176-177), the change should have signalled the need for a significant change in the way they communicated with their aggrieved Arab market as soon as the offensive cartoons were published. As the case study explains, the company did in fact do that later with the hiring of an anonymous local PR firm and a campaign to re-legitimise Arla Foods in Islamic perceptions, but only after a dismally-unsuccessful attempt at using their conventional PR methods to defuse the crisis (Gaither & Curtin, 2008, p. 125). Looking at the crisis from the perspective of social systems theory may have given Arla Foods a small advantage, inasmuch as the company would have perceived the ‘self-referential’ nature of the Arabic social system they must win over and the need to communicate with the market within that system much sooner than Arla Foods eventually did. But the changeable nature of communications also suggests that social systems theory alone, just as Hofstede’s cultural dimensions proved inadequate, might not completely explain the challenge or how to overcome it. Complexity Theory Complexity theory and its intellectual cousin chaos theory can be applied to shed some light on the course of events in the Arla Foods crisis. Complexity theory is not a single idea, but rather a collection of concepts that seek to explain the nature and behaviour of complex systems (Walby, 2007, p. 449; Sellenow, et al., 2002, p. 270). In the context of the Arla Foods case, the application of complexity theory complements social systems theory in two important ways. First, it provides for a way to identify and understand ‘multiple social inequalities,’ such as ethnicity, national affiliation, and religion (Walby, 2007, p. 450), and second, it does this by looking at the system-environment distinction in a different way. Walby (2007, pp. 454, 459) identifies two kinds of social systems: Institutional domains of economy, polity – which in this case could mean both government and organised religious frameworks – violence, and civil society constitute the first kind of social system. Within those domains are sets of social relations, such as gender, class, and ethnicity. These different systems do not necessarily have to be nested or exist in a hierarchy, and actually do not most of the time; rather, they can overlap, exist at different times, interconnect in different ways with one another, or exist in isolation depending on the conditions of the complex environment – an environment that is made up of all the different systems. In other words, any one system’s environment is other systems (Walby, 2007, pp. 458, 460). Using the Arla Foods case to illustrate these concepts, it can be seen – even if the identification of the apparent systems is simplified – how quickly the environment in which Arla Foods was obliged to deal with the crisis becomes extraordinarily complex: Even this visualisation is not entirely accurate because it suggests that all the different systems exist separately from one another; but a more realistic representation, which might look something like a cloud or the contents of a boiling kettle, would be difficult to render in an understandable form. Each of the arrows represents an interaction which could be positive or negative; any small change within a system or along one of the paths of interaction alters every other part of system in a sort of chain reaction – the so-called “butterfly effect” (Walby, 2007, p. 455; Sellenow, et al., 2002). That is how a single cartoonist in Denmark can cause the almost-instantaneous collapse of an international company’s key foreign market and ignite a global controversy. One aspect of complexity theory which is actually more properly ascribed to chaos theory that explains the initial ineffective public relations response to the crisis by Arla Foods is the concept of bifurcation. Bifurcation is a change, usually a sudden and unexpected change, that marks a point at which a system is fundamentally disrupted. An organisation facing a bifurcation in its system often fails to recognise it immediately, and attempts to make sense of the situation with reference to what it already knows, or “standard actions” (Sellenow, et al., 2002: 271-272). Crises elicit a number of predictable cognitive responses in individuals and in groups; information processing becomes much less complex, information searching is reduced, communication increases within the group and decreases between the group and the external environment, and short-term responses are favoured over long-term strategies (Suedfeld & Tetlock, 1977, p. 171): Reduced Responses to Crisis (Source: Suedfeld & Tetlock, 1977) This framework explains some of Arla’s initial response to the crisis, in particular the assertion that they were not responsible for nor had any relevant position to condemn the publication of the offensive cartoons, e.g., “A lot can be done by political authorities, but as a business company we concentrate on producing good products. That is all we can do.” (Børsting & Klingsey, 2005 in Holmström, et al., 2009, pp. 4-5) That particular statement is an example of inward-directed communication, a reduction of information-searching activities, and a rejection of undesirable information inputs (i.e., the non-acceptance of Arla’s non-responsibility by the Arab world), according Suedfeld’s and Tetlock’s (1977) characteristics of stress-induced crisis response. Arla Foods initially had no idea how to respond to the backlash from the Muslim world against the offensive cartoons, and its later, more successful response was successful because it was the beginning of a process of self-organisation, a consequence of a bifurcating event (Sellenow, et al., 2002, p. 272). Self-organisation is a process of fundamental change in the system, such as the recommendation in Gaither and Curtin (2008, p. 129) that Arla Foods shift away somewhat from its Danish identity to a more global identity. While that suggestion implies that Arla can control the process, in reality it is a reaction, not an action; the change in positioning is for all intents and purposes being forced on it by changes in the system, many of which are totally beyond the company’s control. Crisis Communications & Situational Crisis Communication Theory A practical framework for examining the Arla Foods case, one that perhaps leads to better conclusions about what the company “should have done” and “should do in a future crisis” is Situational Crisis Communication Theory (SCCT), which is part of the larger topic area of crisis communications. A crisis can be defined as a sudden, unexpected event that poses a financial and reputational threat; and a threat can be defined as the potential damage to the organisation’s finances and reputation if no action is taken (Coombs, 2007, p. 164, 166; 2010: 19). SCCT is based on Attribution Theory, which – to put it simply – is framework for explaining the connections between actions and events. SCCT can predict a reputational threat from a crisis event, and from that, the organisation can decide on a strategy to limit or repair harm to its various stakeholders (Coombs, 2007, pp. 165-166). The reputational threat is given precedence over consideration of the financial threat in the discussions of SCCT, but this seems appropriate; the financial harm that can affect the company and its stakeholders, as is particularly seen in the Arla Foods case, is a consequence of the reputational threat the company was facing in two areas – first with the initial boycott in the Arab market and second with the backlash among the Danish market in reaction to Arla’s response to the crisis. Crisis management is the outcome of SCCT, and can be defined as seeking to prevent or lessen the negative outcomes of a crisis, or in other words, reduce or eliminate the threats (Coombs, 2010, p. 20); a simple conceptual framework of SCCT might look like the figure below: Basic Framework of SCCT (Adapted from Coombs & Holladay, 2002, p. 181) The “severity of the crisis” and the “performance history” determine who or what level of the organisation is responsible for managing the crisis response. The crisis responsibility is one form of reputational maintenance; for example, if the ‘visible face’ of the company’s response is the CEO or Chairman of the Board, this may better support the organisational reputation (Coombs & Holladay, 2002). On the other hand, it might have a negative impact; we might recall the case of the massive oil spill in the Gulf of Mexico in 2010, in which then-CEO of British Petroleum Tony Hayward was harshly criticised for being insensitive and downplaying the seriousness of the crisis (“BP Chief Berated by US Legislators”, 2010). Hayward’s response was an example of an inappropriate crisis response strategy, and we can see some parallels in the crisis response of Arla Foods to the cartoon controversy. SCCT identifies a number of response strategies, which can be divided into primary and secondary strategies (Coombs, 2007, p. 170): Primary Response Strategies: Attack the accuser – confront the person or group alleging something is wrong with the organisation; Denial – assert that there is no crisis; Scapegoat – blame someone or something outside the organisation for the crisis; Excuse – deny the intent to do harm, or assert inability to control events leading to the crisis; Justification – attempt to minimise the perceived damage caused by the crisis; Compensation – offering money or other repayment for harm done by the crisis; and Apology – taking responsibility for the crisis and asking stakeholders for pardon. Secondary Response Strategies: Reminder – reminding stakeholders of past good performance and relationships of the organisation; Ingratiation – somewhat related to reminding, but praises stakeholders for their contributions to the organisation, thereby making them a party to the crisis; and Victimage – reminding stakeholders that the organisation is also a victim of the crisis. In the first, and generally unsuccessful, phase of Arla’s crisis response strategy, the primary strategies were to find a scapegoat and excuse the company from responsibility for the crisis, while the secondary strategies were to remind stakeholders of Arla’s role (i.e., “we’re a dairy company, not a political organisation”) and position Arla as a victim of the controversy. In Arla’s second and more successful response, the strategies were more apologetic – in the context of condemning religious insults and distancing the company from association with Danish attitudes about Islam – and ingratiation. While this approach began to repair the damage in its Middle East markets, we know of course that it created a backlash among the Danish home market, and so it can be judged to only have been partly successful. Conclusion In this paper, three theoretical frameworks – Luhmann’s Social Systems Theory, Complexity Theory, and Situational Crisis Communication Theory – have presented a richer analytical framework to understand the Arla Foods crisis, and suggest a better conceptual framework with which the company could have constructed its response to the crisis. Social systems theory gives insights into how systems interact internally and with one another, and if applied to Hofstede’s cultural dimensions examined in the case study, provide a more detailed picture of the likely reactions of the two main systems Arla had to interact with – its Middle East market, and its domestic market at home in Denmark. 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