The Corporate Reputation - Essay Example

Introduction: Studies carried out the world over reveal the fact that corporate reputation, its measurement and its management, needs to be high on the agenda of all corporate giants. Incidentally, this has translated into inflated PR budgets. Perception is the name of the game, and it is the job of the PR and the Corporation Communications department in any given company at any given point of time to ensure that public perception of the corporate and its products remains positive (Oliver S, 2004). Image building and brand character life is the real hero behind the success or the failure of any given product. this is the simple assumption that can now explain the use of corporate social responsibility or CSR as one of the tools of intense brand building. If one was to consider the fact that brand image build up and maintenance is essential to the life of the brand itself, one would be able to understand the fact that damage control in case of an incident that could be potential threat and tarnish the brand image needs to be taken care (Ettore, 1999). While the importance of corporate reputation has not really changed over the past decade, the recognition of its importance by corporates has changed…it finds manifestation in the reputation measurement system that is part of big corporate strategy the world over. In keeping with the concept of image management comes the related concept of branding. Branding has been described as a “multi-dimensional discursive practice which is not just a way of “representing the world, but of signifying the world constituting and constructing the world in meaning” (Fairclough, 1992). Abstract: The following analysis will attempt to analyze the hits and misses of one of the better known damage control corporate communication attempts of all times. The issue being put under scanner is the McDonalds French fries controversy. The essay will analyse the strategy followed by McDonald’s and the way the company handled the situation. This will mean looking at the pros and cons of the damage control campaign. The report will also make recommendations for how the company should have acted and how the situation for future references. Before one goes into the details of the crisis and the way it was managed in the McDonalds context it would first be interesting to note the meaning of crisis in commerce and the importance of having a crisis communication plan along with a well thought out strategy for dealing with the crisis when it happens. Crisis Communication: There are those companies and entrepreneurs that chose not to have a crisis communication plan. The idea behind the manner of functioning is that crisis would befall those that are careless with work. The perception however is false, given the fact that the very nature of crisis demands that it be spontaneous. A crisis isn’t always related to something a company has or hasn’t done. Ideally, therefore, every commercial venture should have a competent crisis communication plan; this does not have to be nuclear science. Necessarily larger companies will have a more in-depth plan, but no communication plan needs be complex. A plan that focuses on a strategy based management of crisis and effective PR treatment is often the difference between a crisis negatively affecting or helping the business. Strange as it may sound, a crisis too can be used as an advantage in keeping with the adage ‘any publicity is good publicity’. This would refer essentially to the manner in which the problem is tackled. A campaign based on truth and quick reaction would find favor with the audience, this may also help in the enhancement of business reputation for being honest, community minded, genuinely concerned and proactive. Conversely, if the campaign tries to conceal the situation, lie, avoid the media, and become non-communicative with staff, the business reputation will be destroyed faster than a speeding bullet. Crisis and Crisis management: Crisis has been defined as “people-stopping, show-stopping, reputationally defining event which creates victim and explosive visibility” (Fernandez, 2004). The three types of crises that could affect an organization are: 1. Operational Crisis 2. Non-Operating problems 3. Combination issues .There are pages and volumes that have been dedicated to the study of the management of crisis and the best way to go about it. Equal importance has bee placed over the years on the understanding of the kind of importance that crisis management deserves in a given corporate venture. PR is in essence, the recognition of the process of building a corporate image- a task that is at best a double-edged proposition. The same truth confronts corporates, communities, and organizations across the world. In its avatar as a crisis manager, PR plays the peace-keeping role of conflict reduction while ensuring the difficult task of goodwill maintenance. Crisis management is the corporate world’s worst-case scenario. The global businesscape is littered with wrecks of corporaes that took the wrong turn. The sum of these discussions keeping aside the contentious issues is that every crises calls for a corporate crisis response that is timely, transparent, and responsive. A crisis response, more importantly, needs to be able to proactively control further damage to the lives and the reputations of those concerned. The four most basic guidelines for crises management for all corporate communications and PR personnel can be outlined as four essential points (Wallack, Woodruff, Dorfman and Diaz, 1999): 1. An attempt to stay calm and collected 2. Never exaggerate, evade or lie 3. Never say, “No Comment” 4. Plan for the crisis in advance McDonalds: The History In most cases, corporate crisis management forms the contingency plan of corporate existence. It is the emergency plan that determines the manner in which a given corporate reacts to a crisis or a contingency that it is confronted with. Deployed in time, corporate crisis management is the ultimate tool for damage control. McDonalds is probably one of the best-known brands in the world today. The story of its growth is the stuff of legends-from a small, family owned eatery to a multi-billion dollar global colossal organization with a chain that has a reasonable presence in every nook and corner of the world, the brand has over 30,000 restaurants at present with many more in the offing with years to come (McSpotlight, 2007). The profits tell a story of their own the chain has witnessed increasing profits in every successive quarter. Beside this, McDonald’s presently monopolizes 43 per cent of total US burger sales, and earns four times that of its nearest competitor. By 1992, global franchises were often earning twice that of domestic outlets, with the average franchise earning $114,149 in the US, compared with $188, 006 in Canada and $269, and 225 per outlet in Europe (Carpenter, 2002). With 30,000 restaurants in 121 countries, the brand dominated the market grossing four times Burger King’s $11.3 billion and Wendy’s 9.4. According to Advertising Age, McDonald’s ranks the 12th largest global brand spending $1 405 million on its global advertising campaigns – more than Coke, Pepsi, and Walt Disney. The history of McDonald problems: With the growth of the company came the growth of the controversies. One of the earliest problems that the chain encountered was with respect to its preference for a young labour force (Botteril and Klien, 2007). The New York Times claimed McDonald’s kept wages low, published numerous articles about McDonald’s breaking youth labour codes, and announced that unionization was actively discouraged within the organization. McDonalds chose to fight off allegations with an aggressive counter campaign; court cases and government support. The second big challenge to growth came with the perceived McDonaldisation of neighborhoods and towns, where people started protesting the loss of town individuality, growing traffic, and litter problems (Ritzer, 2004). The problem was dealt with by a smart marketing and advertising campaign. McDonalds hence produced advertising that featured happy young ethnic employees and store managers. The response was tailored so that the perception was angled toward the heavy investments that the corporate took up by investing heavily in social marketing campaigns and charities, and commissioned studies proving that the roads could handle an increase in traffic. They produced advertising featuring happy young ethnic employees and store managers. They pointed out the benefits that employment bring. When the firm started expanding on a global basis, the issues of wage and sameness along with those of Americanization were brought to the fore. McDonald’s fought back claiming they were bringing choice and efficiency to those who had gone without, and fed those who used to stand in bread lines. Beside these issues, there have been other problems that have plagued the organization over the years. These include the problem with the pollution boards and environmental activists and then the issue of the health movement and the concern about cholesterol in the food that McDonalds served its clientele. One of the biggest problems with the McDonald style of eating and the culture it promoted was the culture of obesity and the fact that the food that was served in outlets was harmful for the health. Most of these problems were dealt with in a manner typical of McDonalds...lawsuits and aggressive marketing. The former was thus disposed off; the latter was much more difficult to shed. The report will now look at the French fries controversy and the manner in which the company chose to deal with the lawsuit. The BIG French Fries Controversy: The new millennium however brought with it a slew of newer challenges for the corporate global food giant, given the fact that for the first time in its history McDonalds seemed to be facing big challenges from outlets such as Subway and Starbucks (touted as the healthy sandwich options). The decade of the 1990s was especially challenging given the fact that in the five years spanning 1998 and 2002, the company witnessed a remarkable slowing in the growth rates. Its actual share of the fast-food market fell more than three per cent. Sales were stagnant since 2000 and plummeted 2.8 per cent in 2002, representing the first ever decline in the corporation’s history. . Moreover, it was around this point of time that McDonalds the family restaurant, the reliable eating place saw one of the greatest challenges that it had seen since its inception. The challenge came in the shape of its own litigious folly (Herring, 1996). Because of the concerns rising out of the use of trans fats in the production of fast food McDonalds had announced in 1990 that it would replace the beef tallow and cook its French fries in pure vegetable oil. This was direct manifestation of a response to customer concern that focused on health consciousness and the desire to avoid red meat and fried food. They also preferred to eat at other fast food joints that offered discounts. It was discovered a decade later because the oil change proved costly and altered the flavor of the fries, McDonald’s had not followed through on the commitment. The discovery was made and the lawsuit filed by John F. Banzhaf III, a professor of law at George Washington University. The case was fought on behalf of vegetarians and religious non meat eaters who claimed they had been falsely mislead by the company. McDonald’s of course, responded in its litigious mode and claimed the lawsuit as frivolous. Yet, when the case was heard in 2002, the judge ruled in favour of vegetarian and religious groups. McDonald’s was fined $10 million in a master settlement agreement that controlled the terms of pending cases and protected McDonald’s against further liability. Much more than the damage in litigation costs and the damages paid, the image was hurt, McDonalds as a brand was in the dumps, especially in the newer markets of Asia where the value of vegetarianism is sacred. The protests of the Vishwa Hindu Parishad in Mumbai and the $2 million damages to the property in Mumbai were all results of the crisis. The company came across as the villain, the typical hard-hearted American colonizer looking to make money by fooling the innocent. The justifications provided were weak and the claim that in Islamic and Hindu countries, it had fully observed the religious guidelines for the preparation of food came across as shallow and half-hearted. Things got worse, as the demonstrations increased in size and vehemence. The stance was changed and the giant was forced to apologies (Sachdev, 2001). In a mea culpa on 24 May 2001, the McDonald Board issued an apology for the misunderstanding and ‘confusion’ (Reuters, 2001). The problems with the ensuing steps and the presentation of facts to the public were once again a problem given the fact that the efforts to enhance transparency were drowned out by the fact that it did not modify its ingredients. It issued an apology and adopted a new labeling policy, subjecting itself to further lawsuits by a gamut o9f American Hindus and vegetarians on grounds of emotional suffering. In a press release of 1 June 2002, the Board once more expressed its mea culpa regarding the ‘confusion’ it created. The problems with the damage control policy were the absolute lack of foresight, and a complete absence of an insight into the psyche and the demands of the market. There were no coordinated efforts to demonstrate the company’s stand of not setting out to deliberately deceiving the public. The PR department was tight-lipped when it came to explaining the situation to the enquiring media. There were several “no comment” comments given, thereby leaving the situation open t0o media interpretation. Even after the instances of vandalism, it was the ‘colonizing high handed American firm’ who stood as the villain and not the vandalizers The management of the problem by the McDonalds board and the PR department is a study in confusion, a lack of focus and a display of absolute lack of preparedness. The stand that the comp-nay took in the eye of the rising protests in the early stages of the crisis was that of defending its stance. On 4 May 2001, the Board of McDonald’s openly admitted the use of beef extract in the preparation of its fries (Boston Globe, 2001). The stance also included a claim that the company had never accepted the fact that the fries were vegetarian. The problem with this stance was that it demonstrated the absolute lack of principles in business dealings and sense of disloyalty to the consumers. The flow of positive information and the attempts at damage control were so bad that one author has remarked, that no one would remember the fact that McDonalds has paid over $10 million in damages over 10 years…people would just remember the fact that they were duped. What happened in the crisis was not an instance of food processing problems but touted by the world media as an erosion of trust. This however is not to say that the strategy has been a complete failure. Corporate communications since the disaster has had a complete makeover. The marketing and the advertising are now friendly; the depiction of the place is of one where the family can relax. Attempts have now been made to highlight the healthy food options on the menu and the CSR initiatives have been prioritized and given due weightage in the publicity and media management front. The lessons to be learnt and advice: The manner in which a given company responds to crisis situations is mostly tailored according to the kind of adaptation and alterations that it is able to make within the period of turbulence. Interestingly enough, these changes need to be based on not just the corporate communication initiatives but the marketing as well. The idea needs to be to prepare blend of the various equations and figure out the areas where the best level of support could be exerted. This in tin turn would lead to arise in the levels of incorporation and communication between marketing and the PR personnel thereby creating a strategy that is in tune with the beat and demands of the market mood. A pluralistic market indicates that business is influenced by all other groups in a social system, and business in turn influences them. In a market system based on pluralism, the responsibility that a company has extends not just to itself but to its employees and its customers, including the very environment within which it functions (McGrath, 2008). Thus society as a whole becomes a part of the group that calls itself the claimant or “publics”. This would therefore explain to a certain degree the thrust that is laid on the prioritization of CSR in most corporates. The job of the PR personnel however, is to ensure that the work being done by the company for the good of the society is highlighted during the period of crisis characterized by an erosion of public trust in the company and its products. Beside this one of the best manners of handling the crisis and ensuring that the press hears what the company wants it to hear instead of drawing their own conclusions would be to company has to say in respect of the problem and divert it from the babbling mouths of the critics. Attitudes are changed and for behavioral completion to take place an opportunity such as in-store shopping occurs. As perceptual structures, or fields of experience change, so a release of attitudes is required to support such change. With the “completion” or purchase, attitudinal explanations can be given as to why the product or service was selected (Kitchen , 1996). The no comment clause needs to be thrown out and a press friendly system of communication needs to be set up. Conclusion: In conclusion therefore one could reiterate that the place that an effective corporate communication strategy occupies in the success or failure of risk mitigation and prevention within a given corporate setup has increased manifold with the internationalization of corporatism and the culture of MNCs. The idea now is that a problem with a product does not stay within geographical boundaries but goes well beyond the realms of a nation state. The machinery to mange the information being transmitted therefore needs to be as quick and efficient. In case this does not happen, problems of minuscule nature would assume gigantic proportions and in case it does, a big problem can be dealt with and set aside as a small hurdle. Reference: Botterill, J. and Kline, S, 2007, From McLibel to McLettuce: childhood, spin and re-branding, pub, Society and Business Review, 2(1), p74-97 Boston Globe, McDonalds confirms its French Fries are made with Beef Extract, published, May 4, 2001 Carpenter, D. (2002), Slumping McDonald’s shrinks its super-size expansion strategy, Associated Press, Chicago, November, Vol.2, p. 200. Ettore B, 1999, The Care and Feeding of a Corporate Reputation, pub, Management Review, 85(6), p39-43 Herring, H.B. (1996), “Big Mac, hold the beef”, The New York Times, Section 3; Column 4; Money and Business/Financial Desk October 20, Sunday, Late Edition – Final, p. 2. Kitchen P J, 1996, Public relations in the promotional mix: A three-phase analysis, pub, Marketing and Intelligence Planning, 14(2), pp5-12 McGrath J, 2008, How McDonald's Works, accessed August 18, 2009, < http://money.howstuffworks.com/mcdonalds.htm/printable> McSpotlight (2007), A brief history of McDonald’s, accessed August 18, 2009, Read More