Strategic Management - of Glaxo Smith Kline - Case Study Example

Strategic Management Cast Study Name Professor Institution Course Date Strategic Management Case Study Executive Summary In the recent years, customer relationship management and company reputation have attracted a significant debate among business executives. As the debate continues many agree that the two factors goes hand in hand if the business is to remain successful. Therefore, this essay focuses on customer relationship management and reputation strategies. In particularly, the paper evaluates the coherent actions that Glaxo Smith Kline could have taken to avoid legal and reputational situation involving Ribena. Also, it will analyze potential problems that could arise in implementing the actions and implication of such actions on organization and management practices based on risk management perspective. Table of Contents Strategic Management Case Study 2 Executive Summary 2 Table of Contents 3 1.0 Introduction 4 2.0 Overview of the problem 5 3.0 A set of coherent actions that the organization may have taken to possibly avoid the legal and reputational situation that resulted from their actions 5 4.0 Potential problems that may arise in implementing the suggestions 9 5.0 Implications of the suggestions for organizational and management practice based on risk management perspective. 11 6.0 Conclusion 13 7.0 References 14 1.0 Introduction On a daily basis, human beings are faced with almost 5,000 adverts where companies are attempting to persuade consumers that can actually satisfy their needs (Mannion 2005, p.54). Consumers have become rigid and can never be treated with conventional advertising as companies used to do some few tears back. It takes a creative and innovative company to convince customers to purchase its products. Jiwoong & Sudhir (2010, p.673) states that advancement in technology and era of information has made people more informed than before and can be lured with dubious ads. For that reason, companies must not just creative ad directors but must also produce ad that reflect the quality and content of their products. This is the only way they will be able to create customers expectation and satisfaction. Unfortunately, some companies have been overwhelmed by competition and now create advert which do not match the quality and satisfaction they purport to offer (Mannion 2005, p.57). Glaxo Smith Kline is one the companies which had found itself in the corridors of justices as consumers sued it for advertising and selling a product which does not provide the value. For that reason, this essay will analyze the actions companies take to avoid the reputational and legal situations. 2.0 Overview of the problem Glaxo Smith Kline is pharmaceutical well recognized manufacturing company which currently ranked six based on the revenue. However, in the recent years, it has received criticisms over its adverts which are different from what they offer. One of the controversies the company is manufacturing Ribena without Vitamin C. In 2004, two schoolgirls from New Zealand, Jenny Suo and Anna Devathasan conducted a high school lab experiment to test for the Vitamin C traces (Jaques 2008, p.395). In the experiment, they use Ribena made by Glaxo Smith Kline which demonstrated no Vitamin C traces. This is contrary to the company advert which claimed that …the blackcurrants in Ribena have four times the Vitamin C of oranges." After the findings, the two girls wrote to GSK seeking more answers but the company did not bother to respond. They then took their plight to local TV which airs consumer affairs. The TV managers took the results of the experiment to New Zealand Government Commerce Commission (Jaques 2008, p.395). The Commerce Commission took the company to court after finding its misleading about Ribena. Glaxo Smith Kline pleaded guilty of the charges, was fined and ordered to put adverts correcting its mistakes 3.0 A set of coherent actions that the organization may have taken to possibly avoid the legal and reputational situation that resulted from their actions In business reputation maters most because it is what attracts and retains customers. Brands that are strong today have been created by the reputation of the company. For that reason, management experts argue that a brand is normally created and managed by a firm, but the reputation is left for consumer top judge (Henneberg 2006, p.87). This reality raises the tricky concern of management ‘control’. The organization’s reputation is impacted by its advertisement, policies, people and performance. However, this reputation can be destroyed with just one act. Glaxo Smith Kline of the reputable companies over the years, which was ranked six largest pharmaceutical company by revenue in 2013. However, the vitamin C controversy in Ribena to some extents has tainted the image of the company (Vasagar 2007). Nevertheless, there are several possibilities that the company undertaken to avoid the court process. The first thing would have been to listen to the two schoolgirls. Listening is a way of allowing customer feedback. Ribena is a product meant for a large target group including high school teenagers. In fact, teenagers makes a large customer base for Ribena, therefore they were genuine in asking questions concerning. Declining to answer the school children reflect poor customer services which is experienced at Glaxo Smith Kline. Providing an efficient feedback would have made the two teenagers more satisfied hence stopping them from asking the question on national television. The issue can be analyzed based on customer service theories. Dissonance Theory it states that an individual who anticipated a product that is of high value and gets a product that has low value would notice the difference and faces a cognitive dissonance (Foxall 2005). Meaning, the disconfirmed expectations build a state of psychological or dissonance situation. If there is some truthfulness in the dissonance theory, therefore companies should try and have high expectations substantially over the performance on its products so as to acquire a higher evaluation on their goods. Foxall (2005) went ahead to state that having higher expectations significantly about the products performance may disappoint. Having a conversation with your customers is the only way to be assured you will make a service or product that they can purchase. Feedback from the customer is mainly used in the formation of a product so as to enable the final product to be something that can satisfy a customer’s needs (Grebe 2013, p.72). Companies that are most innovative tend to be the best in the development of its products hence are able to meet the needs of its customers while surpassing their expectations. Currently in businesses that are competitive, the companies that are able to listen to customers’ feedback and have product development are likely to have permanent customers, get advantages over their strong competitors and get support from its customer (Olsson 2014, p.116). Feedback from your customers creates a one on one communications with them, therefore you are able to know if they are dissatisfied with your goods or services you offer before you lose them. Management experts think that Glaxo Smith Kline need to adopt one of the five dimensions of SERVQUAL. Henneberg (2006, p.91) claims that the dimension recommended is responsiveness which urges managers to have the willingness to help its consumer by offering speedy and effective service performances. Environmental scanning is one of the factors that would have contributed to the company in avoiding lawful suit. According to Zhang, Majid & Foo (2011, p.67), environmental scanning can be defined as the process that deals with the projection, evaluation and measurement, of changes in the diverse environment variables. Nowadays most companies are using several strategies so as to remain relevant in the business world, but this can be attained by the environment being analyzed. However, such trends must be in line with the industry trends. For instance, technology have made people more curious and informed; customers want to know more about the products (Majid & Kowtha 2008). The company might have been making Ribena without vitamin C with mentality that customers are not aware. External environment scanning would have made the company know the level to which customer understands its products, and whether its products have satisfied their vitamin needs (Vrontis 2003, p.35). The company would have used corporate apologia as a strategy of influencing the two teenagers not to go public with the findings. Experts argue that an apologia does not mean apology, though it has one in nature, but is a defense which looks to offer a persuasive, counter explanation of the actions of the organization (Bentley 2015, p.23). It works to express asserted organizational illegal behavior in a more positive way than how the preliminary charges state (Frandsen & Johansen 2010, p.352). In a business environment, every company must try to manage the impression of the consumers so as to present likeable and competent front. Benoit contends that companies have reputations or images which are valuable and deserve protection when in danger. In this situation, theories of corporate apologia dictates that the CEO would have assumed responsibility, demonstrate regrets and offer redress for the teenagers if the damage was done. The service or operation managers should have responded by the word such as “we can see you have a valid point, and we will look into them”. This is because refuting these teenagers would lead to luck of trust on the brand. In business settings, a business which has lost the trust of consumer is likely to lose its worth and experiences losses, hence decline in market share (Hearit & Brown 2004, p.461). The company could have used issue management to prevent the controversy from taking a legal perspective. Adopting issue management allows the managers to be alert and concerned with their environment. Laura & Melewar (2005, p.379) argue that it also helps the public to recognize the rising, organization-related issues untimely and take quick actions. It can be done by adapting of the policy found in the organization or participating in shaping the opinions of the public. Just like scanning it involves fast-tracking issues which can affect the company image, analyzing and the right strategy to stop them. Timothy & Holladay (2002, p.171) contended that the company needed to prioritize on the issue as an urgent which impact the whole operation of the company negatively. Issues managers could have been identified to communicate and handle this top issue before it reaches court process (Timothy & Holladay 2002, p.169). It’s getting into corridors of justice depicts a general failure that relates in early warnings to improvement of a strategic response – and directly pertinent to the Ribena case. This is where feedback from the customers is not taken into action and this affects the company. Jaques (2008, p.497) claims that in these two scenarios, there was ignorance in the market evaluation, and also failure to identify the problem and work on it, therefore inadequate objectives within a well managed plan led to wasted effort, confusion, ultimate failure and mixed reactions. When timely feedback is not given, it leads to further crisis. This was evident when the case was already at the court and lawyer was seeking to stop full admission and trial with an argument that the case lacked intent (Eames 2007b). 4.0 Potential problems that may arise in implementing the suggestions Even though, customer service theories dictate that manager shows willingness and to respond to all questions from the customers, that does not mean that the customer will be satisfied with the response (Henneberg 2006, p.93). In brief, it is difficult to measure level customer satisfaction from the feedback. The moment customer is not satisfied with the feedback whether the company thinks that it has provide the best answer, the customer is likely to go public with the news (Xueming & Bhattacharya 2006, p.7). Similarly, the message could have been distorted because the receiver which the teenagers had set their minds that the company had committed ethical offense and no amount of answer could rectify the situation (Grebe 2013, p.75). Apologia is difficult to implement because the teenagers would have thought the company is being defensive yet they have the evidence that Ribena has no Vitamin C as purported by the company advert. If an apologia is created for the public relations stunt, it could bring fresh interest on the issue. For instance, this is what came out when later on GSK management voluntarily chose to publish corrective advertising on television; it is only in Australia, where the issue had less publicity unlike New Zealand where the case had gained much publicity (Jaques 2008, p.397). A senior GSK gave reasons for proceeding to television by stating; “the main agenda was to explain to the mothers who over the years believed in the brand that they offered their sincere apologies for confusing them and plans were underway to rectify the problem (Jaques 2008, p.398). According to Eames (2007b), the GSK pleaded guilty while in court on matters -concerning the vitamin C statement on the RTD, that Phil Gittos who was the judge explained as “not just incorrect but wholly false”. Also, the GSK agreed that the “four times” advert on the television was misleading. The court ordered an apology from the company. An apology that is written down can result into loss of revenues from clients in your business, a perception of incompetence or a boycott (Roberts 2006). Also the implementing issue management has its limitation which could have hindered the Glaxo Smith Kline in many ways. It is observed as crisis management with no proper plans in place. For that reason, the outcome may not be effective because no informed decision was made at the start. Barton (2001) claims that issue management could have worked only if every part of the larger company is involved. However, it is always difficult to bring every division of the company to work together in times of crisis. Planning of issue management planning could also be expensive to the company (Laura & Melewar 2005, p.383). This is because challenges in business environment are many are often changes. Meaning the company has to mobilize resources in every crisis to avert the situation. Endeavors to plan in detail for each imaginable threat may be counterproductive. Excessive emphases on potential threats like Ribena case possibly diverted the focus of management on improving a growth and new opportunities in the market. Remember this was not the major product Glaxo Smith Kline was selling and diverting its attention to one single is likely to affect other products too. However, not giving much attention to this one product could also affect the reputation of the whole company. In this perspective, the company was facing ethical dilemma. 5.0 Implications of the suggestions for organizational and management practice based on risk management perspective. The suggestion for avoiding the legal in the Ribena case has a strong implication on the organization and management practice both positively and negatively. The deep analysis makes it more of risk management. Ribena case presented Glaxo Smith Kline with numerous risks ahead of its operation. The risks encompassed political, social and economical risks (Mehta & Xavier 2012, p.376). The situation could have turned political in nature the moment it reached legal process and the company admitted that they actually made a misleading advert. Glaxo Smith Kline is a strong company which creates a stiff competition in the market, there are other companies which manufacture with Vitamin C and could match Ribena due to company’ strong reputation. The moment it was involved in controversy, rival companies can capitalize on the confusing to destroy Glaxo Smith Kline long outstanding reputation. In politics of the business sector, a company must always maintain the good reputation by telling the customers what they want to listen; that is, quality and superior products (Ignatieff 2004). In order to create a good reputation, the company must have an effective Public relation officer who can advice the company on industry politics. Corporate apologia has a positive influence on the organization, particularly, when Glaxo Smith Kline would go ahead owner the blame and promises to work on it. It shows a company as sympathy for its customers and care for what it offers to them. Frandsen & Johansen (2010, p.357) opined that through, corporate apologia, the company can also manage to create strong relationships with customers hence customer retention. In the perspective, using corporate apologia serves as a method to create a positive about the company. On the other hand, environment scanning, corporate apologia and issue management can help company manage the economical risks such as losing customers, revenue and market share control (Zhang, Majid & Foo, S 2011, p.81). Environment scanning is a top factor that Glaxo Smith Kline needed to have adopted. Business is normally affected by customer behavior and attitude which is resulted from satisfaction or lack of it. Satisfaction also comes with getting value for your money. If that is not achieved, a customer feels economic risk by wasting money which does not satisfy the need. Environment scanning would have made the company to understand that issue had reached the national television and would create a public outcry. In this way, public relation experts advise that the management should own up, quickly make product which can meet the needs (have vitamin C), recall the products on sale and replace them. Timothy & Holladay (2002) posited that reputational management can minimize loss of customer base which would eventually results to loss of profits and markets share. This is bad in economic sense because it can lead to doing away with the product. In 2013, Glaxo Smith Kline sold Ribena section to a Japanese company Suntory. In simple terms, risk management is a two way process meaning identifying the cause of the problem an investment and then looking for a suitable solution to your investments. These strategies could have made Glaxo Smith Kline appear as if they full practice the tenets of corporate social responsibility. This is to say that the company is not just in business to gain profit but also to provide for the social needs of the society (Young & Thyil 2011, p.672). 6.0 Conclusion The research has depicted the importance of business environment scanning, reputation, and customer relationship management in any modern company. The case study of Ribena Vitamin C controversy and its poor ending serves as strong message to industry players and bench to which customer service can be measured. As other companies continue to provide customer needs, they must always remember that reputation is very important to customers because it creates past and future perception of the company. Reputation impacts consumers purchase in a great way than the balance sheet. This means ignoring perception will be detrimental to the company. Managers must therefore use resource to create public relation office which will deal with crisis in the ever-changing business environment and create positive image which can retain customers. 7.0 References Barton, L 2001, Crisis in Organizations II, South Western Bentley, J.M, 2015, Shifting identification: A theory of apologies and pseudo-apologies, Public Relations Review Vol. 41, pp.22-29 Eames, D 2007b, Judges Orders Ribena to Fess Up, NZ Herald. Frandsen, F & Johansen, W 2010, Apologizing in a globalizing world: crisis communication and apologetic ethics, Corporate Communications: An International Journal, Vol.15, No.4, pp.350-364. Foxall, G 2005, Understanding Consumer Choice, Basingstoke, Palgrave Macmillian. Grebe, S.K 2013, Things can get worse: How mismanagement of a crisis response strategy can cause a secondary or double crisis: the example of the AWB corporate scandal, Corporate Communications: An International Journal, Vol.18, no.1, pp.70-86. 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