Strategic Management of Ribena Controversy - Case Study Example

Strategic Management Cast Study: Ribena Controversy Name Professor Institution Course Date Strategic Management Cast Study: Ribena Controversy Table of Contents Strategic Management Cast Study: Ribena Controversy 2 Table of Contents 2 1.0 Introduction 3 2.0 The coherent actions which GSK would have taken to evade the reputational and legal case 4 2.1 Coherent actions 4 2.2 Strategy formulation 6 2.3 Big picture 7 3.0 The potential challenges which might have risen in adopting the suggestions 9 3.1 competitive advantages 9 3.2 Internal or external analysis that must be undertaken 10 3.3 Implication that change to the internal or external would have on the organizations 11 4.0 Implications of the suggestions for the management practice on the perspective of risk management 12 4.1 risk management 12 4.2 How management practices might influence the strategies adopted by the organization and shape its reputation 13 4.3 Effective management and how an organization benefits from it 14 5.0 Conclusion 15 6.0 Reference 16 1.0 Introduction In the recent years, the business environment has changed considerably due to stiff competition. As the 21st century progress, globalization is increasing and technology is increasing and, as a result, customers are becoming difficult to deal with (Edmonds 2011, p.350). This is because they are informed and now ask hard questions. Unlike the previous years, customers now do not purchase anything but quality products after hard questions are answered. Edmonds (2011, p.353) argues that the information era has also been marked with the change of taste and preference due to exposure to the variety of products. In awake of all these issues, the strategic leadership has become a key pillar to running of a modern organization. Strategic leadership influences change which can put the company in line with current changes sweeping every sector of the economy (Fulmer, Stumpf & Bleak 2009, p.18). Effective leadership is needed to create proper communication channel not only with employees but also with customers, and formulate strategies which encompasses sound decision-making and risk management techniques that guarantees a company the competitive advantages. In 2004, Glaxo Smith Kline was faced with Ribena controversy after ignoring consumer questions (Jaques 2008, p.494). It is a situation which depicts lack of effective leadership factors such proper communication, strategic apologia, good customer service, better decision-making skills and risk management strategies. In 2004, two high school girls from New Zealand, Jenny Suo and Anna Devathasan conducted science experiment to test the level of Vitamin C in Ribena. According to Jaques (2008, p.397) the test showed no presence of Vitamin C as claimed in the advert by the producer Glaxo Smith Kline that "...the Ribena have blackcurrants which carries four times the Vitamin C of oranges." The girl became concerned about the situation and inquired from GSK through writing but the response was given by the company. Additional, they called the company but were rudely without their question being answered. After their concerns were no solved, the girls to the issue to consumer program on TV and then to New Zealand Government Commerce Commission which took it to court (Jaques 2008, p. 397). GSK were charged in 2007 with misleading advertising. Based on the case study, this paper identifies and discusses the coherent actions which GSK would have taken to evade the reputational and legal case. The paper will also describe the potential challenges which might have risen in adopting the suggestions and the implications of the suggestions for the management practice on the perspective of risk management. 2.0 The coherent actions which GSK would have taken to evade the reputational and legal case 2.1 Coherent actions Some of the coherent actions that GSK would have taken include building strategic leadership, strategy formulation and looking at the situation at the bigger picture. The controversy surrounding GSK and Ribena advert is clearly a lack of strategic leadership and its tenets. Bordum (2010, p. 246) contends that certainly the most crucial change senior managers are facing in global companies is creating and implementing strategic leadership which will give direction on the current problems facing their companies. The wide gap between present realities and preferred destination can only be reduced by raising individual competency including creating organizational capabilities (Perrott 2011, p. 23). However, this is what the CEO of GSK never did before the Ribena pops up. Strategic leadership is one which presents a direction and vision for the success and the growth of organization through communication, good customer service and involvement in decision-making (Parnell 2008, p.1281). Every leader now undergoes terrific pressures, and therefore urged to short-term decisions which can make them win. Strategic leadership needs effective communication channel. In strategic leadership perspective, the first thing GSK should have done to avoid court processes and negative reputation was to allow communication between the company and the two high school girls (Jaques 2008, p.395). Suppose the company should have allowed communication they would have convinced the two girls that the situation had affected only there area and they were working to resolved it. Paraskevas (2006, p.893) claims that customer feedback vital for modern businesses because through the process, the managers are showing that they are ready to committed to serving customers and satisfying their demands. Listening also shows courtesy to the customers and portrays managers as understanding. Quong & Walker (2010) stated that creative leaders tend to create customer service department which deals with queries and feedback to know areas to rectify to meet customer needs. Providing feedback is not just about speaking to the customer on one-on-one basis but also replying letters and emails. 2.2 Strategy formulation Another action that GSK should have adopted to avoid soiling their reputation and engaging in the legal battle is the formulation of strategies. It would have been useful for GSK to put strategy formulation into consideration to be part of their strategic leadership. Normally this process consists of three stages including the diagnosis, the formulation and the implementation (Ritchie 2004, p.673). The strategic leadership is a continuation practice to develop and review future-oriented strategies which enables a company to realize its objectives and mission, putting into consideration its capabilities, the environment it operates and the constraints. Diagnosis part of strategy formulation entails conducting a situation analysis in the internal and external environment of the company (Pollard & Hotho 2006, p.725). The company mission states that their mission is to help people do more, live longer and feel better. However, this mission is tied in three strategic priorities comprising of reducing risks, increase growth and long-term financial performance. Looking it closely with the case study, the company needed to live by its mission who it had violated by ignoring customer questions and not doing much to stop the legal process. Putting clear communication channel with customers would have saved it from public backlash. Pollard & Hotho (2006, p.727) posited that the risk of not providing feedback is losing customers to competitors. Further, the company should have done external environment situational analysis. This entails evaluating the evaluating opportunity and threats which can impact the performance of the company. Squires (2007) claims that producing Ribena without Vitamin C as purported by the ad was a big mistake for the company. They might have been doing this without assessing customer knowledge about the product. Conducting customer research on product awareness would have made them aware that customers are informed and are to gather information on the content of the products (Vassilikopoulou et al., 2009, p.797). The formulation comes after diagnosis in strategic leadership practice. Schroeder (2014, p.23) opined that this process entails producing viable recommendation with specific justification. Squires (2007) held that GSK should have carried out the market survey of how the situation would affect them should the customer realize about their misleading advert. Theories of strategic leadership hold that a leader should predict a market situation to be able to take necessary steps in confronting them (Mostafa et al. 2004, p.400). Predicting the consequence of public criticism and court process would have made GSK to make sustainable amends to protect is reputation. 2.3 Big picture Paying attention to the big picture of the whole situation would have saved GSK of the reputation and lawsuit (Jaques 2008, p. 398). The bigger picture means the external environment, trends, and consequence. The must always look at the consequence of their actions. Petromilli, Morrison & Million (2002, p.22) asserted that the reality in the business industry is that customers are more informed than before due to the advancement and easy accessibility of technology. For that reason, companies cannot lie to the consumers using adverts to buy their products. In a nutshell, consumer expectation and perception must be met to retain customers. A big company like GSK should have accepted change taking place and started making Vitamins which satisfy customer needs. According to Souiden & Pons (2009, p.108) strategic leadership practices hold that managers must fulfill customer needs if they are to build strong relationship with customers. Building and maintaining large customer base needs a loyalty program which can only be operated through satisfying customer ever-changing needs (Kapferer 2002). The big picture of the situation should have been considered through analyzing competition and its consequences on GSK business. Competition normally becomes dirty when the industry is competitive. Currently, competition in soft drink which provides Vitamin is very stiff as Coca Cola, PepsiCo, and other companies offer products which serve the same purpose and even their substitutes. Bearing the situation GSK was finding themselves into, a competitor would easily use their misleading advert and court case to destroy their reputation so as to gain more sales. For instance, Ribena has two products in this category RTD and Ribena syrup. Nevertheless, in Australia and New Zealand, the company did not distinguish the two instead just named it Ribena. During the controversy, the sale all the two brands were affected (Jaques 2008, p.396). Therefore, companies must look at the bigger picture such as politics of the industry. To quell the situation, the company should have used strategic apologia. This method can be used as a strategic leadership approach to protect the image of the company by engaging the customer in remorseful way (Loebbaka & Lewis 2009, p.195). Even though it is a self-defense approach, customer can ultimately be convinced the company is sorry for the situation and will rectify it. In doing this, GSK would have created an effective public relations office. Hearit (2006) stated that it needs taking a wide view of strategic thinkers who can identify connections of the issue, involve the right experts, perspectives and information to suppress public criticism.. 3.0 The potential challenges which might have risen in adopting the suggestions 3.1 competitive advantages In all circumstance, companies always try to attract more customers so as to have large customer base. In so doing, they can gain competitive advantage because with large customer base, company can realize more sale hence large market share based on revenue and number of customers (Beatty & Quinn 2010, p. 4). The competitive advantage is very important for any firm because it is what defines it future within the industry. Aaker (2004) argues that a company creates competitive advantage through internal capability, customer base, value, brand equity and the reputation of the firm. In this case, the company had used the reputation of the firm and brand equity of the years to gain competitive advantage (Keller & Lehmann 2006, p.745). Ribena had been a strong brand that was introduced in 1938 by GSK into its portfolio. The company has conducted an effective marketing in various media as number one provider of Vitamin C as four times that of Oranges (Jaques 2008, p. 397). It became one of the strong brands of the company worldwide surpassing sales of other products from Coca Cola. The company also used value to market not only this product but also others through its values. GSK values states that the company is patient focus, respect for people, integrity, and transparency. People looks at these values as the culture of the company and what it stands for in its business endeavors. However, the company provides a misleading advert as the product turns out to have no Vitamin after high school experiment (Jaques 2008, p.397). One of the suggested actions that the company would undertake to evade reputational problems is adopting strategic leadership and its components like provide prompt customer feedback. This is a good way to create and defend competitive advantage. However, it also has its problems particularly at the time an organization is facing controversy. In providing feedback to the customer, the company was required first to own up the mistake and appear remorseful and ready to rectify it (Coombs et al. 2010, p.391). The consumers would have taken it as if the company is defending its reputation or hoodwinking the public, hence tainting its values which it has used of the years as a source of competitive advantage values as a source of competitive When the genuineness of a situation is doubted, it creates more curiosity (Grebe 2013, p. 73); this would have made the two students to investigate more about Ribena in other areas. For instance, GSK also marketed Ribena as a product with “no artificial flavor, sweetener and color” (Jaques 2008, p.397). However investigation found the product has high content sugar. Also, giving response would have not guaranteed GSK that the two girls would keep quiet about the matter. 3.2 Internal or external analysis that must be undertaken Situational analysis both internally and externally was important to be carried out by manager to understand his environment and customer needs. To be specific SWOT analysis was highly needed to understand the company capability in dealing with external threats and maximizing the opportunities (Zhang, Majid & Foo 2011, p.66). For instance, lack of proper customer service, feedback, and general communication was a weakness that had a huge bearing when the company could not control the reputation situation. Zhang, Majid & Foo (2011, p.68) went ahead to claim that when a manager takes time to analyze the weaknesses of a company, he or she is not looking blame game for the past mistakes, but rather to recognize the crucial areas which require an improvement to make the business more effective. Yu, Stafford & Armoo (2006, p.93) affirmed that analysis of the internal capabilities could have been done to assess whether company’s public relation could deal with matter at hand to avoid public criticisms. Leaving the matter proceed to court depict lack of strategic leadership and internal capabilities to deal with urgent environmental concerns (Jaques 2008, p.398). A sensible evaluation of weaknesses stops strategic blunders such as selling products which do not meet the standards stated in the adverts. Wallström, Karlsson & Salehi-sangari (2008, p.42) posited that continuous internal analysis leads to consistent improvement in every area of operations which is a significant factor in remaining ahead of the company’s competitors. A threat within the SWOT analysis can be termed as risk because it affects the general performance (Anderson 2005). For instance, the risk in the case study was lack of proper leadership, communication channel and internal controls. As a result, Ribena controversy ended in court where GSK had to admit of using misleading and forced to apologize to consumers (Jaques 2008, p.397). During the court process, Ribena general and financial performance was affected (Gregory 2007. Nevertheless, carrying SWOT has its own challenges. The environment keeps on changing hence a change process could be overtaken by events. Anderson (2005) claimed that SWOT analysis also does not offer solution which was highly needed to stop the court process. 3.3 Implication that change to the internal or external would have on the organizations As usual, change is good for the growth and competitive advantage of the company. A change should start with the internal environment, that is, the internal capability to increase strength which will drive company growth now and in future (Wallström, Karlsson & Salehi-sangari 2008, p.45). For instance, in the case study change was highly recommended in leadership style. Strategic leadership style was the better option to dealing with urgent issues like the Ribena controversy. This is because a strategic leader would have welcome dialogue with the two school girls who found no Vitamin C in Ribena and the issue might have been solved without public knowledge. Souiden & Pons (2009) stated that a strategic leader would have recalled the products already in store to avoid further damage of their reputation. Smith (2008) argued that a change in internal capability would have made the company to urgently create communication and public relations office to issue strategic apologia and improve the image of the company at the time of controversy. Change in internal build efficiency in operations like how the employees respond and serve customers and how decision is made based at the issue at hand (Jaques 2005, p.35). Change brings to the forefront the basic principles of crisis and issue management which is to identify the hitch early enough and promptly set up a strategic reaction plan and the corrective measure. However, change in internal environment also has its negative implication on the organization (Hubbard 2009). Urgent change is likely to be resisted by employees because it’s likely to disrupt their comfort zone. Constituting or restructuring customer service office at GSK means employees will be redeployed to different roles and for the fear of unknown or lack of competence they likely to reject change. Coombs et al. (2010, p.339) opined that even though, sometimes change is needed urgently; managers must predict events shaping up the industry and call and communicate change process earlier to allow employees adjust. 4.0 Implications of the suggestions for the management practice on the perspective of risk management 4.1 risk management Burnaby & Hass (2009, p.539) defined risk management as the process of determining, evaluating and mitigation of the uncertainty through decision-making. In simple term, risk management can be regarded as a two-step procedure which entails recognizing forms of risks that exist in the organization and dealing with such risks in the best-suited way. Risk sources can be identified in many areas of the organization including human component variables, decision-making and infrastructural assets (Hubbard 2009). In the Ribena controversial case, human component variable and decision-making were some of the major risks the company was facing. Human factors such communication breakdown between the company and consumer made Ribena case to end in court. Roehm & Tybout (2006, p.369) argue that such reputational cases always threaten the performance of the company because it can lead to loosing of customers to rival companies. 4.2 How management practices might influence the strategies adopted by the organization and shape its reputation Payne (2006, p.163) There are numerous practices which managers can implement to impact strategies adopted by the company so as to improve its image. These practices are largely considered risk management strategies. The manager must always be available so as to solve various risks on time which can have negative impact of the company (Williams 2002). Being available does not necessarily mean the manger has to be there physically in every situation. However, even if the manager is outside the company, he or she must be up-to-date with daily happenings. This helps in decision-making and what to anticipate the outcome. In Ribena situation, one can easily argue that the manager availability was missing because the company did not bother to provide response to the two students’ question on the product (Jaques 2008, p.397). Hubbard (2009) claimed that the best practices of risk management dictate that the manager does not “spin” the situation but to remain factual about the happenings. “Spinning” of the story is not good for the image of the particularly when the public realize the company is using public relations practices to defend the image of the company. In various circumstances “spinning” has led to boycott of the brand. For instance, GSK first denied the claims that Ribena had no Vitamin as found by the New Zealand Government Commerce Commission. The company even went ahead to provide counter interpretation facts to the public (Jaques 2008, p.401). During the court proceedings, the company pleaded guilty of the accusation painting them as dishonest. The manager also needs to communicate plan for action. In the Ribena case, the company provided no response in writing and also handed phone conversation rudely, a situation which made to two girls to seek audience with consumer watch TV program. As stated earlier, the company needed to accept the blame and communicate their plan to act and improve on the incident. (Kouzes & Posner 2009, p.20) held that Communication of the plan will back customers who had made decided to move to other companies. To reduce further risks, the company needed to be sensitive with the affected consumers. The reality is that many people had bought the Ribena could have felt victims of money which was not properly spent. This is because the company did not provide products which meet customer needs. In some perspective, the two girls were representing the less satisfied customers. Vassilikopoulou et al (2009, p.802) felt that treating the consumer rudely is a big business risk which result to loosing large customer base. Therefore, the business must always understand customer issues as sensitive bearing in mind that they keep the business running. 4.3 Effective management and how an organization benefits from it Risk management is a very critical issue for the management because it holds several advantages for an organization (Hubbard 2009). Risk management strategies enable the company to identify potential risks mitigate them on time. In so doing, the company remain effective and efficient in it operations. However, when the risk is dictated late, it is bound to affect the operation of the company just Ribena controversy did to GSK. The controversy started on 2004 and was decided in court in 2007. Over the three years of the court process the brand remained affected and even products as the company was labeled as dishonest. Jaques (2008, p.399) claims that despite the efforts of GSK to geographically control the matter, the Ribena story got lopsided publicity across the globe, certainly intensified by the connection with two school girls, who offered far-reaching interviews during the court process. Effective management practices is one which internalize risk management strategies within their the organization culture such the stakeholders consisting of top level management, middle level managers, line managers and employees grow knowing how to handle risks (JaqueS 2005, p.46). Effective management regards customer as the king and anything affecting their satisfaction must be eliminated before it get in public. Thus, the firm will be able to retain customers for long-term relationship. Keller & Lehmann (2006, p.747) argued a company with loyal customer has the competitive advantage to perform well even during economic downtown. With the change and competition one thing companies cannot neglect is use of public relations to improve their image. The consumer must be convinced that the company has the capability of solving their problems. The image is enough to the company numerous customers. 5.0 Conclusion The case study has several lessons for contemporary companies to learn. The Ribena case presents a situation of a disgruntled leadership which has no direction, vision and customer handling skills. Companies loose customer frequently because of ineffective leadership style which cannot deal with matters arising. The competition, in the industry today needs various strategies to solve. One of the biggest is losing customers. The research has established that customers are now more informed than before and ignoring their question spell disaster for the companies since they can lose the customers to rival company. Also, the company can as well taint its image. To avoid the risks, the company must embrace strategic leadership and its practices. As defined in the paper, strategic sets vision and objective and skills which ensure they are realized. Communication has been found as one of the skills which a company needs to realize its objective. Communication is needed in create customer expectation and perception and also provide feedback. It is also needed in the organization to keep good relationship with both employees and customer. A breakdown in communication is likely to create conflict between company and consumers as evident in Ribena case. Communication is also improving and maintains the good image of the company. Communication and public relation goes hand in hand in running current organization. However, managers must first grab issues and facts to provide accurate communication. 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