Essay, Pages 6 (1384 words)
Communication is faster than ever due to the advent of the Internet and social media which are venues for forum, interaction and information/issue dissemination, Today, nearly half a billion people around the world utilize the Internet. In the United States alone, about 155 million Americans access the Internet at home, with some citizens accessing the Internet only at work. Internet use by consumers in other countries, especially Japan (49 million users), the United Kingdom (29 million), Germany (36 million), Brazil (25 million) and France (31 million), has escalated rapidly.
(Ferrell, Thorne, & Ferrell, 2012). The increasing number of Internet users warrant firms’ closer attention to and effective management of paracrises. In particular, Nestle’s case in 2010 exemplifies the need to respond pro-actively to social media attack initiated by Greenpeace rather than by not acknowledging the challenge or fighting back against the challenge. If not properly and timely addressed, this may result to a web of chaos for Nestle. Greenpeace is a global campaigning organisation that enhances to change attitudes and behaviour of people in order to protect and conserve the environment.
(About Greenpeace, n.d.)
The reputational threat instigated by Greenpeace stemmed from Nestle’s weak stakeholder/customer relations which is a factor in selling products/services, one of the seven basic functions of marketing. Though it is true that supplier contracts including one with Sinar Mas Group should have been reviewed at the onset to check if these are aligned to the company’s social responsibility mandate, the paracrisis could have been immediately addressed should management responded to every single complaint in its social media.
Based on my analysis, in general, Nestle’s performance in individual functional areas of business is strong. Financial performance is outstanding as group sales and earnings before income tax (EBIT) per its 2010 Annual Report are increasing from CHF 107,618 million to CHF 109,722 million and CHF 15,699 million to CHF 16,194 million in 2009 to 2010. It was also able to manage company’s debt as net financial debt was reduced to CHF 18,085 million to CHF 3,854 million which now only comprised 6.2 percent of equity from the staggering 37 percent in 2009. On the marketing side, Nestle is a well-known brand all over the world, in fact, number 1 in the food industry offering diverse products. Other functional areas of Nestle including operations, research and development, information systems per my research and analysis, are performing effectively.
On the external factor aspect, based on my analysis, firm’s strategies take advantage of the existing opportunities and minimize potential adverse effects of threats. First, food (and beverage) industry is observed to be resilient vis-à-vis other industries during and immediately after the global economic crisis in 2008. The economic value has had an opposite impact on food and beverage industry. The major concern of these industries is increasing transportation costs for which people have to spend. Nevertheless, the food and beverage industry has been relatively less affected when compared to other industries. This is mainly attributed to the fact that food products continue to be essential to consumers in spite of the slowdown. A comparison between the S&P 500 and the Dow Jones US Food and Beverage Index in 2008 is testimony to the resilient nature of this industry. In 2008, the S&P 500 declined 37.6 percent against a fall of 22.9 percent by the Dow Jones US Food and Beverage Index. (IMAP, 2010). Second, people are becoming more health-conscious and are now demanding nutritious products in which Nestle has the capability to produce. Company’s response to these major opportunities is superior. However, reputational attack initiated by Greenpeace could damage Nestle’s franchise value and could result in loss of business and consumer trust.
Though Nestle could have adopted the following mutually exclusive strategies to respond to paracrisis – repentance, refutation and refusal, it is apparent that repentance, a reform strategy will create a harmonious relationship with its stakeholders, hence, the best or the only feasible paracrisis strategy response. Damage to franchise value caused by increasing trajectory of the paracrisis outweighs the cost of changing organizational practices (change supplier) to reflect the demands of Greenpeace. The combined effect of the voices not only from Greenpeace but also from specialist media and mainstream media and commentary on multiple blogs will be damaged reputation and loss of business. Adopting the refutation and refusal strategies will only create organizational hiatus and worst, crisis. Now that repentance is deemed most feasible, the following independent courses of actions could be employed by the crisis management team at the point of view of marketing communications and public relations: 1. Filter pressing and critical issues for appropriate action of Board of Directors and/or Senior Management while attending to minor issues; 2. Resolve all issues – critical or not at their level and respond to these issues through social media in an appropriate and timely fashion; 3. Respond only to issues deemed critical. The first alternative course of action is deemed most feasible. Critical issues could be discussed at the top level of the organization giving the Board and Senior Management the opportunity to carefully review them and adjust company strategies, if necessary. Board and Senior Management sets the tone at the top and has the ultimate responsibility in running the business, hence, they should be fully aware of these critical issues. The crisis management team, on the other hand, should timely and appropriately respond to all issues – critical or not, with an end of assuring its stakeholders that these issues are being resolved by the company. Minor issues can then be resolved at their level.
The public should be made aware, implied or expressed, that the company is taking actions and is responsive to customer/stakeholders’ concerns. My recommendation to address the company’s central problem as mentioned in the above paragraph should be complemented by medium to long-term action plans which includes strengthening its stakeholder relations program; and annual or periodic review of company’s adherence to its mission and vision statements, strategies and business principles. First, stakeholder relations program should be strengthened by keeping community relations at the highest level, improving the customer climate, and maintaining good public image. The “Be redundant and sprawl” rule is highly applicable to prevent a crisis from happening in this particular case of Nestle. Posting articles on its commitment to social responsibility on different sites including its own website will help the company to vindicate itself from any gross reputational attack. Nestle should as well develop a comprehensive and effective communication and marketing strategy. Second, conducting an annual or periodic review of company’s adherence to its mission and vision statements, strategies and business principles will save the company from dealings that may taint company’s reputation. Nestle is committed to its business principles in all countries, taking into account local legislation, cultural and religious practices which include supplier and customer relations. Nestle require its suppliers, agents, subcontractors and their employees to demonstrate honesty, integrity and fairness and to adhere to its non-negotiable standards. In the same way, Nestle is committed towards its own customers. (Nestle’s Corporate Business Principles, n.d.).
These business principles, more particularly supplier and customer relations, should be reviewed not only on first dealings but on a continuous basis. Nestle’s objective is to be the recognized leader in nutrition, health and wellness and the industry reference for financial performance. (Nestle Annual Report, 2010) Remaining at the number 1 spot in the food industry busily catering to customer orders and demands while projecting mounting sales and profits could have prevented Nestle from responding to social media campaigns against irresponsible sourcing of palm oil. Apparently, Nestle failed to live by its dogma of social responsibility. Notwithstanding its desire to be viewed as socially responsible, it was not the actual picture then. Nestle was callous to people’s call for reform until it grew and became a sensation. Nestle should have an effective management team to manage paracrises or reputational threats. Everything seems so stable in an organization like Nestle, but its management should not discount the fact the power of its stakeholders to cause reputational threat.
- (2010). Nestle Annual Report.
Ferrell, O. C., Thorne, D. M., & Ferrell, L. (2012). Social Responsibility and Business. Singapore: Cengage Learning. IMAP. (2010).
- Food and Beverage Industry Global Report.
About Greenpeace. (n.d.). Retrieved from Greenpeace International: http://www.greenpeace.org/international/en/about/ Nestle’s Corporate Business Principles. (n.d.). Retrieved from Nestle: http://www.nestle.com/aboutus/businessprinciples