Introduction
In 2008, GlaxoSmithKline [GSK], which is a well-established global pharmaceutical company, was entangled in a major legal tussle that arose from the ineffective application of strategic management practices. The legal situation involved two 14-year old schoolchildren from New Zealand who challenged the organisation’s marketing campaign.
In its advertising, GSK claimed that Ribena Drink, which is one of its products, was enriched with vitamin C. In an effort to ascertain the truth of the firm’s claims, the two girls undertook extensive tests. The results showed that the organisation’s advert was a hoax that aimed at marketing the product to the target customers.
The girls raised the issue to GSK through writing, but the organisation did not respond. This aspect prompted the girls to raise their concerns via a local media house, which broadcasted the issue through a local television consumer affairs program. The broadcast house raised the issue to the New Zealand Government Commerce Commission, which took GSK to court.
Subsequently, the organisation was fined for misleading the public. In addition, the company was ordered to correct the misrepresentation by placing a new advert in major print media [newspaper] in New Zealand. Jaques (2008, p.394) affirms that the action by the two complainants ‘triggered a sequence of events, which led to prosecution, public opprobrium, and international damage to an iconic brand’.
This paper entails a case study on the Ribena issue at GSK. The case study evaluates the strategic issues that GSK’s management team should have considered in order to avoid the legal and reputational effect.
Secondly, the paper identifies and discusses the possible barriers that might be encountered in addressing the legal and reputational impacts. The final part involves an evaluation of the implications of the suggestions identified in organisational and management practices from the risk management perspective.
Analysis
The situation encountered at GSK was mainly due to poor management practices. Additionally, the management team did not appreciate the magnitude of the issue on the organisation’s corporate reputation. According to Page and Fearn (2005), corporate reputation is an indispensable element in organisations’ pursuit for excellence.
Page and Fearn (2005) further accentuate that the consumers’ perception influences an organisation’s performance. Consumers have noticeably become more concerned with organisation’s behaviour in making decisions on store and product loyalty. This aspect underscores the existence of a strong correlation between organisational behaviour and consumer behaviour.
Since its inception, GSK has managed to penetrate the global market largely due to the extensive investment in product diversification. Consequently, the firm has gained remarkable global reputation. Additionally, GSK global success has also been enhanced by investment in extensive marketing.
The firm did not recognise the effect of ignoring the customers’ complaints on brand preference. Hur, Kim, and Woo (2014, p.76) emphasise that achieving ‘brand preference and stimulating demand are particularly challenging for a company with no reputation in a given product category’.
Moreover, organisations that do not have sufficient reputation experience challenges in developing credibility for their products. Managing corporate reputation leads to the development of positive moral capital, which protects an organisation from negative encountering negative stakeholder evaluation.
GSK should have considered a number of issues in order to avoid the legal and reputational situation that occurred. Some of the issues that the firm should have considered are evaluated and discussed herein.
Ethical advertising
Despite the fact that GSK intended the marketing campaign to be persuasive, the firm failed to adopt effective practices that would have contributed to the attainment of the desired outcomes. Reast, Palihawadana, and Shabbir (2008) affirm that persuasive advertising is focused on establishing a strong bond, hence fostering long-term purchase intention.
The organisation’s marketing department should have ensured that it integrates ethical advertising practices (Biegler 2013). In a bid to achieve this goal, the organisation’s management team should have adhered to the stipulated legal and regulatory standards with reference to advertising.
Countries such as the US have established a Federal Trade Commission, which is charged with the responsibility of regulating advertising practices (Synder 2011).
In the event that there are no clear ethical standards for advertising, GSK should have advocated truthful advertising practices. On the contrary, the firm exaggerated the claim that one of the ingredients used in making Ribena included Vitamin C.
Thus, the advert was deceptive. Trehan and Trehan (2011) argue that a customer has the right to sue organisations based on deceptive advert.
Cramphorn (2014) is of the opinion that developing brand identity depends on the effectiveness with which an organisation nurtures a strong and positive emotional bond. However, ineffective advertising can hinder the development of such strong bond (Trehan & Trehan 2011).
In a bid to achieve this goal, the organisation should have avoided misrepresenting or omitting material facts on product characteristics in the marketing communication process. Product characteristic constitutes a critical element in the consumers’ decision-making process.
Perry, Cox, and Cox (2013) corroborate that consumers seek product information in order to make a purchase decision that is aligned with their product taste, preferences, and values.
By misleading customers to purchase the product through the advert, GSK influenced adversely the consumers’ right to purchase. Koslow (2000, p.248) supports the theory of consumer right by asserting that consumers ‘learn about who, what, where, when, and how to buy through advertising’.
This aspect underscores the fact that organisations should value advertising as a critical element in facilitating the consumers’ right to choose. GSK denied the target consumers the right to choose.
This move led to the development of a negative reaction amongst the consumers. The advertising process was based on different interests, which entailed influencing the consumers to make a purchase decision.
GSK should have avoided incorporating misleading facts in the advert. Conversely, the firm’s marketing manager should have ensured a high level of honesty in its full disclosure on product characteristics. This element would have improved the consumers’ ability to make a decision from an informed position.
Moreover, adopting this approach would have minimised the negative reaction significantly from consumers.
The capacity to influence the consumers positively would have originated from the development of positive perception on the organisation’s approach towards truthfulness in its marketing communication (Gurhan-Canli & Batra 2004). Thus, the firm would have succeeded in protecting its reputation.
Customer Relationship Management
Organisations should not be concerned with profit maximisation only. On the contrary, they should focus on fulfilling the customers’ needs (Bang, Sooyen & Lyndon 2014). This case shows that the advertising process was skewed towards generating sales revenue rather than educating customers on the products.
GSK should have appreciated the importance of integrating the concept of customer relationship management [CRM]. The firm’s management team should have perceived customers as an essential asset in maximising sales revenue. Leticia, Rodolfo, and Ana (2011) cite customers as a fundamental element in achieving corporate success.
The concept of CRM would have enabled the firm to establish a cohesive relationship with its customers (Senn, Thoma & Yip 2013). One of the issues that the organisation should have taken into account in its pursuit for CRM entails complaint management.
Despite the fact that organisations are concerned with delivering value to customers, the probability of errors occurring, hence hindering the delivery of the intended value cannot be ruled out. Customers may raise product complaints, which the firm must address adequately. Ang and Buttle (2012, p.1021) accentuate that customer ‘complaints are a fact of organisational life’.
Past studies show that customers switch service providers due to diverse reasons. Some of the major reasons include the products’ failure to deliver the desired value and unfavourable service encounters from core organisational personnel.
In the event that customers do not receive adequate treatment from key organisational personnel such as the top management, they react by voicing their concerns to third parties (Malhotra, Agarwal & Ndubisi 2010).
This aspect mirrors the situation encountered at GSK. Integrating optimal complaint management minimises the likelihood of customers terminating their relationship with other organisations.
Knox and Oest (2014, p.42) affirm that customer complaints ‘are important non-transactional events because they represent a critical turning point in the company’s relationship with its customers’. Organisations can entrench a high level of customer loyalty through effective complaints handling.
Ang and Buttle (2012) support this argument by affirming that excellent handling of complaints is critical to pre-empting the occurrence of an undesirable outcome. In order to manage customer complaints successfully, GSK should have integrated the concept of data warehousing using the effective customer relationship-management software.
The software would have played a fundamental role in collecting and storing diverse customer complaints and complements. This move would have ensured that that the complaints raised by customers are understood and managed easily.
In its quest to develop a better understanding of the customers’ complaints, it is imperative for the organisation to appreciate the contribution of social media in developing a strong customer relationship. The emergence of social media has provided customers with an opportunity to share their consumption experiences.
Harrigan and Miles (2014) cite Facebook, YouTube, Twitter, Google Plus, and LinkedIn as some of the common social mediums used by organisations in their CRM practices. Consequently, social media has become a critical source of product information that consumers are using.
Raj et al. (2012) opine that negative product experiences shared on social media platforms might have a multiplier effect, hence affecting the organisation’s reputation adversely. This aspect might affect the organisation’s ability to generate sales revenue. GSK should have used its CRM practices in apologising to clients.
In order to undertake CRM successfully, GSK should have integrated the International Organisation for Standardisation [ISO]. Some of the ISO standards that the organisation should have considered entail ISO 10002 and ISO 9001. Adopting ISO 9001 would have provided GSK with an effective framework for integration in managing diverse organisational processes.
Thus, the firm would have ensured that its products meet the customers’ expectations, hence culminating in a high level of satisfaction (Nicklas, Schluter & Winzer 2013).
Conversely, ISO 10002 provides organisational managers with guidance on how to deal with customer complaints related to products. This goal is achieved through optimal product planning, designing, product improvement, and operation.
Potential problems that might arise
The above analysis illustrates the magnitude of the issue faced by GSK as substantially high. This assertion arises from the view that the reaction by the two 14-year old girls received global awareness, which affected GSK’s global reputation adversely.
However, implementing the above issues may improve the GSK’s capacity to prevent the occurrence of such incidences in the future. Some of the major problems that the firm might encounter in implementing the proposed issues are evaluated herein.
Resistance
Implementing the above issues means that the organisation will be required to undertake remarkable strategic changes. Thus, the firm’s management team should not rule out the possibility of resistance to change. Wittig (2012, p.23) accentuates that employees ‘resist change because it involves moving from the known to the unknown’.
In this situation, GSK employees might resist the proposed strategic changes. For example, the process of implementing ISO standards might require the organisation to change the norm with reference to how its personnel handles and interacts with customers.
Some employees might develop the perception that implementing the proposed changes will lead to a significant change in job characteristics.
One of the perceptions that the employees might develop relates to an increase in the degree of job strain due to additional job demands (Choi 2011). Job strain increases the level of work-related stress. Such occurrences might stimulate employees not to support the strategic changes.
Resistance to the proposed change might not only be limited to the lower levels of management, but also amongst the middle and top levels of management. This assertion arises from the fact that the middle and top levels of management would be required to oversee the implementation of the required changes (Shin, Taylor & Seo 2012).
Lack of teamwork
The process of implementing the above strategic issues will depend on the contribution of all the internal stakeholders. Thus, successful change implementation will be influenced by the extent of organisational learning. Perez and Gutierrez (2013, p.245) define organisation learning as ‘a process of knowledge acquisition, assimilation, and exploitation’.
Therefore, it is imperative for the GSK’s management team to consider the concept of employee collaboration in order to derive the required synergy.
One of the strategies that the organisation’s management team should consider entails teamwork. Lack of effective networking amongst the organisation’s employees will affect GSK employees’ ability to share ideas and information (Ulrich et al. 2013).
Thus, its application to the organisation’s needs, which entail the application of ethical advertising and the adoption of a customer-focused approach in the organisation’s operation in order to minimise occurrence of complaints, will be affected adversely.
The capacity to improve an organisation’s competitive advantage entails the understanding that is effectively applied to the already existing knowledge.
Lack of vision and ineffective planning
The effectiveness with which GSK implements the proposed issues will greatly depend on the extent to which the employees have developed a clear vision. Palmer (2015) asserts that successful implementation of change is determined by the degree to which all the directly affected stakeholders by the change have developed a ‘shared-need-for-change’.
The majority of the organisational employees might not appreciate the significance of the proposed approaches in restoring the organisation’s global reputation. Such aspects highlight the existence of lack of clear vision. Moreover, the implementation of the issues identified will depend on the efficacy of the organisation in planning the implementation process.
The organisation’s management team has an obligation to ensure that the vision is well articulated by all the internal stakeholders. Huyer (2014, p.19) asserts that a ‘well-articulated vision paints a visual picture of what it looks like when complete and it has a clearly set direction and purpose’.
Implication of the suggestions
From the above analysis, it is evident that GSK could have avoided the occurrence of the negative publicity by implementing the proposed suggestions. However, the organisation’s management team can derive a number of lessons.
First, by integrating ethical organisational practices, the organisation’s management team would have protected the firm’s corporate reputation. This assertion means that the firm would have improved its effectiveness in managing crises that arise from the external environment.
Hearit (2008) cites reputation as a fundamental strategic resource in an organisation’s operation. Moreover, Hearit (2008, p.319) affirms that reputation ‘is valuable because it informs us about what products to purchase, what companies to work for, or what stocks to invest in’.
This aspect means that investing in ethical practices will play a fundamental role in improving the GSK’s market position. Consequently, the organisation will evade the occurrence of human capital crisis.
For example, the firm will be in a position to attract valuable job candidates from the global labour market because of the positive reputation. Additionally, the likelihood of the organisation optimising its performance, hence its competitive advantage will be improved substantially.
Sohn and Lariscy (2012) accentuate that reputation is a rare resource that most organisations experience in their quest to develop a strong organisational culture. Providing truthful and material facts in the marketing communication process would have promoted the organisation’s ability to develop a strong customer base.
This assertion arises from the view that customers would have been in a position to make optimal purchase decision. Consequently, the likelihood of the firm maximising its sales revenue will be improved considerably.
Furthermore, integrating the concept of customer relationship management [CRM] will play a considerable role in improving its crisis communication. Through effective crisis communication, GSK will be in a position to gain insight on how to manage crisis due to the integration of collaborative communication between the organisation and its customers.
Furthermore, CRM will enable the organisation to be proactive in identifying issues that might affect the organisation’s corporate reputation adversely.
In addition to the above aspect, investing in CRM will improve the organisation’s capacity to undertake crisis management. For example, the firm will entrench different communication approaches such as impression management, image restoration, and apologia (Kim 2014).
According to Riddell (2013), apologia entails a compelling and vigorous defence mechanism used in organisational management in order to restore corporate reputation.
One of the elements in entrenching the concept of apologia includes admission of guilt. In this case study, GSK did not admit guilt for the inclusion of false information in its advert. Consequently, the complainants were forced to take extreme measures by raising the issue to third parties.
Conclusion
Marketing communication constitutes one of the essential elements in organisations’ quest to optimise their performance. However, in their marketing communication process, it is imperative for organisations’ management teams to recognise their capability of influencing the consumers’ purchase decisions.
Thus, organisations have an obligation to give truthful and material facts of their products. This approach improves the consumers’ ability to make effective purchase decisions, hence attaining a high level of satisfaction. For example, customers base their product preference on product information offered through the marketing communication process.
In this case, GSK erred in its market communication through the falsification of the product characteristics. Consequently, the firm’s global reputation was affected adversely. Apart from the reputation impact, the organisation suffered remarkable legal implications.
However, the organisation would have been in a position to avoid such situations by implementing effective strategic management practices. Amongst the issues that the organisation’s management team should consider include ethical practices and customer relationship management.
The firm should ensure that all its operations adhere to ethical practices. Currently, consumers are increasingly becoming concerned with how ethical an organisation is in its operations. This trend is influencing the consumers’ product choice and preference. Therefore, it is imperative for organisations to ensure that they give truthful information.
The adoption of ethical practices will culminate in the development of a strong level of customer loyalty. Moreover, the case study indicates the importance of integrating effective customer relationship management in order to gain insight on diverse customer concerns.
Thus, the organisation will be proactive in dealing with emergent issues. The case study further underscores the likelihood of challenges occurring in implementing the proposed suggestions. However, the firm should consider integrating effective leaders, planning, internal communication, and teamwork.
These elements will improve the likelihood of the organisation transforming its global reputation successfully. Moreover, the organisation’s effectiveness in crisis management will improve considerably.
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