How Companies React To Major Crisis Events
Dr Bhaskar Dasgupta
The infamous Mohammad cartoons crisis had reached global proportions. One of the most common reactions by Muslims was to embark on a consumer goods boycott against firms which were primarily Danish, but other firms were involved as well, all the way from New Zealand. Similar situations like these keep coming up, whether it relates to boycotts of Israeli made/associated firms/products, or environmental disasters, or religiously oriented issues, corporate firms keep on getting in the crossfire. Unfortunately and unlike nation-states, they are not organised to handle political, religious and other crisis like this. So it was instructive to read how various firms reacted in different ways to the Cartoon crisis.
The paper was quite interesting indeed. Crisis management of this scale is not something that firms do very well. Take for example the recent news story that Lehman Brothers so totally mismanaged their bankruptcy and demise that it cost creditors up to $75 billion US Dollars. The authors quote some interesting events such as:
Environmental catastrophes such as the Union Carbide/Bhopal industrial accident and the Exxon Valdez oil spill had long-term ramifications for the companies involved. Criminal and terrorist acts such as the Tylenol poisonings, the Lockerbie/Pan American disaster and the 9/11 World Trade Center attacks have sensitised the public to a world of intense danger. Some crises, such as the Perrier water contamination crisis, seem largely of the company's own making through quality control failure.4 Others, such as the Belgian Coca-Cola crisis, seem to have arisen out of nowhere, apparently attributable to mass hysteria triggered by the previous dioxin scare, but intensified by corporate mismanagement. According to Johnson & Peppas: “A senior Coca-Cola Enterprises official, Phillippe Lenfant, did state that the scare had been mishandled, that communication was inadequate, and that the company was unprepared for a crisis of this magnitude
But religion is perhaps the one which is most difficult to deal with. Usually religion is the furthest from the minds of corporate executives (with perhaps the exception of praying for divine intervention when sales tank or losses mount) and the authors point to some events:
In 1994, the McDonald's fast-food restaurant chain, during its promotion of the Soccer World Cup, printed the flags of participating nations on its disposable bags. Included was that of Saudi Arabia, which bears the Shahada (Islamic creed) including the name of Allah. Muslims were outraged that the name of God was printed on material to be crumpled up and thrown away.18 A similar situation arose when Amstel, the Dutch brewer, printed the flags under the caps of beer bottles, in contact with alcoholic beverage. In India, Reebok encountered huge controversy over its brand champion, Indian cricket captain Mohammed Azharuddin, autographing footwear – including on the sole – resulting in the name Mohammed being trampled in the dirt, which was seen by some as particularly offensive.
The authors have given a nice timeline for the Mohammad Cartoons crisis.
30 September 2005: Danish newspaper Jyllands-Posten publishes editorial cartoons depicting the prophet Muhammad.
21 Oct: Danish PM replies to the ambassadors, indicating that freedom of expression is the foundation of Danish democracy and the Danish government has no means of influencing the press. (Refusal to meet the ambassadors has been subsequently condemned by 22 Danish former ambassadors).
26 Jan: Saudi ambassador to Denmark recalled; retaliatory boycotts against Danish products initiated in Saudi Arabia with supermarkets displaying signs indicating that Danish products have been removed. Norwegian foreign minister condemns publication of the cartoons in a Norwegian newspaper, on the grounds that they incite hatred or hateful expressions.
30 Jan: Jyllands-Posten publishes open letters in Danish and Arabic: “In our opinion, the 12 drawings were sober. They were not intended to be offensive, nor were they at variance with Danish law, but they have indisputably offended many Muslims for which we apologise.”
2 Feb: Boycott again mentioned in Friday prayers in Saudi Arabia and Kuwait; in Qatar, the Grand Mufti calls for boycotts of Danish products; in Yemen, posters of Danish PM set alight; in Lebanon, the boycott situation “has worsened significantly”; in Morocco, “the affair continues to run in the media”; in Egypt, “the controversy is the main topic in the media and Danish products have been removed from all Egyptian supermarkets”; in Sudan, “the president has issued a statement forbidding buying or trading in Danish products.”
3 Feb: Wellington NZ newspaper Dominion Post indicates an intention to republish the cartoons in spite of the outrage in the Middle East and the already-significant losses reported by Danish dairy giant Arla.
4 Feb: New Zealand ministers warn that the decision by New Zealand newspapers to publish the cartoons is irresponsible and could threaten NZ trade. Specific mention is made of Fonterra which “sells much of its product in Muslim countries”. NZ meat industry officials lambast the media for placing trade at risk. Danish and Norwegian embassies in Damascus and Danish embassy in Beirut torched.
7 Feb: The Iranian government sets up a committee to look at possibly annulling trade deals with countries that have published the cartoons, threatening more than NZ$100m-worth of New Zealand exports.
8 Feb: Politicians in Jordan call for cancellation of trade worth NZ$70m. Prime Minister Helen Clark condemns the publishing of the cartoons and refers to New Zealand's reputation as a “peaceful and understanding nation”. Arla – Fonterra's partner in the UK butter market – closes its factory in Riyadh as the boycott bites. Fonterra publishes advertisements in Middle Eastern newspapers emphasising the NZ origins of its Anchor brand milk powders. NZ diplomatic posts are placed on high alert.
By April 2006: retailers across the Middle East were beginning to restock Arla's products, although uptake was slow, with only 20 per cent of pre-boycott sales being recorded by the end of May. Market recovery proved slow in spite of Arla investing heavily in advertising campaigns in selected markets such as Algeria.
Dec 2006: The cost to Arla Foods of the boycott of Danish products in the Middle East amounts to approx. DKr400m for 2006. This equates to a loss of DKr40,000 for each of Arla's 10,000 Danish and Swedish co-operative members. “It's a relief that the boycott has come to an end … many products have been sold at discounted prices.” According to Finn Hansen (divisional director, Arla), “the boycott will have pushed back Arla's development in the Middle East two years.”
March 2007: Arla chairman Knud Erik Jensen was able to say: “We're back in the Middle East and expect to return to previous levels of sales by the end of 2007.”
What I found amusing was the last line, all that outrage and foaming and what was the result? Not much and not for long. But time heals all wounds, so to say, and all it needed was a bit of courage and lots of communications to heal those wounds. Arla went after the crisis with a perspective of doing something is better than doing nothing. They tried to communicate the fact that freedom of speech was part and parcel of western life and supporting the Danish stance. This did not work, and then Arla tried to distance itself. On the other hand, the New Zealand firms simply refused comment or tried to comment as little as possible, keeping heads down hoping that it blows over.
I have certain issues with this. Letting things blow over, especially when you are talking about quarterly financial reporting cycles, free flow of capital, footloose capital, fast changing credit ratings and the like is just not possible. Firms cannot absorb losses over such a long period of time. So one thing which corporates should remember is whenever governmental or Societal related boycotts hit you, you should immediately ask you’re your government’s support so that the firm can endure the boycott or survive the event. Public memory is short and as they say, a week is a long time in politics. It might take longer when we are talking about religion, specially considering that religion is the opium of the masses, but pass it will. You just need capital to ride over the issue.
Second is that corporates should not tie themselves to government or political stances. That is dangerous. Firms are not organised to handle political issues nor can they spin news as is required in today’s 24 hour news and media management. So they will simply stumble and cause issues for themselves. Keeping the head down is a good idea indeed.
Third is the use of gatekeepers. The authors recommend using gatekeepers to link into the populace. Looking at this cartoon issue itself, who would be the gatekeepers? I wrote some essays on this issue.
So go to Al Azhar or to Qum? Or start debates on Al Jazeera or MBC? Or get some fatwas in your favour? Or start dealing with the famed Muslim / Arab Street? And how do you keep them listening to the message? This area is highly emotional, charged with religious symbolism, prone to minefields, subject to linguistic interpretations, full of politics, in short, everything that a corporate executive will never have had handled before in his life. So how on earth would the executive or the corporate communications team know how to handle such aspects? I mean, they themselves make heavy weather of investor relations with bog standard corporate disasters such as losses. Can you imagine them working with a religiously sensitive topic such as this? That said, there is nothing like getting some discreet conversations underway with the gatekeepers and opinion formers directly (and be prepared to pay out of your nose, as these opinion formers are not going to be cheap), but put them on retainer and see what comes up.
Oh! Also pray.
All this to be taken with a grain of piquant salt!
How Companies React To Major Crisis Events
- » Published on January 04, 2009
- » Type: Opinion
- » Filed under:
- » This is part of a regular feature, With a Grain of Salt.