1.0 Introduction
When facing a crisis the former and present reputation of a company could result to instability; hence drive the company in a direction that is unfavorable. The strategy by which a corporate company decides to issue responses in relation to a crisis may positively or negatively influence the reputation perceptions of stakeholders and customers. In turn, this may impact how they choose to interact with the company. This research uses theoretical literature regarding the management of corporate crises, as well as consumer perception to establish the best ways through which a crisis can be avoided or dealt with, despite the magnitude of the crises. The reason of utilizing such literature is to help us analyse a situation using knowledge and insights gained from the Toyota case
1.1 Problem Discussion
A crisis is a situation that has a 50/50 probability of occurring in a company, hence can cause a company’s instability from an internal or external perspective, resulting to serious implications on its reputation, assets, et cetera (Carroll, 2009). Any potential Crisis is considered as a threat to the company, and could cause harm such as distorting the company’s profitability and growth therefore threatening its survival (Tucker and Melewar, 2005). The depth of a crisis which threatens corporate reputation is rather complex. It is worth noting that crises could occur suddenly and/or caused by problems which could have built up over a period of time (Greyser, 2009). Therefore, any company may encounter serious challenges from the public, media, stakeholders and competitors, since it relies on such elements to build trust and reputation (Tucker and Melewar, 2005).
To be able to come to sound decisions, it is necessary to...
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The ability of a company to maintain a good reputation is directly linked to the company’s ability to retain its stakeholders (Peterson, 2005). During a negative event or crisis situation, a company needs to ensure that it has effective strategies and resources in place, to deal with it responsibly, efficiently to minimize losses in share price value and public perceptions of corporate reputation (Coldwell .D, Joosub .T, & Papageorgiou .E, 2012). It is always advantageous to analyze past crises in order to develop a conceptual understanding of crisis situations and appropriateness of various means of coping with them (STERN, E. K., pg.1, 2009).
The general public in today’s society only see’s the outside appearance of the world’s big companies instead of looking at the inner exterior of all corporations. For example Enron a United States exchange Corporation collapses in 2001. The energy exchange company went into bankruptcy after being established since 1999, the company’s executive selected an accountant that in the end dishonestly inflated Enron’s profits. Many leaders inside on Enron’s corporation were stealing large amounts of money over a period of time. This dilemma was seen as a bad performance of an unstable business corporation.
In order to understand the thought process of leadership during a crisis, the authors state that we must first understand a conceptual model that is theoretically grounded, (Combe & Carrington, 2015). The conceptual model is divided into two elements, the descriptive and prescriptive mental models, (Combe & Carrington, 2015). The descriptive mental model focuses the external changes that occur during a crisis. The prescriptive mental model concentrates on future actions that need to be implemented to derail the cognitive overload due to continuous external changes as the situation unfolds. The prescriptive model aligns objectives, providing clarity to future implications related to the crisis, (Combe & Carrington, 2015). The authors, Combe & Carrington, (2015) have noted the importance of longitudal research perspective to capture the thought processes of interaction, communication and problem solving in a crisis. This type of research method is instrumental in depicting the challenges to incorporate better solutions to evolving situations. Sense making in a crisis defines these issues to ascertain the complexity and provide meaning to the event, (Combe & Carrington, 2015). Sense making entails the filtering of excessive data to identify the areas of importance. This perspective provides a means of taking a negative, that being disruptive and changing it to a positive or opportunity for
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The crisis at the Nuance group appears to be a “Reputational” crisis. The case study states that the Nuance Group is “a successful management consulting company.” (Zaremba, 2010) In order to be successful, you must have a positive reputation, which was most likely the case with the Nuance Group. However, as Warren Buffet said, “It takes 20 years to build a reputation and 5 minutes to ruin it”. (Tuttle, 2010) By publishing false information in their brochures, and distributing them to the public, the Nuance Group portrayed themselves as devious and untrustworthy, amongst other negative
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Fueled by the 2008 recession, the automotive industry suffered a crisis that hurt the United States’ national economy.
The communication process is not something that begins when a crisis rears its ugly head rather it is a process that takes place in preparing for a crisis before it happens. While the term crisis represents a blanket term used to describe many situations, each situation is unique, thus presenting different obstacles to overcome. However, with a well-established advanced plan in place an organization places itself in a position to overcome and work around obstacles. The development of a comprehensive crisis management plan is one achieved through effective communication where each member of the crisis management team has an advanced shared understanding of his or her role and responsibility during a time of crisis (du Pr'e, 2005).
Nothing tests a leader as crisis. Crisis can hit at anytime, anywhere, and no organization can escape this stage. And especially nowadays, with rapid changes in economical and political environments, the need of crisis management and leadership is becoming essential. During all hard times, by the light of nature people tend to follow along only a strong leader they trust in. All of this is applicable to a modern business environment as well. In challenging times, only a good leader can keep corporate spirit alive, employees calm and brought together, and eventually lead company successfully through it. Effective crisis leadership can rescue an organization from chaos and deliver opportunities where before there were only disadvantages. Organizations that successfully handle crisis situations can come out of them stronger and with greater employee, customer, and community loyalty than existed prior to the crisis. Leaders must look deep into the crisis for such opportunities that not only benefit the organization but also raise the potential for individual achievement among the organization’s
A frantic call is made to 911 by a passenger inside an out-of-control vehicle. The mechanics had failed. Eventually, the vehicle, driven by an off-duty California Highway Patrolman, careened off the highway at 120 miles an hour. All its occupants perished. This was the 2009, the first time the unintended acceleration issue in Toyota vehicles garnered national attention in the United States. But, Toyota is a multi-national company. This incident cannot be isolated. Turns out, it was not. The problem had surfaced in Toyota’s vehicles in Europe in 2008 from instances of uncontrolled acceleration. In early 2009, the company gave European Toyota distributors information about the sticky pedals along with instructions to replace them if customers complained.
Based on the literature review, reputation is a significant driver in creation of value or the obliteration of it. A number of the consumers consider reputation of a company as their most substantial purchasing criteria. Reputation provides a unique competitive advantage which enables companies to overtake the market. A decrease in reputation is linked with average market loss. Due to globalization, financial and economic unrest, growing business complexity, the news cycle rapidity and the evolution of social media companies are more vulnerable than ever. Today it’s hard to predict crisis which can be harmful to the most carefully build reputation. For example Volkswagen’s reputation has continued to be damaged by the revelation that it cheated emission tests. The company has a had a strong reputation for value but that reputation is now tainted. With different stakeholders all brands need to take care of their solid
According to David Abrahams, senior vice-president of Marsh Risk Consulting Practice and an expert in brand risk, there is often a demonstrable link between the way in which a crisis is handled by a company and what happens to that business and its associated brand. 'The way in which any crisis is handled becomes a visible test of management capability,' he says. 'If that crisis arises from a fundamental breach of trust or performance, the compound effect of the bad handling can be devastating.'
In order to understand the thought process of leadership during a crisis the author states that we must first understand a conceptual model that is theoretically grounded, (Combe & Carrington, 2015). The conceptual model is divided into two elements the descriptive and prescriptive mental models, (Combe & Carrington, 2015). The descriptive mental model focuses the external changes that occurred crating the crisis. The prescriptive mental model concentrates on future actions that need to be implemented to derail the cognitive overload due to continuous external changes as the situation unfolds. The prescriptive model aligns objectives providing clarity to future implications related to crisis, (Combe & Carrington, 2015). The authors, Combe & Carrington, (2015) have noted the importance of longitudal research perspective to capture the thought processes of interaction communication and problem solving in a crisis. This type of research method is instrumental in depicting the challenges to incorporate better solutions to evolving situations. Sense making in a crisis defines these issues to ascertain the complexity and provide meaning to the event, (Combe & Carrington, 2015). Sense making entails filtering excessive data to identify the areas of importance. This perspective provides a means of taking a negative that being disruptive and changing it to a positive or opportunity for improvement.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 25-40.
It is known that corporations play a large part in making the world go around. Many times we read, hear or see stories on companies and why something was done a certain way. The film “The Corporation” has given a whole new insight to not only how businesses operate but what motivates them and their decisions that they make to keep their businesses thriving.