Archive for August, 2011
‘Only 1% of my business….’
…but 100% of the problem.
Until 3 months ago News Corps was the most powerful news organisation in the world. It owns Fox News in the United States which is the voice of Conservative America, as well as the Wall Street Journal and Daily Post. In Europe its subsidiary News International (NI) controls Sky Broadcasting (BSKYB) which in turn has a virtual monopoly of broadcasting of sport in the UK , it owns The Sun, the tabloid newspaper whose support has decided the election for the last 30yrs and the New of the World the most profitable newspaper in the UK, as well as the Times and Sunday Times. In Asia it owns the Star Network.
In July of this year the News of the World was closed after 168yrs, the Chief Executives of the European and American subsidiaries that control NC’s interests have resigned. The Director of Communication for the British Government has resigned and been subsequently arrested for phone tapping and police bribery. Many senior executives at News International have been arrest as result of police investigation, resigned or been sacked. Many of the police officers responsible for the investigation into News Internationals journalistic activities have either resigned or been removed (or even got jobs with NI).
The owner of NI, Rupert Murdoch and his son, James Murdoch, the CEO of NI, have been dragged before parliament to explain their newspaper’s journalistic activities and links with politicians and the London Police.
The British Prime Minister is implicated in a cover-up, both indirectly through his close connections to NI and directly by employing Andy Coulson the editor of the News of the World during the phone hacking years.
Finally (for the time being), News Corps has had to withdraw a bid to take over 100% ownership of Sky Broadcasting of which they already 30% and face investigation by the FBI for criminal activities.
What is even more surprising is that this crisis is a result of journalistic practices that took place 8 yrs ago and have been investigated twice by the police with nothing found to be amiss. Even the main protagonists are no longer working for News International.
Even though a senior NI executive back in 2003 admitted to criminal activity when questioned by parliament. Was News International too powerful to be investigated by the police? The answer is probably yes.
An example of the links between the London Police and News International is the way the senior police officer who investigated NI ended up working for them as a columnist.
It was not only the police who treaded carefully when dealing with NI; Members of the British Parliament lived in fear of News International.
Tom Watson MP speaking at the debate on News International
So why in the space of 3 months did the crisis have such a profound and long-lasting impact on News Corp.
Here’s is part of the answer. NB James Murdoch has subsequently been accused of lying in regard to how much information he knew when authorising out of court settlements for victims of phone hacking & News International have withdrawn their bid for BSKYB
The anatomy of the crisis that NC are involved in is an extreme example of poor crisis management involving, as with much crisis management, cover-up, blaming of third-parties, misinformation and corporate arrogance. They never dealt with the real issues, whether it was because they felt they didn’t need to or couldn’t, as it would compromise their competitive advantage, and the current crisis is the consequence of this strategy.
The Key Questions are:
- What were the issues the have created this crisis?
- How did NI deal with these issues?
- Why and how did these issue become a crisis, after such a long period of time? Why did NI get away with it for so long?
- How did NI originally deal with the crisis and how has their approach changed (and why)?
- How did NI use Corporate Communication as part of their Crisis Management strategy?
- What impact has this had on their reputation and business performance?
Resources
There are countless articles, discussions and videos on the internet regarding this story. And the story is still evolving. Arrests are still being made and new information is coming to light. This is the biggest scandal since Watergate and it’s impact on government, policing and corporate governance in the UK, and worldwide, is impossible to estimate at this time. Below are some suggested resources to get you up to speed with the story and provide extensive information for this case study. Here are some links to resources which will assist you.
Background
Timeline of events dating back to 2005
http://www.nytimes.com/interactive/2010/09/01/magazine/05tabloid-timeline.html?ref=europe
There are many information depositories on this crisis the best is from The Guardian who broke the story.
http://www.guardian.co.uk/media/phone-hacking?INTCMP=ILCNETTXT6921
This video gives a good summary of the position in 2010 before the scandal broke and outlines the problems with the explanation given by NI of the ‘one rogue reporter’ scenario, which was finally dismissed after a parliamentary investigation of journalistic practices at The News of the World.
http://www.guardian.co.uk/media/video/2010/feb/23/alan-rusbridger-phone-hacking
An insight as to the reason’s behind NI unwillingness to deal with the issues is here.
http://www.guardian.co.uk/media/video/2010/sep/09/news-of-the-world-phone-hacking-newsoftheworld1
Finally, an authoritative view of Murdoch’s influence on journalism and wider aspects of his influence
Management Communication
An important part of these events are the management communication that comes directly from Rupert Murdoch. Here is part of the testimony of the CEO of the worlds largest media corporation to the British Parliament.
Here is what Rupert Murdoch’s biographer thinks of the impact of this crisis and the future of NI/News Corps
http://www.guardian.co.uk/commentisfree/video/2011/aug/09/michael-wolff-rupert-murdoch-video
Read Full Post | Make a Comment ( None so far )Google’s bad medicine
Google’s USP has always been that they are different. The nice guys. An antidote to Microsoft’s corporatism and Apple’s smugness. Now to show how different they are, (back in the day we would mention ‘Street Credibility’), they have turned to drug-dealing, well almost.
Get your illegal meds here.
Google’s much admired and hugely lucrative advertising policy has landed them with a massive $500m fine from the US government.
http://www.bbc.co.uk/news/business-14659115
From 2003 to 2009 Google carried ads from Canadian pharmaceutical companies for prescription drugs freely available in Canada but not in the US, they were prosecuted, found guilty and fined. It will be interesting to see how Google deals with this issue. Their past experience with wifi data collection should have burnt their fingers enough for them to tread cautiously and avoid falling to the same trap by trying to brush this off as like student’s try to brush of criminal activity as ‘high-jinx’.
What the wifi data problem should have taught Google is that they need to treat such issues as seriously as their stakeholders do. Or rather as their Stakeholders’ stakeholders do. Shrugging off such issues as being inconsequential is a mistake, even if the $500m is small change for such a profitable company. But this issue could be more damaging.
Unlike the wifi incident which could be brushed of as a ‘geeky’ mix-up. A-bit-of-old-code-got-mixed-up-with-a-piece-of-new-codes-and-inserted-unwittingly-into-a-project-that-would-benefit-Google’s-stakeholders is one thing. But this issue is about cash, making money, increasing shareholder value with no upside for Google’s main supporters, the geeks and the general internet community.
Google saw the advertising of pharmaceuticals as good business, and they actively pursued this market.
Google was advised in 2003 by the National Association of Boards of Pharmacy that it was illegal to import non-controlled prescription drugs into the United States.
Yet a number of Canadian pharmacies were advertising such products through the company’s AdWords system and shipping them to US-based customers.
According to prosecutors, Google later blocked overseas pharmacies from targeting US users, but allowed Canadian companies to continue their activities, even providing them with advertising support.
It finally launched a clamp-down in 2009 when it learned of the government’s investigation.
http://www.bbc.co.uk/news/technology-14708119
Not cool. Google at a management level have been found with their hands in the cookie jar. But they won’t be prosecuted for it, so where’s the problem. Well this, as with other incidents, is eroding Google’s reputation. This reputation has helped them get through some tight scrapes but as with Richard Branson and Virgin, who escaped prison for tax evasion only by pleading naivety, this is the first indication that the authorities are growing weary of Google’s disregard for the niceties of good Corporate Social Responsibility.
As these incidents impact on Google’s reputation so they will impact on their business performance. Governments are more likely to treat Google with much more severity, similar to the way that the EU treated Microsoft’s anti-competition practices, and with Google looking to take on both Microsoft (in the PC software market) and Apple (in the Mobile phone market) they will need all the help they can get.
Read Full Post | Make a Comment ( None so far )Corporate Branding – Shell & BP
Background
BP and Shell are two major multinationals who operate almost exclusively in the Petro-chemical market. Their business is the extraction of oil and the manufacture of oil based products. In a world of dwindling oil resources this extraction process is becoming more and more complicated and resource intensive. For both companies their competitive position is focussed on their brand. These brands are Corporate Brands. Central to their Corporate Branding is their reputation management. These two companies have different approaches to manage their reputation. Shell are proactive and take great care of how they are present to not only to customers but also to shareholders, governments and other important stakeholders.
Competitive Advantage
When filling your car up with petrol or buying oil to put into your engine, how much do you actively choose between BP and Shell (or any petroleum company)? What motivates the purchase of petrol and oil? How do we differentiate between brands of petrol? How much product differentiation is their in the petro-chemical market?
Petro-chemical companies need to promote their brand to sell products. The corporate brands are different to product-based brands such as those used by Proctor & Gamble. And as we will see later help to allow them to continue to extract oil from more and more controversial oil fields.
Shell
Below is an example of how Shell presents itself to corporate partners.
and presents itself to customers.
These presentation of Shell are important to enhance its reputation so when choosing between similar (or even identical products) Shell is brand that people trust and are positively disposed towards.
BP
BP is not a company that is renowned for managing its reputation. In fact the presentation of BP in the last year has been positively damaging.
This resulted in the type of publicity that ruins companies.
and results in this type of scrutiny of management and questioning of the companies motives and policies.
Resulting in this type of communication rather than the type that Shell produces.
And a consumer backlash that results in this.
http://www.bbc.co.uk/news/10233882
How does the perception of Shell and BP differ? Are these differences based in reality?
Corporate Branding and Doing Business
Not only do petrol companies sell petrol and oil product they need to extract oil. Here the corporate brand is important to ensure that an oil company continues to be able to produce oil. So here branding is not only about encouraging customers to buy products but other stakeholders, such as governments and other regulators to allow companies to extract oil.
When drilling in more controversial environments the reputation of an oil company will facilitate access to these oil fields.
http://www.rawstory.com/rs/2011/08/05/shell-arctic/
However…
Do not be fooled by reputation. Shell has had its share of problems.
http://www.guardian.co.uk/environment/blog/2011/aug/16/shell-north-sea-oil-spill-live?INTCMP=SRCH
A serious environmental disaster but one that hasn’t damaged Shell’s reputation as badly as BP’s.
Neither has this
http://www.guardian.co.uk/environment/2011/aug/03/shell-liability-oil-spills-nigeria?INTCMP=SRCH
Questions
- How does Shell use branding strategies and techniques to position itself?
- What is the link between branding and reputation?
- How should BP go about repositioning its brand?
Graeme Lindsay
Corporate Reputation Resource Centre 