Strategic Management - of GSK - Case Study Example

CASE STUDY IN STRATEGIC MANAGEMENT [NAME] [INSTITUTIONAL AFFILIATION] [DATE] Table of Contents Introduction 3 Section 1 4 Quick Response to Customers’ Complaints 5 Communication 6 Effective Internal Management 7  Understanding the Changing External Environment 7 Making Meaningful Apologia 8 Section 2 9 Potential Problems that May Arise in Implementing the Suggestions 9 Loss of the Market Share to the Competitors 9 Resentment from the Employees 10 Section 3 11 Implications of the Suggestions to Organizational Management Practice from a Risk Management Perspective 11 Meaning of Risk Management 11 How Management Practices Might Influence the Strategies Adopted by the Organisation and Shape its Reputation 11 Effective Management and how an Organisation can Benefit from it 12 Conclusion 13 References 14 Introduction GSK is a company that has been in existence since 1930s. It is well-known company in the Great Britain and now New Zealand, Australia and several other parts of the world. In 2004, two high school students- Anna Devathasan and Jenny Suo were conducting an experiment testing the amount of Vitamin C in drinks(GSK (2007a). In this experiment, they discovered that Ribena, a drink manufactured by GSK did not contain four times the amount of Vitamin C that it was purported to contain in the advertisement that had been run on televisions for a period of a year (Food Magazine 2004).An attempt by the teenagers to write to the company to seek redress on the matter was fruitless. They made a few calls but the reply and treatment from the company was rather rude. The same issue got public attention later and became a major bone of contention in New Zealand. It earned little public attention in Australia. The sales for Ribena in New Zealand went down following this saga (Gregory 2007.GSK Australia was sued, it pleaded guilty to the charges brought against them. The jury ordered the company to pay damages and reproduce new advertisements correcting the wrongful misrepresentation of facts in the subsequent advertisements (Eames 2007a. As part of the mitigation measures to rebuild the tainted reputation, the company came up with a number of strategies (Burns and Bruner (2000).One of them is quarantine of Ribena from the syrup so as to safeguard the parent brand. The next approach was to give acceptable “explanation” in a bid to safeguard the reputation of the company. The third step was to give an apologia (Fair Go 2004).The latter was conditional and that it was pegged on the assumption that GSK did not in any way have any intent for wrong doing. This essay attempts to analyze the case study from a strategic management point of view. It begins by analyzing the steps that GSK would have employed to reconstruct its reputation. The actions that would have been taken by the company have been examined from the moment before and after the legal proceedings. The actions have been analyzed in respect to the strategic management theories and practice methods. The second part of the essay identifies and discusses potential problems that would arise in the event that the company employed the aforementioned strategies in the first section. The essay further evaluates the implications of the suggestions given for organizational and management practice. In order to give a clearer picture, this part has been discussed from a risk management point of view. Section 1 The manner in which Glico Smith Kline (GSK) handled the matters that arose following the experiment conducted by the two high school students on the Ribena drink portrayed grave flaws within the organization (ACCC 2007). The major flaws are evident in the customer relations department, the marketing department and the overall leadership of the company. Successful management of customer relationships is key to any business (Anderson and Kerr 2002).Thus, application of skills in strategic management and leadership would have saved the organization. As Kotler and Kettler (2009) notes a holistic customer management approach is an effective way of maximizing interaction between the organization and the customers. This approach is based on three key goals; acquiring customers, retaining them and growing them (Payne 2006). The loss of the well-built reputation and subsequent legal proceedings that GSK got itself into would have been prevented if the company had instituted proper had put in place a number of measures (Hearit 2006). These factors have been discussed under the following subheading below. Quick Response to Customers’ Complaints After Anna Devathasan and Jenny Suo conducted the experiment they found out that Ribena drink did not actually contain the amount of Vitamin C that GSK purported it contains. The first step they took was to try to contact the organization by sending those E-mails but all to avail. The failure to respond in time to these two girls is what aggravated the matter to an extent that it got the public attention it did through social media. Such failure indicates lack of a properly instituted customer management department that handles the needs of the customers and gives instant feedback (Gantenbein 1999). Barnes (2004) underscores the need to cultivate approaches that optimize customer relationships while at the same time establishing long lasting relationships. According to him, creating a relationship that makes meaning with the customers should be the rationale behind any customer management strategies. Proper customer management is central to any business and is something that should not be ignored as it was ignored in this case studies (Peppers and Rogers 2004). Whatever interaction a firm has with its customers is what defines customer’s relationship (Barnes 2001).  GSK Company should have responded on time to the complaints that arose from the two girls. Even though a few customers are susceptible to complaining about flimsy issues once in a while this does not mean that anyone should ignore them (Denham 1998).As the old adage says “The customer is always right”. The saying underpins the centrality of customers to any business entity. Thus; a customer complaint desk at GSK should have been in place. The purpose of this desk is to receive complaints and then channel them to the relevant department so that further action is taken. The presence of an effective department would have ensured that such a complaint as the ones raised by the girls is attended to accordingly. Communication Communication refers to the exchange of meaning between the sender and the receiver (Rosner et al 2001).In a business set-up like GSK communication is assumed to take place if the message is received ,encoded by the sender and then feedback given(Pawelzik 2009). An examination of GSK unearths a breakdown of both internal and external communication. In their attempts to raise the contentious issues to GSK, the two girls send their complaints to the company but they are all ignored. There is no feedback that is given to them. It is evident that there is poor and ineffective external communication between the GSK and its clients. It is this breakdown of communication that aggravates the matter that arises with regard to the Ribena drink. This is because the customer’s needs are not addressed. The needs of the customers are central to any organization and they must be identified and met (Smith 1994). In strategic management and leadership communication is regarded as a crucial element. Strategic management identifies various forms of communication like downward communication, upward communication, lateral communication and external communication. A lot emphasis is placed on the need to communicate effectively within the organization and the external entities like customers and other stakeholders. The objectives of communication are to saves time, solve conflicts like the one that arose with regard to the Ribena drink, and above all ensures productivity. Effective Internal Management The fact that the GSK company does not respond to the customers ‘needs and that it fraudulently misrepresents facts in their advertisement indicates lack of effective internal management (Kinicki et al 2008).The internal management system in GSK is ineffective for a number of reasons. Firstly, it does not have checks and balances to ensure that its employees effectively serve their customers. For a long time, Anna Devathasan and Jenny Suo, attempt to reach the organization all to no avail. Such series of actions clearly indicate that the organization’s internal management is ineffective and that the staff is not held responsible for their malpractice. Secondly, GSK fails to present facts. It fraudulently misrepresents information in their advert as a way of wooing customers to buy their product. There are two strategies that the company would have employed to prevent it from losing its reputation. One, the company needed to embrace honesty as part of their marketing strategy. It was unethical for it to cheat the customers into buying their drink. There are several marketing strategies that GSK would have used in place of falsified information in the advertisement. They include use of direct marketing. Direct marketing not only ensures customer retention but also helps the company market its products to the target customers by means of direct marketing (Karloff and LöVingsson 2005). Others include creating a digital marketing platform that would widen its market share. A company that employs effective marketing strategies is less likely to engage in desperate means of marketing.  Understanding the Changing External Environment GSK ought to have recognized that even if they denied the two school girls a chance to express it, there were other multiple channels that would have been used to air these issues. Part of the channel is the use of the social media. In the contemporary marketing society, the social media is becoming the fastest means of communication (Fouts 2009).Most people and businesses are increasingly becoming aware of the social media platforms. They use platforms like Facebook, twitter and Whatsapp to chat with their friends and also pass lots of pieces of information. The social media is one of the external environments in strategic management. A study of the external environment and in this case (threats and opportunities) of the social media would have given GSK rationale to their actions. They would have for instance used the social media platform to lodge a formal apology, correct the falsified information in the advertisement and reassure their customers that such a thing would not happen. Similarly, the social media would have given the company an avenue to have an interactive discussion with the customers in a bid to convince them and reassure them of their continued support. Making Meaningful Apologia To begin with GSK did make a big mistake when it wrongful mis-represented information about the Ribena drink. The act of pleading guilty was not sufficient to get them off the hook that they had got themselves into. To add insult to injury, the company did not consider publicizing its apology to other parts of the world, outside New Zealand. This was a faulty approach since the news about the mistake they had committed soon spread to other parts outside New Zealand. This technique of market segmentation did not work. A better approach would have been undertaken by the company. In the first place, GSK should have apologized formally to the entire public through the advertisements made. Both direct and indirect advertisements would be appropriate in this particular instance. Direct advertisements (as a form of direct marketing would have been the best as makes the apology appear personalized. The impact of this is to maintain long time loyal customers to the company. Section 2 Potential Problems that May Arise in Implementing the Suggestions Loss of the Market Share to the Competitors In the wake of the reputational and legal issues faced by GSK, there are a number of suggestions that have been given in section one. While these suggestions are better placed to help the company regain its reputation, there are certain problems that are evoked due to their implementation. For instance, making a meaningful apology to all customers in and outside New Zealand is beneficial and catastrophic at the same time. A publicized apology is worth making but at the same time it may be used by competitors in the same market to bring down your market (Sty and Winston 2006). Rivals are poised to take advantage of this situation to win over the market share. To overcome such competition there are a number of things that need to be done. The very first one is to carry out internal market analysis. The goal of this venture is to assess the resources of the company, its key competences, weaknesses and strengths with a view to coming up with a clear way of curbing /curtailing any imminent competition. The second move is to conduct a study of the external market. The key allies and rivals in the same market should be analyzed (Alexander 2008).Their strengths and weaknesses should be analyzed too and then a comparison made. The comparison to done is geared at coming up with a comprehensive framework for implementation of the counter competition strategies. In the internal analysis there are various areas that should be looked at. One of them is the resources of the company. The resources include both human, material and even time it. In this regard, there is need to evaluate of the human resource is competent and qualified enough to handle the completion (Kuala 2008). If for instance the Customer Relationships Department is inefficient, they might need to be trained to deliver effective response to the customers and be able to solve issues the first time them arise. Similarly, it is important to note that leadership plays a key role in ensuring growth of the business. Poor management is a potential cause of failure of a business. Well-trained personnel at the helm of leadership are better positioned to create a higher competitive advantage since they deliver in their diverse positions. Time as resource is one of the internal factors to be considered when a company intends to create a competitive advantage (McCullough and Calder 1991).Time is interpreted in different facets. One of them is the duration that that a customer takes to be served. The other one is the amount of time taken to make decisions and responses in view of the complaints from customers, decisions on the daily running of the business and response to competitors’ marketing strategies. Resentment from the Employees They say a change is as good as rest but is not all times that people welcome changes. Most employees often resent change and would oppose any sudden radical changes that might destabilize their normal way of life. In GSK, for instance, it is certain that changes would be made to the customer relations department and the internal management. Not all people might understand why such changes have to be made but they have to be made anyway. Reorganization of the structure of the company, its chain of communication and other aspects is inescapable in such a dynamic society where the central goal of any business is satisfaction of the needs of the customers (Jones 2007).  Section 3 Implications of the Suggestions to Organizational Management Practice from a Risk Management Perspective Meaning of Risk Management Risk management is a term used to refer to the set of procedures that are geared towards increasing the productivity of a business (Crouhy and Mark 2000). It entails identification of areas of strength and weaknesses, evaluating current practices with a view to coming up with a list of risks in priority form. The overall goal of risk management is to be able to apply the resources economically so as to achieve the objectives of the business (Tarantino and Cernauskas 2011). How Management Practices Might Influence the Strategies Adopted by the Organisation and Shape its Reputation The suggestions put forward for the GSK have a number of implications on the management of the company. This is because they demand a total overhaul of how matters are conducted in the company. One of this implication is a change is the leadership structure of the company as its inefficiency affects the whole organisation(Klitgaard 2005).It is a risk that ought to be undertaken with a view to helping the company improve its reputation. As illustrated earlier, the company deliberately misrepresented information about the drink for a whole year. The management of the company in New Zealand is largely to blame for letting such a deed take place. In the act of them taking responsibility they would be necessitated to make changes in the management. Consequently, resentment by the people involved is probable among others issues that might arise in relation to this matter. The second implication concerns the marketing strategies employed by the company.GSK terribly wronged its customers by giving false information. In an effort to change the image of the company, other marketing strategies would be employed that will certainly affect the manner in which the company operates. One of them is direct marketing strategies that will be geared towards improving customer relationships (Cartwright 2003).  The third implication is an additional cost in the operational costs of the company. The larger share of the budget will be allocated towards marketing to clear the bad reputation that the company has. One of the ways that the company can employ to clear its bad reputation is by investing heavily on marketing. Marketing is a key pillar of risk management (Fouque et al 2008) .The Company also needs money to produce better products, conduct seminars, and trainings for their staff on ways that they can employ to handle the customers better. Effective Management and how an Organisation can Benefit from it Effective management entails a number of aspects. One of them is effective leadership. An effective leader is one who is able to relate with both the customers and the staff in a respectful manner despite who they are. In addition to this, the leader behaves in a manner that the people they lead feel proud when associated with them (Cameron and Green 2008).Management that is sensitive to the needs of the workers is equally important as it helps motivate the employees. This management is equally sensitive to the needs of the customers and does all it can to meet the needs of the customers. As Frederick Herzberg notes in his two factor theory, the unhygienic factors like ineffective management and poor working conditions are factors that demotivate workers (Herzberg 1966). Demotivated workers are less productive and are susceptible to projecting their frustrations to the customers by, for example, treating them rudely as it was the case in GSK (Bruce 2003). An organisation can benefit from good management practices in a number of ways. One of them is by carrying an epistle analysis of the company and searching for the most appropriate means of engaging management practices (Sims 2002).The other way is by having a management structure that is cognisant and has the willingness to try new management practices. Having knowledge of different management practices is one thing and applying them is the another thing. Worse still, lacking willingness to apply management practices is catastrophic (Fink and Holden 2005). Conclusion In conclusion, this essay attempts to analyse the case study from a strategic management point of view. It begins by analyzing the steps that GSK would have employed to reconstruct its reputation. The actions that would have been taken by the company have been examined from the moment before and after the legal proceedings. The actions have been analyzed in respect to with strategic management theories and practice methods. The second part of the essay identifies and discusses potential problems that would arise in the event that the company employed the aforementioned strategies in the first section. The essay further evaluates the implications of the suggestions in given for organizational and management practice. In order to give a clearer picture, this part has been discussed from a risk management point of view. The essay unveils that the problems faced by GSK are caused by human error. 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