Saturday, March 10, 2012


Table of Contents

Pelican Sands
            Often, different executives express different opinions about the same incident. Usually, they all make good points, since they are experienced professionals. This paper will focus on differing executive responses to a critical situation: the wrong dispatch of produce. (Please refer back to the simulation for this incident)
The Wrong Dispatch of Produce
A logistical problem can lead to a wrong dispatch of produce, which then results in an operational crisis that requires immediate attention. Different executives have diverse solutions to this problem.
Table 1
Opinion from different Executives
Resulting Newspaper Story
Recall some produce and reroute the rest. The best option is rerouting the shipments. Although it may be time-consuming and costly, this is the best way to keep our daily delivery promise. If we accept this idea, I can implement the plan within two hours.

CVN leaves some stores off its routes. Uneven availability at CVN stores leaves customers annoyed.

Allow the franchises to decide. Financially, it is best to trust our franchises and let them decide to sell or withhold the produce. This way, we will minimize our losses without either ruining the delivery schedule or the breaking the promise of freshness.

What’s up at CVN? Why is CVN letting your vendors sell rotten fruit?

Recall the produce. The risk of not recalling the procedure is too large to go through; it would compromise both the promise of daily delivery and the produce’s freshness. This will be expensive, but experiencing one day’s loss is better than compromising our brand image.

No delivery at CVN stores. Empty shelves mock waiting customers.
Do nothing.
0 M

Table 2
Analysis from different Executive Opinion
Major Issues of Concern
Strengths of the Solution
Possible or Actual Advantageous Results
Recall some produce and reroute the rest.

Retain delivery promise. Minimize the effort required to implement a solution.
It is easy to implement, and it costs less money than some alternatives.

From an operations perspective, our most important concerns are operation effectiveness, the supply chain, and customer happiness.

With this solution, we can still accomplish most of the deliveries, although some will be inconvenient. This solution also tries to mitigate our losses.

Although the customers may be slightly upset, they will remain content overall if they still receive their deliveries.
Allow the franchises to decide.

Reduce losses and save money.
This is the most cost-effective solution. This solution allows timely delivery and could preserve the food’s freshness.

From a CFO’s perspective, costs and profits are the most important concerns.
This solution mitigates current losses and minimizes the expenses otherwise needed to respond to the crisis. Consider how much the other approaches will cost and how much profits they will sacrifice.

The customers will still be content, because they will still receive their deliveries.

Recall the produce.
Protect the brand image.
This solution best protects the brand’s reputation. Organizational reputation and product brand name influences overall corporate value (Carroll 2012a).

From an integrated risk management point of view, overall brand value is relatively more important than anything else (Barton 2007).
This solution will save the brand. It could even generate positive public relations; customers will think we are willing to sacrifice our earnings in order to protect our brand’s reputation.

The rest of this paper will assess the COO’s suggestion—recalling some produce and rerouting the rest. This solution is easy to implement and relatively inexpensive. Further, it keeps the delivery promise, at least partly, and it avoids wasting food.



Critique Evaluation

Table 3
Critique from Different Responses

Ignored or trivialized considerations that limited or flawed the solution
Ignored or underrepresented risk-related groups and possible impacts
Origins and validity of primary concerns
Flawed perspectives or directions
Recall some produce and reroute the rest
(Selected Decision)

- Overall company risk
- Marred brand image or reputation
- The impact of criticisms from the press and mass media
- Loss of food freshness after the reroute
- Retention of long-term customer satisfaction
- Market risk
- Supply chain
- Brand image and reputation
- Public relations
- Operation silos (not integrated)
- Customer satisfaction and loyalty
- Overall company value
- Market risk: Freshness and quality are marketing variables
- Press or mass media speculation: Exaggerations could ruin the company
- Customer satisfaction and loyalty: Customers could feel slighted and refuse to buy the brand anymore
The COO merely considered operational ease, financial factors, and accounting indicators, ignoring the fact that market value and customer satisfaction play important roles in the company’s overall value. The COO emphasized a short-term turnaround, forgetting about the long term.

Allow the franchises to decide (This decision was not selected, but some of its points are also valid for the selected decision)

- Overall company risk
- Operational effectiveness (it is unwise to ask local franchises to execute decisions without centralized facilitation)
- Long-term customer satisfaction and retention
- Same as above
- Financial silos (not integrated)
- Press speculation: The media could call the food rotten, and the whole company could lose value
- Customer satisfaction: People could say the company values its profits over its customers, even compromising product quality
- Public respect: People could think the company lies to the public in order to evade problems

The CFO merely considered financial and accounting indicators, ignoring the fact that market value and customer satisfaction play important roles in the company’s overall value.
The CFO emphasized a short-term turnaround, forgetting about the long term.
Recall the produce
- Financial feasibility
- Have taken considerations of financial situations, but still cannot overcome overall company lost

- Risks are somewhat integrated
- Responsibility: The company is willing to accept its responsibility, regardless of profits lost when solving the problem.

- Customer and service quality: The company cares
The CRO targeted long-term mutual benefits between the company and its customers by accepting a short-term financial loss.

Although Table 3 describes many important points, the following sections will focus on three of its most important concepts.
Enterprise Risks vs. Silos Risks
Each of these organizations (finance, operations) is responsible for a focused risk area, essentially working from the bottom upward. Senior management is responsible, from the top down, for all corporate risk issues. Enterprise risk management (ERM) differs from the traditional, siloed approach to risk; it views risk holistically. ERM incorporates risks from all sources, including anything that could affect strategic objectives, operational goals, and financial targets. It then creates a common risk management strategy, which coordinates individual risk elements into a cohesive approach. ERM is impact-based, targeting a threat against pre-defined objectives (Carroll, 2012b).
Brand Value and Company Reputation
The value of an enterprise has two forms: tangible assets and intangible assets. Intangible assets include expected profits from operations, intellectual property, brand equity, and reputation. These assets are major contributors to the value of the enterprise, and they could be regarded as tangible assets when determining company value (Carroll, 2012a).
To illustrate the importance of reputation or brand equity, consider the impact of brand value on retail value. Customers can buy a two-liter bottle of generic soda for $0.99, but they must pay $1.59 or more for a brand name such as Coca-Cola or Pepsi. This price difference is largely due to the brand’s value and the company’s reputation, not the costs of production. (In fact, the opposite is probably true; Coke and Pepsi products are likely cheaper to produce, considering the companies’ large product volumes, than products of lesser-known brands, which are produced at smaller volumes.) There may be a difference in taste, but, often, this factor alone does not justify the price (Carroll, 2012a).
Brand and reputation equity are paramount for the modern corporation. This axiom has been amply illustrated by the trials and tribulations of the Lehman Brothers, MF Global, Martha Stewart, Marsh, Arthur Andersen, and numerous other companies whose reputations have been dealt severe blows during recent years. Many of these companies have never recovered (Carroll, 2012a).
Marketing Factors
Pelican Sands targets the organic food market. Consequently, marketing segment variables include quality of food, freshness, and organic status. Customers buy Pelican Sands’ products because they think that these products are higher in quality than regular fruits and that eating organic fruits can help them maintain better health. After the crisis, it would appear that Pelican Sands does not, in fact, sell high-quality foods. As a result, the customers would no longer feel that buying Pelican Sands food makes them special. If the company does not handle its public relations carefully and consequently loses its brand value, then customers will turn away from Pelican Sands.

Action Plan (Fixing the Problem)

Table 4
Convince Executives to Take Risk Management Approach
How would you convince senior management that they are not out of the woods as yet and in fact may be in deeper?
What evidence would you use to bring this forward?
How would you explain the success(es) cited in #1?

Recall some produce and reroute the rest
(Selected Decision)

I would enumerate all possible risks and their impacts.

What if the press said, “CVN leaves some stores off its route; uneven availability at CVN stores leaves customers annoyed”?

Or, what if the press said, “What’s up at CVN? Why is CVN letting your vendor sell rotten fruit”?

What if the supply chain problems continue happening on a recurring basis?

Even though the company did not violate any laws, the public might accuse the company of dumping substandard produce.

Customers will not be satisfied, and sales will decrease over the long term.

Some people might even suspect a conspiracy. Consumers on the street may continue to be wary of CVN for some time.

Brand and reputation equity are paramount for the modern corporation, as demonstrated by the trials and tribulations of Lehman Brothers, MF Global, Martha Stewart, Marsh, Arthur Andersen, and many other companies that have marred their reputations during recent years. Many of these companies have never recovered (Carroll, 2012a).
I would emphasize that the current tactic is focused only on the short term; it does not provide any strategy for the long term.

I would gather and cite past studies, stories, lessons learned, and experiences.

I would note the sales figures of similar case studies after a brand image has damaged. The sales may rise in short run but will decrease in the long run.

I would, again, emphasize that the current tactic is focused only on the short term; it does not provide any strategy for the long term.

I would hire an external expert to convince the others that we need to do more.

I would collect public opinions about the company’s image after the crisis.

I would gather and cite past studies, stories, lessons learned, and experiences.

Table 5
Action Items
Target Goal
Create a public administration program
When a crisis strikes, it is important to maintain consistent communication from the affected organization to the public. The corporate communications department should document all communications to outside parties (e.g., the press) and should disseminate this information to every individual in the organization, thereby ensuring a consistent message.

Reverse and supplement
Fix the supply chain
The supply chain bears the initial costs of any shipment mistakes. We need to avoid repeating the same mistakes. At the very least, we should ensure that similar mistakes will not reoccur often.

Ask the franchises to dump all the food
It is too late to ask the end retailers to return the delivered food, but you can tell them to dump the food themselves. Ask them to dispose of any foods that have known or visible problems. If they cannot determine whether certain foods have problems, they should dump them as well.

Public Relations Program
Crisis media training best practices. The public administration program described in Table 5 needs further elaboration. To run the program successfully, the communications personnel should follow a few public-relations best practices (see also Lerbinger, 1997; Feran-Banks, 2001; Coombs, 2007).
1. Avoid the phrase “no comment”; people think it means the organization is guilty and is trying to hide something
2. Present information clearly by avoiding jargon and technical terms. A lack of clarity makes people think an organization is purposefully confusing its customers in order to hide something.
3. Appear pleasant on camera by avoiding nervous habits, which people often interpret as signs of deception. A spokesperson needs to maintain strong eye contact, limit disfluencies such as “um” and “uh,” and avoid distracting nervous gestures, such as fidgeting or pacing. Coombs (2007) reports that speakers will be perceived as deceptive if they avoid eye contact, use many disfluencies, or display nervous gestures.
4. Brief all potential spokespersons on the latest information about the crisis, focusing on the key message points that the organization wants to convey to its stakeholders.
Public relations program composition. Most organizations, of all sizes, have public relations or corporate communications persons or teams to address public-relations issues. Absent this, someone—typically a senior manager—should be deemed a liaison to the public. After this spokesperson is selected, no one else from the organization should communicate on behalf of the organization, in any form. In fact, no one should communicate publicly at all; whatever is communicated will be interpreted as representing the viewpoint of the organization. Consequently, this is a role best handled by professionals.
This endeavor requires significant planning, which is the responsibility of the continuity professional. The company should establish a formal communications program that identifies internal and external organizations, agencies, and media groups. This program should craft a defined crisis-communications plan for all communications with authorities (local, regional, etc.) and with those affected by the organization's success during the crisis (e.g., employees, customers, and shareholders).
Written plans are essential; they provide a guideline or structure for ensuring that the public relations program addresses all parties consistently. However, any given crisis may require distinct and specific communications activities, depending on the situation; hence, following a written plan exactly is not always optimal. Nevertheless, a plan provides a framework that can be adjusted for each situation. Without a pre-established plan, the public relations personnel are unprepared, and they must make up the process as they go along.
Like all dimensions of continuity planning, this area should be tested, either as a separate and distinct crisis test activity or as part of an overall continuity and recovery test. Commonly, organizations test their public relations plans via mock crises that actually escalate into full-blown business continuity and disaster recovery tests.
Supply Chain
A flaw in the supply chain is one of five threats that could destroy a company (Vinas & Jusko, 2004). When facing a problem in the supply chain, a company must consider what can and cannot be controlled. The company can control what products it makes, where it stores those products, and how the products are shipped, for example. To operate properly, an organization must be competent in these areas. For example, it must maintain its inventory well, keeping the right products in stock at the proper levels and at the right times. Making the wrong products, shipping products late, or sending products to the wrong markets will obviously have a negative impact.


Barton. (2007). Making enterprise risk management pay off.
Carroll. (2012a, spring). 01 MET AD 610, week 1 lecture notes.
Carroll. (2012b, spring). 01 MET AD 610, week 2 lecture notes.
Coombs, W. T. (2007). Ongoing crisis communication: Planning, managing, and responding (2nd ed.). Los Angeles: Sage.
Fearn-Banks, K. (2001). Crisis communications: A casebook approach (2nd ed.). Mahwah, NJ: Lawrence Erlbaum.
Lerbinger, O. (1997). The crisis manager: Facing risk and responsibility. Mahwah, NJ: Lawrence Erlbaum.
Vina and Jusko. (2004). 5 threats that could sink your company. Industry Week, 253(9), 52. ABI/INFORM Global.

Eric Tse, Richmond Hill, Toronto
Tse and Tse Consulting -Security, Identity Access Management, Solution Architect, Consulting

1 comment:

Anonymous said...

This is nice

Eric Tse, Richmond Hill, Toronto
Tse and Tse Consulting -Security, Identity Access Management, Solution Architect, Consulting
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