Kinds of Crisis Situation and the Consequences - Lab Report Example

Executive Summary 7-Eleven is an international chain of company owned or franchised convenience stores, which is owned by the Japan’s Seven & I Holdings Co. With widespread operations, it cannot be smooth sailing all the time for 7-Eleven, as they could face various problems or importantly crisis. 7-Eleven could face crisis both in its internal as well as external environment and operations, necessitating the need for an optimum crisis communication plan. The plan can aid it to alleviate the customers’ ill-will immediately after the crisis, then regain, restore and rebuild customers’ confidence and trust. So, this report will include the kinds of crisis situation the 7-Eleven might face, the consequences of those crises, the need and rationale to develop a crisis-communication plan, an overview of that plan and finally a projection of cost and benefits for 7-Eleven. Communication strategy report 7-Eleven was established by the Ito-Yokado group, with its first 7-11 store set up at Koto-ku, Tokyo in 1974. Actually the predecessor for the current 7-Eleven company or stores is an American retail company called Southland Corporation. In 1972 itself, Ito-Yokado group approached the Southland Corporation for the franchise of opening 7-Eleven convenience stores in Japan. After initially rejection, Southland gave the licensing agreement and thus its first store was opened in 1974 in Tokyo. However, in course of time, the situation changed upside down, with Ito-Yokado group acquiring 70% stake in the Southland itself, and thus all the 7-Eleven stores and its franchise rights came to the Ito-Yokado group, which only transformed into Seven & I Holdings Co. in 2005. Now, 7-Eleven is the “world’s largest operator, franchisor and licensor of convenience stores”, with more than 40,000 stores all over the world, including approximately 7,600 stores in the U.S. and Canada. (“About Us”). Kinds of crisis situation and the consequences Crisis situations are problems or challenges, which happen in an organizational setup, and which could damage the organizational operations, creates bad image in the minds of the customer, putting the organisation under media and government scrutiny. “Any situation that is threatening or could threaten to harm people or property, seriously interrupt business, damage reputation or negatively impact share value” (Bernstein). Although, organizations can face many challenges in their every day operations, most of them are controlled within the organization. Only the ones, which directly affects its customers, the common public and environment, or may be illegal in nature and against government regulations, or it is unethical, will come into the open. In total, all the scenarios that may impact the organization’s legal, ethical, or financial standing could lead to crisis situation. Crisis situations can emerge in organizations in any sector and that includes convenience or retails stores like 7-Eleven. When certain problems comes into the open and reaches the customers as well as the general public, media inquiry will begin and even the government will also take legal actions. In those situations, if the organization does not come up with an effective crisis communication strategy, it will lead to dangerous consequences for it. For example, the operational processes inside the organization can break down, “stakeholders (internal and external) will not know what is happening and quickly be confused, angry, and negatively reactive” and importantly, the “organization will be perceived as inept, at best, and criminally negligent, at worst.” (Bernstein). 7-Eleven could also face these types of crisis situation and also the consequences associated with it, because it has already faced crisis scenarios on the same lines. For example, its selling of a caffeine drink named Cocaine led to criticism from the customers and general public particularly parents. As the brand name clearly resembled the illegal white powder, parents feared that it will make a negative impact on the minds of the young children, who consume beverages quite often. The other crisis situation of 7-Eleven, which came into the open, involved violation of government regulation regarding food stamp benefits. 7-Eleven franchise, situated in Rhode Island, was accused of taking food stamp benefits for cash at its convenience store, with the complaint unsealed in U.S. District Court in Providence stating that its owner Syed Shah has been charging “$30 to $40 in food stamps for every $50 in cash requested” (Cashman). All these incidents created problems and bad image for 7-Eleven, thus leading to crisis, and necessitating the need for the 7-Eleven management to come up with crisis communication strategies. Rationale for developing a crisis-communication plan Every organization needs to have crisis communication strategies or plan, particularly ones in the service or retail industry like 7-Eleven. This is because as these organizations and their physical structures will be frequented by the customers regularly, relations with them have to be good. In addition, the incoming customers will be from varied backgrounds and so the stores’ approach has to be optimal, so that it does not attack or affect their personal aspects. Thus, to manage the key target segment of customers, organizations need to develop crisis-communication plan. In addition, convenience stores like 7-Eleven will sell wide range of products, and all the products may not be welcomed by all the segments of the customer base and common public. Like in the case of caffeine drink, Cocaine, customers and general public could protest against the sale of particular items, and so during those times also crisis communication strategies will help. The other key rationale is, if the organizations have a preset crisis communication plan, it will enable the organizations to respond immediately and effectively, when the crisis arises. If they don’t have one, first the organizations may not know how to respond to the crisis, and also would not have any backup plan if one strategy fails, thus leading to further crisis. “The inherent lag time in marshalling responses to a crisis can result in considerable losses to company revenues, reputation as well as substantially impacting on costs.” (Tomar 46). One of the important rationales is, in the current times, where the media plays an omnipresent role, any negative remark against the organization could taken up by the media and can be blown into a major crisis. As Tomar (46) states today’s 24 hour news cycle along with “gotcha journalism” leads to a media firestorm, when crisis involving big and well known organizations takes place, thus impeding “the ability of the entity to effectively respond to the demands of the crisis.” Thus, it is clear that crisis can occur any time in an organization, leading to problems and so to effectively handle it, organizations has to have an preset crisis communication plan in place, so that they can emerge out of the crisis with reputation intact. Overview of the plan and financial costs While formulating the crisis communication plan, organizations including 7-Eleven have to incorporate certain key aspects in them. The plan can be broadly divided into three stages, firstly regain public confidence and trust, restore customer’s confidence in the brand and finally rebuild brand image, even while reducing the media coverage of the crisis. To first regain the public confidence and trust, the organization has to incorporate strategies on how to “alleviate the communitys anguish” (Lukaszewski). The organization can do that by trying to actualize the status quo prevailing before the crisis, and for that, certain decisions which were taken, that led to the crisis can be rolled back. This way, it can communicate to the customers that they stopped doing the actions that were detrimental to them. 7-Eleven was able do that immediately in the case of caffeine drink, Cocaine. When criticism arose against its selling, 7-Eleven ordered all its vendors and franchisees to remove the drink from the shelves and totally stopped its selling. “Our merchandising team believes the products name promotes an image which we didnt want to be associated with," said Margaret Chabris, a spokeswoman for 7-Eleven.” (“7-Eleven stores pull Cocaine”). This way, 7-Eleven alleviated the community’s anguish, and importantly tried to regain the trust of the customers. The next stage of restoring confidence about the organization and its products in the mind of the customers can be carried out by taking strong actions against the ‘causes’ of the crisis and also steps to prevent those crises from occurring again. 7-Eleven did that when the crisis concerning food stamp encashment occurred in Rhode Island. Firstly, 7-11 management took strong action against the cause of the crisis, by cancelling the franchise of that particular store. In addition, when the government authorities took action against that store’s owner, it did not try to protect him in any way and fully published that news in various mediums, in order to prevent such crises again. The final stage of rebuilding relationships - especially with the victims, while at the same time, reducing media coverage of that particular crisis forms a crucial part in the crisis communication plan. (Lukaszewski). When this is done, the aggrieved party or parties may not raise this issue again, which in turn will lead the media to stop or minimize its coverage. 7-Eleven did that exactly both in the case of Cocaine and Food stamp, and more importantly when it ended its contract with Citgo in 2006. Citgo is the US based subsidiary of Venezuela’s state oil company and was supplying fuel to all the 2000 odd fuel stations of 7-Eleven. However, when hard-line Venezuelan President, Hugo Chavez openly criticised then US President, George Bush, certain sections started criticising 7-Eleven for maintaining ties with them. To prevent this criticism from rising again, 7-Eleven ended its 20 year association with them, although other motives were attached. 7-Eleven Spokeswoman Margaret Chabris said “Regardless of politics, we sympathize with many Americans concern over derogatory comments about our country and its leadership recently made by Venezuelas president Hugo Chávez…so didnt tempt us to stay with Citgo.” (“7-Eleven dropping Venezuela-backed Citgo”). All these media related press statements forms a key part of crisis communication plans and it does not cause much on the budgets of the company. The costs for this plan may vary according to the area and the depth of the crises. However, all can be managed within feasible budgets. Only when communication crisis management specialists are temporarily hired, it could inflate. However, on the whole, these minimal budgets for crisis management may not negatively impact large organizations like 7-Eleven, instead it will bring in indirect benefits by retaining the existing customers and also by bringing in new customers. When the organization’s crises are managed aptly and there is complete minimization of crisis, more customers will come in, raising the profits and the image of the company. Works Cited “About Us.” 7 Eleven, n. d. Web. 23 Oct 2011. http://corp.7-eleven.com/AboutUs/tabid/73/Default.aspx Bernstein, Jonathan. “The 10 Steps Of Crisis Communications.” Bernstein Crisis Management, n. d. Web. 23 Oct 2011. http://www.bernsteincrisismanagement.com/docs/the_10_steps_of_crisis_communications.html Cashman, J. “RI 7-Eleven Owner Took Food Stamps for Cash.” The Associated Press. 2011. Web. 23 Oct 2011. http://www.newenglandpost.com/2011/08/20/feds-ri-7-eleven-owner-took-food-stamps-for-cash/ Lukaszewski, James E. “Seven Dimensions of Crisis Communication Management: a strategic analysis and planning model.” n. p, 1998. Web. 23 Oct 2011. http://www.e911.com/monos/A001.html Tomar, Ravindar. Commercial operations management: Process and Technology to Support Commercial Activities. Global India Publications, 2009 “7-Eleven stores pull Cocaine energy drink.” Associated Press, 25 Oct 2006. Web. 23 Oct 2011. http://www.msnbc.msn.com/id/15411444/ns/business-us_business/t/-eleven-stores-pull-cocaine-energy-drink/#.TqUjh7JadHc “7-Eleven dropping Venezuela-backed Citgo as gasoline supplier.” Associated Press, 27 Sept 2006. Web. 23 Oct 2011. http://www.usatoday.com/money/industries/energy/2006-09-27-7-11-citgo_x.htm Read More