1 Liz Keena Crisis Communication: Tu./Thur. 9:30-‐10:45 Case Paper Carrefo
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1 Liz Keena Crisis Communication: Tu./Thur. 9:30-10:45 Case Paper Carrefour and Its Struggles In China Carrefour was founded in 1958 and since then has become the second largest grossing hypermarket in the world. A hypermarket is a store that provides department and market amenities in one location. Carrefour is a French based company that has grown to have stores in Europe, Argentina, Brazil, Taiwan, Colombia, Dominican Republic, Saudi Arabia, and most importantly China. This is the setting of the Olympic Torch Relay – Carrefour situation. China and its citizens become very upset after French protesters tried to put the Olympic torch out. French protesters were working to bring awareness about China’s poor record in human rights and their occupation of Tibet (Coombs, 2014). In response, the Chinese people chose to target French based companies in retaliation against the French protesters that disrespected them. This paper will explain how this situation turned into a crisis for Carrefour in its China based stores. The Carrefour-China Olympic Torch Relay situation was difficult for me to define at first. I was not sure if this was a full-blown crisis, or just a para crisis. The final conclusion I came to was that this was indeed a crisis for Carrefour. The reason for this is because a crisis is defined as, “The perception of an unpredictable event that threatens important eXpectancies of stakeholders and can seriously impact an organizations performance and generate negative outcomes” (Coombs, 2012). The reason I think that this could be considered a crisis based on this definition is because Carrefour could have done little to predict this type of situation occurring, and the reverberations of the protesting that took 2 place in China had a negative impact on the way the organization preformed. This situation could be specifically defined as a rumor crisis because of tactics Chinese stakeholders took to boycott Carrefour. Carrefour is the second-largest hypermarket in the world, falling second to the all- mighty Wal-Mart. Carrefour first entered the Chinese market in 2008, they currently have 122 stores operating in China which employ about 40,000 people (“China protests French retailer Carrefour”, 2008). Carrefour has been very strategic in their approach to growing their brand in the Chinese market. Carrefour employs locals and also buys locally made products. They have also made it a point to not treat the market as a single whole, but as individual parts. This has helped them appeal to a more costumers because of the regional approach Carrefour has taken. Carrefour sees their place in the Chinese market as absolutely vital. That is why this situation is considered a crisis for them. The population of China is growing more massive each year, meaning Carrefour grows in the number of stakeholders it has. Violating the expectancies of even a minor stakeholder group could cause major problems. That is eXactly was happened too, the eXpectancies of a stakeholder group was violated. The rumors that were spread over the Internet and mobile devices caused a large number of Chinese stakeholders to boycott Carrefour stores. This in turn lead to a negative outcome for the company, which was cutting their sales by about 20% during a large holiday in China (“Carrefour China reiterates support for Beijing Olympics”, 2008). These two negative outcomes help to demonstrate how this fits the definition of a crisis. 3 The definition of a rumor crisis is, “ When false or misleading information is purposefully circulated about an organization or its products in order to harm the organization” (Coombs, 2012). This situation started to turn towards a crisis after citizens of China went online to vent their outrage. The citizens of China were unsure of how to make their voices heard after the attack on 27 year-old Paralympic fencer, Jin Jing by French citizens. The only way Chinese citizens felt they could make France pay for their disrespect was to boycott French companies in China. Carrefour had no way of predicting that the actions of some French protesters would impact their functioning in China as much as it did. This is another reason that this situation fits the definition of a crisis; it was unpredictable in the eyes of Carrefour. It became a rumor crisis after stakeholders started to use online tactics to attack Carrefour. The stakeholders attacking Carrefour did not have fact to prove their allegations, but they were effective in calling the people of China to boycott nonetheless. Online stakeholders made accusations against Carrefour saying that they and their major investors supported activists against China’s occupation of Tibet. Even though Carrefour denied any political involvement, protesters continued to post rumors about Carrefour’s political bias and support through mobile messaging. These protests eventually escalated to the point that they became in-store protests and boycotts. Many of the protesters were youth and university students (“China protests French retailer Carrefour”, 2008). These rumors forced Carrefour to enact their Crisis Management Plan. If this had been not been a crisis then Carrefour would have not had to make a public announcement denying their involvement with the political issue. The impact of the rumors that were 4 spread lead to negative outcomes for Carrefour, including negative Chinese media coverage, a loss in revenue, and violations to important stakeholder groups, all of which define this as a rumor crisis. I have already mentioned one stakeholder group in this crisis, Carrefour consumers. Although they had an impact on how this crisis unfolded, they are not one of the two most important stakeholders in this case. The first major stakeholders in this case are the Carrefour protesters. There are three characteristics to measure the impact and likelihood of impact that a stakeholder group will have on a crisis. The first is to measure the group based on their power. Power is defined as, “The ability of the stakeholder to get the organization to do something it would not do otherwise” (Coombs, 2012). In this crisis I would give Carrefour a high power rating because they may not have had the resources or skills to make Carrefour suffer greatly, but they were a large coalition that influenced the way Carrefour operated. For eXample, Carrefour stopped all promotions for the May Day holiday because of the number of stakeholders voicing their anger towards Carrefour. This media shut down lead to Carrefour taking a hit in the revenue they usually receive from this holiday. A second way to measure a stakeholder group’s impact and likelihood of impact is based on legitimacy. Legitimacy is defined as, “The stakeholder and their concern, and is their concern considered legitimate by society and other stakeholders” (Coombs, 2012). Protesters had strong political legitimacy because most of China, including the government, supported these protests. People outside the country may not have seen the Chinese 5 protesters as having a legitimate stance, but the citizens of China felt that the boycotts and protesters as righteous after France, and other humanitarian groups attacked them for their violations against human rights. The third way to measure the impact and likelihood of impact that a stakeholder group will have is based on willingness. Willingness is defined as, “A stakeholders’ desire to confront the organization about the problem” (Coombs, 2012). The issue of disrespect was clearly important to the citizens of China because people were willing to boycott the second largest, revenue-generating, hypermarket in the world. Apart from the disrespect the China felt the French protesters showed, the people of China may also have been willing to boycott Carrefour based on past incidents. In October of 2007, the Chinese courts sentenced two former mangers of a Carrefour store to jail because of their lapses in safety procedures. These lapses lead to a stampede that ended up killing three people and injuring thirty-one others (Buckley, 2008). A majority of those injured were elderly. This is a problem for Carrefour because harming the elderly is almost as bad for ones reputation as harming children. The ineffectiveness of Carrefour’s staff in preventing this incident could have created an unfavorable relationship with Carrefour, further fueling stakeholders willingness to protest against the organization. A second reason why protesters may feel willing to boycott Carrefour is because of the developmental history of China. Postcolonial studies tries to understand the social, political, and cultural effects on countries that have been ruled and exploited by colonial powers. This is a relevant topic for China because it protested against a corporation that represents a past colonial power. Europe had a large hand in controlling China; France specifically controlled three southern regions. 6 Postcolonial studies can play a role in how countries get along; usually it ends in a negative relationship. This could be a reason why protestors want to further protest against France. The Olympic torch situation could have just been added fuel to a fire that some protesters already had. The high power, legitimacy and willingness scores that protesters received is what makes them so dangerous to Carrefour. The higher the power and legitimacy score a stakeholder group gets, the stronger their impact is. On the same hand, the higher legitimacy and willingness scores a group gets, the stronger their likelihood of impact gets. Having both a strong likelihood and impact score makes the protesters a very influential stakeholder group. The second major stakeholder group in this crisis is Carrefour. Through no fault of their own, the company was dragged into this crisis. Carrefour seemed almost powerless in this situation. Even though they had control over of a large number of resources, they took a very cautious approach to dealing with the situation.