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Case Study: Wal-Mart

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Case Study Wal Mart
02.08.2019
Category: Case Study

A crisis occurs abruptly without warning and impacts negatively on the affected parties. It can arise at a personal, group, community, or societal level. For business or professional level, it can result in a serious loss for the affected organization. The latter includes poor revenue streams, loss of significant stakeholders, poor public image, and even worse closure of the business if the organization is not able to make a recovery. Consequently, it is imperative for organizations to understand the role of communication in the process of crisis management. When crisis communication is done well, it can be effective in averting the negative impact of a crisis on an organization. The organization chosen for this essay is Wal-Mart. Wal-Mart lived to the desired principles of corporate governance, public image, media relations, and strategic crisis communication while facing crisis concerning the breach of its information systems.

Background

Wal-Mart is a multinational retail company that has achieved great success in its parent country, the United States. The company’s prosperity has been facilitated by its operations of a chain of discount stores and warehouses. Over the years, the company has been embroiled in a number of public relations problems which have negatively affected its image. However, the PR problems have served as a learning point for the giant retailer and its PR department. Crisis management based on risk management is essential for the restoration of a positive image of an organization after a crisis. This can only be done if the affected organization demonstrates its ability to take care of the situation and prevent it from taking place again. This can be achieved in case the organization is able to present an effective crisis communication strategy.

Crisis Scenario

A recount of a crisis scenario involving Wal-Mart started with the compromise of the retailer’s information system by unknown criminals. The criminals were able to access sensitive information concerning various stakeholders of the giant retailer. The most vulnerable stakeholders were the customers of the retailer whose credit and debit card information was stolen by hackers. This crisis sent the affected parties in a panic. They expressed their concern about the safety of their finances and asked a lot of questions regarding the status of crisis. The development of social media did not make the situation easy as the news of the hack spread through status updates on popular social media sites such as Facebook and Twitter. On the other hand, other affected parties started threatening to sue Wal-Mart for the danger in which they were placed as a consequence of their information falling into the hands of criminals. Others still reacted to the crisis by vowing to relinquish their ties with the retailer and never to shop there again or do business with the company.

Result of the Crisis and Wal-Mart’s Management Team Response

The result of the crisis was alarming for the management of Wal-Mart. The company realized that it needed to find a way of responding and managing the crisis if it was ever to gain public favor back. Previously, it was decided to make an analysis of the crisis and conduct a thorough investigation into the ways the hack originated. The result of the series of action was information interpreted for accuracy and relevance. Subsequently, the CEO of Wal-Mart and crisis management team derived a communication strategy that would be used to disseminate information to the public, update, and reach out to them. To implement the crisis communication strategy, the CEO of Wal-Mart issued a statement which highlighted the following points on the crisis.

Firstly, he acknowledged the public’s knowledge about the crisis. He proceeded to provide the facts concerning the crisis. In particular, he explained the way the company’s information system had been hacked by unknown persons who got away with customer information, including credit and debate card details. He acknowledged the company’s failure in safeguarding customer information and gave a public apology to those impacted by the crisis. The statement also included the company’s actions to address the problem. The first step for the company was cleaning up its information system by closing the access points used by the criminals and removing the malware that they had left behind. Wal-Mart had hired data security experts to review the company’s information system in order to define the way information was accessed. In a bid to gain public favor, the statement included the company’s announcement that the affected customers will receive zero liability for fraudulent activities arising from the breach. Further, the company would offer a year’s credit monitoring and identity theft protection to them. Finally, the statement concluded with Wal-Mart empathizing with the affected customers and the company’s promise that it would make every effort to solve the issue.

Analysis

An analysis of the case reveals a number of crisis communication principles that were well applied. The first crisis communication principle well articulated in Wal-Mart CEO’s statement was to state the facts and tell the truth. It is very significant for an organization that has been affected by a crisis to share the details of the crisis in a truthful manner. This to a large extent helps to calm the public. Hiding the truth or lying in any way about the crisis will jeopardize the organization’s ability to reclaim back public trust if the truth is ever revealed. Wal-Mart’s CEO stated the facts of the crisis highlighting its details. This included what happened, who was affected, and who was responsible.

Another important crisis communication principle was that the company took responsibility for the unfortunate incident. It is very important for organizations to demonstrate that they recognize their fault in the incident and publicly make an admission. Otherwise, this will further deteriorate the already poor relationship with the public and be an arrogant factor that will further infuriate the public. Thus, in order to appear humble and remorseful as well as to appease the public, it is better for the organization to take responsibility for their failure. In Wal-Mart’s case, the CEO admitted the retailer’s failure to protect the privacy of its customers from the information of the statement made concerning the crisis.

A further analysis proves that the company communicated the action it was taking to address the crisis. Informing what is being done to address the negative impact of a crisis is another critical crisis communication principle that should be taken into high consideration when preparing a communication strategy. This will reassure the public that the company makes every effort to manage the situation thus making them less anxious. Wal-Mart’s CEO in his statement to the public shared the various steps the giant retailer was taking to manage the situation in a way that was clear and easily understood. He spoke of cleaning their information system by removing malware left behind by the criminals and hiring of data experts to investigate the incident.

Critical crisis communication principle of expressing responsiveness should not be ignored when passing information to the public. An organization is in a crisis that directly affects its stakeholders should always demonstrate sensitivity to those affected and acknowledge its awareness of the ways the affected have been impacted. Wal-Mart’s CEO was able to assure that the retailer understood the sufferings of the victims. This proved that the company empathized with its customers when facing the crisis. This principle is essential in making the public and the affected feel their well being is important to the organization. This fact will be significant in repairing the already tarnished reputation of the organization and its poor relationship with its customers.

During the process of crisis communication, it is also important for the affected organization to commit correct actions. This will be essential to reassure the public that the incident will not take place again and that everything will be fine despite the incident. Wal-Mart was able to perform in such a way by stating that it will make every effort to earn the trust and confidence of the public in their ability to protect their privacy and information.

From the above analysis of Wal-Mart’s case study, it is obvious that the role of communication in crisis management cannot be underestimated nor ignored. However, when communication is used as a way of managing a crisis, it is imperative that it be done in a strategic way. The aforementioned principles are some of the ways that crisis communication can be done strategically. It is important to note that when communicating strategically in a crisis, interaction should not be limited to a certain defined plan. Further, all efforts should be concentrated on passing relevant information in a way that will calm the public and those directly affected by the crisis. Organizations should analyze their business and the industry they are operating in order to anticipate the likely crisis scenarios they may face and take steps to strategize effective ways of using the process of communication to manage them.

Media and Organizational Reputation in a Crisis

Crisis communication can be performed through a number of channels. They include the media through TV, radio, newspapers, social media platforms, company websites, and newsletters. Wal-Mart’s management team pursued various media alternatives when it faced the hacking crisis. First, it responded to the information circulated about the crisis in its social media platforms, namely in Facebook and Twitter accounts. This was a significant step as social media is a communication platform that can spread information very fast and to the remotest part of the world. Secondly, it informed its stakeholders and the general public about the crisis on its website. An urgent newsletter was equally sent to the company’s customers in their email. Lastly, the company used mainstream media and called a press conference where the CEO issued a statement. The media is a key component for crisis communication. For this reason, media relations come into play in the process. Organizations should, therefore, ensure they have good media relations. First, every organization should strive to have a media relations crisis plan in place. This will be essential in preventing the media from releasing unconfirmed facts about a crisis, a factor that will worsen the situation. Secondly, it is imperative for the organization to ensure that the unconfirmed facts and stories running in the media do not exist for a long time. Instead, the principle of stating facts and telling the truth should be applied. Otherwise, it may result in the organization becoming a teaching example of poor media relations and their consequences during a crisis.

The main reason that organizations strive to combat a crisis is to protect their public image and reputation. This reason applies to Wal-Mart, as well. A crisis is capable of severely destroying the reputation of an organization. When an organization is negatively held by its stakeholders both internal and external and in a negative light, it will most likely lose their support. Many choose to leave the organization or stop their association with it. Thus, the company may experience a reduction in its corporate worth if the crisis situation is poorly handled. In order to further cement a good reputation with the public and other important stakeholders, organizations should continuously engage in various corporate responsibility activities. Therefore, in case a crisis arises, the positive image the organization has built over time will be useful in managing an issue and cushioning it from criticism.

Conclusion

As aforementioned, crisis management is a significant aspect of the continuity and survival of an organization after a crisis. Failure to manage a crisis effectively can cause untold damage starting with the reputation of the affected organization. Effective crisis management should be done strategically. It highly depends on effective communication. For the latter to be efficient, a number of principles should be applied in combination in order to save face with the public. Some of them include stating facts, demonstrating responsiveness, committing to do the right thing, communicating the action taken to address the situation, and taking responsibility for the crisis. The case study on Wal-Mart is essential in illustrating the ways the principles can be applied during crisis communication.

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