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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Communication with stakeholders is essential for all the organizations to build and maintain a strong reputation. Acting morally and socially responsible is critical for an organization to be considered legitimate by different stakeholder groups. In today's world, no organization can operate on its own and succeed without interaction with multiple stakeholders involved such as consumers, competitors, government, media, employees and regulators.

Public Relations is strategic communication on behalf of an organization to foster mutually beneficial relationships with inter related groups of stakeholders. Based on the flow of information, there are two main types public relations systems – Open and Closed. Open system involves two-way flow of balanced information between an organization and its internal as well as external environment. This system helps the company to anticipate any changes and respond in the most effective manner. On the other hand, closed system does not involve free flow of internal and external communication with the business environment.

Management plays a key role in providing a direction and coordinating the efforts of public relations teams to produce results that are in the best interests of all stakeholders involved. There are many theories related to public relations. Stakeholder theory describes relationship between the organization and stakeholders as contracts which includes economic exchange and transactions. This theory seeks to promote more effective, efficient and ethical interactions in the best interests of the firm and its stakeholders. Systems theory emphasizes that the practice of public relations requires ongoing efforts at analyzing, planning, executing and evaluating to promote a healthy and open organization. Persuasion theory suggests that socio-psychological needs and motivations of both the speaker and receiver should be considered while drafting PR strategies. Social exchange theory has its roots in sociology, psychology and economics and stresses cost benefit analyses to predict behaviors and relationships. Agenda setting theory focuses on how media plays a big role in influencing our perceptions and opinions about issues and organizations. Social learning theory stresses how a person observes and takes in information which helps us to understand the behaviours of stakeholders. Elaboration likelihood model and innovation theory help public relations professional to better understand the beliefs and attitudes of key stakeholders.

Ethical and Legal Perspectives

Several regulations and laws govern the relationship between the organization and various stakeholder groups and hence the PR practitioner must consider the legal environment of host country when shaping strategies. Practitioners must always base their decisions on the principles of honesty, human dignity and social responsibility.

Real World Example

One of the most famous coffee shop chain in the world, Starbucks believes in building long term relationships with its stakeholders through wide range of stakeholder initiatives and social media engagement. Starbucks has some of the best in class practices for stakeholder engagement as well as community participation. The company follows open public relations model that is responsive to changes within its environment and its external and internal systems. This was very well demonstrated in the recent racial bias incident in Philadelphia. The systematic environment analysis helped the PR team to realize that it was their fault. The CEO of the company acknowledged it immediately and issued a public apology. The company announced closing of 8000 stores for a day to provide racial bias training to its staff. This action sent out a clear message to the customers and other stakeholders involved that Starbucks is committed to making things right. This way this multinational firm managed the crisis to develop and maintain long term relationship with the public.

Chapter 2: Stakeholders


People management is an important aspect for the success of any organization as satisfied workforce is commitment towards the organization's growth. A well-managed business organization considers it employees as primary drivers of productivity gains.

Public relations professionals work in close partnership with human resource managers to ensure that an employee's everyday responsibilities are closely tied with organization's overall objectives. This partnership aims to create a positive work environment for employee where they can get great reward for talent and skills and where the organization can get highest return from its resources to achieve its goals.

Employee Satisfaction Pays Measurable Returns

Satisfied employees are committed to providing excellent customer service, putting more effort and working with their colleague to achieve team goals. Employee satisfaction has many benefits for all firms as satisfied employees contribute to higher productivity, lower costs and higher profitability. It is a win-win situation for employees and the organization as satisfied employees are loyal and committed to the current organization and less likely to accept new jobs with other organizations.

Effective Leaders Inspire Trust and Confidence

Researchers have found that employee satisfaction increases when workers feel they are involved in decision making process, have clear understanding of goals and are encouraged to provide feedback. Effective leadership plays in big role in developing employee's trust and confidence in the organization.

Organizations use different forms of traditional and social media to reach employees such as newsletters, posters, e-mail, blogs, YouTube etc. Another traditional method of engagement which has retained its popularity over the years is on site group meetings as it provides opportunity for face-to-face dialogue and facilitates two-way communication.

Case Study 1

I think Zappos will be highly successful in attracting talented employees without direct advertisements as this will direct better quality candidates who have knowledge about the organization to the hiring team. It will also reduce the volume of applicants and make recruitment process more efficient for small hiring team.

Zappos has a unique corporate culture called Holocracy wherein all employees are encouraged to pursue multiple opportunities and responsibilities for growth to foster a culture of innovation. The company follows two-way channel of communication wherein employees have a say in the decision-making process. Zappos' core values encourage its employees to pursue open and honest relationships. All these values have a common theme of employee engagement which can take place in different ways depending on the type of organization and its overall objectives.

Case Study 2

McDonalds' McResource helpline had two major flaws. The independent third-party experts failed to customize the content in line with the company's operations and hence a lot of the web content looked anti McDonalds. The second major issue was that the website content was accessible by anyone who signed up on the page. There should have measures to ensure that the person is who has signed up is an actual employee. McDonalds corporate statement in response to both the situations did not balance the needs of employees and media stakeholders. In McRersouce situation, the company's commitment to building healthier workforce resonated well with employees.

In wage rate increase request, the company explained about how it believes in providing advancement opportunities to its employees and emphasized that 80% of its stores are run by independent small business owners who operate in highly competitive industry.

Employers can engage in activities to unionize as long as they do not interfere with the employee's right of freedom of choice and speech. McDonalds offered its employees to engage in the activities and work their regular hours as it valued it employees.

Real World Example

Google is often considered as the company with the best corporate culture because of best training programs, collaborative leadership and unparalleled perks. Its culture is open, fun, and emphasizes on building a sense of community. Employees are rewarded for failures to encourage creativity. They have the flexibility to work according to their own schedule which promotes greater productivity. Google's culture of trusting its employees is what breeds job satisfaction, creativity and strong performance.

Chapter 3: Stakeholders


Building a strong community relationship is an important aspect of stakeholder engagement for any organization. Community building refers to the various methods businesses use such as cultural support, infrastructure development, environmental monitoring and civic responsibility for the well-being of the communities in which they operate.

A major challenge for PR professionals and corporate management is to define the key communities and prioritize the interests of key stakeholder within them. There are many benefits of building positive community relations:

• It builds positive public image and reputation.

• Contributing to social, cultural and economic infrastructure of the community boosts employee morale and results in higher productivity. It helps the organization to attract and retain high quality talent.

• A company with strong corporate social reasonability program may get economic benefits from the government in the form of tax incentives, rebate and subsidies

• Customers like to be associated with a company that gives back to the community. Hence, community building also leads to customer loyalty, repeat sales and increased revenues.

Organizations use different methods of communication to engage its key stakeholders such as company website, social media, meetings and special events. Many international corporations use annual corporate social responsibility report to inform the public about how its economic actions are aligned with long term social and environmental sustainability.

Case Study 1

Non-profit organizations have moral and ethical obligations to support rebuilding of the community and its infrastructure after a crisis. Various non-profit groups have a mandate to serve the public by providing shelter, healthcare, counselling and financial assistance. In this case, Make it Right housing foundation stepped in to rehabilitate Lower Ninth Ward after it was destroyed by Hurricane Katrina in 2005. In addition to the construction of safe and sustainable home, they worked with the residents to ensure long term sustainability of the local community.

Communities welcome any form of assistance and relief from non-profit organizations in the situation of crisis. However, they have expectations of open and honest communications about rehabilitation plans and in having a say about how they would like to see the socio-economic growth of their communities in long run. Make it Right faced a lot of criticism and negative media attention due to the flaws in the construction project and also because it was linked to international celebrity. The organization had a noble goal to create sustainable homes in the community which could withstands natural disasters like hurricanes. All the non-profits do not have the capacity to hire highly qualified PR professionals to effectively respond to public criticisms. It highly depends upon organization's scale of operations and revenues to decide whether it can have dedicated staff to handle crisis situations.

Case Study 2

PepsiCo Beverages started “Refresh Everything” campaign in 2010 to receive community-development proposals that people could vote on and the proposal with majority votes would get the funding from the multinational corporation. This was one of its kind marketing campaign that combined community giving with crowdsourcing. The campaign's impact was measured by various metrics such as number of tweets, Facebook posts, likes and social media impressions. Pepsi's online followers increased from 225,000 to 1 million and 6.4 million people registered on the website during the first year of the campaign. However, the sales of Pepsi beverages declined during the campaign period partly because its expansion projects in Asia and Latin America got delayed.

Real World Example

TD has recently taken over RBC as Canada's largest financial institution by assets. Its ability to grow year over year has only been made possible by its commitment to invest in the community and people where it operates. The organization believes in enriching lives of employees, customers and communities through various initiatives such as TD Tree Days, The Ready Commitment and TD United Way Employee Giving programs. TD employees over 85000 employees and was ranked Canada's top employer for year 2018 by LinkedIn. The company attributes its strong talent base to its positive work environment and its focus on developing the colleagues.

Chapter 5: Stakeholders


Effective management of media stakeholders can help an organization to take the advantage of mass media tools to reach wider target audience at minimal cost. There are various benefits associated with maintaining positive media relations:

• Mass media, such as television, newspapers and websites, is highly efficient as it can reach millions of people with unparalleled speed.

• Public believe that information shared by popular media houses such as BBC or CNN is more trustworthy as compared to similar information provided by an organization.

• It provides an opportunity to PR practitioners to tailor their content to meet the needs and interests of target audience.

• Media plays a big role creating a sensation about certain subject which can help practitioners who are planning to launch a new product or service.

• Print and digital media provide convenience to public to read and follow the news at their own time.

Journalists are usually looking for news to satisfy their audience's needs and to provide them entertainment and lot of useful information does not get coverage as it does not meet the mentioned criteria. It is very important for organizations to not only tailor their content to target stakeholders but also the intervening stakeholders such journalists and editors to build a good reputation.

Most organizations these days maintain electronic newsroom to provide information about recent news releases, fact sheets, corporate reports and upcoming events. The goal is to provide most up to date information to the media in a clear, transparent and navigation friendly formats. Although there are various traditional and digital tools available, there is no substitute for human contact. Certain sensitive subjects require human interaction to make stories realistic and alive.

Case Study 1

General Mills made a change in its legal policy that indicated anyone who signed up on their website, downloaded promotional coupons, joined social media pages and entered any contest would forfeit their right to sue the company. This change was made without adequate public notification and landed the organization in huge criticism from media and customers. Within few days, the company reversed the change and issued a public apology for taking a wrong path. It is a clear example of a major policy change was made without consultation or prior notification to all the stakeholders involved. General Mills should have solicited the customers' feedback before making changes to its legal terms. This case also reinforces the need to constantly monitor social media and traditional media coverage.

Case Study 2

Lance Armstrong, one of the most successful athletes in the history of cycling, was found guilty of doping and misleading the public. This not only cost him his medals and endorsements but also his reputation as a hero. During early stages in his career, Armstrong was diagnosed with cancer and had to undergo chemotherapy treatment. After his treatment, he started a foundation called Livestrong that would advocate for cancer research and the patients. In 2013, Armstrong appeared on a public TV show to talk about his wrong choices about drugs, lying and his attitude to win at any costs. Although public apology is considered a powerful public relations tool, Armstrong's admittance to the doping allegations attracted a lot of criticism from the public. People felt that they were misled by him and questioned his credibility.

Real World Example

PepsiCo is one of the world's largest and most recognized brands that offers wide range of beverages, healthy snacks and foods such as Pepsi, Gatorade, Tropicana, Doritos and Lay's. Pepsi launched an advertising campaign featuring the celebrity Kendall Jenner which sparked some serious social issues. The organization immediately withdrew the campaign videos from all the social media platforms and issued an apology. The company realized that although it wanted to convey the message of unity and understanding, it clearly missed the mark. Pepsi could have avoided this crisis by showing the commercial to a small group of target audience for feedback.

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