PRN3124

The Characteristics of issues and crises.

The characteristics of issues and crises

Part A: Analysis of the concepts behind issues and crises Part B: Review of an issue that recently occurred
_______ Author: Ola Falck Student ID: 10274133 Unit: PRN3124 PR Issues and Crisis Management ________

This assignment covers two different parts. Part A, and part B. Part A covers the concept of an issue and the concept of a crisis. It will briefly compare differences and similarities between an issue and a crisis. Part B covers a public issue that recently occurred. It will give a review over what happened with Groupon, and why the current CEO had to be let off.

Ola Falck

10274133

PRN3124

The Characteristics of issues and crises.

Part A: Analysis of the concepts behind issues and crises.

In order to determine what a crisis and an issue are, a definition of the term problem would be helpful. A problem can be defined as a matter or situation regarded as unwelcome or harmful and needing to be dealt with and overcome. If a problem is not handled correctly an issue or crisis is usually not far behind. Problems can be easy to spot, but hard to handle, an issue is something you can control, while a crisis is out of your control. No matter what situation you find yourself in the most important part is the outcome, and what knowledge you gather from the experience. (Regester, 2005) When comparing the three together it becomes clear that there are different ways of preventing situations like these to occur, and there are ways of handling them when it`s already to late. Unfortunately, crises tend to come without warning, and even the best-laid plans are worthless if it cannot be communicated. (Regester, 2005) Communication is key when it comes to issues and crisis management. And especially when the damage has already happened. The normal reaction when something like this happens is usually to give out all the information you have about the current issue to the people affected. Tell it all, and tell it fast, but at the same time be truthful, and hopefully by the time you have finished these points, the crisis will be gone. (Regester, 2005) For many people this would be the most reasonable solution to a crisis, but in reality the lack of truth and information internally within a company is usually the main triggers for a crisis, or the issue itself. (Jaques, 2008) When targeting an issue people tend to focus on the internal, rather than the external. (In most cases they focus on both, but not always) There are countless studies that suggest that this is the way to do it, and that most issues caused are internal. Others argue that an issue is only an issue if you call it for it. (Schannon, 2006) This ideology is usually what caused the issue, and what will eventually cause the crisis.

Ola Falck

10274133

PRN3124

The Characteristics of issues and crises.

There are also those who argue that technology is one of the biggest threats for an organisations reputation, seeing how it can be used as a tool to spread information extremely fast to countless people around the world. (Turnbull, 2000) Information shared online will be seen by thousands within a few seconds now a days. In order to prevent an issue to occur from an online publication remember that it takes patience to prevent disaster, and only one moment of impatience to ruin an organisations reputation (Regester, 2005) When explaining the difference about issues and crises, it is important to remember that a crisis is usually a low-probability high-consequence event. (Jaques, 2008) In order to prevent a crisis, the probability of the consequence has to stay at a low and steady level. To ensure this happens, planning and research must be worked at constantly, and be kept maintained. A issue is commonly known as the reason for a crisis, but is usually just the tip of an iceberg. (Comer, 2010) It is said that an issue ignored is a crisis ensured. Issues however dont have the same low-probability highconsequence events, and there are therefor some issues that wont cause any crises at all. In order to decide what issue to focus on, research and planning will have to be provided, and communicated within the corporation, understood by the stakeholders, and the public. (Regester, 2005) Constant planning and research is the two things that prepare you for either a crisis or an issue, and the way you communicate the information gathered is how you deal with both. So you could say that the similarities between a crisis and an issue, is that a crisis is an issue that is out of control. If a crisis occurs, Call in all the managers, create a crisis committee and make an action plan and define roles and authorities (who does what) who speaks to the press, who speaks to the victims in case of an accident etc. To prevent all of this from happening, preparation is key. (Comer, 2010) Both issues and crises are bad for a company. But the outcome can be turned around to something more positive. It all comes down to how you handle each problem, because there is no way of always having the right answer when it comes to issue and crisis management. A Problem becomes an issue when it is underestimated. With time, the issues will keep on stacking upon each other and reform till it grows out of proportions, and transforms into a crisis. Ola Falck 10274133 3

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The Characteristics of issues and crises.

References
Comer, D. R. (2010). Journal of Management Education . Special Issue: Crisis Management Education . Jaques, T. (2008). Schadenfreude or an opportunity to learn? A case study approach to issue and crisis management . Schannon, M. (2006). Risk, Issue and Crisis Management - Journal of Promotion Management. Risk, Issue and Crisis Management . Regester, M. L. (2005). Risk Issues and Crisis Management : A Casebook of Best Practice (3rd Edition). Risk Issues and Crisis Management . Turnbull, N. (2000). Issues and crisis management in a convergent environment. Issues and crisis management .

Ola Falck

10274133

PRN3124

The Characteristics of issues and crises.

Part B: Review of Groupon Inc.

When Groupon launched in 2008, it started out as a simple coupon-site. The interest for such a thing was huge, and Groupon quickly became one of the fastest growing companies in the world. (Steiner, 2010) With over 12.000 employees in 48 different countries, Groupon has reached over 500 markets in 4 different continents. All within 5 years. Groupon has without doubt done something incredible, but what caused the company to plummet when it went public in 2011? What issues caused the fall of the Groupon, and what is to be expected of Groupon in the coming years? Are Groupon experiencing a crisis, or have the press just taken issues out of proportions? Its no secret that Groupon has taken a hard hit when it comes to negativity in the press. In an interview with the co-CEO of Groupon, Ted Leonsis tells the verge that he thinks people dont separate the signals from the noise, and are therefor not capable to see the company for what it really is and the potential it has. We have 1.2 billion in the bank. We have basically zero debt. And this last quarter, we had an operating profit. Yes, with one-time write-downs, there was a loss, but the fundamentals of the business are sound. (Popper, 2013) Usually companies with money in the bank and no debt are considered successful ones. Seeing how Groupon had such an intense growth while the rest of the world suffered from the outcomes of the financial crisis, its hard to understand what went so wrong with Groupon. There are six key events that have led Groupon to where it is today. In 2008 when the company launched, with Andrew Mason as CEO. May 2010 when the Samwer brothers stepped in and help expand Groupon to Europe. In December 2010 Groupon turns down a $6B offer from Google. November 2011 when Groupons IPO starts $20 share. April 2012 when Groupons stock sinks to $13. And in March 2013 when CEO Andrew Mason is let of. Through all of these events the growth of employees raised

Ola Falck

10274133

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The Characteristics of issues and crises.

from 30 people to 12.000 people. At most the company was valued at a staggering 12.5 billion dollars, but is now validated to around 3.49 billion dollars. (Popper, 2013) The issue at hand is how Groupon will win back the support of the consumers and stakeholders. And the reason this is not a crisis or a problem, is because the companys history before its IPO was so successful. There is no doubt that Groupon has fallen victim of the costumer-mobs that attack the Groupons Facebook sites. Groupon Norway experienced this first hand, and could not find any other solution to the problem than to shut down the option to share your opinion on the company site. (Baugerd, 2012) From personal experience, working in the costumer service department for Groupon Norway, I would say that for every call and email I answered I received three new ones. The issues were usually not Groupon, but rather the provider, and the lack of communication between the customer, the provider and Groupon. Internally at Groupon Norway the mentality of the sales department were to make as much money as possible on the deals, and let the customer service handle the problems that might come up. There was no internal communication between the different departments, which eventually caused the costumer service department to grow from 2 employees answering phones and emails, to 45 employees doing the same thing, in just under a year. The CEO of Groupon Norway explained the high increase as a necessity caused by the increase of Groupon members. (Baugerd, 2012) It is also worth mentioning that the CEO of Groupon Norway recently handed in his resignation. Looking at the issues at Groupon Norway is a good way to reflect on what is happening with Groupon internationally. The issues are as mentioned earlier not caused by either internal or external factors, but usually a mixture between the two. In this case Groupon failed by focusing too much on their mission statement that is: To become the operating system for a local commerce. They ignoring the external pressure caused by the costumers and focused mostly on what they thought were internal problems. There was not set up a team to solve the issue, and the mentality was to just let the issue solve itself out. Or rather give refunds and Groupon credit to everyone who called in to complain.

Ola Falck

10274133

PRN3124

The Characteristics of issues and crises.

The issue at Groupon Norway could have been solved within a couple of weeks with the right PR team. The fact that the CEO resigned is not considered a crisis neither is the fact that Andrew Mason got fired, because everyone who has been paying attention knew that at was inevitable. The foundation of Groupon is what is interesting for the investors, and Groupon now has the chance to prove that it is not only a money making machine, but a reliable one. (Wilhelm, 2013) Groupon is no longer a simple daily-deal site, and it has no intention on going back as one. Through the last year or so they have spent significant time and resources evolving Groupon is trying to change the fundamentals on how the consumer interact with Groupon. By creating new categories such as travel, goods and live, they are expecting to reach out to a broader audience. And by keeping up with apps on mobile devices, they are able to reduce the amount of emails that are sent out daily. (Wilhelm, 2013) Which is one of the biggest complaints from the costumers. The public issue with Groupon is the fact that no one wants to invest in the concept because they either think its out of date, or that there is simply to much noise about Groupon in the press. In order to restore it`s reputation, Groupon has to be very clear about what it is they want to do, and how they want to get there. (Agrawal, 2012) It seems like people forget that the company is only 5 years old, and that it is still in its growing phase. There is no doubt that Groupon has potential as a company, but as a daily-deal site, its time might be over. (Rushe, 2012) Groupon might have a promising future as a operating system for a local commerce, but they have to change the mentality of the company, before changing its appearance. What they need to do now is to plan and do a lot of research internally, and figure out how they want to be viewed by the media, the public and the stakeholders. At the moment there is too much uncertainty around Groupon, and if they do not open up and inform the public about whats going on internally, they at least have to remind themselves that the company is nothing without its users, so to whatever extent, they are the ones who always come first. (Popper, 2013) I think that Groupon have realized that their old business model would not last forever, and by firing the CEO and publishing his resignation letter online, I think they are showing that they are in fact ready for a change, and that they are ready for a fresh start. Ola Falck 10274133 7

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The Characteristics of issues and crises.

Reference list
Agrawal, R. (2012, march). Venture Beat News . Retrieved april 2013 from Why Groupon is poised for collapse: http://venturebeat.com/2012/03/31/whygroupon-is-poised-for-collapse/ Wilhelm, A. (2013, february ). TNW . Retrieved april 2013 from Andrew Mason is out as CEO of Groupon, heres his sendoff letter.: http://thenextweb.com/insider/2013/02/28/andrew-mason-groupoin/ Baugerd, O. P. (2012, may). din side . Retrieved april 2013 from Why Groupon is having issues : http://translate.google.no/translate?hl=en&sl=no&u=http://www.dinside.no/89 6248/derfor-sliter-grouponnorge&prev=/search%3Fq%3Dgroupon%2Bnorge%26hl%3Den%26biw%3D 1417%26bih%3D740&sa=X&ei=8dRkUeOmM4TQkgXviYDYBg&ved=0CE cQ7gEwAQ Baldwin, A. B. (2011, nov). reuters. Retrieved april 2013 from Groupon's IPO biggest by U.S. Web company since Google: http://www.reuters.com/article/2011/11/04/us-grouponidUSTRE7A352020111104 Conlin, M. (2011, october). Business insider. Retrieved april 2013 from Groupon Is A Disaster: http://au.businessinsider.com/groupons-fall-to-earthswifter-than-its-fast-rise-2011-10 Comer, D. R. (2010). Journal of Management Education . Special Issue: Crisis Management Education . Evelyn M. Rusli, C. C. (2010, november). Dealbook . Retrieved april 2013 from Google Is Said to Be Poised to Buy Groupon: http://dealbook.nytimes.com/2010/11/30/google-is-said-to-be-close-to-buyinggroupon/?ref=business Eha, B. P. (n.d.). Entrepreneur . From The Rise and Fall of Groupon's Andrew Mason: http://www.entrepreneur.com/article/225990#ixzz2Q1hLr2JM Geneschi, D. (2012, december). secure scheduling. Retrieved april 2013 from Groupon: what could have been: http://www.blog.securescheduling.com/2012/12/groupon-what-could-havebeen/ Jaques, T. (2008). Schadenfreude or an opportunity to learn? A case study approach to issue and crisis management .

Ola Falck

10274133

PRN3124

The Characteristics of issues and crises.

Pepitone, J. (2012, november). CNN Money. Retrieved april 2013 from Groupon plummets 30%. Can the company survive?: http://money.cnn.com/2012/11/09/technology/groupon-stock/ Popper, B. (2013, march). The verge . Retrieved april 2013 from Greed is Groupon: can anyone save the company from itself?: http://www.theverge.com/2013/3/13/4079280/greed-is-groupon-can-anyonesave-the-company-from-itself Schannon, M. (2006). Risk, Issue and Crisis Management - Journal of Promotion Management. Risk, Issue and Crisis Management . Steiner, C. (2010). Forbes magazine . Retrieved 2013 from Meet The Fastest Growing Company Ever: http://www.forbes.com/fdc/welcome_mjx.shtml Rushe, D. (2012, december). the guardian . Retrieved april 2013 from Groupon: from dotcom star to just another coupon business: http://www.guardian.co.uk/technology/2012/dec/02/groupon-dotcom-star-justanother-coupon-business Regester, M. L. (2005). Risk Issues and Crisis Management : A Casebook of Best Practice (3rd Edition). Risk Issues and Crisis Management . Turnbull, N. (2000). Issues and crisis management in a convergent environment. Issues and crisis management .

Ola Falck

10274133