Stakeholder analysis of Unilever PLC
One woman in Nigeria who was a regular customer of Unilever’s product particularly the Blue band brand. The company stocks two flavors of the brand, blue brand spread, and Blue band original. Noting blue band spread appeared to remain in solid form even in extremely hot conditions, she decided to test the two products. She subjected them under extremely hot condition using boiling water. To her surprise, the blue band spread did not melt while the original blue band easily melted. Perplexed by her findings, the woman decided to contact the company’s customer service department for an explanation. However, the representatives did not provide a satisfactory response to her and dismissed her for not reading the ingredients used to manufacture the product. Unsatisfied by the company’s response, the woman decided to create a video of her new findings and post it to YouTube. Within hours of her YouTube post that compared the two flavours side by side, there was a massive response with customers panicking that they have been consuming a sub-standard product. The video went viral not only in Nigeria but in other parts of Africa such as Kenya. The company was forced to come up with a statement to deconstruct the circulating video poking holes into its allegations. However, the damage was already done, and the company lost a lot of customers in the process.
The scenario depicts how the customer as an important stakeholder can have a great impact on the company’s bottom line. Any issue raised by a section of the customers even if it is a single client need to be addressed promptly to avoid adverse impact on the company. Despite Unilever being a globally recognised firm, failure to address a small issue can lead to a huge impact on its reputation. With the availability of social media, one customer’s complaint even if not genuine can affect the company’s stakeholders globally. In this case, for instance, it took less than three days for the negative video to spread in many countries in the region denting the firm’s reputation. Despite, the company’s statement after the spread of the video restoring its reputation significantly, some customers were lost.
The firm can undertake further action to restore its image among the stakeholders. One way, for instance, is the use of social media such as Twitter, Facebook, and YouTube. For instance, the firm can creatively use the same medium the negative video was posted, YouTube, to demonstrate to the customer how the product is manufactured and how it is safe. Additionally, the firm can engage the customers through Television and Newspaper advertisement. The adverts should adopt both an informative and appealing tone to explain to the customer why they should continue consuming the products despite negative publicity.
In summary, the following can be deduced from the case study and the stakeholder matrix (power-interest) analysis.
- a) Consumers are assigned the highest priority (HH) who as stakeholders are interested in product quality and price in addition to the sustainability aspect of the products produced by the firm. The significance of these stakeholders groups is huge due to the ability to determine the firm’s profits. For instance, a satisfied customer can refer to others and make a repeat purchase. However, dissatisfied customers like in the case can lead to loss of other customers and loss of revenues by the firm.
- b) Employees are also considered high priority stakeholders (HH) due to having a direct influence on the firm’s performance in the retail sector. The employees can influence consumers’ decision through their action. For instance, negative response by customer service employees led to an escalation of the issue the customer raised.
- c) Investors are also crucial stakeholders for the company (HL) with much power do to the provision of capital to the firm.
- d) Suppliers provide the firms with the raw materials for production and parts and hence are important stakeholders (LH). They have high interest in the firm but less power since there are many vendors of supplies.
- e) Communities are also important stakeholders (LL) as they form the market for the firm and also provide the labour force.
2.3 Stakeholders Influence on Retail sector Firms
As demonstrated by the case, stakeholders and particularly the customer possess a lot of power over firms in the Retail sector market. Consequently, together with other stakeholder groups such as the employees, suppliers, and investors, they have a great bearing on the policies, choices and decisions made by firms in the sector. Customers, for instance, strive for better quality and prices from the firms and thus such decisions need to consider their perspectives. Such stakeholders keep putting pressure on firms to deliver superior quality and in the most efficient manner. For the employees, the concern is remuneration and better working environment. In the consumer industry, competition is high, and firms are looking for talented employees to drive their strategies. Hence, firms are under pressure from these stakeholders to offer competitive remuneration and good working environment. For all the stakeholders, effective communication needs to be maintained to ensure firms do not suffer from negative influence.
3.0 STAKEHOLDERS COMMUNICATION STRATEGIES
As outlined in the previous sections, different stakeholders have different interests, attitudes as well as priorities. Through adopting an effective communication strategy that recognizes the needs of each of stakeholders group, the firms ensure stakeholders receive information that is appropriate for their needs in addition to building positive attitudes for their firms or project. Butt, Naaranoja, and Savolainen, (2016) outlines that effective communication is one of the most critical tools for the advancement of the organization. Through effective communication, managers can perform their basic function and manage the expectations of the stakeholders. The view is reinforced by McDonald et al. (2010) who views effective communication as the basis for all business activities. In addition to being the foundation for the motivation of the employees, who are a key stakeholder, communication functions as a source of information that aid the decision-making process in addition to assisting in the identification of alternative course of action.
Dialogic change model outlines a structured way through which entities can plan, and implement their stakeholder’s communication strategies. The first step entails exploring and engaging which include determination of the factors that may influence dialogue with the stakeholders, determination of the type of the stakeholder and examining the systems that are in place and their impact on stakeholder communication (Bushe, & Marshak, 2016). Through this process, stakeholders are identified, trust formed, credibility gained and external influencing factors identified. The second phase as per this model is building and formalizing, and it encompasses the solidification of the stakeholder communication process and movement towards the formal acknowledgment of stakeholder’s commitment (Bushe, & Marshak, 2016). The outcomes of this phase include collaborative agreements, project plan, and implementation agreement. Implementing and Evaluating phase follows where key performance indicators are the results. Lastly, the model recommends replicating or institutionalization where sustainable communication structures are established.
According to Turkulainen et al. (2015), there are several elements that are essential for successful stakeholder communication. Creation of effective stakeholder communication plan entails;
- Identification of key stakeholder
- Creation of stakeholder management plan
- Creation of communication plans for stakeholders.
While the steps above answers the “how” question, there are several qualitative issues that need to be addressed in the organization’s communication plan. Among these issues include the mapping of stakeholder preferences as well as potential conflicts. The organizations and stakeholders expectation may experience a mismatch emanating from encoding and decoding issues of key communications. The context that the organization operates may differ from that of the stakeholders and failure to take this into account when communication may lead to failure. The challenge is even greater when the organization is dealing with stakeholders from different culture, industry or age range. Mapping of stakeholder preferences such as language, industry knowledge, cultural context, and technical proficiency, therefore, assist the firm to minimize chances of conflicts. Another important issue in organization communication and community engagement plan is having clear default protocols. Despite the organization’s communication varying from project to project, there is a need for an established set of default protocols that are familiar with all the stakeholders. In the case study of Unilever Company, for instance, the recognized people to speak to the stakeholders like customer and communities are those from Public relations.
Turkulainen et al. (2015) outline three rules of successful communication with stakeholders. The rules are outlined below;
- Knowing who the stakeholders are: For the management in the organization to influence the various stakeholders, it is critical to consider their perspective of the organization and its projects and policies. This can be achieved through carrying research with the aim of discovering what is important to them and their priorities.
- Communicating with the use of the right format at the right time: Different organizations, individuals and other stakeholders prefer receiving communication in a manner that is common to their business. Hence, if a given stakeholder prefers telephone calls over email, then such a strategy should be adopted when dealing with them.
- Less communication may be needed when engaging sponsors: More senior stakeholders such as sponsors may lack enough time and thus are unlikely to read huge documents from the organization. As such, such stakeholders prefer brief and concise communication. The message should be tailored in the way they can best understand it.
Like in the case of Unilever Nigeria and handling of the identified stakeholder’s crisis, several communication strategies can be adopted. In the contemporary digital era, the internet has brought numerous digital communication strategies that the firm can influence. One such strategy is the use of social media platforms. A social media strategy that is gaining popularity is the use of influencers. These are people who review products and recommend them independently to the consumers. Such people are more trusted by the stakeholder as they are perceived to be neutral. Another strategy the firm can adopt is the traditional print media and television advertisement that should be structure to inform the consumers and clarifies misunderstandings.
Effective communication presents several benefits to the organization like Unilever. According to Binder, (2016), one benefit of such communication is enabling stakeholders to better understand the company goals. Communication with employees and their union, for instance, may make them understand what the company is striving to achieve and the inputs required of them. Effective communication also creates influence and positive associations with the stakeholders such as media and special interest groups. This is important to ensure the reputation of the organization is maintained or improved. Effective communication also influences the source of power. For instance, when the government is enacting legislations that influence the business, constant effective communication with the government can ensure that the firm’s viewpoint is considered in the policy or legislation.
4.0 STAKEHOLDER MANAGEMENT THEORIES
The concept of stakeholder theory is much credited to Freeman (1984). The idea of stakeholder is to define how the organization needs to be and how it is conceptualized. According to Friedman (2006), the organization needs to be perceived as a grouping of stakeholders and the role of the firms should be the management of their interests, needs, and perspectives. The stakeholder management role is implemented by the managers of the organization. The managers manage the firm for the benefit of shareholders, who are important stakeholders, making sure their rights and participation in making a decision are upheld. Managers also manage other stakeholders such as customers and employees and ensure their needs are met and interests are taken care of.
According to the stakeholder theory, the stakeholder denotes any person or group of people who can affect or be impacted upon by business organization. The stakeholder theory deals with the debate on whether the business has a bigger responsibility towards the stakeholders as opposed to the shareholder and the manner the way the responsibilities can be fulfilled. According to Friedman, and Miles, (2006), business needs to serve the interests of the shareholders. However, proponents of stakeholder theory consider this an excessively capitalistic view and thus discredit it. Managers aiming at realization of full potential of their organizations must take the interests of the stakeholders into account. The key stakeholders include customers, employees, suppliers, management, and shareholders. Other include the media, the government, political groups, trade association and trade unions. The stakeholder theory postulates that all these affect or are affected by the business hence the need for their better management including effective communication.
The stakeholder theory can be divided into three branches; descriptive, instrumental approach and normative approach. According to Darnall, Henriques, and Sadorsky, (2010), combining the three approaches without acknowledging can lead to confusion.
Descriptive approach: The aim of the descriptive stakeholder approach is understanding of how managers deal with stakeholder as well as how they represent their interests. The corporation between them is often viewed as a constellation of interests while sometimes it is considered competitive and other cooperative. The analytic theory demonstrates how the divergent interests of the stakeholders can be dealt with.
Instrumental approach: The approach examines the firms’ consequences of considering stakeholders in management examining the association between the practice of stakeholder management and attainment of varied corporate governance goals.
Normative approach: This approach of stakeholders’ theory relates to the identification of moral as well as philosophical guidelines interconnected to activities or the management of corporations.
From the analysis and explanation of different stakeholder approaches, Unsilver combines the descriptive and Instrumental approach. For instance, the company’s CSR strategy outlines the different firms’ stakeholder and describe how the managers should prioritize and deal with them. With the instrumental approach, the consequences of how the management deal with stakeholder is explained. As established in the case, the customer support staff failed to deal with the customer appropriately and the consequence was deterioration of the company image and loss of revenues. The stakeholder theory also needs to emphasis the importance of communication between different stakeholder. As shown, in appendix 1, the stakeholder theory has traditionally been represented in which the firm is positioned at a central point and is surrounded by stakeholders. However, interactions among the stakeholders are not given a lot of attention. However, Paul, (2015) emphasizes the importance of interaction among the stakeholder through effective communication to achieve competitive advantage. Knowledge and value need to be shared among the shareholders.
Conclusion
The report sought to is to carry out stakeholder analysis of Unilever PLC and provide a recommendation on effective strategies to manage and communicate with the stakeholder. From the analysis of the literature conducted, it is clear that stakeholder analysis is an important undertaking for the firm. The process needs to begin with the definition of stakeholders, who are then grouped into categories. This can be done with the use of a matrix. In the current study, a case of Unilever is used and power interest matrix used in the analysis of various stakeholders. The firm’s stakeholders include investors, management team, consumer, employees, supplier, and communities. Through the case study provided, it has been concluded that managing stakeholders is very critical for the firm. Effective and prompt communication is necessary to avoid escalation of issues as evidenced by the case of Unilever. How the firms manage communication after stakeholder crisis is also important and relevant strategies need to be adopted including digital, and traditional media. The influence of stakeholders is strong on the retail sector necessitating relevant strategies to be adopted by firms to manage the stakeholders. Several strategies have been outlined for effective communication with stakeholder and community engagement. Finally, stakeholder theory and its various approaches have revealed how the organization can manage their stakeholders.