Crisis and Disaster Management: Case Study of Apple’s Inc. Deception Crisis
Executive Summary
Apple Inc. has recently been faced with various allegations of misconduct involving violation of False Advertising and California’s Unfair Competition laws. Moreover, the company has been accused of misrepresentation of information after its release of Wi-Fi Assist in iOS program. The feature turned on cellular data without the consent of the customers resulting in high usage of the data and hence the high cost. This research explores the deception crisis facing Apple Inc. The turning point of the crisis was the lawsuit filed against the company by its customers seeking compensation. The customers and the management are some of the prominent stakeholders affected. The paper gives some of the response strategies in accordance with the situational crisis communication theory. The proposed response strategies involve denial, diminish, rebuilt and bolstering. The company also need to perform contingency planning before product release.
Table of Contents
2.1 Apple’s Crisis Turning Point 2
2.4 Apple’s Public Relations. 3
4.0 Business Continuity Proposal 4
4.1 Objectives of the proposal 4
4.2 Business continuity proposals. 4
Appendix 1: Company Background. 8
Appendix 2: Other Stakeholders Affected. 8
Crisis and Disaster Management: Case Study of Apple’s Inc. Deception Crisis
1.0 Introduction
1.1 Crisis Background
Apple Inc. has enjoyed customer awareness for a long time due to its high quality products. According to Lazonick, Mazzucato, and Tulum (2013), the company has created a loyal customer base due to its iOS products, the primary products being the iPad and the iPod. The company has consequently had market capitalization. Mid months of 2015, Apple Inc. launched an iOS 9 program that was intended to revolutionize the Wi-Fi connection for the customers. The operation of the feature was a great milestone advancement in the design of the new iOS programs for mobile phones.
Wi-Fi Assist, hereafter Assist, feature was intended to help Apple customers to have a strong WI-Fi connection at all times. The feature was intended to solve the problem of maintained Wi-Fi connection to a weak signal by switching it off and connecting to the mobile data automatically. Woollaston (2015) highlights that once the Wi-Fi signal to which an iPhone was connected to becomes weak, the Wi-Fi signal switched it off and connects to the mobile data without the user having to switch off the Wi-Fi connection manually. Consequently, the users were to have a strong connection always.
The application of the feature was initially perceived to have a major positive impact on the company’s iPhones customers (Woollaston, 2015). However, the response from the market has been controversial to the expectations. The feature has jeopardized the welfare of the company’s public relations. According to users, the Assist feature spikes cellular data imparting a high cost on them (Huddleston, 2015). Customers whose iPhones use the iOS program have consequently complained of the skyrocketed costs due to the high data usage resulting from the switching on of cellular data by the Assist feature. Some of the iPhone users have since sued Apple for compensation of the cellular data cost claiming that the company failed to inform them on how the feature works.
The causes of the crisis are internal. The company failed to offer information regarding how the Wi-Fi Assist works. Consequently, customers were not able to control the feature to prevent it from turning on cellular data without their consent. Moreover, the crisis indicates the company’s lack of a contingency plan. The presence of such a plan would have enabled the company to identify the possible effects the feature will have to cellular data and hence offer the necessary information as well as curb the crisis before its escalation (Kisi, 2002, p. 788). The crisis is possible of causing destruction of the Apple Inc.’s reputation of producing high quality products. Moreover, the crisis has possible negative financial repercussions due to the compensation charges filed against the company.
The following research provides a business continuity plan for Apple Inc. In providing the plan, the crisis that Apple Inc. is currently facing is explored. The plan covers issues regarding this crisis up to 5th December 2015. The causes and the possible repercussions of the crisis are covered to emphasize the importance of the company’s recovery from the crisis. The stakeholders affected by the crisis are also considered and the possible methods through which the company can curb the crisis and restore its brand image.
2.0 Apple’s Crisis
2.1 Apple’s Crisis Turning Point
iPhone users filed a class action lawsuit against Apple Inc. in October 2015 seeking compensation for the cellular data cost resulting from the operation of the feature (Huddleston, 2015). The plaintiffs claimed that the Assist feature turned the cellular data on when the Wi-Fi signal is weak without their knowledge incurring additional cost. In previous OS programs, the iPhone would remain connected to the Wi-Fi even when the signal was weak. The user would turn on the cellular data only when they needed it minimizing the cost. According to the plaintiffs, Apple Inc. had not provided sufficient information regarding how the feature operates. Therefore, Mastroianni (2015) explains that people who used Wi-Fi connection to save data ended up using more cellular data and hence the high cost of the same. As a result, the feature incurred an extra cost without the knowledge of the users. Moreover, Apple Inc. did not provide information regarding how to switch the Assist feature.
The $5 million compensation lawsuit filed by users marked the epitome of the crisis making the company change its perspectives on the issue. According to James and Wooten (2006, p. 1105-1107), a lawsuit has a negative impact on a company’s brand image. In this case, the Apple Inc. was negatively portrayed as not being concerned with the welfare of its customers. Such depiction implied constrained relationships with its market. Moreover, lawsuit costs the company energy, time, and cost during the process of litigation. Moreover, the lawsuits resulted in the company explaining the operation of the Assist feature (Bolton, 2015; Chowdhry, 2015). The complaints forced the company to seek methods to restore its image in the society to avoid further deterioration of its public relations.
2.2 Defining Crisis
Organizations are often faced with various challenges that may have adverse effects on their operations, stakeholders or the society (Bhardwaj, 2014, p. 1). Crises cannot be predicted, but they are not unexpected. Crises are characterized by such as short time, suffering of brand image, demand for information, building of pressure and rapid decisions. Ray (1999, p. 17-18) further explains that a crisis may be any event that can result in closer organizational integration, create innovations and allow for clarification of issues.
James and Wooten (2004, p. 6) highlights that there are two main type of crisis. These types include the sudden and the smoldering crises. The case of the crisis facing Apple Inc. is the smoldering type. This inference is because the Wi-Fi Assist problem started as a small issue of complaints by the customers until when it escalated to a crisis status of litigation.
2.3 Deception Crisis
Apple Inc. is in a deception crisis. Bhardwaj (2014, p. 13) explains that a deception crisis is one in which an organization misrepresents or conceals information about it or its products while dealing with the various stakeholders. Considering the facts presented previously regarding the Assist feature in the new iOS 9, the Apple company did not provide information regarding it. Mahoney (2015) explains that the plaintiff in the litigation claimed that Apple Inc. did not warn them that the feature would cause higher bills due to cellular data usage increase.
The deception crisis facing Apple Inc. is in the chronic phase. Chronic phase is one in which an organization tries to clean itself from the adverse effects of the crisis. It involves actions by an organization such as recovery, explanation, blame and investigations. The deception crisis facing Apple is at the stage when the company is trying to give explanations and blames the users. For instance, Bolton (2015) explains that Apple Inc. explained the working of the Wi-Fi Assist after its customers complained and after lawsuits were filed due to the cost incurred due to the automatic switching on of the cellular data. Moreover, an article by Brown (2015) sought to show the market that Wi-Fi Assist was not responsible for the high usage of their cellular data. Instead, the article states that Apple has enabled its customers to set limits of which programs can connect to data and hence they can control its usage.
The deception crisis that Apple Inc. is facing can be perceived using the situational crisis Communication Model formulated by Coombs and Holladay (Fronz, 2011, p. 124). This model primarily focuses on the strategies for responding to crisis and the involvement or the responsibility of the firm in the crisis. This inference is due to the crisis that appear to be the triggering factor in the case of Apple crisis. Moreover, the response strategies adopted by Apple seem to align with the model. The model gives denial, diminishing, reinforcement and rebuilding as the primary response strategies to a crisis. Apple Inc. seem to use these models by denying its involvement in the crisis as indicated by its Brown’s article in 2015 discrediting Wi-Fi as the cause if data usage escalation. The explanation of how Wi-Fi feature works seems to be an initiative to diminish the allegations while rebuilding the corporate image.
2.4 Apple’s Public Relations
The public relations (PR) of Apple Inc. is ranked the best in the world. The company has been able to use media to shape and control discussions about its products and also curb any information that is negative towards the company (Gurman, 2014). The company relies primarily on in-house marketing strategies. Inherent of the previous factor, the company’s PR team is small company to the company’s size. There are six teams that are involved in PR issues in the company. The first is the Momentum and Buzz Marketing team that integrates the company’s products into a culture that is popular. The second is the Mac team that deals with software and hardware. The iPhone, iPad, iOS and iCloud, the iTunes and Events are the other PR teams. The collective work of these teams has been overwhelming shaping of the media narrative of the company.
3.0 Stakeholders Affected
In considering, the stakeholders affected in the Apple Inc. crisis, it would be crucial first to consider the stakeholder theory. According to Freeman (2001, p. 41), a stakeholder is any person and groups who are affected by an organization’s actions. Such effect may be either harmful of beneficial to the stakeholders. The theory stipulates that the role of the organization is to maximize the stakeholder’s welfare (Freeman, 2001, p. 44). Following the definition above, the stakeholders affected in the Apple Inc. crisis involve the customers and the Investors.
Following allegations that the Wi-Fi Assist feature escalated cellular data use, customers sued Apple corporation seeking compensation. Huddleston (2015) explains that the company was being sued to award $5 million compensation to its customers. Therefore, the customers are one of the primary stakeholders affected by the crisis. Customers are affected by the deception crisis by denial of information regarding the operations of the Wi-Fi Assist feature. Consequently, customers did not get to realize the possible repercussions that would result from upgrading to the new iOS program. Mastroianni (2015) highlights that about half of the company’s customers downloaded after the release of Ios 9 program without having the necessary information regarding how it operates. Consequently, customers failed to monitor their data usage resulting in high cost of cellular data.
The management is also a stakeholder in an organization. The management has the role of safeguarding the welfare of the corporation (Freeman, 2001, p. 44). Such role is achieved by ensuring that the relationship among various stakeholders is balanced. In the case of this crisis, the management at Apple Inc. failed to facilitate such balancing of stakeholder’s interests. The management failed to provide information regarding the working of the Wi-Fi Assist feature causing financial harm to them. Customers expect corporations to spend more on development and research. Apple Inc. appears to have failed in meeting this requirement of its customers resulting in declined corporation health that portrays the management as to have failed in their responsibility.
4.0 Business Continuity Proposal
4.1 Objectives of the proposal
The objectives of the proposal are as listed below:
- Restore Apple Inc. brand image
- Prevent harmful effects to the company’s stakeholders (Coombs, 2007, p. 165).
- Provide information to stakeholders regarding how the company is protecting them from future crisis
The response strategies for business continuity are in accordance with the situational crisis communication theory (SCCT). The strategies follow an accommodative-defensive continuum (Kyhn, 2008, p. 37). It assumes that the company will have laid a good foundation with the victims of the crisis through proper communication that addresses their grievances.
4.2 Business continuity proposals
Apple Inc. should first deny its involvement and diminish the crisis. In this case, the company will such as attack the accusers, use a scapegoat, justify and assert that there is no crisis. Apple company allows iPhone users to control the programs that can access data (Brown, 2015). Therefore, Apple can use such as a justification and an escape goat by claiming that users ought to have used such features to control their data usage. The deny strategy will help the company to distance itself from the crisis and hence protects itself from the harm of the litigation compensation it is being sued for. The diminishing strategies that involve use of excuse and justification as explained by Kyhn (2008, p. 40), lessens the company’s association with the crisis. Diminishing the crisis will help reduce the negative perception that the customers have towards Apple Inc. due to the deception crisis. Consequently, the company will have lowered the degree of the harmful effects resulting from the crisis.
Mahoney (2015) explains that the litigation compensation of $5 million against Apple Inc. is small compared to the wealth of the company. Therefore, the company can adapt the rebuild response strategy. This strategy involves the use of compensation and apology for the inconveniences that may have resulted from the deception crisis (Kyhn, 2008, p. 40). In this case, the company will offer the compensation customers are suing it for and apologize for failing to disseminate information regarding the working of the Wi-Fi Assist. The company will only take responsibility for the delayed information dissemination and rather not the crisis. Thereafter, the company should provide information regarding the working of the Wi-Fi Assist and also mask the crisis by informing customers why the feature is essential and remind them of other excellent features (Coombs, 2007, p. 172). The deception crisis jeopardizes the reputation of Apple Inc. since customers are claiming that the company violated False Advertising and California’s Unfair Competition laws. Moreover, the explanation by the plaintiffs that the company allowed for negligent misrepresentation further poses a threat to its reputation. This strategy will be critical in restoring the reputation of the company of producing quality products.
Daly (2011, p. ix) explains the Steve Jobs, Apple Inc. Chief Executive Officer (CEO), is well known for his captivating presentation skills. These skills have made him an idol among the community that has helped him to create good relationship with the company’s stakeholders. This fact can be exploited to implement the Bolstering strategy. The CEO can use this position that he has in the society to improve the company’s relationship with the stakeholders and in drawing sympathy through the use of victimage (Coombs, 2007, p. 172). The company also need to ensure that they have a contingency planning to avoid the occurrence of such events in the future.
5.0 Conclusion
The aim of this paper is to unravel the deception crisis that Apple Inc. is currently facing. The company’s failure to deliver information regarding how one of the features introduced in the iOS 9 program caused an upsurge in the use of cellular data among iPhone users. The crisis has seen the company facing a litigation compelling it to compensate its custo $5 million compensation against the customers. The study has given some of the response strategies that the company ought to use to restore the reputation of its brand image. These strategies involve the denial, diminish, rebuild and bolstering. The combination of these strategies will help the company to restore its reputation and return to normalcy.
However, the research fails to capture the empirical evidence regarding the effectiveness of the proposed response strategies. The paper is primarily explanatory. Therefore, a future research on the crisis should incorporate empirical evidence in support to the proposed response strategies.
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Appendices
Appendix 1: Company Background
Apple Inc. is an American based multinational company. It is deals with the designing and selling of electronics, personal computers and computer software (Pandey, 2013, p. 1). The company is well known for its iPod, iPhone, Macintosh computers and iPad products. Some of the company’s software include such as the iTunes media browser, iWork, iOS, iLife and Mac OS X operating system. The company is ranked third after Nokia and Samsung Electronics in the making of phones. Apple Inc. was considered the most admired company in the year 2008 in the United States and from 2008-2012 in the world. The company has been faced with various obstacles such as criticism due to its business and environmental and contractor’s labor.
The company had 364 retail stores by the year 2011 in thirteen countries and also runs an online store. The company is the largest publicly traded company according to market capitalization. Apple Inc. is also the largest technological company by profit and revenue. The number of permanent full-time employees of the company by 2011 was 60,400 while that of the temporary full-time was 2,900.
Appendix 2: Other Stakeholders Affected
The company also affects the investors in the company. Investors expect financial returns from any organization. The awarding to the compensation charge filed against Apple Inc would imply a reduction in the investors financial return. Freeman (2001, p. 43) explains that the local community expects an organization to have social contributions to it. The allegations in the crisis that Apple Inc. violated legal provisions is against the social contribution and hence would affect the local community.
