1 Gukinos

Public Relations Case Study Ethics Business

Every chapter includes at least one extended case study embedded in the main text illustrating how real companies, organizations, and people have addressed public relations challenges.

click thumbnail for larger view

“I absolutely love this concept.  I like how it is set up, the author walks you through it and then gives the reader the actual solution.  Great real world example!”
Megan Toland, Arkansas Tech University

“This is excellent.  Students often remember these events and they can now see the situation in terms of public relations.  It helps for students to know that what they are studying is actually happening in the real world, and especially in their world: on social media.”
Amy Zufelt, Cardinal Stritch University

“Grade: A. Case studies bring the concepts to life. Students today relate to real life situations and of course, we all learn from what not to do as well as what to do from them.”
Rise Samra, Barry University

“These are essential. I use such activities every week. It helps the students really consider each case and encourages them to examine their values, morals and ethical codes.”
Sallyanne Holtz, University of Texas at San Antonio

“The case study does an excellent job of bringing the ethical decision-making process to life with a relevant example. It illustrates the process of ethical decision-making and gives concise yet adequately comprehensive details to demonstrate the process.”
Kevin Trowbridge, Belmont University

Case Study: Mercedes-Benz

This case study was written based on Tan and Tan’s study published in the Journal of Business Ethics in 2009.

Background

Ethics is vital to the practice of global public relations, but it is also “one of the greatest challenges facing practitioners in the 21st century because it impacts on the management of strategic relationships within the complex dynamics and interrelationships of a global context.”

In the Chinese market, foreign car brands have a competitive advantage over domestic car brands because of their being associated with luxury and novelty. Thus, they have experienced tremendous growth in the high-end market, especially after China entered the World Trade Organization (WTO) in 2001 when the tariffs on imported cars were significantly reduced.

However, the strength of a strong brand being associated with luxury and novelty could also be its weakness – there are high expectations for their product quality and customer service in the minds of Chinese consumers.

Dilemma

In 2001, German auto-maker, Mercedes-Benz, was involved in a clash with the Wuhan Wild Animals Zoo when the zoo discovered problems with the quality and reliability of the vehicle. In December 2001, a Mercedes-Benz owned by the zoo was found to be dragging into the street by an ox. The act was considered a protest towards the problems with the vehicle’s performance and quality, resulting in numerous costly repairs.

After numerous attempts to request Mercedes-Benz to replace the vehicle and cover the costs of the repairs, the zoo was dissatisfied that the company had not repaired the car like it would in the United States.

Similarly, in 2002, a Mercedes-Benz owner performed a public act of destruction after numerous attempts to repair the car. The quality problems of the vehicles resulted in the formation of an anti-Benz organization, Association of Victims of Benz Quality Problems. In other words, a public-initiated public relations (PPR) problem arose as publics formed into active and activist problems to collectively solve the problem.

Their problem recognition was high as a result of the gap between their expected state and their experiential state. The following factors contributed to the perpetration of the problem:

Discrepancy between U.S. and Chinese laws: The Chinese consumers heard that the U.S. had a law which would require the company to replace the defective car with a new car after the third repair. They felt discontent to have been treated differently.

Class action lawsuits not allowed in China: The Chinese government actively suppressed class action lawsuits because they could cause social instability. Thus, individual consumers were not protected by the legal system and had to use other means to have their problem resolved.

Expectation of the adoption of Western principles: Because Mercedes is a Western company, consumers expected that it would favour the “customer is always right” principle.


Course of Actions

After numerous attempts to repair their vehicles and negotiate with Mercedes-Benz, the issue was escalated into a crisis as consumers attributed Mercedes-Benz’s lack of interests in resolving the matter as the result of “the arrogance of Western multinationals.” Thus, they responded by smashing more cars which resulted in extensive media coverage and hostilities against the company.

Mercedes-Benz responded by:

Declining the request: It did not offer explanations for the malfunctions and attributed responsibility to consumers for their use of Grade 93 gasoline instead of the Grade 97 gasoline recommended. Chinese consumers responded by saying that it was not written in the manual in Chinese.

Reasserting consistency in customer service: In a statement published after a widely publicized event of car smashing, it claimed that it dealt with all reasonable concerns and issues in the same manner all over the world. Chinese consumers had claimed that the way Mercedes-Benz treated its Chinese consumers caused them to lose dignity.

Condemning publicized acts of car smashing: The company described the highly publicized acts of destruction as “unreasonable and senseless” and requested apology for the public defamation of their reputation. They even threatened to take legal actions against acts of consumer protests.

Consequences

The activation of public sentiment through consumers’ smashing of their own cars showed that Chinese consumers were no longer seeking dialogue or negotiation. The issue became framed in the media as a matter of national dignity and resulted in Chinese consumers’ gaining a new understanding of consumer rights and responsibility.


In 2008, when Mercedes-Benz discovered a manufacturing error in its vehicles, it announced a massive recall in China and established a hotline for consumers to report their concerns. Mercedes’ announcement of product recall reflected its having learnt a lesson from its previous experiences.

Moral of the Story

Lesson #1 highlights the contestation of the adoption of a global vs. a local standard of ethical practices. It is problematic when there is a gap between Chinese consumers’ expected state and experiential state. On one hand, Chinese consumers expected that foreign companies would adopt the same principles as they would in other markets. On the other hand, they experienced that foreign companies were just like domestic companies. Public relations, as a relationship building function, should recognize that publics have different expectations for local and global companies. Although country-specific factors, such as political system, economic system, culture, media system and level of advocacy, are relatively static, publics’ expectations for companies could differ from one company to another. Instead of asking what country-specific factors should guide us in adopting one standard of ethical practices for one country, we should ask what standards are expected of my company. 

Discussion Questions

  • What are the ethical problems in this case?
  • What are the global ethical problems present in this case?
  • How was public relations practiced in this case?
  • How should public relations be practiced in this case?
Next Page: Lesson 1 Assessment

Leave a Comment

(0 Comments)

Your email address will not be published. Required fields are marked *