Communication & Crisis Management in International Business

Instructor: Sean Kennedy

Sean has 8 years experience as a supervisor and has an MBA with a concentration in marketing.

Communication and crisis management in international business are essential. In this lesson, we will discuss what a crisis response plan is, the impact of crises on stakeholders, and stakeholders' reactions after a crisis.

Crisis Response Plans

Expanding your business internationally can cause significant growth and can be very exciting for a company! However, there could also be a crisis that occurs that could impact business, which is why it is crucial to develop a crisis response plan. A crisis response plan is used in international business to collect, process, and deliver information regarding a crisis. Operating in a new business environment can be both negative and positive. The business must have a deep understanding of the culture in order to communicate effectively after a crisis.

For instance, in a democratic country, this begins with the permission of the public and their approval. When a crisis response plan is not put in place, the company may not respond quickly enough to a crisis, which could hurt their reputation and business. Companies can communicate after a crisis by updating their website, holding a press conference, and/or posting on social media.

Deciding which communication strategy is most effective for the region the business is located is essential. A press conference or social media is the most effective because it is easily accessible. Companies should work closely with the press to make sure their message is being portrayed accurately. Working closely with the government is another communication strategy. The government can assist in which steps to take and how to help communicate updates.

The Swag Garment Company is based in the United States but has decided to open operations in Sweden. This is the first international venture for the company. Unfortunately, a manager has been stealing hundreds of thousands of dollars from the company and ripping off customers and employees in Sweden. The company did not have a crisis response plan in place and did not react quickly enough. They posted some brief information on their website, but it was not enough information to keep consumers informed. By not having a crisis response plan, their reputation suffered tremendously with the people of Sweden and even in the United States.

The Impact of Crises on Stakeholders

A crisis can also have a significant impact on stakeholders. Stakeholders include customers, employees, the media, and shareholders. After a crisis, it can create a negative impact on current customers, and potential customers may refrain from purchasing a product from a company with a negative brand image. When a company does not communicate and take ownership when a crisis is their fault, this will cause the consumer to seek a better alternative.

Employees morale may be affected, and it may be difficult to attract high-level employees. When a company does not value employees during a crisis, this will cause them to lose morale and faith in the company. How the media portrays a company depends on how the company handles the crisis. For instance, when BP oil had very little interest in employees or in communicating effectively; the once-popular company became a poster company for how not to handle a crisis.

Shareholders are the ones that put money into the business to receive profit and have a successful investment. Once a crisis occurs, a shareholder may withdraw their capital, leaving the company in an even worse situation. It is crucial for a company to be transparent with shareholders to keep them involved in the business operations. Whenever operating abroad, there is a risk; but after a crisis, the risk increases because of the company's reputation.

Stakeholders' Reactions

Stakeholders' reactions can be negative if the ability to communicate properly is not achieved. The reactions of stakeholders will depend on the culture of the area in which the business is located. Stakeholders that are part of cultures that are less tolerant to risk will respond negatively, and those that are more tolerant to risk will respond more positively. It is crucial for the business to understand how some countries may be less tolerant and to make sure stakeholders are always informed.

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