Target's Crisis Management and Reputation

This assignment examines Target's accounting scandal of 2016, focusing on the financial implications, public perception shifts, and the company's subsequent crisis management strategies. Students are tasked with analyzing news articles, reports, and expert opinions to assess the effectiveness of these strategies in mitigating reputational damage and rebuilding trust. The assignment emphasizes understanding the complexities of corporate reputation management in the face of significant crises.

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Reputation Management Plan
Target Australia Pty Ltd of Wesfarmers Group, Australia

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Executive Summary
Reputation of any organization is the perceived image that the company holds in the minds of its
stakeholders. It is one of the most important intangible assets of any organization and must be
protected at any cost. The firm in consideration is Target Company Pty Ltd which is a leading
retail brand of Wesfarmers’ group. Despite a strong brand name, off late the firm has been facing
issues that have led to a hampering reputation of the firm. Unfortunately Target Company Pty
Ltd was associated with an accounting scandal which has caused a bad name in the market. The
company’s CEO aims to move its office from a small town in Geelong to Melbourne which will
cause a loss of 900 local jobs and the firm has been sourcing its raw materials from Asian
markets where various ethical issues have been surfacing especially sweatshops. This report
throws light on how Target Company Pty Ltd can save and rebuild its deteriorating reputation
and regain its position in the minds of its stakeholders.

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Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................3
1 Situation Analysis.........................................................................................................................4
1.1 Organizational Background..............................................................................................4
1.2 Present State......................................................................................................................4
1.3 Issues faced............................................................................................................................4
Ethical issues while sourcing raw materials.............................................................................4
Accounting Scandal..................................................................................................................5
Shifting office...........................................................................................................................5
2. Strategy........................................................................................................................................6
2.1 Target Publics........................................................................................................................6
2.2 Goals and Objectives.............................................................................................................6
2.3 Strategy and Tactics...............................................................................................................7
Evaluation........................................................................................................................................9
Accounting Scandal.....................................................................................................................9
Ethical Issues while sourcing raw materials..............................................................................10
Shifting office............................................................................................................................11
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
Public relations are the efforts put in by companies to maintain a favorable public image. It
is a strategic communication process that benefits relationships between organizations and
public. Reputation of any organization is essentially the perceived value of the firm by its
stakeholders as compared to its competitors. Strong positive reputation often attracts a larger
customer base and hence increased market share (Lange, 2010). Any gap in the expected value
and the real value offered by the firm risks a company’s reputation. These risks can be internal as
well as external but it is imperative that a firm works towards hedging these risks in the most
efficient manner.
Reputation is considered an intangible and invisible asset of the firm. It is an equally important
asset and hence care must be taken to preserve it. Most of the firms make the mistake of focusing
their energies on handling risks that have already surfaced. This process is crisis management
and not risk management (Harvard Business Review, 2007). Organizations must work upon their
listening skills to be sufficiently aware of ongoing and upcoming issues; to strengthen their
understanding of, and current relationships with, significant stakeholders; and to take steps
beyond traditional PR by activating a network of supporters who can influence key
constituencies (McKinsey, 2009). This report throws light on the issues faced by the firm Target
Company Pty Ltd which is a part of Wesfarmers group in Australia. It is a leading brand and
currently facing certain issues which have adversely hampered its public relations. This report
provides a detailed insights about the issues faced and recommended strategies to fix the damage
done.

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1 Situation Analysis
1.1 Organizational Background
Wesfarmers is a renowned conglomerate with diversified businesses in the field of Department
stores, Liquor, Chemicals, Energy, Fertilizers and office supplies. Target Company Pty Ltd is
their trademark department store brand that has successfully established a name for itself by
offering a sundry variety of apparels, home wares and merchandise. The giant brand functions
across 300 outlets in Australia with assistance from a 16000 member team (Wesfarmers, 2017).
Target is a flagship brand of ‘Wesfarmers’ and has been gifted with a strong brand name since its
inception (Wesfarmers, 2017). This brand name has no doubt helped Target establish a positive
goodwill for the company. However, this calls for a greater responsibility to protect and preserve
the reputation that comes with the legacy of Wesfarmers. Target Company Pty Ltd along with
Wesfarmers therefore invest in various strategies for their reputation management.
1.2 Present State
Wesfarmers group’s Target Company Pty Ltd is currently going through radical changes in terms
of preserving its reputation to its stakeholders. No doubt, the company is backed with the
Wesfarmers brand to hold on to, yet the recent issues faced by the firm have drastically impacted
its positioning in the market. There are three specific issues that are discussed in the report and
strategic recommendations are offered for the same. However, it is imperative that Target
Company Pty Ltd jumps the bandwagon and resolves the issues at the earliest.
1.3 Issues faced
Ethical issues while sourcing raw materials
Asian markets still continue to be subjected to extreme cases of child labor and underpaid labor.
This is the reason most Australian nations including Wesfarmers are shifting to direct sourcing
by eliminating the agent. This requires setting up direct sourcing offices and enhanced
knowledge of local businesses. This process is usually time consuming and demanding (Journal
of Superannuation Management, 2012).

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This adversely impacts the reputation of Target and at this moment, the brand is looking for
alternative sources of raw materials. Also the cost of raw materials is increasing at a high pace.
Their main sources of raw materials are China and Bangladesh. China government’s 5 year plan
focuses on increasing labor wages and domestic consumption. This automatically makes raw
materials sourced from there expensive. On the contrary, Bangladesh has a bi lateral trade
agreement with Australia and which allows duty free imports (Bangladesh high commission,
2016). But sweatshops and infrastructural issues are abundant which limits the advantages of the
agreement and also hampers Target’s reputation.
Accounting Scandal
For the 6 months ending in December 2015, it was brought to light that Wesfarmers’ department
store Target has fraudulently inflated income by $21 million. This mishap not only led to
resignation of then MD Stuart Machin but also diminished the brand’s goodwill (ABC news,
2016). This incidence was covered by all leading newspapers, news channels and magazines and
created a major havoc in the brand’s reputation.
Every time any such fraudulent activity by the firm comes to notice, it becomes the talk of the
town and disrupts the goodwill of the company, hampers its sale, reduces customer footfall in the
stores and diminishes customer loyalty. Richard Goyder went to the extent of saying that the
entire brand of Wesfarmers has been hit by ‘Stupid’ target (The Australian, 2016). Firstly no
organizations should ethically involve in such practices and secondly, in case of such a crisis,
immediate actions must be taken by the firm to resolve it and reduce the damage.
Shifting office
CEO Richard Goyder confirmed that after the accounting scandal of 2015, the business required
a physical shift. Which is why Target Company Pty Ltd’s office is to be shifted from a small
town of Geelong to Melbourne. This will lead to a loss of 900 local jobs. Also any physical shift
requires immense adjusting and is a time consuming process (ICAS, 2016). But most
importantly, if not handled well, it can hamper the firm’s reputation immensely. Especially with
the increasing unemployment rates in Australia, people are very sensitive towards this subject. A
sudden loss of 900 jobs by a single firm will lead to a negative image in the consumer’s minds.

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2. Strategy
2.1 Target Publics
Primary and secondary stakeholders of the firm as identified are:
Primary Stakeholder Secondary Stakeholder
 Customers  Potential customers
 Employees  Competitors
 Leadership  Families of employees
 Other Wesfarmers group companies  Real estate agents
 Clients  Potential employees
 Suppliers  Contractors
 Media houses
 Public relations
 Government bodies

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2.2 Traditional and Social media approach
Every time a company faces issues as mentioned above, it adversely affects its relationship with all of its
stakeholders. Media plays an important role in this entire procedure. The traditional media strategies
include using television, media releases, articles, magazines and newspaper as a means of
communicating with stakeholders. Owing to rapid development in technology and increased use of
internet, various social media strategies include the following:
1. Social media: Facebook, twitter and Instagram have all become brilliant sources of
communication between the organization and its public. They can be used to fix the issues by
increasing their brand awareness and improving their brand presence on these platforms.
2. SEO/SEM: Search engine optimization is an efficient technology to make sure that people are
able to find details about the organization easily. This helps in increased brand awareness.
3. Google Ad Words: Google ad words involves the art of listing down certain specific words. When
anyone uses these words on their Google search, Target Corporation Pty Ltd will be suggested.
2.3 Goals and Objectives
The overall objective of this plan is to ensure the brand with a long lasting reputation that attracts
customers. The idea is to resolve the above mentioned issues in the most efficient manner and
ensuring that Target Company Pty Ltd develops a positive goodwill among its customers. The
strategic goals are as below:
 To find more efficient sources of raw material procurement within 12 months
 To resolve sweatshop and labor issues in Bangladesh within 18 months
 To rectify the bad marketing caused due to accounting scandal within 2 months
 To ensure no accounting scandal takes place in the future by forming a committee to
check all reports published. This committee should be formed in 1 month.
 To have a more transparent accounting system in place within 3 months
 To ensure sustainable handovers by 900 employees in Geelong within 3 months
 To ensure the employees do not face disruptions in their careers within 6 months

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2.3 Strategy and Tactics
Goals Objectives Tactics
 To resolve
ethical issues
related with
raw material
procurement
 To find efficient sources
of Raw material
 To resolve sweat Shop
and labor issues in
Bangladesh
 To ensure a positive
reputation in the market
in terms of raw material
sourcing
 Conduct researches and
explore further Asian
markets for raw material
procurement
 To establish offices in
Bangladesh and employ
effective human resource
department to check these
issues in place
 Zero tolerance towards
forced labor
 Fair remuneration must be
practiced across the firm
 Surprise visits to
Bangladesh facilities
 Release media reports and
documentaries
demonstrating effective
raw material procurement.
 To ensure
efficient and
responsible
shift to a new
office in
 Ensure job safety of 900
Employees at Geelong
 Effective turnover by
these employees
 Offer jobs at other
Wesfarmers group
companies
 Offer jobs at the new

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Melbourne
from Geelong
location in Melbourne
 Offer a minimum 3 month
notice period to find other
job
 Offer relocation bonuses to
families willing to shift
 Offer jobs to spouses of
employees who are willing
to shift
 Recommendation letters
must be given to all
employees
 Full and final payment
settlement must be done
without any delay
 To resolve the
aftermath of
accounting
scandal in the
firm
 Avoid Accounting
scandals in the future
 Rebuild the reputation
ruined by the scandal
 Fire employees responsible
behind the scandal
 Publicly release the correct
accounting details of the
firm
 Public punishments to
ensure no employee
indulges in similar actions
 Future reports must be
monitored by a team before
release to a general public
 Board of directors must
release a letter of apology

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 Media houses must be
invited for public
statements by the company
Evaluation
Accounting Scandal
Target Company Pty Ltd.’s accounting scandal was one of the biggest cause of negative
publicity and put the firm in a bad light. The decision to immediately fire the CEO saved some
grace (Sydney Morning Herald, 2016). However the after effects were rather catastrophic. It is a
classic example of a black propaganda. Public relations play a vital role in managing, protecting
and further rebuilding the reputation of a firm in such a scenario. Using these public relation
tools efficiently becomes increasingly important. The following evaluation plan is recommended
to the firm.
Stage Measurement Purpose
Pre implementation  Back check all
accounting records of
the company for the
last 5 years
 To ensure that no such
mistake has been
made in the past
1 months  Committee formation
to reach the depth of
the issue
 To recognize people
responsible behind
this scandal. Make
sure they are punished
to establish reputation

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among people.
2 months  Fire the employees
 Apologize publicly
 To ensure no one
commits such a
mistake again
 To ensure the public
knows that the firm is
taking responsibility
3 months  Release correct
accounting numbers
 To gain trust among
the public again and
save the company’s
reputation.
Ethical Issues while sourcing raw materials
Raw materials and their sourcing has been a major issue faced by Target Company Pty Ltd in the
last few years. The increasing number of reports published by various leading magazines
throwing light on sweatshops and worsening labor conditions in the Asian markets are now
reaching a wider audience. This has created a dent in the reputation of the firm. Steps
recommended to the Target Company Pty Ltd to remedy this are:
Stage Measurement Purpose
Pre implementation  Identify all the issues
related to procuring
raw materials from
Bangladesh
 To ensure the issues
can be resolved in an
efficient manner and
the company’s
reputation can be

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saved from further
harm.
1-2 months  Committee formation
to reach the depth of
the issue
 To recognize the
causes responsible
behind the issues there
6-8 months  Establish offices in
Bangladesh
 To conduct surprise
visits
 To monitor workings
of the office
 To make sure these
issues are not repeated
else it will majorly
affect the company’s
goodwill.
1 year  Continue to evaluate
better sources of
procuring raw
material
 To gain trust among
the public, improve
reputation and
reduce cost
Shifting office
Due to growing opportunities and market size of Target, it is no doubt important that the office
be shifted to a more developed city like Melbourne. Also the CEO opined that the firm needed a
physical shift post the accounting scandal (Brisbane Times, 2016). However, the loss of 900
local jobs must be compensated for. It was observed by leading news channels that the
frustration among employees post the announcement was evident (Geelong Advertisers, 2016).
Recommended steps to remedy that are as below

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Stage Measurement Purpose
Pre implementation  Identify the total
count of job
 To ensure these lost
employees are
addressed efficiently
and they develop a
goodwill for the
company
1-2 months  To offer jobs in other
Wesfarmers
companies in Geelong
 To ensure employees
don’t lose jobs. If
they do, they will
spread a bad name
and hence affect the
company’s
reputation
3-4 months  To write
recommendation
letters
 To provide a two
month notice period
 To effectively
complete the full and
final settlement
 To make sure
employees are not
frustrated or helpless
6 months  To provide relocation
bonus and paid leaves
to employees who are
willing to shift to
 To gain trust among
employees leading to
improved reputation

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Melbourne in the market
Conclusion
The functions of PR play a very vital role in establishing, sustaining, protecting and
rebuilding this reputation if the need be (Griffin, 2014). Reputation management is an
essential part of working with any business. Reputation defines what the stakeholders’ perceive
about the organization. Marketing is a tool to promote products whereas PR can be
efficiently used to influence the business environment in order to build a positive
reputation.
This report has mentioned three major issues faced by Target Company Pty Ltd of
Wesfarmers group in Australia. These issues include a massive accounting scandal, shifting of
their office and other ethical issues faced in the process of procuring raw materials from Asian
markets. This report critically throws light on these issues and recommends strategies to
overcome the same. The detailed evaluation plan also affirms the working of these strategies and
the time taken to completely build the reputation again.

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References
Bangladesh High Commission, 2016, ‘Bangladesh Australia trade relations’,
http://www.bhcanberra.com/trade-investments/bangladesh-australia-trade-relations, viewed on
30 September, 2017
Brisbane times, 2016, ‘Target to shift from Geelong’,
https://www.brisbanetimes.com.au/business/companies/target-could-cut-up-to-25-per-cent-of-
geelong-head-office-staff-20160413-go57d5.html, viewed on 30 September, 2016.
Geelong Advertiser, 2016, ‘900 Geelong target jobs in lingo’,
http://www.geelongadvertiser.com.au/news/geelong/900-geelong-target-kobs-in-limbo-as-new-
boss-guy-rosso-searches-for-melbourne-base/news-story/6ca2d242326c2bb173d1dbc56cbe69e3,
viewed on 30 September, 2017.
Griffin, A. (2014). Crisis, Issues and Reputation Management: A Handbook for PR and
Communications Professionals. Kogan Page Publishers.
Harvard Business Review, 2007, ‘Reputation and its risks’, https://hbr.org/2007/02/reputation-
and-its-risks, viewed on 28 September, 2017.
ICAS, 2016, https://www.icas.com/ca-today-news/target-accounting-scandal, viewed on 30
August 2017.
Lange, D., Lee, P. M., & Dai, Y. (2011). Organizational reputation: A review. Journal of
Management, 37(1), 153-184.
McKinsey, 2009, ‘Rebuilding Corporate reputations’, https://www.mckinsey.com/global-
themes/leadership/rebuilding-corporate-reputations, viewed on 30 September, 2017.
Sweeny, M, 2012, How Sustainable are Australian retailers’ new sourcing strategies. Journal of
Superannuation management 04(03), 22-26.

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Sydney Morning Herald, 2016, ‘Outgoing Target boss Stuart Machin quits’,
http://www.smh.com.au/business/retail/outgoing-target-boss-stuart-machin-quits-ahead-of-
investigation-findings-20160408-go27nt.html, viewed on 30 September, 2017.
Sydney Morning Herald, 2016, ‘Wesfarmers takes action against staff over target rebates’,
http://www.smh.com.au/business/retail/wesfarmers-takes-action-against-staff-over-target-
rebates-20160411-go3il5.html, viewed on 30 September, 2017.
The Australian, 2016, ‘Wesfarmers’ takes a hit from stupid Target’,
http://www.theaustralian.com.au/business/companies/richard-goyder-wesfarmers-takes-hit-from-
stupid-target/news-story/267f4fc82b653b6f298a53af694cccc9, viewed on 28 September, 2017.
Wesfarmers, 2017, ‘Our Businesses’, http://www.wesfarmers.com.au/our-businesses/our-
businesses, viewed on 28 September, 2017.
Wesfarmers, 2017, ‘Target’, http://sustainability.wesfarmers.com.au/our-businesses/department-
stores/target/, viewed on 30 September, 2017