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Foxconn Crisis Proves Need for Global PR

'Suicide Factory' Case Part of Growing Trend in Foreign Companies Seeking Image Counseling From U.S.

By Published on . 2

DANGER ZONE: Nine committed suicide at Foxconn.
DANGER ZONE: Nine committed suicide at Foxconn. Credit: Bloomberg

NEW YORK (AdAge.com) -- Foxconn, the China-based technology manufacturer that produces iPhones and iPads for tech giant Apple, had a major corporate-reputation problem this summer. After nine separate incidents involving workers leaping to their deaths as a result of overly strenuous working conditions, the company was labeled "the suicide factory."

With little to no experience in speaking with the media or consumers, no PR strategy to speak of throughout its 35-year history and its sights set on establishing a bigger presence in the U.S., Terry Gou, founder of Foxconn, found himself in the middle of an international PR nightmare and looking for help. He turned to WPP's Burson-Marsteller. The agency and its global head, Mark Penn, have a long history of managing high-profile crises for companies such as AIG, Ford, Blackwater and Virginia Tech.

Mr. Penn said he could not discuss the nature of the relationship between Burson and Foxconn but said "there are certain outreaches we have assisted them with."

The most notable of those outreaches resulted in an all-access Bloomberg Businessweek cover story in mid-September. In the article, which included interviews with employees about working conditions, Mr. Gou discussed his company, his personal life and the suicides. He admitted that it wasn't until the fifth one that he decided to do something different. (And it wasn't until after the ninth suicide that the company sought the help of a PR agency adept at handling a crisis.)

Foxconn is just one of a number of billion-dollar companies headquartered in an emerging market that, despite having products used every day in the U.S., have no presence or brand identity here. While other companies don't have to address an alarming suicide rate among employees, there are challenges to telling their stories and establishing a brand and relationships with U.S. consumers, media and politicians.

Mr. Penn said this type of work is "definitely" a growing component of Burson's business and adds that it's not always a crisis that leads these companies to his agency's door.

"Recently a big foreign telecommunications company came to us asking how to create and strengthen its global image," Mr. Penn said. "Several companies from different parts of the world have come to us with a similar problem, asking, 'How do we now tell our story to the rest of the world?' This type of work is going to become a really important part of a global agency's business."

Industry executives said there are a number of RFPs in the pipeline focused on this type of work from the energy, consumer, technology and telecomm sectors. The work is not only coming from Brazil, Russia, India and China but areas such as the Middle East and Portugal as well.

To be effective, Mr. Penn said these companies typically need to refine the narrative of what they do and how they "grew up" so fast. "They need to do a lot of upfront work so the program is targeted and shaped correctly."

The problem for most of these companies is that they are vastly unfamiliar with the inner workings of American media, advertising, politics and government affairs. One agency CEO, who asked not to be identified, said the Toyota and BP crises both point to what can happen when a company's leadership doesn't fully understand the American marketplace or have someone managing the crisis that Americans trust.

Margery Kraus, global CEO of independently owned APCO, has been helping foreign companies break into the American market for years. She is seeing an increase in the number of "national" companies wanting to expand into the U.S. market in the wake of the recession but said those that try it on their own often make near-fatal mistakes before looking for help.

"To be successful they need an education on how our market works, what is reputation and how do you build it and who are the people they need to know to have 'permission to operate' in both a formal and informal sense," Ms. Kraus said. "Many of these companies also have to overcome the fact that they are from countries that are misunderstood or feared by the U.S., such as Russia and China."

Industry executives said the majority of these "new" companies view things entirely through a business lens, with a heavy focus on ROI and very little attention paid to things like brands and reputation. The concept of investing resources to build reputation is slowly being grasped, but only by the more sophisticated.

According to Harris Diamond, CEO of Interpublic's Constituency Management Group and PR shop Weber Shandwick, the challenges in working with these companies include getting them to understand the value of brands and how that differentiates them in the marketplace, especially when companies that have grown up in an insular world are used to selling themselves simply on price.

Getting them to understand the long-term nature of building a brand and that it's not three-to-six-month project can also be a formidable task. "And we have to explain to them that it goes beyond marketing to their customers," Mr. Diamond said. "There's a broader universe like employees, potential customers and industry they don't have a history of speaking with. We have to teach them that it's not as specific as they think it is."

Weber Shandwick recently won a sizable pitch for a Seville, Spain-based solar-energy company, which is expected to build one of the largest solar plants in the world in Arizona. The company is looking to Weber for help with establishing a corporate brand image and executive visibility with U.S. media, as well as consumers.

Paul Cohen, partner in the corporate practice of Omnicom Group's Ketchum, said the key to driving successful business in the Western world is having a good reputation in the U.S. His agency is working with a major Russian energy company on changing consumer and media perceptions in the West. "The assumption is that these companies are using energy as a political weapon but they aren't and you have to work hard to demonstrate the commercial nature of their actions," Mr. Cohen said.

Rob Rehg, president of Edelman's Washington office, said one of the biggest challenges he's encountered in the space is getting a company that has never dealt with a PR shop to take its advice over that of a lawyer. Mr. Rehg, who focuses heavily on negotiating the political channels for marketers trying to break into the U.S., said lawyers are completely counterproductive in the political community. "These companies don't always put a premium on the need to manage their reputation and that is essential," Mr. Rehg said.

In speaking to the policy community, Mr. Rehg said the key is to translate what contribution a company can make to the U.S. economy in terms of jobs, tax contributions and philanthropic giving.

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