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Arla Foods CaseThere are societal issues raised in this case and by the Charlie Hebdo killing in Paris.At a societal level, one issue is that of free speech. What are your thoughts about free speech? Does it, or should it, have limits?What about the David Brooks’ Op Ed in the New York Times? Are you Charlie? (article Brandeis Betrays Attached) explaining what he is talking about in his reference to Ayaan Hirsi Ali, which was her cancelled talk at Brandeis University.However, aside from the societal level issues, there are also managerial issues that are important in this case, and Arla managers in Denmark and the Middle East face a crisis and have to respond to events. Put together an action plan that identifies the managerial issues on which they need to take actionWhat is your reaction to what happened in the case?What, if any, are the implications of the Arla situation for your business or career?
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Version: 9.27.2007
ARLA FOODS AND THE CARTOON CRISIS
In early February 2006, Astrid Nielsen, Group Communications Director of Arla
Foods, faced the greatest crisis of her career. Tens of thousands of Muslims in cities
around the world had taken to the streets to protest the publication of caricatures of
Muhammad by a Danish newspaper. The caricatures, which most Muslims viewed as
blasphemous and offensive, prompted some to attack Danish embassies and
businesses. In several countries, protests turned deadly.
Saudi Arabia was able to avoid much of the violence seen elsewhere. Instead,
consumers protested by boycotting Danish products. For Arla Foods, which owned a
large dairy in Saudi, the result was nothing short of disastrous. As other countries
began to join the boycott, Nielson wondered what, if anything, her company could do
to mitigate the total loss of Arla’s Middle Eastern business.
BACKGROUND
Arla Foods, a co-operative owned by 10,000 milk producers in Denmark and Sweden,
was formed in 2000 through the merger of MD Foods of Denmark and Arla of
Sweden. Arla was Europe’s second largest dairy company, with 58 processing plants
in Scandinavia and Britain, and annual revenues of nearly $8 billion. It enjoyed a near
monopoly on domestic dairy products, with market shares of between 80 and 90
percent in most categories. The UK was the company’s largest market, accounting for
33 percent of total sales, followed by Sweden and Denmark at 22 percent and 19
percent respectively. The rest of Europe accounted for another 13 percent.
Outside Europe, the Middle East was Arla’s most important market (see Table 1). The
company exported approximately 55,000 tons of dairy products from Denmark and
Sweden to Saudi Arabia, and produced around 30,000 tons through its Danya Foods
subsidiary in Riyadh. Local production was based mainly on non-perishable goods and
included processed cheese, milk and fruit drinks. In Saudi Arabia, which accounted for
70 percent of total Middle East sales, the company’s Lurpak, Puck and Three Cows
brands were market leaders in butter, cream, dairy spread and feta categories. Other
important Middle East markets included Lebanon, Kuwait, Qatar, and the United Arab
Emirates.
This case was written from public sources by David Wesley under the direction of Professors Henry
W. Lane and Mikael Sondergaard for the purpose of class discussion. The authors do not intend to
demonstrate either effective or ineffective handling of management situations.
Copyright © 2007 Northeastern University, College of Business Administration
Page 2
*
Table 1
Arla Foods: Middle East Key Facts
Annual Revenues
Net Income
Danish Expatriate Workers
Non-Danish Workers1
Average Annual Growth
$550 million
$80 million
20
1200
10-12%
Other overseas markets included Argentina and Brazil, where Arla produced cheese
and whey products. Arla also exported significant qualities of Danish cheese to Japan,
and milk powder to less developed countries in Asia and Latin America. In North
America, Arla cheeses were produced under a licensing agreement.
THE MUHAMMAD CARTOONS CRISIS
Terrorism and Self-Censorship
In 2004, controversial Dutch filmmaker Theo van Gogh produced a short film on
Islam titled “Submission.”2 The 10 minute documentary, written by Dutch Member of
Parliament Hirsi Ali, featured the stories of four abused Arab women. It intentionally
provoked some Muslims by showing a woman dressed in a semi-transparent burqa,
under which verses from the Qur’an were projected on her skin.
After the film was shown on Dutch public television on August 29, 2004, van Gogh
and Ali began to receive death threats. Then, on November 2, 2004 Van Gogh was
murdered while riding his bicycle in downtown Amsterdam.3 The assailant attached a
note to his body calling for Jihad against “infidel” America and Europe and
threatening a similar fate for Ali.
Van Gogh’s murder created broad awareness of his film, which was subsequently
rebroadcast on Italian and Danish public television and widely distributed on the
Internet. In Denmark, tension was already high following another well publicized
incident in which a lecturer at the University of Copenhagen was assaulted by five
Muslim youths for reading the Qur’an to non-Muslims.4 The killing of Van Gogh only
served to heighten the cultural distance between Muslim immigrants and native born
Danes. Although most Europeans decried the violence of radical Islamists, many
publishers, authors, and artists were reluctant to participate in projects that could
offend Muslims and invite the wrath of terrorists.
1
Most of Arla’s non-Danish staff was comprised of Muslim migrant workers from less developed countries. Many
entered Saudi Arabia as Hajj pilgrims and remained in the country at the end of their pilgrimage.
2
Submission is the English translation of the word Islam.
3
Gunman kills Dutch film director, BBC News, November 2, 2004
4
Overfaldet efter Koran-læsning, TV 2 (Denmark), October 9, 2004.
Page 3
*
Fear and Self-Censorship
In the summer of 2005, Danish author Kåre Bluitgen decided to write a children’s
book on the life of the Prophet Muhammad. He had hoped that such a book would
help Danish children learn the story of Islam and thereby bridge the growing gap
between Danes and Muslim immigrants. Yet the illustrators who collaborated with
Bluitgen on other books feared reprisals from extremists and, therefore, refused to
participate.5 They understood, perhaps better than Bluitgen, that graphical depictions
of Muhammad were considered blasphemous by many Muslims.6
Bluitgen eventually found an artist willing to illustrate his book anonymously.
However, when the culture editor of the Danish newspaper Jyllands-Posten heard
Bluitgen’s story, he was incensed. “This was the culmination of a series of disturbing
instances of self-censorship,” Flemming Rose later wrote.
Three people turned down the job for fear of consequences. The person
who finally accepted insisted on anonymity, which in my book is a
form of self-censorship. European translators of a critical book about
Islam also did not want their names to appear on the book cover beside
the name of the author, a Somalia-born Dutch politician who has
herself been in hiding.7
Danish Cartoons: Muhammad As You See Him
To counter what he saw as a move against free speech, Rose invited 40 artists to
submit drawings of “Muhammad, as you see him.” Twelve artists responded,
including three members of the Jyllands-Posten staff. When the cartoons first appeared
on September 30, 2005, Rose wrote in the accompanying article,
The modern, secular society is rejected by some Muslims. They
demand a special position, insisting on special consideration of their
own religious feelings. It is incompatible with contemporary
democracy and freedom of speech, where you must be ready to put up
with insults, mockery and ridicule… We are on our way to a slippery
slope where no-one can tell how the self-censorship will end. That is
why Jyllands-Posten has invited members of the Danish editorial
cartoonists union to draw Muhammad as they see him.8
5
Allah und der Humor, Die Zeit, January 2, 2006
Not all Muslims agree on the interpretation of Muslim scholars who have issued fatwas against images of the
prophet Muhammad. Some argue that Islam has a centuries old tradition of paintings of Muhammad and other
religious figures. The more famous of these continue to be displayed in palaces and museums in various Muslim
countries, including Iran. Source: Bonfire of the Pieties: Islam prohibits neither images of Muhammad nor jokes about
religion, The Wall Street Journal, February 8, 2006
7 The Dutch politician refers to Hirsi Ali, who collaborated with Theo Van Gogh on the film Submission. Why I
Published Those Cartoons, Jyllands-Posten, February 19, 2006
8
Translated from Muhammeds ansigt, Jyllands-Posten, September 29, 2005
6
Page 4
*
Muslim Reaction
Two weeks after the publication of the 12 cartoons, Danish imams organized a protest
in downtown Copenhagen. More than 3,000 Danish Muslim immigrants gathered to
show their disapproval of the cartoons. The most offensive cartoon, in their opinion,
featured Muhammad wearing a turban filled with explosives. On the turban was
written the Shahādah (Islamic creed),9 while a lit fuse emerged from the back of his
head.
Another image featured a schoolboy named Muhammad scribbling a message in
Farsi10 on a blackboard. “The editorial team of Jyllands-Posten is a bunch of
reactionary provocateurs,” it states. Ironically, artist Lars Refn was targeted by both
sides in the ensuing quarrel. He was the first artist to receive death threats, while at the
same time secular free speech advocates accused him of cowardice for not drawing the
prophet. In apparent defense of Refn’s decision to not draw the prophet, Rose
explained in an editorial,
I wrote to members of the association of Danish cartoonists asking
them ‘to draw Muhammad as you see him.’ We certainly did not ask
them to make fun of the prophet.11
A few days later, eleven ambassadors from Islamic countries sought a meeting with
Danish Prime Minister Anders Rasmussen to demand government action against the
cartoons. The Prime Minister refused, noting that such a meeting would violate the
principles of Danish democracy. “As prime minister I have no tool whatsoever to take
actions against the media, and I don’t want that kind of tool,” he replied.12
Cartoons Circulated Abroad
Meanwhile, Danish imam Abu Laban decided to take matters into his own hands. He
sent a Muslim delegation on a tour of Egypt, Lebanon, and Syria, where dignitaries,
religious leaders, and journalists were shown the cartoons. The greatest stir, however,
was not caused by the Danish cartoons, but by three additional images that were far
more graphic and offensive than those published by the newspaper.13 While the origin
of the three additional images was unknown, within days they were circulated on
Islamic websites and chat rooms, causing outrage among Muslims who thought they
had been published in Danish newspapers.14
9
The Shahādah is the declaration of belief in the oneness of God and in Muhammad as his messenger. Recitation of
the Shahādah is considered one of the Five Pillars of Islam by Sunni Muslims. In English the Shahādah reads:
“There is no god but God and Muhammad is his messenger.”
10
Farsi is a Persian language spoken in Iran, Afghanistan, and several other Middle Eastern countries.
11
Why I Published Those Cartoons, Jyllands-Posten, February 19, 2006
12
The Danish Cartoon Crisis: The Import and Impact of Public Diplomacy, USC Center on Public Diplomacy, April 5,
2006
13
Anatomy of a Global Crisis, The Sunday Herald (Scotland), February 12, 2006
14
Child’s tale led to clash of cultures, The Guardian Unlimited, February 4, 2006
Page 5
*
In December, the cartoons were circulated among heads of state at a Summit of the
Organization of the Islamic Conference (OIC) in Saudi Arabia. The OIC later issued a
statement calling on the Prime Minister of Denmark to apologize. When he refused,
the OIC’s secretary general for Islamic education and culture urged the organization’s
51 member states to boycott Danish products until they received an apology.15 Since
the entire Middle East accounted for less than one percent of Denmark’s exports,
Danes showed little concern over the threat of a boycott. Moreover, a poll conducted
in late January by the Epinion Research Institute found that 79 percent of Danes
supported the Prime Minister’s decision to not apologize for the cartoons.16
Outside of Denmark, the OIC found wider support. United Nations human-rights
commissioner Louise Arbour proclaimed her “alarm” at the “unacceptable disregard
for the beliefs of others.” Both the Council of Europe and the Arab League condemned
the cartoons.17
European Media Reprint Cartoons
When the OIC called on Muslim countries to boycott Danish products (see “Arla and
the OIC Boycott” below), many Europeans saw it as an attack on free speech. In
protest, newspapers and magazines across Europe began reprinting the cartoons.
Between the beginning of January and early February, the original cartoons appeared
in more than 50 European newspapers and magazines. Prominent periodicals, such as
France’s Le Monde and Germany’s Die Welt, displayed some of the images on their
front pages.
In explaining his reason for reprinting the cartoons, the editor of Le Monde stated, “A
Muslim may well be shocked by a picture of Mohammed, especially an ill-intentioned
one. But a democracy cannot start policing people’s opinions, except by trampling the
rights of man underfoot.”18 Likewise, the Economist, which did not reprint the
cartoons, stated that European newspapers had a “responsibility” to show “solidarity”
with Jyllands-Posten.
In the Netherlands two years ago a film maker was murdered for daring
to criticize Islam. Danish journalists have received death threats. In a
climate in which political correctness has morphed into fear of physical
attack, showing solidarity may well be the responsible thing for a free
press to do. And the decision, of course, must lie with the press, not
governments.19
15
Muslim organization calls for boycott of Denmark, The Copenhagen Post, December 28, 2006
OIC Demands Unqualified Danish Apology, Arab News, January 29, 2006
Prophetic insults, The Economist, January 5, 2006
18
France’s Le Monde Publishes Front-Page Cartoon Of Mohammed, Agence France-Presse (AFP), February 2,
2006
19
Cartoon wars, The Economist, February 9, 2006
16
17
Page 6
*
For many Muslims, the reprinting of the cartoons was seen as further provocation.
Some protested peacefully, while others reacted with violence. In some countries,
buildings were set ablaze and shops selling European goods were vandalized. In
Lebanon and Syria, the Danish and Norwegian embassies were firebombed.
Elsewhere, clashes with police and security forces in Afghanistan, Pakistan, and other
countries left as many as 300 people dead (see Exhibit 1). In northern Nigeria,
Muslims went on a rampage, burning churches, shops, and cars belonging to the
Christian minority. The violence left scores of dead and as many as 10,000 homeless.20
ARLA AND THE OIC BOYCOTT
At first, Arla viewed the cartoon crisis more as a security concern than an economic
one. “It will be a serious blow to us if the situation becomes so grave that we are
forced to withdraw our Danish workers,” explained Arla Executive Director Finn
Hansen.
Our tremendous success in Saudi Arabia is thanks in large part to the
fact that over the past 20 years, we’ve kept a number of our most
talented managers constantly stationed in the country. It will hurt our
credibility to pull out our Danish workers, and in the long term, it will
impact sales. But I don’t think things will get that bad. The Irish and
Dutch dairies we compete with in Saudi Arabia are keeping their
workers down there for now as well. Consumers in Saudi Arabia will
continue to buy food, regardless of the terror threat. So I don’t think our
customer base will disappear.21
However, within a few weeks it became clear than Arla had underestimated the threat
to its business. In Saudi Arabia, its products were featured in news stories about the
boycott campaign and religious leaders across the country called on worshipers to
avoid Danish goods. By the end of January 2006, Danish products were removed from
store shelves, replaced with signs stating “Danish products were here.” Egypt, Kuwait,
Qatar, Bahrain, and the United Arab Emirates soon joined the boycott (see Exhibit 2
for a timeline of key events).
The boycott also aroused the anger of many local Muslims, some of whom threatened
and harassed Arla employees as they went to and from work. In two separate
incidents, workers were physically assaulted as they removed banned Arla products
from store shelves. As a result, Arla provided employees with additional security
escorts.
In early February, Iran became the first country to officially sever all economic ties
with Denmark.22 It made a further symbolic gesture by renaming domestically
20
Although the latest hostility was sparked by the cartoon crisis, ethnic violence has been part of an ongoing conflict
that has claimed 10,000 lives in Nigeria since 1999. Nigerian religious riots continue, BBC News, February 24, 2006
21
Terror threaten dairy exports, The Copenhagen Post, January 7, 2006
22
EU warns Iran over boycott of Danish goods, China Daily, February 8, 2006
Page 7
*
produced Danish pastries as “Roses of the Prophet Muhammad.”23 “The Commerce
Ministry will not allow Danish brands or products which have been registered in
Denmark to clear customs,” announced Iranian Commerce Minister Massoud MirKazemi.
Iranian importers, including state-affiliated organs and companies, have
three months to designate substitute products for Danish goods and
then we will enforce the law. All on-going negotiations or contracts
with Denmark which are pending will also suspended, and all signed
contracts will be reviewed. The exchange of delegations between the
two countries will be suspended until further notice.24
The rapid deterioration in relations between Denmark and the Middle East stunned
Arla Foods executives. Although they had been monitoring the situation since the
cartoons were first published, the boycott “was hard to foresee,” Nielsen explained.
Some of our customers are extremely influential and powerful people.
One of the retailers owns a large chain of grocery stores and he is
extremely religious. Everyone else looks to see how he will react…
We were in constant contact with our customers, and they never
suggested that they were going to boycott our products. But they had to
react when the religious community told them to. Even after the
boycott was announced, retailers said to us “We want to do business
with you, but we can’t.”
The immediate impact of the boycott was extensive. “Our business has been
completely undermined,” Hansen lamented. “Our products have been taken off the
shelves in 50,000 stores. Without a quick solution, we will lose our business in the
Middle East.”25 Meanwhile, Arla was losing sales worth $1.5 million per day, or about
eight percent of the company’s worldwide revenues.26
Other companies preemptively distanced themselves from the cartoons. Switzerlandbased Nestlé bought front-page advertisements in Arab newspapers to explain that its
powdered milk was “neither produced in nor imported from Denmark.” French
supermarket giant Carrefour went further, removing Danish products from store
shelves with a notice declaring “solidarity with the Islamic community.” Other signs
read “Carrefour doesn’t carry Danish products.”27
European Criticism: “The Right to Offend”
23
Iran targets Danish pastries, Aljazeera.net, February 17, 2006
Iran bans import of Danish products, Islamic Republic News Agency (Iran), February 6, 2006
Muslim protest spreads to Danish butter, The Sunday Times, February 3, 2006
26
Danish Companies Endure Snub by Muslim Consumers, The New York Times, February 27, 2006
27
Carrefour JV with MAF in Egypt halts sale of Danish products, AFX News Limited, February 3, 2006
24
25
Page 8
*
In Europe, some viewed attempts by European companies to show “solidarity” with
Muslim protesters as cowardice. At a Berlin rally, Hirsi Ali, who rarely made public
appearances in the face of the numerous threats against her life, expressed outrage. “I
am here to defend the right to offend,” she proclaimed.
Shame on those European companies in the Middle East that advertised
“we are not Danish” or “we don’t sell Danish products”. This is
cowardice. Nestlé chocolates will never taste the same after this, will
they? The EU member states should compensate Danish companies for
the d …
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