Reference no: EM133394523

Case Study: The California Wood Harvesting Company has been clear-cutting for over 50 years in Northern California. The company has always complied with governmental regulations and actively replants the areas where it logs. However, more than 20 years ago various environmental groups began to criticize the company's policy of clear-cutting, a procedure wherein all the trees in an area are cut, leaving a patchwork pattern on the mountainsides. Even though the company replants these areas, the environment groups feel that the practice is destructive to the forest. As the years go by, they have become more vocal, larger in size, supported by growing numbers of sympathetic citizens, and more financially viable. As a result, they have created considerable negative press for the company.

The company used to underplay and ignore these concerns based on the fact that it provides logging jobs and economically supports the logging communities. Recently, however, the company has been very concerned with its public image. A company study showed that the image of the company and its practices has become increasingly more negative with Northern Californians in particular and with the nation as a whole. There is some indication that this negative press has reduced sales, but an even larger indication that this negative public sentiment may result in additional government regulation that would be extremely costly to the company. The company is very concerned about this issue, given that clear-cutting also has been named as a contributing factor in the ongoing disappearance of several bird and animal species.

Question: In order to improve the company's public image, the CEO comes up with the following strategy: Some land that is not profitable for the company will be donated to the government as wilderness areas. This contribution to the environment will be widely promoted through publicity and through paid institutional ads.