The Impact of Social Media Crisis on Business: BMW Ice Cream Incident as an Example

Abstract

On 20 April 2023, BMW was accused of suspected anti-Chinese discrimination at Shanghai international Automobile Industry Exhibition show, mainly because the staff at BMW booth appeared to have deliberately ignored requests from Chinese people to receive free ice-cream. The aim of this paper is to investigate the effect of social media crisis on the business, by taking this BMW ice cream incident as an example. The main research methodology in this article is to use ARIMA model to predict the trend of the BMW share price excluding the effect of this incident based on stock return analysis and then compare it to the real data. The findings from this research provide evidence that predicted stock price are close to the real one, which shows that the possible short-term negative impact of BMWs reputation may appear as a result of this incident, but due to BMWs quality and product status, the negative performance will still not exist for a long-term. The main conclusion drawn from this study is social media scandal may not have lasting impact on business. Different from previous literature, this study contributes on the ARIMA analysis on the certain companys data to derive the relationship between the stock price and the social media crisis. Recommendations include: Improving social media regulation for policy makers; Establishing dedicated teams for dealing with social media information; Changing investment strategy cautiously based on social media messages.