A rise in manufacturing automation and product complexity has created a product crisis prone environment for businesses (Weinberger & Romeo, 1989). A product crisis occurs when a company faces negative publicity due to a product defect/failure (Laufer & Coombs, 2006). In order to manage the risk of lost revenue and market share, companies need to develop appropriate responses. This work examines research journals that focused on product crisis case studies, response strategies and the response effectiveness. A successful product crisis response is Tylenol as they combated the negative effects of a product crisis. Tylenol responded to a product recall by re-engineering their packaging and increasing sales promotion. As a result, Tylenol effectively
regained their lost market share within two years, thus illustrating the importance of an effective response (Weinberger & Romeo, 1989). A company’s response should reflect their reputation, market segment, the nature of the product and the blame acknowledgment. Reputable companies require a low level response, as they are less likely to be blamed for the defect (Laufer & Coombs, 2006). Typical company responses are alterations to pricing or advertising levels. An increase is advertising has the ability to increase sales following a product crisis (Cleeren, 2015). This is a popular response amongst brand managers as they are able to recover revenue that was lost over the product recall period. However, response decisions have limited effectiveness due to price and advertising elasticity levels. An analysis of scanner data following an ETA peanut butter recall found that ETA’s price elasticity had decreased. Therefore, an attempt to increase ETA revenue by increasing prices would have been unsuccessful (Van Heerde, Helsen, & Dekimpe, 2007). In summary, a company should consider internal and external factors when developing a response to minimize the effects of a product harm crisis.
Economic responsibility requires a company to remain profitable in order to appease stakeholders and risk management and sound business practices play a large role in acceptable economic responsibility. Johnson and Johnson may have tried too hard to increase its profits, which resulted in mediocre production rather than timely inspection to ensure the products are safe for distribution. A halt in production may decrease profits temporarily, but in the long run, products distributed will be safer and revenue would resume to a normal amount. Instead, trying to be profitable and avoid loss in the short run made Johnson and Johnson less profitable in the long run. Failure in legal responsibility may have caused Johnson and Johnson to fail. The Food and Drug Administration (FDA) regulates drug distribution and has several criteria to pass in order to allow Johnson and Johnson to administer its premier medicines such as Tylenol. Not adhering to those laws allowed the distribution of unsafe medicines, subsequently leading to recalls and damaging the company financially. Johnson and Johnson tried covering up prior recalls of Motrin by hiring contractors to buy every packet (Kimes). Ethical responsibility requires companies do not perform questionable practices such as that described. The secret recall bought attention to Johnson and Johnson that it makes shoddy products out of the public’s view, which is wrong on many ethical bases. In the recent occurrence with Tylenol, Johnson and Johnson slacked on its labeling and tarnished the company’s
...he company has had to recall a number of products that have defected or injured customers in recent years.
The Johnson & Johnson Corporation has conducted business for over 60 years utilizing their credo in implementing their obligations to all of the stakeholders across the globe. Mr. Johnson attempted to share his philosophy, but it took him an additional 8 years to publicize his corporate credo and management to put it into action. “He believed that by putting the customer first the business would be well served, and it was” (Hartman et al., 2014, p. 165). The Johnson & Johnson’s reputation and credo was tested during the Tylenol crisis when a product was use...
What we conclude from our research that there’s no single organization free from facing complications and difficulties. Each and every organization face few or many strategic problems. Johnson & Johnson had a problem with one of their products, and they were smart in handling that problem to keep the company on the safe side without letting it effect it negatively. It is very important to act quickly to fix the problem before many consumers notice.
For instance, Primark 's products offer customers clothing as a base product, of witch actual benefits are being to be cheap and trendy, and they may have some return policy as augmented benefit in case of defects. Each product may be realised following a new product development process to improve its success rate (Harris and Schaefer, 2015, p.43-47).
In 1982 the company Johnson & Johnson, recalled 31 million bottles of Tylenol from store shelves after eight people in the United States died from cyanide-laced capsules. The recall cost Johnson & Johnson $240 million dollars and cut its profit on five billion dollars in revenue in 1982 by almost 50 percent. Although the tampering was no fault towards the company, Johnson & Johnson decided to act before it had complete information on the entirety of the unfortunate situation. As a result, the Tylenol product containers were redesigned and new tamperproof packaging was introduced. The company’s immediate response to the problem saved the Tylenol brand and won the company admiring reviews for their immediate action and their ethical and moral prowess. The move turned out to be a huge marketing coup for the company of which resulted in significant goodwill from customers (Seglin, 2000). Johnson & Johnson’s ethical practice proved to be a great guide, displaying the imperative of being both socially and ethically accountable for the lives of others.
“The company introduced the first commercial first aid kits in 1888, and manufactured first mass produced sanitary protection products for women in 1896-1897” (MarketLine). In 1921, Johnson & Johnson invented Band-Aid adhesive bandages. In 1944, the company went public and its shares were listed on the New York Stock Exchange (MarketLine). Johnson & Johnson continued to grow by acquiring a number of biopharmaceutical and medical devices companies between 2001 and 2007. “In 2010, the FDA sent a warning letter to McNeil Consumer Healthcare, a J&J company, regarding significant violations of the current good manufacturing practice regulations at its manufacturing facility in Puerto Rico. Later in 2010, McNeil suspended operations at the Fort Washington plant in connection with the recall of infants' and children's liquid OTC products manufactured there” (MarketLine).In the US, Caribbean, and Brazil, McNeil initiated voluntary recalls at wholesale level of Tylenol, and certain lots of Benadryl, Sudafed PE...
McTigue Pierce, L. (2005, July). Pfizer: Growth amid adversity. Food & Drug Packaging, 69, p. 60.
The Consumer and Industrial Products, Inc a company where their headquarters is based in the United States , also doing business internationally with facilities in Europe, Asia and South America. They are a manufacturing company what produced well known products to individuals and industries. This company is experiencing a great deal of trouble with their internal Payable Audit System (PAS) and how it would purchase goods; receive goods and pays for them. They are challenged with the redundancy and the lack of productivity to their system. They were finding ways to lower costs and eliminating steps in how these processes are getting accomplished. They decided that they needed to change their system and the way they did things at their business. There are some people, their roles and departments that will be closely involved with the process of this project. Some of these important roles will come from Ted Anderson director of disbursements, Peter Shaw the user project manager and Linda Watkins project director for the Payable Audit System (PAS). In addition, the Steering Group and the IS management department will have some important roles to the project too. Finally, there will be several major problems with the development of the project and how the one person would deal with these issues.
Meditech is an organization that produces endoscopic surgical instruments. The company manufactures and market low cost endoscopy surgical equipment to hospitals and independent surgeons. New products were critical to Meditech’s strategy of product development, but these product needed to be introduced flawlessly in order to protect Meditech’s reputation and sales of their other products. Three years after Meditech spun off from its parent company, the Largo Healtcare Company. Meditech captured a majority of their market by competing aggressively, developing new, innovative instruments and selling them through a first-class selling force, causing a success in a short period of time. In the past, the organization was experiencing a good customer service, however despite the success, customer dissatisfaction has been growing. Due to the fact that the delivery of surgical equipment on time is very important, this has become a big problem for the organization. Some of Meditech’s customers have been waiting for more than six weeks for products to be delivered, this is not acceptable so Meditech has to come up with a solution.
There is an increasing pressure within pharmaceutical markets to reduce prices in line with medical budgets, as well as maintaining patent expirations. Being a global brand means disturbance in the operations when the market fluctuates. There is an internal weakness in the pharmaceutical industry, which includes theft and counterfeiting of drugs, and therefore is a weakness of Johnson & Johnson. While Johnson & Johnson has these specified weaknesses they deal with, there are even more opportunities which gives them an advantage for strengthening their position in the market. They already have the strength of meeting a broader range of customer needs with their products falling under three categories. Expiring patents on brand name drugs lead to an increase in the sales of generic drugs, Johnson & Johnson could capitalize upon this opportunity. With diagnostic markets growing, this positions the company in a good place as well as new medical therapies and findings that align with some of the company’s primary capabilities. Threats the company faces is with product recalls, extreme competition in pharmaceuticals that results usually in the first to enter is generally where success is determined. With technology developments, biotech concepts might possibly move the traditional pharmaceutical methods out of the
State the purpose of the paper and an overview of what will be covered in the introduction. Tylenol's 1982 ordeal has become a classic example of successful crisis management. Johnson & Johnson faced a major crisis when their leading pain-killer medicine, extra-strength Tylenol, was found to have caused the fatalities of seven people in Chicago, Illinois. It was reported that unknown suspects took the product off store shelves, tampered it with deadly cyanide and returned it to the shelves. As a result, seven people died and consumers lost confidence and panicked over hearing the news of the incident.
..., Crisis communication failures: The BP Case Study, International Journal of Advances in Management and Economics, Issue 2, March-April 2013, accessed 28 March 2014,
In this world, creating a new product, as good as it may be, is not enough. The success of any product, in this day and age, depends grandly on the way it is presented to the market. Marketing is responsible in assuring a successful launch of a product, new or reinvented, and to assure its sustainability in this competitive world. For those reasons, billions of dollars are spent each year on tools and strategies to improve marketing research and predict the success of a product: many marketing firms form focus groups, do trials and conduct many tests just to end up with a fairly high percentage of failures.
According to David Abrahams, senior vice-president of Marsh Risk Consulting Practice and an expert in brand risk, there is often a demonstrable link between the way in which a crisis is handled by a company and what happens to that business and its associated brand. 'The way in which any crisis is handled becomes a visible test of management capability,' he says. 'If that crisis arises from a fundamental breach of trust or performance, the compound effect of the bad handling can be devastating.'