Crisis Management can be defined as “the identification of threats to an organization and its stakeholders, and the methods used by the organization to deal with these threats.” (Investopedia, 2018).
In October of 1982, Johnson and Johnson came under tremendous scrutiny, as it was reported that seven people in Chicago had died after taking their extra-strength painkiller Tylenol. At this point in time, Tylenol was the USA’s number one painkiller medicine. The report did not mention if the deaths were at the fault of Johnson and Johnson, of if their deaths were because of tampering after the manufacturing and distribution. Tylenol had a huge market share of 37 percent before this crisis emerged. Immediately after the deaths news broke of the travesty, and this resulted in Johnson and Johnsons market share declining to a meagre seven percent. After an investigation, it was confirmed that the tragic deaths were due to an external party poisoning the Tylenol capsules by adding 65 milligrams of deadly cyanide into the Tylenol capsules.
This report will attempt to explain the context behind the Johnson and Johnson case study, as well as analyse the approaches employed by Johnson and Johnson in order to gain an understanding o how and why they were so effective.
Literature Review:
Findings and Conclusions:
Once Tylenol was removed from the market, Johnson and Johnson needed to formulate a plan to restore their product to its former success. There is no quick-fix in this case study, due to the reputation of the brand and the severity of the harm caused. However, Johnson and Johnson employed some effective managerial strategies to negate the damage caused.
Formulate crisis strategy team and initial response:
Johnson and Johnson were alerted to the crisis after a news reporter called asking for comments of the death and their relations to them. Johnson & Johnson’s first response was to form a crisis strategy committee. The committee decided that the safety of their public was their primary concern. Once this was achieved their second task was saving the product. They began their response by alerting consumers throughout the country, using media outlets, to not consume any Tylenol until updated in the future. Johnson & Johnson then conducted a nationwide recall of all Tylenol related products, stopped production and cancelled advertising after finding two more contaminated bottles. The cost of this recall came to around 31 million bottles, which resulted in a loss of over $100 million dollars (Iml.jou.ufl.edu, 2019). Their decision to remove and withdraw every Tylenol product, they proved that the consumer safety was their upmost concern. The likelihood of finding more Cyanide-laced Tylenol capsules was obviously low, as it was more of a regional issue but nevertheless they still did it. This helped them to be viewed by the public as the victim rather than the culprit, which made improvements with their relations to a key stakeholder.
Communications with stakeholders:
As previously mentioned, Johnson and Johnson were late to find out about the Tylenol, and as such the media where quick to point the finger at Johnson and Johnson. They made front page news throughout the country, with media outlets using titles such as: Time Magazine, 'Poison Madness in the Midwest,' and The Washington Post, 'Tylenol, Killer or Cure”. Appendices A1 and A2 are a further illustration of this. This created a negative opinion and was pushed out to millions of consumers. Johnson had to act on this relations breakdown and so they made use of as many media outlets as possible to initially alert consumers on the current danger of Tylenol. This would have cost a hefty sum considering it reached nationwide press, but chairman James Burke and the committee thought it essential to be open to the public. They also opened a phoneline, so they could directly address the concerns of customers giving consumers a more personal response to their own issues.
Remediation:
Remediation can be defined as ‘the process of improving or correcting a situation’ (Dictionary.cambridge.org, 2019). Johnson and Johnson assisted the affected families financially and also offered counselling. This promoted positive feelings amongst the public, as it was clear that even though Johnson and Johnson were not responsible for the deaths, they still claimed full responsibility and were committed to righting all wrongs.
Immediate update of product safety:
Tylenol products were re-introduced to the market after some essential changes were made to the packaging. After the investigation confirmed the deaths were due to external tampering, Johnson and Johnson introduced a special triple-seal tamper resistant packaging that was installed on the product, to give consumers more confidence in purchasing their products. In addition to this, they began promoting the use of caplets, as opposed to capsules, which they believed to be more resistant to tampering.
Motivating their market:
Johnson and Johnson suffered a heavy loss in revenue due to the crisis and needed a way to revive their attractiveness in the eyes of the consumer. In order to achieve this, they offered a coupon of $2.50 off of their product, which could be attained through newspapers and calling a toll-free phone number (Mitchell 1989). Furthermore, they introduced a price scheme for a few of the affected products, offering up to 25% off the product. (Mitchell 1989)
Recommendations and implementation:
Johnson and Johnson handled the case very effectively; after suffering early losses in market share and revenue and then losing more to control and rectify the crisis, their quick actions helped the company recover 70% of its previous market share (Mallen Baker's Respectful Business Blog, 2008). Furthermore, the lengths they took to rectify the situation, compensate those affected and prevent future crises of a similar nature happening again has to be commended. However, you could argue that the company should have had a positive relationship with the media before the crisis happened. Johnson and Johnson did not actively participate in media coverage, excluding advertising and the likes. As previously mentioned, they found out about the crisis through a news reporter asking them for a response. If the company had a positive relationship with the press they may have been able to keep the crisis from going national if they were notified early, meaning they would have been able to act earlier and identify that the poisoned bottles were only in the Chicago area. Limiting it to this would mean that a national recall would not have been necessary, thus negating the losses.