Johnson and Johnson and Coca-Cola Crisis (Research Paper Sample)

The crisis management of (Johnson & Johnson's 1982) and (Coca-Cola 1999) crisis
Student Name:
Course:
Instructor:
Institution:
Date:
Abstract
On 30th September 1982, the Johnson & Johnson CEO received news that seven people had died from consumption of cyanide laced capsules of Tylenol in Chicago. The news spread vast through the media causing national wide panic. The company launched investigations to find out the causes of the deaths and ascertain the association of their product to the deaths. The outcome proved that someone had maliciously replace the Tylenol extra-strength capsules with cyanide extra strength in their packages and sold them to the consumer to fault the Johnson & Johns.
The company had a hard time trying to explain itself to the public and convince the m to continue trusting their products. The strategy worked but lost many revenues. Even with such a scenario the company did not prepare for the eventuality of another such attack. In 1986, a similar attack took place: the company was more prepared and was able to deal with the problem. This redefined the rules of crisis management and scholars have strengthened their thesis on this fact.
A different scenario in Europe put Coca-Cola in the same spot making it lose market control and its products and rights being banned from markets. Unlike the Johnson and Johnson, they had poor public relations, which would cost more to re-enter the market.
The scenarios in these two companies have given crisis control scholars two different points of view and allowed them to analyze the approaches in a manner that determines which method is most appropriate in what kind of scenario.
Every company must have crisis management embedded in their managerial strategy. They must learn to study the market and determine the threats, as they occur in order to do away with them as soon as they pop up to avoid losing business and maintain the brand name (Smits 2007).
Introduction
Following the large-scale industrial and environmental problems that arose in the 1980s, crisis management was introduced. The aim was to assess damages that occur in case of a disaster and create mechanisms to deal with them while maintaining the company financial status as it were or as close as possible to its former position.
During this period, an industrial crisis hit the Johnson & Johnson Company, which dealt in pharmaceuticals. The first crisis had repurcations on how it was handled but a similar crisis in 1986 redefined the company’s position and crisis management. On the other end in 1999, coca-cola was hit by the same kind of crisis but the slowness in response deteriorated their position leading to major losses in the European region. This paper will focus on these two crises to bring out the key points that determine the effectiveness of a response to a crisis and the failures associated with poor handling of the scenarios.
Critical Analysis
Case 1: Johnson & Johnson
By 1982, the company commanded about 35% of U.S counters analgesic market. This translated to about 15% of the total national revenues in over the counter drugs. By far it had the controlling power and thus acted as the price giver. The results of cyanide incorporation in the Tylenol were catastrophic. Seven people died in the U.S resulting in a market wide panic and reduction in consumption of their products.
As can be imagined, the information turned the population against the drug. For a large period, their drugs lost value, the company shares too went down almost to a recess. The events must have taught the company a major lesson. Following the end of this crisis that was somewhat poorly managed, another similar crisis faced the company in 1986.
The company was not ready to lose any more value in stock. They made a quick response to the crisis, recalling their products both in the home market and in the international. This move was consumer friendly and would go a long way in its future. Though the company had to spend over one billion dollars in correcting this mistake, they were awarded the most consumer responsive company. This achievement swayed the population to trust their products. The consumer base was assured that the company was readily responding to their call in case of a crisis. Most consumers of painkillers shifted their loyalty from other brands like Perrier to Johnson &Johnson.
This move by Johnson was a calculated one. The risks were too high, Face criminal sue that would have cost more billions and still lose the client base or loss the product and maintain the market for future production. The move reduced their liability. This is because any more deaths would have resulted in the company’s products being burnt from many of the markets. This crisis would not have been controlled at that level.
The quick response created trust between the manufacturer and the consumer. By observing the consumer characteristic of wanting to consume nothing but the best, the firm understood that the consumer would shift to another product unless there was a compensating factor. The recall was smart as the consumer felt cared for and thus convinced to remain loyal (Curtin, 2004).
The company’s management forewent he short term goals for the long ter. By losing the billion dollars in recalls, the restructured the company strategy. Their ability to achieve the long-term goals at that moment entirely depended on how they would handle the situation. By managing o silence the problem, of Corse at a cost, assured the customers to continue enjoying their products. Since these were the same target consumers for their longer goals, they secured their returns in the long run (Ferrell, 2010)
The analytical point of view is that the move was a game changer. It had not been tried before and thus it was problematic since any backfiring would have cost the company more resources. The outcome was unpredictable and open to market forces. For the crisis manager to undertake this method, he must have studied his market to know which move to play.
Case two: coca-cola 1999 crisis
Coca-cola is a globalised company with its financial assets estimated at 160 billion dollars. It controls most of the world soft drink market. In Europe allow its market share is about 60%. This means it has the majority market share and thus a price setter. Given that Europe acts as one trade block in most of its economic decisions, any crisis that hits a single nation could be translated into the entire 15 nation in the union. A company like coca-cola must thus be careful in its response to crisis so as to ensure it remains at the same controlling position and retain its profits constant (Childs, & Childs, 2008).Unfortunately this was not the case in 1999. While it tried to respond to the issue of drink contamination in its own approach, the company was unable to convince the nations that it had everything under control.
The managers were faced by a contamination in imported drinks. Countries like German were unhappy with the situation and asked the company to be responsive. The company sent crisis managers to curb the spread of the disaster as well as return the company to its former position. Unlike Johnson & Johnson, they did not recall the products instead they pushed to oversee that the product were sold sitting that the drinks were not contaminated and thus could not affect the health of the consumers.
Due to this, some of the loyal consumers remained loyal to the brand but the nations and consumer protection groups pushed for the withdrawal of the products from the market. The result was some nations banning the use of the products in some countries, for instance, Belgium manufactured products were banned from German markets. Spain and Italy followed suit. The situation was so escalated that the vice president of Coca-Cola was forced to leave his office in Atlanta for Brussels to join hands in curbing the market degradation (Johnson 2007)
Implication
Loss of market control- Coca-Cola lost market as his products were banned from these major markets. Considering that it controls 60% of the European soft drinks market, the company lost billions in dollars, the consumers lost their trust in their products.
Investment loss- while the products were not recalled, the company was unable to sell the products. This means they lost both the short-term invest meant, the long term as the products remained in stall, production slowed, and the future of sales was uncertain.
Product recall- The Company was finally recalled from the market following the push by the Belgian Health Ministry. This was a result of two unrelated matters, one consumer complained of irregular taste and odor in their products and bottles and secondly, one hundred people became ill following consumption of the drinks. The estimated recalled bottles and cans amounted to fifteen million.
Decrease in consumer loyalty- Coca-Cola had existed for over one hundred and thirteen before this event. They had gained massive consumer loyalty. Most consumers regarded their products to have the highest quality in soft drink manufacturing. Following this, the consumer behavior changed. From June 1999, the European market for Coca-Cola product reduced by almost half. This had to force the company to diversify and look for new market n order to maintain their profits. This added increased cost in market venture and advertisement.
Methodology
Following the identification of the crisis and an overview of the course of action the two study groups took, this paper will make a chronological review of the management of the crisis, the outcomes both in short and long-term periods in an attempt to see the effect of their approaches. The paper will also define a working plan that will compare the approaches to studied theories of crisis management ...