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Haisum Bhatti | 0812155 | BS-SE VI

Johnson & Johnson


and Tylenol
A case study of how to deal with crisis

Haisum
4/7/2011
Haisum Bhatti | 0812155 | BS-SE VI 1
Johnson & Johnson and Tylenol
http://haisum.info

Contents
INTRODUCTION .......................................................................................................................... 2
Analysis ........................................................................................................................................ 3
Problem Statement ................................................................................................................... 3
Questions .................................................................................................................................. 3
Study Objectives ....................................................................................................................... 3
Methodology ............................................................................................................................. 3
Background .................................................................................................................................. 4
The Real Story .............................................................................................................................. 5
What Happened ........................................................................................................................ 5
How did Company Deal with Crisis .......................................................................................... 5
How did they Re-introduce Product.......................................................................................... 6
Cost and Benefit ....................................................................................................................... 6
Causes of Success ................................................................................................................... 7
Organizational Behavior Concepts in Case ................................................................................. 8
Utilitarianism ............................................................................................................................. 8
Lessons for Other Organizations for Dealing with Such Crisis ................................................ 8
Conclusion .................................................................................................................................... 9
Works Cited ................................................................................................................................ 10
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Johnson & Johnson and Tylenol
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INTRODUCTION
Before quantum world was discovered in second decade of 20 th century by Alan
Turing, Neil Bohr and other fellow scientists it was believed that everything in this
world was organized and was controllable in some logical way. It was also perceived
that everything is predictable if we conduct proper quantitative or mathematical
analysis of current state.

However discovery of world of chaos, quantum, opted humans to think differently, as if


nothing was certain and not everything can be fully controlled. Same perception was
linked with organizations. For decades managers have acted on the basis that
organizational events can be controlled. However often situations go out of control of
organizations and create chaos and crisis, forcing organization to take decisions for its
survival or dominance.

Crisis need not strike a company purely as a result of its own carelessness or disaster.
Often, a situation is created which cannot be blamed on the company, but the
company finds out pretty quickly that it takes a huge amount of blame if it does nothing
or messes up in response.

One of the classic tales of how a


company can get it right is that of
Johnson & Johnson, and the
company's response to the Tylenol
poisoning.

This document discusses crisis


Johnson & Johnson came under
and how they recovered from it,
followed by suggestions and precautions for other organizations.
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Johnson & Johnson and Tylenol
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Analysis
Problem Statement

To investigate what should companies do in sudden crisis caused by unusual events


rather than company’s own conduct

Questions

What caused Tylenol crisis to take place and how Johnson and Johnson tackled the
crisis?

How should other companies in same situation tackle the problems such as this?

Study Objectives

This study focuses on following main objectives:

• To study possible causes behind sudden crisis


• To find out solution for recovery from such crisis
• To analyze what Johnsons and Johnsons did to recover from Tylenol crisis in
1982

Methodology

This case study was searched on internet and not investigated personally. Theories
discussed are available in book Organizational Behavior by Stephen P. Robbins, and
on internet. No further research of verifying information is done due to time and
resource constraints.
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Johnson & Johnson and Tylenol
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Background
Johnson & Johnson was found by three brothers, Robert Wood Johnson, James
Wood Johnson and Edward Mead Johnson, found Johnson & Johnson in New
Brunswick, New Jersey, U.S. in 1886. Company introduced first commercial First Aid
Box, baby powder, no more tears shampoo and modern form of medicine packaging
along with many useful medicines.

In 1982 a drug Tylenol, sold by Johnson & Johnson was tempered with cyanide and 7
people died giving a big setback to reputation and sales of company. However
company didn’t give up and came back strongly from this crisis.

The word crisis comes from the Greek krisis, meaning "decision."
We've all been there. Move to the left, or move to the right. Fight or
flee. Offer an explanation, or dummy up tight.

It's a true test of what we are, either as a company or a person, how


we handle ourselves in the middle of a crisis. The bad news is we
never know for sure how we'll do until it is test time. The good news is we can prepare
ourselves in principle.

There are three smart ways to approach crisis situations: (Hook)

1) Avoid a crisis in the first place (a pinch of prevention is worth a mound of cure);
2) Quickly address and resolve crisis issues before they escalate;
3) Seek possible ways to turn your crisis into an opportunity.

Johnson & Johnson’s way of dealing with crisis is good model of how a crisis can be
turned into an opportunity for good reputation.
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The Real Story


What Happened

In October of 1982, Tylenol, the leading pain-killer medicine in the United States at the
time, faced a tremendous crisis when seven people in Chicago were reported dead
after taking extra-strength Tylenol capsules. It was reported that an unknown
suspect/s put 65 milligrams of deadly cyanide into Tylenol capsules, 10,000 more than
what is necessary to kill a human.

The tampering occurred once the product reached the shelves. They were removed
from the shelves, infected with cyanide and returned to the shelves. In 1982, Tylenol
controlled 37 percent of its market with revenue of about $1.2 million. Immediately
after the cyanide poisonings, its market share was reduced to seven percent.
(Effective Crisis Management)

How did Company Deal with Crisis

Once the connection was made between the Tylenol capsules and the reported
deaths, public announcements were made warning people about the consumption of
the product. Johnson & Johnson was faced with the dilemma of the best way to deal
with the problem without destroying the reputation of the company and its most
profitable product.

Johnson & Johnson conducted an immediate product recall from the entire country
which amounted to about 31 million bottles and a loss of more than $100 million
dollars. Additionally, they halted all advertisement for the product. Not only that, but
the company decided the product would not be re-established on the shelves until
something had been done to provide better product protection.
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How did they Re-introduce Product

Once the product was removed from the market, Johnson & Johnson had to come up
with a campaign to re-introduce its product and restore confidence back to the
consumer.

1. Tylenol products were re-introduced containing a triple-seal tamper resistant


packaging. It became the first company to comply with the Food and Drug
Administration mandate of tamper-resistant packaging. Furthermore, they
promoted caplets, which are more resistant to tampering.
2. In order to motivate consumers to buy the product, they offered a $2.50 off
coupon on the purchase of their product. They were available in the
newspapers as well as by calling a toll-free number.
3. To recover loss stock from the crisis, Johnson & Johnson made a new pricing
program that gave consumers up to 25% off the purchase of the product.
4. Over 2250 sales people made presentations for the medical community to
restore confidence on the product.

Cost and Benefit

The cost was a high one. In addition to the impact on the company's share price when
the crisis first hit, the lost production and destroyed goods as a result of the recall
were considerable.

However, the company won praise for its quick and appropriate action. Having
sidestepped the position others have found themselves in - of having been slow to act
in the face of consumer concern - they achieved the status of consumer champion.

Within five months of the disaster, the company had recovered 70% of its market
share for the drug and the fact this went on to improve over time showed that the
company had succeeded in preserving the long term value of the brand. Companies
such as Perrier, who had been criticized for less adept handling of a crisis, found their
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reputation damaged for as long as five years after an incident. (Companies in Crisis -
What to do when it all goes wrong)

In fact, there is some evidence that it was rewarded by consumers who were so
reassured by the steps taken that they switched from other painkillers to Tylenol.

Causes of Success

The features that made Johnson & Johnson's handling of the crisis a success included
the following:

• They acted quickly, with complete openness about what had happened, and
immediately sought to remove any source of danger based on the worst case
scenario not waiting for evidence to see whether the contamination might be
more widespread
• Having acted quickly, they then sought to ensure that measures were taken
which would prevent as far as possible a recurrence of the problem.
• They showed themselves to be prepared to bear the short term cost in the
name of consumer safety. That more than anything else established a basis for
trust with their customers.
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Johnson & Johnson and Tylenol
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Organizational Behavior Concepts in Case


Utilitarianism

Utilitarianism is the idea that the moral worth of an action is determined solely by its
utility in providing happiness or pleasure as summed among all sentient beings. It is
thus a form of consequentialism, meaning that the moral worth of an action is
determined by its outcome. (Utilitarianism)

In this case Johnson & Johnson initially risked bearing a loss of nearly 100 Million
dollars for greater good of greater numbers. Although it knew that it had not to be
blamed for tempering of medicine with cyanide, but its concern for costumer safety
proved beneficial to both customers and organization.

Lessons for Other Organizations for Dealing with Such Crisis

1. Prepare a system that will allow you to respond to the emergency

Although emergencies are unexpected by nature, you can make a list of the
predicted problems and implement a plan to possibly deal with them. For example,
a good idea is to hold a brainstorming session with influential members of the
organization to identify events that might bring unfavorable publicity.

2. Develop policies

Each company or organization should have a set of policies or guidelines to deal


with emergencies. When asked by the media what the company’s policies are
about a certain situation, your spokesperson should be able to answer firmly. This
assures the public that the company's employees are reliable and knowledgeable.

3. Create a crisis management team

Assign certain individuals to be fully knowledgeable about the company’s policies


and who are efficient in problem-solving to deal with emergencies. Appoint a team
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leader, a spokesperson to deal with the media, team members to deal with the
victims and emergency officials, and others to guide the staff and volunteers.

4. Assemble and Organize resources

Make sure you have up-to-date information to be able to react immediately without
having to do extensive research. Resources include: lists of contacts for team
members, volunteers, staff, as well as emergency officials such as police, hospitals
and the fire department.

5. Distribute an emergency procedures guide

This is to ensure that volunteers, staff and team members know what to do in case
of emergency. For example, how to talk to the press as well as how to deal with
the safety of the people involved.

Conclusion
Coming of crisis cannot be controlled it may come at any time. However it can be
controlled by proper planning and decision making. A good example of how to deal
with crisis and make good use of the situation is in Johnson and Johnson’s dealing
with Tylenol crisis they faced in 1982. However with proper steps and decisions, they
didn’t only recover from crisis but came out with stronger customer relations. Other
companies may also learn from this experience of company and prepare their selves
for any sudden crisis.
Haisum Bhatti | 0812155 | BS-SE VI 10
Johnson & Johnson and Tylenol
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Works Cited
Companies in Crisis - What to do when it all goes wrong. (n.d.). Retrieved April 7, 2011, from
mallenbaker.net: http://www.mallenbaker.net/csr/crisis02.html

Effective Crisis Management. (n.d.). Retrieved April 7, 2011, from


http://iml.jou.ufl.edu/projects/fall02/susi/tylenol.htm

Hook, S. R. (n.d.). Crisis Management Moments. Retrieved April 7, 2011, from All About
Public Relations with Steven R. Van Hook:
http://www.aboutpublicrelations.net/aa021701a.htm

McNamara, C. (n.d.). Brief Overview of Contemporary Theories in Management. Retrieved


April 7, 2010, from Management Help:
http://managementhelp.org/mgmnt/cntmpory.htm

Utilitarianism. (n.d.). Retrieved April 7, 2011, from Wikipedia:


http://en.wikipedia.org/wiki/Utilitarianism