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

Haisum Bhatti | 0812155 | BS-SE VI 2 Johnson & Johnson and Tylenol http://haisum.info

INTRODUCTION
Before quantum world was discovered in second decade of 20th 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 poisoning. This and document how they discusses recovered crisis from & Johnson, and the company's response to the Tylenol

Johnson & Johnson came under it,followed by suggestions and precautions for other organizations.

Haisum Bhatti | 0812155 | BS-SE VI 3 Johnson & Johnson and Tylenol http://haisum.info

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: y y y 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.

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

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.

Haisum Bhatti | 0812155 | BS-SE VI 5 Johnson & Johnson and Tylenol http://haisum.info

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.

Haisum Bhatti | 0812155 | BS-SE VI 6 Johnson & Johnson and Tylenol http://haisum.info

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

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

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: y 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 y Having acted quickly, they then sought to ensure that measures were taken which would prevent as far as possible a recurrence of the problem. y 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.

Haisum Bhatti | 0812155 | BS-SE VI 8 Johnson & Johnson and Tylenol http://haisum.info

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

Haisum Bhatti | 0812155 | BS-SE VI 9 Johnson & Johnson and Tylenol http://haisum.info

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 http://haisum.info

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

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