CRISIS MANAGEMENT: A CASE STUDY

PRESENTED BYMr. I.D. Jaiman Ms. Arti Srivastava

The case pertains to a multinational health and pharmaceutical firm with a highly successful drug X.

Active component of Drug X was acetominophen a.k.a. paracetamol, advertised for relieving pain, reducing fever, and relieving the symptoms of allergies, cold, cough, and flu. It was the most successful drug in its category and boasted of maximum market share.

On the morning of September 29, 1982, twelveyear-old Mary Kellerman of Elk Grove Village, Illinois, died after taking a capsule of ExtraStrength drug X. Adam Janus of Arlington Heights, Illinois, died in the hospital shortly thereafter. Adam's brother Stanley of Lisle, Illinois, and sisterin-law Theresa died after gathering to mourn his death, having taken pills from the same bottle.

Soon afterward, Mary McFarland of Elmhurst, Illinois, Paula Prince of Chicago, and Mary Reiner of Winfield, also died in similar incidents. Investigators soon discovered the drug X link. Urgent warnings were broadcast, and police drove through Chicago neighborhoods issuing warnings over loudspeakers

The initial media reports focused on the deaths of American citizens from a trusted consumer product. Throughout the crisis over 100,000 separate news stories ran in U.S. newspapers, and hundreds of hours of national and local television coverage.

It was claimed that this story had been given the widest US news coverage since the assassination of President John F. Kennedy. Suddenly the market share of drug X which was at a healthy 37% previously, dropped to 7% as the crisis escalated swiftly into large scale denouncements from consumers.

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What do you think was the reason of this crisis and how can the company combat this crisis?

The above mentioned crisis was actually faced by Johnsons and Johnsons Pvt Ltd.  The drug in question is the famous Tylenol, the largest selling analgesic in the U.S.


It was the consumption of Tylenol that became the cause of seven deaths in the U.S in October of 1982.  It was reported that an unknown suspect/s has tampered Tylenol bottles and put 65 milligrams of deadly cyanide into Tylenol capsules.  10,000 times more than what is necessary to kill a human.


A person or persons, replaced Tylenol ExtraStrength capsules with cyanide-laced capsules  Resealed the packages, and deposited them on the shelves of at least a half-dozen or so pharmacies, and food stores in the Chicago area.  The poison capsules were purchased, and seven unsuspecting people died a horrible death.


Johnson & Johnson, parent company of McNeil Consumer Products Company which makes Tylenol, suddenly, and with no warning, had to explain to the world why its trusted product was suddenly killing people.

What would you suggest Johnsons and Johnsons to combat the crisis effectively ?

Johnson & Johnson chairman, James Burke, reacted to the negative media coverage by forming a seven-member strategy team. Johnson & Johnson used the media to issue a national alert to tell the public not to use the Tylenol product, until the extent of tampering could be determined.

Johnson & Johnson stopped the production and advertising of Tylenol. They 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. The company announced the product would not be re-established on the shelves until something had been done to provide better product protection.

Tylenol products were re-introduced containing a triple-seal tamper resistant packaging. It became the first company to comply with the F.D.A. mandate of tamper-resistant packaging. Furthermore, they promoted caplets, which are more resistant to tampering.

To recover loss stock from the crisis, they made a new pricing program that gave consumers up to 25% off on purchase of the product.  Over 2250 sales people made presentations for the medical community to restore confidence on the product.  In order to motivate consumers to buy the product, they offered a $2.50 off coupon on the purchase of their product.


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. 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.

Within five months of the disaster, the company had recovered 70% of its market share for the drug and acquired 35% of total market share in a span of less than a year.

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

Avoid a crisis in the first place. Quickly address and resolve crisis issues before they escalate. Seek possible ways to turn your crisis into an opportunity.

Prepare a system that will allow you to respond to the emergency  Develop policies  Create a crisis management team  Assemble and Organize resources  Distribute an emergency procedures guide