Crisis Risk Management

This report analyses Johnson & Johnson (J&J) as an example of crisis management. It will point out the crises on J&J, the reasons behind those management reactions and the lessons we can learn from it. It is also critical to list the border consequences that had added to risk management process.

1. The Facts Surrounding the Case

J&J is an American company that mainly manufactures medical devices, pharmaceutical and consumer goods. It was ranked at 68 on the Fortune 500 list of the largest industrial companies in the United Stated in 1981. The company has been awarded the Benjamin Franklin Award for Public Diplomacy by the U.S. State Department for its funding of international education programs. With the continuous efforts made to cultivate an image of company’s responsibility and to create an iconic brand that links with superior quality products, consumer’s trust to its products had been built up.

Tylenol, a questionable product in this crisis

Tylenol was manufactured by one of J&J’s subsidiaries, McNeil. It was introduced for reducing pain and fever, as well as relieving the symptoms of allergies, cold, cough, and flu. By the year of 1974, Tylenol had made a sale of $50 million due to its strategic marketing campaign to physicians. Moreover, Tylenol had become the largest selling health and beauty aid in drug and food mass merchandising. Additionally, Tylenol has occupied a market share of 35.3% as a leading drug compared to others. However, it had been in trouble since 1982.

Case I—Tylenol in 1982: The first crisis was that seven people died after taking the Extra-strength Tylenol capsules, which all happened in the Chicago-area. The cause of death was cyanide, which is a deadly poison that can kill people within 15 minutes. However, it was found that the poisoning did not occur in the manufacturing process, either intentionally or accidentally. The Food and Drugs Administration (FDA) suspected that someone unconnected with the manufacturer had bought the Tylenol over the counter, inserted cyanide in some capsules, and returned to retail stores.

Case II—Tylenol in 1986: It was even worse that the same situation happened in 1986. Despite company introduced the tamper-resistant package, another woman died from Cyanide-laced Extra-Strength Tylenol capsules.

Case III—Levamisole in 1992: J&J was questioned of the “unconscionable” price of levamisole, the drug used to treat colon cancer. It costs patients $1,250 to $ 1,500 for a year’s supply, while a veterinary version costs them only $14 with the same active ingredients. However, J&J defended the price of the consumer version is higher due to its costly research and regulatory costs in preparing the drug for human consumption.

Case IV—Tylenol in 1998: Forbes magazine revealed that children and adults being significantly affected by overdosing of Tylenol. It pointed out that hundreds of fatalities and serious liver injuries resulted from an active ingredient of Tylenol, and complained that Tylenol labels did not sufficiently spell out liver damage risks.

Key Risk Management Issues

The first risk management issue came up to J&J was how to react to the public, which was what they dealt with at the first step in managing the crises. Secondly, another issue was whether they should keep the brand name of Tylenol since it was a very serious situation when the product is associated with death. After customer surveys taken by J&J, they decided to rebuild the brand of Tylenol. Subsequently the last management issue was how to rebuild it because company’s public image and customer trust had fallen to the bottom.