Tylenol vs. Toyota: Crisis Management at Its Best and Worst Essay
Tylenol and Toyota are two companies that have faced adversity in the form of crises. In Chicago in 1982, Tylenol was faced with the crisis of people dying from consuming its medication. The company acted quickly and appropriately; it was able to minimize its negative publicity and clear its image. Toyota has had its own recent crisis, and has been forced to recall over 8. 5 million vehicles in the past seven months due to defective accelerator pedals. Some of these cars have been on the road since 2004. According to Corporate Communication by Paul A.
Argenti, there are eight steps that should be followed in order to manage a crisis. They are as follows: * Step 1: Get Control of the Situation- First off, the appropriate manager must be made aware of the situation. His or her role is to organize everyone and get control of what is happening; this means that the problem must be defined. Goals should be set so the company’s constituencies will be able to measure its progress. * Step 2: Gather as Much Information as Possible- It is important for companies to understand the full extent of the problem.
Data must be collected from numerous and reliable sources to ensure accuracy. Some companies have been negatively judged because the information took too long to be presented to the public. Even if it takes time to gather information, the company should still release a statement to explain its delay. * Step 3: Set Up a Centralized Crisis Management Center- Managers should set up a center that can serve as a platform for all communication during the crisis. Fewer communication failures will occur if all of the planning and decision making take place at one location.
Step 4: Communicate Early and Often- The company spokesperson should give a statement as soon as possible especially if the crisis involves a threat to lives or property. The spokesperson should also alleviate constituency concerns by answering the audiences’ questions. Employees, media members, and other constituencies should be told that the crisis center will continually release updated information. * Step 5: Understand the Media’s Mission in a Crisis- The company facing the crisis must remember that the media will always try to make a story more interesting and they will always try to break the news before their competition.
Therefore, the company must work with the media to avoid false reports from being released. Also by doing this the company will stay on the good side of the media and prevent themselves from appearing secretive or untrustworthy. * Step 6: Communicate Directly with Affected Constituents- First a company needs to prioritize its constituencies. Whichever constituency is the most drastically affected by the crisis should be dealt with first. It needs to realize that while communicating through the media is helpful, it should be communicating directly as well.
The medium of communication must be appropriately selected. A letter is usually a good form but if time is of the essence multiple mediums may be employed, including email. * Step 7: Remember that Business Must Continue- Whether on the crisis team or not, managers need to remain conscious of how the company is doing. He or she should try to anticipate any effects of a crisis in all aspects of business. * Step 8: Make Plans to Avoid Another Crisis Immediately- After a crisis, communication experts and managers should collaborate on ensuring the company will be more prepared the next time.
Preparation is important in handling crises successfully. The President of Toyota, Akio Toyoda is the grandson of Sakichi Toyoda, the founder of Toyota Industries. He took over in the summer of 2009 to become president of the largest automaker in the world. When he first took his position he did not communicate how he planned to handle problems the company may face. Toyota has been a widely featured story in the news over the past several months because it has been dealing with a crisis. Thirteen of its models have been recalled. The list includes the Prius dating back to 2004 and the 2005 Avalon.
The general public is alarmed that a potentially fatal flaw has been on the road for so long and so little has been done to fix the problem. Toyota took too long to recognize this problem. It also failed at the next step, gathering information. Toyota first addressed the problem on September 9, 2009 when it recalled 3. 8 million U. S. vehicles. Unfortunately, the recalls did not stop there. On January 27 Toyota added several more models to the recall list, raising the number of recalls by millions. Toyota did not realize that European vehicles were dangerous to its drivers until January 29, 2010.
By February 2, over 8. 5 million cars and/or trucks had been recalled. Toyota’s headquarters are located in Toyota City, Aichi, Japan. The company used its headquarters as a base of operations during the crisis but was forced to maintain constant communications with its U. S. headquarters in Torrance, California. Toyota struggled with the fourth step, communicating early and often. It did not address its faulty headquarters until September 29 when it made its first recall. Some of the faulty cars were on the road for nearly five years before the problem was addressed.
Once the company became aware of how urgent the situation was, it did not hesitate to update the media when necessary. By continually updating the media, Toyota attempted to assure all of its constituencies that its main priority was to protect the publics’ safety. Toyota prevented its image from crossing over from accidental to malicious. Toyota reacted wisely by having its dealers call everyone who purchased a possibly defective Toyota. The purpose of the phone call was to inform the car owners of potential vehicle problems and to set up an appointment so the vehicle could be repaired.
Toyota was aware that business must continue but in an appropriate manner. Toyota suspended the sales of its affected models as well as manufacturing for a week starting on January 26. The Wall Street Journal wrote, “TOYOTA has unveiled new measures to beef up its quality control, including opening “customer-first” training centers by July in all major regions, as it seeks to regain customer trust dented by its global recalls. ” It seems that Toyota is realizing its mistakes and is beginning to repair the damages. Any organization has the potential to be involved in a crisis, as no company is immune.
Although an organization may plan for a crisis, it cannot fully be prepared. A crisis can be categorized in four characteristics: element of surprise, insufficient information, fast pace of events, and intense scrutiny. When a crisis occurs, one characteristic that often occurs is the unexpectedness of the situation. Without being able to know when a crisis is about to happen one cannot be fully prepared to handle it. The company typically does not have all of the information about the situation but at the same time must answer pressing questions presented by the media.
A common characteristic of a crisis is usually the rapid speed of the events taking place. Things tend to be chaotic, quickly escalate, and the company is oftentimes under intense examination of the media. As a crisis situation arises, the media is quick to report it and demand answers, while it can take executive some time to get correct answers. Before the crisis began, people associated the brand of Toyota with quality and reliability. Due to Toyota’s lack of immediate response to the crises, its brand image has been negatively affected. Toyota was slow to respond to the problem, and as a result it began to lose the trust of customers.
One possible reason for why Toyota was slow to respond to the problem is because of the location of its headquarters, in Japan. Currently, Japan is underdeveloped in terms of managing crisis situations. Toyota was slow to respond, minimized issues as they arose, were slow to recall products, poorly communicated with the public, and failed to show concern for affected customers. Open communication within an organization is essential, and it was not present within Toyota. Hopefully Toyota can grow from being forced to deal with this crisis, and perhaps it will reform its corporate culture to further improve its open communication.
If Toyota implements a two-way communication between itself and its customers, it would allow for a feedback system, improving the way corporate communicates. If it appoints a crisis manager or if a plan of action is formed in regards to what to do in the face of a crisis it will be very prepared if a crisis occurs again. In the fall of 1982, McNeil Consumer Products, a subsidiary of Johnson & Johnson, was confronted with a crisis when seven residents on Chicago’s West Side died without any explanation. Authorities determined that each person who passed away had consumed an Extra-Strength Tylenol capsule that had been laced with cyanide.
During the time of the crisis, Tylenol sold the most pain-killing medicine in the country, and all who used it had confidence in the product. The news of this unpleasant incident quickly traveled and was the source of a massive, nationwide panic. These poisonings made it essential for Johnson & Johnson to launch a public relations program without delay, in order to save the integrity of both its product and corporation as a whole. The first death occurred on Wednesday, September 29, 1982 when a twelve year old girl was found dead on the bathroom floor by her parents.
During the night, Mary Kellerman woke with cold symptoms and her parents gave her an Extra-Strength Tylenol to get through the night. They then discovered their daughter in the bathroom at around 7:00 am. By the end of the weekend there were a total of seven deaths related to Extra-Strength Tylenol in the Chicago area. McNeil Consumer Products Co. , recalled two batches of the medication, a total of 264,400 bottles nationwide, and the federal Food and Drug Administration warned Americans not to take any Extra-Strength Tylenol capsules until the mystery was solved.
Drugstores and supermarkets from coast to coast pulled Tylenol products off their shelves. Police drove around the streets announcing the warning over loudspeakers. All three national television networks (ABC, NBC and CBS) reported about the deaths from the contaminated drug on their evening news broadcasts. Poison-control centers as far away as San Francisco and New Orleans were flooded with calls from frightened citizens. Customers brought boxes of Tylenol into stores asking for money or other painkillers to replace the potentially laced pills. Authorities could only hope that more victims would not turn up.
They were worried, too, that the cyanide murders would encourage a new, over-the-counter terrorism that could be aimed at companies or random individuals. In the first month after the Tylenol related deaths, the Food and Drug Administration counted 270 incidents of suspected product tampering. Although, the FDA thinks this number may have been inflated by consumers who blame any type of headache or unsettled stomach issue on food and medicine they think may have been poisoned. Officials at McNeil Consumer Products made clear that the tampering had not taken place at either of its plants, even though cyanide was available on the premises.
A spokesman for Johnson & Johnson told the media of the company’s strict quality control and said that the poisonings could not have been performed in the plants. The cyanide laced Tylenol had been discovered in shipments from both of the company’s plants and had only been found in the Chicago area, authorities concluded that any tampering of bottles must have occurred once the Tylenol had reached Illinois. The most possible explanation was that someone had taken individual bottles from retail stores and filled some capsules with cyanide. The same person then could have replaced the bottles back on the shelves for innocent people to purchase.
Authorities believed that the offender could be practically anyone; from an employee of McNeil or Johnson & Johnson to someone from a competing company since Tylenol was the top pain-killing medicine at the time. Johnson & Johnson’s Assistant Director of Publications, Robert Andrews was the first to hear of the Tylenol crisis within the company. Surprisingly, this information was discovered by a telephone call from a Chicago news reporter. The reporter inquired about a medical examiner who had found that poisoned Tylenol was the cause of death for a few individuals. The reporter wanted Tylenol to comment on this.
Andrews told the reporter that he knew nothing about the incidents. “In that first call we learned more from the reporter than he did from us”, he later said. Johnson & Johnson Chairman James Burke first reacted to the crisis by forming a seven person crisis strategy team. Burke gave the team two questions. First was, “How do we protect the people? ” and second, “How do we save this product? ” Johnson & Johnson immediately alerted the public through the media not to ingest any type of Tylenol’s capsules. The public was instructed not to use Tylenol products again until it was discovered how the product was tampered with.
Tylenol’s next steps were to stop all production and advertising, as well as remove all Tylenol capsules from the Chicago area’s stores. This recall removed approximately 31 million bottles from stores and cost the company more than $100 million dollars. Burke quickly became the face for Johnson & Johnson, appearing on 60 Minutes and The Donahue Show. Several major press conferences were also held at Johnson & Johnson corporate headquarters. An internal video staff was able to set up a live television feed through a satellite to the New York area. From here, the news conference was broadcasted nationally.
Johnson & Johnson also established a 1-800 hot line for all customers to call concerning any safety risks associated with the Tylenol product. A toll free line was also created for news organizations. This was updated daily with a pre-taped message detailing the status of the crisis. Alongside of the nationwide alert, Johnson & Johnson formed close relations with the Chicago Police, FBI, and the FDA (Food and Drug Administration). This was done in order to ensure that the company could do its part in searching for the person who had tampered with the Tylenol containers as well as prevent this from occurring again.
When the product was ready to be re-introduced, Johnson & Johnson devised a campaign in order to makes customers once again have assurance in using Tylenol. A triple-seal tamper resistant packaging was put on store shelves. Johnson & Johnson became the first company to abide by the FDA orders and produce this kind of packaging. Caplets were also used instead of capsules, which are more resistant to tampering. Tylenol offered the public a $2. 50 off coupon for the purchase of a product. This was available in newspapers and could also be obtained by calling a toll-free number.
Because Johnson & Johnson’s stock had suffered severely, a new pricing program was established that gave consumers up to 25% off the purchase of a product. In addition over 2,250 sales representatives made promotional presentations to the medical community. This was done in order to get back the confidence of those in the medical field. The way that Johnson & Johnson chose to handle this crisis has been regarded as an example of success in terms of crisis communication strategy. One scholar stated, “The Tylenol crisis is without a doubt the most exemplary case ever known in the history of crisis communications.
Any business executive, who has ever stumbled into a public relations ambush, ought to appreciate the way Johnson & Johnson responded to the Tylenol poisonings. They have effectively demonstrated how major business has to handle a disaster. ” When looking at the eight approaches used in crises management, Tylenol was able to touch upon each one. Tylenol promptly got control of the situation, even though the company had been informed about it in a surprising way. Johnson & Johnson was able to gather information quickly once establishing a crises communication team, which allowed them to set up a centralized plan.
Johnson & Johnson communicated early and often as well as directly, always letting consumers and the media be aware of the status of what was going on within the company. Assistance was available by calling a toll free number on any questions or concerns of the capsules. Tylenol understood the media’s mission, and spoke directly to significant sources such as 60 Minutes and The Donahue Show. Lastly, Johnson & Johnson recognized that business continues and came back with a strong re-introduction to the public. In addition, Johnson & Johnson took several precautions to ensure that this would not happen again.
In conclusion, these two very different examples of crisis communication within companies show an effective and ineffective way to deal with a major problem in an organization. As one can see, Tylenol and Toyota had very different methods in approaching the problems going on. Andrew Gilman, CEO of CommCore states only one similarity between the two. This is that both companies were forced to recall a product. Although only one similarity exists between the two, many differences can be found. The first difference is that something happened to Tylenol.
In this case, the company was sabotaged from an outsider. This is different than Toyota, which was at fault for the recall that occurred. Another difference between the two deals with the “face” of a company. For Tylenol, chairman James Burke became the “face”, appearing on national television, public addresses, and news conferences. Toyota struggled in the fact that the company never had a face, or someone that the public could associate with the product. Lastly, a difference between the two is evident in the technology available at the time of the crisis.
In 1982 when Tylenol’s crisis occurred, media such as YouTube, Facebook, Twitter, and online forums were not available. Because of this, Tylenol had to focus its efforts on effective channels that were popular at the time. These included newspapers and television. Currently, Toyota has the previously mentioned online tools to use. These can be looked at as both advantages or disadvantages. For example, Toyota has received negative public feedback on social networking sites such as Facebook and Twitter. However, the flexibility to constantly update Toyota’s web page can be looked at as an advantage.
Toyota has also used YouTube to post current advertisements and campaigns in order to gain back the trust of consumers. Regardless of the similarities and differences between the two, it can be agreed that the strategy used by Tylenol was effective, while the strategy carried out by Toyota was flawed. Both of these cases are great examples of what can happen to a business when a crisis occurs, and can be a learning tool to companies who may have crises in the future. Nick Purdom of PR Week wrote, “The PR industry has an important role to play in helping companies identify and manage risks that could damage their reputation. Our group has learned that this statement is very true.
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