Product-Harm Crisis Case Study

Discussion Paper by Onifade Taiwo A Student number A00613334 5A Project Presented in Partial Fulfillment of the Requirements for DDBA 8006- 26 Contemporary Challenges in Business Instructor Dr. C. Lentz July 20, 2015 Abstract A Synthesis 4of the analysis to develop and support a recommendation for a company handling a product-harm crisis to mitigate its effects. A myriads of consumer oriented companies will be used as a case study providing past accomplishment with respect to how product –harm crisis are to be managed. Data will be analyzed to form the basis of conclusion and recommendation. Definitions of Terms. 3Product-harm crisis is when event caused by a product being found to be defective, contaminated or even harmful to consumers is

The resultant effect after a long time 6can severely damage the reputation of the affected brand and company. The major task that such companies needs to accomplish after a crisis is to regain consumer trust. The following factors had been found to contribute immensely to product-harm crises. The major contributing factor to product-harm crisis is the media. Yannopoulu, Koronis, and Elliot (2011) discussed extensively how the media was the main culprit in product-harm crisis amplifications. Consumer who had direct contacts with product had already given excuses for the defect but later changed their opinions after the amplifications. The globalization of the world economy also made information sharing very easy and unfortunately bad information spreads faster than the good ones. The company’s response is another very important factor in that most consumer will pardon the companies and reduce what is described as trade-off of product purchase if the affected company is perceived to be truthful in the handling of the entire process. For example, if the company did not wait for the external intervention from the government for example before initiating a

Zhao, Zhao and Helsen (2011) discussed that a 1key finding in their research is that the use of a proactive product-recall strategy, which firms can use to elicit positive responses from consumers, actually hurts a firm’s financial value more than a passive recall strategy. We also find that less reputable firms are more likely to use proactive recall strategies. These results suggest that in choosing proactive versus passive strategies, firms are primarily concerned with minimizing potential financial losses associated with the recall. In essence, the stock market and investors use recall strategies as a proxy or signal to estimate the financial impact of recalls. They interpret proactive strategies as a signal of severe product hazard and substantial financial losses to the firm. This explains our result that proactive recalls are more negatively related to a firm’s value than passive recalls. In conclusion my findings and research recommends that companies experiencing product – harm crisis should focus on rebranding of product. The company should have an effective communication strategies, include trade-off and compensations with incentives References Yannopoulu, N., Koronis, E., & Elliot, R.