Product – Harm Crisis within a Company
Product – Harm Crisis within a Company
How an organization responds to a product – harm crisis can make or break an organization. A product crisis can happen in any kind of business or organization. If not handled properly, the organization can be impacted greatly and can even experience a significant financial hardship. Employees watch management closely to see how they react to a product crisis.
Product Crisis
Product – harm crisis is when a product is found to be defective, contaminated or harmful
to consumers. This event is usually publicized and results in product recalls which expose the flaws and dangers of the product and can be either low probability or high consequence. Siomkos and Kurzbard (1994) defined product-harm crisis as an “abrupt break of the product life cycle.” (30) A product - harm crisis can have a significant impact on a company’s reputation, sales and financial value and have the potential to damage developed brand equity and lead to revenue and market share losses. They occur when a firm’s product fails to meet a mandatory safety standard, contains a defect that could cause substantial harm to consumers, creates an unreasonable risk of serious injury or death, or fails to comply with a voluntary standard adopted by the specific industry. (Mullan 2004). Depending on the market, product defects can impact brands differently. Some may cause a negative effect on the affected brand and some may cause a significant increase in sales, such as the competitor of the affected brand. Sales of their product can increase because sales of their competitors have been greatly impacted do to well a publicized product defect. For example, earlier this year, Chrysler had to recall 651,000 SUVs in the U.S. because vanity mirror lights were casuing a short circuit and started fires if not reassembled correctly. This being the largest recall for Chrysler, can have a significant effect on...