Part 1

Question 2
Write up on the Causes of the Financial Crisis of
2008
The 2008 Financial Crisis was a result of various causes most notably Sub
prime lending. After the 9/11 attacks there was a minor recession in the
US as there was no liquidity and money flow in the market. To increase the
money flow the Federal government reduced the interest rates on loans.
This allowed the financial institutions to give out housing mortgages at
lower rates and to people who had bad credit histories. The government
also wanted to project that they were able to provide housing for all. A
Housing Boom was thus created increasing the prices which everyone
believed would go on increasing.
The Sub Prime lending resulted in a large number of bad loans
which could not be recovered once the interest rates moved to normal
levels. The financial organizations in turn had put these mortgages in
pools to put them in the investment market. In this market investors bet
on the possibility of the consumers being able to pay back their
mortgages and they would make money through these bets. Once the
interest rates increased the consumers were unable to pay back their
loans, leading to the financial intitutions losing a lot of money. The
investors backed out or suffered huge losses which resulted in money
moving out of the economy.
Financial institutions were finally left with housing assets which were
valued higher than their actual rates as the prices were significantly lower
due to their high availability. Since the money could not be recovered, the
financial insurance firms also lost a lot of money. Increased losses affected
the economic stability and since the investors from all over the world were
affected, all countries most European and other countries affected as well.
Regulatory bodies were also responsible as they were not able to
check the Sub Prime lending and the Housing bubble resulting in the
whole crisis. If they had acted on time the huge losses could have been
minimized

.Part

Question 1

Yes I would agree to the statement. The Tylenol crisis brought about a
change in the approach of the manufacturing organization, one of the
changes was to build a mechanism or system which could be both
proactive and reactive to any kind of eventuality related to product and
organizational image. Johnson & Johnson provided an excellent lesson on
how to be produce efficient reactionary measures in the advent of a crisis
which could not have been predicted.
The image of Tylenol and Johnson & Johnson took a severe beating in the
initial stages of the crisis but they were able to control the damage
through quick decision making and also effective communication. The
extensive use of media to communicate with the public, retailers and
employees re-established their trust and a positive image for the brand. A
PR department which was non-existent earlier was established to ensure
that all communications reach the required audience and to deal with
their queries and problems.
The major learning from the crisis was that any external factor could
influence the image and good will of the manufacturer and the
manufacturers were now focussing on the being prepared rather than only
on building a good product and maintaining a good relationship with the
consumer retailer, employees and the public.

Question 2
Johnson & Johnson used the Remediation, Rectification and Forgiveness
strategies to tackle the Tylenol crisis and they were effective in minimizing
the negative publicity and garner trust in the consumer. In my opinion the
Remediation, Rectification and Forgiveness strategies can be explained as
follows.
Remediation: The process of providing an alternate solution to a particular
problem or a mistake that has occurred. In this case Johnson & Johnson
provided financial benefits to the families of the victims. Although the
lives of the victims were lost, the next best support system was provided
to those effected.
Rectification: This involves correcting an anomaly or an issue, which may
or may not have been directly committed. In this case, Johnson & Johnson
did not commit any mistake directly but they did improve the packaging of
the bottles so that a similar issue might not occur in the future
Forgiveness: The act of seeking forgiveness is to accept your mistakes and
apologizing as Johnson & Johnson continuously did throughout the crisis.
They also created sympathy and acceptance by showing themselves as
victims of mischief as well which helped them seek forgiveness.

Question 3
Johnson & Johnson spent a lot of money (more than $ 100 million) on the
recall of its product and the handling of the disaster as a whole. Its stocks
went on a downward spiral and there were considerate losses to the brand
image. However, the effective management of the crisis saw the stocks
rebound in some months and Tylenol was re-established as a market
leader in the segment.
Johnson & Johnson also went ahead and established a PR department
which was non existent earlier.
The market as a whole was effected by the introduction of the new triple
safety packaging which also Johnson & Johnson pioneered and introduced.
This led to better safety in packaged medicines.

Question 4
Johnson & Johnson were very effective in handling the Tylenol crisis as
they were able to establish Tylenot as the market leader once again after
the crisis and they were able to build a positive image which had taken a
bashing. After lives were lost, the next best thing that could have been
done was to support the families of those affected both through monetary
and emotional means, was taken care of. Instead of thinking about profit,
they decided to apply a more humane approach which also enabled them
to recover the losses.
In my opinion, all actions of Johnson & Johnson were how the crisis should
have been ideally handled but I must say that it seems they took a lot of
time to put through these actions. Some lives could have been saved if
they had acted earlier.