AMITY INTERNATIONAL BUSINESS SCHOOL
MARKETING TOOLS & TECHNIQUES
Contingency Plans & Crisis Management
Submitted to: Ms. Nidhi Bhatia
Submitted by: Harshita Baranwal, Section A, Enrollment No. A1802011082
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Organizations prepare contingency plans in recognition of the fact that things do go wrong from
time to time. Contingency planning involves:
Preparing for predictable and quantifiable crises
Preparing for unexpected and unwelcome events
The aim is to minimise the impact of a foreseeable event and to plan for how the organisation
will resume normal operations after the crisis
The contingency plan:
Identifies alternative courses of action that can be taken if circumstances change with
Details standby procedures to enable the continuation of essential activities and services
during the period of the emergency
Includes programmes for improving the business in the longer term once the immediate
situation has been resolved
Steps in drawing up a contingency plan
Recognise the need for contingency planning
Identify possible contingencies - all the possible adverse and crisis scenarios
Specify the likely consequences
Assess of the degree of risk to each eventuality
Determine risk strategy to prevent a crisis & to deal with a crisis should one occur
Draft the plan and identify responsibilities
Simulate crises and the operate of each plan
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Dealing with the “what if” question Scenario analysis:
This involves constructing multiple but equally plausible views of the future
The scenario consists of a “story” from which managers can plan
Involves testing the effect of a plan on alternative values of key variables
e.g. the effect of a 50% loss of capacity
Crisis management involves:
Identifying a crisis
Planning a response
Responding to a sudden event that poses a significant threat to the firm
Limiting the damage
Selecting an individual and team to deal with the crisis
Resolving a crisis
Stages of a crisis
Pre-crisis Prior to the event
Warning Indications that there is or may be or could be an event liable to cause a
significant impact on the organization
Crisis point When the event begins to cause significant impact on the organisation
Recovery The acute stage of crisis has passed and the organisation is able to focus
on a return to normal operations
Post crisis Evaluation of the effects
Repair to the organization
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Role of the crisis manager
Managing human considerations
Assessment or resources and options
Development of contingencies
Co-ordination with external bodies
Managing legal requirements
Advice on handling a crisis
Appoint a crisis manager
Recognise that the crisis manager is likely to adopt a more authoritarian style than is
Do an objective assessment of the cause (s) of the crisis
Determine whether the cause (s) will have a long term effect or whether it will be a short
Project the most likely cause of events
Focus on activities that will mitigate or eliminate the problem
“Look for the silver lining”- opportunities in the aftermath
Act to guard cash flow
Dealing with the financial aspects of a crisis
Accelerate accounts receivable (payment by debtor)- by offering a discount if necessary.
Slow up payment to creditors where possible.
Increase short term, sales
Reduces expenses - especially “non mission critical” expenses
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Outsource non mission critical operations.
Dealing with the “people” aspects of a crisis
Form a crisis team
Designate one person only to speak about the crisis to the outside world
Act to prevent or counter the spread of negative information
Make use of the media to provide a counter argument
Do not tell untruths - trying to manipulate or distort the information will backfire
If we could be absolutely sure about what the future holds and what the consequences of our
decisions and actions were we would not need to be prepared for the unexpected and unintended
consequences. But in reality much of what marketing deals with is full of uncertainty and risk.
The best plans include contingencies and so mean the organization is, for example, at least
prepared if there is an emergency.
Contingency planning can get difficult. You have to be able to argue why the plan you adopt is
better than any contingency plan you also have, otherwise the question can be asked, "why not
go with the contingency plan straight away?". This means a contingency plan should not be an
alternative plan radically different to the one you implement. Instead it should consist of small
subtle deviations based on the plan you are implementing.
Contingency planning involves the following:
Identify both beneficial and unfavourable events that could possibly derail the strategy or
Specify trigger points. Calculate about when contingent events are likely to occur.
Determine early warning signals for key contingent events. Monitor the early warning signals.
Assess the impact of each contingent event. Estimate the potential benefit or harm of
each contingent event.
Ensure that contingency plans are compatible with current strategy and are economically
Have an end game plan – and if necessary an exit strategy
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Assess the counter impact of each contingency plan. That is, estimate how much each
contingency plan will capitalise on or cancel out its associated contingent event.
Crises that could affect businesses
Depending on your business' specific circumstances, there are many possible events that might
constitute a crisis:
Natural disasters - for example, flooding caused by burst water pipes or heavy rain, or
wind damage following storms.
Theft or vandalism - theft of computer equipment could prove devastating. Similarly,
vandalism of machinery or vehicles could be costly and pose health and safety risks.
Fire - few other situations have such potential to physically destroy a business.
Power cut - loss of power could have serious consequences. Would you be able to
operate without IT or telecoms systems, key machinery or equipment?
Fuel shortages - temporary shortages in fuel supply could prevent staff getting to work
and affect your ability to make and receive deliveries.
IT system failure - computer viruses, attacks by hackers or system failures could affect
employees' ability to work effectively.
Restricted access to premises - how would your business function if you couldn't access
your workplace - for example, due to a gas leak?
Loss or illness of key staff - how would your business cope if a key member of staff
were to leave or was incapacitated by illness?
Outbreak of disease or infection - an outbreak of an infectious disease among your
staff, in your premises or among livestock could present serious health and safety risks.
Terrorist attack - consider the risks to your employees and business operations from a
terrorist strike, either where you are located or you and your employees travel. Also consider
whether an attack may have a longer-term effect on your particular market or sector.
Crises affecting suppliers - how would you source alternative supplies?
Crises affecting customers - will insurance or customer guarantees offset a client's
inability to take your goods or services?
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Crises affecting your business' reputation - how would you cope, for example, in the
event of a product recall?
Cases of Crisis Management
CASE 1: Johnson & Johnson's Tylenol
In 1982, Johnson & Johnson's Tylenol medication commanded 35 per cent of the US over-the-
counter analgesic market - representing something like 15 per cent of the company's profits.
Unfortunately, at that point one individual succeeded in lacing the drug with cyanide. Seven
people died as a result, and a widespread panic ensued about how widespread the contamination
By the end of the episode, everyone knew that Tylenol was associated with the scare. The
company's market value fell by $1bn as a result.
When the same situation happened in 1986, the company had learned its lessons well. It acted
quickly - ordering that Tylenol should be recalled from every outlet - not just those in the state
where it had been tampered with. Not only that, but the company decided the product would not
be re-established on the shelves until something had been done to provide better product
As a result, Johnson & Johnson developed the tamperproof packaging that would make it much
more difficult for a similar incident to occur in future.
Cost and benefit
The cost was a high one. In addition to the impact on the company's share price when the crisis
first hit, the lost production and destroyed goods as a result of the recall were considerable.
However, the company won praise for its quick and appropriate action. Having sidestepped the
position others have found themselves in - of having been slow to act in the face of consumer
concern - they achieved the status of consumer champion.
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Within five months of the disaster, the company had recovered 70% of its market share for the
drug - and the fact this went on to improve over time showed that the company had succeeded in
preserving the long term value of the brand. Companies such as Perrier, who had been criticised
for less adept handling of a crisis, found their reputation damaged for as long as five years after
In fact, there is some evidence that it was rewarded by consumers who were so reassured by the
steps taken that they switched from other painkillers to Tylenol.
The features that made Johnson & Johnson's handling of the crisis a success included the
They acted quickly, with complete openness about what had happened, and immediately
sought to remove any source of danger based on the worst case scenario - not waiting for
evidence to see whether the contamination might be more widespread
Having acted quickly, they then sought to ensure that measures were taken which would
prevent as far as possible a recurrence of the problem
They showed themselves to be prepared to bear the short term cost in the name of
consumer safety. That more than anything else established a basis for trust with their customers
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CASE 2 : The Wormy Controversy (Dairy Milk)
Rise of the Controversy
State FDA Commissioner Uttam Khobragade said a group of people approached him
with chocolates that had worms in them.
Sebastian Fernandez had purchased Cadbury Dairy Milk chocolate from a shop at Pick
and Pay, Vile Parle.
Fernandez discovered that the chocolate (Batch No28F3I10703) had worms in it.
Fernandez complained to the shopkeeper Jitendra Shah who later informed Pravin Marve,
vice-president, Andheri Vyapar Manch.
Marve then contacted the FDA and gave them the sample. FDA Joint Commissioner
Hindurao Salunkhe said Cadbury's Talegaon plant will also be inspected.
Effects Of The Controversy On Cadbury
The state Food and Drug Administration has ordered abduction of Cadbury's Dairy Milk
chocolates from all over Maharashtra after worms were found in two of them in Mumbai.
bad storage practices by retailers and distributors that had led to the worms.
Festival season sales (Cadbury sells almost 1,000 tones of chocolates during Diwali)
plummeted 30 per cent.
Role Of The Public Relations
Not denying the fact
Maharashtra Food and Drug Administration had given a clean chit to the company's two
plants in the state.
tell consumers about improper storage
Bharat Puri, Cadbury's mild-mannered MD, went to media offices around the country
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Company launched Project Vishwas, a retail education programme.(generating awareness
and providing assistance in improving storage quality.) “Steps to ensure quality &
regain the confidence”
new double packaging even for the smallest offering
wrapped in aluminum foil and enclosed in a poly flow pack, which was sealed on all
company also carried out quality checks
Gaining back trust
AB played a pivotal role in all communication relating to Cadbury's products and brands
created a campaign which aimed for both rational and emotional appeal.
Benefits Of A Good Campaign
The company bounced back soon after the campaign hit the screens. Between October
2003 and January 2004, Cadbury's value share melted from 73 per cent in to 69.4 per
cent. The recovery began in May 2004 when Cadbury's value share went up to 71 per
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Case 3: Exxon Valdez
In 1989, the Exxon Valdez oil tanker, entered the Prince William Sound, on its way
The ship ran aground and began spilling oil. Within a very short period of time,
significant quantities of its 1,260,000 barrels had entered the environment.
At the moment of the collision the third mate, who was not certified to take the tanker
into those waters, was at the helm.
The probable cause was established that the Captain and many of the crew had been
drinking alcohol in considerable quantities.
What did the company do?
The action to contain the spill was slow to get going.
The company refused to communicate openly and effectively to the public about the
The Exxon Chairman, Lawrence Rawl, was immensely suspicious of the media, and
Poor Crisis Management
The Chairman refused to be interviewed on TV and said that he had no time for “that
kind of thing.”
A company spokesman misrepresented the extent of the spill and clean-up efforts
This was in contrast to the footage of the ecological disaster shown on TV
Failure to Fix the Problem
While Exxon stalled and attempted to cover up the problem, the clean-up operation was
slow to begin
Around 240,000 barrels had been spilled, with another million still on the ship.
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During the first two days, when calm weather would have allowed it, little was done to
contain the spillage.
This spillage spread out into a 12 square mile slick.
The Problem Compounds
Then the bad weather struck, making further containment almost impossible.
After more than a week, the company was still giving no ground on the request for better
The media clamor became so hostile that eventually Frank Larossi, the Director of Exxon
Shipping, flew to Valdez to hold a press conference.
It was not a success. Small pieces of good news claimed by the company were
immediately contradicted by the eyewitness accounts of the present journalists and
John Devens, the Mayor of Valdez, commented that the community felt betrayed by Exxon's
inadequate response to the crisis, in contrast to the promises that they would be quick to react
exactly in this eventuality
Eventually, Chairman Rawl was interviewed live
He was asked about the latest plans for the clean-up.
It turned out he had neglected to read these, and cited the fact that it was not the job of
the chairman to read such reports.
He placed the blame for the crisis at the feet of the world's media.
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Exxon lost market share and slipped from being the largest oil company in the world to
the third largest.
The "Exxon Valdez" entered the language as a shortcut for corporate arrogance and
What went wrong?
The company failed to show that they had effective systems in place to deal with the
crisis - and in particular their ability to move quickly once the problem had occurred was
not in evidence
They showed little leadership after the event in ensuring such problems would never
They quite simply gave no evidence that they cared about what had happened. They
appeared indifferent to the environmental destruction.