1. Tylenol’s
Rebound
Business Ethics
Tylenol’s Rebound
Presented By: 1.
2.
3.
4.
5.
Sahil Bansal, u110104
Subhradeep Mitra, u110115
Sherwin Trindade, u110108
Sukant Bisoi, u110118
Tapaswini Mallick, u110120
Xavier Institute of
Management Bhubaneswar
1

2. Case Highlights
•
One of the landmarks in the extensive growth of Johnson & Johnson
was the writing of credo that codifies the company’s ethical and
socially responsible approach to conducting business
•
Mc Neil, a Johnson & Johnson subsidiary, has a painkiller called
Tylenol.
•
Tylenol was a market leader in the OTC analgesic product category
with a market share of 35.4 % and contributed to 17-18% of the
company’s revenues
•
In 1982, a series of murders in Chicago involving tampering of Tylenol
capsules and lacing them with cyanide created a major crisis for the
company.
•
As a result, the market share came crashing down to 18.3%, millions
of bottles were pulled off the shelves and the stock prices of J&J
plunged.
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3. Case Highlights
• Poisoned capsules were from four manufacturing lots and they
were taken from different pharmacies over a period of
week or even month.
• The person responsible for the death of seven person spent few
hours in tampering and resealing the bottles with five or less
cyanide capsules and one with ten and then placing them back
on the shelves of five different stores in the Chicago area.
• The publicity about the cyanide laced capsules created a nation
wide panic.
• Johnson & Johnson received 1411 telephone calls within the 10
days of crisis.
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4. Tylenol’s Recall Decision
The two vital questions before Johnson & Johnson were
•
How to Save the Consumers?
•
How to save the product?
Johnson & Johnson executives had to weigh several certainties:
•
A recall would involve a loss of up to $100 million.
•
The loss was not covered by insurance.
•
News of a recall could so damage the product that Tylenol might never be able
to regain public confidence and its 37 percent of market share.
•
The news and loss would surely result in a dramatic drop in the company’s
stock.
•
The competition in the analgesic market was fierce. Competitors would try to
make Tylenol’s loss their gain.
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5. Universal Obligation
Immanuel Kant View:
•
Actions are not good or bad based on the purposes for which we act. Ask if the
basis of our action could become a �universal law� for all moral actors in
similar circumstances.
•
If it is wrong for any company to sell a potentially defective product, it is wrong for
Johnson and Johnson to do so despite the considerable cost of a recall. This rule
would prohibit seeing the consumer purely as a means to corporate.
John Rawls View:
•
People will choose proper rules when they are forced to reason impartially.
•
Management and stockholders of Johnson & Johnson would have reasoned
impartially, that is, they would never have put the consumer at risk any more than
they would have been willing to put themselves at risk!
5

6. Utilitarianism
• This approach to ethical reasoning is known as
Utilitarianism and was argued most strongly by John Stuart Mill.
• According to Mill, actions that produce the most good for the most
people are considered morally right.
• Following this course, the decision makers at Johnson & Johnson
would be forced to consider not only the interests of Johnson &
Johnson, but also the interests of the public at large. Determining
the greatest good for the greatest number would require a cost and
benefit analysis for all parties concerned.
• This method of reasoning probably would have required the
product recall. The protection of the millions of Tylenol users
represents the greater good and outweighs the financial costs to
Johnson & Johnson.
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7. Economic Personalism
• This approach has human dignity at its center.
• Ethical reasoning according to this approach will ask the
question: Which action most leads to the protection and
promotion of human dignity?
• This approach also includes the wisdom contained in the prior
methods. Universal obligation (Kant and Rawls) must be
respected because of our equal human dignity, and we must
consider carefully the ultimate impact (Utilitarianism) on actual
human beings when reaching a judgment.
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8. Tylenol’s Recovery Measures
The expensive measures taken included
–
Task force of top level executives set up
–
Massive product recalls of 22 million bottles
–
Media messages in the form of press conferences and TV
Shows.
–
Product Testing
–
Halting of all advertisements for a few weeks
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9. Tylenol’s Recovery Measures
•
Consumer Research to study company perception
•
Swapping of Tylenol capsules with Tylenol tablets
•
Developing tamper resistant packaging.
•
Sales promotion tools like Coupons and Discounts
•
Letter of backing from the Food and Drug Administration
•
These measures cost the organization tens of millions of
dollars.
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10. Resurgence of Tylenol
A resurgence of Tylenol by the end of the year can be attributed to
–
Johnson & Johnson management,
–
Compton advertising,
–
Public confidence in the product.
–
Media
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11. Crisis Management
•
The company’s proactive and extremely prompt actions
helped tide over the crisis, protect consumer interest and rebuild the brand.
•
US Consumer Product Safety Commission, R David Pittle
commented: “They did the right thing and they did it
promptly. Putting customer safety above all else can help
develop a loyalty from the consumer”.
•
The company accepted complete responsibility for the crisis
and incurred lot of expenditure for damage control instead
of being in denial mode. Their concern for public safety led
to mass recall and several other measures won them a lot of
empathy for their plight.
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12. Crisis Management
•
Even though the company had the easier option of
changing the product name and re-launching it, they
chose otherwise.
•
Because the tampering happened outside the factory
premises, the company could have put the blame on the
distributors or the retail outlets.
•
The company’s communication strategy was also aligned
towards creating public awareness, addressing safety
issues and offering a swap.
•
It also made itself available to the media for questioning.
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13. Crisis Management
•
Came out with a permanent solution of Triple sealed tamper
resistant packaging which shows their sensitivity to the issue
•
Customer loyalty – Because of Tylenol’s image as a brand endorsed
by medical practitioners and its ad campaign which showed real
life incidences, it commanded immense consumer loyalty.
•
In their PR campaigns the task force even decided to appear on 60
minutes despite initial reservations about its aggressive style of
questioning.
•
They adopted a direct stance which was much appreciated.
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14. Summary
• Johnson & Johnson understood its social responsibility to
protect persons, whose unique value is inestimable. Human
beings were put before things or money. This action was
consistent with the protection of human dignity, and therefore
the recall was a proper exercise of managerial freedom.
• Recognizing their social obligation, Johnson & Johnson acted to
protect people on the material level. Because they too were
fragile and morally inconsistent, the J&J executives could have
chosen otherwise. They recognized basic equality by not putting
their own good above others.
• In sum, they chose the action that most led to the protection
and promotion of human dignity.
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15. A look into Toyota’s response to product
defects

16. The Problem
• Recall on 02/11/09: To correct a possible incursion of an
incorrect or out-of-place front driver's side floor mat into
the foot pedal well, which can cause pedal entrapment.
• Recall on 21/01/10: It was after some crashes were shown
not to have been caused by floor mat incursion. This latter
defect was identified as a possible mechanical sticking of
the accelerator pedal causing unintended acceleration,
referred to as Sticking Accelerator Pedal by Toyota.
• Toyota also issued a separate recall for hybrid anti-lock
brake software in February 2010. NHTSA reported the total
no. of deaths as 37.

17. Effects of Recalls
• The worldwide total number of cars recalled
by Toyota stood at 9 million by end of
January’10.
• Sales of multiple recalled models were
suspended for several weeks as a result of the
accelerator pedal recall, with the vehicles
awaiting replacement parts.
• Numerous lawsuits were filed.

18. Root causes
• Toyota’s desire to supplant General Motors as the
world’s number-one car-maker pushed it to the
outer limits of quality control.
• Ingrassia, who has just authored a new book on
the auto industry, notes that in 2005 Toyota
recalled more cars and trucks than it sold; by
2007, Consumer Reports magazine stopped
automatically recommending all Toyota models
because of quality declines on three models.
• Delay in identifying the source of the problem –
sticky gas pedals/ gas pedals stuck to floor/ both.

19. Accepting Responsibility
• What went horribly wrong in Toyota’s case was
its reluctance to accept responsibility when the
problems first emerged. It took 39 deaths in the
USA for the top management to get out of denial
mode. Consumer confidence was dented and the
lack of effective communication and PR
aggravated the problems.
• Toyota now seems to have learnt a lesson in crisis
management, albeit too late.

20. Toyota lessons
• Reputation can be easily lost – and Toyota’s
reputation is indeed threatened – but it’s highly
unlikely the company will collapse completely.
• And that may be one of the one of the biggest
lessons for other companies as they study how
Toyota emerges from this recall crisis.
• The reality is that Toyota is positioned for
recovery about as well as it could be – owing, in
large measure, to the reputation for quality
products and corporate responsibility it has
developed over the last two decades.

21. The Recall of VIOXX
The Arthrite drug recalled by Merck and
Co. Inc(global Pharma major)
BE Presentation
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22. Introduction
• Merck and Co Inc is a global pharma company
which develop, manufacture and markets a broad
range of human health products.
• Vioxx was approved by FDA for the treatment of
pain, inflammation and stiffness caused by
arthritis.
• The drug was also approved for use of
rheumatoid arthritis in both children and adults.
• The product was promoted aggressively by Merck
and had emerged as one of the best selling drugs
for the company within a year of its launch.
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23. The Problem
• Early 2000, medical expert raised doubt about
the cardiovascular risks associated with Vioxx's
long-term usage.
• Study shows increased blood pressure in Vioxx
patients compared to patients who took the drug
Celebrex.
• Study shows twice the rate of serious
cardiovascular problems and five times the rate
of heart attacks as compared to Naproxen.
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24. The Recall
• September 30,2004 – Merck pulled Vioxx from
pharmacy shelves – the largest drug recall in the
history of Pharma
• Merck has been criticized for being slow to
acknowledge the health risk linked to the
consumption of Vioxx.
• The Food and Drug Administration (FDA) sent a
warning letter to Merck's CEO Raymond Gilmartin on
September 17, 2001
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25. Learnings
• Merck aggressively marketed an unsafe drug, under
the brand name Vioxx, without properly disclosing its
serious side effects to consumers. After the facts
were revealed, the company faced costly lawsuits,
angry investors and falling profits. This shows how a
disaster can occur when a company becomes greedy
and seeks undeserved profits at the expense of
ethics and social responsibility.
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26. Learnings
• Building a successful and competitive business
requires managers to make decisions that balance
profit and social responsibility. When business
managers run their business solely for profit,
problems will almost certainly occur. Such problems
can cause severe damage not only to the company's
customers but also to the company itself.
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