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Exxon Valdez

Many companies have faced a crisis during their history, whether due to external forces beyond their control, through their own failings or management problems, or a combination of the two. Only a few, however, come to personify corporate irresponsibility through one pivotal event. Such a one is Exxon's experience with the Exxon Valdez.

What happened

In 1989, the Exxon Valdez oil tanker, entered the Prince William Sound, on its way towards California. In spite of the fact that the weather and sea conditions were favourable and the Bligh Reef clearly marked on the maps, 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 probably cause was established that the Captain and many of the crew had been drinking alcohol in considerable quantities.

What did the company do?

According to most observers, too little and too late. The action to contain the spill was slow to get going. Just as significantly, the company completely refused to communicate openly and effectively. The Exxon Chairman, Lawrence Rawl, was immensely suspicious of the media, and reacted accordingly.

Shortly after the accident had taken place, and the world's media had piled in to begin extensive coverage, a company spokesman pointed to the existence of procedures to cover the eventuality - procedures which the TV shots showed were demonstrably failing. When asked in Rawl would be interviewed on TV, the response was that he had no time for that kind of thing.

Meanwhile the operation on the ground was getting nowhere fast. Around 240,000 barrels had been spilled, with another million still on the ship. 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.

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 communication. The media clamour became so hostile that eventually Frank Iarossi, 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 fishermen.

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 they had been quick to give of how they would react in exactly this eventuality.

Eventually, Rawl deigned to go onto television. He was interviewed live, and 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. Exxon's catastrophe was complete.

Cost and benefit

The consequences for Exxon of its two-pronged disaster - the spill and its environmental consequences, alongside its disastrous communications - were enormous. The spill cost around $7bn, including the clean up costs. $5bn of this was made up of the largest punitive fines ever handed out to a company for corporate irresponsibility.

The damage to the company's reputation was even more important, and more difficult to quantify. However, 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 damage.

Conclusion

The features that made Exxon's handling of the crisis a failure included the following:

• 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 showing their commitment to ensuring such problems would never happen again
• They quite simply gave no evidence that they cared about what had happened. They appeared indifferent to the environmental destruction.

The Exxon Valdez spilled 11 million gallons of crude oil into one of the most pristene and beautful places in the world. It covered over 700 miles of coastline. It was heart breaking. Thousands of animals died immediately; the best estimates include 250,000 to as many as 500,000 seabirds, at least 1,000 sea otters, approximately 12 river otters, 300 harbor seals, 250 bald eagles, and 22 orcas, as well as the destruction of billions of salmon and herring eggs.The effects of the spill continue to be felt today.

Crisis need not strike a company purely as a result of its own negligence or misadventure. Often, a situation is created which cannot be blamed on the company - but the company finds out pretty quickly that it takes a huge amount of blame if it fumbles the ball in its response.

One of the classic tales of how a company can get it right is that of Johnson & Johnson, and the company's response to the Tylenol poisoning.

What happened

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 might be.

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 protection.

As a result, Johnson & Johnson developed the tamperproof packaging that would make it much more difficult for a similar incident to occur in future.

What did Johnson & Johnson do?

Once the connection was made between the Tylenol capsules and the reported deaths, public announcements were made warning people about the consumption of the product. Johnson & Johnson was faced with the dilemma of the best way to deal with the problem without destroying the reputation of the company and its most profitable product.

Following one of the guidelines of protecting people first and property second, McNeil Consumer Products, a subsidiary of Johnson & Johnson, conducted an immediate product recall from the entire country which amounted to about 31 million bottles and a loss of more than $100 million dollars. Additionally, they halted all advertisement for the product.

Although Johnson & Johnson knew they were not responsible for the tampering of the product, they assumed responsibility by ensuring public safety first and recalled all of their capsules from the market. In fact, in February of 1986, when a woman was reported dead from cyanide poisoning in Tylenol capsules, Johnson & Johnson permanently removed all of the capsules from the market.

How did Johnson & Johnson re-introduce the product to the market?

Once the product was removed from the market, Johnson & Johnson had to come up with a campaign to re-introduce its product and restore confidence back to the consumer.

1. Tylenol products were re-introduced containing a triple-seal tamper resistant packaging. It became the first company to comply with the Food and Drug Administration mandate of tamper-resistant packaging.(Mitchell 1989) Furthermore, they promoted caplets, which are more resistant to tampering.

2. In order to motivate consumers to buy the product, they offered a $2.50 off coupon on the purchase of their product. They were available in the newspapers as well as by calling a toll-free number. (Mitchell 1989)

3. To recover loss stock from the crisis, Johnson & Johnson made a new pricing program that gave consumers up to 25% off the purchase of the product. (Mitchell 1989)

4. Over 2250 sales people made presentations for the medical community to restore confidence on the product. (Mitchell 1989)

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.

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 an incident.

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.

Conclusion

The features that made Johnson & Johnson's handling of the crisis a success included the following:

• 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

AS if Iceland does not have enough problems, McDonald’s has just announced the closure of its three restaurants there and said it has no plans to return.

Apparently, most of the ingredients used by McDonald’s in this crisis-hit country are imported from Germany and the franchise holder would have to raise prices by at least 20% to produce an acceptable profit.

The story was important enough to make it to the front page of the Financial Times on Oct 27.

According to the report, for McDonald’s to stay profitable in Iceland, the Big Mac there would have to be priced above US$5.75, which is what it costs in Switzerland, home to the most expensive Big Mac, according to the Big Mac index.

The Big Mac index is published by The Economist as an informal way of measuring the purchasing power parity (PPP) between two currencies and provides a test of the extent to which market exchange rates result in goods costing the same in different countries.

You can get a good exposition of how this index works, including its limitations, by referring to Tan Sri Dr Lin See Yan’s column on July 25 entitled “Burgernomics and the ringgit”.

Since this column is not into heavy economic stuff, I was more interested to find out where the most expensive and cheapest Big Macs are to be found.

As of February this year, the most expensive burgers were in Norway (US$5.79), Switzerland (US$5.60), Denmark (US$5.07), Sweden (US$4.58) and Eurozone (US$4.38).

Now, here’s the interesting part. According to the same index, Malaysia (US$1.70) actually ranks No 1 among the five most affordable Big Macs, ahead of Hong Kong (US$1.71), China (US$1.83), Thailand (US$1.86) and Sri Lanka (US$1.95).

To be frank, I am not a real fan of fast food but when I am overseas and am at a loss as to what to eat, it is quite comforting to be able to step into a McDonald’s, KFC or Pizza Hut outlet, and order familiar items.

We also have to understand why some of our overseas friends do not like to be too adventurous with our wide array of Malaysian hawker fare, especially when they are on a short trip. There’s nothing worse than having to repeatedly run to the toilet because their stomachs are not accustomed to our delicious, spicy stuff.

Still on the same subject, I am trying to figure out why the fast-food joints are increasing the number of their 24-hour outlets.

In my neighbourhood, they compete with the Syeds and other 24-hour teh tarik outlets, and for the life of me, I cannot imagine anyone preferring a snack plate of original recipe chicken over a piping hot bowl of sup kambing in the hours after midnight, or a Big Mac over the Ramly burger sold at the roadside stall.

But they have obviously done their research, and I suppose my preferences are fast being overtaken by more global taste buds. That may well impact on the Burgernomics figures eventually, since prices are determined to a large extent by supply and demand.

I like to think that I’m doing my bit to keep Malaysia in the top ranking for most affordable Big Macs – by sticking to my teh tarik and roti canai during EPL matches.

Quoted from: http://biz.thestar.com.my/news/story.asp?file=/2009/11/2/business/5012387&sec=business

My comment:

Owh! Big Mac kat Malaysia rupanya dah dikira sangat murah. Tapi masih tetap mahal bagiku... >.<

McDonald's closes in Iceland as currency collapse takes a bite out of Big Mac profits

By Gudjon Helgason and Jane Wardell, Associated Press Writers On 3:41 pm EDT, Monday October 26, 2009

REYKJAVIK, Iceland (AP) -- The Big Mac, long a symbol of globalization, has become the latest victim of this tiny island nation's overexposure to the world financial crisis.

Iceland's three McDonald's restaurants -- all in the capital Reykjavik -- will close next weekend, as the franchise owner gives in to falling profits caused by the collapse in the Icelandic krona.

"The economic situation has just made it too expensive for us," Magnus Ogmundsson, the managing director of Lyst Hr., McDonald's franchise holder in Iceland, told The Associated Press by telephone on Monday.

Lyst was bound by McDonald's requirement that it import all the goods required for its restaurants -- from packaging to meat and cheeses -- from Germany.

Costs had doubled over the past year because of the fall in the krona currency and high import tariffs on imported goods, Ogmundsson said, making it impossible for the company to raise prices further and remain competitive with competitors that use locally sourced produce.

A Big Mac in Reykjavik already retails for 650 krona ($5.29). But the 20 percent increase needed to make a decent profit would have pushed that to 780 krona ($6.36), he said.

That would have made the Icelandic version of the burger the most expensive in the world, a title currently held jointly by Switzerland and Norway where it costs $5.75, according to The Economist magazine's 2009 Big Mac index.

The decision to shutter the Icelandic franchise was taken in agreement with McDonald's Inc., Ogmundsson said, after a review of several months.

"The unique operational complexity of doing business in Iceland combined with the very challenging economic climate in the country makes it financially prohibitive to continue the business," Theresa Riley, a spokeswoman at McDonald's headquarters in Oak Brook, Illinois, said in a statement. "This complex set of challenges means we have no plans to seek a new partner in Iceland."

McDonald's, the world's largest chain of hamburger fast food restaurants, arrived in Reykjavik in 1993 when the country was on an upward trajectory of wealth and expansion.

The first person to take a bite out of a Big Mac on the island was then-Prime Minister David Oddsson. Oddsson went on to become governor of the country's central bank, Sedlabanki, a position that he was forced out of by lawmakers earlier this year after a public outcry about his inability to prevent Iceland's financial crisis.

Lyst plans to reopen the stores under a new brand name, Metro, using locally sourced materials and produce and retaining the franchise's current 90-strong staff.

Ogmundsson said it was unlikely that Lyst would ever seek to regain the McDonald's franchise with Iceland still struggling to get back on its feet after the credit crisis crippled its overweight banking system, damaging the rest of its economy, last October.

"I don't think anything will happen that will change the situation in any significant way in the next few years," Ogmundsson said.

It is not the first time that McDonald's, which currently operates in more than 119 countries on six continents, has exited a country. Its one and only restaurant in Barbados closed after just six months in 1996 because of slow sales. In 2002, the company pulled out of seven countries, including Bolivia, that had poor profit margins as part of an international cost-cutting exercise.

AP Business Writer Jane Wardell reported from London. AP Retail Writer Ashley Heher contributed to this report from Chicago.

Quoted from: http://finance.yahoo.com/news/Iceland-says-goodbye-to-the-apf-2609404079.html?x=0&.v=6

My comment:

Owh yeah. Big Mac is expensive. Big Mac = McDonald. Thank God KFC franchises in Malaysia ade owned by Malaysian now.

Sekarang dah kurang busy. mari ambil peluang ini untuk update blog.

Before ADwPR 09

2 minggu aku yg sebelum ini adalah minggu2 yang paling sibuk. Tak lupa juga 1 minggu sebelum cuti raya. I got presentations almost every two days and several datelines to meet. Belum masuk task aku as a Special Task committee - Multimedia presentation, prepare excuse letter, parking lot reservation, prepare tag, souvenirs, souvenirs giving, prepare kit for participants, prepare program books, find photographers, registration table. Thanks sangat2 to Pub n Pro to take in charge of the registration and thanks sangat2 gak to Sponsorship bureau sebab partially take in charge of the souvenirs. Kawan2 yang melihat to-do-list aku berasa pelik:

"Er.. Jai, knaper kau kena buat multimedia dgn excuse letter wei? pelik dowh. Bnyk sgt ke task Secretary and Prep&Tech sampai ko kena buat kerja diorang?"

Bile buat checklist ape yang dah buat dan yang belum buat, Ta Daa... sampai 2 pages to-do-list aku.Tak cukup tidur aku jadinye. Ini of course dah jadi benda biasa bagi kebanyakan students. Ape yang membezakannya ialah berapa hari yang aku tak cukup tido tu dan kemampuan diri aku.

Setiap kali aku tengok to-do-list aku, aku rasa susah nak bernafas. 2 pages of to-do-list, and the program are just around the corner - this is too much for me. Beyond my capability. I can't do this all by myself. Doa2 harian aku mula penuh dgn doa2 untuk mencari kekuatan untuk melakukan semua ini.

Kisah Tag

Yang ni Emilia menjadi saksi. The final part yang aku buat dlm tag tu ialah cover belakang tag. aku tulis phone number sumer head committee. Masa tu dah pukul 12am. Mata dah ngantok. Emi pon dok menunggu dgn tabah tag aku sehingga siap di HS Cafe. Tengah2 taip nama sumer komiti - dah siap taip n design dah pon. Tibe2 semuanye hilang. Dari A sampai Z. Ya ampoooon.... Terus aku jadi segar. Ape aku da tekan? Adoi. Last2, aku suro Emi baca sumer nama komiti dan phone number, aku taip laju2. So akibatnye page belakang jadi hentam keromo. Capitalize dan yang tak capital habis campur adok. Maaf ye kawan2. huhu.

Kisah souvenir

Aku rasa aku dan komiti aku dah over budget beli souvenir. total up, kitorang dah habiskan RM200 just for souvenirs. Ya Allah. Dapat claim ke tak nanti. Kesian kat salah sorang subcomm aku. at least kalau dah dapat claimkan budget untuk dia dulu pon, aku dah sangat bersyukur. Yang aku kecewa kat sini ialah at the end of the program. Aku dapati ada pulak souvenir yang lebih. Ya Allah sedihnya aku tengok souvenir tu. 2 souvenir tu total cost RM60. Nanti dapat diclaim ke tak tu?

Kisah program book & backdrop

Alhamdulillah. program book aku memuaskan ramai pihak. Sangat2 berterima kasih kepada semua yang buat grammar check. Yana. Sir Aznan. Mira. Brape banyak kali buat grammar check and editing. Sentiasa ada silap. Itu aku anggap sebagai kelemahan diri aku. Grammar check yang terakhir dilakukan pada waktu maghrib by Mira. Huhu. Ni part yang best nie. Dari siang buat grammar check tak de pon yang perasan aku tulis tarikh salah kat program book tu - 13 August. Padahal program 8 Oktober. nasib baik la aku suruh adik aku buat final check dgn Mira malam tu, walaupon Sir Aznan dan Yana dah lepaskan program book tu. (Masa tu aku kat luar tgh beli hadiah untuk rector. Aku mintak adik aku - which is one of the committee members to handle the grammar checking) So aku rasa mira atau adik aku la yang betul kan tarikh tu pakai fotoshop (bukan aku sebab aku ade urusan lain ketika itu - membeli hadiah untuk rector)

From one issue to another (How fool of me)

Next day on the morning, aku terlintas untuk tukar desktop wallpaper laptop yang akan digunakan sepanjang program ADwPR 09. Sebab current wallpaper time tu ntah ape2. So aku tak de pulak design any specific wallpaper untuk hari tu. Aku pon dengan la la la nye ambik je cover page program book (seperti gambar diatas) yang ADE KESILAPAN PADA TARIKH (13 AUGUST 09) UNTUK DIJADIKAN WALLPAPER PADA HARI PROGRAM 8 OCTOBER TU. Aku langsung tak sedar tarikh wallpaper tu salah. Aku telah diinform pada malamnye. But it was very lightly informed until aku betul2 terlupa tentang isu tarikh silap itu. Damn how stupid I am. If kalau korang tanya what will be the main reason of my recklessness, aku rasa kerana aku terlalu letih ketika mendesign program book tu. Malam sebelum tu pon aku dgn adik aku tak tidur buat program book. (which is aku dah tak ingat dah bila kali terakhir aku dapat appropriate sleep)

Aku harap semua pihak dapat memaafkan aku. Ntah la ape komen Dr.Norbaiduri bile baca backdrop tu. Takut gile aku nak jumpa dia for the next time. Tu belum lagi Rector dan Shameem Abd Jalil. Kesian committee2 ADwPR 08 yg berkerja keras untuk lihat Opening ceremony ADwPR 09 berjalan lancar. Kesian Sir Aznan dgn Yana yang tengah duduk sebelah rector time tu. Ape la agaknye perasaan diorang. Oleh itu aku ingin melakukan public apology di sini kepada semua yang telah terlibat dalam program ADwPR 09. I will pay more attention on this issue in the future.

Some task left

Ok. Some task left. Certificate, excuse letter, (again, why me doing the excuse letter? secretary is so busy or what?) and to conduct a post-morterm. I will try my best to finish everyting by next week.

Thanks for reading. Dah lama aku tak buat entry panjang2.

To all muslims, hopefully this is a better Ramadhan for everyone compared to previous years. I would like to take this opportunity to wish "Selamat Hari Raya Aidilfitri" and "Maaf Zahir Batin".

Maaf ku pinta dari hujung rambut hingga ke jari kaki terakhir. Kite kira 0-0 dan marilah kita buang yang keruh, ambil yang jernih. Sekian...

Tadi bukak facebook, ade update terbaru dari Big Apple. Big Apple dah officially release their first commercial ad! Comel je. 17 saat. huhu... Congratulation Big Apple. I'm looking forward to watch your PSA someday. Tema xnak kalah. "Now you know what angels eat". hahaha... All the best!

The left side is the Malaysia Brand Logo, and the right side is the International Brand Logo

Hari ini aku berbuka puasa dengan beberapa senior aku di Jaya Jusco Wangsa Maju. Seperti biasa, aku pasti sempat singgah unutk beli Big Apple sebelum berbuka. Aku menyatakan kepada mereka bahawa aku bangga jadi penggemar Big Apple sebab Big Apple produk Malaysia. Mereka tidak percaya. Hai... Akak, bukak la website Big Apple kak... semuanya diterangkan dengan jelas kak... Geram betol rasanye kalau ade yang tak percaya. huhu...

Tekan gambar tu. Aku nak korang baca ape yang tertulis kat image tu betol2. Big Apple is originated from Malaysia. Untuk maklumat yang lebih lanjut, sila layari website mereka di Bigappledonuts.com. Satu lagi untuk pengetahuan umum, Big Apple is a healthy food. So, kalau korang tak makan donut Big Apple dengan alasan "Manis la. Tak elok untuk kesihatan", than I think your reason is not valid.