Crisis Management - Types of Crisis

For management learners globally

Crisis Management: Types of CrisisTweet

A crisis is defined as ‘ a time of intense difficulty or danger'

A major crisis can affect the survival of a firm. A business must do its best to protect itself from any major crisis that may have an impact on the firm or its reputation within the market place. A crisis can come in many forms. These include:

Product or service fault. If a product is faulty and if this product puts customers at harm, then the firm must take action to deal with this. Toyota recalled millions of cars worldwide after discovering faulty brakes on a number of their vehicles. Massive recall rates and the fixing of the problem are now helping the firm with rebuilding their brand.

Strikes. Strikes can bring a company to a standstill and have a major impact on profitability. British Airways has recently settled dispute with their cabin union after major strikes over busy periods crippled the airlines capabilities.

Natural disasters. The massive earthquake in Japan in April 2011 resulted in many firms production capabilities being destroyed. As a result of this, many car mnanufacturers had run short of or had to wait longer for supplies. This can again have a serious impact on profitability.

BP's oil spill in America had a major impact on the image of the firm, with the President of America commenting on BP's handling of the affair. This resulted in people at top level losing their jobs

Paretos Law: If 80% of your business comes from 20% of your customers, then what would happen if half of these customers decided to leave? There is a danger that the firm may collapse. It is important for an organisation to move its reliance away from the few customers that contribute to the majority of the firms turnover.

Takeovers: If a firm is not doing too well and the share price drops dramatically, they may become subject to a takeover. If there is a threat of this then the firm has to organise an appropriate strategy which could include convincing shareholders not to sell the shares to the prospective company that wants to take them over.

As you can see crisis management must take into account a number of different factors and anyone of these factors can have an impact on how the organisation conducts its business.