Crisis Management - Strategic Planning and Assessing Crisis Vulnerability

  • Crisis Management Overview:

    • PUB 421 Crisis Management, Week 4, 25.03.2025.
    • Covers strategic planning and assessing crisis vulnerability.
    • Key topics include the internal and external landscape, organizational learning, ethics, crisis communications, and taking action during a crisis.

  • Crisis Landscape: Risk Identification and Crisis Prevention:

    • Identifying warning signs is crucial but challenging.
    • Requires organizational and industry experience.
    • Environmental scanning is essential for threat identification and crisis prevention.
    • Example: An automobile manufacturer receiving an initial report of an engine fire.

  • Strategic Approach to Crisis Prevention:

    • Requires a strategic mindset with four key distinctions:
    • Comprehensive analysis of internal attributes and external factors.
    • Long-term and future-oriented perspective.
    • Distinctively opportunistic approach.
    • Involves choices and tradeoffs between different alternatives.

  • Strategic Approach to Crisis Management Model:

    • The model encompasses:
    • External Analysis (External Landscape).
    • Internal Analysis (Internal Landscape).
    • Strategy Formulation.
    • Strategy Execution.
    • Strategic Control.
    • Organizational Learning is integrated throughout the process.

  • Uncertainty and Crisis Potential:

    • Uncertainty is affected by:
    • Degree of Complexity.
    • Degree of Change.
    • Quality of available information.
    • Cosmology episode: Low uncertainty environments might not be as safe as perceived (Weick, 1993).

  • Managing Uncertainty:

    • Adapt to the environment:
    • Example: Local hospitals responding to crime.
    • Change the environment:
    • Example: Nissan’s anti-hail system (http://www.youtube.com/watch?v=dRPe7IvZDyI, http://www.msnewsnow.com/Global/story.asp?S=1628848&).
    • Buffering: stockpiling by department stores, forming a Crisis Management Team (CMT).
    • Imitation: mimicking a successful competitor.

  • Environmental Scanning:

    • Collecting and analyzing information about relevant trends in the external environment.
    • Cues should not be ignored (e.g., Royal Dutch Shell and Greenpeace – Brent Spar).
    • It should be an ongoing, continuous process (e.g., Dalkon Shield plastic urine contraceptive device).
    • It should involve objectivity (e.g., mining companies disregard for safety).
    • Determine which information requires attention (e.g., 2004 Asian Tsunami, https://www.youtube.com/watch?v=uAiIGd_JqZc).

  • Assessing Crisis Vulnerability:
    SWOT Analysis:

    • SWOT (Strengths, Weaknesses, Opportunities, Threats) is a strategic management tool.
    • Can be used to assess a firm’s crisis vulnerability.

  • Internal Strengths and Potential Crises (TABLE 4.1):

    • Extremely fast company growth: Loss of managerial control, defective products, poor service quality.
    • Unique differentiating product/service: Product/service defects may emerge later.
    • Charismatic organizational leader: Leaders not challenged, leading to financial ruin; may take on a godlike status.
    • Long history of successful performance: Criticism from stakeholders (employees, environmentalists, community, stockholders, government, lawmakers).

  • Internal Weaknesses and Potential Crises (TABLE 4.2):

    • Poorly trained employees: Industrial accidents, poor customer service, defective products.
    • Poor relationship with the union: Labor strikes, negative publicity.
    • Poor ethical orientation of top management: White-collar crime, cash flow problems, publicity issues.
    • Aging production facilities/equipment: Machine breakdowns, lost productivity, higher operating costs, industrial accidents, poor product quality.
    • Understaffed/nonexistent HR Department: Discrimination, sexual harassment charges, higher operating costs.
    • Haphazard safety inspections: Industrial accidents, increased workplace injuries, negative publicity.
    • Employee substance abuse: Increased industrial accidents, workplace injuries, product quality problems.
    • Lack of a crisis management team and plan: Slow/ineffective response to crisis events, negative public perception.

  • Domino's Pizza Example:

    • Domino's example (http://www.youtube.com/watch?v=TijGaUNOAA).

  • External Opportunities and Potential Crisis Events (TABLE 4.3):

    • Expand product availability online (brick-and-click): Denial-of-service cyberattacks.
    • Expand manufacturing facilities to another country: Risk of interference from the host country, potential government takeover.
    • Outsourcing manufacturing: Negative publicity, loss of domestic jobs, pirating of proprietary information, defective products.

  • Thomas Cook Example (brick and click):

    • Example of Thomas Cook (brick and click) (http://www.bbc.co.uk/turkce/multimedia/2013/03/130313bizthomas_cook.shtml).

  • External Threats and Potential Crisis Events (TABLE 4.4):

    • Changing demographics: Increased crime, vandalism, robbery.
    • Severe weather: Damage to buildings/facilities, interrupted sales revenue.
    • Dysfunctional customers/individuals: Workplace violence.
    • Poor-quality components from a supplier: Defective final product, consumer lawsuits.
    • Consumer activism: Consumer lawsuits, boycotts.
    • Extortionists: Product tampering, online denial-of-service attacks.
    • Earthquake, wildfire, natural disaster: Structural damage, injuries, fatalities.
    • Rumors: Loss of revenue, negative publicity.
    • Terrorism: Physical attacks, supply chain disruption, damage, injuries, fatalities.

  • Fight against high sugar beverages:
    (http://www.bbc.co.uk/turkce/multimedia/2013/03/130312bizabd_mesrubat.shtml)

  • Airbnb Homestay:

    • Airbnb example (http://www.bbc.com/capital/story/20160304-dogs-booze-and-chaos-is-renting-through-airbnb-worth-it).

  • Organizational Culture and Crisis Planning:

    • Crisis vulnerability is linked to cultural norms and assumptions.
    • Crisis management must be embedded in the organization's DNA.
    • Comparison between crisis-prepared vs. crisis-prone cultures.

  • Questions for Discussion:

    1. Warning signs preceding crisis events.
    2. Importance of quality information to crisis prevention.
    3. How crisis planning fits into strategic management.
    4. Environmental uncertainty and its management.
    5. Why some managers deny the possibility of a crisis.
    6. Embedding a crisis prevention mentality in organizational culture.

  • Chapter Exercise:

    • Perform a crisis vulnerability assessment using SWOT for the college or university.
    • Assess likelihood and potential impact of each crisis threat.