Research Paper: Product Recalls

Pages: 12 (3035 words)  ·  Bibliography Sources: 5  ·  Level: College Junior  ·  Topic: Business  ·  Buy This Paper

SAMPLE EXCERPT:

[. . .] Thecost of obtaining the product recalls is an additional financial loss. The cost incurred to retrieve the products from distributors, retailers, and consumers also causes the business to loose finances.

The financial loss for recalling products is also observed in terms of the share value for the company. The business value loss is in addition to the direct loss incurred from product recalls. There are also some potential moderators as well that can reduce the impact of financial loss to a company. The business has to take care of various factors that can amplify or reduce the financial loss to the business. The moderators of financial loss are event specific as well as firm specific. The firm specific moderators are regarded as business reputation, size, diversified portfolio, and long terms liabilities of the business. The share price of a business is affected from these factors and at the same time the corporations with stable business portfolio and financial conditions are more likely to absorb the product recall financial backlash (Ganesan, 2012).

Loss of reputation:

According to Ganesan (2012) the strategy adopted by the business is relevant for handling the business related loss observed due to product recalls. The business is likely to incurheartyexpenses due to a large number of product recalls. Additionally the strategy adopted before the incident is as applicable in handling these issues as the event, and after event strategy to handle brand value. The presentation of the event and its handling strategy is also considered relevant in most cases. The business executives and higher management of a business prepares a crisis strategy to handle situations of product recalls.

There are preventative and preparations for product recalls should be considered central in handling the business effects. The responsibility of product recalls should be fully designated to a dedicated person in the business. The broad range of tasks for product recalls includes quality control processes safety issues, new product development, testing, traceability, and supply chain solutions for distribution channels is also important. The getting ready strategy carries a huge potential and capability to handle issue soft product recalls for a corporation. The effectiveness of different strategies in a particular business scenario should be considered in advance and nominal changes can be made according to the event requirements. The preventive strategies should also be given their due weightage in order to handle the negative effects on business reputation and value (Ganesan, 2012).

Legal and regulatory issues:

The legal and regulatory issues arising from the product recalls are also a considerable threat for the company. The first impact of the product recalls is to comply with the legal and regulatory issues. The authorities require a business to recall its damaged or potentially vulnerable products. The business ensures that the products are recalled and retrieved back in order to satisfy the legal requirements. The second most relevant issue is the potential threat of law suits in case the product has caused damage to any consumer. The legal claims also pose a financial loss as well as threat to the reputation of the business.

The business often tries to conclude the legal claims to be settled out of court. The court hearings as well as the media coverage of issue pose an increased damage to the business. In certain cases the companies contest these claims and appear to defend their position in law courts. However the regulatory agencies also get involved and ensure that a maximum protection is provided to consumers under legal jurisdiction. The consumer response as well as the investor's response to crisis situations such as product recalls is similar and these issues pose a threat to the business.

Handling of Product Recalls:

The product recalls are a routine case for pharmaceutical and food products companies. Additionally the large number of case studies in the market also provides an insight to handle such issues. The business develops a strategy for handling product recalls and as a result they prepare themselves for handling such situations. The technological advances have also enabled the business to incorporate techniques for maintaining data and necessary product information to help in cases of product recalls. The business is also likely to establish a crisis response teams. These teams are fully authorized to handle such situations. The supply chain networks are initiated to bring the faulty products back in events of such crisis. The crisis situation also demands a transparent operational strategy to facilitate in carrying out product recalls. The corporations compensate consumers, retailers, and distributors with various initiatives. The compensations given in response to the product recalls also tend to maintain the business position in the market.

Treatment of Recalled Products:

The recalled products should be handled efficiently and it should be ensured that the business incorporates a strategy to facilitate the business. The business crisis is increased in case the authorities investigate and find out that the business did not incorporated appropriate strategy to recall and dispose-off these products the fines and penalties imposed become one of the additional costs. The drugs and foods recalled according to class I segment should be incinerated according to the directive guidelines. However the class II, and class III recalls can be treated and sent back to shelves after the resolution of issues. The food business should take in consideration that the product recall is handled through efficient strategy. The recalled drugs are handled according to the company as well as regulatory procedures. The requirements for handling drugs and foods that are recalled are different to other recalls e.g. motor industry or electronics recalls. The product recalls are often a business initiative or an FDA request. The rare cases of FDA issuing an order to recall products are observed. FDA is required to issue and order under certain cases to recall products that not in compliance with the requirements. The medical devices facing recall are also considered a threat to the consumer's health. Therefore vigilance should be observed to address issues of incinerating these products.

Communications Strategy:

Product recalls require a detailed plan for communication as the business can encounter these issues at any given time. The communication plan for responding to the crisis situation similar to product recalls should be detailed and the personnel dedicated to handle these situations. The communication with in the organization as well as the external communications is important factors in handling the situation effectively. The test of an organization to have a complete communication plan is also related to the competence and skills of management. The higher management should prepare and keep a ready to respond policy for product recalls. The laid out outlines for a business to handle product recall situations helps in efficiently and effectively handles these situations.

The communication strategy should include a clear message to handle its employees, logistics agents, distributors, retailer, and consumers. The message should be clearly articulating the company policy as well as the actions taken in order to correct the situation. The message should further provide a clear strategy to prevent such situations from happening in the future. The product recalls are also a sensitive issue with respect to the consumer health issues therefore the continuity of messages as well as timing of delivering the message. The communications strategy should be backed up with an active public relations strategy. The selection of communication channel should also be careful and carrying the element of effectiveness.

Conclusion:

The product recalls are a usual practice for business involved in various consumer products. The industries affected by these issues are mainly food and drugs related manufacturing organizations. The products of these businesses directly affect the consumer health and well-being. Therefor they are supposed to under strict scrutiny of law enforcement agencies and regulator closely monitoring any malfunctions of the products. The usage of technology for eliminating issues related to product recluses including use of RFIDs has created a room for cost saving and increasing traceability.

The effects a business faces in case of product recall are in terms of financial loss, loss of business credibility, and legal complications. However a corporate strategy for eliminating these issues with an appropriate response can reduce the impact of such events as well as enable the business to face these losses with minimal effects on its credibility. The investor relations and consumer confidence is the most hit area of a company which can also cause a long-term effect. The business should establish a diverse product portfolio and limited liabilities to tackle such issues especially in food and pharmaceuticals sector.

References:

Ganesan, S. (Ed.). (2012). Handbook of Marketing and Finance. Edward Elgar Publishing.

Germann, F., Grewal, R., Ross Jr., W.T., & Srivastava, R.K. (2013). Product recalls and the moderating role of brand commitment. Marketing Letters, 1-13.

Granata, L.A., Flick Jr., G.J., & Martin, R.E. (Eds.). (2012). The seafood industry: species, products, processing, and safety. Wiley. com.

Sodhi, M.S., & Tang, C.S. (2009). Modeling supply-chain planning under demand uncertainty using stochastic programming: A survey… [END OF PREVIEW]

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