Product Recall

One of the major crises which an organization can face is the recall of a defective product. Product recall crises should be a central consideration in the continuity plans of all organizations, particularly since the liability of organizations for their products is well-established in legal systems world-wide. The implications of a product recall crisis and product liability litigation are clear. Not only may an organization face the costs of legal action, the revenue losses from direct sales, the cost of public relations activities and the costs of redesign increase the expense of such crises. Moreover, the reputation of an organization and its brand may have further repercussions beyond the ambit of a single recalled product.[1] In being intangible, the effect of a crisis upon a reputation is immense. It should be remembered that a corporate and product reputation takes many years of investment and effort to build, yet little time to destroy. Reputation may be central to an organization's competitive advantage. Even where an organization has managed to recall products without injury to customers, the organization will find itself in an inferior competitive position than prior to the recall. [2] The effect of a product recall quite clearly threatens the continuity of an organization's operations. The causes of such recalls may arise from supplier defects, errors in research and development, and poor manufacturing. During such a crisis, several functions of an organization undertake higher levels of involvement: legal affairs, in dealing with the threat or actuality of litigation; marketing, in its attempt to restore the image and reputation of the organization and its products; and the manufacturing function, in resolving physical causes of defects. Equally, services can face their own equivalents of product recalls. A parochial approach is counter-productive to prevention and recovery of business operations in the wake of a product recall and could indicate, inter alliance, negligence, unreasonableness and a failure to act with due care.[3]

Product recall is one situation which organizations and business try to avoid. Organizations don’t want product recall to transpire because it wastes financial resources and it tarnishes the identity of the company. For retailers product recall should be prevented because the financial resources they use in buying a product from manufacturers are wasted. Product recall also strains the relationship between manufacturers and retailers. Moreover product recall also changes the image of retailers to clients and manufactures. On the other hand product recall creates a better relationship between the client and the retailer. Through constant product recalls the clients can be given information on what products to purchase, in turn product recalls help the retailers determine what type of product has a tendency to be recalled and thus they will not waste effort in purchasing such kind of products from manufacturers. The product recall helps clients and retailers to be extra vigilant on products.

---

[1] Dominic Elliott and Brahim Herbane, Business continuity Management: a crisis management approach (London: Routledge, 2002), 27

[2] Dominic Elliott and Brahim Herbane, Business continuity Management: a crisis management approach (London: Routledge, 2002), 28

[3] Dominic Elliott and Brahim Herbane, Business continuity Management: a crisis management approach (London: Routledge, 2002), 31