Discuss how ADP should strategically manage and plan for crises in ways that minimise their long term impact on the business.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

1. Knowledge: Crisis management – the process by which an organisation deals with a major event that threatens to harm the organisation, its stakeholders, or the general public.
2. Knowledge: Definition of contingency planning.
3. Knowledge: Identification of appropriate responses to crises.
4. Knowledge: Act quickly.
5. Knowledge: Investigate causes of crisis.
6. Knowledge: Recall products.
7. Knowledge: Stop production of faulty products.
8. Knowledge: Public relations activities.
9. Application: Reference to accidents at Factory Q as example of potential crisis.
10. Application: What evidence is there of prior planning or even a sense of urgency over the current safety issue e.g. delay in discussion at Board meeting.
11. Application: Issue of compensation for customers.
12. Application: Issue of whether ADP response is ethical – insisting that customers sign letters.
13. Application: Asif's assertion that admitting responsibility would be expensive mistake.
14. Application: Stop selling the hairdryers.
15. Analysis: Is this a crisis? Not yet – but it has the potential to become one. Risk to consumers: personal injury. Risk to business: ADP could come under intense media scrutiny if the news 'gets out' which could result in loss of goodwill, brand image, customer relations and sales.
16. Analysis: Keep quiet and pay compensation: might only be a problem with a small batch of hairdryers so to recall them all would be unnecessarily damaging. Find out quickly how many units are likely to be affected – then decide on further action. This might prevent loss of quality brand image if all units of the hairdryer are recalled unnecessarily.
17. Analysis: Admit responsibility and recall all units, offering full compensation. This cuts the long term risk of 'covering up' the problem (legal action and lost sales/reputation) but there will be short term consequences as quality image will be hit, in short term. Employees might be more motivated working for an organisation that is seen to be operating responsibly.
18. Analysis: Importance of strategically managing and planning for similar contingencies will help to reduce the potential negative impact of them e.g. preparing employees and resources and training of PR employees for media communications.
19. Evaluation: ADP senior management not very stakeholder responsible e.g. workers in country Z and suppliers not happy so this is likely to influence the decision made.
20. Evaluation: Contingency planning and crisis management have costs associated with them - need to be compared with potential cost of not strategically managing/planning for negative events.
21. Evaluation: Contrasting short term versus long term impact.
22. Evaluation: Would help to know cost of recall.