7 examples of crisis in business

Some problems and dysfunctions in the life of a company are distinguished from others by their magnitude in all sectors of activity. Their impact is so great and the stakes are so high that they are called a crisis. When they occur, they undermine the entire organization, as was the case for the beer brand Corona in 2020, with the crisis related to the Covid-19 pandemic. To better understand the concept, we will give a brief overview with seven examples of crisis in business. But first, we will define the notion of crisis and expose the different categories that exist.

A crisis in business: what is it?

Bringing a generic definition to the notion of crisis in business is sometimes cotton. Indeed, it can be a one-off event or an accumulation of sudden events jeopardizing the stability and life of the company. A crisis in the company therefore affects not only the organization itself, but also the staff, who then find themselves in a palpable uncertainty. It is a dynamic process that takes place in four stages: incubation, triggering, acute phase and straightening.

Its particularity is, according to the definition provided by Roux-Dufort in 2000, that it requires the involvement of several actors and a great deal of immediate attention despite the strong climate of uncertainty. In this case, management must put actions in place with the available resources.

Pauchant goes further in 1998 in its definition by alleging that the crisis is capable of causing an interruption in the present or future operations of the affected company. As a result, it has an impact on individuals and communities at the physical, psychological and/or existential level.

It is not excluded that a company is the target of several simultaneous crises. These can come from internal or external origin to the structure.

The most frequent examples of corporate crises are:

• A management failure;
• A health crisis;
• A climate disaster;
• A situation of insecurity of employees,
• A merger after buying back the box;
• An overhaul of the company’s organizational structure.

A crisis differs from an ordinary problem in business mainly in terms of proportion. Very quickly, it can become unmanageable. In the absence of an effective solution, it can have irreversible repercussions, including the loss of the business. Fortunately, there are ways to prevent potential crises to make a transition while putting in place an action plan. .

Categorization of crises in companies

During their lifetime, entrepreneurs and their businesses face several types of crises. They can be classified into several categories. However, although some types are more recurrent than others, no studies indicate that one is more harmful than the others.

• The financial crisis: This is the most common type of crisis. A crisis is financial when it causes the company to lose turnover or value.

• The staff crisis: a little more subtle, this one concerns situations where a member of the team or any other person affiliated with the structure is involved in a shady situation. That situation could concern their private life or professional career. The manager is important in this type of situation.

• The organizational crisis: it is generally described as bad faith on the part of the company. Indeed, it is when the company withholds information, is guilty of exploiting customers, or delivers false information about its activities or products, etc.

• The technological crisis: it refers to the situations of technological crash.

• The natural crisis: it is not caused by the company or a member of its team. It has natural origins. These can be storms, earthquakes, floods, etc. The most famous is the crisis of the covid-19 pandemic, which has disrupted the daily lives of all organizations around the world, forcing them to adopt new ways of working in order to adapt.

Each of the categories of crises mentioned above requires a tailor-made solution. The latter is largely dependent on the size of your business. If it is too big, you will undoubtedly have a specific crisis unit for management. Its mission will be on the one hand to find solutions and on the other hand to preserve your reputation and the image of the company with the general public.

Crisis management: the different stages

Crisis management in business is not just about offering quick solutions or tinkering with a few homemade tricks to get out of this state of emergency. The complexity of the situation is also well expressed by Pearson and Clair in 1998, who argue that the search for crisis management solutions is based on three distinct approaches. These are psychological, socio-political and technical-structural ones. This is a perfect illustration of the four-step research framework used in this case and its implementation.

Prevention

The first step in crisis management, prevention is certainly the longest. This is also the incubation phase of the crisis. Any good observer will notice a subtle accumulation of malfunctions. From there, managers will then have to start researching and identifying the elements at risk for the company and be aware of the news of its sector.

First, it is recommended to install a permanent information center in the company. Its mission, like certain tools such as a trusted platform for employee reviews, will be to fish for information and if necessary its disclosure. Rumors could thus be detected and denied so as not to undermine the credibility of the company in the midst of a crisis.

For proper planning, it is important to know the environment in which the company operates. In other words, it is necessary to have knowledge of the information that is transmitted on the one hand, and to control the stakeholders on the other hand.

Thanks to the knowledge of stakeholders, it is possible to anticipate the nature of interactions. This is the secret to contain the crisis in order to quickly resume the company’s activities.

As for information and rumours, it is useful to collect them by monitoring the internet and the media, by collecting testimonials on employee experience inside and outside the company. By doing so, managers will be able to analyze them and better guide potential risks. This is the basis for designing good crisis communication plans.

Preparation

The second phase consists of planning the way out of the crisis. To achieve this, a team called the crisis unit is set up. It will have two main missions

The first is the assessment of the agency’s crisis potential. Be careful, this is not a part-time job . The members of the cell must be present 24 hours a day, 7 days a week, or their replacements in case of force majeure. To identify potential risks, you need to be open-minded. Nothing should be left to chance. They can use a typology of crisis.

Each of the potential crises identified must then be scripted so that the unit can use it to design a guide.

The second task of the crisis unit will be to develop a crisis management guide. This document will help the company to have a number of solutions in case of crisis. Once completed, the guide must now be integrated into company policies. As for the members of the cell, they must each have a copy of the crisis management guide with them.

In order to verify the validity of the guide, simulations must be made with examples of corporate crises. Preferably, these exercises are done with the different teams of the structure in order to prepare everyone for a perfect reaction in case of a crisis.

Reaction

When the crisis in business occurs, several factors cause it to widen both in amplitude and in time. It is at this level that the effectiveness of the previous two sentences is felt. Indeed, we are at the critical stage of crisis management here. The first knot is to be able to determine precisely the entry into crisis. As soon as this is done, crisis communication must be triggered. Everyone should be treated with care, mainly:

• Victims and their families;
• Financial partners (suppliers and subcontractors, shareholders);
• Media and social networks;
• The public;
• Employees.

The reaction to an example of a crisis situation in a company is guided by three important principles. The first is to keep the situation under control. You do not have to keep pace with rumors, but it is up to you to impose your pace of dissemination of information. The second principle is to put yourself up to the level of the stakeholders. This allows you to fully understand events and respond to them effectively. Finally, the third principle advocates anticipation. No decision should be made haphazardly. Everything is decided taking into account the possible consequences on potential risk factors.

During a crisis situation, such as workplace conflict management within HR, the company must appoint a qualified spokesperson to manage media communication. Thanks to them, the structure becomes the first to provide the information. This must be done frequently, without lies, without ambiguity, and with complete information. Even silences must be justified.

Adaptation

At this level, the company takes stock in order to relaunch its activities. In all objectivity, it will try to seize the opportunities offered by the crisis.

Of course, all this must be concluded with an evaluation of crisis management. This basically consists in considering the successes and failures of the various actions from the psychological, socio-political, and technical-structural points of view. This is also a good time to launch a satisfaction survey for your employees.

Adaptation occupies a predominant place in crisis management, because it is what will allow you to stem the bad atmosphere at work early on.

Examples of crisis in business

Every year, several companies face crisis cases. Here are some of the most famous examples of crisis communication.

H&M: an image crisis

It was in 2018 that H&M had to face a typical case of image crisis. The company faced a wave of 2.3 million negative tweets when it had just published an image of a little black boy wearing a green sweatshirt with a rather demeaning handwriting. Indeed, it read: “Coolest Monkey in the Jungle”. This was enough to raise a great wave of indignation among Internet users.

Dolce & Gabbana

Also in 2018, the famous Dolce & Gabbana brand also had its share of crisis, shortly after entering the Chinese market. In one of its commercials, we see a young Chinese woman eating pizza and also a large plate of spaghetti bolognese. A voice-over was in charge of telling her how to eat these Italian dishes properly with chopsticks. This video, at the origin of a real bad buzz in China, will cause no less than 120 million negative messages and tweets this year. Everything in said advertisement was indeed perceived as a real insult to Chinese culture.

Dale Of Norway

For the 2018 Winter Olympics, the Dale of Norway brand added neo-Nazi signs to the clothing of Norwegian athletes. Soon enough, it went around the world, to the point of ending up on the front page of the Daily Mail and the New York Times.

Greenpeace

This time, in 2014, it was with all the best of intentions that Greenpeace inscribed the words “Time for change, the future in renewable” on the Nasca site in Peru. This was not at all to the liking of the local authorities who saw it as a crime against cultural heritage. Indeed, the site in question is a protected archaeological site. It was a badbuzz that dealt a blow to the image of Greenpeace.

Facebook: the Cambridge Analytica crisis

We go back again to 2018 to Facebook, this time for one of the biggest scandals in its history. An investigation this year, following a data breach involving 50 million users, found that Facebook allowed Cambridge Analytica to use the data of more than 50 million users of the social network without their knowledge. The use made of this data would have made it possible to guide the votes of voters during the 2016 presidential elections in the USA. The consequences of this scandal continue to be felt at Facebook.

Danone: when innovation saves a brand

In 2012, the dairy company Danone experienced poor results. In response to this situation, the boss decides to make a risky bet by betting everything on the snack format. This is how Danio, the Greek yogurt of 150 grams and rich in protein will be launched. Very quickly, it became a great success and tens of millions of jars are sold in 2014. This has served as examples for major brands like Carrefour.

Spanghero: a new name for a new life

A large part of the population does not know what the true history of the Occitane ready meals brand is. In 2013, Spanghero suffered a scandal for recycling 42 tons of horse meat to cook dishes that should contain only beef. To get by, the company changes its name for the first time and becomes La Lauragaise. Subsequently, it became Occitane plats cuisinés, the name that is known to it today. This crisis management strategy , far from being risky, saved the life of this company. About 250 people still work there to make ready meals.