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Companies ... ...
    Milk, shoes and scandals
2005-07-18 06:41

Things have turned sour for China's dairy industry in recent times: Shoddy milk powder caused widespread alloplasia, and some deaths, among babies in Anhui Province last year; Bright's Zhengzhou subsidiary was found reprocessing expired milk last month; and even multinational giant Nestle was in May accused of using excess iodine in formula milk.

Public trust in big brands such as Bright and Nestle has been eroded in the wake of the scandals; and the declining confidence extends to big foreign and domestic brands in other industries.

Renowned companies should nurture their public image by providing top-quality products and services - that is the message from an on-line survey conducted by, a leading Chinese Internet portal, last month.

The frequent scandals also illustrate that the country's supervision system has been strengthened, respondents say.

The survey, covering 96,218 netizens, collected public views on corporate image building and protection; and provides valuable pointers to entrepreneurs and experts.

The survey dealt with, among other things, corporate governance, relationship with investors, interests of consumers, brand nurturing, crisis management, corporate social responsibility and relationship with business partners.

Regarding the number of the scandals disclosed, 56 per cent of the respondents believe these are just the "tip of the iceberg."

Meanwhile, a quarter of the respondents say that mistakes of companies in the public eye are easily detected.

"That explains why the public believe a large proportion of problems have not been found and why so many large Chinese enterprises and multinationals slumped into a public-image crisis," says Zhang Wenkui, vice president of the Corporate Research Institute attached to the Development Research Centre of the State Council and one of the formulators of the survey.

Along with market development and liberalization, Chinese consumers' awareness of their rights and interests is increasing; and they have evolved from placing blind and complete trust in international companies and old and famous brands to raising their concerns publicly.

"International giants and domestic conglomerates should pay close attention to guarantee the quality and safety of their products. It may take decades to establish a brand, but it can be destroyed overnight," says Zhang.

The discovery and disclosure of the scandals also reflect that China's market supervision has been improving over recent years, but it should be further strengthened to match economic development. Strict industrial standards and more detailed administration provisions should be rolled out.

Some 46 per cent of the respondents attribute the scandals surrounding multinationals mainly to lax supervision systems in China, and 20 per cent believe the major reason is that multinational firms adopt double standards when it comes to China.

Zhang indicates that the foreign behemoths usually have their own corporate codes, which, in general, are higher than China's national standards.

"But due to the lax supervision compared to the developed market and poor consciousness of Chinese consumers, some multinationals either slacken their standards or take undue advantage of the loopholes," says Zhang, adding that the punishment is not stiff enough to deter violators.

The survey also shows that a corporate's public image not only has a close relationship with the quality of products and services but also involves a series of issues, such as environmental protection, social responsibility, labour management, corporate ethics and business credit.

Some 11.2 per cent of the respondents list the forest-denuding case of APP, the world's leading paper products manufacturer, as the most serious corporate scandal last year, while 5.03 per cent believe Nike's ill treatment of its local factory workers should be ranked the top.

Meanwhile, how the companies dealt with the crises and communicated with the public affected their corporate image much.

According to the survey, 96 per cent of the surveyed netizens believe a company has the responsibility to stop production and sales when any problem is found; and the products should be recalled immediately.

And, 98 per cent agree that a responsible corporate citizen should inform consumers straightaway when it discovers a quality or safety problem.

Fang Shumin, mother of a three-year-old baby, tells China Business Weekly that she was shocked to know that the Nestle 3+ milk powder could harm babies due to excess iodine.

"The more astonishing thing is that this big international company did not inform the consumers at once and even refused take back the milk powder at the beginning. I will never buy any product of Nestle," says Fang.

The survey indicates that consumers are more tolerant of Nike because of the company's honest, open and sincere approach to accusations of ill-treatment of labour.

After the case was disclosed, Nike immediately made a public apology and has taken measures to solve the problem.

Around 45 per cent of the respondents say Nike's wrong-doings can be partially attributed to the imperfect labour law and poor supervision of local factories.

"Anyway, companies should pay more attentions to their role as corporate citizens. In addition to business performance, a firm must be honest and responsible to the public," says Zhang, adding that a sound public image will in turn support sound and sustainable development of a company.

(China Daily 07/18/2005 page3)


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