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Quality issue and implications in China. Group members: Yue Wenchao , Tom Qian Fang, Tracy Lam Chi Fai,Benson Mak , Edward Chan Waileung , Jonavon. SK-II Introduction. SK-II . a Procter & Gamble Beauty brand

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Quality issue and implications in china l.jpg
Quality issue and implications in China

Group members: YueWenchao, Tom

Qian Fang, Tracy

Lam Chi Fai,Benson

Mak, Edward

Chan Waileung, Jonavon

Sk ii introduction l.jpg
SK-II Introduction

  • SK-II

    .a Procter & Gamble Beauty brand

    .over 25 years ago in Japan

    .four years ago in the United States

  • Unique raw- material : Pitera

    .the 'Secret Key' to beautiful skin

    . Pitera is a single blend of

    . Vitamins

    . Amino acids

    . Minerals

    . Organic acids

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SK-II Introduction

  • Products

    .Skin care products :

    Purifying , Renewing, Brightening, Nourishing, Anti-Ageing , Finishing

  • Price

    .Average consumption around 700 RMB

    - It belongs to luxury skin care products in mainland Chinese

  • Place

    -- SK II’s counters are located in each big shopping mall in mainland China

  • Promotion

    -- Advertising

    --image representative

    --super movie stars


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Quality product issues

  • SK II Quality problem

  • Happened In 2005 in Nanjing

  • Happened in 2006 in Shanghai

  • SK-II products with heavy metals of chromium and neodymium in Mainland China

  • It injured consumer’s facial skin, after used this product, and consumer complainted SK II


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Quality product issues

-- Response from consumer and government

  • The products with quality problem have to be recalled by company

  • Chinese customers attempted to refund the money on fake SK-II

  • Those products are banned from import to China

  • Consumer very care about the quality of product in mainland, especial the product which close or relate their bodies and healthy

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Quality products Issues

Chinese quality-milk powder

--the milk powder contaminated with melamine sickens 1253 babies

After use the quality-milk products ,baby was silken—kidney calculi

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Quality products Issues

  • Response from consumer and government

    --the milk companies stop all production, recall and detection all milk products, destroy all quality products

    -- injury compensation, the babies who used products

    --Government will impose the product quality control

Destroy the quality milk powder---Sanlu

Consumer response: http://www.youtube.com/watch?v=-n35bCnivM0

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Other Foreign Production Quality scandal In China:

  • Kraft’s GM Incident

  • Johnson&Johnson Baby Care Probe

  • Lipton Tea Fluotin incident

  • Fenbid Bad for Hearts

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Globalization product quality and services from both domestic and multinational firms?

  • Global competitions among MNC more choices provided to consumers

  • Increase in information flows enable consumers to know more about the standard of products and services

  • Different kinds of consumer may vary in demand on quality, service or other factors  force companies to improve their products to increase their competitive advantages

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2) Rapid income growth product quality and services from both domestic and multinational firms?

  • Consumers demand not only a greater quantity of food, but also higher quality performance

  • Frugal consumption diminishes as income rises, the majority of consumers are not only satisfied on cost-effective, but value added on the product

    Price Quality

  • Consumers with higher incomes tend to purchase more expensive products with higher quality

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3)Culture and customers’ perception product quality and services from both domestic and multinational firms?

  • Mix of western culture

    • The introduction of western quality standards Increases awareness of product quality

    • E.g. ISO9000

  • Perception of domestic and multinational firms

    • China made products should not be bad in quality because of “FACE”

    • Imports should be good in quality because customer paid a higher price on it

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4) Discovery of unsafe products product quality and services from both domestic and multinational firms?

  • Customer became more and more impatient on quality issue after a series of quality accidents.

  • These incidents began as early as 2004

    • 2004 - Soy sauce made from human hair

    • 2005 - Sudan I Red Dye(蘇丹紅)

    • 2006 - Fake drugs & Poisonous mushrooms

    • 2007 - Potential carcinogen used in frying oil

    • 2008 - Baby formula & egg products with melamine(三聚氰胺)

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Q2. Is this a sign of overzealous consumer advocates, a conspiracy theory, double-standards?

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Is this a sign of overzealous consumer advocates? conspiracy theory, double-standards?

  • Ans: Yes!

  • The rising fear due to a lot of quality problem

    e.g.: Mengniu

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Mengniu conspiracy theory, double-standards?

  • Mengniu daily regional sales volume is decreased 98% after tainted milk was disclosed

  • The executive director of Mengniu drank the milk themselves to save the customer confidence of Mengniu

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Is this a sign of overzealous consumer advocates? conspiracy theory, double-standards?

  • The uncertain rumors stimulate customer overreaction

  • E.g: Mandarin orange in Shantung

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Mandarin orange conspiracy theory, double-standards?

  • There are rumors of warms inside the mandarin orange in Shantung

  • The demand of mandarin orange downturn rapidly

    - 300 tons a day dropped to 60 tons a day

    - Price dropped 70% to $0.8 per kg

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Is this a sign of a conspiracy theory? conspiracy theory, double-standards?

  • Ans: It is possible

  • The conspiracy theory is unconfirmed but caused some speculation

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Conspiracy Theory conspiracy theory, double-standards?

  • China took advantage of consumer response to the quality problem of foreign company in an attempt to retaliate some unfriendly country

  • E.g.: SK-II from Japan

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SK-II conspiracy theory, double-standards?

  • The relationship between China and Japan is poor at that period

  • At the same time, P&G halts sale of SK-II in China due to the harmful elements was found in the product

  • SK-II deny such issue and assure that their product meet the standard of quality and


  • Is there any conspiracy?

Customers wait in line to return SK-II skincare products in Shanghai

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Is this a sign of double-standards? conspiracy theory, double-standards?

  • Ans: Yes!

  • As mentioned above (the SK-II case)

  • We are suspicious that…

    China Government perceived that:

    Foreign Company, who makes profit by using Chinese resources, is needed to take more responsibility than local company

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Is this a sign of double-standards? conspiracy theory, double-standards?

  • Some local company is protected by local government.

  • E.g.: Sanlu

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Sanlu conspiracy theory, double-standards?

  • Sanlu food scandal is covered by Shijiazhuang Government over several months

  • It is discovered that there were the collusion between the government and Sanlu to conceal the issue

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Is this a sign of double-standards? conspiracy theory, double-standards?

  • Chinese customer give more support to local enterprise due to nationalistic ties

  • E.g: Coca Cola buy HuiYuan juice group Limited

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Coca Cola buy Huiyuan conspiracy theory, double-standards?

  • Huiyuan is consider as the national brand of China

  • Coca Cola plan to use 17.92 billion dollar to buy Huiyuan

  • 79.8% of people disagree and

    prefer drink water instead of

    Coca Cola

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3 conspiracy theory, double-standards? ) Recommend integrated marketing communication strategies to build up brand image and also shore up company image in China, after a crisis or scandal has occurred.

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  • Customers: conspiracy theory, double-standards?

    - lost confidence to our products

    - are more demanding about product quality

    Objectives of the IMC strategies:

    -Ease Consumers’ anxiety

    -Rebuild the brand image

    -Rebuild customers’ confidence to our products

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Where are we now? conspiracy theory, double-standards?

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Where are we now? conspiracy theory, double-standards?

  • After the crisis or scandal

     go back to the Prepurchase stage

    IMC strategies:

  • Advertising

  • Sales promotion

  • Public relations

  • Personal selling

  • Direct marketing

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Advertising conspiracy theory, double-standards?

Use the strategy: Celebrity Endorsements

Celebrity: Chinese celebrity (黃聖依 Huang Shengyi)

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Advertising conspiracy theory, double-standards?

  • On television

    - reach large audience

    - to let Chinese consumers know ‘we will take the responsibility”.

  • On magazine

    - reach our target customers

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Public relation conspiracy theory, double-standards?

-Invite media to visit our production plant

- increase the transparency of the production procedures

E.g. Foreign press is invited to visit to Mengniu dairy production line

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Public Relation conspiracy theory, double-standards?

-Third party endorsement

e.g. government endorsement on new non- melamine product

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Sales promotion conspiracy theory, double-standards?

  • Sale at discount price

  • Samples

    - give free sample to customers

    - reduce customers’ risk

    - may also cooperate with magazine

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Packaging conspiracy theory, double-standards?

  • With a label on the package

    - safe

    - only available after passing the safety test

    - White rabbit change package to clean the image of its tainted food

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Rebuild customers’ confidence to our products conspiracy theory, double-standards?

  • Enhance product quality and safety

    - strengthen the quality control on production and quality assurance on sourcing

Meet the international standard

Get the third party certification


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Long-term action conspiracy theory, double-standards?

  • Involve more charity

    - donation to some charities or Sichuan earthquake

  • Improve the transparency of the company’s responsive action

    - showing social responsibility to calm annoying customers

    - more emphasis on problem solving than the problem itself

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Conclusion conspiracy theory, double-standards?

China consumers is vulnerable

Quality problem could ruin the whole business of MNC

Key solutions:

Short-term: the use of IMC to calm customer

Long-term: Quality control

Charitable events

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Crisis management: conspiracy theory, double-standards?

Short-term: the Use of IMC


quality control

establish a responsible image

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The End conspiracy theory, double-standards?

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  • Mengniu: conspiracy theory, double-standards?

  • Sanlu: http://hk.news.yahoo.com/article/080915/4/889q.html

  • SK-II: http://www.chinadaily.com.cn/china/2006-09/22/content_694757.htm

  • Orange: http://news.sohu.com/20081026/n260247361.shtml

  • Huiyuan: http://www.chinareviewagency.net/doc/1007/4/5/0/100745040.html?coluid=5&kindid=110&docid=100745040&mdate=0914001817