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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

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quality issue and implications in china
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
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

sk ii introduction3
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


quality product issues
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


quality product issues5
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
quality products issues
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

quality products issues7
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


Other Foreign Production Quality scandal In China:

  • Kraft’s GM Incident
  • Johnson&Johnson Baby Care Probe
  • Lipton Tea Fluotin incident
  • Fenbid Bad for Hearts
Why Chinese consumers are increasingly more demanding about 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
2 rapid income growth
2) Rapid income growth
  • 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
3 culture and customers perception
3)Culture and customers’ perception
  • 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
4 discovery of unsafe products
4) Discovery of unsafe products
  • 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)
q2 is this a sign of overzealous consumer advocates a conspiracy theory double standards

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

is this a sign of overzealous consumer advocates
Is this a sign of overzealous consumer advocates?
  • Ans: Yes!
  • The rising fear due to a lot of quality problem

e.g.: Mengniu

  • 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
is this a sign of overzealous consumer advocates18
Is this a sign of overzealous consumer advocates?
  • The uncertain rumors stimulate customer overreaction
  • E.g: Mandarin orange in Shantung
mandarin orange
Mandarin orange
  • 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

is this a sign of a conspiracy theory
Is this a sign of a conspiracy theory?
  • Ans: It is possible
  • The conspiracy theory is unconfirmed but caused some speculation
conspiracy theory
Conspiracy Theory
  • 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
sk ii
  • 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

is this a sign of double standards
Is this a sign of 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

is this a sign of double standards24
Is this a sign of double-standards?
  • Some local company is protected by local government.
  • E.g.: Sanlu
  • 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
is this a sign of double standards26
Is this a sign of double-standards?
  • Chinese customer give more support to local enterprise due to nationalistic ties
  • E.g: Coca Cola buy HuiYuan juice group Limited
coca cola buy huiyuan
Coca Cola buy Huiyuan
  • 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


3) 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.



- 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

where are we now31
Where are we now?
  • After the crisis or scandal

 go back to the Prepurchase stage

IMC strategies:

  • Advertising
  • Sales promotion
  • Public relations
  • Personal selling
  • Direct marketing

Use the strategy: Celebrity Endorsements

Celebrity: Chinese celebrity (黃聖依 Huang Shengyi)

  • On television

- reach large audience

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

  • On magazine

- reach our target customers

public relation
Public relation

-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

public relation35
Public Relation

-Third party endorsement

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

sales promotion
Sales promotion
  • Sale at discount price
  • Samples

- give free sample to customers

- reduce customers’ risk

- may also cooperate with magazine

  • 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

rebuild customers confidence to our products
Rebuild customers’ confidence to our products
  • 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


long term action
Long-term action
  • 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


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


Crisis management:

Short-term: the Use of IMC


quality control

establish a responsible image



  • 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