Wal-Mart China “Pork Scandal”: When Pork is not “Green”

October 16, 2011

Employees of a Wal-Mart in Chongqing, China were accused of mislabeling pork as organic.  The pork was not organic and should have been considered “green.”  Two employees were arrested, another 25 detained, and seven confined to their homes.  A total of 13 Wal-Mart stores were temporarily closed in the area.  Wal-Mart opened stores in Chongqing in 2006 (Wal-Mart has been in China since 1996) and has been 21 times in that area for selling uninspected or expired food and false advertising.  As one analysts observed:  “Wal-Mart has a record of other incidents related to its credibility in China and not in Chongqing alone.  The latest incidents added even more pressure on Wal- Mart and drive consumers to its competitors.”

Wal-Mart has been fined 3.65 million yuan for ($574,000) for the mislabeling.  That is five times the value of the mislabeled pork that was sold.  This may seem like an extreme reaction for mislabeling pork as organic.  However, this crisis is set against the backdrop of some very serious food scandals in China including banned additives in pork, dyed buns, hormone injected watermelons that exploded, and the melamine-tainted dairy products in 2008 that killed six children.  Wal-Mart is not responsible for any of those problems but the number and severity of the tainted food concerns has raised food safety as a “hot” issue in China.  Western firms have come under very close scrutiny over food issues due to this increased government vigilance.  Some claim even closer scrutiny that Chinese firms:

“Foreign supermarkets get targeted more for this,” said Paul French, founder of Shanghai-based market research company Access Asia. “I am sure Chinese supermarkets do it too but they have a level of protection at the moment from the government that does not want too many scandals among local food-related companies after the bad formula, tainted milk and endless scandals.”

The Chinese consumer market is massive.  Wal-Mart wants to be a part of that market to increase its profits.  However, Wal-Mart faces strong competition from other competitors including China’s Sun Art, China Resources Enterprise, Tesco (UK brand), Metro (German brand), and Carrefour (French brand).  Wal-Mart is second in Chinese market share but Carrefour is close behind.  Mis-steps such as the pork scandal could allow Carrefour and others to overtake Wal-Mart in China.

Here is Wal-Mart’s initial statement on the situation:

SHENZHEN, China—Walmart China issued a statement regarding recent store closures in China. The company was ordered to close several stores in Chongqing because of the mislabeling of pork products. The Chongqing Administration of Industry and Commerce says Walmart mislabeled regular pork as “green,” or organic, pork.

The statement follows:

“We were officially directed earlier today by the Chongqing Administration of Industry and Commerce (AIC) to temporarily close some of our stores in Chongqing for a period of 15 days.

We believe the closure has come about as a result of a recent investigation in some of our stores in Chongqing due to the “green pork” incident by which the rights of consumers were infringed.

We have fully cooperated with the investigation and focused upon the fastest implementation of corrections suggested by the local AIC. Some Walmart associates have been detained by the Chongqing Public Security Bureau (PSB). Walmart China is cooperating fully with the PSB and doing everything possible to conclude the investigation.

A taskforce from Walmart China headquarters was sent to Chongqing to work closely with the respective stores and the local officials of the AIC immediately after notification of the investigation several days ago. They are leading the Walmart commitment to ensuring our stores in Chongqing follow Walmart’s strict inspection and management policies and taking all necessary steps to ensure this does not recur. Walmart is committed to protecting the rights of consumers and will spare no efforts in this regard.

The closure of the stores in Chongqing for the next 15 days will allow us time to focus on implementing corrective actions.

Walmart is an important part of the Chongqing community, and we care deeply about the well being of the community with over 3000 of our own associates living and working in Chongqing. We are deeply sorry for the inconvenience this may cause our customers and are even more determined to meet the service expectations they have of us.”

Questions to Consider

1.  Based upon SCCT, what type of crisis is Wal-Mart facing in China?  What evidence lead you to that conclusion?

2.  Based upon SCCT, evaluate Wal-Mart’s initial crisis response.  Did it fit with the prescriptions from SCCT?  Why or why not?

3.  Does it matter that Western brands get closer scrutiny about food safety in China that local brands?

4.  What impact will Wal-Mart’s past violations have on the current crisis and why?

5.  What other advice would you give Wal-Mart about responding to this crisis and why?

6.  What makes this situation a crisis for Wal-Mart?  For consumers in China?

7.  What role might risk communication play in this situation?


Puffins, China, and Olympics a Threat to Curling?

February 20, 2010

Usually an increased interest in a sport is a good thing.  More revenues for companies involved in the sport and sponsorships for successful teams.  The Nagano Winter Olympics 1998 Winter Olympics introduced curling as an Olympic sport.  Unless you watch the Olympics or live in an area where curling is popular (not than many locations really), you probably know very little about the sport.  However, being an Olympic event helped to increase the popularity of curling beyond tradition locations such as Canada, the UK, and other European locations.  The growth in curling has been centered in Asia.  China has become a curling powerhouse and looks for the gold in Vancouver 2010 as their women’s team is the defending world champions.  But popularity is not necessarily a good thing for curling.

Curling involves sliding 40lb granite rocks down a sheet of ice toward a target.  Some liken the sport to shuffleboard on ice but curling is much more complex that that involving people with brooms strategically sweeping the ice.  The key to all of this is the granite rock.  You see not any old granite will do for elite curling (international competitions such as the Olympics and World Championships).  The elite stones are carved from blue hone granite.  The stones strength (curling stones do hit one another) and ability to not absorb water make them perfect for the sport.  But there is only one source for blue hone granite in all of the world, Ailsa Craig a 104-acre off the coast of Scotland.  For images of the the island try http://www.maybole.org/photogallery/ailsacraig/ailsacraig2.htm.  Kays of Scotland have exclusive rights to the island and its blue hone granite.  To learn more about the curling stones themselves visit http://www.kaysofscotland.co.uk/about.cfm.

So where do puffins fit it?  Puffins nest on Ailsa Craig.  In the 1960s the puffins and other native birds disappeared.  A government study found the problem, rats.  The rats had been brought to the island by the granite miners.  Ailsa Craig was declared a Site of Special Scientific Interest and in the 1990s all commercial activity was stopped.  Currently, Ailsa Craig is a bird reserve managed by the Royal Society for the Protection of Birds.  So Kays can no longer mine blue hone granite.  In 2001, Kays was granted a one day permit to take as much loose granite from the island as could.  They were not allowed to blast, the common way to extract granite.  Kays collect about 1,500 tons that day.

So there is a finite supply of blue hone granite at this time.  No elite curlers can use Welsh granite but that is not good enough for elite competition.  On average, 180 tons of blue hone granite are used per year.  A complete curling set-up costs around $30,000 so the expense holds down the demand.  A curling stone lasts from 30 to 40 years so there are replacement stones as well as those looking to enter the elite levels.  Estimates place the supply at from 10 to 20 years.  Kays is working to persuade the government to allow another harvest.  There is still plenty of loose stone and new, environmentally friendly blasting techniques have been developed.  Still there is no guarantee Kays will ever harvest blue hone granite from Ailsa Craig again.  A sport holds its breath as its main piece of equipment may become extinct http://sports.yahoo.com/olympics/vancouver/curling/news?slug=dw-curling021810&prov=yhoo&type=lgns

So, the packed 6,000 curling arena in Vancouver is both a happy and a frightening sight for international curling.  It is happy site as fans want to see curling and are very loud in their support of their teams.  Most are there to support the Canadian women’s and men’s teams.  But if the popularity of curling continues to increase, the supply of blue hone granite will be used up more quickly thereby hastening the crisis that it the end of blue hone granite. 

Questions to Consider

  1.  Kays is engaging is issues management to allow another harvest.  What are some key points they will have to address in this effort?
  2. How does this case illustrate the effects of globalization?
  3. Who could Kays recruit as allies in their issues management effort and why might each ally be helpful to their effort?
  4. Should national curling associations be trying to promote the sport?  Why or why not?
  5. What actions can be taken to protect the blue hone granite supply for elite level competition and how can the various national curling associations help with that effort?
  6. What role can public relations play in trying to alleviate this looming crisis?

Cyber Attack Spurs Google to a Human Rights Stand

January 14, 2010

On Jan. 12, 2010, Google changed its relationship with China.  China is a massive market so it is very attractive to businesses.  There are more Internet users in China that there are people in the U.S.  So it follows that Google has been a part of the Chinese Internet market.  However, the Chinese government does have wide ranging control over businesses, including foreign businesses, that operate in China.  Google in China is not the same as Google in the rest of the world.  The Chinese language version of Google (Google.cn) was censored as per requirements of the Chinese government.  This practice dates back to 2006.  The censorship restrictions included what terms people could search and the web sites they could access.  The focus of the censorship involves issues related to governmental policies and challenges to them.  Many news and human rights sites were blocked along with information on the Tiananmen Square massacre (http://news.bbc.co.uk/2/hi/technology/4645596.stm)

So Google decide nearly four years later to stop censoring with a post to the Internet.  Here is part of that post:

“We launched Google.cn in January 2006 in the belief that the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results. At the time we made clear that “we will carefully monitor conditions in China, including new laws and other restrictions on our services. If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China.”

These attacks and the surveillance they have uncovered–combined with the attempts over the past year to further limit free speech on the web–have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.” http://googleblog.blogspot.com/2010/01/new-approach-to-china.html

As the part of the message notes, the change was due in large part to a cyber attack on Google traced to China.  The focus of the attack was the Gmail (Google e-mail accounts) of Chinese human rights activists.  Some 20 other companies experienced similar attacks designed to access information about human rights activists.  The groups Human Rights Watch congratulated Google for finally ending censorship nd taking a stand in China saying, “Google’s resolve to avoid complicity with such flagrant violations of freedom of expression and association deserves praise.” http://www.bloomberg.com/apps/news?pid=20601080&sid=a9RFgswPERxg

Clearly this is not the end of the story.  There will be reactions from the Chinese government to these actions.  Google may well leave the Chinese market and Google.cn could be dismantled. In addition to attempts to gain information about human rights activists, the cyber attack also resulted in the theft of proprietary information from Google.  It appears the cyber attack was state-sponsored and that was finally enough for Google to take a stand in China.

Questions to Consider

  1.  Does the tail of Google in China support the need for corporations to develop foreign policies (guidelines for how they will relate to foreign governments)?
  2. Would you argue this case is more about business or more about human rights?
  3. How might this incident help Google’s reputation?
  4. How could Google justify censorship in China for so long?
  5. What ethical implications do you find in this case?
  6. How does this case serve as an example of public diplomacy?
  7. What, if anything, has Google done previously to help promote human rights?

What Does it Mean when the Lights are Yellow and Red?

October 20, 2009

The Empire State Building has different color lights that can be lit to illuminate events.  For instance, the lights shine red, white, and blue around July 4th for the US holiday.  If you know the color system, you can tell about when a scene from a movie or television was shot when it shows the Empire State Building.  The building is not opposed to going international.  The lights have gone red, white, and green for Italian flag on Columbus Day and white, green, and orange for India Day.  Other countries honored in the past include Canada, Australia, and Ireland.

Protestors appeared In late September 2009 when the lights went red and yellow.  Bonus point if you know right now what those lights symbolized.  Not the spoiler:  it was the 60th anniversary of China.  Chinese Consul General Peng Keyu was the for the ceremony and noted he was “honored and delighted.”  He was joined by about 20 protestors who were not delighted.  They were protesting China’s occupation and oppression of Tibet.  They chanted “No to China’s empire, free Tibet now.”  http://news.yahoo.com/s/ap/20091001/ap_on_re_us/us_empire_state_building_china

Online, blogger/journalists questioned honoring a country that represses freedom of the press and restricts Internet access.  Lest we forget Google operates with filters in China at the behest of the Chinese government.  Even some New York politicians spoke out against the lights.  “Democratic Congressman Anthony Weiner of New York said the lights should not be used to pay tribute to what he called “a nation with a shameful history on human rights.” http://wcbstv.com/local/empire.state.building.2.1217995.html

Fox news noted in a story:

“Tourists were squirming as the city’s 102-story landmark — which gained a special significance for New Yorker’s after 9/11, when it again became Manhattan’s tallest building — was being converted into a shining red beacon for Chinese communism.” http://www.foxnews.com/story/0,2933,557823,00.html

The criticisms echoed concerns of the Olympics taking place in Beijing in the summer of 2008.  Remember how French protestors put out the torch on its relay through France.  The issues arise not just because of China’s policies but because of China’s rising prominence in the world.  China is economic and military super power that is difficult to ignore.  On the plus side, in countries like France and the US, people are free to express their concerns over China celebrations and remind people about the human rights issues.  The world political stage has many players and country’s leadership must be ready for mixed reactions.

Questions to Consider

  1.  If you worked for the management of the Empire State Building, how would you publically justify the lights for China?
  2. How did the lighting serve to help the Free Tibet groups?
  3. As a publicity event, how would you evaluate the success of the event for the Chinese government?
  4. Is it fair to take the lights for China as an endorsement of human rights violations?  Why or why not?
  5. How does the event illustrate the marketplace of ideas?
  6. How does the event illustrate globalization?

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