Disgraced Giants

With the addictive scandal of McDonald’s, the problem of multinational’s images was once again put under the limelight.

The foreign-funded enterprises, especially the multinationals, has gained drastic development in China’s big market, abundant resources and cheap labor force, since they got into China after the reform and opening up. In return, the multinationals provide the Chinese people with diversified products which improve their living standards. For the Chinese, the multinationals and their products once represented quality and credit. The multinationals used to be the decent and responsible companies in China.

However, recently, the reports about foreign companies’ bribery, product quality problem and being irresponsible are frequently heard, which brings great damages to the multinationals’ corporate images in China. Some multinationals have to think of how to improve their images in China.

The Endless Events

On July 19, 2010, the Shanghai TV reported such an event: a middle-aged lady living in Shanghai bought a Nokia mobile phone. However, something wrong happened to the phone’s battery which could only last one day after being fully charged. This lady sent the phone to the service center of Nokia for repair. However, things became worse after that the keyboard of the phone didn’t work. This time the workers in the center said that there was no component for replacing because the production of this type had been stopped. Nokia also rejected the lady’s request of replacing or paying back for the mobile phone.

“Nokia is a big enterprise and I bought its product for its fame. I can not believe that such a big enterprise can be so irresponsible,” said the lady when being interviewed.

Nokia is not the only enterprise having dissatisfied the customers with quality problem and bad service. It was reported this March that HP was sued by 60 consumers for the quality problems of the laptops they bought. But HP’s respond was even and cold, which triggered the consumers’ complaints and criticism.

Till this June, when HP found that problem of laptops has spread to all over the world, this US computer company had to recall 900 thousand problematic laptops from the global market. But HP’s pride left very bad impressions for the Chinese consumers. All the ones having bought the problematic laptops said that “they will not buy HP’s computers forever”.

In July the addictive scandal of McDonald’s broke out. By the end of this July, McDonald’s had not given an official reply to this event. They just reiterated that they didn’t add any over-the-counter addictives to their products.

In April 2010, the Shanghai Consumer Interest Protection Association published a report doubting the performance of Tide washing powder. P&G made a response immediately, saying that Tide washing powder completely conforms to the national standard. However, this was not the first time that Tide washing powder was under doubt. In 2008, the China Association of Surfactant Soap and Detergent Industries published 10 kinds of unqualified washing powder, in which one of the Tide washing powder was included.

Previously, the body wash for babies of Johnson & Johnson (J&J) was reported to have dioxane which can cause cancers. J&J denied the possibility of mixing dioxane during the production process and refused to take the body wash having problems out of the shelves.

The multinationals’ frequent involvements in the bribery cases in China were also put under heavy scrutiny. According to Anbound Group, 64% of the 500 thousand bribery cases in China in the past ten years were related with multinationals. In March 2010, the US Department of Justice said that Daimler bribed the government officials in Russia, China, Turkey and some other countries in the last ten years to win big orders. A while ago, Siemens admitted that it had bribed the Chinese government officials.

This July J&J was reported to be involved in the corruption case of Zhang Jingli, former deputy director of the State Drug and Food Administration. A source said that J&J bribed Zhang Jingli to get the registration number for its medical products. This event cast a shadow over J&J which spread its name in China with “love and responsibility”.

The Reason of the Disgraced

Images

Apparently, the disgraced multinationals’ images can be attributed to the service, product quality and briberies. But the root lies in their attitudes towards Chinese market and Chinese consumers.

The experts say that the multinationals have been looking down upon the Chinese consumers. In the 1980s and 1990s, the Japanese companies were said to have this philosophy the first-class products were sold to the USA and Europe; the second-class products were sold to Japan and the third-class products were sold to China. The multinationals invested a lot of money in China, but they didn’t bring their best technologies, products and management in China, which caused many following problems.

In truth, every multinational attaches enough importance to the Chinese market. But most of them desire for quick returns. Therefore, the quality problems of the multinationals’ products are easy to see. Many multinationals didn’t make use of their international influence and great power to change the market environment in China; instead, they were affected by some negative elements of this market. In addition, in order to take the market as quickly as possible, the multinationals accelerated their paces into China to a very high level. Their productions were subcontracted to the other companies; their sale and services were done by the agencies; their brand publicity was taken by the public relationship (PR) agencies. The division of duties seems to be quite rational and effective. But the unfamiliarity, variability, specialty and amplitude of the Chinese market meant great test for the multinationals’ development and management ability. HP’s problem just proved the possibility of damages.

Moreover, the multinationals kept adapting themselves to the changing market in the 30 years and somewhat got tired of it. The symptoms are: a), the executives don’t pay enough attention to the brand building and the problems that could affect corporate images; b), the executives are busy with daily work and fail to follow the changes of local laws and policies, so the companies do some illegal things; c), the multinationals are not aware of competitors’ improved strength and don’t prepare well for the fierce competition; d), some of the multinationals’ executives are arrogant and ignore the customers’ need.

The improvement of Chinese people’s knowledge also gives them better cognition of the multinationals and they have higher requirements about multinational’s products and services. When the reform and opening up began in the 1970s and 1980s, the well-established companies like Volkswagen, Coca Cola and 3M got into China and became extremely popular. Because China’s productivity was very low at that time, the Chinese consumers liked or even worshipped the Japanese enterprises and their products.

The situation was continued in the 1990s. According to a report from the Samsung Economic Research Institute, the Chinese consumers still favored the foreign companies’ products and service at that time.

However, as the Chinese people became richer and more knowledgeable, the multinationals found that they were no longer superior to the Chinese domestic companies. Prof. Park, head of the Samsung Economic Research Institute said that the cancellation of the favorable taxation conditions for the foreign companies in 2008 was the best proof of this point.

“The multinationals are no longer the favorite of the consumers, who have attached more importance to the minutia of service and quality,” said Prof. Park.

In addition, the Chinese media are able to find and report the mistakes of the multinationals and the Chinese government also exerts stricter supervision and regulation over the multinationals.

How to Improve the Images?

Nowadays, the multinationals have to face the problem of improving their corporate images. Previously, the PR activities and philanthropy became the main measures to improve the corporate images.

Each multinational’s branch in China has its own PR department, which is responsible for contacting the clients and government officials. However, some multinationals’ PR departments overdid their duties and caused some bribery cases.

In the philanthropy, the multinationals didn’t perform very well either. In the donation ceremony for Wenchuan Earthquake and Yushu Earthquake, the famous foreign companies, like Microsoft, Dell, Samsung, donated quite a small amount of money compared with the Chinese state-owned and private enterprises. Some people even worked out the “List of International Misers”, McDonald’s, Microsoft, P&G, Nokia and so on “unfortunately” appeared in the list. Though the Minister of Commerce Chen Deming said that “the list was not fair for the foreign companies”, it could still manifest the Chinese people’s dissatisfaction towards the multinationals’ “miserliness”.

In truth, it is wrong to blame these companies’ miserliness. Different from the Chinese domestic companies which like high profile, the foreign companies prefer to be engaged in philanthropy through community activities and social welfares. But their “low profile” can not be known to the Chinese people. Therefore some experts suggest that the foreign companies should improve their contact with Chinese people to make them know their culture of philanthropy.

Nevertheless, in today’s China, donation is not enough to improve the corporate image. Dr. Wang Lingyi from the Shanghai Academy of Social Sciences, said: “The Chinese legal system has seen great improvement. The industrial standard is also catching up with the world level. Therefore, simple PR activities and donations are not enough to improve the corporate images.”

Now a company’s image mostly lies in the corporate social responsibility. “The multinationals introduced the concept of corporate social responsibility into China. The most fundamental standard for a responsible corporate citizen includes the honest operation, fair competition and humanism working condition. However, some multinationals fail to fulfill their responsibility in China,” said Dr. Wang Lingyi.

In June and July 2007, IPSOS Group based in Paris launched the online survey named the “Multinationals in Chinese Eyes”. The result showed that 34.2% of the respondents thought the Chinese enterprises outperformed the foreign companies in fulfilling social responsibilities; 73.1% of the respondents were quite dissatisfied with the multinationals’ “moving the businesses and factories with pollution to China”. In addition, 82.5% of the respondents blamed the companies planning to make false financial results.

From it we can see that the Chinese people’s interest in foreign companies has been moved from their products to their commitment to environment, sustainable development and the return to the society.

According to a survey in January 2010, 95% of the interviewed multinationals were not willing to disclose their investment into the corporate social responsibilities. They just said that they had such investments each year and 75% of them said that the investment was not fixed.

Starbuck’s way of improving its corporate image may be a good example for the foreign companies in China. The company regularly organizes its staff and customers to do some community services and have these reports posted on its website. In addition, the company has introduced some kinds of Chinese tea and redecorated some cafes with Chinese elements. The popularity of Starbucks can prove the importance of localization for a foreign company in China.

Therefore, attaching real importance to the Chinese market, producing the products the Chinese consumers like and trust, treat the Chinese consumers fairly and fulfilling their social responsibilities are key to improving the corporate images for the multinationals. The Chinese people have higher and higher requirements for the multinationals and their products. But the huge profit in the Chinese market is a good reason to do this!