A Trilogy of Unfortunate Events in China: Reflecting on the Management of Crises

A Trilogy of Unfortunate Events in China: Reflecting on the Management of Crises

Zhang A. Long (China University of Geosciences, China), William Crandall (University of North Carolina at Pembroke, USA) and John Parnell (University of North Carolina at Pembroke, USA)
DOI: 10.4018/978-1-4666-0276-2.ch019
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Abstract

In this paper, the authors address three recent organizational crises that have occurred in China; the SK-II cosmetic incident, the Sharon Stone comment on the May 2008 earthquake in China, and the melamine milk contamination crisis. Each held significant notoriety due to the crises involving major companies and an assortment of negative outcomes. After presenting an overview of each case, the authors outline their reflections on the management of these crises in relation to their cultural context.
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A Trilogy Of Unfortunate Events In China

The SK-II Crisis

The SK-II product line of cosmetics is manufactured by Proctor & Gamble (P&G) in Japan and distributed to stores in Australia, China, Hong Kong, Japan, Korea, Malaysia, Singapore, Taiwan, the United Kingdom, and the United States. In the United States, the product line is available through Saks, with a market comprising high-end consumers.

The SK-II crisis began on September 14, 2006, when authorities in South China’s Guangdong Province detected chromium and neodymium in a type of SK-II cosmetic. Because these metals can cause skin irritation and disease, they are banned in all cosmetics in China. Sales of SK-II in China represent less than seven percent of the brand’s global sales (Crandall, Parnell, Xihui, & Long, 2007).

Initially, P&G denied there was a problem with the cosmetics, instead stating that it was working with the authorities to verify the validity of the findings. After the types of allegedly contaminated SK-II products increased to nine, the company agreed to offer refunds to consumers. To be eligible for those refunds, consumers had to bring the product back to the store of purchase with no less than one-third remaining, complete and sign a form acknowledging that the product was of good quality, and wait several weeks for a refund to be processed (China Daily, 2006a; Guan, 2006). On September 21, hundreds of Shanghai women sought refunds at P&G’s specified locations, only to become frustrated when told that their refunds would take three weeks to process. On September 22, P&G announced that it would suspend its refund operations due to security concerns. A few hours later, tempers flared as an angry group of consumers kicked down the front door at P&G’s Shanghai office. Media calls to P&G officials in Guangzhou and Shanghai were not returned. The company’s China website was reportedly hacked that weekend. Some retailers of the SK-II products began offering immediate cash refunds to customers after P&G suspended its refund program (China Daily, 2006b, 2006c).

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