Managing in Troubled Times Case Study

`San Lu`, The Chinese Milk Products Manufacturer’s Product Failure: Managing the Crisis?

OR

Abstract:
This case study’s primary objective is to trigger a discussion on how to manage a crisis keeping in mind three very important facts: a) the crisis emanated from a product failure, b) the product is highly sensitive, i.e. it’s a food item and c) when the company in question comes from China, which has recorded serial product failures. Since the 21st century, China has been known for its food crises ranging from fake milk powder and pet food to duck eggs and toothpaste. In September 2008, the country witnessed another milk powder crisis that sickened and killed many babies. The case delves into the reasons for why the country is so prone to food crises. The latest crisis involved San Lu, one of the largest domestic dairy firms. In spite of being one of the largest and the most trusted dairy firms, San Lu’s milk powder was found to be contaminated with an industrial chemical, melamine. Unfortunately, there were other 22 firms involved in the crisis. To manage the crisis, San Lu made a much delayed product recall and issued a public apology. However, are these measures sufficient to undo the damage and rebuild customer trust in a country where food safety is consumer’s first priority and cutting back on dairy purchases is unavoidable? The case delves into the challenges that San Lu, the dairy industry and China would face in refurbishing its tainted image.

Pedagogical Objectives:

• To understand and analyse the reasons for serial product failures and frequent food crises in China
• To analyse the San Lu milk crisis and understand the reasons behind it
• To explore the ways and means available for San Lu to manage the crisis in the short term as well as the long term.

Keywords : Food supply chain, Crisis management, logistics, Brand image, Quality control, Regulatory system, Business ethics, Corporate Social Responsibility, Made in china, Corporate image, International trade

Contents:

• China's Economy: Size of the Market
• Food Crises in China: Lessons Never Learnt
• San Lu's Milk Powder: Product Failure and Accompanying Crisis
• Managing the Crisis