STARTEGIC ISSUES

Startegic Issues: Case Of Hewelett Packard



Startegic Issues: Case Of Hewelett Packard

Introduction

After more than a year of massive toy recalls, tainted toothpaste scares and poisonous pet food incidents, consumers around the globe are becoming increasingly reluctant to buy China-made goods. This should not be surprising because product quality and safety-related issues were commonplace in China long before they were publicized by Western media. During economic and social transformation, societies tend to become increasingly devoid of morals (Harvey, 1999), often allowing illicit and immoral business practices to prevail. If not effectively curbed, however, these practices will harm not only consumer well-being and collective credibility of Chinese firms, but also economic growth of the society as a whole. For legitimate businesses competing in international or domestic markets, it is important to comprehend the severe consequences of quality and safety-related recalls and devise strategic approaches to avoid their occurrences. This essay analyses the product recall issue from a strategic perspective by explaining how it is related to the problem of moral degradation in a transforming society and the consequences of product recalls to the strategic development of the firm.

Strategic Analysis Of Product Recalls

Safety and quality-related recall is, of course, by no means exclusive to Chinese products. Nokia's mobile phones had overheating problems caused by batteries manufactured by the supplier Matsushita. In 2006, Dell recalled more than 4 million PCs worldwide, costing an estimated $300m. Lenovo, Dell, Apple and Toshiba together recalled millions of Sony-made lithium-ion batteries in laptops sold worldwide (Campbell & Moltzen, 2006).

The severity and scale of safety-related recalls have recently been magnified due to heightened customer awareness, increased global and domestic competition and more stringent product safety legislations in advanced markets, particularly, in the USA, the EU and Japan. For example, the new European Product Safety Legislation, effective from November 2005, regulates that manufacturers are responsible for informing the authorities and consumers of any potential risk to consumers (Schepel, 2006). Additional reasons for this magnification of recalls might include the fear of China's manufacturing and exporting power in the minds of Western protectionists and the lack of experience and education of Chinese producers, especially medium and small suppliers who are new to both global competition and living up to international rules and standards. In addition, emotions ran high when the volume of recalls (especially with toys) reached more than 20 million units from one company alone and when the safety issues involved children, a vulnerable group about whom adult consumers are particularly concerned.

It is interesting, as acknowledged in the letter of apology by Mattel, that the 'vast majority of the products that were recalled were the result of a design flaw in Mattel's design, not through a manufacturing flaw in China's manufacturers' (Businessline, 2007). While this indicates that US firms are partly responsible for the errors that result in recalls, it also provides a context for assessing the subsequent vehement accusations aimed at China, as many in the protectionist crowd used these events for their own narrow and private ...