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Communication Implications for Quality

Control, Outsourcing and Consumer
Relations
 
 
 

r  
 

omas te
ank
et food

ootpaste
attel toys

r   
 

oy safety and product safety
Quality control wen outsourcing to Cina

oy safety inspection processes
 h |



r  
 r  
 

Involved over 21 million 
e Recall is particularly
toys, most made in Cina alarming since attel, known
ue to lead paint, poorly for its strict quality controls, is
designed magnets considered a role model in te
r      toy industry for ow it operates
anufactures over 800 in Cina.´ - A
million toys annually r     
(isney, Harry otter, 1997: Global anufacturing
Fiser rice, Barbie) rinciples - etical standards at
r |   factories
 percent of its toys are 2007
op 100 Best Corporate
manufactured in Cina Citizens (attel #92)
Owns  Cinese factories
  !

 

e C C is a federal agency tat monitors te

safety of ,000 products.
uggests standards. Companies are expected to
comply.

e C C can inspect, monitor, prosecute and
fine, but its budget is limited.
"#
 : companies must report a
defect/recall witin 24 ours of discovery.
"#
 : stipulates legal lead toxicity levels
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$ !

 

attel¶s website states tat:

r Children¶s health, safety and well-being are our

primary concern.´
r ³We could damage our consumer¶s trust if we sell
products that do not meet our standards.´
r ³We will meet or exceed legal requirements and
industry standards for product quality and safety.´
 
 #


r  

80 percent of U. . toys are made in Cina

. billion in toys are exported to te U. . from Cina annually
 percent of attel¶s toys are made in Cina

r % 
 
  #&'
 

upply cain likened to intellectual property.´
Cinese appy wit crappy´ mentality

r   

177 recalls since 200 were of products
made in Cina
 
( #
 ) 
*

r 
 
attel often outsources batc testing´ to factories
temselves
attel elps contractors build inspection facilities.
Reality: can¶t ceck all
    


· billion toys are sold per year in te U. .

< 1% are recalled

r  +!!

lost sales, damaged reputation, diversion of resources,
increased customer support, treat and expense of litigation
r |

$ · recalls since 1998
  ,h 
-../( -

Involved 10 million ride-on toy veicles: Fires, electrical

malfunctions
C C mandated te recall after conducting inspections from
µ9 to µ98
attel was investigating,´ but didn¶t comply wit te 24-our
C C regulation
attel said C C timeline unreasonable.´
Needed to conduct an internal investigation
first.
Fined
1.1 million by C C in 2001
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r   r 0 
orked wit te C C to elayed reporting to te
launc an external media C C: 1. monts
blitz rematurely sifted blame to
CEO Eckert apologized Cina
to parents in a video
posted on website
New Corporate
Responsibility
organization
New tree-point safety
ceck system
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$ +1 

r h

Eac crisis is unique and requires a unique response
r  ,   
Assess te reputational treat of a particular crisis and
apply te appropriate response strategies:
r ictim´ - low reputational treat (‰se denial strategy)
r Accidental´ - moderate reputational treat (‰se diminishing
strategy)
r reventable´ - ig reputational treat (‰se rebuilding
strategy)
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Recalls were a preventable crisis:

requires rebuilding strategies
r   r 0 
ortification:
e CEO
enial tactic: sifted blame
publicly apologized on
television and online to Cina
Compensation: attel iminising tactic: said
offered coupons media and government
attel igligted its overly magnified te crisis
stringent inspection process
and ow it will improve
going forward
 _ %
 

r Assume tat attel's crisis is ig level and requires

"rebuilding" strategy. id attel appropriately apply tis
strategy? If not, wat sould it ave done differently?
r How can attel redirect negative media attention to
ensure te recall crisis turns into a competitive
advantage?
r uppose tat in 2008 a attel manufacturer operating
in Cina is found to be using lead paint. How sould
attel respond from a corporate crisis communication
standpoint?
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$ +1 
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r h
  #

An issue is a penomenon or trend tat gains a public's
attention and directly involves an organization
r E.g. uman rigts or environmental sustainability
r Can be political, social, regulatory or legislative
r Can be potential, emerging, current, crisis and dormant level
Current and crisis issues place te most strain on a
corporation
Issues managers constantly scan te environment to
anticipate issues-driven crises before tey break.
Often, corporate communicators will intervene in an issue
during te potential or emerging stage


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o prevent a circulating issue from becoming a crisis,

corporate communicators sould:
r Asses te worst tat could go wrong and become te
most visible
r Assess wic issues would make te corporation most
vulnerable and wic are most urgent
r rite questions, answers and resolutions for every
possible crisis scenario
r lan wat to do and wat to say during te first critical
ours following te start of a crisis
r Have a strategy to contain and counteract
r Influence issue-related policy in favor of te company
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$% 
 
 

Environmental scanning reveals tat quality control

and outsourcing are crucial issues. y?
Recalls ave existed as a toy company sortcoming for
decades.
As companies move manufacturing abroad, te media,
lobbyists and consumer groups ave focused increasing
attention on quality control.
0 percent of te recalls in 2007 were of products
manufactured in Cina.

e melamine pet food and tootpaste contamination
crises in spring 2007 eigtened concern over food and
drugs manufactured in Cina.
 _ %
 

r Has tis issue been building over a long period of time?

r id attel learn from past mistakes, like its andling of te
ower eels recall? Considering its istory, was attel's
2007 communications plan for a quality control/product
safety crisis adequate?

r
o avoid repeat recalls, ow sould attel andle

outsourcing issues? How sould it manage Cinese
suppliers and contractors?
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r  

 r 
# 2
 

tocks dropped, too ost additional safety info
Recall and toy safety on web
Q&A pages Hotlines
Increased te frequency
IA conference wit
and rigor of safety Cinese toymakers in
cecks Guangzou
r 
 Accreditation criteria for
inspection labs
tock value dropping
awsuits, allegations of Facilitate int¶l comm
failure to disclose recall obby for federal
in timely manner legislation
 +1
  ) 
*

r  
 r 


··% will buy fewer toys
tis oliday
4% will avoid toys
manufactured in Cina
8% of parents affected
by recalls will avoid toys
manufactured in Cina
enate Appropriations
Committee earing
House Energy and
Commerce Committee
earing
Bot aim to legislate
tigter restrictions on
imported goods
Global policing body
elosi calls for
resignation of U. .
roduct afety Regulator
  #



r attel adapts its definition of trutfulness to matc its

interests at a given moment.
r By waiting over a mont to make a potential toy azard
public, attel evaded te trut.
r ome investors suspect te reporting delay was meant to
falsely bolster stock sares.
r Framed communication to make Cina appear culpable
for te magnet recalls in order to minimize reputational
damage.
r On te oter and, posting news releases and video
interviews on its website kept publics informed and
created a degree of transparency and onesty.
  #
 
,
:
 
r attel as pledged action:
A corporate responsibility department
a revamped safety audit system run by tird party inspectors
a tree-point safety ceck system
r Now it must follow troug
r Holding periodic action evaluations are
recommended
r Evaluations sould be made public
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r attel sould improve two-way, interpersonal communication
wit two key customers:
parents
sopkeepers/retailers
r Corporate communication campaigns sould increase
interaction wit consumers online: cat rooms, message boards,
social media.
r opkeepers ave te most face-to-face contact wit
consumers. attel sould equip tem to answer consumer
questions compreensively and accurately.
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o plan for tomorrow, attel sould:
r Anticipate future crises by scanning domestic and international
consumer watc groups and industry websites.
r Understand domestic and international markets. Be ready to
circumvent any safety related issues tat are brewing.
r Ensure tat eac country receives products eld to te same
safety standards. ub-standard products sould not be dumped
on developing markets.
r Generate goodwill wit its international customers. Understand
cultural nuances.
r Ensure tat every single one of its factories worldwide
implements te tree-step safety ceck process.
  # 
 !

h   _ 

r An in-ouse communications team oversaw all

communication during te recalls.
r
e team consulted experts from  (web services),
AOR and localized public relations agencies
operating in international markets.
r Upper management played a visible role. CEO
Robert Eckert appeared on television and te website
and gave media interviews.
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+1 
 

Actions in good times and bad sould convey te

company's caracter:
r anagement--Eckert expressed attel's empasis on family
wen e spoke to parents from is perspective as a fater.
r
oy retailers--Can communicate attel's caracter during a
crisis.
r uppliers--attel sould extend its corporate culture to its
suppliers, demanding te same standards bot at ome and
overseas.
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  ( 
r attel prematurely placed disproportionate blame on
Cinese manufacturers.
r attel appeared defensive and fearful.
r In reality, by exposing flaws and coming clean early
on, attel may fare better tan its competitors.
r
e panic may sift to te industry as a wole, and to
oter toymakers, tus alleviating attel's public
scrutiny.
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 #
1.
o reassure parents tat cild safety and product
safety come before te bottom line.
2.
o collaborate wit Cinese suppliers and
government agencies to adopt realistic quality
control solutions for wic it can be eld
accountable.
o communicate tese actions to its
stakeolders.
·.
o improve international, cross-cultural
communication.
4.
o delicately and deliberately manage and balance
its supplier, customer, governmental, media and
investor relationsips.