Losing Trust in a Global Market

I have not been updating the blog lately because I have been working on a complete redesign for my website, as mentioned in the last post.

 

There has been some very interesting news in the world of marketing and business in general over the past week.  And no, I’m not talking about the Dow hitting 13,000.  Lou Dobbs did a great piece on the pet food scare and how this can happen to the human supply chain as well.  It is now known that the tainted ingredient in question came from
China and the substance used, helps to give a false reading on protein content to make it appear higher.  Of course with higher content reading, they can sell more without having to actually put more in.  The end result has been the deaths of countless animals and untold more suffering and playing Russian roulette every time you go to the supermarket to get pet food.

 

The fact that the product came from China, doesn’t surprise me, for Americans, this practice may be shocking but for anyone familiar with Chinese business practices, you certainly wouldn’t be as shocked as the average Canadian or American was.  As Lou Dobbs pointed out, the Chinese control over 80% of the vitamin C market in the
US, raising prices in the process 5 fold and with no quality checks. 

 

If I were an executive using food ingredients from
China, I’d be sweating bullets right now wondering if my company will be the next one with its name all over the news with pet or people dying because of a Chinese company seeking profits at our health or lives as the expense. 

 

This is the dark side of globalization few will even mention.  Yes the news talks about all the great things it brings, but there are risks.  We still have the same rules of reality in play as we did before globalization; everything has a risk element, especially something that is essentially a fail theory that has proven so for 10 years.  Don’t believe me, go back to the 70’s and read the original idea of globalization, lower taxes, lower debt, better jobs, more quality time for the average worker were all promises.  Not one promise has been met, so it has failed and now your health is at risk too. 

 

As a pet owner, I’m appalled at the way our system for pet food works.  As a business person I’m frankly disgusted that the ducks are lining up to show that corporate greed is most likely the real cause of this issue unfolding.  As a consumer, it makes me even more wary about the promises that everything will be ok with globalization, this is proving we should slow down and do better management.

 

This all relates to marketing because marketing is really the link between the promise you make and the way in which you deliver it to the customers.  In the pet food situation, everyone failed, it’s a classic example in which no one kept their promise and just hoped nobody figured it out.  Well, we did, and I will not be surprised when lawsuits are brought up.  This is a shameful event for business as a whole because this does highlight what many companies do.  It may not mean the life of an animal, but I can tell you, I won’t even touch a MenuFoods product now.  I saw the conferences, heard the time line and there is no way they did enough to gain my trust back.  And I’m not alone.

 

Think about your company and if it were you, are you keeping your brand promise on all levels?  Chances are there is a broken chain somewhere, fix it before you become the next MenuFoods.  They have lost half their stock value and are underperforming the S&P by over 40%.  I’m still waiting for the sales figures, but my guess is, it’s just as bad.

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12 Comments

Filed under Branding, Business, Customer Satisfaction, Globalization, Marketing

12 responses to “Losing Trust in a Global Market

  1. freetochoose

    If a company is so worried about contaminated Vitamin C from China, why does it not buy its Vitamin C from the other 20% of the market that China has not cornered. Afterall, chinese Vitamin C is not that cheap (you point that out in your article). Buddy, that is how the market works.

    You talk about promises of globalization. Globalization is not some governement program like Welfare or Medicare, which has mandates promises etc. Globalization is freedom! When I spend $100 to purchase a TV, I do it because it benefits me. The seller sells it to me because it benefits him. It is a mutually enriching transaction. When people like you say that I cannot buy that a TV from a guy in Japan or China, you are preventing me and the chinese guy from completing a mutually enriching trasaction. You infringing on my freedom and making us poorer!

    Be free.

    freetochoose.wordpress.com

  2. Thank you for your comments on my blog. Although you totally missed the point, no where did I say you don’t have the choice or shouldn’t have a choice.

    What I said was, if a company chooses to take the route you want to, they can, there is a price for all actions. And if globalization is forced on people, like it is today, then that isn’t a choice either. You believe that raising concerns is some how limiting your choices, is an inaccurate read on the article. Information about who and how we get our products allows for greater choices. How many people knew 80% of the vitamin C market is controlled by China and that no safety checks on the quality are used? That’s good to know information so people are now informed and CAN choose freely to get it somewhere else. Free of information does not infringe on your rights to choose, it helps people to make better choices. Questions globalization is not a sin and as a trade policy it has failed, there is nothing wrong with looking at alternatives that meet the needs of people.

  3. freetochoose

    There is absolutely no evidence for your claim that globalization has failed. It is a common refrain among politicians that globalization has failed. But there is a profession that studies this issue in a serious, scientific manner and these professionals are called “economists”. There is a overwhelming consensus among economists, including left-wing economists like Paul Krugman (read “Peddling prosperity”) that globalization is good. Adam Smith established in “Wealth of Nations” that merchantilism is enervating and trading with the world enables one to specialize in products tha you make best. David Ricardo, enunciated the principle of “Compartive Advantage” which showed the countries benefit from trading even when one country is able to make all products more efficiently. These works were competed way back in the 18th and early 19th centuries and are commonly accepted by economists ever since. Today, TV demagogues like Lou Dobbs do not even have basic understanding of these concepts.

    If you think this is just theory, look at countries like India and CHina, which are coming out of decades old poverty by opening up and trading with the world. The US is undergoing unprecedented levels of productivity surge due to globalization. The US is currently at full employment and I simply cannot figure out what people are complaining about. On the flip side, look at coutnries like Iran, N. Korea and countries of Latin america which are isolated from the world and mired in poverty.

    If US trading with China is bad, then California trading with Texas should be bad too. If Cal trading with Texas is bad, then Houston trading with Austin is bad too. Within Houston, Katy trading with Sugarland should be bad too. Streching even further, me trading with anybody should be bad for me. Which means, I need to do everything, from farming for my food, wood-cutting for my furniture, making the semi-conductors for my computer etc etc. which is absurd.

    In a free country, you are free to practice the absurd. In the real world, if you dont like globalization, go buy a bad Impala over a Camry. You have the choice. But when you talk about “alternatives”, what you are saying is that I should not have the choice to buy a Camry and that I should be forced to buy an Impala.

    Globalization is a the natural order of things when people are free to make choices.

  4. Ah, so really you just don’t like Lou Dobbs, I knew someone just like you would come along and comment.

    Where in my article did I say trading is bad? Where in my article did I say, “don’t trade with China”? You are seeing issues in this piece that are not even represented nor even the topic of the article. If you really want to pick a fight on trade, why don’t you wait for an article that actually talks about trade and then discuss that.

    As for globalization, one doesn’t need to be an economist to speak on globalization, Adam Smith didn’t have a PhD in Economics yet you list him. I have a BA and MBA in global business from the top programs in these fields of study; I think I’m well qualified to discuss the failures of globalization. It is rather foolish for anyone to claim that it is the natural order or that it is some how a good thing and that there are no other options available to explore. There are many economic models available to explore, as I said, information is a good thing. When we limit ourselves to only one way of doing business, we really do ourselves the greatest dis-service of all. If Sears followed your idea they would never have gone past the Sears Catalogs, they adapted to new models, globalizations time has come and gone, time to move on.

    I’d rather live in a world with many options and open information on the products and services I buy, so that I can make the choices I want, isn’t that what you claim to represent? Freedom of Choice? Then what is your problem with looking beyond the status quo? Consumers are demanding greater information on the products they buy and for more sustainable business models and fair trade products. It is not for economist to tell us we need to stick to the old and outdated globalization model, it is for you to adapt to the changes of the consumers. In that aspect, any company that sticks to globalization as it has been practiced over the past 30 years, is not going to survive the next 30 years of consumer taste.

    BTW, China does not practice globalization, its currency does not float and its domestic markets are highly protectionist. Latin America does trade quite freely btw, among each other and other parts of the world. There are many news sources that you can find, even in English that can help you see they are not the close off societies you paint them to be.

    In the real world, the only country actually practicing globalization is the US; everyone else is looking out for themselves only, can we blame then, no. Check out the protectionist practices of the EU, of Japan, of China and of India. They practice aspects of globalization and free trade (two separate topics) but they do not actually subscribe to the idea of true globalization.

  5. freetochoose

    You are talking as though companies are forced to buy goods from some country or the other. In a free society and in perfectly globalized world, all people/companies would be free to buy goods/services from whosoever they want. When you talk about “alternatives” or “other economic models”, you are talking about limiting this choice that companies/people have. Just because this choice is limited by a democratically elected government of the USA, you think that this ok and that this does violate anybody’s freedom. But it does. When the US govt. puts a tariff on imported ethanol or other agricultural products, it does infringe on my freedom, no matter whether the govt. is democratic or not. We have gone around this merry-go-round on this point, I would prefer that we leave it at that.

    As for your other points,

    “China does not practice globalization, its currency does not float and its domestic markets are highly protectionist.”

    It is true. But let us examine what the chinese govt. is doing. It is keeping value of its currency lower that the market would allow. In the process, it is wasting the chinese people’s money. In other words, the chinese govt. is using chinese people’s money to give the US customers a discount. If anybody’s should be pissed off about this, it has to be the chinese people! Not us!

    I agree that no country is practicing real free trade, including the US. It is just the US is a lot freer than other, which is partly the reason why it is prosperous that the others. China and India are definitely not free trade paragons, but they are a lot freer than they used to be, which has made them a lot more richer than they used to be. Yes, these countries are limiting free trade and think that “they are looking out for their interest”. In reality, the extent to which they limit their citizen’s freedom only makes them poorer, not richer.

  6. Now who is talking theory? 🙂 We do not have a perfectly globalized world, so my point is still a very real and reality based one that other countries do not practice globalization or free trade and therefore, pointing out the discrepancies is not limiting anyone’s choices, it is informing them so they can make choice or develop methods that are better suited to what they want if they choose to want something else.

    “you are talking about limiting this choice that companies/people have.” Really, I am? Again you place words in my mouth that I did not say, please actually read what I say and stick with that, not what you assume I am saying, what you seem to be assuming is not even what I said. When we have alternatives to any standard, that often creates more choices, not less. If consumers choose something other than globalization and you force globalization on them, you have limited their choices, not I. Case in point, I ran an organization that was open book, more information gave clients the ability to make choices outside the normal scope of what was offered. We did 4 times the business over the previous year and system by providing more information and allowing clients to go outside the norm. It’s not limiting and it certainly didn’t make us poor, and customers were the happiest and most satisfied in the industry.

    I do not agree with your assessment of the Chinese government’s motives for the currency fixing. Talking to journalist in China and our own state department, they do not believe the economic numbers given by the Chinese government. They do not do this to give us a discount. Back to the Vitamin C, it was $2 when we had global competition, now with only 4 Chinese companies dominating the market, the price is up to $10. Where is the discount? There is none. They are doing the oldest trick in the book, under cut the competition until there is no competition and then jack the price up.

    As part of my studies, I study culture, economics will never tell you the cultural practices of other people, one needs to go beyond economics to really see the whole picture. China has an agenda far different than just selling us cheap goods, even my Mainland Chinese friends (of which I have many) will admit that. I buy plenty of stuff from China, but I do prefer to be informed as to what I’m buying, information is what makes a consumer a good consumer one that can be counted on to give accurate economic data. And uninformed consumer can not be counted on to give accurate economic data because they don’t know they have choices. And price alone is not the answer to any business to compete on. We have learned this over the last 20 years and pricing as a key model is less and less important, brand, customer service, quality, and many other aspects are rising in importance. That’s why organic foods companies can charge more for their product even though the actual production costs are often the same as mass produced products. More and more people want something other than just cheap stuff and are willing to pay more to get it.

    I do not believe freedom is the issue. Singapore had long been a big brother state and people were rather well off. Same with Korea, the military ruled that country up until just 15 years ago. They did quite well under military rule. The cultural and historic dynamics of each culture and country play a role in how they prosper, just as much as the economics. Mexico is free, you can do stuff there that you can’t in the US. Yet their economy is horrible. It has bigger degrees of difference between the rich and poor than the US does. If you look at the cultural and historical evidence, you find many answers as to why it is that way. These issues are not simple ones that can be limited to freedom or trade.

  7. freetochoose

    You talk about “alternatives” and other “models” to free trade. But wont specify what exactly you are talking about. When somebody talks about “alternatives” to free-speech, they cannot continue to maintain that they are not against freedom. Why dont you propose what you propose, then we can see if you are in favor of Free trade or not.

    I am not suggesting that the Chinese govt. intends to give us a discount. They are merchantilists who seem to beleive that exports are good and imports are bad and they want to keep the prices of their goods articficially low to stimulate exports from their country. I am sure that you learned in your MBA economics classed that Adam smith disproved merchantilism in 1776. BTW, there is a real discount. The other day, I bought a phone at Wal-Mart for $5 !!! As far as Vitamin C, if 20% of the market is not controlled by the 4 companies from China, why cant they sell their Vit C cheaper and acquire greater market share? Seems to be more factors at work than just collusion in China. Any monopoly that is not based on an enduring competetive advantage will not last, as long as capital markets are free.

  8. freetochoose

    Also, the point about freedom. No country that has not had economic freedom has ever had enduring economic growth. That is just a fact. It is true that in socialist coutnries, there is an initial spurt of growth due to greater efficiency in capital mobilization like in socialist India in the 50s and 60s. Eventually they just die out, simply because the total factor productivity does not increase.

    Political freedom is a different issue. Countries that have extensive political freedom can be poor like socialist India (I am an Indian, as you might have guessed by now) and countries without much political freedom had become rich, like China now. But like Milton Friedman points out in “Capitalism and Freedom”, policital freedom and economic freedom cannot exist without the other for long periods of time.

  9. Many European countries are socialist by nature and they do quite well for themselves. Having lived in the Netherlands, I know from first hand, they like their high taxes because it means they will be cared for, that was the rational given to me by the natives of that country which at the time had many government run and owned enterprises.

    France, 50% GDP is government, many CEO’s are appointed by the government, it is a socialist country and Americans may not like them, but they do alright for themselves, it may not be our way, but it works for them.

    Variety is not a bad thing, choices are not a bad thing, more information about where our products come from and why, is not a bad thing. In order to truly tell if a system is working, you need all three, otherwise it is merely speculation.

  10. “You talk about “alternatives” and other “models” to free trade. But wont specify what exactly you are talking about. When somebody talks about “alternatives” to free-speech, they cannot continue to maintain that they are not against freedom. Why dont you propose what you propose, then we can see if you are in favor of Free trade or not.”

    As I said already, you have misread the article to be about globalization in terms of free trade. When in fact the article is pointing out that like anything else, the buyer should be aware of what they are buying. In the case of MenuFoods, they did not and are paying a huge price for it and will pay a bigger one down the road. Knowing who they are buying from is important, in this case they didn’t do their homework. Quality has never been that high on the list of the Communist Chinese government and this has trickled down into many business practices. This is something any person should be aware of, when dealing with other cultures, you need to know who you are dealing with and how they do things, MenuFoods clearly didn’t do it’s homework and should pay the price for it. They made a promise of quality and safe products and did not keep it because they didn’t check their ingredients. Your interpretations that this is some how a free trade or free speech article is totally false, as I have said already, you can come around when I actually do talk about it, but to use this article is like talking about oranges and using an apple as an example of an orange.

    “The other day, I bought a phone at Wal-Mart for $5 !!! As far as Vitamin C, if 20% of the market is not controlled by the 4 companies from China, why cant they sell their Vit C cheaper and acquire greater market share? Seems to be more factors at work than just collusion in China. Any monopoly that is not based on an enduring competetive advantage will not last, as long as capital markets are free.”

    First off, how many people are aware of the Vitamin C market dynamics? Not many I am sure, you can’t tell if you buy a product where it is made, that’s the problem. Raising the issues so people are aware of the fact helps inform consumers so if they choose, they can demand that information be given to them so they can make an informed purchase. As I said before, only informed consumers produce good economic data that is reliable, uninformed consumers do not produce good data because you can not tell what their true purchasing motives are, they did not have the fact and so you can’t say they buy for a given reason other than they are mis-informed.

    As for the cheaper goods at Wal Mart, the actual purchase price is only one aspect. The cost of ownership is another. A study 4 years ago compared bicycles made in the US and China. The US bikes had a higher purchasing price but over the course of 5 years, the cost of ownership was lower. In the end, the cost of ownership for the Chinese made bikes actually ended up with a higher total than the US bikes. That cheaper price take actually cost the buyer more in the long run. As I said before, price is not everything today, the pricing model is not the only model people use.

  11. freetochoose

    Without knowing much about the Vitamin C market, you quickly concluded that its price was being fixed by some chinese companies based on a report by the great economic genius Lou Dobbs. Yet you sermonize about becoming enlightened customers. You conclude that globalization is the problem for the pet food scandal. Everybody universally blames the chinese supplier of wheat gluten for the scandal. Yet, when a similar scandal broke with respect to spinach at Taco Bell, nobody blamed the americal suppliers of the spinach. Everybody was onto Taco Bell.

    No company has to blindly import anything fron China. If they have safety concerns, they can insist that what they import goes through some checks. If they dont trust the chinese, they can do those test right now (which they are doing with Wheat gluten after this pet food scandal). There is no need to demonize globalization for it.

    But no matter what we do, stuff like this will happen, unfortunately. But the free market will correct it. But in the meantime, everybody can get on their hobby horse and blame the big corporation (Taco Bell) or globalization !!

    Wealth is a result of innovation. The USA is wealthy because it is innovative. It is innovative because the govt. does not get in the way of the people. Eventhough the govt. plays a big part in the European economies, they are open economies for the most part. What this enables them to do is to import the latest technologies from the USA. Netherlands would be a third world country if it were a closed economy. In Frace, you see unemployed immigrants burning cars on the street. Their unemplyment rate is nearly 10%. France is a welfare state which does not incentivize hard work. A lot immigrants get there to dip into the welfare cookie jar. Immigrants like me come to the US to work hard, because hard work is rewarded here and this is the greatest country in the history of the world.

  12. You have a highly biased opinion of Lou Dobbs, can you refute his claims? If not then I will go with them until there is evidence that proves otherwise.

    Where I live, Taco Bell does not use spinach in their products. There was a general spinach contamination issue months ago and yes that was blamed on the US producers for not ensuring the quality of their products was up to par and they were targeted with much greater scrutiny than the Chinese have been with the pet food recall. And as I have said in the article, globalization has risks, ignoring those risk are doing your readers a great dis-service. You seem to want to ignore those risks, any intelligent business person weights the risks and understands measure need to be taken to counter the risks. By your logic we should never tell people that they can lose money on investment in the stock market, of course if we did not tell people the truth about the risks, they would never trust the system.

    “There is no need to demonize globalization for it.” Again, where did I demonize globalization, risk is a part of business, wake up and see the reality of life! There is nothing wrong with saying something has some real risk that needs to be addressed.

    “Wealth is a result of innovation. The USA is wealthy because it is innovative.”
    Singapore has a higher per capita than the US, it’s not an innovation leader. Dubai and Saudi Arabia have equal or better standards of living and they are not centers of innovation as defined by your own definition. France has had riots since there was a France, we blame unemployment but that’s not the real issue, they use protests a lot more as a form of civil opposition than in the US, again, cultural difference. Seriously, try and read the article for a change and understand what’s being said. You dishonesty is getting a tiresome. If you can’t understand the topic of the post, try asking questions so you can understand instead of making attacks because you have issue with Lou Dobbs.

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