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Toyota And China. It's A Small World After All.

By Dan Harris and Steve Dickinson

News Flash: Chinese do not like being treated as "second class citizens." It appears Toyota has failed in this most basic of business propositions. I have written of how I am of the view that foreign companies doing business in China would be wise to employ their highest and best environmental standards, and not "dumb them down" for China:

We are aware of a large Fortune 500 retail company that is opening units in China that meet or exceed the toughest United States environmental law. I estimate this company's environmental sensitivity will cost them at least an additional $25,000 per unit, yet I am firmly convinced this company is doing the right thing.This company's actions make sense because the odds are good that China's environmental laws and enforcement will get tougher over time, and building environmentally sound units now will almost certainly cost less than having to retrofit existing units a few years from now. On top of this, people often get very emotional about the environment and I can see Chinese citizens getting very angry at a foreign company whose units in China are less environmentally sound than their units in the United States or elsewhere. This is obviously even more likely to be the case if there were to be some sort of environmental disaster.

This same sort of thing can hold true for products, as China Hearsay points out in its post, "Toyota Losing the China Messaging War on Recall." The post discusses how Chinese internet car forum participants are voicing anger over how Toyota's Chinese customers are not being picked up and driven to their recall repairs, as is apparently the case in the United States. China Hearsay concludes its post with some excellent advice, which involves calling in China PR Pros to assist:

But my larger point here is that these things can snowball on you, and if you?re a Japanese company in China, the margin for error is tiny. Many might disagree with me, but the public here has a sort of love/hate relationship with Japan. On the one hand, emulation of Japanese media and fashion is common, but public sentiment may turn quickly if it appears that China or the Chinese people are not being treated fairly (Toyota is no stranger to this and should know better). This reaction might, depending on the situation, be wholly irrational, but given modern history, it is easily understood. Toyota is getting hammered. People here already think that they have been given crap products. They also think that Chinese consumers are being treated relatively poorly compared to mitigation campaigns carried out in other countries. The accuracy of these accusations is beside the point. Toyota better hire some top gun PR consultants in a hurry (or fire the ones they have now) or they might be looking at a coordinated effort to embarrass them and drag their asses into court. Whether the Chinese government will encourage or put a stop to such consumer-led actions remains to be seen.

A few months ago, I wrote on similar issues in "China, Glocalization, And The Specter Of Product Liability And More:"

A few years ago, I represented a medical product manufacturer that made a relatively high end, very profitable and ubiquitous product for doctors and hospitals. For confidentiality reasons, I am going to have to stay really vague here, while keeping the thrust of this story intact. This product sold for about $200 in the United States and in Europe, but my client saw a massive need for this product in places like Africa, India, and rural China. But it knew $200 would be way out of reach for these places. On top of that, this item needed to be sterilized after each use, making it not only cost prohibitive for the world's poorest regions, but also not a good choice medically. So my client developed a disposable version of the same product and had it made in China at a price point that would allow it to sell them for less than $10 a pop. But that is hardly the end of the story. Though the disposable version would no doubt save lives by bringing a medically important product to regions that previously lacked it, this sort of massive product differentiation in a high risk area like medical treatment can have massive legal and public relations implications for a Western company. Just some of the questions we had to consider: 1. What are the legal ramifications if a Westerner gets poor treatment and a subsequent injury using one of the $10 devices? What happens if this happens in a place like Ghana? What happens if someone starts reselling these $10 devices into Western countries like the United States and someone gets injured there? What are the legal ramifications if someone sues my client in someplace like Pakistan, claiming that they were provided with an inferior product simply to save money? What happens if physicians re-use the device against all instructions? What happens if hospitals seek to sterilize the device, against all instructions? What if the $10 devices are improperly disposed of and that leads to the spread of disease? 2. What are the public relation implications if my client gets sued (or even if they do not get sued) if people start complaining how company X cares far more for the people in the United States than it does in rural China? I know this sounds silly on one level, but trust me this sort of thing does happen and it is why so many top companies maintain worldwide standards in various areas like environmental and human relations.

Worldwide companies must consider Peoria in dealing with Wuhan. On a somewhat related note, am I the only person over 7 years old who actually likes the song, "It's a Small World"?

Full post as published by China Law Blog on March 04, 2010 (boomark / email).