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🤜 What can companies learn from the crises of BMW Group & Cathay Pacific in China | Following the yuan
Unraveling the 3 big factors behind these costly employee mishaps
There have been market-moving public relations crises over the last few weeks in China starting from banal things including ice cream for BMW Group (BMWG.DE) and blankets for Cathay Pacific Airways Ltd (0293.HK). And from where I see it, the frequency would only continue.
In this post, I intend to lay out the confluence of factors affecting these large businesses, despite the incidents being seemingly minor employee mishaps.
A recap of BMW’s ice cream incident 🍨:
On April 20, a video circulated on Weibo showing two Chinese workers at the BMW Mini stand at Shanghai Auto Show initially telling local visitors that the free ice cream had run out, but later offering it to a Western attendee. As a result of the online controversy, the German carmaker’s shares slid 3.62% and lost 2.4 billion euros in market value on that day. The company apologized twice in two days.
A recap of Cathay Pacific’s blanket incident 🛌🏼:
On May 21, a Mandarin-speaking passenger, described in a post on Xiaohongshu how flight attendants complained in English and Cantonese about passengers who struggled with English while requesting blankets. Overheard conversations included phrases like "If you cannot say blanket, you cannot have it" and "The carpet is on the floor." With the online fiasco, the Hong Kong aircraft company apologized three times in three days.
While one can always blame the companies for insufficient training (true in both instances), we should look beyond the surface for factors that made such incidents so costly and likely to repeat.
1. The prominent role of social media 📈
The rise of social media platforms has given consumers a powerful voice and the ability to amplify their opinions. That is not China-specific.
But what’s unique to China is that in a tightly controlled media world, online content is likely to get picked up by bloggers, short-video vloggers on Douyin, Kuaishou and WeChat Channels, and the state media. The matrix of information channels is proven to be detrimental as they can quickly fill in the unfamiliar audience with their views, without context or the larger picture.
2. Government influence and the anti-West sentiment 🏛
It’s an awkward position that Beijing is in, that while maintaining social stability and political unity, it wants its people to embrace traditional Chinese culture and eschew foreign influences, what that inevitably causes is that the mass consumers naturally turn against Western businesses.
In essence, China wants people to be anti-West in politics and culture, but be compartmentalized enough to still keep buying Western goods, that is just not possible. It doesn’t work that way.
3. The power of being a Chinese consumer 💪
This point is less talked about but it’s becoming more apparent thanks to the majority of people's common collective mindset and the state media’s long-time portrayal of China’s strong spending power, so much so that many are hot-tempered if any company touches their nerves.
That is not to say those who point out the problems are purely driven by hatred, nationalism, and propaganda. If you look at the things they ask for, they are within reason: treat them as any customer with respect. The thing in today’s China is they know how to defend themselves and they may know that anti-West is a touchy subject and the power they could rally.
Then, we also have a couple of adjacent & interesting cases that happen to Chinese entities/person that testify to the tense market environment that, on one hand, likes to take things to the extreme, and on the other hand, prefers to use non-Chinese brands as targets:
One incident happened shortly after Cathay is that Great Wall Motor (601633.SS) reported against BYD (002594.SZ) on the latter failing to meet China's emissions standards with two hybrid models. And something BYD responded was: "it's not easy for a Chinese brand to grow into our size, we hope that everyone will do things that benefit the industry and Chinese brands!" That is interpreted by internet users as saying "why are you reporting us given that we are both Chinese companies."
Another thing is the company that hired Chinese stand-up comedian Li Haoshi, whose referenced a slogan used to describe the country’s military on his dogs, was fined more than $2 million in mid-May. Coincidentally, numerous stand-up shows from other companies also got canceled across China.🔚
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