Too many multinationals with operations in China are not enforcing quality standards in design and right through the supply chain. The consequences are becoming painfully aware as a slew of companies announce product recalls or are embroiled in consumer-related scandals in their home markets such as the US or even Japan.

Take the case of Mattel which recalled almost 20 million toys made in China in the latter part of 2007. And 10 people in Japan have fallen ill this month after eating dumplings imported by Japan Tobacco from a Chinese food factory. There are a plethora of other cases.

With lower wages and a plentiful supply of skilled labour, China's urbanised eastern and southern provinces have been an attractive manufacturing destination for companies from around the world which then export products to third markets. There's plenty of upside but also loads of risks as many multinationals are finding, with damage caused to their reputations.

Mattel's handling of the toy recalls is a matter of some debate. However, its chairman and chief executive Bob Eckert is now saying the right thing. According to an interview in the Financial Times, Mr Eckert has expressed his view that companies need to take responsibility for their manufacturing processes:

"One of the first things we did in early August, with a major recall, we ran a letter from me to consumers that basically said 'I'm sorry'. I've got four kids. I get it...

It could always happen again. One of the things I've learned is you never say never. But we're doing everything we can to prevent it. The important thing is to catch it quickly and do something about it...

Countries don't make products; people do. The fact is most of the toys today are made in China and most of the toy manufacturing problems are in China...

But we've had manufacturing problems in other markets. So the important thing is for companies to take responsibility for their manufacturing process. I don't know that we need more government intervention."

Full marks now to Mr Eckert who can (some months after the event) eloquently communicate in a way which puts a human face on the company, takes responsibility (without shifting blame) and puts the issue in perspective. These are all essential components for effective communication when a serious issue or crisis confronts a corporation.

Here are some other reputation management suggestions for multinationals operating  in China:

• audit all your operations to ensure compliance with local Chinese laws as well as those in the markets where you are exporting

• abide bv international standards

• check all ingredients at your production centres as well as those of materials purchased from suppliers to ensure compliance as well as safety

• bring in a third party auditor to conduct checks

• be prepared for the worst to happen

• have crisis management and communications plans including ready-to-go statements in place

• be a good corporate citizen: communicate regularly with stakeholders locally and in important foreign markets. Goodwill, relationships and trust built up during good times can be invaluable when confronting a crisis and then embarking on the lonely, tough task of brand rebuilding

Hong Kong, Friday February 15 2008

Asia is not flat. Surely that's the riposte we need to send to Thomas Friedman, author of the incredibly popular tome, "The World is Flat".

A mistake made by many in assessing Asia is that "it's all the same". That essentially is the thesis of Friedman's book writ large and applied to the world, thanks to the trend of globalisation. However, Asia as a region remains - and will continue to be - so diverse in terms of cultures, languages, political systems and business practices that the only thing that really unites the region is its diversity.

With this in mind, it was with relief that I stumbled across a brief review today of a new book by Harvard Business School professor Pankaj Ghemawat, "Redefining Global Strategy". According to the reviewer in The Economist, a better and more accessible title would have been "The World is Not Flat". 

"Differences between countries matter enormously, Mr Ghemawat explains, and unless companies seek to understand those differences - which can be cultural, administrative, geographic or economic - their global strategies are likely to fail," says The Economist article.

"Particularly revealing is Mr Ghemawat's account of how Coca-Cola has gradually developed a global strategy that ‘neither ignores the differences across countries nor caves in to them entirely-that is, it recognises the reality of semiglobalisation.' This book deserves to be a bestseller ..."

It's my view that multinational companies operating in Asia need to develop not only corporate reputation and branding strategies relevant to each market in the region where they operate but also adopt a local "face" and approach. That involves dropping the typical multinational-style template overlay some companies still insist on keeping for all aspects of their business - and they provide little freedom or room to maneuver in accordance with local preferences. Instead a core set of products or services, principles, values and messages aligned with the global business are required, but much more latitude should be given to develop or alter goods, services and communications materials which also resonate locally.

This is the point I was making in my post, "Five trends that will shape the Asian century", when referring to the region's economic rise on the world stage: "Few multinational companies with operations in Asia have yet recognised the impact this massive shift will have on communications and brand strategies - including where the power over related decisions still resides geographically."

Support for a local approach has recently been expressed by McKinsey & Company which found in a large survey most Chinese consumers trust domestic brands more than foreign brands. In its report on the survey, the Financial Times highlighted "the good news for multinationals [which] is that there is considerable confusion about the national identity of some products, with many Chinese consumers believing that brands produced by multinationals are actually home-grown. In the case of two well-known US toothpaste brands, for instance, more than 80 per cent of respondents said they thought they were Chinese. ‘The successful foreign companies have usually made a real effort to listen to Chinese consumers and create local brand management teams, rather than import approaches from other markets,' " said Andrew Grant, the head of McKinsey's China practice.

The days when foreign brands were generally preferred over local ones are fast disappearing in a complex, dynamic  and more confident Asia.

Beyond the glittering skyline of Tokyo, the innovative electronic gadgets and cutting-edge technology, the excitement of manga comics and J pop, there has existed a mind numbing, boring grey zone, the existence of which raises doubts Japan's future prosperity. That's the world of Japanese politics - the smoke-filled rooms and ultra-expensive restaurants where dull men in dark suits have traditionally cut deals which doom the world's second largest economy to an uncertain future.

Japan has been a nation with so much to offer during the 60 years of its phoenix-like rise from the ashes of World War II. But at the centre of despair about its future is a sense of hopelessness about the Japanese political scene, its uninspiring politicians and their general lack of vision for the future.

That could all change in coming days following the resignation of the opposition party leader on Sunday which came two months after Shinzo Abe quit from the post of Prime Minister as a broken man. That's because the downfall of Ichiro Ozawa, leader of the Democratic Party of Japan, opens the way for a fresh opposition leader who could turn Japanese politics upside down. However, the prospects of an outsider taking charge of the DPJ is remote as the likely successors currently being touted are the same faces. There's a sense of growing crisis in Japanese politics which provides a sense of opportunity, and hopefully bring more openness and the potential to harness the power of communications.

What all this highlights is the need for a fresh approach to political communications in Japan. Last week, I wrote that one of the defining trends of the Asian century will be increased political choices for Asians. Unfortunately the prospect of greater choice for Japanese voters appears as elusive as ever unless a breakthrough comes soon. Real choice will only emerge in Japanese politics, hopefully in the close to medium-term future, thanks to the onward rush of globalisation and the growing realisation that the nation risks being left behind by the rest of the region.

What really needs to happen in Japan is for the reservations and lack of direct communication which still smothers much of the nation's dynamism to be lifted from its political system. Appeals to the interests and needs of voters must replace the focus on factions and service for vested interests. Populism is not an alternative but a more popular, appealing and dynamic form of politics needs to be developed. What is missing primarily is dialogue between the elected and their true electorate, the people.

Politicians need to develop policies which answer not only the nation's myriad problems as well as the real concerns of their voters and then effectively communicate their proposed solutions. Apart from the traditional methods of consultation such as the election period speech, kissing of babies in shopping malls and community meetings, social media on the Internet should be better utilised by politicians to explain their platforms as well as listen to the voters.

And to put the icing on this cake of reform in political communications, politicians should craft more compelling "political and life stories" about their policies and themselves.  They need to put a human face on their political persona, not present themselves as yet another grey suited factional operative. Remember Junichiro Koizumi, the pint-sized lion-haired reformer? Now he had a story to tell.   

HONG KONG, Monday November 5, 2007

The Asian century is unfolding with full speed.

Here are five trends currently unfolding that will be pivotal in shaping the years ahead:

1. The rise of Asia on the world stage

 "Chindia" is the fashionable reference for the continuing rise of two of the world's fastest growing and most populous nations. China and India comprise 40 percent of the world's population. With the standard of living in China one-fifth and India one-tenth that of high income economies, high levels of growth are expected for another 40-50 years. It's likely China will continue as the world's factory and India its office for the foreseeable future. Their political and economic systems are currently vastly different and there is some prospect for cooperation. However, some analysts also see political and economic divergence giving rise to potential conflict.   China's growth has been so rapid that Goldman Sachs a few months ago revised its projection for it overtaking the US (in real dollar terms) by 2027 (moved forward from 2035). The investment bank also projects India will be larger than the US by 2050.

Few multinational companies with operations in Asia have yet recognised the impact this massive shift will have on communications and brand strategies - including where the power over related decisions still resides geographically. The opportunities/threats which are arising have yet to be properly addressed.

2. Choice in markets, politics and brands

Asians are enjoying not only prosperity which they could only dream of in the previous century - choice and personal freedoms are on the rise. Markets will continue to be opened. The longer-term trend is for more choice in the political space too, continuing the developments of the past 30 years.

Increased prosperity will flow through societies across Asia, empowering consumers and providing them with the greatest choices in products, services and how to spend their time than ever before. Civil society will continue developing across the region. Accordingly, the rise of stakeholders will heighten pressure on companies to behave according to international norms, with greater transparency and accountability. CSR is already on the rise, with approaches currently heavily borrowed from Western best practice - expect Asian-grown solutions to emerge.

The ongoing liberalisation of markets will not only bring more multinational brands into Asians' lives, the quality and quantity of locally-produced products will increase dramatically.

Competition will be intense, consumer and media scrutiny unrelenting. 

3. Asian brands going global

The first and second waves of brands from Japan and Korea to go global have been successful in winning awareness - Sony, Panasonic, Samsung, LG and so on. Now the third wave of brands and Asian companies taking on the world is emerging from China and India - Lenovo (computers), Haier (whitegoods), Li-Ning (footwear), Ranbaxy (pharmaceuticals) and Tata (steel, cars and the owners of Tetley tea).

The strategies are currently focused on acquiring well-known Western brands but as experience, confidence - and quality - is further developed, Chinese, Indian and more Taiwanese companies will take their brands to the global markets.  For the time being, Western multinationals which have managed to build indigenous brands with strong local appeal will need to remain nimble and flexible - the key will be identifying appropriate opportunities for portraying foreign or local attributes, depending on the tastes of audiences. Conversely, Asian brands will need to develop globally by downplaying their roots. They should only retain some appeal based on origins when brand development is boosted by that association.

4. Taking the race out of the Asian space race

The much-hyped Asian space race is on, and the effects - far beyond the media sensationalism and patriotism - will be long lasting and mostly beneficial. With space as the final frontier now being conquered, the focus on the heavens truly indicates Asia's arrival. China, India and Japan are all shooting for the moon now. All three nations rely heavily on natural resources and are major exporters. Natural resources on the moon and Mars figure in their space plans. However, the spill over effects for R&D and innovation in the region will be significant.

Governments will need to communicate carefully the benefits of these programs to local audiences as well as the international community to avoid tensions or nationalism being stoked. After an initial period of focus on the competitive elements of ‘being first', the emphasis will likely move to exploring resources and space collaboratively - not exclusively, certainly not in a race - and communicated accordingly.

5. Turning green

The air over much of Asia is brown and polluted. Green zones in populated areas are disappearing. Asia has paid the price for its rapid development and as prosperity rises, the toll it takes on health and the environment will no longer be tolerated. China is showing signs of getting tough on polluters and facing up to the dilemma of development versus growing calls from the international community to cut greenhouse emissions. Japan's experience indicates the trend for the century ahead: its post-war development frenzy and rising level standards culminated in demands for tight controls on pollution and conservation of what remains of the natural environment. The rest of Asia has no choice but to turn green. [For more on H&K's Return on Environment study including impact in China, click here]

Companies in Asia will need energy strategies to deal with rising concern from regulators as well as stakeholders about climate change. Given the state of the environment in the region and signs the situation is moving to a tipping point, broader environmental strategies will also be crucial for corporate reputation.

Trends and events examined in detail

These trends are not only related to economics, politics and security, they have significant ramifications for communications and branding activities of multinational and local corporations as well as governments.

Hong Kong, November 1, 2007