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Integrity of Management. Case of Sanlu Group (Milk scandal in China 2008)

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Дата создания 09.05.2016
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Statistically since 2007 one quarter full the baby food sold in China pear year has come from the American company Meadjohnson which in 2009 have received 1,6 billion yuans for the production. Due to the situation in the market at decrease in demand of the Chinese clients for internal powdered milk foreign brands promptly undertake shortage. For example the Wyeth company plans to construct the largest milk plant of powdered milk in Suzhou, the Province of Jiangsu, making baby food on new technologies. In February, 2008 Danon, the second-large producer of dairy products in the world has united with the private company Miaoshi. [1]The growing demand for better powdered milk also promotes is increasing. Customs data show that in the first quarter 2008 China imported 31000 tons of dry baby dairy food at cost on 140 ml dollars. The share of the USA has increased by 5,5 percent and 95,9 percent respectively in comparison with the similar period of 2007.Per capita annual consumption of milk among city dwellers in China in 2008 was only 27 kg - this indicator was even lower in rural areas. Still it is much lower than world indicators which average from 80 kg to 200 kg on the person in the developed countries. In the USA figures of the consumed milk make 260 kg that exceeds consumption level in China almost ten times. It is counted that only 300 million from 1,3 billion people in China regularly drink milk, thereby leaving the huge not covered markets for the dairy companies. Since 2006 the government has started realization of campaign for advance of consumption of dairy products within efforts on providing citizens with food, under the slogan "The Glass of Milk Can Make Every Day People stronger". Meanwhile, the increased demand in sector of children's mixes wasn't noted. Many dairy companies accepted efforts on expansion of the business in the field. For example before scandal by Mengniu melamine there were offered free milk for 500 rural elementary schools within the movement "one glass of milk a day" but scandal has cast a shadow on all dairy products.One of the few Chinese brands which remained safe from crisis there was a Sanyuan company which provided a constant control of milk quality receiving from own dairy farms. Now it contains 27 dairy farms from 35000 cows making annually 160 million kilograms of qualitative crude milk. Their model, though more expensive, has been copied as a result of scandal with melamine by other companies. Mengniu unites the small-scale separate enterprises under the uniform standard of quality control of production. According to forecasts, the recover from blow with melamine scandal would take two-three years for the China dairy industry. For such companies as Yili and Mengniu it will be heavy fight restoration of clients trust. For all enterprises in dairy sector and beyond its limits the old lesson was the true proof once again the fact that quality is the most important factor for the long-term market.NationalandlocalenvironmentIn 2010 China became the world's largest exporter. Reforms have begun with refusal of the collectivized agriculture. In economy gradual liberalization of the prices, financial decentralization, increase of autonomies of the state enterprises, creation of a diversified banking system, development of stock markets, rapid growth of the private sector and opening of domestic market for foreign trade and investments hasbeen carried out. In recent years China has resumed support of the state enterprises sectors which it considers important for "economic security".[1]Exchange rate of China is closely connected with US dollar for many years. From the middle of 2005 until the end of 2008 cumulative increase of yuan exchange rate in relation to US dollar has made more than 20%, but the exchange rate remained is almost attached to dollar since the beginning of world financial crisis till June, 2010. Restructuring of economy and as result - production efficiency increases, promoted more than tenfold increase in GDP since 1978. Counting economic indicators on the parity purchasing power (PPP), the China in 2012 became the second-large economy in the world the US Ambassador, having overtaken Japan in 2001. In dollar expression, an agricultural and industrial output of China surpass the volume of production of the USA. Nevertheless, the income is per capita lower than an average world value. The Chinese government faces numerous economic problems, including: - decrease in internal savings and, respectively, low domestic demand, - need maintenance of adequate growth of number of workplaces for tens of millions of migrants and new labor, - existence of corruption and other economic crimes, - causing damage to environment and strong social not the equality connected with fast transformation of economy.Economic development happenscoastal provinces more actively than in continental part of the country.By 2011 more than 250 million migrant workers and members of their families have moved to the cities in job searches. Deterioration in environment - in particular air pollution, an erosion of soils and steady falling of ground waterslevel, especially in the north of the country, are one more long-term problems of economic development of China. The country continues to lose arable lands because of an erosion and influence of economic development. The Chinese government seeks to increase energy production power from other sources, besides coal and oil, paying special attention nuclear and to development of alternative power engineering. [1]In 2010-2011, China has faced the fact of high inflation substantially the caused the credit fuel program for economy priming. The government has taken more drastic measures, for fight against inflation, but at the same time GDP growth was slowed down to 8% in 2012. [1]In general conditions for business in China remain unsatisfactory as there is no possibility of full quality check of production. In thecountry corruption has grown and officials allow production of low-quality goods in domestic market of China. The export market represents a better segment in economy of China. However if large Chinese corporations don't begin to work by rules of social responsibility domestic market of China and will remain is filled with the foreign companies because their goods are more better also safe.References:Sanlu Group Case Analysis http://www.studymode.com/essays/Sanlu-Group-Case-Analysis-1742924.htmlSanlu Melamine Scandal http://www.chinasmack.com/tag/sanlu-melamine-scandalChinese dairies to compensate melamine victims//http.articles.dailyamerican.com

Список литературы

References: 1. Sanlu Group Case Analysis http://www.studymode.com/essays/Sanlu-Group-Case-Analysis-1742924.html 2. Sanlu Melamine Scandal http://www.chinasmack.com/tag/sanlu-melamine-scandal 3. Chinese dairies to compensate melamine victims//http.articles.dailyamerican.com список литературы
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