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Wal-Mart and China’s western brand ethical stitch-up

Great wall of management rather helpful in China

Amidst all the environment and social unrest stories out there, it’s oddly refreshing when a good old ‘business ethics and politics’ tale comes to light.

The FT reports that:

“Two junior Walmart store managers in China have been arrested as local authorities investigate allegations that the US retailer mislabelled ordinary pork as organic at its scandal-plagued Chongqing city operation.”

What might be wrong with this occurance?

According to our man in China, Paul French, it’s that only junior local managers are arrested when things go wrong. Rarely (Rio Tinto’s Stern Hu aside) if ever, do Western expat managers get in trouble in China. In this case, for example:

“Walmart, which has 350 stores across China, closed its 13 Chongqing stores earlier this month after police discovered they were selling ordinary pork as organic pork – a label that can result in the product fetching three to five times the usual price.”

So this is not exactly an isolated incident. The FT goes on to say that:

“This is the third time this year that Walmart’s Chongqing operations have run into trouble with local authorities. It has been punished 21 times in the city since 2006”

What is going on here? Paul’s view is that it suits the Chinese government to bash a big Western brand now and again. Chinese brands are often in trouble with customers, so hanging a big foreign corporate out to dry now and again goes down quite well with the masses and mollifies the blogosphere somewhat.

But China does not want to upset Wal-Mart too much. China needs FDI, jobs, Western brands and everything good that comes with them.

So simply arresting and imprisoning a couple of local guys suits everyone. Foreign managers are not scared away. The money keeps rolling in, and a couple of the little guys take the fall.

Look at what happened with Sanlu a few years ago.

Suits everyone doesn’t it? Except perhaps anyone with a sense of justice.

In the West, in a scandal such as this, some senior heads would roll.

Not in China. Who says the Chinese don’t understand cynical and effective public relations?

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