Tianlong Company and the Toxic Capsule Scandal
(8 pages of text)
This case presents the perspective of a Chinese company, Zhejiang Tianlong Capsule Co. Ltd. (Tianlong), and its experiences with the negative impact of an industry scandal. On April 15, 2012, China Central Television disclosed that several capsule producers in Ru’ao had illegally used industrial-grade gelatin to produce medical capsules. The capsules were found to contain excessive chromium, a heavy metal harmful to human health.
Tianlong was not on the list of guilty companies, but the scandal threatened to ruin the reputation of all capsule firms located in Ru’ao. Most pharmacy companies immediately avoided Ru’ao after such a nationwide scandal. The director of Tianlong must decide how to address customers’ concerns and keep Tianlong’s good reputation from being damaged as a result of the current scandal. The director was also annoyed by the local government’s requirement to suspend production. Some gelatin material had already been melted; suspending production would result in a direct financial loss. How should he respond to the supervision agency’s order?
This case is intended for use in courses in strategy or international business. The primary issue in the case is crisis management. How should the company deal with its stakeholders, including employees, customers, public media, government institutions, etc.? Can crises be prevented?
The secondary purpose is to help understand the unique business environment in China, including the Chinese political system and the government’s involvement in business.
China, Large, 2012
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