McDonald’s Corporation Memo RE: Shanghai Husi Crisis
TO:
Bridget Coffing, Senior Vice President and Chief Communications Officer, McDonald’s Corp
FROM: Ahmad Almoshiqeh
DATE: October 1, 2014
SUBJECT: Analysis of McDonald’s Crisis Management Communication RE: Shanghai Husi 2014
Hello Miss Coffing,
Enclosed is a report of McDonald’s Crisis Management from July 20, 2014 through September 30, 2014
regarding Shanghai Husi.
During this time McDonald’s Corporation had to deal with the discovery that OSI, McDonald’s main
food supplier for restaurants in China and Japan, repackaged expired meat. Though McDonald’s
responded by quickly apologizing, shutting down the factory and changing their supply line, it has lost
business in Asia. In order to recover, it must target messages to win back customer and investor publics.
We suggest risk mitigation techniques to avoid future problems.
While McDonald’s Corporation has managed the health crisis, it also must continue to monitor, mitigate
and manage other interconnected threats to its reputation.
We conclude this report by making recommendations on how McDonald’s Corporation can show its
commitment to making life better for communities everywhere.
We hope that these analyses and recommendations will help McDonald’s as it develops and adds onto
future crisis management plans.
Thank you for your time,
Ahmad Almoshiqeh
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McDonald’s Corporation Memo RE: Shanghai Husi Crisis
History of the McDonald’s Corporation
McDonald’s Corporation is an American fast-food company. The first McDonald’s was built in
1940, San Bernardo, California by two brothers named Dick and Mac McDonald. Their restaurant was
famous for fast and cheap burgers and fries. In 1954, A milkshake machine salesman, Ray Kroc, took
their business model and spread it through the country through franchising. By 1965, there were over 700
franchised restaurants, and by 1967, McDonald’s was an international company. Now, it has franchises in
over 119 countries in the world, with over 34,000. As its franchises have expanded, its suppliers have
expanded too. For example, OSI Food Group, an American company, supplies McDonald’s with cheap,
manufactured food all around the world. McDonald’s brand and logo (“I’m lovin’ it”) are symbols of joy
(McDonald’s History, 2014).
Many customers go to McDonalds for its cheap, affordable food. Recently, however, McDonald’s
Corporation is failing to compete with other, more expensive and healthy restaurants as customers begin
to prefer healthy and nutritious foods. Publics expect McDonald’s to sell low price, low-quality food. As
a result, profits have been low and McDonald’s is trying to change how the public perceives its food and
its role in the community. For the past couple of years, McDonald’s has been showing Corporate Social
Responsibility by offering more nutritious food, and is trying to end perceptions of being a cause of
obesity and disease. It also has sustainability goals and has become the world’s most reliable food
supplier.
Communication Outlets
Reaching External Publics
McDonald’s Corporation seems to have different communication outlets in different parts of the
world. For external communication outlets, each country has its own representative website in the local
language. They usually show food on the local menu and special events in that language. In Japan and the
United States (two countries involved in the OSI group), the main social media outlet is Facebook, which
they use to promote food, deals, sponsors, and sweepstakes, for example, McDonald’s coffee, NFL player
sponsors, and the Monopoly game. On the other hand, in China, McDonald’s has their corporate profile
on Weibo, which is the main Chinese social networking site.
In Japan, China and the United States, consumer publics use these sites to talk about McDonald’s
policy, food and workers. McDonald’s Corporation also indirectly communicates with external publics
through interviews with news media, especially online financial news. Sarah Casanova, the CEO of
McDonald’s Japan, also communicates with the Japanese public through press conferences. As
McDonald’s and OSI investigate the sources of the problem, they will also have to cooperate with
Chinese and Japanese public health officials.
Reaching Internal Publics
When dealing with international crisis, it is important that crisis management teams from
different countries are able to coordinate their crisis response so that their messages are consistent. In this
case, it does not seem like China and Japan coordinated their response to Shanghai Husi. While China
responded immediately after the event and pulled their product (July 20), McDonald’s Japan pulled their
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Comment [AH1]: Good choice to include
information about how they use their external
communication tools, especially in a cross-cultural
contexts.
McDonald’s Corporation Memo RE: Shanghai Husi Crisis
product on July 21 and responded three days later (McDonald’s Chinese Newsroom, 2014; McDonald’s
Japanese Newsroom, 2014). While McDonald’s China said they didn’t know it was happening, but took
responsibility, McDonald’s Japan blamed it on OSI and bad Chinese regulation (Iino, 2014). Instead of
saying one consistent message, McDonald’s China seems more socially responsible than McDonald’s
Japan.
In this case, it is also important for there to be internal communication between the food suppliers
and the restaurant franchises that use their food in order to track down unsafe food products. Crisis
management teams must also contact restaurant owners and workers to tell them how to respond to the
public. Their direct interaction with customers affects how the public perceives McDonald’s.
Comment [AH2]: This is a good thought and
should put in the Recommendations section (a
better fit for it than here).
The Issue of Food Safety in China
In the United States, Japan, and other countries, business regulation makes sure that food,
chemicals, and products are safe for the public. China, however, has a reputation for bad food regulation.
According to Moss and Gough (2014), in 2008, six Chinese babies died after being poisoned by milk; in
2012, KFC stopped putting “excessive amounts of antibiotics and hormones” in chicken products after
Chinese customers stopped buying it; and, this year, fox and donkey meat were found in Walmart food.
Experts interviewed by Moss and Gough say that this poor regulation is caused by difficulty tracking
unsafe food to the factory, a weak court system that can’t enforce the laws, and workers that do not
understand food safety standards. Because of the “collapse of the country’s business ethics and failure of
government regulators,” almost 94 million people get sick and 8,500 die from unclean food each year
(Huang, 2012).
All Chinese food supplier crisis management teams (CMT) must understand that the Chinese
government regulators and the personnel in that location makes their organization vulnerable to humanerror product harm and organizational misdeeds. In order to prevent these risks from turning into a crisis,
the organization should have surprise inspections or secretly watch their factories in order to make sure
the food is up to standard. The CMT should also have a crisis management plan (CMP) for recalling
unsafe products and informing the public before they get hurt. If a CMT does not have a CMP, they will
be responsible for public harm.
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Comment [AH3]: Like the previous comment, I
think part of this can go in the recommendations
section.
McDonald’s Corporation Memo RE: Shanghai Husi Crisis
“Stinky Meat-Gate” – McDonald’s Chinese Meat Scandal *
On July 20, 2014, a reporter recorded workers at Shanghai Husi changing the expiration date on
perished meat and sending them to Chinese and Japanese McDonald’s restaurants. The Chinese
government, McDonald’s and OSI Food Group sent investigators to see if this was a one-time event or an
on-going violation. According to OSI’s investigations, they gave local Chinese managers and workers too
much freedom, and did not monitor their food standards. An article on Fortune notes,
“Sometimes that works, like on Wall Street, where investment companies allow
individuals to independently wager on stocks to avoid groupthink. But in Big Food
Processing, OSI’s business, global standards need to be exactly followed by everyone —
and verified. The private OSI’s decentralized business model allowed Chinese managers
leeway to make their own decisions. The strategy that helped OSI expand quickly in
China since the early 1990s. But it’s now clear there were problems. OSI didn’t audit
enough to ensure Chinese plants followed standards coming from OSI’s Illinois
headquarters and didn’t monitor its plants located 6,600 miles from headquarters in
Aurora, Illinois.” – Cendrowski, 2014
In short, OSI blamed it on bad management of bad workers.
On the other hand, Gu Zhenghua, a deputy director of the State Food and Drug Administration’s
Shanghai bureau, concluded that “some of the illegal conduct was not that of certain individuals but was
an arrangement organised by the company [OSI] (Hornby et al, 2014).” The Chinese government arrested
five people for being behind the criminal activity and “seized” over 5,000 boxes of tainted meat (Mathew,
2014). So far, no one has gotten sick or died because of the McDonald’s food (Cendrowski, 2014).
McDonald’s China Response
After the information about the bad meat was released on CCTV, Chinese business blogger
Phillip reports that, “Less than one hour later,” McDonald’s China was the first company to respond on
their official social networking site, Weibo. The company apologized, said it would investigate, and they
would “guarantee” that they would make sure there was “safe, hygiene [sic] food to customers... [we]
welcome supervision from government, media, and customers. (Phillip, 2014).”. Phillip notes,
“Two hours later, this post has been shared by 8400 different accounts and total fans of
these 8400 accounts are over 10 million. This means this post reaches 10 million people
on [W]eibo in only 2 hours.”
They also posted this news release on McDonald’s Chinese newsroom (McDonald’s Chinese Newsroom,
2014).
By July 21, McDonald’s China reported that they pulled all meat from Shanghai Husi, which
would create “shortages” and “inconveniences” but keep the customer safe. By July 24, they announced
that they would stop getting food from Shanghai Husi, but continue using the OSI food group company,
which promised better quality in the future (McDonald’s Chinese Newsroom, 2014).
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McDonald’s Corporation Memo RE: Shanghai Husi Crisis
Analysis of McDonald’s China Response
Through careful media monitoring, McDonald’s China quickly identified and responded to a
crisis. It told their side of the story before rumors could spread and people could criticize it. Furthermore,
McDonald’s has sent a clear message that it is taking action, that it cares, and that it is transparent,
through Weibo which is a medium that will reach many in their Chinese market.
News media report conflicting messages from publics. According to the Trefis Team (2014), “the
scandal has built a negative reputation among Chinese customers, leading to a drastic decline in customer
count.” On the other hand, Lu (2014) claims that Chinese publics will continue going to McDonald’s
because it is their safest choice. They don’t expect companies to have high levels of social responsibility
like American publics do.
McDonald’s Weibo and its official Chinese site are still managing the crisis, but are focusing on
recovery instead of information about the crisis. It is promoting non-meat products, like ice cream,
coffees, and barley burgers, to try to profit even though meat is not allowed (McDonald’s Chinese Weibo,
2014; McDonald’s Chinese Newsroom, 2014).
On McDonald’s Chinese Newsroom (2014), the CMT has sent out messages keeping Chinese
people and press up-to-date on the crisis. In this medium, McDonald’s China has sent a consistent
message of Corporate Social Responsibility and caring about food safety. On July 24, they announced
that they would stay with the OSI group because they promised to improve their food safety and quality
standards, but wouldn’t be using Shanghai Husi, the facility with the problems. On August 4, their
newsroom posted a press release about McDonald’s donating 2 million Yuan to an earthquake relief
effort. On September 2, they released information about their new meat facilities and vegetable vendors,
third-party inspectors, and the creation of an “anonymous hotline” for workers to directly report
violations. They also announced that the shortages would end, which signaled that the Shanghai Husi
crisis was over (McDonald’s Chinese Newsroom).
By being transparent about their new food safety processes, McDonald’s China is sending a
message that they are honest. Some publics might have been angry with the decision to keep OSI, but
because OSI is McDonald’s supplier all around the world, they could not afford to lose business with
them. They used their press releases as a chance to tell their side of the story and mitigate stakeholder
challenges, saying that OSI was safer than finding new suppliers (FlorCruz, 2014).
McDonald’s Japan Response
McDonald’s Japan also received 20% of its chicken meat from Shanghai Husi. As a result, the
Japanese publics were exposed to health risks, too. McDonald’s Japan, however, failed to respond as
quickly and as sincerely as McDonald’s China. They pulled the product July 21, but did not tell the
Japanese public why. Instead of responding the day the information came out (July 20), or the day the
meat was pulled (July 21), McDonald’s Japan responded on Facebook and their online newsroom on July
23, and waited until a financial press conference on July 29 to talk about it in public. Instead of focusing
on the public’s concern about the health risks, Sarah Casanova (McDonald’s Japan CEO and
spokesperson) said that because of Shanghai Husi, that they weren’t able to give an accurate financial
forecast (Iino, 2014).
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McDonald’s Corporation Memo RE: Shanghai Husi Crisis
Many customers commented on McDonald’s Japan Facebook announcements on the crisis,
saying that they will not be able to trust McDonald’s chicken unless it is made in Japan. Some show more
concern for food inspection, by saying ‘what’s the difference between chicken from Thailand, Japan, or
China if McDonald’s doesn’t have people monitoring their food?’ However, because of past food
poisoning from China, a lot of the Japanese public will not trust any food from China (McDonald’s
Japanese Facebook, 2014). On July 29, the day of the press conference, McDonald’s Japan signaled the
end of the crisis and start of the recovery by posting a plan for future food safety on their newsroom
website (McDonald’s Japanese Newsroom, 2014).
Analysis of McDonald’s Japanese Response
If McDonald’s Japan wanted to send a message that cared about the Japanese community, it
should have done two things. First, it should have pulled the meat. Second, it should have informed the
public what was going on and how they were acting to protect them. While McDonald’s pulled the meat,
they did not explain why until two days later. This allowed the public to panic about all Chinese products
(“Break by McDonald’s”, 2014). It also allowed the public to hear about the Shanghai Husi Crisis from
other sources. In other words, McDonald’s Japanese CMT team lost the opportunity to tell its side of the
story first.
The press conference was a major mistake in crisis management strategy. First, it should have
been called right away. Because it wasn’t, McDonald’s sent a signal that the risk of sick Japanese
customers was not important enough to call a press conference right after it happened (July 20). Second,
because Casanova apologized during a financial press conference, it sent a message that the most
important part about Shanghai Husi was profits and financials, not the customer’s health. She treated the
event as a normal financial event instead of a crisis.
Casanova also did not seem to be trained to be a spokesperson for a public safety crisis. Japanese
PR expert Iino (2014) notes, she “did not speak in an apologetic tone at all,” but used the press conference
as PR event to promote McDonald’s instead of addressing customer concerns. By blaming the Shanghai
Husi’s workers and by not compensating customers, Iino claims that Casanova did not take responsibility
for the crisis (Iino, 2014).
Besides the press conference mistakes, McDonald’s Japanese social media manager was good at
listening to what the public wanted and responding. Because Japanese publics were concerned about
Chinese food and inspection, McDonald’s Japan chose not to get their food from China, and posted a PDF
guide of how McDonald’s food is processed to make food safety transparent on their Facebook page
(McDonald’s Japanese Facebook, 2014).
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McDonald’s Corporation Memo RE: Shanghai Husi Crisis
Recommendations
Based on our analysis of the Shanghai Husi Crisis and McDonald’s Response, we have four main
recommendations for McDonald’s Corporation’s future crisis management plans. Included in this report,
we will talk about (1) having regional crisis management plans, (2) continuing to be transparent about
mistakes and Corporate Social Responsibility, (3) inspect all of McDonald’s suppliers around the world
and publishing the results, and (4) continue monitoring complaints and social media challenges about
food suppliers. Because McDonald’s is an international company that is responsible for food safety
around the world, these recommendations will improve McDonald’s food quality and how the public
perceives that quality on a global scale. They are also aimed to improve McDonald’s profits, which have
declined 7% in Asia after the scandal (Mathew, 2014)
Integrating Country’s Crisis Management Plans by Region
While McDonald’s China was able to quickly see and respond to Shanghai Husi, McDonald’s
Japan did not seem to be told about the event until later. As a result, McDonald’s Japan had less time to
analyze the crisis and evaluate their response. Their messages were not consistent with McDonald’s
China, and showed more of a concern for finances than for the health of the Chinese or Japanese publics.
In order to reduce the impact of regional crises, and respond quickly, international CMTs should
create international CMPs, communication channels, and train spokespersons. CMTs should be able to
respond to an international crisis with one voice, but have a CMP that they can adapt to fit their local
publics’ expectations and concerns.
Continuing to be Transparent and Socially Responsible
Besides Casanova’s late apology to the Japanese publics, all McDonald’s CMT responded
quickly and honestly about Shanghai Husi. They did not try to hide facts about OSI or Shanghai Husi, and
were transparent about their solutions to the food safety problem to all publics. This allows the public to
feel safe, and creates an image of McDonald’s as an ethical company. It also allows the public to check to
see if McDonald’s is doing what they say they are doing.
McDonald’s must be transparent about how it is Socially Responsible as well. In this case,
McDonald’s China was careful to show how it was giving back to China while it was recovering from the
Shanghai Husi crisis. This calls attention to how McDonald’s is focused on helping the community, not
profitting. McDonald’s Japan (which sent messages that it cared more for profit than people) would
benefit from focusing its resources on social responsibility efforts.
Inspecting and Monitoring All World Suppliers and Publishing the Results
In order to win back public confidence, McDonald’s should show that it is committed to every
person’s public health. It should show that it is doing something to prevent future health problems. This
also takes the public focus off problems happening now.
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McDonald’s Corporation Memo RE: Shanghai Husi Crisis
Instead of limiting its inspections to Chinese OSI factories and suppliers, McDonald’s should inspect
all of its suppliers. This will encourage suppliers to be ethical or gain an unfavorable reputation. This will
mitigate McDonald’s Corporation risk, especially if OSI does violate food safety regulations in the future.
By publishing good and bad results, furthermore, McDonald’s sends a message that it is an ethical,
transparent, company that is always trying to grow. Both good and bad results should also include reports
on what the company needs to do to improve.
Excellent synthesis and analysis of the crisis at hand. You provide quite a bit of research and depth to
your recommendations too. Very well done! Keep up the good work.
Grade: 150 / 150
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McDonald’s Corporation Memo RE: Shanghai Husi Crisis
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Cendrowski, S. (2014, Sept.) “Why McDonald’s supplier failed in China.” Fortune. Retrieved from
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lds_KFC
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McDonald’s Corporation Memo RE: Shanghai Husi Crisis
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