In the days after a devastating earthquake struck China’s Sichuan province on May 12, 2008, China Vanke Company, one of the country’s largest home builders, found itself at the center of an unexpected controversy. The company’s chairman, Wang Shi, had made what was perceived as a small donation (2 million RMB [US$286,000]) to relief efforts. He also asked his staff to restrict their individual contributions to just 10 RMB ($1.50), believing that charity should not become a burden. As word of Wang’s actions spread, a furor erupted on the Internet. Chinese netizens attacked Vanke for being stingy, despite the company’s established reputation for social responsibility and philanthropy. The situation worsened when Wang defended himself on his blog — one of the most popular in China. Vanke’s stock price dropped by 12 percent between May 15 and May 20. Wang had to scramble to repair the black mark on his company’s name, issuing an apology both on his blog and directly to shareholders, pledging 100 million RMB ($14.6 million) to rebuild homes in the disaster zone, and offering to resign if company performance suffered more serious setbacks.
Vanke’s woes were a sharp contrast to the experience of the JDB Group, the parent company of Wang Lao Ji, a maker of herbal teas. JDB made an extremely generous initial donation to earthquake victims of 100 million RMB, an openhandedness that did not go unnoticed. China’s Internet activists highlighted JDB’s actions on numerous online bulletin boards and in e-mails urging fellow consumers to support the company by buying its products. Demand for Wang Lao Ji beverages surged overnight.
The Internet is the most popular medium for the expression of public opinion in China, a country where open communication is often limited. As these incidents illustrate, public opinion channeled through the Internet can have a huge impact — positive or negative — on corporate reputations in China. According to data from the state-sponsored China Internet Network Information Center, China has the world’s largest Internet population, with 340 million people, or 22.6 percent of the population, online as of January 2009 (compared with a world average of 21.9 percent). And the number of Chinese Internet users is increasing rapidly, growing 13.4 percent from the end of 2008 to June 2009. Through Web forums, bulletin boards, video-sharing sites, instant messaging, and other online tools, the country’s Internet users — generally a young, activist, and influential group — can discuss a wide variety of topics and gain access to reams of information beyond the state-controlled media in ways that would previously have been inconceivable. For companies, the challenge is to manage the threats and the opportunities posed by the speed with which public opinion can spread online. Never before has it been so easy to reach mass audiences. And never before have negative views been able to wreck corporate and individual reputations so fast.
It is not just domestic companies that need to tread cautiously. Foreign multinationals are also at risk of having their reputations tarnished, and not only if they show a lack of sensitivity and generosity. The biggest threat they face is being branded anti-Chinese or imperialistic, which is how Western governments and companies have been perceived for centuries. Such attitudes came to the fore in 2006, when U.S. private equity firm Carlyle Group LP made a bid for Xuzhou Construction Machinery Group Inc. (XCMG), a leading Chinese industrial equipment manufacturer. Carlyle suddenly found itself facing an online onslaught of criticism after Xiang Wenbo, executive president of Sany Heavy Industry — also a bidder for XCMG — wrote a series of blog entries calling the deal a “cheap sale of state assets.” This ignited a public discussion on whether the government was letting foreigners acquire Chinese companies at prices below their value, a debate that almost certainly played a role in Beijing’s eventual decision not to approve the sale to Carlyle.
With more and more activists coming online in China, companies must prepare themselves for Web traffic with a thoroughness that may not be necessary in other markets. If businesses want to be able to respond rapidly and effectively, it is vital that they track commentary and news about themselves online and put plans in place to deal with negative publicity as soon as it arises. Executives must consider the impact of Internet-driven public opinion when formulating strategies and actions, and they must understand the speed with which views are formed and spread on the Web, as well as the harm that can come from misinformation or negative postings. To protect themselves, companies should take the following three actions.
• Monitor and manage. Unverified news spreads more quickly on the Internet than through other channels. On a day-to-day basis, senior executives and public relations managers must involve themselves as active agents in the monitoring of online commentary and discussion about their company and its products and services.
New companies that deal in online reputation management have sprung up to help executives follow public opinion. For example, Beijing-based Daqi and Shanghai-based CIC (which calls itself the “first Internet Word of Mouth research and consulting firm in China”) charge multinationals monthly fees to monitor activity on the Web, assess the danger, and diffuse the issue or create a positive spin. Some businesses specialize in promoting discussion online, posting and replying on online forums in ways that boost their clients’ products or services, and designing targeted discussion topics to catch users’ attention. However, these companies are unregulated, and that has led to the emergence of businesses known as “Internet innuendo spreaders.” Rather than promoting a company, they aim to harm its competitors. Reports suggest that hundreds of such businesses are operating in Beijing alone.
• Be proactive. Wherever possible, companies should proactively manage online opinion, whether for marketing and promotion or to defuse potential crises. Any company planning an acquisition in China, laying off staff, or taking any other action that could be perceived as anti-Chinese needs to be especially careful. As Coca-Cola Company learned in its failed 2008–09 bid to acquire China’s biggest juice maker, Huiyuan Juice Group, companies considering a major deal in China need to bear in mind the possible online repercussions before making announcements. The Chinese news service Sina.com conducted an online poll on whether the Coca-Cola deal should be allowed to go forward. The views expressed in blogs and discussion forums were less vitriolic than those expressed during the XCMG debate, but the Sina survey revealed that an overwhelming majority of those polled — some 80 percent — were against the acquisition, which Beijing could not ignore.
Corporations should also be aware of how attempts to manipulate opinion can backfire. A viral campaign by computer maker Lenovo aimed at promoting its laptops flopped when Internet users realized that what appeared to be a Web posting from someone looking for a real person whose photo he had taken (the “red laptop girl,” an attractive young woman usually pictured toting a red Lenovo IdeaPad) was in fact a corporate promotion. The campaign attracted a lot of discussion, but most of it was negative.
• Prepare for crisis. Executives should educate their staff, and themselves, about the proper use of online tools such as blogs. Many professionals and senior executives have personal blogs, but it is crucial to understand that the Internet is not a private space and that what is published on blogs can affect the image of the company one works for. Initially, Vanke’s Wang Shi learned this lesson the hard way, but he was also able to use his popular blog to his advantage in making his public apology.
If an online scandal should occur, companies must have an Internet crisis management protocol in place, with the highest-level executives involved, to confront it. A company may suddenly find itself the subject of collective online anger — such as that shown in the calls for a boycott of French supermarket company Carrefour after protesters in Paris disrupted the torch relay for the Beijing Olympics, or the criticism of Dior because actress Sharon Stone, featured in the company’s advertisements, suggested that “bad karma” from the Chinese government’s crackdown in Tibet might have caused the Sichuan earthquake. When a Web activist campaign like this erupts, it is too late to begin drafting a reactive plan. Whenever negative opinions are voiced, companies must act quickly, never allowing comments to spread unchecked or unaddressed. And, where possible, companies should identify ways of leveraging online opinion that support their strategic development; this will put them in a strong position to mobilize voices in their favor if things go wrong.
- Edward Tse is Booz & Company’s managing partner for Greater China, specializing in definition and implementation of business strategies, organizational effectiveness, and corporate transformation. He has assisted several hundred companies — headquartered both within and outside China — on all aspects of business related to China and its integration with the rest of the world.