MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI MINH CITY

SUBJECT: INTERNATIONAL BUSINESS STRATEGY

CASE STUDY

NOT A TOY PROBLEM: HOW CHINESE

TOYMAKERS RESPOND TO RECALLS

Teacher: NGUYEN XUAN DAO

Students:
TRAN THI YEN NHI
VO NHAT HAO
DANG NU TIEU TRAN
VO THI HOANG THU
TRAN LE PHUONG DUNG

HO CHI MINH CITY – 2021

 TEACHER’S COMMENTARY

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TEACHER
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 GUARANTEE

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▪ TRAN THI YEN NHI – ID : 030834180176
▪ VO NHAT HAO – ID : 030834180064
▪ DANG NU TIEU TRAN – ID : 030834180261
▪ VO THI HOANG THU – ID : 050606180400
▪ TRAN LE PHUONG DUNG – ID : 030834180041
Case study: NOT A TOY PROBLEM: HOW CHINESE TOYMAKERS
RESPOND TO RECALLS
Teacher: NGUYEN XUAN DAO
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not copy any documents and have not published this entire content anywhere; the figures,
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Ho Chi Minh, 11th January, 2021

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 WORK ROSTERS

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1 TRAN THI YEN NHI Question 2 100%
2 VO NHAT HAO Question 1 100%
3 DANG NU TIEU TRAN Word Compilation 100%
4 VO THI HOANG THU Question 1 100%
5 TRAN LE PHUONG DUNG Question 3 100%

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 CONTENT
Question 1: .............................................................................................................................. 1
Question 2: .............................................................................................................................. 3
Question 3: .............................................................................................................................. 5
BIBLIOGRAPHY .................................................................................................................. 7
Question 1:
What are the pros and cons of each of these strategic choices?
Advantages
For this strategy businesses can
refuse their responsibility in the
global market.
Family-owned companies in the
Chinese toy industry fit this
strategy because family-owned
companies can ignore problems
such as persistence in operations
and make mistakes. acquired in
Passive company development. The
strategy company takes action after the
recall is announced because it is
only when the loss of the
company's profits is made that the
company will pay attention to the
problem of the recall.
Companies that adopt this
strategy acknowledge the
influence of formal and informal
institutions, accepting their
responsibility.
Acknowledge your mistakes and
try to improve.
Defense Act after the foreign entity applies
strategy formal pressure policies directly
on the company such as the
announcement or announcement
of the recall.
May improve after recall.
Realize the importance of
complying with foreign
institutions.
Disadvantages
They may lose their position in
the domestic market. In the
process, companies that chose a
passive strategy were unable to
convey their responsibilities to IB
stakeholders and evolved in a way
that would cause more problems
and eventually lead to them being
affected. profit loss.
Companies that adopt a passive
strategy often put themselves in
the dilemma that while they aim
to make a profit, they lose the
most in disclaimers and action
after withdrawal... They may even
face a "death penalty" when
forced out of the market for not
complying with the rules of both
at home and abroad.
They lack willingness and the
ability to change ahead of time.
When firms choose their strategy
carefully in the face of pressure
from foreign institutions, they
create an image of ignoring the
rules of international markets,
which jeopardizes their reputation
in Introducing Brokers, therefore,
may pay a heavy price for their
reputation as well as their profits.
They also face a high probability
of being rejected by markets
governed by formal and informal
institutional frameworks.
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 Help can be obtained from the The reason companies do not
local government when applying adopt this strategy may be the
this strategy. high cost of having an individual
When companies take advantage company acknowledge the
of this proactive strategy and difference between domestic and
pursue knowledge in foreign global institutions.
organizations by continuously Shortage of resources and
investigating through various capabilities.
ways.
Accept your responsibilities and
adhere to local and foreign
Proactive institutions.
strategy There is a higher chance of
maintaining legitimacy under
institutional pressure.
Firms acting before recalls are
announced offer advantages such
as avoiding possible pre-crisis
losses and helping to maintain
long-term corporate legitimacy.
When applying this strategy
companies will take some moves
that benefit the company and
avoid problems in the future.

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Question 2:

If you were a toy company executive and you were aware that the problem
behind the recall was due to design flaws and not manufacturing flaws, what
would be your reaction?
At first, we should understand what design flaws are. Generally, design flaws are
products that have “sharp edges, long strings, and small detachable parts'' (Bapuji &
W. Beamish, 2008). If I were a Chinese toy company executive, I would learn from
the mistakes of my own firm and competitors. In Exhibition 1 of the textbook, from
1988 to 2007, there had been a vast quantity of toy recalls which were carried out all
over the world. Therefore, the firm has a good opportunity to insight the way their
companies handled this crisis. In case this circumstance was unprecedented, Chinese
companies should identify and define what the core of the problem, why this problem
occurred and how to conquer it.
As Strategic response framework for Ethical challenges (W. Peng, 2009, 110), the
institution-based view is the core on how certain strategic choices under institutional
influence. It means that the institution, even in the domestic market or foreign one,
play a pivotal role in which strategy firms choose to react to the spontaneous problem.
In this circumstance, the problem is the design flaws of the toys that were
manufactured in China.
The case says that most of Chinese toymakers are OEMs (original equipment
manufacturers), it means Chinese manufacturers produce components as the foreign
partner orders, including the design, criteria, technical standard etc… of the products.
Obviously, Chinese firms were blamed for foreign partners’ faults in terms of
products design. They should have taken the responsibility for the shortage of cross
border institutions’ acquisition solely. Chinese OEMs should let the government,
stakeholders and customers be aware of their responsibility in this case and seriously
make an apology to the related parties in action and in official announcement.
Afterwards, they should establish the department which evaluates the risks if they
accept these offers. This requires a firm international institutions literacy.
To prevent the recall from reoccurring, the Chinese firms should comprehend the
overseas institution, comprising regulatory, normative and cognitive pillars (W. Peng,
2009, 93). Chinese companies should assess the design of the products ordered by
their partners whether they meet the international and the foreign countries’ criteria,
technical standard or not. If they don’t fit these criteria, Chinese companies should
inform immediately to their foreign partners or reject the orders from their partners.
Although the manufacturers cannot make a killing from these offers, they will
maintain their prestige in the eyes of foreign and domestic markets in the long run.
What’s more, Chinese toymakers can get acquainted with “the rule of the game
overseas”, in turn predict the risks that the Chinese companies possibly encounter in
the future, and find out the solutions.
In terms of domestic environment, Chinese firms should understand profoundly their
nation’s institution to face the aftermath of the recall. A crucial factor that contributed

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to the collapse of Lee Der and the failure of Le Qu toys is the Chinese government's
dissatisfaction. If they knew how serious Chinese government paid attention to the
quality image of goods made in China, they would not have lost legitimacy in the
eyes of their government.
In a nutshell, companies should learn the past, adopt proactive strategy and build up
a strong cross border institution literacy and domestic market knowledge to defend
against the threats around the corner and even in long term.

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Question 3:

If your company’s products were cited as unsafe, what strategy would you
choose to deal with the crisis?

Concerning the situation given in question 2, our company – a toy manufacturing

company produces these products which are determined to be recalled as design
errors, instead of production errors. But after receiving that failure, our company is
said that the company provides unsafe toys.
In this situation, through two big lessons from BMW and ELI given in the Chapter 4
case, both firms had an effective selection and implementation of the Proactive
Strategy that has brought success to them, as opposed to the failures of Lee Der or Le
Qu.
Therefore, based on Strategy Responses to Ethical Challenges with 4 main strategies,
when the firm faces this problem, as the operators of the company, we will choose
the Strategy of Proactive (anticipate responsibility; do more than is required) to solve
this problem.
Given the situation in verse 2, it was clear that national differences were important in
the company's business. The company's culture and management platform in different
countries must also be different, which greatly affects the development of the
company in that country.
The Company must have a thorough strategy on market research, participate in
discussions, learn about culture, techniques, other National standards, as well as the
laws of the Country selected for production. In addition, the company must set out
risk prevention plans as well as business risk response plans, to minimize losses from
risks.
From a production perspective, the company needs to be clear, transparent, and
strictly control the parties involved in the product formation process, who has
provided any ingredients, is responsible for which part of the product, the company
mapped,... If a faulty or harmful product is found to be harmful to the user, it is easy
to trace and determine the cause of one or more specific ingredients or deviations at
any production steps, thus requesting a complaint against the supplier or manufacturer
of that component. Companies must exercise caution when putting certain
components or identification vehicles into the product, to avoid the responsibilities
and risks associated with components or components manufactured by another
company.
When there is negative information about the company's products, the Company must
quickly identify the cause and give appropriate directions before let things go too far.
Be willing to make errors, take responsibility, and make product improvements
seriously and thoroughly. We need to appease customers after receiving product
shortcomings, making refunds, making better policies, incentives, and promising
products with better quality assurance quality from the company.

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In this step, after completing the product improvement, the company can apply a
"special" Marketing strategy to be able to regain the trust of customers after old
mistakes by bringing accurate, reputable, and guaranteed information to consumers.
If there is a problem, it is necessary to carefully check the cause, proactively admit
the error and try to fix it immediately. If the customer feels irresponsible company,
turns away from the skepticism, does not give authentic evidence but only calls the
storm, it will also cause disbelief from customers, leading to the deterioration and
failure of the company.
Thus, to prevent risks, we must make business plans, marketing, production
efficiently, accurately, and professionally. Offer risk prevention options such as
refund to show customers that they are confident about their products as well as create
peace of mind in the spending of customers.

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 BIBLIOGRAPHY

Bapuji, H., & W.Beamish, P. (2008, 3). Avoid Hazardous Design. Havard Business

Review.

W.Peng, M. (2009). Global Strategy (2nd ed.). South-Western Cengage Learning.

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