Sanlu Milk Scandal Case Study

Issues of SanLu Milk Powder Scandal

Contents

Introduction 1

1. SanLu milk powder scandal in 2008. 2

1.1 Brief introduction of SanLu milk powder scandal. 2

1.2 Financial loss in SanLu milk powder scandal. 3

2. Internal and external reasons of the scandal. 5

3. Countermeasures of Chinese government and other countries. 7

Conclusion 9

Introduction

In recent years, the quality problems about milk safety in China have become more frequent and serious than before. According to Foster (2011), top 10 Chinese milk scandals include Melamine Milk and Leather milk. Among these scandals, there was a company named SanLu mostly attracted social attention in 2008. To study the issues of milk safety, its impacts and potential factors, the framework

Internal and external reasons of the scandal.

As it was previously shown, the loss in SanLu milk powder scandal was extensive. Thus, it is indispensable to discover the original factors in order to avoid further similar tragedy. In this section, both internal and external reasons of this incidence will be analyzed from diverse perspectives.

On the one hand, shortage of accountability and inappropriate competition strategy of SanLu were the foremost reasons. Firstly, intangible regulation in production process and ignorance of leaders were relevant to the milk powder scandal. In the producing process, every stage was supposed to under fierce guarantee with guidance of national food safety standard. Besides, ignorance of leaders of was additional vital factor that led to the scandal. As the biggest milk producer in China, leaders were necessarily obligated to establish comprehensive corporate governance to ensure their quality of products. However, even after revealing Melamine combination in milk products, it still took a long time for SanLu Corporate admitted their illegal behavior. In this case, majority of poisoned milk powder was only sold 18 RMB per bag. In fact this was one method to facilitate SanLu to win massive rural market. Therefore, adding poisoned alternatives as a replacement of protein was relatively worthwhile. According to the demand and supply relationship in elastic market, when the price increases, demand will decline. Therefore, decreasing the price

In fact, enormous loss in this scandal expanded from bankruptcy of SanLu Corporation to export reduction in China. Largest dairy companies such as MengNiu and YiLi were all unveiled contained tainted chemical Melamine. Because of this scandal, reputation of Chinese food overall doubted by international markets. In this case, huge financial and physical loss was led by both external and internal reasons. Factors such as lack of accountability, wrong competition strategy ignorance of regulation by government and immature purchasing knowledge of consumers are supposed to be responsible for this scandal. In conclusion, this scandal is not only an illegal poisoned milk manufacturing, but also economic