Haidilao Case Analysis

 

This document will analyse the case of Haidilao Catering’s hygiene crisis in 2017 including a case overview, list of the facts, factors and context and an exploration of the Public Relations (PR) problem, approach and decision making criteria.

 

2.0 Case Summary

On August 25th 2017 Chinese hot pot chain Haidilao experienced a crisis when a publication released information of unhygienic kitchen activities occurring in their Beijing Jinsong and Taiyanggong restaurants (Shu & Zheng, 2018). This situation received immediate media and public attention which led to Haidilao’s founder, Zhang Yong to take communicative measures which yielded positive and negative reviews.

3.0 Facts, Factors & Context

This section highlights the facts, factors and context present in Haidilao’s case . Refer to Appendix 1 for further content.

3.1 Facts (Shu & Zheng, 2018)

  • –  Haidilao:
    • Has over 200 restaurants globally
    • Requires 20-30% of staff in new establishments to have relevant work experience• Before incident had 74.75 % positive online comments and only 9.22% negative• After incident had 11.07% positive comments and 49.15% negative comments
  • –  10:58 am August 25th 2017 – press writer from Legal Evening News released a story about
  • –  hygiene problems in Haidilao’s Beijing Jinsong and Taiyanggong restaurants.Haidilao’s first response was issued at 2:31 pm – an apology letter acknowledging the hygiene
  • –  issue and apologising.5:30 pm second public response – announced rectification and future prevention plan and named who would be in charge of actioning plan.

    3.2 Factors (Shu & Zheng, 2018)

 

Stakeholders:

• Employees and management of Haidilao
• Chinese media and public
• Netizens
• Zhang Yong, founder and chair of the board of Haidilao• Investors

Opposers:
• Competitors who were affected by Haidilao’s leading industry position• Netizens whose opinions were altered after crisis

Supporters:
• Netizens who thought Haidilao’s response was appropriate

• Employees who supported Haidilao’s company culture 

– Organisation Values & Priorities of Decision Makers:

• Service standard reflected Haidilao’s core corporate values and goals:• Fair working environment
• Allow employees to grow
• Expand to every city in China

• Turn threats in opportunities leading to renewal (phoenix nirvana)

• Make consumer experience their point of difference and focus
• Legendary reputation supported Haidilao’s rapid development and success

3.3 Context

–  Market competition is fierce, pushing importance of establishing point of difference (Shu &

–  Zheng, 2018).

–  High level of netizens in China means saturation of online opinions (Shu & Zheng, 2018).

Chinese market have high expectations and are extremely conscious of food safety (Xinhua,

–  2018; Zhou, 2016).

–  Food safety is vital to the survival and success of catering companies (Shanghai Daily, 2017).

–  Media and public flooded online channels to discuss Haidilao’s crisis (Shanghai Daily, 2017).

McDonald’s had safety issues in 2012 which left consumers angry after their response stated it was an isolated incident (Shu & Zheng, 2018).

4.0 Public Relations Problem

Hot pot chain, Haidilao is a market leader with over 200 chains globally (Shu & Zheng, 2018). With unique and memorable customer service approaches, Haidilao has managed to maintain its leading position despite saturated competition. On August 25th 2017 at 10:58 am, a story from the Legal Evening News released information about food and kitchen hygiene problems in Haidilao’s Beijing Jinsong and Taiyanggong restaurants (Shu & Zheng, 2018). The report, along with online videos showed the inappropriate use of customer tableware and mice present in the kitchens. These reports quickly spread via social media and caused discussions on Haidilao’s next move to be heavily debated. This crisis saw Haidilao’s positive online reputation drop to 11.07% (Shu & Zheng, 2018).

A multitude of publics were affected including, employees, customers, investors, media and netizens. After the news broke, Haidilao shut down it’s affected restaurants and assured customers that all other sites would also be checked.

Not only did this crisis affect Haidilao’s trade, but it impacted consumer trust leading to Haidilao’s tainted reputation.

5.0 Public Relations Approach

 

To effectively manage this crisis, Haidilao had to react quickly with two responses released on their official website on the day of the crisis. The first response was an acknowledgement and apology letter that was published at 2:31 pm and the second public response at 5:30 pm was a rectification prevention plan (Shu & Zheng, 2018). Contrary to public expectation, Haidilao’s management took full responsibility for this issue in an attempt to retrieve public support (Shu & Zheng, 2018). Along with shutting down the infected restaurants on August 25th, Haidilao additionally performed health and safety checks at all their locations (Shu & Zheng, 2018).

This commitment to transparency continued when Haidilao installed cameras in their affected restaurants so returning customers could watch a live stream of the kitchen which promoted Haidilao’s confidence in their repaired kitchen environment (Lianzhang, 2017).

Instead of diminishing this crisis, Haidilao made timely and relevant actions that aligned with their company values leading to trust renewal and continuation of trade.

 

6.0 Decision-Making Criteria

There were three working theories utilised by Haidilao during this crisis; situational crisis communication theory, situational theory and attribution theory (Hurst, 2019).
These theories focus on the importance of an organisation’s placement of accountability which in Haidilao’s case was present after they took responsibility for the crisis and apologised to all affected (Hurst, 2019; Shu & Zheng, 2018). Utilising these theories allowed for the reduction of reputational impact for Haidilao and effectively enabled them to deal with the issues properly.

The stakeholders who impacted Haidilao the most during this crisis were the media and netizens due to their online discussion and content sharing. Haidilao’s management bodies were the stakeholders who rectified this crisis with two press releases, restaurant closure, global restaurant checks and the implementation of the prevention plan.

A consideration that was important for Haidilao to examine was McDonald’s 2012 safety breaches which caused netizens to feel ignored after McDonalds claimed the issue was isolated and no cause for concern. Netizens believed McDonalds should have taken more responsibility as an industry heavyweight (Shu & Zheng, 2018).

With three main corporate goals; fair working environment, employee growth and China-wide expansion, maintaining Haidilao’s reputation through crisis management was integral (Shu & Zheng, 2018). Therefore, internal staff were given priority and were not blamed for this incident. The decision to move all blame from individual employees to management aligns with the core corporate values of supporting and fairly treating employees. Additionally, to maintain this healthy environment, Haidilao abided by legalities and shut the affected restaurants as well as running all required safety and hygiene testing (Shu & Zheng, 2018).

Through Haidilao’s admittance of accountability to this crisis and transparency throughout their decision-making process, they communicated their commitment to consumer and employee satisfaction.

Refer to Appendix 2 for further explanation of the decision making criteria in this case.

 

7.0 Conclusion

 

Overall, this document has presented an analysis of Haidilao’s crisis management case for their 2017 hygiene dilemma. Providing a case overview, listed facts, factors and contexts and discussion of the PR problem, approach and decision making criteria used.

 

8.0 References

 

Hurst, B. (2019). AMB374 Global Public Relations Cases: Working Theory [Lecture notes]. Retrieved from https://blackboard.qut.edu.au/bbcswebdav/pid-7825693-dt-content- rid-23100549_1/xid-23100549_1

Lianzhang, W. (2017). After Hygiene Hiccup, Haidilao Reopens With Kitchen Webcams.

Retrieved from https://www.sixthtone.com/news/1000971/after-hygiene-hiccup%2C- haidilao-reopens-with-kitchen-webcams

Shanghai Daily. (2017). How a popular hot pot chain turned a food safety scandal into a positive PR exercise. Retrieved from http://english.sina.com/buz/b/2017-08-31/detail- ifykpysa2175744.shtml

Shu, C., & Zheng, S. (2018). Haidilao catering: From a hot pot to crisis management. Retrieved from https://services.hbsp.harvard.edu/ api/courses/610150/items/W18801-PDF-ENG/

sclinks/5678b0d995be197da6541fd6c596df8e

Xinhua. (2018). China’s food safety rate at 97.6% in 2017. Retrieved from http://english.gov.cn/ state_council/ministries/2018/01/27/content_281476027703468.htm

 

Zhou, G. (2016). The Regulatory Regime of Food Safety in China: A Systemic not Accidental Failure. Retrieved from https://digital.library.adelaide.edu.au/dspace/bitstream/ 2440/100197/2/02whole.pdf

 

9.0 Appendices

 

9.1 Appendix 1

Additional Facts, Factors and Context.

Facts (Shu & Zheng, 2018)

– Before incident Haidilao relied now word of mouth publicity
– Staff of about 50,000 at of March 2017
– Maintained a top economic presence in the industry with growing revenue

Factors (Shu & Zheng, 2018)

  • –  Who has Power and Influence:• Media
    • Netizens
    • Consumers
    • Management team at Haidilao
  • –  Underlying Opinions or Assumptions:
    • Some netizens though that Haidilao’s response was honest and thoughtfulContext (Shu & Zheng, 2018)- No competitors have dethroned Haidilao from leading position

9.2 Appendix 2

Building a Decision- Making Framework

Decision-Making Influencer

Criteria Used By the Organisation

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Additional Comments

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Stakeholder involvement/impact (Shu & Zheng, 2018)

  • –  Media and netizens play a large role in Haidilao’s stakeholder environment, so Haidilao needed to rectify negative online opinions to save their reputation.
  • –  Media and netizens feedback were a strong encouragement for Haidilao to act as quickly as they did.
  • –  Stakeholders who were stated to be responsible would have probably been consulted before second public comment regarding rectification plan was published
  • –  Haidilao used information that mutually benefitted the company and its customers which indicates symmetrical decision making
  • –  Not all stakeholders were fairly considered with management getting immediately blamed.
  • –  Haidilao was not only having to maintain their reputation within their community, they had to deal with the global ramifications of this issue due to the information spread on social media.
  • –  It can be assumed that prior to releasing information, everyone who was involved in Haidilao’s rectification plans would have be consulted so they were on board and ready to implement.
  • –  By Haidilao moving all blame from individual employees to management, they did not fairly consider the managers reactions. This could lead to annoyance amongst staff.
page10image10907904

Application of ‘working theory’ (Shu & Zheng, 2018)

– Three main working theories utilised my Haidilao:

o Situational crisis communication theory

§ Haidilao took responsibility for the crisis to show they were committed to fixing the problem.

  • –  Haidilao’s working theories focused on salvaging their reputation by re-building a positive reputation with the public.
  • –  There was clear connection between these theories and how Haidilao reacted to this crisis
  • –  They only other theory that Haidilao could have incorporated into their repertoire was diffusion of innovations:

8

§ Immediately begun making changes in attempt to salvage their reputation.

o Situational theory

  • §  Situation was affectingHaidilao’s reputation with positive comments plummeting which was affecting customer trust.
  • §  Publics had to step in and attempt to rectify the situation.o Attribution theory
  • §  Management was immediatelyblamed for outbreak.
  • §  Haidilao took responsibilityand accepted what had happened, highlighting to the public how they were going to fix it.
page11image21730368 page11image11286864

o Allowed key channels to be identified to communicate more information;
o Haidilao could have used media to

their advantage, rather than them

working against the restaurant.
o Media could control and influence

more opinions and encourage more netizens to adopt a positive opinion.

Social/intercultural considerations (Shu & Zheng, 2018)

  • –  There was a pre-existing issue of kitchen hygiene after McDonalds was exposed by China Central Corporation in 2012.
  • –  McDonalds claimed that their issue was isolated, and this led to a lot of online judgement that they were brushing off the severity of the issue.
  • –  Haidilao is very involved in their staff member’s lives and blaming kitchen staff could lead to employee disputes
page11image21646336 page11image21644032

  • –  Previous McDonalds issue indicates a pre- existing wariness of restaurant hygiene.
  • –  After McDonalds experienced such backlash over how they dealt with the issue, it was important Haidilao took a different decision making path to not further damage their reputation.
  • –  If there were ramifications for staff and they were fired, this could affect their family financial stability as well as their education

9

Local, national, global (Shu & Zheng, 2018)

o All restaurants across the world underwent health checks to ensure the problem did not present itself anywhere else.

o Internal staff were taken care of with blame being moved to higher personnel.

o Social media made issue known globally very quickly on Sina Weibo and Baidu.

page12image21589824 page12image11429056

o Aligning with Haidilao’s acknowledgement of this issue, it was very important that Haidilao ensured that all their sites were clean and proper kitchen and food management was occurring to prevent further issues.

o Haidilao’s quick response worked in favour of reducing negative online comments that were spreading globally.

page12image21593472 page12image21588480

Organisational priorities (Shu & Zheng, 2018)

o Haidilao highlighted the importance of this outbreak and how it would change the company.

o They did not diminish the issue o Stated core corporate values

o Fair working environment
o Enabling employee growth and

protection
o China- wide restaurant expansion

o Human resources management policies – selection, cultivation, use, assessment, retention, subsides.

o Haidilao wanted consumers to keep trust in company so they installed cameras in restaurants so consumers can monitor kitchen activities (Lianzhang, 2017).

  • –  It could have been more effective to state that all staff were to undergo more training, rather than take the blame completely off of them and blame management.
  • –  Despite their core values, training staff could have had more of an effect on preventing this occurrence in the future because staff would be reminded of the proper way to run their kitchens
  • –  Admitting the problem was very helpful in demonstrating Haidilao’s commitment to fix the issue rather than just diminishing it and trying to ignore public opinion.
page12image10719840

PR practice area (Shu & Zheng, 2018)

o Event forced company to engage in crisis management

o Internal staff were publics that were given priority rather than being at fault which aligns with corporate morals to support employees.

– Due to the speed in which the article discussing Haidilao’s hygiene issue spread online, this company had no other choice then to protect their reputation and engage in crisis management.

10

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– Blame was automatically put on management whereas it wasn’t put in staff who were actually responsible.

page13image21971904 page13image21979584

Ethics, morality, rules and the law (Shu & Zheng, 2018)

o Very fast communications with first comments going out three and a half hours after story about safety breaches was published.

o Haidilao acknowledged the issues and were transparent with how they would handle them. o Law was abided by with rest of investigations.

Haidilao participated in all appropriate health checks as they had done in the past as well.

o Despite dealing with a crisis, Haidilao successfully still abided by all legalities including multiple safety checks and changes to prevent this situation occurring again.

o Speed and transparency allowed for negative comments to reduce and for some consumers to take Hailidao’s side.

Other influencers?

o n/a

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o Haidilao utilised all of the above criteria to make their decisions in this case, there has been no further criteria identified.

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