CSR and communication strategies during bilateral political tensions: The case of Japanese...

CSR and communication strategies during bilateral

political tensions:

The case of Japanese companies in China during the

Diaoyu/Senkaku Island conflict

Freie wissenschaftliche Arbeit zur Erlangung des Grades eines

Master of Science am Department für Betriebswirtschaft

Munich School of Management

der Ludwig-Maximilians-Universität München

Eingereicht von Referent:

John Joachim Feigs Prof. Dr. Franz Waldenberger

München, den 08.08.2013

II

Table of contents

List of tables ............................................................................................................................ IV

List of figures ........................................................................................................................... V

List of abbreviations ............................................................................................................... VI

Abstract ................................................................................................................................. VII

1 Introduction ........................................................................................................................ 1

1.1 Purpose of the thesis .................................................................................................... 2

1.2 What is special about the “Chinese case”? .................................................................. 4

1.3 Narrative of the Island crisis ....................................................................................... 8

1.3.1 Sovereignty claims to the Islands ................................................................... 8

1.3.2 Beginning of the Island dispute ...................................................................... 9

1.3.3 Aftermath and causes of the crisis ................................................................ 11

2 Literature review .............................................................................................................. 14

2.1 Motivation of the stakeholders .................................................................................. 14

2.1.1 Animosity and related concepts ................................................................... 14

2.1.2 The relationship between anger and behavioural intentions ........................ 16

2.1.3 Summary and adaptation to the Island crisis ................................................ 17

2.2 Crisis communication ................................................................................................ 17

2.2.1 Crisis definitions .......................................................................................... 18

2.2.2 Situational Crisis Communication Theory ................................................... 19

2.2.3 Summary and adaptation to the Island crisis ................................................ 22

2.3 Corporate social responsibility .................................................................................. 24

2.3.1 CSR overview .............................................................................................. 24

2.3.2 CSR in China and Japan ............................................................................... 25

2.3.3 Communication of CSR ............................................................................... 28

2.3.4 Summary and propositions ........................................................................... 29

3 Empirical part .................................................................................................................. 31

3.1 Research methodology .............................................................................................. 31

3.1.1 Research strategy and research design ......................................................... 31

3.1.2 Data collection .............................................................................................. 33

3.1.3 Analysing methods ....................................................................................... 35

3.2 Results – Causes ........................................................................................................ 37

3.3 Results – Crisis responses and CSR .......................................................................... 41

3.4 Results – Case studies ............................................................................................... 48

3.4.1 Company I .................................................................................................... 48

3.4.2 Company II ................................................................................................... 48

3.4.3 Company III ................................................................................................. 49

3.4.4 Company IV ................................................................................................. 50

III

3.4.5 Toyota ........................................................................................................... 50

3.4.6 Nissan ........................................................................................................... 52

3.4.7 Car manufacturers’ strategies ....................................................................... 53

4 Discussion and conclusions .............................................................................................. 55

4.1 Theoretical contributions ........................................................................................... 55

4.2 Managerial recommendations ................................................................................... 55

4.3 Future research .......................................................................................................... 58

4.4 Limitations ................................................................................................................ 58

4.5 Conclusion ................................................................................................................. 59

5 Appendices ........................................................................................................................ 61

5.1 Appendix: Detailed information regarding the Diaoyu/Senkaku Islands ................. 61

5.2 Appendix: China sales of Japanese car manufacturers before and after the crisis .... 63

5.3 Appendix: Nationalism in China ............................................................................... 64

5.4 Appendix: Crisis response strategies of SCCT ......................................................... 65

5.5 Appendix: Recommendations for the application of crisis strategies ....................... 66

5.6 Appendix: Outline of the thesis’ research design ...................................................... 67

5.7 Appendix: List of the selected companies ................................................................. 68

5.8 Appendix: List of respondents .................................................................................. 69

5.9 Appendix: Main interview questions ........................................................................ 70

5.10 Appendix: Rival explanations with examples ........................................................... 73

5.11 Appendix: Original and revised propositions ............................................................ 74

5.12 Appendix: Aeon’s message regarding the Island crisis ............................................ 76

5.13 Appendix: Advertisement expenditures of some Japanese car manufacturers in

China .................................................................................................................................. 78

5.14 Appendix: Overview of the fields of CSR engagement of the selected companies .. 79

Bibliography ........................................................................................................................... 80

List of tables IV

List of tables

Table 3-1: CSR engagement of some heavily affected companies .......................................... 46

Table 5-1: Japanese and Chinese names of the Islands ............................................................ 62

Table 5-2: Car sales data of Toyota, Nissan, Honda, Mazda in China from July 2012 to June

2013 ................................................................................................................................. 63

Table 5-3: Primary and secondary crisis response strategies ................................................... 65

Table 5-4: List of the contacted companies ............................................................................. 68

Table 5-5: List of the study’s respondents ............................................................................... 69

Table 5-6: Overview of rival explanations with examples ...................................................... 73

Table 5-7: Areas of CSR the selected companies are engaged in according to their last CSR

reports .............................................................................................................................. 79

List of figures V

List of figures

Figure 1-1: Year-on-year comparison of the Japanese car sales in China in 2012-2013 ........... 1

Figure 1-2: Reaction chain of the Island crisis ......................................................................... 13

Figure 2-1: Research fields overlapping with the studied surrogate crisis .............................. 14

Figure 2-2: Reaction chain derived from the animosity framework and adapted to the Island

crisis ................................................................................................................................ 17

Figure 2-3: Revised and tested crisis situation model of SCCT .............................................. 19

Figure 2-4: SCCT model adapted to the Island crisis .............................................................. 22

Figure 2-5: Relationship between CSR, anger and organisational reputation ......................... 29

Figure 3-1: Yin’s categorisation of case studies ...................................................................... 32

Figure 3-2: Principle of data triangulation ............................................................................... 33

Figure 3-3: Explanation building process ................................................................................ 36

Figure 3-4: Fields of CSR engagement of the chosen companies ............................................ 45

Figure 4-1: Year-on-year comparison of the Japanese car sales in China in 2012-2013 ......... 56

Figure 5-1: Map of the Diaoyu/Senkaku Islands ..................................................................... 61

Figure 5-2: Map depicting the distribution of nationalism in China ........................................ 64

Figure 5-3: Crisis response recommendations suggested by the SCCT ................................... 66

Figure 5-4: Overview of the research design ........................................................................... 67

Figure 5-5: Comparison of the advertisement expenditures of the top 10 Japanese car

manufacturers in China in 2011 and 2012 (measured in million CNY) ......................... 78

List of abbreviations VI

List of abbreviations

Aeon AEON Co., Ltd.

B2B business-to-business

CCP Chinese Communist Party

CEO Chief Executive Officer

CNY Renminbi

COO country-of-origin

CSR Corporate Social Responsibility

e.g. exempli gratia (for example)

et al. et allii (and others)

etc. et cetera (and so on)

Honda Honda Motor Company, Ltd.

i.e. id est (that is to say)

JETRO Japan External Trade Organisation

Mazda Mazda Motor Corporation

NGO Non-governmental organisation

Nissan Nissan Motor Company Ltd.

P# proposition

SCCT Situational Crisis Communication Theory

Toyota Toyota Motor Corporation

U.S. United States

US$ United States dollar

Abstract VII

Abstract

This thesis aims to broaden the understanding of what happened in the Diaoyu/Senkaku

Island crisis by providing a descriptive framework that encompasses the following areas:

First, the causes of the outbreak and motivations of the troublemakers were analysed by

reviewing the history of the Islands and conducting interviews with both, Chinese and

Japanese. The major motivation of the Chinese troublemakers, namely animosity towards

Japan, was integrated into the resulting framework.

Second, crisis responses of Japanese companies are revealed by conducting case studies

including interviews with four Japanese companies. Most of the affected companies

maintained a low profile strategy to be not targeted by troublemakers, but they had no strategy

to tackle the main reason underlying the crisis, namely animosity. After all, most Japanese

companies faced only minor problems, whereas the biggest of these was the sales slump. The

car manufacturers, who faced a harsh sales slump, neglected their Chinese consumers for

years. Thus, in their case, the Island crisis might have only amplified an underlying problem.

The Situational Crisis Communication Theory was used to classify the responses to the crisis.

Third, the CSR engagement of 30 Japanese companies in China is analysed. Besides a few top

performers, the CSR activities of Japanese companies do not match the Chinese “demand” for

CSR, i.e. they engage in environmental activities and the Chinese favour philanthropic and

social activities, and the Japanese companies seem not to be aware of this issue. Furthermore,

the presentation of the CSR activities is insufficient, namely, there is no emphasis on numbers

showing their commitment, e.g. how much money they spent, how many trees they planted,

since when they engage in CSR in China.

By integrating the animosity framework into the Situational Crisis Communication Theory

and introducing a number of moderators, a descriptive framework for the Island crisis was

created by which further response options are identified.

Introduction 1

1 Introduction

On 15th

September 2012, thousands of Chinese protesters targeted Japanese government

agencies and businesses, because the Japanese government bought three of the

Diaoyu/Senkaku Islands1, which are claimed by both, China and Japan, and led to many

protests and diplomatic disputes in the last 40 years (Dzurek, 1996; Ho, 2012). The protesters

damaged and destroyed hundreds of Japanese cars and burned down a Toyota car dealership

(Ying, 2012). The protests peaked already on 18th

September, when the protests were carried

out peacefully in dozens of Chinese cities. After that day, the demonstrations faded out

quickly because of a strong police presence. The Chinese protesters wanted to affect the

Japanese government by their actions, but because this was hardly possible due to the few

representative offices of Japan in China, they tried it indirectly by protesting against Japanese

firms. Hence, the Diaoyu/Senkaku crisis can be called a “surrogate crisis”, because Japanese

companies were neither the cause of the Island dispute nor related in any other direct way

(Friedman, 1985; McCurry & Branigan, 2012). As the following figure shows, this was just

the beginning of the problems for the Japanese car manufacturers.

Figure 1-1: Year-on-year comparison of the Japanese car sales in China in 2012-2013

(Carsalesdata)2

Japanese car manufacturers, precisely their Chinese-Japanese joint ventures3, were among the

main targets of the boycott, which followed the anti-Japanese protests (Beamish, 1993;

1 Japanese refer to the Islands as Senkaku Islands, Chinese as Diaoyu Islands and Taiwanese as Diaoyu Tai

Islands. Hereafter the Diaoyu/Senkaku Islands will be referred to as “Islands”. More detailed information

including a map regarding the Islands is enclosed in section 5.1 of the appendix. 2 Please find the data in section 5.2 of the appendix.

-5%

-15%

-49% -44%

-22% -16%

24%

-46%

-12%

-7%

0%

9%

-2%

1%

-35%

-41%

-30% -24%

22%

-46%

-16%

3% 2%

-8% -12%

-6%

-35%

-45%

-30% -26%

-16%

-25% -25%

-15% -12%

-31%

July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June

Toyota Nissan Mazda

Introduction 2

Harner, 2012a). Figure 1-1 depicts the devastating effects of the Chinese boycott on the

Japanese car manufacturers. The sales increase in January and the decrease in February can be

explained by Chinese New Year, which is a public holiday that was started in January in 2012

and in February in 2013 (GovHK, 2011, 2012). Although other industries were also hit by a

sales slump, the car industry faced the worst decline: “from October 1 to 30, 118 Japanese

companies adjusted their sales expectations, 90 percent of which are in the automobile and

electric motor industries.” (Yang, 2012)

But why do some Chinese overreact like that? In fact, some Chinese are rather excitable and

since protests are forbidden in China their anger will be released whenever there is an

opportunity (Xun, 2012, p.10). Because Japan is still associated with atrocities in the past, it is

even dozens of years after the Second World War still a good “excuse” to take to the street.

China has not forgiven Japan for its war crimes; even more, many Chinese hold strong

animosity towards Japan (Xinhua International, 2013). These and other aspects of the

historical context of the Island crisis will be elucidated within this chapter.

Almost no research has been done on surrogate crises, therefore the causes of the crisis and

the crisis strategies of Japanese companies will be depicted and analysed to fill this void

(Jensen, 2008; Maher & Mady, 2010). Moreover, another void that is addressed by this thesis

are the corporate social responsibility (CSR) activities of Japanese companies in China, which

have not received any attention yet, although there has been more research about CSR in

China recently (Moon & Shen, 2010).

1.1 Purpose of the thesis

This thesis is divided into three parts: (A) the motivations and causes of the stakeholders’

reactions to the conflict, (B) the crisis communication strategies of Japanese companies and

(C) their CSR efforts. From an academic viewpoint, it is interesting to study the Island

conflict, because a surrogate crisis is a special case in crisis management that leads to new

insights for existing theories, such as the Situational Crisis Communication Theory (SCCT).

From a managerial point of view, Japanese companies lost billions of Yen due to the sales

slump that followed the protests, thus it would be important to figure out how to avoid such

severe outcomes in the future (carsalesdata, 2012, 2013).

The research questions of the thesis are as follows: What was the motivation of the

“troublemakers” and what were the problems they caused? What were the communication

3 According to the Chinese joint venture law, there are now two forms of joint ventures: an equity joint venture

in which the foreign party has to contribute at least 25% of the capital and a cooperative joint venture in which

the foreign party has no such obligation. Since the Chinese joint venture law was relaxed more than 20 years

ago, foreign companies do not have an obligation to hold 50% of the joint ventures equity anymore.

Introduction 3

strategies of Japanese companies during the Island conflict? Did they actively engage in CSR

in China prior to the crisis and did they communicate their CSR efforts during the crisis?

These questions comprise but are not limited to the following aspects:

• Uncover the underlying causes of the crisis

• Identify the most important stakeholders and the problems they caused

• Reveal the communication strategy the companies pursue to cope with those particular

problems, especially the communication of CSR efforts

• Depict CSR activities prior to the crisis and during the crisis

According to Corley & Gioia (2011) most of the papers today focus on scientific utility and

do not deliver any significant managerial implications. In addition to contributing to theory,

this thesis depicts some possibilities of how Japanese companies could tackle problems

caused by the Island crisis.

According to the mass media, the sample of affected Japanese companies was relatively

small; therefore, a qualitative approach was adopted. Because almost no research about

surrogate crises has taken place yet and no theoretical framework exists, exploration is needed

to understand the underlying structures of this particular issues. As Yin (2003b, p.30) notes,

“any new empirical research study is likely to assume the characteristic of an ’exploratory’

study.” Therefore, exploratory case studies were chosen to answer the proposed research

questions. Although it is not necessary to develop propositions (P) before the data collection

in this type of case study, the researcher’s goal will be more clearly defined and it is more

likely to reach it (Baxter & Jack, 2008, p. 551-552). Propositions are created to guide the

researcher following the general criteria for writing propositions published by Gerring (2001,

p.89-117).

The thesis is structured as follows: The remainder of this chapter describes differences

between China and Western countries and gives an overview regarding the history and the

most recent events connected to the Island conflict. Thereafter, a literature review presents

theories and concepts in chapter 2. The review focuses on (A) animosity theory, (B)

Situational Crisis Communication Theory, and (C) CSR in China. Chapter 3 first discusses

the methodology of the case study approach, followed by the results of the qualitative

research. The last chapter analyses the results and provides the theoretical implications and

managerial recommendations, shows future paths of research and depicts the study’s

limitations.

Introduction 4

1.2 What is special about the “Chinese case”?

This section points out why China is different from most other countries and elaborates on the

difficult relationship between China and Japan. Furthermore, it answers the question why it is

challenging for Japanese companies to operate in China.

In 1987, Deng Xiaoping emphasised that Japan owes China more than any other country.

Chinese refer to two kinds of debt regarding Japan: On the one hand, they think Japan owes

China because of 2000 years of trade and cultural exchange comprehending art and

knowledge about science and agriculture. On the other hand, there are the Sino-Japanese

wars, particularly the atrocities of the Second World War (Rose, 1998, p.4-5). One of the

cruellest events of the Sino-Japanese wars was the Nanjing Massacre in which more than

100,000 civilians4 were slaughtered and thousands of women were raped and abused (Klein et

al., 1998, p.91; Yang, 1999, p.844). According to a survey conducted in Nanjing by Klein,

Ettenson et al. (1998, p.93), more than 75% of the respondents agreed with the statement: “I

will never forgive Japan for the Nanjing massacre.” The Chinese have urged the Japanese to

issue a formal apology for the cruelties of the Second World War but Japan has refused to

apologise for some cruelties up to now and certain groups of the Japanese society even

repudiate the events instead of coming to terms with their past (Cui, 2012, p.209-210; Rose,

1998, p.84-85).

I want to shed some light on why many Japanese display a lack of understanding for the anger

of Chinese people towards Japan. In his article “What Japanese history lessons leave out” Oi

(2013) claims the Japanese education system does not put much emphasis on the most recent

history, especially on the war crimes of Japan such as the Nanjing Massacre. Many Japanese

have only little or no knowledge about these events, because often only a few sentences in

Japanese textbooks are dedicated to these events (Oi, 2013). After the Second World War,

Japanese conservatives created several war myths, which were supported by the United States

(U.S.), because it wanted Japan to be an anti-Communist state. One of these war myths claims

that only a few top ranking military men were the warmongers of the Second World War,

while the rest of the Japanese, including the Emperor, had been deceived by them. Another

myth shows Japan as a victim and pacifistic nation (Yinan, 2006, p.74-76). In the 1980s,

several initiatives were started in Japan to come to terms with the past, especially with the

atrocities of the Japanese army and the involvement of the Japanese Emperor (Rose, 1998,

p.177). Nevertheless, certain Japanese right-wing groups still try to keep the “victim” image5

4 Other sources claim that up to 300.000 Chinese lost their lives.

5 According to Cui (2012), the reason why Japanese feel rather as victims are the devastating effects of the

atomic bombing.

Introduction 5

of Japan and want to paper over issues such as the Nanjing Massacre, Unit 7316 and the

comfort women7 (Cui, 2012, p.211; Harris, 1992, p.22-43; Schneider, 2008, p.109-114).

Because many Japanese do not know about these war crimes, it is rather easy for right-wing

groups to claim that Chinese anger is completely unreasonable and distorts history (Oi, 2013).

Another part of the problem is the Japanese response to all these issues: Several authors claim

the Japanese government should apologize for the aforementioned wartime atrocities, to calm

down the Chinese anger, instead of provoking further escalation by visiting the Yasukuni

Shrine8 and denying the past

9 in general. In 1993, the first time since 1955 a non-conservative

coalition led the country, apologies for some Japanese atrocities were issued by Prime

Minister Morihiro Hosokawa. Unfortunately, most Chinese do not even know about the

issued apologies and, as mentioned above, the current government intensifies the situation

even more (He, 2007, p.5-8; Joyce, 2007; Kazuyuki, 2011, p.665; Yamazaki, 2005, p.71,

133).

While Western countries are predominantly influenced by Christian values and Western

philosophy, China has its own schools of philosophy, such as Confucianism, Taoism,

Buddhism and many others. In contrast to Western philosophy, the Chinese focuses not on

truth and wisdom, but good ways of living. Chinese philosophers sought to understand

systems as a whole, and unlike occidental philosophers who searched for cause-and-effect

relationships. Harmony is an important goal for the society, according to the teachings of the

influential Chinese philosopher Confucius. This can be achieved by a state that helps the

people to live in peace and prosperity, but the people have to trust in and obey the authority of

the ruler (Kowacsik, 2010, p.4-5, 62). Another part of the Chinese culture is their special

understanding of corruption, which is often referred to as Guanxi. “Guanxi is the process of

social interactions that initially involve two individuals (A and B). A may or may not have

special relationships with B. A asks B for assistance (favour) in finding a solution to a

problem. B may have the solution at hand, or more often, has to seek further assistance from

other connections, i.e. starts another process.” (Fan, 2002, p.549) Guanxi is welcome among

family members, but when the government is involved people think of it as corruption (Fan,

2002, p.556). Another important aspect of the Chinese culture is not to lose face, i.e. doing

something that is below the tolerable requirements of one’s position in society. Losing one’s

6 Unit 731 was a part of the Imperial Japanese Army that tested chemical and biological weapons on Chinese

civilians and thereby killed hundreds if not thousands of people. 7 Thousands of “comfort women” were imprisoned in “comfort stations” and raped by the Japanese Army.

8 Several Japanese Prime Minister regularly visited the Yasukuni Shrine, which has enshrined high-profile war

criminals. 9 For instance, Japan’s Prime Minister Abe denied the existence of comfort women in 2007, although the

Japanese government already apologised for it officially in 1993.

Introduction 6

face means social unworthiness and leads to shame (Bedford, 2004, p.36; Ho, 1976, p.871).

This concept applies even to product purchases, in which people try to buy brands that match

their social position (Lee, 1983). According to some nationalist Chinese, it does not behove

Chinese to buy Japanese products or work for Japanese companies, wherefore they try to

avoid it or keep it as a secret. Thus, one could argue that this is a form of social pressure.

When people think about China, things such as the Chinese Wall or the Chinese Communism,

comes to their mind. According to common sense, the state has total control over the people

in a communist country. However, Cui (2012) proclaims the control of the Chinese

Communist Party (CCP) has gradually decreased since the 1980s due to nationalism. After the

Second World War, both parties10

promoted nationalism and tried to legitimize their existence

with it. The CCP used its power to create the image of the Japanese devils, the “riben guizi”,

in the 1950s and 1960s (Gao, 2012, p.182-183). During that time, the CCP also made up

several myths, for example, that it fought and defeated the Japanese Army alone. The myth

that only some Japanese military leaders were responsible for the war crimes was created by

both sides: Japanese wanted to protect the old structures and the emperor, whereas Chinese

tried to enable business with Japan. Since the 1980s, the Japanese atrocities and the Chinese

suffering took centre stage of the Chinese propaganda. This change led to two things, first,

Chinese started to condemn Japan as a nation, second, they were disgusted by their own

government for not telling them about the Japanese atrocities for decades (Yinan, 2006, p.76-

78, 89-90). In the 1990s, the CCP had to rely more on nationalism and hence promoted it,

because the party had almost abolished its ideological ground, i.e. Marxism-Leninism. The

CCP started a campaign that was supposed to create legitimization by highlighting the victory

over Japan and the humiliation and the suffering11

of the Chinese people during the war

(Downs & Saunders, 1998, p.123). Japanese companies adapted their marketing strategies to

this policy change as two content analyses of Chinese newspapers show: one covers 1979-

1990 and another one is from 2004. Until the 1990s, Japanese firms used Japanese symbols in

advertisements and thereby identified themselves as Japanese. In 2004, this has changed and

their advertisements tried to persuade the readers that the firm is a Western one by using

English headlines and Western models (Ishii, 2009, p.307).

The promoted nationalism soon proved to be not as flexible as foreign policy had to be. For

instance, Japan was the first country that lifted sanctions and showed understanding after the

10

After the Second World War, there were the Nationalist Party also known as Kuomintang and the Chinese

Communist Party in China. 11

The paragon of the campaign was the Nanjing Massacre.

Introduction 7

Tiananmen Massacre12

and when Deng Xiaoping met the Japanese Emperor in 1992, the

Chinese people looked blank and even accused their government to overlook the shadows of

the past to achieve international recognition. Chinese, especially nationalistic oriented ones,

question their government and often consider it as deficient and corrupt. Nevertheless, it is not

reasonable to protest against the government due to its strict leadership, wherefore the

nationalists seize all other opportunities to release their anger (Cui, 2012, p.204-210; Gao,

2012, p.182-184; Kazuyuki, 2011, p.670). This is why even small missteps of foreign

companies, especially Japanese, have recently sparked outbursts of anger. For instance, the

US fast food chain KFC launched a sales promotion in 2010. Customers could download a

limited number of coupons at a certain point of time, but many other websites mirrored the

coupons and thus more coupons than expected were redeemed. As the stores started to reject

coupons claiming they were fake, customers got angry, especially because the explanations

varied slightly from store to store (Madden, 2010). Some Chinese even became violent

because of coupons worth up to US$ 4.65, such as the customers storming “the Kentucky

Fried Chicken at the China World Tower in Beijing […], flipping chairs and tables and

refusing to leave after their coupons were denied” (Shengxia & Jun, 2010). Although such

protests definitely interrupt companies’ business, they tend to be reactive and fade out quickly

(Cui, 2012, p.204-210; Gao, 2012, p.182-184). “Leading nationalists summarize their mission

into two paramount tasks: internally struggle for human rights, externally fight for national

rights” (Gao, 2012, p.182). Because it is very difficult for the nationalists to achieve their first

goal, they focus their efforts on the fight for national rights, such as the territorial rights of the

Islands. They can live out their nationalistic feelings by taking to the streets.

Cui (2012, p.210-211) claims that in contrast to the old form of nationalism, which was

promoted by the government through films and other forms of propaganda, the new form is a

bottom-up nationalism that has a social initiative character. He states the CCP has partly lost

control over the nationalism and thus over the people’s actions. According to Cui (2012,

p.214) the Chinese government acts pragmatic and hence tries to calm down any anti-

Japanese protests in order to keep good bilateral relations to Japan13

. In his article “Who

Engineered the Anti-Japanese Protests in 2005?”, Tam (2007) also argues that the Chinese

government did not set up protests. He explains for example why the government provided

transportation for the protesters. After the protesters marched a while the government sent out

the buses, which carried them without charge to the next public transportation station. After

12

Until the massacre on June 4, 1989, pro-democracy and anti-corruption demonstrations were taking place on

the Tiananmen Square in Beijing and many other big Chinese cities. The protests were initiated by students and

intellectuals and ended very bloody when the Chinese military cleared the square. 13

The author gives various examples in which the Chinese government acted according to his claim.

Introduction 8

all, the Chinese government tries to avoid any instability, but due to years of propaganda and

a gigantic government body, it is not always possible to enforce the official strategy. Other

authors claim that the Chinese government fuels protests to distract from domestic problems

(D'Costa, 2012, p.233; Spegele et al., 2012).

Out of this recent Chinese history and propaganda arises a victim complex, which explains

the distrust regarding the international community as well as the common belief that Japanese

companies treat Chinese consumers worse than others (Gao, 2012, p.182; Schneider, 2008,

p.112). There are many examples for this belief made public by organisations close to the

Chinese government, e.g. Toyota recalled some cars, but did not compensate the Chinese

customers as it is common in the European Union or the United States (U.S.) (Wang, 2010 ).

On the other hand, Chinese also think of Japan as an inferior country by calling it “xiao

riben”, which means small Japan (Kazuyuki, 2011, p.660).

Operating in China as a Japanese company is certainly more difficult compared to companies

from most other countries. Sudden political tensions between China and Japan are often

rooted in their history and the widespread nationalism in both countries. This creates a

dilemma for Japanese companies, because if they accommodate Chinese stakeholders too

much, for instance, by taking a political stance, what will be the reaction of their Japanese

customers?

1.3 Narrative of the Island crisis

The Island crisis began in the 1970s when a report was published that claimed close to the

Islands are oil and gas reserves. Thereafter, both nations started claiming to be the rightful

owner of the Islands. In addition, right-wing groups in both countries began to protest; the

economic impact of these protests became larger over the years, peaking in the most recent

outbreak in September 2012 (McCurry & Branigan, 2012).

1.3.1 Sovereignty claims to the Islands

The Chinese government’s claims date back to the Ming dynasty when the Islands were first

discovered by Chinese, most likely in 1372 during their first investiture mission to the

Ryukyu Kingdom, which consisted of a group of islands in the Pacific Ocean. Unfortunately,

the reports of investiture missions prior to a report written in 1534 have been burned (Shaw,

1999, p.43-44). The Islands were finally incorporated in the Chinese coastal defence line in

1556, and therefore belonged to China since then (Pan, 2007, p.77; Shaw, 1999, p.56). A

document often used to defend the Chinese position is the imperial edict of Empress Dowager

Tsu Hsi issued in 1893 (Su, 2005, p.48). In this edict, three of the Islands were awarded to

Sheng Xuanhuai for making very effective medicine for the emperor and the empress.

Introduction 9

However, there is much doubt about its authenticity of the edict, which might merely be an

advertisement for Sheng Xuanhuais business. Nevertheless, it indicates that the Islands were

known in and very likely belonged to China before 1895 (Shaw, 1999, p. 61-62).

In contrast, the Japanese government claims the Islands were terra nullius14

when it

incorporated them in 1895. However, it was probably difficult for the Qing Empire, which

represented China during that time, to safeguard the Islands or object to the Japanese claim

due to the first Sino-Japanese War; in addition, the Islands seemed to be untouched (Pan,

2007, p.77; Shaw, 1999, p.97-98). There are plenty of inconsistencies regarding Japan’s claim

as Shaw (1999, p.77-85) and Su (2005, p.56) outline in detail such as the fact that the national

markers of Japan were not erected on the Islands before 1969.

After the Second World War, the Islands were administrated by the U.S. according to Article

III of the San Francisco Peace Treaty signed by the U.S. and Japan among others in 1951

(Dzurek, 1996). China neither signed the treaty nor objected to the arrangement of the Islands

(Shaw, 1999, p. 118; Su, 2005, p. 49). Article II of this treaty states that Japan renounces its

claim to Taiwan, which they controlled since the Chinese signed the Treaty of Shimonoseki15

in 1895. The crux is whether the Islands belonged to the Taiwanese territory and thus are part

of these treaties or not (Su, 2005, p.48).

As one can see, it is certainly not a trivial issue to find out which party has the right to claim

the Islands. On one hand, China failed to claim the Islands until December 1970 when it was

actually the last party that made its claim (Fravel, 2010, p.146). On the other hand, the history

of the Islands shows that China almost certainly controlled the Islands a long time before

Japan claimed them in 1895. Consequently, the Islands were not terra nullius and Japan’s

argument that China has not displayed sovereignty over the Islands for a long time might be

useless because of various cases in which countries did not display state authority for decades,

but won their case before the International Court of Justice (Su, 2005, p.52-53). All in all both

positions have their weak spots and hence one cannot foresee what the result of an

international trial might be (Shaw, 1999, p.133).

1.3.2 Beginning of the Island dispute

The actual dispute over the Islands started to unfold in 1968, when the United Nations

Economic Commission for Asia and the Far East published a report suggesting that close to

the Islands is oil and natural gas (Dzurek, 1996). The U.S. Energy Information Administration

assumes that East China Sea has between 60 and 100 million barrels of oil in proven

14

Terra nullius is territory belonging to no one. 15

The Treaty of Shimonoseki ended the first Sino-Japanese War.

Introduction 10

reserves16

and between 1 and 2 trillion cubic feet in proven natural gas reserves (eia, 2012,

2013). On 17th

July 1970, the Japanese ambassador in Taipei handed over a note to the

Taiwanese government stating the Islands belong to Japan. Already in September 1970,

protesters planted a Taiwanese flag on one of the Islands. This was the beginning of the first

worldwide anti-Japanese protests. These peaked on 13th

May 1972 when thousands of

students demonstrated because of the execution of the Ryukyu Reversion Treaty. According

to this treaty, the U.S. had to return the control over the Islands to Japan on 15th

May 1972.

Because the Chinese government wanted to be recognized as the legitimate government of

China by the Japan, the Islands were seen as minor issue compared to the international

recognition (Shaw, 1999, p.13-15). Over the following decades, the Islands caused many

times strained diplomatic relations, however usually everything went back to normal after a

few months.

In 2005, two Japanese companies began talks with their government regarding drilling rights

for natural gas in the area (Pan, 2007, p.76). In June 2008, a “consensus agreement between

China and Japan over the development of petroleum resources in the disputed East China

Sea” (Fravel, 2010, p.160) was signed. This displays the ambiguous situation, in which both

governments acted pragmatic and the people did not. The last clash before the outburst in

2012 was the collusion of a Chinese fishing trawler with a ship of the Japanese coast guard on

9th

September 2010 that led to a major diplomatic dispute and sparked again anti-Japanese

protests (Lunn, 2012, p.5; Sakai, 2010).

The current crisis started to heat up when the Tokyo metropolitan government announced on

16th

April 2012 that they consider buying three of the Islands (Unezawa, 2012). On 7th

July

the Japanese Prime Minister Noda announced that it is a part of the governmental policy to

buy the Islands (Harner, 2012b). After the detention of a group of Chinese activists, who

landed on the Islands on 15th

August, protests started on the weekend after that in several

Chinese cities. An interesting fact is that the Chinese media tried to portray the

demonstrations as smaller as they were. The editor of Global Times, which is a rather

nationalistic newspaper with very close ties to the government, tried to calm people down by

saying on a conference a couple of days later that the Islands are not worth a full-scale war

(Bradsher et al., 2012). As one can see on Figure 1-1, these protests had already an impact on

the Japanese car manufacturers’ sales, which increased in August by only 5% in contrast to

those of other foreign car manufacturers sales, which increased by more than 10%. The reason

16

Chinese sources claim that the area has undiscovered oil resources between 70 to 160 billion barrels. This is

quite a lot with respect to the proven oil reserves of Saudi Arabia with around 260 billion barrels.

Introduction 11

stated by the Japanese manufacturers was that due to political tensions they have to reduce

their promotion activities (ChinaIRN, 2012).

The straw that broke the camel’s back was the announcement of the government having

bought three of the Islands on 10th

September 2012. This led instantly to icy diplomatic

relations and the biggest anti-Japanese protests since 1972 (Lunn, 2012, p.5). The protests

started on Saturday 15th

September, when thousands of protesters took to the streets. They

targeted for example the Japanese embassy in Beijing at which they threw eggs and rocks, but

unlike many Japanese stores, the embassy was guarded by Chinese police officers. Sometimes

the Chinese police also intervened when protesters damaged others property, but usually it

waited until the protesters had released most of their anger (Ho, 2012). Some of the protesters

were shouting slogans of the CCP’s propaganda of the 1960s, “We believe we need to declare

war on them because the Japanese devils are evil. Down with little Japan!” (Emphasis added)

(McCurry & Branigan, 2012). In some cities the protesters were fairly violent, for instance, in

Xi’an or Changsha, where protesters damaged more than hundreds Japanese cars, smashed

and ransacked Japanese shops, and beat a driver of a Japanese car until he was paralysed

(Ying, 2012). However, the rage also spilled over to other foreign businesses such as Rolex

and Christian Dior stores, which were smashed and ransacked too. The irony about these

events is that most of the damage occurred to Chinese people, because these usually own the

stores and cars (Ashcraft, 2012). Although little information came to the surface about other

stakeholders of Japanese companies such as their employees, but there is one example of two

factories of Panasonic in Qingdao and Suzhou that have been sabotaged by Chinese workers

causing flames and smoke (Cooper, 2012; IBTimes, 2012). Thus, the question arises whether

similar incidents happened at other firms. The protests lasted four days until 18th

September,

the anniversary of the Mukden incident, when the central government seemed to back away

“from the tacit encouragement of public anger over the territorial row.” (Ng & Lee, 2012) In

some cities protests were banned, protesters were arrested and the police forces were

increased to end the protests (McCurry & Branigan, 2012).

1.3.3 Aftermath and causes of the crisis

Of course, most of the Japanese companies reacted to the protests immediately, e.g. Canon,

Hitachi, Honda, Mazda, Mitsubishi, Nissan, Panasonic, Sony, Suzuki, Toyota halted

production or even closed some or all of their Chinese factories; Aeon, Japan’s Fast Retailing,

and Seven & I Holdings closed the majority of their stores (Sohu, 2012). These measures

were taken up to four days, when the protests faded away. Japanese companies did not close

all of their factories, because in some regions of China the protests were more violent and

harsh than in others. Some companies stated they want to secure their employees from

Introduction 12

damage by closing factories and stores. A few store managers were able to appease their

customers by letting their employees wear armlets with pro Chinese phrases on them and

playing Chinese music. Nonetheless, many store managers just barricaded their stores and put

down all signs that would identify them as Japanese ones (Liu & Lifei, 2012).

By observing the Chinese media, one can draw conclusions about the interests of the Chinese

government because of the government’s control over the media via censorship (Hassid,

2008, p.416). The China Daily wrote, “Yet when people's anger is directed at the wrong

targets and displayed in ways that result in vandalism, physical attacks, and damage to private

property, it is criminal and must be stopped. Therefore, we applaud the timely statement by

local authorities that patriotism is no excuse for criminal offenses.” (China Daily, 2012) The

government seems to calm people down and tries to stop them of causing damage to the

“wrong” targets, probably Chinese. A comment in the People’s Daily, which is the

mouthpiece of the CCP, pled for civilised behaviour and abide the law. Furthermore, the

citizens should not destroy the “property of Chinese or attack Japanese people” (Yong, 2012).

With respect to its wording, the article is doubtlessly ambiguous. In the overseas edition of

the People’s Daily, the tone changed to paying Japan back with China’s “economic gun”

targeting to Japan’s financial and manufacturing industry (Wen, 2012a). Although some of

the articles only praised the protesters’ national pride, others are not so even-tempered.

A protester assumed that the Chinese government is in favour of the protests, because it

“could have stopped all of us when we were approaching at the subway station. The

government has taught us to be anti-Japanese at school, so if they want us to stop it would be

like slapping their own mouths.” (Wee & Duncan, 2012) However, another one gave the

following reason for joining the demonstrations, “We saw the anti-Japan protests online and

joined because China rarely gives people a chance to take part in protests.” (McCurry &

Branigan, 2012) He just found a vent for his pent-up aggressions and thus the nationalism was

not the main reason for joining the protests.

How many people actually took part in these demonstrations? According to the Chinese and

Japanese media, tens of thousands of people marched in more than 100 cities. A survey

questioning 1000 Chinese reports that 24% participated in the protests whereas 74% thought

the protesters crossed the line (Ho, 2012; Japan Times, 2013a; Jing, 2012; McCurry &

Branigan, 2012).

A boycott of Japanese goods followed in the months after the protests. Chinese boycotted

Japanese products for several times over the years and every time the economic effect grew

bigger (McCurry & Branigan, 2012). In addition, there are various reports of Chinese who

Introduction 13

stopped sometimes ostentatiously working for or together with Japanese people and

businesses, e.g. Chinese companies began to switch from Japanese to South Korean suppliers

or a woman’s hospital erected a sign saying that it will not treat Japanese women anymore

(Dreyer, 2012; Sharp & Hamlin, 2013). These examples are rather random, but they reveal

that such things happen on all levels.

Figure 1-2: Reaction chain of the Island crisis

The figure above shows in general how the Island crisis triggered the aforementioned

reactions. The announcement of having bought three of the Islands prompted anger in the

Chinese population. The Chinese media’s voice and thereby the message of the government is

ambiguous, thus its influence is difficult to determine. Although, there are authors who side

with the Chinese government I tend to say it rather fuels up the anger to distract from

domestic problems. Less equivocal is the influence of the Chinese grassroots nationalism;

feelings of superiority and hate towards Japan are generated by this new nationalism, which

grows independently from the CCP within the Chinese population. The anger, released during

anti-foreign protests, is directed on the one hand to Japanese government that insulted the

national pride and on the other hand to the corrupt Chinese government. Because it is difficult

for Chinese protesters to punish the Japanese government, they look for surrogate victims

such as Japanese companies to vent their anger. Social pressure is a common phenomenon in

China. Chinese have as mentioned before a “face” culture, in which, for instance, making

holidays in Japan or buying a Japanese car during the Island conflict might be considered as

below the acceptable requirements for a Chinese (Lee, 1990; Qi & Yin, 2010). Thus, also

people who hold no animosity towards Japan might take actions against Japanese companies,

e.g. cancelling their trips to Japan or buying a German car instead of a Japanese one.

P1: Anger generates social pressure that in turn forces others to join actions against Japanese

companies, such as boycotting.

Literature review 14

2 Literature review

According to my knowledge, no research has yet been conducted on how companies

operating in a foreign country react to a bilateral political crisis with the home country.

Therefore, the state of the art of the literature related to the thesis’ three themes will be

depicted to begin to fill this research gap. After an intensive literature research including

electronic databases, such as ABI/INFORM Complete, EBSCO, and JSTOR, research fields

have been identified that can help to describe and analyse the (A) causes of the crisis, the (B)

crisis communication and (C) CSR of Japanese companies, as depicted in Figure 2-1.

Figure 2-1: Research fields overlapping with the studied surrogate crisis

2.1 Motivation of the stakeholders

Some customers and other stakeholders took actions against Japanese firms during the crisis,

but why did they do it? Why were they angry? Researchers came up with several constructs

that explain the attitude of consumers towards foreign countries and firms from these.

Although, the thesis focuses on the animosity model, other related constructs will be briefly

described for the sake of completeness.

2.1.1 Animosity and related concepts

A concept related to animosity is the so-called country-of-origin (COO) effect. COO is

usually defined as the information about the product’s point of origin (Amine, 2008, p.404-

405). In newly industrialised countries, such as China, the COO of a certain brand serves not

only “as a quality halo or summary of product quality (see Han, 1989), but can also possess

an additional dimension that of the degree of foreignness or non-localness” (emphasis added)

(Ramaswamy et al., 2000, p.92). Thus, if a consumer buys a product, he will consider various

attributes including the COO of the brand, which is an important indicator for the quality of

the product.

Another related term is consumer ethnocentrism. According to Shimp & Sharma (1987,

p.280) ethnocentric consumers belief that they will cause damage to their home country’s


economy if they buy imported products. This concept is in contrast to the other presented

concepts not country specific.

The described concepts were introduced several decades ago and there is plenty of research

on them. Consumer ethnocentrism is useful for determining the opinion of a population

towards foreign countries in general, whereas the COO construct is an indicator for the

product quality associated to a certain country. Because both constructs do not fit to describe

the Chinese hatred towards Japan and their reaction to political events, the animosity

framework is going to be applied.

Klein et al. (1998, p. 90) first introduced the animosity framework and defined animosity as

the “remnants of antipathy related to previous or ongoing military, political, or economic

events”. Examples for such events are the aforementioned atrocities of the Second World War

or the rumour that the owner of French retailer Carrefour would support the Dalai Lama or

when the disabled Chinese torchbearer was attacked by pro-Tibet protesters in France during

the Olympic Games torch relay (BBC, 2008; Spiegel.de, 2008). The authors conducted a

survey in Nanjing among 244 Chinese consumers. They proposed and validated that the latent

construct animosity leads to war animosity and economic animosity. The latter is based on the

feeling of being treated unfair, e.g. Japanese firms are believed to buy and bury Chinese

competitors to help their own brands (Klein et al., 1998, p.91-92). I want to focus especially

on war animosity in this thesis because of the special Chinese-Japanese history that many

Chinese have still in mind when they think of Japan. War animosity explained in the initial

study far more variance than economic animosity. A point that could be criticised about Klein

et al.’s study is that the answers given by inhabitants of Nanjing regarding animosity towards

Japan might differ from other regions in China due to Nanjing massacre. In fact, the Chinese

provinces differ strongly in their degree of displaying nationalism17

. Thereby it is quite likely

that they also display different levels of war animosity towards Japan (Amine, 2008, p.408;

Klein et al., 1998, p.91-93; Lan et al., 2012, p.26).

Ang et al. (2004, p.192) came up with a categorization for animosity, i.e. stable vs. situational

and national vs. personal animosity (Ettenson & Klein, 2005). Stable animosity is based on a

historic event, whereas situational animosity is triggered by a contemporary event. National

animosity is based on the perception how a foreign country treated the home country.

Personal animosity is created when an individual makes bad experiences with the people from

the foreign country or the country itself. Moreover, Leong et al. (2008, p.1003) found that

“feelings of situational animosity were increased by […] stable animosity” due to a

17

Please find in section 5.3 of the appendix a figure that illustrates the different levels of nationalism in China.


perception bias arising from stable animosity (Leong et al., 2008, p.999-1000). Regardless the

probably rather few cases of personal animosity towards Japan, this study will consider only

the stable/situational dimension. An important antecedent to animosity was found in a recent

study regarding the boycott of Danish products in Kuwait. Describing “group responsibility”

as the responsibility attributed to a group as a whole for a certain incident, the authors argue

that a high level of “group responsibility” is related to a high level of animosity (Maher &

Mady, 2010, p.636). If Chinese people assume the Japanese government represents the will of

the Japanese people, Chinese will attribute the responsibility for the decision to buy the

Islands to the Japanese population and consequently the animosity towards Japan will be high.

The initial study by Klein et al. (1998) also asked the respondents regarding their animosity

towards Japan as a whole and not towards a group of Japanese government officials. For

further studies of animosity please see Riefler & Diamantopoulos (2007), who published an

extensive literature review regarding animosity research.

2.1.2 The relationship between anger and behavioural intentions

After the announcement that several hundred Japanese employees were having an orgy-like

party with hundreds of prostitutes on the eve of the anniversary of Japan’s attack on China in

the Second World War, 30% of Chinese college students’ chat messages were about hate

towards Japan (Gates, 2013, p.254; Tam, 2007, p.285; Tse et al., 2004). “When a major

political event […] occurs, individuals are consumed by anger toward the foreign country and

subsequently transfer this anger to products imported from the offending country” (emphasis

added) (Cui et al., 2012, p.502). Hence, people who feel disadvantaged tend to translate their

anger into actions, which has been empirical validated in the field of psychology (e.g. Birt &

Dion, 1987; Walker & Mann, 1987).

Consumer boycotts are triggered by an egregious act that stimulates negative emotions and

have been the target of most research in the field of animosity (Riefler & Diamantopoulos,

2007). A boycott is defined as “an attempt by one or more parties to achieve certain

objectives by urging individual consumers to refrain from making selected purchases in the

marketplace.” (Friedman, 1985, p.97-98; Klein et al., 2004, p.93) Boycotts can be divided

into direct and indirect boycotts. Direct boycotts aim at single products and therefore try to

influence companies’ behaviour, whereas indirect boycotts, also known as surrogate boycotts,

usually address third parties such as governments and thereby all brands with the same COO

(Friedman, 1985, p.102).


2.1.3 Summary and adaptation to the Island crisis

Figure 2-2: Reaction chain derived from the animosity framework and adapted to the Island crisis

The figure above depicts the reaction chain of an egregious event and thereby summarises the

literature of this section. The event triggers situational animosity, which can be increased by

existing stable animosity such as the Chinese war animosity towards Japan. Because of the

mentioned Chinese propaganda, I assume that in case of the Island crisis the Japanese people

are held responsible as a group for the actions of their government, wherefore the level of

animosity will increase further. The animosity generates anger towards the one who is held

responsible for the egregious act. The anger may translate into some concrete actions, here,

against surrogate victims.

Because most of the extensions of the animosity model, i.e. anger, group responsibility and

the situational/stable dimension, have already been tested in China, only the part about group

responsibility is brought forward in a proposition.

P2: Many Chinese attribute the crisis responsibility to Japanese people as a whole group.

By elucidating the important antecedent group responsibility and the categorisation of

animosity, i.e. stable and situational animosity, in section 2.1.1, a link between the Sino-

Japanese history and the presented theory was established. Chinese history refers to the

aforementioned war crimes, which led to a stable animosity that persisted until today, and the

change in propaganda, namely, that all Japanese are responsible for the war crimes and not

only a few military leaders.

2.2 Crisis communication

The last section presented a model to explain the behaviour of customers and other

stakeholders, whereas this section focuses on the companies’ crisis responses. What are the

mechanisms by which the crisis causes damage to the companies? How can firms prevent this

damage from happening? Answers to these and similar questions shall be given in this

section.


2.2.1 Crisis definitions

“Crisis has, in many respects, been subject to the same level of ambiguity as the term “art”.

While one person's trash may be viewed as another person's treasure, one person's incident is

often viewed as another's crisis.” (Guth, 1995, p.125)

As Coombs (2005, p.221-222) points out, although a crisis is unpredictable, it can often be

expected, disrupt an organization’s operations and threaten the organization and/or its

stakeholders. Accordingly, the primary goal of crisis management is to decrease the damage

caused by a crisis to the organisation and its stakeholders who may be harmed economically

and/or physically. Thus, during a crisis firms try to protect its stakeholders from damage and

stress. Hence, the Island crisis was more or less over after most of the companies did not face

problems from the crisis anymore, i.e. after two months the crisis was over, though some

companies such as the car manufacturers still had trouble with the aftermath. Furthermore, a

basic assumption of crisis management is that crises threaten an organisation’s reputation

(Allen & Caillouet, 1994; Coombs, 2007, p.163-165).

Organisational reputation can be defined as an “observers’ collective judgements of a

corporation based on assessments of the financial, social, and environmental impacts

attributed to the corporation over time” (Barnett et al., 2006, p.34). It develops and grows

through the information stakeholders receive regarding the organisation; the media and the

internet play an important role in this process (Fombrun & Van Riel, 2004). Reputation is

crucial for a company, because the stakeholders might change their behaviour towards the

company when its reputation changes (Coombs, 2007, p.164). Moreover, Fombrun & Van

Riel (2004) refer to a number of event-based studies finding that companies with a good

reputation before a crisis will suffer less during a crisis due to a “goodwill reservoir”.

Essential for crisis management is to create and implement plans including procedures for

dealing with crises and to learn from them. Companies should redesign or at least adapt their

systems after each crisis to improve them (Carmeli & Schaubroeck, 2008). Thereby, firms

should be able to anticipate potential crises and eventually prevent them (Weick & Sutcliffe,

2011, p.45). During a crisis, the public relations department is crucial, because the

communication with the public and usually most of the stakeholders is carried out there.

However, instead of focusing on the firm’s pre-crisis mechanisms, I will concentrate on the

communication strategies of the companies after or during a crisis. Most of the crisis

communication research has been conducted on the Situational Crisis Communication Theory

or the Image Restoration Theory (Avery et al., 2010, p.190). In this thesis, I will follow

Coombs and his Situational Crisis Communication Theory, because it provides a holistic


framework in which not only crisis strategies are discussed, but also a link between particular

strategies and the crisis itself is established. Moreover, several crisis communication

strategies of the Image Restoration Theory were integrated into the SCCT (Coombs, 2007,

p.171).

2.2.2 Situational Crisis Communication Theory

Figure 2-3: Revised and tested crisis situation model of SCCT

(Coombs, 2007, p.166; Choi & Lin, 2009, p.201)

SCCT uses the rationale behind Attribution Theory, precisely Weiner‘s framework, which

suggests that (A) individuals look for the causes of incidents and attribute the responsibility.

Central emotions in Weiner’s framework are anger and sympathy; the former is evoked when

an entity is held responsible for the event (Weiner, 1985).

According to the SCCT, three factors determine the threat for the reputation of a firm: (1)

initial crisis responsibility, (2) crisis history, (3) prior relationship history. The core

assumption of the model, which has been validated, is that (B) crisis responsibility is

negatively related to organisational reputation. Thus, the more people attribute a crisis to a

certain firm, the greater is the reputational threat (Coombs, 1998; Coombs & Holladay, 1996,

2001, 2002, 2004).

Coombs started his analysis with the stakeholders, who categorize a crisis by framing it or

adopting the existing frame; the outcome of a framing process is a crisis type. A frame is


“manifested by the presence or absence of certain keywords, stock phrases, stereotypical

images, source of information, and sentences that provide thematically reinforcing clusters of

facts or judgments” (Entman, 1993, p. 52). Thus, framing basically means to categorise an

event based on the available information and create a frame that stresses salient features of the

event. Because framing shapes the attribution of responsibility and most stakeholders will

usually experience and accept the frames reported by the media, companies do not only try to

underline certain cues in their messages, but also try to stay in contact with the media to give

their side of the story. However, if a crisis is mainly discussed over the internet, it will be

much more difficult to influence the frame, even if one can employ prominent celebrities

(Coombs, 2007, p.167-171; Cooper, 2002). SCCT researchers have clustered crises according

to their crisis responsibility attributions and found three different crisis types. The (1) victim

cluster has weak attributions of crisis responsibility and the company is seen as the victim of

the event, e.g. rumours, sabotages, natural disasters. The (2) accidental cluster has minimal

attributions of crisis responsibility and the event is seen as uncontrollable or unintentional,

e.g. technical problems. The (3) intentional cluster has strong attributions of crisis

responsibility and the event is viewed as purposeful, e.g. human error accidents, company did

not fulfil its duties and thereby caused an accident (cf. Coombs, 2007, p.167). Thus,

stakeholders frame and thereby classify a crisis according to the perceived crisis

responsibility.

Two intensifying factors have been identified, i.e. crisis history and prior relationship history.

When a firm has a (C) crisis history, i.e. a similar crisis occurred in the past, it is likely that

there is an ongoing problem in the firm. The (D) prior relationship history refers to how a

firm has treated its stakeholders in the past. Research suggests that the occurrence of these

factors has a (C & D) direct and via crisis responsibility an (E & F) indirect intensifying effect

on the organisational reputation, because companies that have a crisis history or a bad history

with their stakeholders will be attributed more responsibility than otherwise. Furthermore,

research shows the firm’s reputation after a crisis is related to (G) behavioural intentions and

that (H) crisis response strategies can have a positive impact on the firm’s reputation.

Although Coombs (2007) proposes that crisis response strategies have an effect on the

attribution of crisis responsibility, other authors found no relationship between them (Brown

& White, 2010; Claeys et al., 2010; Coombs, 2004a, b; Coombs & Holladay, 2001, 2004).

“Increased attributions of crisis responsibility generate stronger feelings of anger and in some

extreme cases schadenfreude.” (Coombs, 2007, p.168) This is an important fact for the thesis,

because it links responsibility to anger. A recent study revised the SCCT by adding the

“anger” to the model. In a case study about Mattel, a US based toy-manufacturing company,


customers’ emotions were analysed and the authors found that by integrating anger into the

model the overall fit of the results increases. Anger is related to (I) crisis responsibility and it

has a negative relationship to (J) organisational reputation and to (K) behavioural intentions.

The main weakness of the study is the usage of postings from online bulletin boards as the

only data source and they did neither state how many users wrote the 277 analysed posts or

what kind of online communities they used. This may influence the levels of anger and

preselect certain individuals who like to release their anger (Choi & Lin, 2009, p.200-206).

Coombs (2007, p.170) argues that the aim of crisis response strategies is to restore the

reputation and to prevent any behaviour that would cause damage to the company or its

stakeholders. Primary and secondary crisis response strategies are listed in section 5.4 of the

appendix.

The “Deny Strategies” try to dissociate the firm from the crisis by claiming the crisis does not

exist. When a “Diminish Strategy” is applied, the firm posits that the crisis is not as bad as

people think and it tries to weaken its connection to the crisis. “Rebuild Strategies” shall

improve a company’s reputation by doing positive things and calm down any stirred up

emotions. On a much smaller scale, secondary response strategies can also improve

reputation. These usually support the primary strategies. For all of these strategies it is crucial

that the company supports its claims with new information about itself and/or to remind its

stakeholders of its good behaviour in the past, e.g. a credible long CSR history (Coombs,

2007). Similarly to this, Yuksel & Mryteza (2009, p.257) claim that the most effective action

was publishing unrelated positive information regarding the company after conducting an

experiment with 175 students regarding strategic responses towards boycotts. However,

whether the results of this experiment conducted with students are similar to the reactions of

the Chinese public should be tested. Specific recommendations for response strategies are

displayed in Figure 5-3 in section 5.5 of the appendix.

Some researchers claim the SCCT is too static, i.e. a certain strategy should be chosen

because of the few environmental factors the SCCT consists of. The critics argue that there is

no “one fits all” solution because plenty of special cases exist. Furthermore, they claim that

good relationships to the stakeholders are pivotal for recovering reputation and not the crisis

response strategies (Brown & White, 2010, p.89-90). I would object to their arguments that

the SCCT can be adapted and extended to fit to the special cases and that the SCCT’s

strategies can be mixed as Coombs (2007, p.173) points out. Hence, one should further

develop the theory instead of claiming crises are too complex due to their “humanistic nature”

(Brown & White, 2010, p.89-90).


2.2.3 Summary and adaptation to the Island crisis

Figure 2-4: SCCT model adapted to the Island crisis

The figure above shows a modified version of the SCCT model in which anger plays the

central role instead of crisis responsibility, because the victims of the crisis are merely

surrogate victims and thereby not responsible for the crisis. If a political event happens, the

stakeholders will categorise the event by (A) framing it or using the dominant frame. As

pointed out earlier in the thesis, Chinese media are closely connected with the Chinese

government and their frames are often a dominant due their reach. As explained in section

1.3.3, it is possible that the (B) Chinese government has influenced the frame of the crisis via

the Chinese media. Moreover, the before mentioned (C) Chinese grassroots nationalism may

also play its part in influencing the frame. The framing of the event served not only as an

explanation for the attribution of responsibility, but was included in the framework because of

the special “framers” and theirs interests. Afterwards, the stakeholders (D) attribute the

responsibility for the event. According to the literature, Chinese tend to condemn all Japanese

people for political tensions with China, thus group responsibility replaces crisis

responsibility in the revised model. Attributing the responsibility (E) lowers the reputation of

the members of the group, i.e. Japanese companies, on the one hand, and (F) sparks anger

against the group on the other hand. Anger in turn is related to (G) behavioural intentions and


negatively to (H) organisational reputation. Whether a company is affected by actions,

especially boycotts, and how much depends on a firm specific (I) “visibility” and (J)

“Japaneseness”. A possibility to operationalize the first construct would be to follow Wang &

Qian (2011, p.1163), who proposed that the degree of “visibility” depends on the firm’s

advertising intensity and obviously on the industry it operates in. “Japaneseness” could

depend on whether Chinese can easily identify the product as a Japanese one. However, these

are merely suggestions for the operationalization in future quantitative studies. Behavioural

intentions are directed towards (J) surrogate victims in default of the Japanese government as

a target. As stated before, a change in reputation may (K) alter how the stakeholders interact

with a company. Both, (L) prior relationship reputation and (M) crisis response strategies are

related to the reputation of the surrogate victims. Furthermore, (N) prior relationship

reputation is negatively related to crisis responsibility. Thus, people who had a good prior

relationship with the victim will rather not attribute the responsibility. Crisis history seems to

be rather non-relevant to companies during a surrogate crisis, wherefore it does not appear in

the adapted model.

The following propositions are about the untested parts of the adapted SCCT model.

P3: The Diaoyu/Senkaku crisis was framed by the Chinese government via the media.

P4: The Diaoyu/Senkaku crisis was framed by Chinese nationalists.

P5: The higher the degree of “visibility” of a Japanese company is, the more likely it will

become a target of boycotts and protests during a surrogate crisis. “Visibility” is based on the

firm’s advertising intensity and on the industry it operates in.

P6: The higher the degree of “Japaneseness” of a Japanese company is, the more likely it will

become a target of boycotts and protests during a surrogate crisis. “Japaneseness” is based on

whether Chinese can easily identify the firm as a Japanese one.

The variables proposed in P5 and P6 are interconnected, e.g. if a company displays a high

degree of “Japaneseness”, but only a low visibility, it will probably have much less problems,

than the other way round.

P7: The response strategies of most Japanese companies were to maintain a low profile,

because they did not want to draw the attention of the public on them or to create a dilemma

due to the Japanese animosity towards China.

P7 extends the strategies suggested by the SCCT. The low profile strategy fits best to a

surrogate crisis, because it makes sense not to rock the boat when one cannot convince the

other party that he is not responsible for the crisis or calm them down. Furthermore, if


Japanese companies please Chinese, there is a possibility this might backfire due to certain

right wing groups in Japan mentioned in section 1.2.

The focus shifted in this section to the companies and their reactions to the crisis. The

adaptations of the SCCT to the Island crisis serve as links to the first section of the literature

review, i.e. group responsibility and the “framers”. With the adapted model, I should be able

to depict the points that could be used by Japanese companies to tackle the crisis.

2.3 Corporate social responsibility

The CSR section sets out to answer the following questions: Do companies have to adapt their

CSR approach for China? What kind of CSR activities are commonly used in China? How do

Chinese customers respond to these CSR actions? Should firms communicate their CSR

doings during a crisis? This part begins with a CSR “overview”, followed by a description of

the roots and values of Chinese CSR. Afterwards, recent developments of Japanese CSR

practices will be pictured to see the differences between the approaches in the two countries.

The section concludes by presenting a CSR communication framework for analysing CSR

announcements and CSR reports.

2.3.1 CSR overview

I see CSR from a Western point of view and hence I compare Chinese and Japanese CSR

adaptations to the Western one. One of the most cited CSR definitions is, according to

Dahlsrud (2008, p.7), brought forward by the Commission of the European Communities:

“CSR is a concept whereby companies integrate social and environmental concerns in their

business operations and in their interaction with their stakeholders on a voluntary basis.” (EU

Communication, 2002, p.3) This definition comprises many dimensions such as economy,

environment, society, stakeholder and voluntariness. Nevertheless, there are plenty of other

definitions, which have different views on CSR and related or subordinate concepts

(Dahlsrud, 2008, p.7).

So what are the roots of CSR? Several authors argue that it emerged from academia, while

corporate citizenship has its roots in companies (Banerjee, 2008, p.62). For instance, some

German and Japanese scholars claim that CSR has a long tradition in their countries which

goes back to the so-called “honourable businessman” in Germany and to corporate principles

that focused on the society and employees in Japan (Klink, 2008, p.72; Demise, 2006, p.6-8).

However, others see the beginnings of CSR in charity and stewardship, consequently there is

no consensus about its origins (Van Marrewijk, 2003, p.98). Nevertheless, most researchers

think of the book “Social Responsibilities of the Businessman”, published by Howard Bowen,

in 1953, as the definite beginnings of CSR literature. For those readers interested in the


history and evolution of CSR literature, I can recommend the widely acclaimed paper

“Corporate social responsibility evolution of a definitional construct” published by Archie

Carroll in 1999.

In the following, several concepts related or subordinate to CSR are mentioned to give a

comprehensive overview; a subordinate concept to CSR is corporate sustainability (CS).

According to Linnanen & Panapanaan (2002), CS comprises corporate responsibility (CR),

which in turn consists of social responsibility, environmental responsibility and economic

responsibility (Van Marrewijk, 2003, p.101-102). Another term is corporate philanthropy

(CP) that can be seen as a part of CSR and is defined as “an unconditional transfer of cash or

other assets to an entity or a settlement or cancellation of its liabilities in a voluntary

nonreciprocal transfer by another entity acting other than as an owner.” (Financial Accounting

Standards Board, 1993) Corporate citizenship means that a company has not only rights, but

also duties and it should take over unserved governmental functions as well as protect civil

and political rights (Matten et al., 2003, p.116-118). With respect to the use of all these terms

in company reports, e.g. sustainability reports, CR reports, CSR reports, very strict definitions

become less meaningful in practice (Carroll & Shabana, 2010, p.86).

2.3.2 CSR in China and Japan

As mentioned before Confucianism had a huge impact on Chinese culture and thinking. This

impact, although it is becoming weaker, still exists today as one can see by means of the CSR

definition of the Chinese government. Confucius’s teachings were based on “li”, which stands

for rules of the society, and “ren”, which means people and stands for philanthropy (Gao,

2009, p.25-26). And just like Germany with its concept of the “honourable businessman”,

China had 2500 years ago the concept of the Confucian trader who applied the teachings of

Confucius (Wang & Juslin, 2009, p.435).

Today, the Chinese government plays a very important role for CSR in China, because it still

controls various economic resources and it is a major promoter of its own CSR version (Tang

& Li, 2009, p.202). The Chinese Bureau of Commerce defines CSR as “a concrete action

taken by Chinese companies to implement the political aspiration of the new Communist

Party collective leadership – ‘putting people first to create a harmonious society’.” (Emphasis

added) (Ethical Corporation, 2005) One can see that on the one hand the rules of the society,

“li”, which are set by the CCP, are still very important and on the other hand people, “ren”,

are central to create a “harmonious” society (Kowacsik, 2010, p.62).

Assuming that Chinese companies know what CSR activities correspond best with the

Chinese consumers, a study about 29 Chinese companies of the Fortune 100 China list should


provide insights regarding the “right” CSR activities. More than 80% of them donated money,

the purpose of the donations was usually natural disaster relief and the reason they stated was

philanthropy (Tang & Li, 2009, p.205-206). These findings are consistent with those of an

analysis of Chinese retailers showing that donations for disaster relief are very common.

Furthermore, lists and rankings regarding the total donations made in China or for a certain

event are published to compare the companies’ social contribution (Kolk et al., 2010, p.296;

people.com.cn, 2008).

In another study regarding foreign retailers in China, Xun (2012) found that they exercised a

government-aimed and a consumer-aimed CSR instead of the holistic Western CSR in which

every stakeholder’s interests have an intrinsic value. The government is targeted to engage “in

the political process to interact, communicate and exchange with key legitimacy actors […] as

a way to enhance firm performance.” (Xun, 2012, p.10) The government’s support for foreign

retailers and their expansion plans is crucial because of the government’s power over

resources in China (Xun, 2012, p.11). The same is true for many other industries that want to

operate in China. The author reports that in contrast to consumer-aimed CSR, government-

aimed CSR leads to an increase in firm performance. Since it is so important, what is

government-aimed CSR? Xun (2012) explains it as building up “guanxi”, i.e. relationships

based on doing each other favours, with the government, especially the local government, and

thereby boosting certain officials’ careers by donating money at the right time, e.g. disaster

relief. Nevertheless, retailers also engage in consumer-aimed CSR, because it is also a way to

show the government that the company is a good citizen and it serves “as signal of a firm’s

goodwill, principally to soothe or appease Chinese consumers’ easily escalated negativity (i.e.

boycotts).” (Xun, 2012, p.10) In fact, China has a long tradition of boycotts, Hong et al.

(2010, p.6) list various boycotts that also happened before the CCP came to power. Most of

them had a nationalistic sentiment, targeted products sharing the same country-of-origin and

were surrogate boycotts. Furthermore, Xun states that when Chinese customers become more

sophisticated in evaluating CSR activities, companies may have also some financial

advantages coming from consumer-aimed CSR. Until then firms should not cease their CSR

activities because of the reputation that may protect them from short-tempered customers

(Xun, 2012, p.11).

Ramasamy & Yeung (2009, p.127-128) surveyed consumers in Shanghai and Hong Kong and

found that CSR seems to be more important to them than to Western consumers. The authors

give various explanations for their findings such as the strong Chinese collectivism that

supports the notion of CSR or the Chinese middle class that became wealthier wherefore it

acts more socially responsible. Another insight was revealed by the respondents from


Shanghai stating companies have no economic responsibilities. Moreover, the philanthropic

and the ethical responsibility are the ones that mattered most to Chinese consumers

(Ramasamy & Yeung, 2009, p.127-129). Another study published in 2011 reports that

Chinese who have been aware of CSR evaluate companies more positively and display a

higher purchase intention. An interesting insight is that instead of caring about how the CSR

activities look like or being concerned about the motives of the companies, Chinese

consumers are much more interested in the results and the sustainability of the CSR activities

(Tian et al., 2011, p.204-208). Yang (2010, p.14-15) reports that Chinese are easily misled by

companies that engage in green washing, i.e. spending more money on advertising the green

image of the company than on the environmental activities. He explains that by the absence of

independent NGOs in China, which would be able to pressure those firms by scrutinising

them and draw the media’s attention to the issue. A study regarding the effects of corporate

philanthropy (CP) on financial firm performance in China shows that the firm performance

significantly increases by engaging in CP. This is caused by a gain in political resources and

positive stakeholder reactions to the CP; the relationship was moderated by the firm’s

visibility18

, its dependence on political resources and stakeholder expectations (Wang & Qian,

2011, p.1167, 1174-1178). All these studies clearly show that Chinese consumers have a

distinct view on what CSR is and hence companies should adjust their CSR strategy.

Most of the studies were limited due to their sampling technique, nonetheless they point

towards the same direction, namely, that Chinese consumers are easily convinced by striking

measures such as donating money. To get a first glimpse on how Japanese companies

approach CSR, the following paragraph presents the recent developments of CSR in Japan.

Fukukawa & Teramoto (2009, p.143-144) argue that it may look like Japan is lagging behind

other developed countries, however “Japanese CSR managers are well versed and indeed

willing to discuss the issues at stake, but that they also reserve the right to be skeptical too.”

One of their interviewees said the firm does not want to dupe its stakeholders by signing

guidelines such as the Global Compact without coming up to it. Other more recent studies

have a more distinguished view on CSR in Japan by classifying it as employee- and

environment-oriented in comparison to, for instance, Chinese or Western CSR. Furthermore,

the authors claim that Japanese companies are among the best in the aforementioned areas

(Witt & Redding, 2012, p.18-21; Sun et al., 2012, p.927-928). They need to adapt their

practices to country specific stakeholder needs. However, D'Costa (2012) claims that up to at

least 2005 the approach of Japanese firms in China did not take the Chinese society into

18

Visibility was indicated by the advertising intensity of the particular companies, which was calculated as the

ratio of selling, general, and administrative expenses to sales.


account and that “the social contributions of Japanese companies in China are inadequately

publicised.” (D'Costa, 2012, p.234) Furthermore, the firms should maintain close

relationships with communities and the local government. Although there is no doubt that

Japanese companies engage in CSR activities nowadays, their focus on unappreciated areas in

China may not lead to the desired results.

Argandoña & von Weltzien Hoivik (2009, p.227, 229-230) stated that different cultures have

different CSR models. Although the CSR models may have many things in common, each

model fits to its culture that shaped and will continue to shape its form. After all, foreign

companies in China should definitely engage in CSR, because the benevolence of Chinese

consumers and the government seems to depend on such acts.

2.3.3 Communication of CSR

Du et al. (2010) created a framework to analyse the CSR communication, which will be

explained in detail in the following. Several aspects of a CSR message can be analysed, i.e.

the issue, commitment, impact, motives, and fit of the message. The issue of the message can

be about either the social cause, e.g. being merely a sponsor, or the company’s involvement,

e.g. donating money for every sold product. Although in Western countries it is more credible

for a company to be involved, this seems not to be the case in China as shown in the last

section.

A company can focus the CSR communication on one or several aspects of its activities.

Commitment towards the matter of concern can be communicated in the following ways:

input, e.g. in million RMB, durability, e.g. the program runs since 15 years, and consistency,

e.g. 5% of every sold product (Dwyer et al., 1987, p.19). A company can show commitment,

for instance, by donating money or providing other resources to a charity organisation. The

impact of the specific actions may also be stressed in a CSR message, e.g. what will change if

you buy one crate of beer. As mentioned in the previous paragraph, motives are crucial to the

consumer’s evaluation of CSR activities. Usually, companies should have a CSR fit, e.g. a

paper company supports projects saving the rain forest (Haley, 1996). But there are also

authors who report that a low CSR fit leads to positive reactions, because consumers will

think the firm tries not only to improve things in its own field but also in other areas (Bloom

et al., 2006; Menon & Kahn, 2003).

The findings of a recent study indicate that during a crisis companies with a short CSR

history19

should act differently from companies with a long one. While the latter will face less

consumer scepticism when they use their long CSR history in crisis communications,

19

A short history was defined as less than 1 year and a long one as 10 years or more.


companies with a short CSR history should not try to utilise it for crisis communication,

because their reputation will suffer even more (Vanhamme & Grobben, 2009, p.275-281).

Although the study was conducted in a Western country, it shows that defending the

reputation during a crisis by pointing at a long CSR history might also be an option for

Japanese corporations in China since Chinese seem to be easily convinced by striking

measures, e.g. earthquake donation and green washing.

2.3.4 Summary and propositions

Although, Chinese consumers are fond of different CSR activities, they seem to appreciate

CSR even more than Western consumers. Companies should not only engage in the activities

Chinese are currently fond of, but also in those that are more sophisticated, i.e. environmental

activities. However, for now Japanese firms should focus the presentation of their doings on

philanthropy and social issues.

Figure 2-5: Relationship between CSR, anger and organisational reputation

Figure 2-5 depicts a possible function of CSR in a crisis such as the Island crisis. As the

literature has indicated, CSR in China is often aimed at two main stakeholders, the

government and the Chinese consumers. By targeting the latter, Japanese firms hope to calm

them down and to prevent a loss of their reputation during a crisis. Japanese firms want to

show their value for the Chinese society to the Chinese government, which might in turn

frame the crisis in a way that does not stir up anger towards the particular company. These

relationships are moderated by their CSR history, i.e. whether they engaged in CSR activities

for a long period of time, and a CSR country fit, i.e. whether the CSR activities were

appreciated by the Chinese stakeholders.


P8: By targeting Chinese consumers with their CSR activities, Japanese firms might be able

to decrease anger and prevent damage from their reputation in case of a crisis.

P9: By targeting the Chinese government with their CSR activities, Japanese firms might face

fewer problems during a crisis.

P10: The effectiveness of the CSR activities in respect to the goals stated in P8 and P9

depends on the CSR history, i.e. for how many years did the firm engage in CSR activities,

and the CSR country fit, i.e. did it engage in activities that are appreciated by the citizens of

the host country.

Empirical part 31

3 Empirical part

The empirical work of the thesis turned out to be quite a challenge. The difficulties transpired

soon after the first inquiries were made and continued even after the research design had been

adjusted for several times. The topic was too delicate for 26 of the 30 contacted companies,

which refused to answer any questions related to the Island conflict. Nonetheless, it was

possible to depict the problems Japanese companies faced during the Island crisis, the

responses to these problems and their CSR activities in China. In the first part of this chapter

the used methods are presented, which is followed by the results of the investigation.

3.1 Research methodology

One of the thesis’ goals is to get insights into the problems of Japanese companies during

bilateral political crises and to depict the response strategies to these problems. To achieve

this, a case study approach was chosen for several reasons that will be explained in further

detail in the next section. Besides the research strategy, the researcher also should think about

the emic-etic question, i.e. whether the research should be culture specific (emic), e.g. the

Chinese view on CSR, or universally applicable (etic)? Although, parts of the research are

very culture specific, e.g. the government as a framer or “Japaneseness”, the core of it, e.g.

animosity leads to anger, is universally applicable to surrogate crises. Thus, a combination of

an emic and an etic approach was employed in which the universal core concepts were

adapted to the Chinese situation (Pike, 1967).

3.1.1 Research strategy and research design

To conduct the cases studies, I follow Yin (2003b) and his widely acclaimed book: “Case

study research: Design and Methods”.

Beginning with the selection of the research strategy, e.g. survey, case study, experiment etc.,

Yin (2003b, p.5-6) states that the selection partly depends on the type of research question,

e.g. how, why, what and how many. He claims if research questions begin with how or why,

case studies are a suitable research strategy, because other research strategies, such as

surveys, rather focus on one certain point of time in contrast to case studies. In addition,

“what” questions with an exploratory character can also be answered well by case studies. A

study can be classified as having an exploratory character when no research on the topic has

yet been conducted and usually one of its goals is to develop propositions for further research.

Moreover, Yin (2003b, p.7-8) claims that case studies fit to research questions about

contemporary problems that cannot be manipulated. Furthermore, case studies incorporate the

context of the research question and do not deliberately remove it in contrast to surveys and

Empirical part 32

experiments. Because the research topic and the research questions of this thesis fulfil the

stated criteria, case studies are the method of choice.

Figure 3-1: Yin’s categorisation of case studies

The most influential categorization for case studies was created by Yin (2003a, p.5), who

divides them into single or multiple and descriptive, exploratory, or explanatory ones as

illustrated in Figure 3-1. To ensure that a variety of coping strategies will be identified by the

research the case study will consist of multiple cases (3<), which follow a replication logic

instead of a sampling logic. This makes it also easier to generalize in contrast to a situation of

analysing a single case study (Yin, 2003b, p.37, 47). Exploratory case studies were chosen,

because, to my knowledge, no research has yet been conducted on this contemporary topic.

The research design consists of three phases20

. In the first phase, stakeholders of Japanese

firms and problems with the former were revealed by conducting interviews with experts.

These interviews shed some light on the problems and their causes and facilitated the creation

of interview questions for the second phase. In fact, interviews with journalists of newspapers

and magazines, such as Japan Times, Nikkei, Handelsblatt, were also planned, but none of the

contacted journalists was willing to give an interview. One of the reasons mentioned was

again that the topic is too political. In addition to that, newspaper articles and corporate

reports ensure to have multiple sources of evidence. The second phase consisted of four

multiple, exploratory case studies with Japanese companies to uncover company-specific

problems, CSR activities and communication strategies of Japanese firms during the conflict.

Because the car manufacturers refused to support research on this topic, interviews with

managers of car dealerships of Toyota and Nissan were conducted. Although this might

provide only limited insights concerning the CSR strategy of the particular company, the

responses and the rules of conduct issued for a crisis were uncovered. In the final stage, the

20

Please see for an outline of the thesis’ research in section 5.6 of the appendix.

Empirical part 33

findings were summarized and linked to theory. Moreover, implications and future research

directions are presented.

In academic research, several criteria have been identified to judge the quality of a research

design. According to Yin (2003b, p.33-34) the four most common tests for social research are

also relevant for case studies:

Construct validity: Does the instrument measure what it should?

Internal validity: Is the cause-effect relationship based on the proposed conditions?21

External validity: Can the study’s findings be generalized?

Reliability: Is it possible to repeat the investigation and get the same results?

Figure 3-2: Principle of data triangulation

Yin (2003b, p.33-37) lists several tactics to deal with the tests. To achieve high construct

validity, multiple sources of evidence, which is also called triangulation, should be employed.

There are several types of triangulation and the most important type for this thesis is data

triangulation, i.e. to use not only one source of evidence but several sources to support a fact.

This could for instance mean to not only rely on newspapers, but also on reports and

interviews. Thus, whenever possible more than one source is quoted. By doing multiple case

studies, the external validity increases. A high reliability can be ensured by conducting the

case studies in a careful and archival manner and by maintaining a clear chain of evidence, i.e.

to enable an external observer to understand the thoughts and the evidence that led the

researcher to exactly these conclusions.

3.1.2 Data collection

In general, there are several possibilities to retrieve the information needed. Six sources of

evidence are listed by Yin (2003b, p.86): (1) documentation, (2) archival records, (3)

21

Yin (2003b, p.34) states that internal validity has no use for exploratory or descriptive case studies.

Empirical part 34

interviews, (4) direct observations, (5) participant-observation, and (6) physical artefacts. For

this thesis, interviews, documentation and archival records were consulted to answer the

research questions.

Representing the core of this thesis’ work, the data collection process was much more time-

consuming and complicated than initially thought because of various reasons. First, the topic

as already mentioned, is a very political topic that neither Japanese nor Chinese companies

want to discuss in public. Second, as Pearson & Clair (1998, p.21) put it, “organizations are

reluctant to open current or past "wounds" to external examination and speculation.” Third,

unfortunately there is an incredibly significant language barrier for a German student who

wants to interview Chinese or Japanese employees. Due to the support of an interpreter,

conducting interviews with Chinese was not as big a problem as initially thought. However,

most interviews conducted without an interpreter were very time consuming and not as rich in

information as interviews are supposed to be. Fourth, doing research in China is different

from many other countries due to the Chinese culture, especially bureaucracy and guanxi. In

fact, the Chinese researchers I talked to mentioned that they would not even try to conduct

research on this sensitive topic without having very close contact to the right people in the

Chinese branches of the affected Japanese companies.

A list of Japanese companies was compiled based on the following two criteria. Japanese

companies were either chosen when they were mentioned in newspaper articles, because they

were affected by the Island crisis, or when they were listed in a number of very recent CSR

rankings, namely East Asia 30 published by NKSJ Holdings and TOP100 Chinese

Companies’ CSR Ranking report created by Fortune China (Fortune China, 2012; Ju, 2012).

The reason for the first criterion is obvious, whereas the reason for the second may not be so

clear. It was chosen to figure out whether Japanese firms with outstanding CSR practices have

fewer or no problems during a crisis. Companies that do not operate in China or do not release

a CSR report were excluded from the list. The list can be found in section 5.7 of the appendix.

It includes how often the word “China” was used in the particular CSR report; this can be an

indicator for the importance of the Chinese CSR activities.

The Japanese CSR and public communication departments of the companies on the

aforementioned list, and if possible the Chinese departments, were contacted and after

agreeing to cooperate, the interviewees were identified. Table 5-5 in section 5.8 of the

appendix lists the respondents ordered by nationality.

Empirical part 35

Interviews

Interviews are typically a rich source of information because the interviewee usually has tacit

knowledge about the topic and, if necessary, the interviewer is able to dig deeper.

Nevertheless, interviews are only verbal reports that could be heavily biased because both the

interviewer and the interviewee are subjective and may unconsciously influence the results

(Yin, 2003b, p.89-91). Even more, the respondents might wilfully give wrong answers,

because they want to let the interviewer hear what he wants to hear or to cast a positive light

on the company. According to Yin (2003b), open-ended interviews are common in case

studies. However, due to the limited time of the interviewees semi-structured interviews22

were conducted because on the one hand, these are still flexible enough to go into details

whenever necessary and on the other hand this type of interview also ensures that the main

questions will be answered in time (Galletta, 2013, p.24).

Due to the delicacy of the topic, anonymity was granted to all respondents. Thus, only some

general data about the corporations is revealed. The interviews usually lasted between half an

hour and two hours and were often conducted via the telephone. Some respondents did not

want to take part in oral interviews and preferred to reply via email. Although, the

information is not as rich as in interviews, with respect to the difficult topic any valuable

information was included in the analysis.

Archival material and Documents

The other main sources of information were websites, company brochures, annual reports,

and newspaper articles. These were consulted to depict and analyse the CSR activities and the

communication strategy of the particular company. Yin (2003b, p.86-87) warns researchers to

use documentation, such as reports and newspaper articles, without questioning its accuracy.

This might be low due to the purpose and the audience of the records. Nonetheless, in contrast

to interviews, documents are stable and can be reviewed repeatedly.

3.1.3 Analysing methods

According to Yin (2003b, p.111-115), a researcher should choose a general “analytic

strategy” because the strategy will guide the researcher and it is linked to “analytic

techniques”. Yin proposes three general strategies: (1) relying on theoretical propositions, (2)

thinking about rival explanations, and (3) developing a case description. If the researcher

relies on propositions, the data collection will be highly influenced by the propositions, thus

certain things will be in the spotlight while others will be ignored. As depicted in Table 5-6 in

22

Please see section 5.9 of the appendix for the main questions of the interviews.

Empirical part 36

section 5.10 of the appendix, Yin differentiates between two types of rivals, “craft rivals” and

“real-life rivals”, and identifies nine kinds of rival explanations, which can deepen the

understanding of the topic. The last general strategy describes the case in detail and structures

it by developing a descriptive framework. Afterwards it will be easier to analyse the complex

context of the case.

As mentioned before, Yin (2003b) also presents several “analytic techniques” applicable for

case studies: cross-case synthesis, logic models, time-series analysis, pattern matching, and

explanation building. A cross-case synthesis can only be applied in multiple case studies,

because it uses the data of several cases. This data has to be unified to recognise overall

patterns. The underlying idea of logic models are cause-effect-cause-effect patterns, “whereby

a dependent variable (event) at an earlier stage becomes the independent variable (causal

event) for the next stage.” (Yin, 2003b, p.127) Time-series analysis is, simply put, the

comparison of data collected over a certain time with respect to a predicted pattern. Pattern

matching is a very common method in which propositions are formulated and then compared

to the cases.

In explanation building, the researcher stipulates propositions, which will be compared with

the case and, if necessary, afterwards revised and compared with other details of the case or

another case. Figure 3-3 underlines that this method is iterative in contrast to the other

presented ones (Yin, 2003b, p.116-137).

Figure 3-3: Explanation building process

Explanation building was chosen for this exploratory case study, because my knowledge

about the context of this crisis was limited and no literature about the topic of the thesis

existed. Therefore, a more flexible method was picked to ensure that the research would not

be trapped in a dead end. For the thesis, a descriptive framework was created and adapted

according to the findings of the interviews. Because of the focus of the master’s thesis,

propositions were made to limit the scope of the descriptive framework. Thus, a combination

Empirical part 37

of the first and the last general strategy and explanation building was chosen to analyse the

strategic options of the Japanese companies during the crisis.

3.2 Results – Causes

In this section, the results of the interviews regarding the causes of the protests and the

context of the crisis will be presented and linked to theory. The related propositions will be

compared with the findings and will be revised whenever necessary.

Framing of the crisis

A challenging topic was whether the Chinese government or Chinese companies incited the

Chinese citizens, especially the protesters, because almost all respondents hesitated to answer

and during the interviews, most Japanese even wanted to skip questions connected to the

Chinese government. Most of the respondents claimed that the Chinese government framed

the crisis indirectly, because it is assumed to control the mass media, i.e. the newspapers,

radio, television and all the major websites, and via censorship also the information available

on the social media platforms. One informant said, “the Chinese government is encouraging

people to protest by letting the media set up an anti-Japanese atmosphere.” Furthermore, half

of the Chinese interviewees believed that the protesters had acted on their own, whereas all of

the Japanese respondents, who answered the more delicate questions, claimed that the

Chinese government had staged the protests and instigated the protesters. Interestingly, the

Chinese who advocated the latter view had spent several years abroad. This indicates that the

Chinese government seems to have a huge influence even on the more educated population

since some of the respondents are scholars at a university.

Nonetheless, some interviewees differentiated between the central and the local government;

for instance, an expert for Japanese companies said the local government supports Japanese

companies, whereas the central government would incite the protesters. A Chinese scholar

disagreed with the first part and proclaimed that the local government would try to follow the

orders of the central government, but it takes some time to “synchronize all the departments”

and it is sometimes difficult to apply the instructions of the central government, because they

are not very explicit due to sensitive topics. However, the managers of the Japanese

companies stated that the local government usually helps them whenever possible.

Although, the interviewees were explicitly asked about the Chinese grassroots nationalism,

only two respondents viewed it as a major movement that would be able to frame the crisis. A

Chinese manager objected that the Chinese grassroots nationalism could easily be used by the

government.

Empirical part 38

Surprisingly, the grassroots nationalism seems to be not as important as indicated by the

literature. Hence, P423

will be rejected and P3 will be slightly revised to incorporate the

distinction between local and central government.

P3.1: The Diaoyu/Senkaku crisis was framed by the Chinese central government via the

media.

Motives of the troublemakers

Many of the interviewed Chinese characterised the protesters as “uneducated, bored and

unemployed” without any goals in life. This makes them an easy target for manipulation.

Others pictured them as small business owners or freelancers who can spare time for such

activities. Two of the Chinese car dealership managers gave very detailed descriptions of the

boycotters and protesters and their motivations. I consider these descriptions as very valuable,

because these managers are closer to the ordinary Chinese people as most of the other

interviewees.

A manager of a Dongfeng Nissan car dealership said three groups of people join protests

against Japan. The (1) “shouters” are intellectuals who want to tell others about their ideas

and conceptions. They usually do not engage in violence in contrast to the (2) “destroyers”

who were described as bored and inherently violent. They are poor and feel treated unfairly

by the society, especially the perceived gap between rich and poor people fuels their anger.

An interesting insight is that she explicitly mentioned that workers of Chinese car companies

are among this group, but no one ever heard that the competitors encourage their workers to

protest. The last group (3) consists of uninvolved passers-by, who just like to watch what is

happening.

One manager of a Guangqi Toyota car dealership separated the boycotters of cars into two

groups according to their motives. The first one consists of people who hate Japan, but during

the protests this usually rather latent hatred became stronger, wherefore they stopped buying

Japanese products. This perfectly fits the findings of Leong et al. (2008), namely that stable

animosity amplifies situational animosity. The second group of “boycotters” acts more out of

self-interest. These people fear on the one hand that someone might destroy their property and

on the other hand that they lose their reputation if their friends, who might be nationalists,

find out about their Japanese car. While describing the second group, he stated that the

visibility and accessibility of cars is the main reason for this group to postpone their purchase

or to buy a brand with a different country-of-origin.

23

Please see section 5.11 of the appendix for an overview of the propositions.

Empirical part 39

One female respondent asserted that Chinese do not differentiate between the suffering of old

family members and their own suffering due to collectivism. “In contrast to individualistic

countries, it is considered as personal what happened 70 years ago to your grand-

grandparents.” Another interesting statement regarding the motivation of protesters made by a

Chinese was, “Japanese are always an excuse to release pressure, because you will not be

charged.” The Chinese government seems to encourage people by not punishing Chinese

when they target Japanese.

Other reasons stated for joining protests and other actions were the following: Animosity

towards Japan, Chinese nationalism, releasing their anger due to the corrupt government, bad

working conditions, fun, and the wish to be famous at least once in their life. All of these

reasons were at least given by two interviewees. It remains unclear which motives were the

most dominant, where the roots of the protests can be located and which groups merely joined

them.

Social pressure

Many interviewees agreed that social pressure is a reason for Chinese to take actions against

Japanese companies, e.g. some workers are said to be forced by their families and friends to

quit their jobs, although they would like to do so. However, they disagreed that anger causes

the social pressure, because the latter is constantly present and rather part of their

collectivistic culture. One scholar postulated that the degree of social pressure highly depends

on the region, e.g. in Northern China social pressure is more common than in other regions.

Although the scholar could not give any reason for that, P1 will be revised to incorporate this

useful input.

P1.1: Social pressure forces others to join actions against Japanese companies, such as

boycotting. However, the degree of social pressure varies by region.

Group responsibility

According to the Chinese interviewees, Chinese people think that only the Japanese

government is responsible for the most recent outbreak of the crisis in contrast to P2. The

Japanese informants did not agree with that view and claimed that the Chinese would hold all

Japanese people responsible. A Japanese manager said that the Chinese would hold onto a

general animosity towards everything that is Japanese and therefore “Japan” is guilty in

general. Similar answers regarding the Chinese animosity towards Japan were given by all

interviewees. Although there might be a bias due to social desirability, there were more

Chinese than Japanese respondents and the latter have less contact to Chinese people,

therefore P2 will be revised.

Empirical part 40

The proposition was based on the propaganda change in China by which the Chinese should

have started to attribute the responsibility for the atrocities of the Second World War to all

Japanese people. However, the change in propaganda seemed to have no effect on the

attribution of the responsibility. Nonetheless, Chinese obviously tried to put pressure on the

Japanese government by taking actions against the surrogate victims.

P2.1: Many Chinese attributed the responsibility for the Diaoyu/Senkaku crisis to the

Japanese government and therefore took actions against surrogate victims to put pressure on

it.

Thus, there is no direct attribution of crisis responsibility to Japanese firms, because only the

Japanese government was held responsible. Wherefore crisis responsibility replaces group

responsibility again and the link between it and organisational reputation is probably indirect

or does not exist at all, i.e. (E) in Figure 2-4.

Visibility and “Japaneseness”

Only few people came up with answers to the question why certain brands or products were

more in the focus of the Chinese protests and boycotts. For the selection process of the

protesters, it seemed to be important if the destruction of a Japanese product gears towards the

media and if it is accessible by the protesters. Thus, they have burned cars instead of

smartphones. Moreover, visibility influenced the decision not to buy certain products,

especially cars, because others might damage them or, even worse, they might harm the

owners. Besides that, several interviewees stated an international image tends to make

Japanese brands “less Japanese” and thereby less vulnerable to Chinese anger. A Chinese

manager gave the example of Sony that he would consider more international than Toyota.

Another interviewee asserted, “Toyota or Nissan are symbols for Japan.” Thus, there seems to

be a very strong link between certain car manufacturers and Japan.

In consideration of the findings, P6 does not have to be changed. However, P5 has to be

adapted, because visibility rather stands for the physical accessibility of the product by

strangers or if the usage of the product can be observed by acquaintances than for the level of

public attention the product is able to attract.

P5.1: The higher the degree of “visibility” of a Japanese company is, the more likely it will

become a target of boycotts and protests during a surrogate crisis. “Visibility” is based on

whether others can observe the product usage or have unimpeded physical access to it.

At the end of the interviews, the figures of the literature review’s summary sections were

explained to the respondents who were then asked to comment on them. Although, the

Empirical part 41

interviewees agreed that animosity and the resulting anger against Japanese are very

important, most of them stated a multitude of additional reasons for taking actions against

Japanese companies as stated in “Motives of the troublemakers”. Nevertheless, the majority

agreed to the ideas underlying Figure 1-2, 2-2 and 2-4 with the above-described exceptions,

i.e. there is no link between anger and social pressure and Chinese grassroots nationalism is

very likely not a cause for actions against Japanese firms.

3.3 Results – Crisis responses and CSR

Besides the obvious problems, such as the damaged stores and sales slump, there are

numerous other things Japanese companies had to worry about during the crisis. However,

most respondents stated that the majority of these problems had ceased after one or two

months. For example, officers at the Chinese customs started interpreting the subtle messages

of the Chinese central government and hence acted on their own when they slowed down

imports from Japan. After a while, the officers stopped doing that, because their supervisors

did not give them any orders to do something alike. The reason stated for their actions was

animosity towards Japan. Another source said that the government would pressure Chinese

companies to stop them from doing business with Japanese firms. The interviewees

mentioned the following other problems: Chinese workers quit or wanted higher wages,

Japanese employees were threatened or harassed, Japanese companies were excluded from

tendering and had problems to get approvals of operation, Chinese companies changed their

suppliers, and protesters as well as workers destroyed machines and finished products

(Kajimoto & Nakagawa, 2012; Tokyo Times, 2013).

The immediate reaction to the crisis was to close factories and stores at risk as described in

section 1.3.3. A representative of Seven & I said, “there was almost no damage to our stores

because there were barricades by armed police.” (Yamaguchi & Ozasa, 2012) In contrast to

that, an Aeon store had been ransacked for four and a half hours causing damage of US$ 8.5

million (Okudera, 2012). Thus, either the damage prevention strategy of Seven & I is better,

e.g. protection by police and shuttering their stores, or Aeon had had bad luck because the

protesters showed up at their store. As revealed in the interviews, many plants were closed

because suppliers and other firms just saw a sharp decline in demand and some firms wanted

to prevent damage from their equipment as it happened at the two plants of Panasonic.

The reaction of Japanese firms to the crisis was described as “silent”, which means that they

kept a low profile until most of the trouble was over. This is, according to experts for

Japanese business, the only reasonable strategy, because Japanese companies are unable to

influence the key stakeholders, i.e. government and consumers. This is also the opinion

Empirical part 42

among analysts: “public relations crisis management by the companies is expected to have

little effect in reassuring consumers and regaining growth momentum in the short term.”

(Tianyang, 2012). In an interview with Bloomberg, a car expert said that Japan’s car

companies’ future in China “is tied to Sino-Japanese relations, and there isn’t much one

company can do through marketing […]. If consumers generally don’t have a positive feeling

toward them, their market share will only decline further.” (Jie & Hagiwara, 2013) In

addition, an extensive search on the companies’ websites in Chinese, English and Japanese

for news in September and October 2012 showed that only Aeon and Fast Retailing had

published a statement on their websites regarding the protests.

Aeon’s statement was published24

one week after the protests stopped and states that some

stores were closed to protect employees and customers. One particular store, which had been

damaged during the protests, was operated only by Chinese employees. Furthermore, Aeon

emphasised that it has started its operations in China already in 1985, employed many

Chinese, and set its focus on the Chinese market by setting up headquarters in China. “This

strategy “shift to Asian markets” will never change.”24

By stating that, Aeon also highlights

the importance of China and that it will not give up the market because of some protests. At

the end of the press release, Aeon gives examples for their environmental and social

contribution in China with a focus on their CSR commitment, especially on the durability, and

on the impact of their CSR activities, e.g. their 1% program funded 1500 scholarships (Aeon

Co., 2012). This message is an excellent example for good crisis communication from a

theoretical point of view. Aeon told its stakeholders that it is not going to retreat regardless of

what happens, which might be important to demoralise the protesters under the assumption

that they want Aeon to leave the Chinese market. Aeon combined this with a “Reminder

Strategy” pointing to the people who suffered most from the people’s actions and underlining

its long-time CSR efforts in China. The latter is nothing else but unrelated positive

information, which is the most effective way to overcome a crisis according to Yuksel &

Mryteza (2009).

The other statement was made by Fast Retailing only three days after the protests had

stopped. A sign posted in a display window of a Uniqlo store in Shanghai for less than an

hour triggered strong reactions in Japan. Within four days, more than 1,000 complaints were

directed at the headquarters of Uniqlo, whose operator is Fast Retailing, because the

following was written on the sign, “We support the claim that the Diaoyu Islands are

inherently China's territory.” (Fast Retailing, 2012) Fast Retailing explained that the local

24

Please find the Aeon’s statement in section 5.12 of the appendix.

Empirical part 43

police had advised the store manager to put up a sign because of more than 1,000 protesters

were projected to pass the store. This highlights the dilemma of Japanese companies that

arises when they side with the Chinese or the Japanese. In the end, Fast Retailing had to

appease the Japanese claimants. The main message of the statement is that the store manager

disobeyed the company’s policy by setting up the sign. “Going forward, we will strictly

ensure that a similar type of incident does not take place again.” (Fast Retailing, 2012) In

addition, Fast Retailing stated also that it has no intention to change its expansion plans in

China (Fast Retailing, 2012).

Canon merely posted a message to inform its customers that its service centres in Beijing and

Guangzhou were to be closed on 17th

and 18th

September without giving any reason (Canon,

2012). No other company on the list issued a statement regarding the crisis on their website.

Actually, very few companies posted any news in the weeks after the protests on their

English, but especially on their Chinese website.

Another reaction was that many Japanese companies scaled down their advertisement

expenditures. Outstanding in that respect was Canon that almost stopped its spending in

October 2012. The Japanese car manufacturers also decreased their expenditures25

and the

void was instantly filled by other car manufacturers, for instance, Volkswagen and Land

Rover increased their spending by 500% and 1800% compared to October 2011 (Wen,

2012b). The sales of the competitors rose up to 55% in October (Kubota & Sugiyama, 2012).

Furthermore, an official of Toyota admitted that a planned marketing campaign targeting the

bias towards Japanese cars has not been carried out due to the protests (Shirouzu, 2013).

One Japanese interviewee put it this way: “Compared to the Chinese people, Japanese know

when they should be calm.” Tuning down all communications is on the one hand a logical

answer to short-tempered Chinese people who are looking for the next misstep of a Japanese

company. Because there was only little or no communication with the public and the

advertisement expenditures were lowered radically, one can say that the Japanese firms were

pursuing a low profile strategy, hence P7 will not be changed.

After all these protests and boycotts, some Japanese executives seem to have lost their trust in

China. A survey conducted by the Japan External Trade Organisation (JETRO) in January

2013 was able to question almost 2000 Japanese companies regarding the current situation

and their plans in China. The JETRO found that Japanese firms consider the risk of doing

business in China 2013 higher than two years before, especially the extraordinary high

25

Please find a figure regarding the advertisement expenditures of Japanese car manufacturers in section 5.13 of

the appendix.

Empirical part 44

political risk alienated them. Furthermore, the percentage of companies that thought about

downsizing or withdrawing from China increased from 2.4% to 7.5%. Almost 40% of the

surveyed companies operating in China said business would recover to pre-crisis levels by the

end of March 2013 and more than 50% answered that their revenues and/or their profits were

already below their estimations when the survey was conducted (Kajita & Suzuki, 2013). One

could now assume that all kinds of industries were affected by the Island crisis, but it is

uncertain which industries failed to match their expectations, to what extent and what the

reason for that might be. Unfortunately, the authors refused to disclose further information

regarding the results of their survey. As stated in the introduction, it seems that car

manufacturing was the industry that was affected the most.

Many Japanese companies are dependent on the Chinese market. Nonetheless, more and more

Japanese companies consider the so-called “China plus one” strategy due to the animosity

towards them. “China plus one” is a long-term strategy that proposes not to rely too heavily

on China and therefore to look for another Asian country for production and as a local market.

According to the interviewees, there are two reasons for considering this strategy. First,

although the Chinese market is huge and profitable, there is the soaring animosity that results

in boycotts and protests. Second, wages in China have been rising in recent years and, hence,

China is losing its production advantages compared to other Asian countries. Thus, Japanese

companies try to diversify by setting up plants in other countries and thereby expand their

sales markets and lower their costs and risk. Nonetheless, this is not an easy process, because

China already has a good infrastructure and many suppliers, which are particularly important

for car manufacturers, whereas in other countries one would have to start from scratch

(Nakata, 2012; Topham & Nakagawa, 2012).

As mentioned, in the last section, towards the end of the interviews the frameworks and

models were explained to the interviewees who were then asked to review these. In case of

the SCCT, most respondents agreed to most parts of the completed SCCT model depicted in

Figure 2-4. However, three informants raised their concerns about the link between

organisational reputation and behavioural intentions claiming that not all people are

influenced by the reputation of the particular company. Because the actions of a few people

have an effect on the bulk of the “boycotters”, this link might be unimportant. Nonetheless,

the majority of the respondent was in favour of the relationship.

Common CSR activities in China are, according to the CSR experts, donations, reforestation

programs and support programs for employees. These are currently most welcomed by the

population, but one expert already foresees a shift towards environmental CSR activities.

However, it will probably take a decade until the majority appreciates these activities.

Empirical part 45

Furthermore, an employee of an NGO specialised on CSR from an area close to Hong Kong

noticed that after the crisis Japanese companies started advertisements regarding their past

CSR efforts. Thus, at least in Southern China, some Japanese companies seemed trying to use

their CSR history to improve their image.

Figure 3-4: Fields of CSR engagement of the chosen companies26

(CSR Report)

As one can see in Figure 3-4, environmental activities, usually planting trees, are the preferred

options for the selected companies. This fits the descriptions given by the literature, because

Japanese firms engage in China in exactly the same CSR fields as in Japan. Only 66% and

60% of the 30 selected Japanese companies engage in activities linked to philanthropy and

society, respectively. These fields are highly appreciated by consumers and the Chinese

government as was stated in the literature and the official Chinese CSR definition.

Nonetheless, only 11 of the 30 companies engage in both, philanthropy and societal activities,

which is quite low with respect to their importance.

Overall, there are huge differences regarding the impact and longevity of the CSR activities

among the firms on the list and even within industries. For instance, Toyota has an excellent

CSR program in China, which is described in section 3.4.5, in sharp contrast to Honda, Mazda

and Mitsubishi, which conduct their CSR activities on a very small scale. Large multinational

Japanese enterprises tend to engage more intensively in CSR in China, these are Canon,

Hitachi, NEC, Panasonic, Sharp, Sony, and Toyota. These firms also have Chinese CSR

reports, which are not merely translations of their English CSR reports, but contain exclusive

26

Please find a more detailed list in section 5.14 of the appendix.

Empirical part 46

content. However, firms that were hit severely by the protests such as most of the car

manufacturers and the retailers, namely Aeon, Japan’s Fast Retailing and Seven & I, engage

far less in CSR than the aforementioned top performers. An exception of that is Toyota that

engages heavily in CSR, but was also strongly affected. Although most companies have

established headquarters in China, very few have a CSR department in China, e.g. Hitachi,

Honda, Kao, NEC, Sharp, Sony and Toyota (CSR reports). These companies, except Honda,

are also among the top performers in recent CSR rankings (Fortune China, 2012; Ju, 2012)

Table 3-1: CSR engagement of some heavily affected companies

Table 3-1 shows the different CSR areas in which some of the aforementioned companies are

engaged in China. There is no clear focus on societal and philanthropic CSR activities,

although Chinese are very fond of these kinds of activities. According to the interviews, it

seems that Japanese CSR managers are not aware of this situation. They were convinced that

the activities their companies engage in are common in China.

The Chinese CSR report of BMW was chosen to compare the CSR areas it engages in and the

way of presenting the results with the Japanese companies’ reports, because it is also a foreign

car manufacturer operating in China. Overall, the reports of Japanese companies rarely depict

their commitment, as described in section 2.3.3, in China well. However, BMW’s report is

full of its “input” numbers and achievements of the different programs. BMW engages in

employee trainings and environmental, philanthropic, safety activities, and puts a lot of

emphasis on a “harmonious society”. This is exactly what Chinese consumers and the Chinese

government favour the most. The big difference between Japanese and other foreign

companies’ CSR focus in China becomes obvious, if one compares Chinese CSR reports of

the top performers with respect to societal and philanthropic activities; for instance, in

Toyota’s CSR report 15% of the pages are dedicated to the these activities, in contrast to that,

half of BMW’s report features activities about the society and donations (CSR Report BMW

Chinese Version, 2011; CSR Report Toyota Chinese Version, 2012). In Chinese image

Company name

Aeon Environment Society

Honda Environment Society

Japan's Fast Retailing Environment

Mazda

Mitsubishi Motors Employee training Philanthropy

Nissan Environment Philanthropy Society

Seven & I Employee training Environment Philanthropy

Fields of engagement

Empirical part 47

rankings Toyota is usually far behind BMW, which is also due to animosity as well as other

issues (The economic observer, 2010).

The representatives of Japanese companies were also questioned about the CSR related

propositions. However, they avoided giving any statement concerning the Chinese

government and thus regarding P9. Therefore, Chinese CSR experts were questioned via

telephone.

Because the impact of CSR on angry Chinese seems to be too weak to stop them, P8 has to be

adapted. Moreover, if a company does not engage in CSR activities, Chinese have an

“excuse” to attack them. Thus, CSR activities should not be ceased, although they do not have

the theorised effect on Chinese anger as depicted in Figure 2-5. In accordance with Xun

(2012, p.10), the respondents stated that CSR indeed has an influence on the firm’s reputation.

P8.1: If Japanese companies engage in CSR activities only insufficiently or not at all, they are

more likely to be targeted by Chinese protesters during a crisis.

Although it is very unlikely that the whole frame can be changed, the government, especially

the local one, might support the company to a certain degree, thus P9 was adapted as follows:

P9.1: By targeting the Chinese government with their CSR, Japanese firms in China might

face fewer problems during a crisis due to support of the Chinese government.

The respondents agreed unanimously with the idea that the Chinese government officials

would be more in favour of a company with a long CSR history and CSR activities that are in

line with the official CSR definition made by the CCP. Moreover, two of the CSR experts

said that it would be important to advertise the CSR efforts. In Western countries, advertising

CSR efforts might even backfire, but it is very common in China (Ashforth & Gibbs, 1990;

sina.com.cn, 2008). Hence, P10 is modified to incorporate these valuable remarks.

P10.1: The effectiveness of the CSR activities with respect to influencing the Chinese

government depends on the CSR history, i.e. for how many years did the firm engage in CSR

activities, the CSR country fit, i.e. did they engage in activities that are appreciated by the

citizens of the host country, and if the companies advertise their CSR efforts.

In summary, the vast majority of the examined Japanese companies seemed to show no public

reaction to the crisis and thereby one might speak of a low profile strategy. The long-term

strategy of an increasing amount of Japanese firms is to look for another country in Asia as a

second pillar. Although China as sales and/or labour market is very important to most

Japanese companies, many of them do not put much emphasis on good CSR practices in

Empirical part 48

China, thus do not engage in cherished CSR activities or issue a CSR report translated into

Chinese.

3.4 Results – Case studies

This section consists of case studies with four Japanese companies that cooperated to a certain

degree. Furthermore, the behaviour of the two largest Japanese car manufacturers in China

was analysed via surrogate agents such as salesperson and industry experts to describe their

responses to the crisis. Car manufacturers were selected for examination, because they faced

the harshest reactions during the crisis according to the media (Yang, 2012).

3.4.1 Company I

The company mainly produces consumer goods, stated revenues of more than one trillion yen

and had several thousand employees in China in 2011. Although the respondent declined to

say whether the firm was affected by the Island crisis, he admitted that it was affected by a

former crisis in 2004/2005. During this crisis, rumours were spread about the company, which

led to a temporary sales slump. During the most recent outbreak of the Island crisis, nothing

was published and the strategy was not adapted. When asked about the stakeholders of the

company during the crisis, the respondent named employees, customers, communities,

suppliers, public, shareholders and the government, but not the media. The latter were

excluded, because these are merely the “intermediary” between the firm and the stakeholders.

According to the interviewee, the firm did deliberately not adapt its CSR approach to China,

because it is difficult to adapt the CSR to a country and the firm wanted to “perform” its own

CSR first and let the Chinese stakeholders evaluate the CSR practices. Hence, the company

has focused on the environmental activities in China just as it has been doing in Japan. When

the interviewee was asked to name common CSR activities in China, he said “eco activities,

especially, the reduction of environmental burden” were common, which are exactly the

activities the firm engages in. Hence, common activities are not well adapted to China.

Chinese customers are, according to him, not only interested in short-term effects, but also in

long term ones, such as a better environment. Unfortunately, the firm did not “deliver” the

kind of CSR specially developed for China, but “imported” the Japanese CSR that is at the

moment less appreciated by the Chinese people. I claim that the company should engage far

more in CSR activities that are adapted to the country with respect to its size and market

share.

3.4.2 Company II

The manufacturing company stated sales of less than 1 trillion yen and has six plants with

several thousand workers in China. Furthermore, among its customers are both consumers and

Empirical part 49

other businesses. China is the company’s most important overseas market with sales of more

than 100 billion yen.

The company halted its production on 18th

September, because the local government

requested the firm to do so. The respondent assumed that the government wanted to prevent

damage from the factory and ensure staff safety, which it successfully did. No other problems

were stated. The only other response of the company was to share information regarding the

crisis with its stakeholders by issuing a president’s message in which he highlighted the CSR

activities of the recent years and encouraged the stakeholders to “contribute to a better life and

a better society”. Unfortunately, the message was not disclosed for further analysis. This can

be categorised as a pure “Reminder Strategy” that focuses on CSR and the firm’s goals.

The firm focuses its CSR activities on philanthropy and it did neither change its CSR strategy

nor suspend any CSR activities. Common activities in China are, according to the respondent,

philanthropy and environmental activities. The firm’s CSR activities are quite limited, also

with respect to its presence in China.

3.4.3 Company III

The company is a B2B manufacturing company with revenues of less than one trillion yen. It

has several thousand employees and twelve plants in China. The interviewee said that in

contrast to earlier crises, the sales went down sharply and the utilised capacity of the plants in

China was only between 50% and 70% from September to December and recovered

afterwards. Because only 10% of the customers are Chinese, the fall in demand cannot be

explained by cancelled orders of Chinese companies, but by the cancellation of Japanese

contractors, which were facing a sales slump. Astonishingly, the sales slump was the only

problem of the company during the crisis, although it has thousands of employees and a dozen

plants in China. On the other hand, being in the manufacturing industry that has only B2B

customers causes fewer problems than, for instance, selling consumer goods in stores

belonging to the company. The firm neither made any announcements nor set up a strategy to

fight the problems underlying the sales slump. It seems that the firm felt powerless in the face

of declining sales.

The interviewee said that the firm created a special CSR approach for China, i.e. scholarships

for Chinese students, donations, and community clean-up activities. As usual, the respondent

considers these kinds of activities as common ones in China. Although, the firm has a CSR

history lasting longer than 10 years, it did not state the beginning of its activities in the CSR

report. The company never suspended its CSR activities and did not release any information

regarding its CSR activities in China during the crisis. With respect to its size, the company’s

Empirical part 50

CSR efforts seem to be reasonable, although it is not a top performer. However, the

presentation of their efforts is inappropriate, because the firm merely lists them in the CSR

report without giving any details about their commitment or the impact.

3.4.4 Company IV

The manufacturing company does mainly B2B transactions, states revenues of more than one

trillion yen, employs several thousand workers and operates five plants in China. Though the

interviewee said the crisis had only a small impact on the firm, he named many different

problems, e.g. some clients had stopped paying their bills or cancelled orders, and workers

protested and destroyed machines. Chinese customers started to hesitate when they considered

buying the company’s products. According to the informant, the motivation of the

stakeholders was mostly animosity and self-interest. The interviewee said that the firm’s most

important stakeholders are the customers, employees, suppliers and the government in exactly

this order. He did not want to explain in detail why the government was ranked last, but he

emphasised that it was a key stakeholder during the crisis and a key addressee of the

company’s CSR. Moreover, the Chinese government has a huge influence on the firm’s

business because of its control of resources, its support of Chinese competitors, and its

influence on consumers and protesters. The firm had no strategy to tackle the problems

caused by the crisis because its impact was only “minor”. In an internal message, the firm

reminded its staff to mind their safety and the Japanese employees to avoid contact with

Chinese whenever possible. The message was not disclosed.

Because no activities were planned in the last quarter of 2012, the company did not have to

suspend any CSR activities. According to the interviewee, donations are a common CSR

activity and the “easy way” to engage in “CSR”. However, the company focuses on

environmental activities because this is how it “understands” CSR and it wants to improve in

areas that are related to its business. Their CSR report puts considerable emphasis on the CSR

fit, such as improving their own factories, and the impact of the activities, i.e. improvements

compared to last year. Although China is the company’s second most important overseas

market, it engages only in very few, rather insignificant, CSR activities in China, compared to

other Japanese companies.

3.4.5 Toyota

Toyota has several thousand employees, 650 car dealerships, and 4 plants in China. In terms

of sold cars, Toyota is number two27

of the Japanese car manufacturers in China behind

27

Please see section 5.2 of the appendix for the detailed sales numbers of Japanese car manufacturers.

Empirical part 51

Nissan, but it is less dependent on the Chinese market than Nissan is28

. As described in 1.3.3,

one of their car dealerships was burned down and the production was scaled down for several

days (ABR, 2009; Fangfang, 2012; Yamaguchi & Ozasa, 2012). However, Toyota did not

disclose whether certain plants were temporarily closed (AP, 2012). In Shanghai, the car

dealerships of Guangqi Toyota, one of the Chinese joint ventures of Toyota, were advised to

protect their cars during the protests. Furthermore, Guangqi Toyota instructed its staff during

the protests not to incite any protesters, for instance by displaying Japanese flags. Toyota did

not change the prices of its cars in Shanghai and the managers of the car dealerships claimed

that their sales went down by roughly 20%, but recovered after a month, which is a sharp

contrast to its overall sales decline in China.

Due to the sales slump as pictured in Figure 1-1, the Japanese car manufacturers had to scale

back their production by half in October 2012 and to some degree as well in the following

months (Kubota & Sugiyama, 2012). To achieve this, they extended the holidays of the

workers (Chua, 2012). Three weeks after the protests ceased, Toyota announced that it wants

to help car owners, who were not reimbursed by their insurance companies, by repairing their

damaged cars for free and by offering a subsidy of US$ 3160 in case they want to replace

their old car by a new one (Beibei, 2012). This move can be seen as a “Compensation

Strategy”, which should be applied in an accident or an intentional crisis according to the

SCCT. However, due to the circumstances, this offer is not a confession of guilt as the SCCT

claims, because there is nothing to admit (Coombs & Holladay, 1996). After all, Toyota faced

the first annual sales drop in China since 2002 and predicted in April 2013 that sales would

fully recover in fall 2013 (Japan Times, 2013b). Both things show that the protests had a huge

impact on the car industry. A Toyota manager who was questioned by Reuters confirmed this:

“Unlike in the past, when sales figures recovered quickly after certain events, the situation

seems different this time. It is difficult to predict the longterm effects. Customers are speaking

of fear of owning Japanese brands, and this is most disconcerting.” (Wittchen, 2012)

A while after the protests had ceased, Toyota started to implement changes regarding its long-

term strategy: renaming “Toyota China” to “China Toyota”, recruiting Chinese for China

Toyota’s top management team, planning to introduce 20 new models in China over the next

three years, changing the warranty policy in favour of the Chinese customers and focussing

on southern China, “where anti-Japanese sentiment is historically weaker” (Shirouzu, 2013)

because it was never occupied by Japan (Zhu, 2012). The protests were like a wake-up call for

the Japanese car industry, which seems to have neglected the Chinese market according to an

28

“Bank of America-Merrill Lynch estimated that operating profit from China accounted for 16% of Honda's

earnings, 21% of Toyota's and 25% of Nissan's.” (Carsalesdata et al., 2012a)

Empirical part 52

analyst of the car industry in China. The analyst claims that Japanese car manufacturers have

to “develop China-specific cars, or use more local designers to better tailor their cars to local

taste” to be successful in the Chinese market (Japan Times, 2013b). Hence, the car

manufacturers would have faced less problems during the crisis, if they had adjusted their

products better to the market. Toyota’s new strategy, to put more emphasis on Southern

China, seems to work out because the sales in Southern China recovered to pre-crisis levels

long before the sales of Northern China did. However, Toyota is also looking for less risky

options to grow as an US$ 1.2 billion investment in plants in Indonesia shows (Shirouzu,

2013). This can be regarded as part of a “China plus one” strategy, which was described in

section 3.3.

As mentioned before, Toyota is among the top performers with respect to their CSR practices.

It has engaged in employee training, environmental issues, philanthropy, safety and societal

issues since 1998. Each CSR activity is described in at least one paragraph of their CSR

report, focussing on its durability, what the impact of it is and, if applicable, how much

money Toyota contributed. Nevertheless, Toyota did not use its long CSR history to fight the

crisis and, thus, stuck to a low profile strategy. In contrast, Honda engages only in

environmental and societal activities, but its sales were slightly better than Toyota’s. A very

interesting fact is that in Toyota’s Chinese CSR reports are the “Diaoyu” Islands depicted as a

part of the map of China from 2010 on (CSR Report Toyota Chinese Version, 2012, p.14;

CSR Report Toyota Chinese Version, 2009, 2010, 2011). This is most likely a reaction to the

protests in 2010 that should appease angry Chinese. According to my knowledge, there was

no response to that change in Japan.

3.4.6 Nissan

Nissan, “Japan's largest-selling auto brand in China” (Yu & Murphy, 2013), operates 408 car

dealerships and 4 plants in China (ABR, 2009; Shiga, 2012, p. 11). Nissan halted production

at its plant in Zhengzhou on September 18th

, but there is no news of serious damages. On 18th

October one month after most of the protests had ended, Nissan promised that it would repair

damaged cars for free or grant a new car under its Chinese brand name and “cover medical

expenses of people if they are injured in the cars during protests.” (Yoshioka, 2012) This can

also be classified as a “Compensation Strategy”. Furthermore, Nissan also claimed that it

would “reimburse customers for damage to vehicles incurred during past and future anti-

Japan protests in China” (emphasis added) (Carsalesdata et al., 2012b). According to a

manager of a car dealership and an expert for the car industry, the guarantee was not enough

to fuel the car sales again, because it did not even attract the “self-interest” boycotters, which

would still have more potential trouble with a Nissan than with a VW.

Empirical part 53

Like Toyota, Nissan introduced new models and extended its warranty, offering a

replacement car within 7 days after the defect occurs (Yu & Murphy, 2013). The company

plans to invest CNY 50 billion over the next five year to increase the number of its car

dealerships (Dongmei, 2012). Although it is not a direct reaction to the most recent outbreak,

Nissan might also favour the “China plus one” strategy, because it recently invested US$ 376

million in new plant in Thailand (Ranasinghe, 2012).

As mentioned before, with respect to their reported CSR activities, the contrast between

Toyota and the leading Japanese car manufacturer in China could hardly be bigger. CSR in

China is according to Nissan’s CSR report merely a side-note. Nissan engaged in only one

minor philanthropic and one social activity as well as several environmental activities closely

related to efficiency improvements of their factories. Though the activities fit the company,

their scope compared to Nissan’s size in China is insufficient. When one compares the sales

decrease of Toyota and Nissan with their CSR engagement, there seems to be no linkage.

However, as one interviewee said, car manufacturers are symbols for Japan and therefore

might face much more pressure than others.

3.4.7 Car manufacturers’ strategies

The car industry was severely hit in terms of slumping sales. Unfortunately, only very few

articles mention the development of other industries and claim that, for instance, the

electronics industry had already faced declining sales the whole year before the crisis broke

out (Chen & Li, 2012). However, the question arises whether the protests are the only cause

for this plunge or if not, the additional neglect of the Chinese market by Japanese

manufacturers could be another noteworthy reason as it was claimed by some interviewees

and analysts. Did the protests just amplify this underlying problem? As indicated in the

section about Toyota, Japanese cars seem not to match the Chinese consumers’ needs.

Moreover, one Chinese interviewee misunderstood a question and told me that she would not

dare to buy a Japanese car for her child, because these are believed to be less safe than others

are. Similar to this statement, a young Chinese questioned by the Wall Street Journal said that

he had heard about “some quality issues with Japanese cars” (Yu & Murphy, 2013). This

seems to be the Japanese car bias Toyota wanted to fight by advertisements (Shirouzu, 2013).

These problems are emphasised by the market share of Japanese car manufacturers, which has

continuously decreased since 200829

(Tianyang, 2012). So, are the protests and the wave of

situational animosity only the stroke that broke the camel’s back? Furthermore, why did the

car manufacturers grant the free repairs so late, e.g. Nissan and Toyota granted it one month

29

The combined market share of all Japanese car manufacturers in China was 31.4% in 2008 and it dropped to

22.6% in 2012 (Jan-Aug).

Empirical part 54

after the protests ceased? Did they not want to draw attention on them or did they want the

insurance companies to pay for the damages first etc. Another question is whether such a late

reply still appeases the customers who might have to wait for a whole month with a damaged

car. The sales slump continued for months, thus their strategy did not work out and they had

to make further changes in their long-term strategy.

Discussion and conclusions 55

4 Discussion and conclusions

This thesis aimed at giving insights regarding the Diaoyu/Senkaku Island crisis. First, the

Chinese and the Sino-Japanese history were elucidated to provide a common background.

Second, theories and frameworks were presented and adapted to the Island crisis to create the

descriptive framework depicted in Figure 4-1. Third, guided by theory and propositions case

studies were conducted to gain first-hand experiences of the problems caused by the Island

crisis and the companies’ responses to it. Within this chapter, the contributions to theory,

recommendations to practice, future research directions and the conclusions of the study are

presented.

4.1 Theoretical contributions

The research is mainly contributing to the field of crisis management and CSR by modifying

and integrating existing theories and models. The SCCT is the core of the resulting

descriptive framework that enhances the understanding of the Island crisis’ context. It is

depicted in Figure 4-1. Although the protesters still attribute crisis responsibility, they cannot

harm the responsible ones during a surrogate crisis. Crisis responsibility cannot explain

anymore which companies are hit by the protesters and hence it is not a central variable in the

descriptive framework. By integrating the animosity framework into the SCCT model via

anger, an important motivation of the troublemakers and the Sino-Japanese history was

incorporated into the resulting framework. Thus, the new framework explains better why

people, who are almost not affected, except of their national pride, get angry. In addition, the

framing process was also included in the framework, because of the special “framers” and

their interests, i.e. the Chinese government might use the animosity to distract from internal

problems.

I theorised that the influence of CSR on organisational reputation and anger in China is

moderated by CSR history and CSR country fit, because the situation in China is different

from Western countries, i.e. the government is the main stakeholder and most of the Chinese

consumers do not yet appreciate more sophisticated CSR than planting trees and donating

money. Although, the moderators are created for the Chinese context, I believe that especially

the CSR country fit can be applied to other new industrialised countries.

4.2 Managerial recommendations

What can Japanese companies do before and during the next outbreak of animosity? After

doing a research on animosity in China, Cui et al. (2012, p.501) claim “regardless of what a

company does, it often cannot overcome the overwhelming negative impact of consumer

animosity” and therefore it should maintain a low profile until the people’s anger cooled


down. That is what most of the examined Japanese companies seemed to have done according

to the interviews, their advertisement expenditures and an analysis of news sections on their

websites. However, other possibilities to cope with a surrogate crisis arise from the

descriptive framework and the literature.

The best-case solution would be to stop situational animosity from coming into existence and

diminish the stable animosity towards Japan, but to achieve the former the crisis should be

framed in a different way and the latter is a difficult long-lasting process. By making anti-

Japanese protests illegitimate, protesters with other motivations than animosity would also

have to look for a different “excuse” than “Japan”.

Figure 4-1: Year-on-year comparison of the Japanese car sales in China in 2012-2013

Prior to a surrogate crisis, Japanese companies in China can make several preparations to be

less or not affected by it. Among other factors, the chances of success of these preparations

depend on the industry the firm is operating in and on whether the usage of its product is

observable, which might lead to pressure from acquaintances and is difficult to change for the

firm. Japanese firms should develop (A) good relationships with all Chinese stakeholders.

This includes particularly the public, the communities, and the government, which are very

important, but were rarely named in the interviews with the companies. A good relationship


with the police and other authorities is especially important. Sumitomo Chemical is a good

example for actively (B) decreasing the stable animosity towards Japan, because it partook in

the celebrations of the 40th

anniversary of Sino-Japanese relationships (CSR Report

Sumitomo Chemical Company, 2012, p.18). Cultural exchange and convincing Chinese that

Japanese are like them helps to further diminish prejudices and animosity. In addition,

Japanese firms should try to adapt themselves to China just as “China Toyota” did, which will

(C) decrease the perceived “Japaneseness” and thus the possibility of being selected as a

target. Japanese firms should even go further and clearly show how “Chinese” they are, e.g.

how many Chinese they employ, how much they invested, how many taxes they pay.

Moreover, the companies should engage in (D) CSR to get the support of the government and

to benefit in the future from having a long CSR history. In addition, if companies do not

engage in CSR the (E) likelihood of being targeted by protesters or boycotters seems to

increase. The CSR activities should be (F) advertised and fit China, i.e. most appreciated by

Chinese are philanthropic and societal activities. Unfortunately, the CSR departments of most

Japanese companies have not adapted their CSR practises adequately to China; they usually

claimed that they engage in what they believe are common practises. However, they focus on

similar things as they do in Japan, namely, environmental activities. This does not mean that

they should stop their environmental activities, but they should also engage in and especially

highlight the ones that are appreciated in China.

Besides these preparations, Japanese companies can also tackle the crisis after it broke out.

The majority of the examined Japanese firms applied a (G) low profile strategy. A part of this

strategy is to reduce the advertisement expenditures and stop making many announcements.

Other companies were doing business as usual, but unfortunately, I was not able to evaluate

which strategy led to better results in terms of sales or reputational damage due to a lack of

data. Because the Chinese government was named by a lot of interviewees as the (H)

“framer” of the crisis and it controls important resources, Japanese firms should communicate

with it, though it remains unclear whether this is doomed useless.

In addition to that, information about the number and motivations of the protesters might lead

to new options for Japanese firms to calm down the troublemakers. As the Uniqlo example

illustrated, making political statements can lead to a dilemma. The companies have to make a

trade-off between the damage to one of the most important markets on the one hand and some

thousand angry customers in the home country who might or might not buy less for a short

period on the other hand. Another option to deal with a boycott is presented by Cui et al.

(2012, p.502), who claim that Chinese customers would make a trade-off between animosity

and price. Although lowering prices is usually considered as a taboo, one might be spared by


the boycott and face no reputational damage that might arise from, for instance, being named

with other boycotted companies by the news media.

Overall, there are more options than to duck one’s head, but there is a risk that such an

untested option backfires.

4.3 Future research

Several directions for future research emerge from this thesis. As a matter of course, the

propositions and the level of fit of the descriptive framework should be evaluated within

quantitative studies. Furthermore, especially the CSR part of the thesis offers plenty of

possibilities for future research, such as the influence on the different stakeholder groups by

using a long CSR history to fight a surrogate crisis or whether the CSR moderators can also

be applied to other countries. Also interesting would be to test how much greater the chance is

to be targeted by troublemakers, if a firm does not engage in CSR activities or whether a

“goodwill reservoir” helps to be spared during a surrogate crisis.

Because the rather severely affected industries, i.e. car and electronics industry had sales

problems for the last few years, the crisis might have merely amplified already existing

problems such as image problems and insufficient adaptations to the Chinese market. Hence,

future work is needed to confirm this.

Many motives for taking action against Japanese firms emerged from the interviews. The

actual impact of animosity on behavioural intentions via anger should be compared to other

motives in future studies. By including other important motivations in the descriptive

framework, one might find more solutions to tackle the surrogate crisis. Another interesting

topic are the reasons underlying the different extent of the protests in different Chinese

provinces, e.g. different levels of nationalism, dissatisfaction with the government, a high

jobless rate, or a former occupation. Most of the selected companies pursued a low profile

strategy and hence waited for the crisis to blow over. A future study could compare the

effectiveness of different communication strategies in a surrogate crisis in terms of sales by

conducting experiments. Thereby, more successful options than the current strategy, which

seems to be far away from perfect, might be identified.

4.4 Limitations

The theoretical basis of the thesis was not developed from scratch and therefore it does not fit

perfectly to the Island crisis. For instance, there are many other reasons for taking actions

against Japanese firms, but animosity seems to be a salient one due to the Chinese history and

surveys (Cui, 2012; Klein et al., 1998; Xinhua International, 2013). As mentioned before

some researchers claim that the SCCT is too static and in fact, it does not offer a low profile


strategy or a surrogate crisis, but this is unnecessary, because it can be extended and adapted

to such special cases (Brown & White, 2010, p.89-90).

Case studies are often criticized for their low generalizability and although multiple case

studies with several companies across various industries were conducted, the generalizability

is still low due to the uniqueness of the setting, which includes a territorial dispute between

two rather nationalistic nations, each with an exceptional culture. The fact that only very few

rather not severely affected companies were willing to “cooperate” is definitely a limitation of

the thesis. Another often-mentioned problem about case studies is the researcher’s lack of

rigour leading to a low reliability. To tackle this, theory was used to force the researcher to

stick to the research inquiry. Moreover, some of the “insights” might be made up by the

respondents due to socially desirable answers or faked by the state-controlled media.

Unfortunately, not all of these might have been identified as questionable, because the data

collection process relied heavily on interviews and newspaper articles (Yin, 2003b, p.10-11,

90, 113, 164). Another limitation causing low reliability was that neither the companies’

names nor the names of any informant could be revealed due to the mentioned problems with

the topic. Overall, the approach to display the communication strategy of the car

manufacturers was very indirect, i.e. interviewing managers of car dealerships and industry

experts. This study faces several limitations, but although it may suffer from these, the overall

goal of exploring the context of the Diaoyu/Senkaku conflict could still be attained.

4.5 Conclusion

This thesis set out to determine the causes of the crisis, the problems and strategies of

Japanese companies and if they used their CSR activities to fight the Island crisis. Because

only very few companies used their CSR history, e.g. Aeon, the research focused more on the

status quo and the problems of the CSR engagement of Japanese companies in China. This

study was able to provide answers to all of the initial research questions as summarised in the

following:

What was the motivation of the “troublemakers” and what were the problems they caused?

Although the troublemakers had various other motivations, animosity towards Japan was the

most salient one. Similarly the caused problems, there were many different trouble spots, but

the biggest problem was the sales slump, which many companies faced to some degree.

Reasons for this decline in sales besides animosity were self-interest and that the Chinese

government put pressure on Chinese firms to stop them from making business with Japanese

companies anymore. Nonetheless, most industries, except of the car manufacturing industry,

were only affected by the Island crisis for one or two months.


What were the communication strategies of Japanese companies during the Island conflict?

Almost all companies maintained a low profile and a few tried to calm down their customers

by issuing statements and internal messages or compensating them for the incurred losses.

Moreover, Japanese companies seem to have no strategy to tackle the underlying cause of the

Island crisis, i.e. animosity. However, as illustrated in section 4.2, there are options for

Japanese companies to approach the crisis such as actively decreasing stable animosity.

Did Japanese companies actively engage in CSR in China prior to the crisis and did they

communicate their CSR efforts during the crisis?

Although some Japanese firms do not engage at all in CSR in China, the majority does so to a

certain degree. Besides some top performers, many companies have rather small CSR

programs compared to their revenues in China, e.g. Nissan. Furthermore, most Japanese firms

did not adapt their CSR practices to China, i.e. they engage predominantly in environmental

activities and only partly in philanthropic and social activities, which are highly appreciated

by the Chinese consumers and the government. In addition to that, most Japanese companies

are not aware of their poorly adapted CSR practices and do not present their activities in a

proper way, i.e. only a few sentences or words about the activities and no focus on the CSR

commitment or impact.

The economic effects caused by bilateral tensions grew stronger with every outbreak and

because the Chinese market is one that can hardly be neglected, Japanese companies have to

find a way to deal with the underlying problems. It is not enough to treat merely the

symptoms, to cede the situation by keeping silent or to focus on other provinces or countries

as sales markets.

Appendices 61

5 Appendices

5.1 Appendix: Detailed information regarding the Diaoyu/Senkaku Islands

Fig

ure

5-1

: M

ap o

f th

e D

iao

yu/S

enk

aku I

sland

s

(Tag

essh

ow

.de,

20

11

)

Appendices 62

# Japanese names I Japanese names II

Chinese names I

Chinese names II

1 Uotsuri Shima 魚釣島 Daioyu Dao 釣魚島

2 Kuba-shima or Kobi Sho 久場島 Huangwei Yu 黃尾嶼

3 Taisho-jima or Akao Sho or Sekibi Sho 大正島 Chiwei Yu 赤尾嶼

4 Kita Ko Shima 北小島 Bei Xiaodao 北小島

5 Minami Kojima or Minami-ko-shima 南小島 Nan Xiaodao 南小島

6 Okino-kita Iwa 沖の北岩 Da Bei Xiaodao 大北小島/北岩

7 Okino-minami Iwa 沖の南岩 Da Nan Xiaodao 大南小島/南岩

8 Tobi Se 飛瀬 Fei Jiao Yan 飛礁岩/飛岩

Table 5-1: Japanese and Chinese names of the Islands

(Dzurek, 1996; Shaw, 1999, p.10)

Note: Number 6-8 are regarded as rocks and as not Islands due to their size (Dzurek, 1996).

Appendices 63

5.2 Appendix: China sales of Japanese car manufacturers before and after the crisis

2

01

2

20

13

Ju

ly

Au

g Se

pt

Oct

N

ov

Dec

Ja

n

Feb

M

ar

Ap

r M

ay

Jun

e

Sum

Toyo

ta

784

00

753

00

441

00

45

60

0

63

80

0

90

80

0

72

50

0

36

30

0

75

90

0

76

40

0

79

00

0

76

90

0

81

50

00

Y/Y

%

-5%

-1

5%

-4

9%

-4

4%

-2

2%

-1

6%

2

4%

-4

6%

-1

2%

-7

%

0%

9

%

-11

%

Nis

san

9

8100

9

5200

7

6100

6

43

00

7

95

00

9

04

00

1

15

70

0

58

20

0

11

00

00

1

02

80

0

10

30

00

1

01

40

0

10

94

70

0

Y/Y

%

-2%

1

%

-35

%

-41

%

-30

%

-24

%

22

%

-46

%

-16

%

3%

2

%

-8%

-1

1%

Ho

nd

a 5

2000

5

1400

3

3900

2

41

00

4

12

00

6

33

00

4

72

00

3

20

00

6

11

00

6

06

00

5

46

00

6

10

00

5

82

40

0

Y/Y

%

1%

-9

%

-41

%

-54

%

-29

%

-19

%

22

%

-27

%

-7%

-2

%

5%

-6

%

-10

%

Maz

da

143

00

165

00

133

00

95

00

1

22

00

1

73

00

1

91

00

1

04

00

1

57

00

1

24

00

1

39

00

1

11

00

1

65

70

0

Y/Y

%

-12

%

-6%

-3

5%

-4

5%

-3

0%

-2

6%

-1

6%

-2

5%

-2

5%

-1

5%

-1

2%

-3

1%

-2

2%

Tab

le 5

-2:

Car

sal

es d

ata

of

To

yo

ta,

Nis

san,

Ho

nd

a, M

azd

a i

n C

hin

a fr

om

July

20

12

to

June

20

13

(car

sale

sdat

a, 2

01

2,

201

3)

Appendices 64

5.3 Appendix: Nationalism in China

Figure 5-2: Map depicting the distribution of nationalism in China

(Lan et al., 2012)

Note: Only mainland China is included in this study. The straight line in the map is the Hu's

Line. The east side of the line includes 43% of China's territory but 94% of its population

(Lan et al., 2012).

Appendices 65

5.4 Appendix: Crisis response strategies of SCCT

Primary crisis response strategies

Deny crisis response strategies

Attack the accuser Crisis manager confronts the person or group claiming something is wrong

with the organization.

Denial Crisis manager proclaims there is no crisis.

Scapegoat Crisis manager blames some person or group outside of the organization for

the crisis.

Diminish crisis response strategies

Excuse Crisis manager minimizes organizational responsibility by denying intent to do

harm and/or claiming inability to control the events that triggered the crisis.

Justification Crisis manager minimizes the perceived damage caused by the crisis.

Rebuild crisis response strategies

Compensation Crisis manager offers money or other gifts to victims.

Apology Crisis manager indicates the organization takes full responsibility for the crisis

and asks stakeholders for forgiveness.

Secondary crisis response strategies

Bolstering crisis response strategies

Reminder Tell stakeholders about the past good works of the organization.

Ingratiation Crisis manager praises stakeholders and/or reminds them of past good works

by the organization.

Victimage Crisis manager reminds stakeholders that the organization is a victim of the

crisis too.

Table 5-3: Primary and secondary crisis response strategies

(Coombs, 2007, p.170)

Appendices 66

5.5 Appendix: Recommendations for the application of crisis strategies

Figure 5-3: Crisis response recommendations suggested by the SCCT

(Coombs & Holladay, 1996)

Rebuild

Strategy

Victim crisis

Diminish

Strategy

Inform and

adjust

information

No crisis history and/or bad prior

relationships

Crisis history and/or bad prior

relationships

No crisis history and/or bad prior

relationships

Accident crisis

Intentional

crisis

Crisis history and/or bad prior

relationships

Regardless crisis history and bad

prior relationships

Deny Strategy

or victimage Victim crisis Rumours are spread

Appendices 67

5.6 Appendix: Outline of the thesis’ research design

Fig

ure

5-4

: O

ver

vie

w o

f th

e re

sear

ch d

esig

n

Appendices 68

5.7 Appendix: List of the selected companies

Company Name CSR

award Affected

CSR

activities

in China

Chinese

CSR

report

China

word

count in

the CSR

report

Aeon Co. O X X O 103

Asahi Group Holdings X O X O 11

Canon O X X O 19

FUJIFILM Holdings X O X O 41

Hitachi Ltd. X X X X 69

Honda O X X X 15

Japan's Fast Retailing O X X O 34

Kao X O X X 14

Kokuyo X O X O 9

Komatsu X X X O 42

Konica Minolta X O X O 16

Mazda O X O O 29

Mitsubishi Motors O X X O 1

Mitsui & Company X O X O 20

MS&AD Insurance X O X O 11

NEC Corporation X O X X 9

Nissan O X X O 42

NKSJ Holdings X O X X 17

NSK X O X O 36

Omron Corporation X X X O 12

Panasonic O O X X 35

Seven & I O X X O 13

Sharp O X X X 106

Sony Corporation X X X X 32

Sumitomo Chemical X O X O 29

Suzuki Motor Corp. O X X O 27

Toshiba Corporation X O X O 38

Toyota O X X X 19

UniCharm X O X O 11

Yamaha X O X O 9

Table 5-4: List of the contacted companies

(CSR reports; Fortune China, 2012; Ju, 2012)

Appendices 69

5.8 Appendix: List of respondents

Japanese respondents Chinese respondents

1 Expert for Japanese business in

Beijing

1 Scholar of the Tongji University


Shanghai

2 Scholar of the Tongji University


Hong Kong

3 Employee of an Asian NGO

4 Employee of a Japanese news

agency

4 Expert for the car industry

5 Employee of a CSR department 5 Manager of a Toyota car dealership

6 Manager of a corporate

communications department

6 Manager of a Toyota car dealership

7 Manager of a CSR department 7 Manager of a Nissan car dealership

8 Manager of a Nissan car dealership

9 Employee in a public relations

department

10 CSR expert (NGO employee)



Table 5-5: List of the study’s respondents

Appendices 70

5.9 Appendix: Main interview questions

Questions related to the CSR department

1. What were the CSR activities in China your company was engaged in before the Senkaku

Island crisis happened? When did the firm start them?

2. Did you create your own CSR approach especially for China? In other words, were the

CSR activities adapted to China, if so how?

3. What are common CSR activities in China?

4. Do you agree with the following statement “Chinese customers are not interested in

sustainable results, but want to see immediate impacts such as donations to earthquake

victims”? Why? Why not?

5. Did your company publish anything about CSR activities during the crisis? Did your

company use past CSR activities to prove that it is a good Chinese “citizens”?

6. Who are the main stakeholders of your CSR engagement? (government, customers,

suppliers, employees, media, shareholders, communities, public e.g. protesters)

7. Would you agree as a CSR manager that CSR has an impact on the people's anger towards

a company? For instance, if a company heavily engaged in CSR activities, will the

company be less likely target of the protesters anger? Will CSR activities have an

influence on the organisational reputation?

8. I created two variables that might influence the relationship between CSR and

organisational reputation and between CSR and anger:

The first variable is the CSR history, i.e. for how many years did the firm engage in CSR

activities, and the CSR country fit, i.e. did it engage in activities that are appreciated by

Chinese.

Do you agree with these variables? If not, why? Is there anything you would like to add or

change?

Questions related to the public relations department:

1. Did the Senkaku Island crisis affect you? If so how was your company affected?

Appendices 71

2. Who are the stakeholders during the crisis? (government, customers, suppliers,

employees, media, shareholders, communities, public e.g. protesters)

With which stakeholders did you communicate during the crisis because of the crisis? Can

you grade them in respect to their importance on a scale from 1-7 (7 means very important

and 1 means not important)?

3. Who are the troublemakers (e.g. Panasonic faced sabotage in its factories, thus the

employees were the troublemakers, other companies had problems with protesters which

damaged their stores), are there any?

4. What kind of problems did they cause? (This question is obsolete if there are no

troublemakers)

5. What was the reaction of your company to the problems? (This question is obsolete if

your company did not experience any problems)

6. Did you communicate with the trouble causing stakeholders? Was there a public

statement? (This question is obsolete if there are no troublemakers)

7. Were you affected by similar previous crises (2004/5, 2010)?

8. Did your company have good relationships with the stakeholders until the Senkaku Island

crisis broke out or were the relationships already strained due to a general anti-Japanese

animosity? Can you rate the relationships on a scale from 1-7, (7 means very good

relationship and 1 means very strained relationship)? (government, customers, suppliers,

employees, media, shareholders, communities, public e.g. protesters)

9. What was the communication strategy within the Senkaku Island crisis?

10. Can you have a look at the appendix and find the strategy your company used in the

Senkaku crisis?

11. Why did you use precisely this strategy?

Questions for those who are familiar with China

1. What kind of feelings do Japanese have towards Chinese?

2. Who framed the Senkaku crisis? How was the crisis framed?

3. What was the motivation of the troublemakers/protesters?

4. May Chinese nationalism or unfair treatment by Japanese companies be a cause?

Appendices 72

5. Is animosity towards Japan or the wish to release anger a reason for them to protest?

6. May social pressure be an issue? For instance, a “good Chinese” should not buy a

Japanese product and because it is important what his neighbour thinks about him, thus he

will not buy it?

7. Did someone incite the Chinese protesters? Is it possible that the central or the local

government or Chinese competitors may fuelled the protests?

8. What kind of problems do Chinese companies usually face in China? (Is anti-Japanese

animosity a common phenomenon in China? If so, can you give examples for this

animosity?)

9. Do Chinese think Japanese companies / Japanese people are responsible for the Senkaku

Island crisis?

10. What kind of problems do Chinese Companies face during and immediately after the

crisis, e.g. employees do not want to work anymore for a Japanese company etc.?

11. Why are some companies more in the focus of Chinese protests/boycotts?

12. This question is about why some companies were affected by the crisis and others were

not. I propose that the higher the degree of “visibility” and “Japaneseness” of a Japanese

company is, the more likely it will become a target of boycotts, protests, etc. during a

surrogate crisis. “Visibility” is based on the firm’s advertising intensity and on the

industry it operates in, whereas “Japaneseness” is based on whether Chinese can easily

identify the firm as a Japanese one.

13. Are there cases in which Japanese companies discriminated against Chinese customers,

e.g. fewer refunds than in Japan etc.?

14. Are there regional differences in the magnitude of protests (in numbers and aggression?)

If so why are there differences?

Appendices 73

5.10 Appendix: Rival explanations with examples

Craft Rivals

The Null Hypothesis The observation is the result of chance circumstances only

Threats to Validity e.g., history, maturation, instability, testing, instrumentation, regression,

selection, experimental mortality, and selection-maturation interaction

Investigator Bias e.g., “experimenter effect”; reactivity in field research

Real-Life Rivals

Direct Rival An intervention (“suspect 2”) other than the target (Practice or Policy)

intervention (“suspect 1”) accounts for the results (“the butler did it”)

Commingled Rival Other interventions and the target intervention both (Practice or Policy)

contributed to the results (“it wasn’t only me”)

Implementation Rival The implementation process, not the substantive intervention, accounts for

the results (“did we do it right?”)

Rival Theory A theory different from the original theory explains the results better (“it’s

elementary, my dear Watson”)

Super Rival A force larger than but including the intervention accounts for the results

(“it’s bigger than both of us”)

Societal Rival Social trends, not any particular force or intervention, account for the results

(“the times they are a-changin”)

Table 5-6: Overview of rival explanations with examples

(Yin, 2000; Yin, 2003b, p.113)

Appendices 74

5.11 Appendix: Original and revised propositions

P1: Anger generates social pressure that in turn forces others to join actions against Japanese

companies, such as boycotting.

P1.1: Social pressure forces others to join actions against Japanese companies, such as

boycotting. However, the degree of social pressure varies by region.

P2: Many Chinese attribute the crisis responsibility to Japanese people as a whole group.

P2.1: Many Chinese attributed the responsibility for the Diaoyu/Senkaku crisis to the

Japanese government and therefore took actions against surrogate victims to put pressure on

it.

P3: The Diaoyu/Senkaku crisis was framed by the Chinese government via the media.

P3.1: The Diaoyu/Senkaku crisis was framed by the Chinese central government via the

media.

P4: The Diaoyu/Senkaku crisis was framed by Chinese nationalists. Rejected.

P5: The higher the degree of “visibility” of a Japanese company is, the more likely it will

become a target of boycotts and protests during a surrogate crisis. “Visibility” is based on the

firm’s advertising intensity and on the industry it operates in.

P5.1: The higher the degree of “visibility” of a Japanese company is, the more likely it will

become a target of boycotts and protests during a surrogate crisis. “Visibility” is based on

whether others can observe the product usage or have unimpeded physical access to it.

P6: The higher the degree of “Japaneseness” of a Japanese company is, the more likely it will

become a target of boycotts and protests during a surrogate crisis. “Japaneseness” is based on

whether Chinese can easily identify the firm as a Japanese one.

P7: The response strategies of most Japanese companies were to maintain a low profile,

because they did not want to draw the attention of the public on them or to create a dilemma

due to the Japanese animosity towards China.

P8: By targeting Chinese consumers with their CSR activities, Japanese firms might be able

to decrease anger and prevent damage from their reputation in case of a crisis.

P8.1: If Japanese companies engage in CSR activities only insufficiently or not at all, they are

more likely to be targeted by Chinese protesters during a crisis.

P9: By targeting the Chinese government with their CSR activities, Japanese firms might face

fewer problems during a crisis.

Appendices 75

P9.1: By targeting the Chinese government with their CSR, Japanese firms in China might

face fewer problems during a crisis due to support of the Chinese government.

P10: The effectiveness of the CSR activities in respect to the goals stated in P8 and P9

depends on the CSR history, i.e. for how many years did the firm engage in CSR activities,

and the CSR country fit, i.e. did it engage in activities that are appreciated by the citizens of

the host country.

P10.1: The effectiveness of the CSR activities with respect to influencing the Chinese

government depends on the CSR history, i.e. for how many years did the firm engage in CSR

activities, the CSR country fit, i.e. did they engage in activities that are appreciated by the

citizens of the host country, and if the companies advertise their CSR efforts.

Appendices 76

5.12 Appendix: Aeon’s message regarding the Island crisis

September 26, 2012

AEON CO., LTD.

Our present situation in China and policy for the future

To the damage that our JUSCO Hungdao Store suffered in recent demonstrations in China,

we have received warm messages of encouragement and thoughtful expressions of concerns

from many customers in Japan and abroad. We would like to express our deepest appreciation

for their support and thoughts with us. It is extremely regrettable that our store is suffered

from the damage. In fact this store of Qingdao Aeon Dongtai Co., Ltd., a Chinese subsidiary

of Aeon Co, Ltd., is operated by local people including the store manager. Furthermore, many

local customers appreciate its convenience and good service and love shopping in the store

every day. It is our sincere wish that such incidents will never take place again in the future.

During and in the wake of the demonstrations against Japan, we temporarily closed some of

our stores in China because the safety of customers and employees is our top priority. All our

stores in China except JUSCO Hungdao Store have already come back to normal operations.

Fortunately, none of our customers or employees suffered any damages or injuries.

Meanwhile, detailed investigation is currently underway to assess the damage to the JUSCO

Hungdao Store. With many local customers expressing their wish to shop at the store again,

all the employees of the store are single-mindedly striving for the resumption of store

operations as soon as possible.

In China, the Aeon Group has steadily developed it soperations since its first entry in the

market in 1985 with the establishment of JUSCO Stores (Hong Kong) Co., Ltd. Currently, we

operate in four regions of Hong Kong, Beijing and Tianjin, Qingdao, and Guangzhou with 89

stores in general merchandise stores, supermarkets, convenient stores, and other store formats.

In addition, we are also engaged in shopping center development, financial services, specialty

store operation, and other service businesses, employing approximately 13,000 local Chinese

people across the group.

For the Aeon Group, China and ASEAN markets are the focus of our growth strategy in

accordance with one of our group-wide strategies, “shift to Asian markets”, specified in our

three-year Medium-term Management Plan starting from fiscal 2011. Accordingly, our China

Headquarters began operations in March 2012 to strengthen our management platform in

China, facilitating our strategy for growth, store development, product development,

Appendices 77

recruiting and human resources development and other necessary practices to spur the growth

of our businesses in China.

This strategy “shift to Asian markets” will never change. The Aeon Group will continue and

even accelerate its consolidated efforts toward further growth in China and ASEAN markets.

In addition to business activities, we have been actively engaged in environmental protection

and social contribution initiatives since the early 1990s. Our tree-planting projects to conserve

the country’s rich natural environment are among major examples. Started with a project in

the Badaling area along the Great Wall in 1998, led by Aeon Environmental Foundation, we

have planted a total of 1.15 million trees to date in China.

We also implement various initiatives to promote international cultural and interpersonal

exchange. Under the Teenage Ambassador Program, one of Aeon 1% Club programs started

in 1995 initially as a program with Hong Kong, we have invited high school students from

Qingdao, Guangzhou, and other regions in China, to develop friendships between Japan and

China. Through the Aeon Scholarship, we have provided financial support to more than 1,500

personally funded students from seven Chinese universities.

Under our unchanging philosophy, “pursuing peace, respecting humanity, and contributing to

local communities-with the customer’s point of view as its core,” we at Aeon will continue to

strive to even better serve to our customers and help them enrich their lives.

(Aeon Co., 2012)

Appendices 78

5.13 Appendix: Advertisement expenditures of some Japanese car manufacturers in

China

Figure 5-5: Comparison of the advertisement expenditures of the top 10 Japanese car manufacturers in China in

2011 and 2012 (measured in million CNY)

(Wen, 2012b)

Appendices 79

5.14 Appendix: Overview of the fields of CSR engagement of the selected companies

Company name Employee

training

Environ-

ment

Monitor

suppliers

Philan-

thropy Safety Society

Start of their

earliest

activity

Aeon Co. O X O O O X 1992

Asahi Group Holdings O X O X O O 2004

Canon X X O X O X 1995

FUJIFILM Holdings O X O O O O 2001

Hitachi Ltd. X X X X X O 2005

Honda O X O O O X 2001

Japan's Fast Retailing O X O O O O -

Kao X X O X X X 1993

Kokuyo X O O X O O 2007

Komatsu X X O O X X 2004

Konica Minolta X O O O X X 2007

Mazda O O O O O O -

Mitsubishi Motors X O O X O O 2010

Mitsui & Company O X O O O X 2006

MS&AD Insurance O O O X O O 2008

NEC Corporation X X X X X X 2008

Nissan O X O X O X 2005

NKSJ Holdings X X O X X X 2006

NSK X X O X O O 2002

Omron Corporation X O O X O O 2010

Panasonic X X O X O X 1995

Seven & I X X O X O O 2008

Sharp X X X X X X 2006

Sony Corporation X X X X X X 2003

Sumitomo Chemical X O X X X O 2006

Suzuki Motor Corp. O X O X O X 2005

Toshiba Corporation X O O X O X 2002

Toyota X X O X X X 1998

UniCharm O O O O X X 2008

Yamaha O X O O O X 2010

Chinese report

Table 5-7: Areas of CSR the selected companies are engaged in according to their last CSR reports

(CSR reports)

Notes: Activities were included in “society”, when they benefit certain groups or the society

as a whole. Philanthropy refers to the donation of money or goods. Companies were rated as

environmental, when their activities actually improve the condition of the environment, e.g.

saving energy or planting trees. Safety refers to any measure that increases the safety for

employees above the necessary standards. Training for employees and monitoring the

suppliers in respect to the firm’s CSR criteria does not need further explanations.

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96

Ehrenwörtliche Erklärung

Ich erkläre hiermit ehrenwörtlich, dass ich die vorliegende Arbeit selbstständig angefertigt

habe; die aus fremden Quellen direkt oder indirekt übernommenen Gedanken sind als solche

kenntlich gemacht.

Die Arbeit wurde bisher keiner anderen Prüfungsbehörde vorgelegt und auch noch nicht

veröffentlicht.

München, den 08.08.2013

____________________

(Unterschrift)

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