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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Kanebo: It looks bad

C. HUYGENS - Thursday, September 19, 2013
Charles Haskell Revson, founder of Revlon, liked to remind people that while his company manufactured cosmetics, it sold hope. Kanebo, a division of Kao Corporation (TYO:4452), ranking hope higher than safety or "confusion," continued selling defective skin whitening products more than a week after it was discovered that the product caused blotching.

Skin whitening products are popular among women all over east Asia, with users seeking lighter tones. The recall, involving almost 4.75 million products on retail shelves, was announced July 4, almost a week after Kanebo first decided to take them off the shelves.

News of the delay emerged in early September with pundits concluding that this will probably damage Kanebo's (and therefore Kao's) reputation. Perhaps, writes reputation controls expert Jonathan Salem Baskin. "Reputation, however, isn’t the purview of marketing or the outcome of good or bad publicity, but rather the result of financially-relevant stakeholder behaviors...Kanebo’s sourcing, manufacturing, and distribution operations are the drivers of its reputational value, and it will be interesting to see how it addresses any failures or shortcomings its investigation uncovers in areas such as sustainability, quality, and reliability. And only then will it see how deep its problems may go."  Read more.

The ethical issues associated with the recall delay raise another concern. It is possible that stakeholders' expectation of prompt action will conform to a standard that arguably was set by Johnson & Johnson in 1982. Or not. Much depends on the degree of goodwill Kanebo had established with its customers prior to this process failure, and the degree with which those customers concur with Kanebo's decision to delay notification "...(not to cause) confusion among customers... Concerns among customers could get worse if we were not properly prepared to answer their questions."

According to the news source Happi, "as of August 25 a total of 8,678 consumers in Japan had been confirmed to have blotches after using creams such as "Blanchir Superior", with 65 people reported as having the trouble overseas, according to Kanebo. The value of shares in the parent company Kao has fallen more than 15 percent since the recall was announced." Read more. 

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