Executive Summary

    Product and service standards reflect a level of quality and safety. They serve the purpose of protecting the consumer and equally important, the manufacturer’s employees in the form of safety standards. These standards are an accepted factor in the United States, and with the formation of the International Standards Organization (ISO) and other international organizations have become commonplace internationally. China, however, has historically used their standards primarily as a means of blocking imports. Over the past several years, China has placed more emphasis on product standards as they vie for acceptance into the World Trade Organization (WTO). In 2001 they created the Standardization Administration for the sole purpose of developing and managing product standards and the laws to enforce the standards.

    Staples, as a seller of office supplies, is not impacted by product and service standards in the normal sense. The manufacturers of the office supplies sold by Staples, such as 3M, Pilot Pens and Avery Dennison are responsible for meeting national and international standards. Interestingly, many of these manufacturers already have factories in China, making it relatively easy for Staples to purchase in-country products if it were to pursue the burgeoning office supply market in China.

Introduction

Limitations

Limitations encompassing this paper may include:

(1)Time. The research and writing of this paper was conducted during the one-week period from 11.17 – 11.23, 2002.

(2)Resources. Research was limited to information accessible online and in English. Many of the resources regarding China & Product Standards were in Chinese.

Definition

    The term standard has many definitions, but when used in conjunction with products or services it is understood to mean a certain level of criterion often clarified by technical specifications particular to the product or service. Products / services are then certified to meet the minimum requirements of the standard. See Appendix for the International Standards Organization’s definition of standards.

Background

    Standards exist in many different forms. There are trade standards, local standards, national standards, international standards, product / service standards, industry standards, safety & health standards, technical standards, etc. They are typically created by experts in the industry and serve the purpose of protecting the consumer and those manufacturing the product. Historically, these standards are often outside the governance of the law in which case they are referred to as voluntary. Standards “enter the world of law as they are selected by governments and made mandatory through reference in legislation” (wwlia.com).

    Standards increasingly play an important role in our society as consumers have come to expect a certain level of quality inherent in the products they purchase. The quality level then lends itself to product safety, life expectancy and general functionality. Similarly consumers expect that the manufactures of the products are ensuring the safety and well-being of the individuals actually producing the product. As a result, many of the “voluntary” standards have become mandatory or regulated.

    For example, in the US, the safety of employees is mandated through the Occupational Safety and Health Administration (OSHA). In other instances, compliance with voluntary standards are expected although not legally required. The National Institute of Standards and Technology (NIST) is a non-regulatory agency with the responsibility to “develop and promote measurements, standards, and technology to enhance productivity, facilitate trade, and improve the quality of life” (nist.gov). Many of these standards are being voluntarily adopted internationally through the efforts of the International Standards Organization (ISO) working in conjunction with the World Trade Organization (WTO).

Chinese Product Standards

    Although many standards are voluntary, businesses are finding that in order to sell their products or services they are expected to meet certain standards. This is particularly true in the emerging global commerce of China.

History

    Although China has had a set of product standards for several decades, these standards don’t appear to have been enforced with any regularity. A 1997 Country Alert notes that “’shoddy goods’ produced in China are a regular fixture in national newspapers.“ It goes on to describe “a corrupt business environment, in which many factories put short-term profits above quality and in which regulations on product quality and safety standards are often not enforced.” In fact as recent as 2000, testing showed that less than 80% of a random sample met prescribed standards (Country Briefing, 2001).

    China uses its standards and regulatory strength in inspections and certification of imported products from other countries as a means of keeping out imports. According to the US Department of State (2002), despite being a significant supplier to China of several products, fair market access is often denied due to “strict testing and standards requirements for some imported products.” This can make it difficult to conduct ongoing business operations.

    China has also received much news coverage regarding the poor working conditions in its factories, lack of health and safety precautions and just generally poor human rights protection. The resulting problem is two-fold. First, illness, injury and occasionally death affect the poorly treated and paid workers. But the inadequate systems also fail to motivate the workers to do their best and / or keep machines maintained resulting in “shoddy goods” (Country Alert, 1997).

    Fortunately, China’s determined campaign to join the WTO has begun to bring some prominence to the product standards issue. According to a July 2002 Financial Times Information article, China issued its first ever mandatory recall and promised “severe punishment” for failure to comply. Although the changes are slow and not every industry will be initially included or focused on, some of the potentially larger problem areas are receiving much needed attention.

Standardization Administration

    Additional evidence of this new attention to quality was the establishment of the Standardization Administration in 2001. In an effort to prove its sincerity, China has been working closely with the WTO, ISO and other standards groups and begun adopting a number of national standards of which almost half were based on international practice (ACC-PRC, 2002, Part 3; china.org.cn, 2002). The organizations goal is “to draft and revise the state laws and regulations on standardization, to formulate and implement the policies on standardization; to prepare the national administrative rules on standardization and develop relevant systems; to organize the implementation of laws, rules and systems on standardization” (sac.gov.cn, 2002). Another key reason for implementing this administration is to help make Chinese products competitive and desirable to the newly opened WTO markets where many of these standards are required by businesses.

Doing Business In China

Staples Office Supplies

    While office supplies per se are not subject to standards, many of the raw materials, specific manufacturing processes, and machines utilized are subject to regulated and voluntary standards. As the trend toward Small & Medium Enterprises (SMEs) and home offices begins to take root in China, it “increases demand for office supplies and equipment” (tdctrade.com, 1997).

Staples Strategy

    If Staples chooses to go after the Chinese office supply market it has several   options. First it can purchase, partner, or form some type of relationship with an existing office supply store in China. Or Staples can open new, wholly-owned stores in China with the choice of importing goods and products from the US or other international location, or purchasing them from local manufactures.

    Regardless of which route Staples decides to take, product and quality standards will not really present much of an issue. Should Staples decide in some form or another to invest in an existing Chinese business,  the product standards would most likely already be addressed by the Chinese operations. In the case of importation, it is likely that China’s recent international standards adoption and desire to open its borders to countries like the US, would negate any potential issues.

    However, given the large number of office supply manufacturers that are already operating in China, it seems that the more logical approach for Staples would be to purchase locally within China. For example, 3M, Pilot Pens, Avery Dennison, OIC, etc. all currently have manufacturing plant(s) in China. Because these companies already export to countries with strict product standards, selling within China shouldn’t present a problem. In fact, a recent Office 1 Superstore announcement noted that “China has an abundance of inexpensive but high-quality office supplies that can well meet the requirements of many transnational companies” (Anonymous, 2002).

Conclusion

    Now that China has joined the WTO, and appears to be more serious about equally opening its borders, it offers a significant opportunity for Staples. With the largest population in the world, there is not an abundance of workers available but also consumers. Compounded by the global trend toward smaller and home based businesses which can also be seen in China, there is clearly a market for office supplies and potential for Staples to succeed. Interestingly, Staples is probably already supporting the Chinese economy, by purchasing products from companies like 3M and Pilot. And these companies, because they are headquartered outside of China and export to the office supply market world wide are already concerned about and meeting expected product standards.

    However, as China joins the global economy on a more equal footing it will need to adopt more and more of the international product standards, voluntary and mandatory for its headquartered manufacturers. Equally important, China will need to focus a great deal on the safety and health issues of its working masses. Implementing and enforcing OSHA type standards will not only improve the products manufactured in China, but will help the country create a more humane reputation. Both will allow China’s industries to better compete with the rest of the world and become more accepted in the global marketplace.

Appendix

International Standards Organization (ISO), July 17, 2002.

References

    ACC-PRC (American Chamber of Commerce – Peoples Republic of China). (2002). 2002 white paper; American business in China. Retrieved online from: http://www.amcham-china.org.cn/publications/white/2002/en-1.htm

    Anonymous. (2002, May 28th). Office 1 superstore to tap China’s office supplies market. People’s Daily [Online]. Retrieved from: http://english.peopledaily.com.cn/200205/28/eng20020528_96619.shtml.

    Country Alert. (1997, July 10). Consumers fed up with shoddy goods. Business China [Online]. Retrieved from: UMUC Database -- EIU viewswire.

    Country Briefing. (2001, January 22). Survey – product quality virtually unchanged in 2000. ChinaOnline [Online]. Retrieved from: UMUC Database -- EIU viewswire.

    Financial Time Information. (2002, July 16). China issues first mandatory product recall. Asia Africa Intelligence Wire. Retrieved online from: UMUC Database – Prompt.

    china.org.cn. (2002, February 25). China to introduce new industrial standards. Retrieved online from: http://www.china.org.cn/english/investment/27524.htm.

    nist.gov. (2002). General information. National Institute of Standards and Technology. Retrieved online from: http://www.nist.gov/public_affairs/general2.htm.

    sac.gov.cn. (2002). Standardization administration of China. Retrieved online from: http://www.sac.gov.cn/english/cnorg/index2.asp.

    tdctrade.com. (1997, October 24). Pen & paper fair set for Hong Kong next week. Retrieved online from: http://www.tdctrade.com/tdcnews/9710/97102402.htm

    US Department of State. (2002). Background note: China. Retrieved online from: http://www.state.gov/r/pa/ei/bgn/2742.htm

    wwlia.com. (1998). Product standards and the law. World Wide Legal Information Association [Online]. Retrieved from: http://wwlia.org/standard.htm.