Psychological Theory

In the fluctuating market, with the coming up of a variety range of goods, most of businesses compete to maintain their brand and position with each other in the views of customers. Milk market is a promising market with a large number of consumers, and the growth rate is extremely high. Being one of the most reputational trademarks in milk production companies, in parallel with the improvement of products and the launching of new products, New Gen - the strategic milk powder, is expected to gain the huge benefits for the company in this year. The product has been launched to the market four months ago through various branch stores, supermarkets and hundreds of private stores. Based on the large number of annual consumption, this strategic product is expected to hit the market with high purchasing power, the fact that more than 500,000 products have been sold is predictable. That means more than half of the total products have been consumed. However, a product testing report was such sky falling down to the company. A large amount of melamine element, which causes kidney stones and after that is cancer in the human body, was found in New Gen milk powder last two week. Immediately, every member in Board of Director is convened in an emergency caucus with one survival meaning: "Should New Gen milk powder be recalled or not?" There are two completely opposite viewpoints within the caucus and each one has their own reasons.

Stopping produce New Gen product, continuing sell products remaining in stock and creating a new product to replace is the ideas of one side in the meeting. This idea leads to some positive factors such as avoiding capital loss, guaranteeing the revenues, and all products in stock can be consumed. Moreover, the company will have a high reputation and customers' belief in order to premise that new product will be developed and get more success. On the other hand, if the company decides to recall the New Gen milk powder, customers will lose their faith in the company. Consequently, products of the company will not attracted clients, thus, this problem leads to revenues loss. Company will have capital destruction; because cancelling all remaining products may lead to capital loss and reduce benefits. In case of force majeure, company has to sentence of bankruptcy.