Once the negative public opinion events are widely spread and rendered by the audience, and the audience group happens to be the main consumer group of such products, when the supply of substitute products is unrestricted, this negative public opinion event will have a very obvious impact on the supply and demand relationship of the whole industry.
Dairy Pollution in China in 2008
Sanlu Group, a company involved in the case, was found to have added melamine as a chemical raw material to its baby milk powder, which led to many incidents in which babies suffered from kidney calculi after eating it. After the incident was exposed by the media, through the heated discussion of consumers on the Internet, it quickly attracted the attention of the government regulatory authorities and severely punished the company. It went bankrupt in 2009 and was acquired. In particular, the domestic dairy industry experienced a period of sharp decline in demand before and after the incident, and the negative public opinion events on the Internet had a great impact on the supply and demand relationship of the industry.
( 1)? Changes at the industry level
In view of the changes in the relationship between supply and demand in the industry after the negative online public opinion events at the industry level (some are caused by enterprises, but may have an impact on the whole industry), the corresponding model I (as shown in figure 1) is constructed.
In figure 1, d stands for demand, s stands for supply, p stands for price, and q stands for product sales. When negative online public opinion events occur, the demand curve of the industry will move to the left, from D0 to Dt, and the corresponding product sales are q0 and qt respectively. If π represents enterprise profit and c represents enterprise cost, then enterprise profit can be expressed as a formula (1). Given c, there are formulas (2) and (3).
As can be seen from the figure 1, under the same price conditions, the decrease of industry demand leads to the decrease of enterprise profits. As shown in Formula (4), the reduction of enterprise profits is entirely determined by the reduction of product sales.
The result shown in Formula (4) is only one case, and it is mostly in the initial stage of the event. When negative online public opinion events last for a period of time, the decline in sales at the industry level will often lead to intensified competition in finished products. In order to increase the sales volume, enterprises often adopt the strategy of reducing the sales price, which leads to the decline of the sales price at the whole industry level, resulting in a situation of "both quantity and price falling" and a change in the model (Figure 2). The decline in profits will eventually lead to the loss of solvency of enterprises and affect the credit level of enterprises.
( 1)? Changes in profits at the enterprise level
For a single enterprise, especially those involved in online public opinion, the impact can be shown in Figure 3. After the demand of enterprise products is impacted, the sales qt corresponding to the same structure is obviously reduced, and Formula (4) still holds. It should be noted that the change of demand curve of a single enterprise is different from that of the whole industry. Because most enterprises are not directly related to events, the change of demand curve is continuous, showing a broken line as shown in Figure 3. Even for the enterprises involved, it is possible that with the passage of time, the impact will become more and more obvious, and the change of broken lines is also the majority. Only those events that have a great impact on the enterprise may lead to a "cliff-like" decline in demand as shown in figure 1, resulting in damage to the credit level of the enterprise.