There have been two big global product recalls this week. Mattel Inc. is pulling out millions of toys that have been made in China. And Nokia has promised to replace millions of defective batteries that go into their mobile phones.
There are two things to be learnt from this. First, that the rapid spread of supply chains across the world creates both efficiency and problems. Firms have to manage suppliers and take responsibility for their failings.
The second learning is about the usefulness of brands. It is fashionable in some circles to argue that brands are embellishments that provide profit-hungry companies with a justification to charge higher prices. But brands provide consumers with important information—that the product they have bought will be of a certain quality. That explains the premium consumers are ready to pay for them.
Just think: who would you complain against if your child’s unbranded toy had lead paint on it?