The market share of Taiwan's Phalaenopsis orchid has shrunk sharply mainly due to the Netherlands' Phalaenopsis orchid having surpassed Taiwan either in the rate of infection or double stem. In order to analyze this scenario, we set up a model of vertical product differentiation to discuss the influence of two policy tools on the quality of Taiwan's Phalaenopsis orchid industry. The first tool in question is to set a minimum quality standard for the orchid industry, and the second one is to subsidize the orchid industry to the amount of its quality-upgrading expenditure. Our results show that imposing the policy of minimum quality standards raises the quality of both domestic and foreign orchids, and the difference in the quality of the two orchids is also narrowed down which further brings down the price gap. Moreover, adopting a subsidization policy gives rise to the same effect on price, quality and the sales quantities. To sum up, the policy effects are equivalent for the minimum quality standards and quality-upgrading subsidies, which will no doubt help the domestic orchid industry raise its product quality.