Executive summary In this case, there are two major problems that I can analyzed. Firstly, Kaki and Houdini which are two of major loyal customers of Couture Fashions Bad (HCI)’s were writing to Jeffrey to inform him that they may looking to China to “contract manufacture” for them as the prices there were very competitive. Second, the previous adverse perception of “Made in China” labels had slowly changed as China now manufactured clothes that are higher quality at substantially lower operating costs.
There were some recommendation that are going to implemented which are raptors to expand to China, proposal to close down Hess factories in Malaysia and Thailand or manufacturing its own label for Malaysian and Sean market. Statement of Problems HCI may lose their big major loyal customers which is Kaki and Houdini as they may looking to China to “contract manufacture” for them as the prices there is cheaper. Apart from that, nowadays China was produce high quality product with cheaper price so then makes the perception of people about the “made in China” goods changed to a good view.
This is because of the labor cost in China is cheaper rather Han Malaysia. HCI now is very confusing to make decision but based on the problems they have to make accurate decision. According to these problems they have to deeply make consideration of their short term and long terms decision. As far as I am concerned, the short term problem is HCI may lose their big major loyal customers which is Kaki and Houdini. For long term, they may face a very big loss and no wonder if their company will go for bankruptcy as Kaki and Houdini may become the benchmark for other customers that are rely on Hess company.
Other customers may assume that HCI does not maintain its reputation and that is why Kaki and Houdini are quit from keep doing “contract manufacture” with HCI. As it shows a bad benchmark to other customer, it may cause other customers quit from HCI. As a decision, I agree if HCI still operate it existing company but doing Joint venture in China. Causes of problems There is some cause or problems that cause Kaki and Houdini may switch doing “contract manufacture” from HCI to China which is they can save their financial sources a lot as they will get cheaper supply from China rather than what was offered by HCI.
Apart from that, in 1997 Malaysia had face economic downturn and fluctuation or currency exchange. Rather than buying with higher price, Kaki and Houdini may get some more loses in currency exchange. To make an accurate decision, I prefer HCI to use PESTLE theory. PESTLE is divided into six categories which are political, economic, social, technology, ecological, and legal. Based on political and legal, to build new factory in China is not an easy way as HCI have to get he permission from the government and also have to fully understand and follow the rules and regulation to incept new factory in China.
So it may take a very long period to face all the procedures. In term of economic, HCI may get lack of financial resources to build new factory as not confirm can sell both of their existing companies. Even they can sell both it is still not enough to incur all the cost to build new factory in China. Based on social view, HCI may lose their specialist once they move to China as some of them may not want to leave Malaysia which is their country. To find new specialist in China is not easy and may incur a big cost as HCI have to train them well to become professional enough.
Their current workers also may lose Job as they will be layoff if HCI close their current company and move to China. In term of ecological, by building new factory it may cause pollution to the environment, so it relates to the government policy, rules and regulations. HCI may build a factory but in rural area that may cause the shipping cost to send all the goods to its customer become higher. In addition, from technological view, I can see hat in China the technology is different from Malaysia, so HCI once again have to incur a big cost to train all the workers with new technology.
Decision Criteria and Alternative Solutions Based on the problems and alternative solution, I am totally agree if HCI still continue its operation in Malaysia but in the same time doing Joint venture with any other strong and well known company in China. This is because by doing Joint venture HCI will not incur a lot of cost rather than doing Greenfield which is building a new factory there. Apart from that, by doing Joint venture OVA) with well-known company, it is easy for HCI to find new prospect of customers from China thus in the same time HCI can increase their customers.
If HCI want to build new factory, it may incur a lot of cost and if HCI want to manufacture its own label for Malaysian and Sean market, it is hard to brand new label and incur a lot of cost too as they have to advertise it new label. Recommended Solution, Implementation and Justification As a conclusion, I am totally agree if Jeffery Echoing continue it operation in Malaysia UT in the same time doing Joint venture with strong and well known company in China.
To ensure that HCI not lose their current big major loyal customers which is Kaki and Houdini, HCI have to as soon as possible doing Joint venture with China. By doing Joint venture, HCI can directly continue operation in China without need to comply with government policy, legal restriction and tax if they are build new factory. They Just continue follow the regulation of its Joint venture partner. Once again I am totally agree if HCI doing Joint venture and still continue its existing operation.