China Dolls Essay

Jeffrey Cheong picked up the tract label URGENT, which his secretary had just fit(p) on his table and looked at its content. The folder contained letters from two of his major clients, KiKi and Houida. twain(prenominal)(prenominal) KiKi and Houida, two European mood houses, were Haute Couture dash Berhad (HCF)s first guests and have been with HCF since its inception. They were piece of music to Jeffrey to inform him that they may be expression to China to contract manufacture for them as the prices there were re all toldy competitive.Jeffrey stared out of his windowpane in contemplation. He was in a dilemma. Loss of its two major clients would be disastrous to HCF. As it s in like mannerd, HCF had been experiencing falling margins and remuneration over the become some days as evidenced in the fiscal state ments enclosed. Loss of Kiki and Houida would mean that HCF would then(prenominal) be incurring losses.As briefly as his new(prenominal) clients heard of this fre shly development, they too would be taking similar steps. Jeffrey accomplished he had to review his strategy readily if he cute to retain the cave in clientele. He knew the inevitable. During the late 1990s and into the advance(prenominal) 21st century, China had make inroads into the cloth industry and was forecasted to grow further. Fol minoring the tranquillity of trade barriers, many of the European and American way of life houses were looking at trade habilitate from China at very low prices. This was mainly collectible to its low direct equals. This had a massive negatively charged impact on many companies direct at lavishlyer hails and base elsewhere. The previous adverse perception of make in China labels had soft changed as China now manufactured attire that are high-pitcheder quality at substantially lower operating follows.If Jeffrey wanted to survive in this industry, he too must consider moving his operations to China.Haute Couture Fashions Bhd (HCF)Houte Couture Fashions Bhd was established in the 1974 by the tan family. burn Boon Kheong, the patriarch of the Tan family was a skilled master cutter, adept by British cutters in fifties in Penang. He ran a mild exclusively successful business adapt mens clothing in Argyll Road, Penang until his retirement in 1980. pricking Tan, the oldest son of Tan Boon Kheong, initially low his father as a young 17-year-old but afterward terce historic period left for Europe as he was interested in creating for both men and womens means, rather than and tailoring mens suits and pants. His inhabit in Europe motto him teach at Yves St Laurent and Gucci. He had a bang-up eye on womens project and soon established himself as a dexterous physical bodyer. numerous of the demeanor houses were able to employ him into their team. He returned to Malaysia with a wealthiness of experience, eager to put his newly acquired knowledge into use. His return to Malaysia coincided with the trend of European raiment manufacturers looking at Asia for outsourcing. scratch maxim this as an opportunity to kick-start his business venture, especially with his contacts with the European musical mode houses.HCF started out as a family owned business with all of its shares being held by the Tan family. beam prepared to conspire for contract manufacturing deals with the European fashion houses. With the help of his contacts and excellent booster cable record with the fashion houses, he soon managed to convince three of them to sign outsourcing deals with him. These fashion houses were keen on doing business with the concourse known to them as they dress out-off their new venture.HCFs GrowthHCF started its first fully equipt pulverisation in Penang in November1974. nether Peters helm, HCF very apace established itself as a high quality manufacturer of both mens and womens clothes. It had no embarrassingy meeting the necessity of the fashion houses as Peter had recruited several European-trained Malaysian designers to sum total his team.By late of 1970s, HCFs turnover had reached RM10 jillion. Over the ensuing five years since its inception, HCF had managed to add two more European fashion houses into its customer base. HCFs talented designers wereproviding inputs toward the development of the off-the-shelf designs and were well original by the fashion houses. HCF was now face up with a problem. The pulverization located in Penang was no longer big lavish to cope with the output capacity. Peter right away sourced a large plot of overturn in mainland Penang Butterworth and began building a new and much(prenominal) larger state-of-the-art factory to cater for the growing pauperism.In July 1980, HCF undefended its new factory in Butterworth. Peter, then the Managing Director of HCF, decided not to leave out down the Penang factory but operated both factories. HCF then employed among 80 to 100, mostly tailors in the Penang fa ctory, while the Butterworth factory employed close 300 employees.HCF keep to experience growth in gross r veritable(a)ue throughout the early 1980s to mid(prenominal) 1990s, charted annual sales of around RM100 million. Its customer base had also increased, drawing in customers from Europe as well as America. Profits were also riding high. HCF clear two more factories. In 1990, it spread out up its third factory in Jitra, Kedah. The factory had a capacity of producing 1 million garments a year with a faculty of 300 employees. In 1995, due to plane increasing demand for its clothes, HCF decided to open its fourth factory with a production capacity of 2 million garments a year. This time, it looked to Thailand, as tug was very cheap. HCF set up a wholly owned subsidiary Haute Couture (Thailand) Pte. Ltd to operate the Chieng Mai base factory. It recruited about 500 employees.In 1997, Malaysia was facing m onetary crisis, with foreign exchange market irritability being the main issue. Manufacturers with foreign customers were unable to honour their contract price as exchange judge fluctuated. HCF was cought unaware. HCF had to tender for a contract six months before the obstetrical delivery of the consignment. Fluctuation in the exchange rates made it impossible to predict the cost of poppycock that HCF had to purchase form the fashion houses. HCF found itself selling its garments at very low margins for the very first time. 1998 saw HCF suffering its first loss since its inception. Many of its competitors also suffered losses and some even had to cease manufacturing. In a bid to survive the financial tsunami that had hitMalaysia, Peter Tan consolidated HCFs go under by deciding to cut operating costs.HCFs major cost away from the cost of imported material was grate cost. Peter Tan made the finality to shut down the Penang factory, much to the withstand of his father. HCF was still able to meet the demand while still operating the other three factories in Butterworth, Jitra and Chieng Mai. He also decided to shift as much of the production to Chieng Mai, as the labour cost was a quarter of the labour cost incurred in the Malaysian factories. Moreover, HCF was facing labour shortage problems in Malaysia, as many of the labour force were moving to the cities for violate prospects. As a result of this integration exercise, about 300 of HCFs employees were made redundant, many of whom had been with HCF since its inception.Over the next few years, its profitability increased gradually and HCF slowly pulled itself out of the loss making situation. HCF managed this difficult feat because of its customer base as well as its reputation for high quality clothes, which commanded premium prices with its customers. The financial crisis had not affected Europe much, and as such, demand for the clothes continued.HCFs Contract Manufacturing social systemThe contract manufacturing deals signed with the European fashion houses were suc h that the designs were provided by the fashion houses and HCF had to cleave to the designs when producing the respective labels. The fashion houses welcomed suggestions from HCFs designers but were particular that the designs were not crossed between the various labels that HCF was producing. Cross producing design between labels would be disastrous for HCF as it would at once loose the contract for the labels involved.Further, the European fashion houses would supply the material for the clothes as they wanted to maintain the quality of the output. HCF purchased the material, sourced for detach accessories locally and produced the clothes. The fashion houses would contract for a particular quantity of a particularized design at a specific quality to be delivered at a specific time. Any variation out of doors the contract stipulation would have to be borne by HCF itself.Usually, the contracts were for delivery of clothes one lenify ahead. This meant that summers design clothe s would have to be delivered by the beginning of spring. HCF would sell the manufactured clothes at a contracted price. The fashion houses allowed HCF to tender for the contract price based on the design, quantity and price of material supplied. The contract tendering process usually took infinite about six months before the due date for the delivery of a seasons batch.HCFs CustomersHCF manufactured ready-to-wear clothes for a number of European and American fashion houses. Its clothes were well-sought after for its modern designs and high quality finishing. HCFs customers have remained loyal over the last three decades, although its major coup was the securing of 2 major American fashion houses as its customers within the last 5 years. completely of HCFs clothing was manufactured under the customers own label.