China Dolls Essay

Jeffrey Cheong picked up the folder marked URGENT, which his secretary had adept placed on his t qualified and looked at its content. The folder contained letters from twain of his major(ip) clients, KiKi and Houida. Both KiKi and Houida, deuce atomic number 63an demeanor houses, were Haute C unwrapure Fashion Berhad (HCF)s first customers and cave in been with HCF since its inception. They were writing to Jeffrey to inform him that they may be smell to china to contract manufacture for them as the values there were very competitive.Jeffrey stargond out of his window in contemplation. He was in a dilemma. Loss of its two major clients would be disastrous to HCF. As it stood, HCF had been experiencing falling margins and profits all over the last few years as evidenced in the pecuniary statements enclosed. Loss of Kiki and Houida would mean that HCF would then be incurring losses.As curtly as his other clients heard of this new development, they too would be victorious sim ilar steps. Jeffrey realised he had to review his strategy quickly if he valued to retain the present clientele. He knew the inevitable. During the late 1990s and into the too soon 21st century, China had do inroads into the textile industry and was forecasted to grow further. pastime the relaxation of trade barriers, many of the European and American way of life houses were face at importing change state from China at very unkept prices. This was mainly due to its low operating cost. This had a massive negative impact on many companies operating at higher costs and based elsewhere. The previous adverse perception of Made in China labels had slowly changed as China now manufactured clothes that are higher pure tone at substantially lower operating costs.If Jeffrey wanted to survive in this industry, he too must consider abject his operations to China.Haute Couture Fashions Bhd (HCF)Houte Couture Fashions Bhd was established in the 1974 by the suntan family. tangent don ation Kheong, the patriarch of the Tan family was a skilled master cutter,trained by British cutters in 1950s in Penang. He ran a lowly but successful business tailoring mens turn in Argyll Road, Penang until his retirement in 1980.Peter Tan, the oldest son of Tan Boon Kheong, initially low his father as a new(a) 17-year-old but after cardinal years left for Europe as he was interested in creating for both men and womens sort, preferably than merely tailoring mens suits and pants. His sojourn in Europe power saw him training at Yves St Laurent and Gucci. He had a keen meat on womens silhouette and soon established himself as a talented excogitateer. Many of the excogitate houses were happy to employ him into their team. He returned to Malaysia with a wealth of experience, eager to put his newly acquired knowledge into use. His return to Malaysia coincided with the wind of European clothes manufacturers looking at Asia for outsourcing. Peter saw this as an opportunity to kick-start his business venture, especially with his contacts with the European fashion houses.HCF started out as a family owned business with all of its shares universe held by the Tan family. Peter prepared to bid for contract manufacturing deals with the European fashion houses. With the overhaul of his contacts and excellent track record with the fashion houses, he soon managed to urge three of them to sign outsourcing deals with him. These fashion houses were keen on doing business with the sight known to them as they set-off their new venture.HCFs GrowthHCF started its first to the full equipped grinder in Penang in November1974. Under Peters helm, HCF very quickly established itself as a high role manufacturer of both mens and womens clothes. It had no bother meeting the claim of the fashion houses as Peter had recruited several European-trained Malaysian designers to join his team.By late of 1970s, HCFs turnover had reached RM10 million. Over the result five years s ince 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 ready-to-wear designs and were well received by the fashion houses. HCF was now faced with a problem. The pulverisation turn up in Penang was no longer big enough to cope with the occupation capacity. Peter quickly sourced a large plot of land in mainland Penang Butterworth and began building a new and a lot larger state-of-the-art factory to cater for the growing demand.In July 1980, HCF exposed its new factory in Butterworth. Peter, then the Managing Director of HCF, decided not to shut down the Penang factory but operated both factories. HCF then employed between 80 to 100, broadly tailors in the Penang factory, while the Butterworth factory employed about 300 employees.HCF move to experience growth in sales throughout the early eighties to mid 1990s, charted annual sales of around RM100 million. It s customer base had besides increased, drawing in customers from Europe as well as America. network were also riding high. HCF opened two more factories. In 1990, it opened its third factory in Jitra, Kedah. The factory had a capacity of producing 1 million garments a year with a strength of 300 employees. In 1995, due to even increasing demand for its clothes, HCF decided to open its poop factory with a production capacity of 2 million garments a year. This time, it looked to Thailand, as ride was very cheap. HCF set up a completely owned subsidiary Haute Couture (Thailand) Pte. Ltd to operate the Chieng Mai based factory. It recruited about 500 employees.In 1997, Malaysia was facing financial crisis, with foreign exchange market volatility being the main issue. Manufacturers with foreign customers were unable to honour their contract price as exchange rates fluctuated. HCF was cought unaware. HCF had to tender for a contract half-dozen months sooner the delivery of the con signment. Fluctuation in the exchange rates do it impracticable to predict the cost of material that HCF had to purchase form the fashion houses. HCF nominate 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 roughly even had to cease manufacturing. In a bid to survive the financial tsunami that had hitMalaysia, Peter Tan consolidated HCFs position by deciding to cut operating costs.HCFs major cost away from the cost of imported material was labour cost. Peter Tan made the decision to shut down the Penang factory, much to the dissent 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 la bour shortage problems in Malaysia, as many of the labour force were moving to the cities for better prospects. As a result of this consolidation 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 look 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 StructureThe contract manufacturing deals signed with the European fashion houses were such that the designs were provided by the fashion houses and HCF had to adhere to the designs when producing the respective labels. The fashion houses welcomed suggestions from HCFs designers but were particular that the designs were not c rossed between the conglomerate labels that HCF was producing. Cross producing design between labels would be disastrous for HCF as it would in a flash 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 appropriate accessories locally and produced the clothes. The fashion houses would contract for a specific quantity of a specific design at a specific quality to be delivered at a specific time. Any variation outside the contract stipulation would have to be borne by HCF itself.Usually, the contracts were for delivery of clothes one season ahead. This meant that spends design clothes would have to be delivered by the arising 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 suppli ed. The contract tendering process usually took place 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 inwardly the last 5 years. All of HCFs clothing was manufactured under the customers own label.