Hcf bhd china dolls

CHINA DOLLSHAUTE COUTURE FASHIONS BHD (HCF)

CONSULTANTS :

Luluk Nor Khotima Bt Nursam

Ashvenee Devi Selvaraju

Noor Armi Addila Bt Noor Ariff

Nur Azlinda Bt A.Azaman

Norliza Bt P P Mohamed

INTEGRATED CASE STUDY (PAS 3183) 

AGENDAS

• BACKGROUND OF HCF

• EXPAND TO CHINA

• STAY IN MALAYSIA

• CLOSE DOWN HCF’S FACTORIES

• RECOMMENDATION

Haute Couture Fashion Bhd

Background of HCF

Established in 1974

Started as a family-owned business, grew into

a public listed company

Contract manufacturing

High quality clothes for European and American

fashion houses

Under clients’ own labels

Owns 3 factories – Butterworth, Jitra and Chiangmai;

Business types Direct Investment Joint Venture

Entry Setting up its own factory Form separate entity with Celestial Clothes

Cost RM 15 Million RM 2.4 Million

Operation Capacity Same with Malaysia and Thailand capacity

One and half time HCF current capacity

Operate After 18 Months 6 Months

Profit Share 100% 30%

Advantages Full Control Low Cost

Disadvantages High Cost Clash of culture

1. EXPAND TO CHINA

Porter's five forces model on HCF

Evaluation of Porter’s five forces model

• Threat of new competition

HCF do not have sufficient funds to fund its

own factory cause of increasing in creditors

• Threat of substitute products or services

HCF should consider time, money, personal

preference and convenience in the industry

• Bargaining power of customers (buyers)

Customers possess the power to buy seller or

rival. If customer is so large that it may choose

backward integrate, the HCF loses influence

• Bargaining power of suppliers

HCF may reduce the profits of the buyer through

more advantageous pricing and limiting quality of

the product/services.

• Intensity of competitive rivalry

Fixed costs high:

- Encourages competitors to cut prices below

their average costs to recoup some of their fixed

costs.

Evaluation of Porter’s five forces model

Financial analysis year 2008 and 2007

INCREASE DECREASE DIFFERENCES PERCENTAGE

Revenue √ RM 10 mil 7.7%

Cost of Sales √ RM 4,470 mil 6.5%

Operating Profit

√ RM 9,240 mil 67%

Overdraft √ RM 1,415 86%

FREE TRADE ZONE 

- Subject to local policies, if HCF registered

in a FTZ may enjoy various financial and

tax incentives example FTZ in China is

Shanghai Waigaoqiao .

INTERNATIONAL RISK

- Cross-cultural risk

- Country risk

- Currency risk

- Commercial risk

PREPARE TO SUCCESS IN MALAYSIA “Failure is simply the opportunity to begin again, this time more intelligently.”- Henry Ford

WHY ?

Low risk and uncertainty. Ethical issue Avoid wasteful of opportunity and skill workers.

HOW ?

Close down factory in Chieng Mai and Jitra for costs saving purposed.

Outsourcing to China Find new customers R&D for new label and launched it in short period of time.

GLOBAL OUTSOURCING“Success means only doing what you do well, letting someone else do the rest.” 

- Goldstein S. Truism

WHY?Up to 60% saving costs.Cost of labor.Cost of shipping.Reduce cost for consumer.Minimize cease of workers in Malaysia.

HOW ?PROCEDURE OUTSOURCING IN CHINAFINDING MANUFACTURER IN CHINA

RISK/ISSUE ? INTELECTUAL PROPERTIES OWNERSHIP

FIND NEW CUSTOMERS“Make a customer, not a sale.”

Kiki and Houida might consider to continue business with HCF Bhd if HCF managed to implement the outsourcing.

However, if HCF need to find new customers, HCF can :-

1. Repositioning the 4P’s marketing strategies.

2. Used all client database in your record in order to pull back your old clients.

3. Relevant marketing budget that suites your current situation.

4. Interactive business website.

OWN LABEL“In the end, the customer doesn’t know, or care, if you are small or large as an

organisation. She or he only focuses on the garment hanging on the rail in the store.”- Giorgio Armani

• When HCF Bhd getting more stable and start

making profit, R&D for own label should begin.

• What HCF Bhd have to do :

Spend time working for other designer for

experience purposed. Build own portfolio design. Develop contract within industry. Focus on creating product that people want to buy. Organize business and start production. Create great marketing campaign. Sell the product.

Analysis based on place of factories

Jitra, Malaysia Butterworth, Malaysia

Chieng Mai, Thailand

Profit Rural area Strategic location Rural area

Cost of Workers

Medium high Demanding More lower

3. CLOSE DOWN HCF’S FACTORIES

Shutdown FactoryAdvantage Disadvantage

Abandon Easiest way•Let go then go to China

Ethic•Would become a haven for drug addicts

Demolish Good way to leave the place• The people may attract to do something new at the land

Wasteful• Costly

Sell Can get more profit• Avoid from big loss

May be hard to find a buyer• Buyer may be choosy

Effect from close down HCF’s factories in Malaysia and Thailand

• Harm company reputation

• High cost of pulling down

– Jitra & Chieng Mai’s factory would cost HCF RM1.2m

• Redundancy payment

– RM3.0m at a minimum

• Lose human capital

– Many employees with specialized skills would find

difficult to seek employment elsewhere – if retrenched

• Gain profit from the sale of the Butterworth and Penang’s

land and factories

RECOMMENDATIONS

• Close down factory in Chieng Mai and Jitra

• Outsourcing to reduce cost

• Find new customers

• Producing its own label

THANK YOU…..

Q & A