Program: Global MBA – Hong Kong SAR Group
Student Name: Angela Lau
Student Number: 8726568
Date: 20 August, 2012
For reasons of confidentiality, the name of the company used in this assessment will be referred to as Company X hereafter.
Company X is a multi-national company listed in Hong Kong SAR, China. Its business covers areas such as garments manufacturing, shoe manufacturing, bag manufacturing, fishing apparatus, information technologies, real estate investment and logistics. The sector that we will be exploring here is focusing on manufacturing.
Company X, as a garment ...view middle of the document...
(Baines et al, 2011, p.8)
Company X was founded in 1965 and has been in garment manufacturing since 1983. Their headquarters are located in Hong Kong SAR, China. Company X has various manufacturing locations, including Philippines, Cambodia, Indonesia, and China. Company X does not carry its own brand, but acts solely as manufacturer for well-established brands in US, Europe as well as Japan.
The products that Company X produces range from casual wear, ladies’ wear (career, intimate and fashion wear), sports and active wear, sweaters, outerwear, as well as children’s wear, and the majority customers of Company X are located in the United States. In the early years, most of the manufacturing of Company X was spread across the world, in Philippines and Saipan. However in 2005, with the elimination of quota in China, like many manufacturing companies, Company X moved most of its production into China.
Market Development and its effect on marketing mix
“The marketing mix of a firm in a large part is the production of evolution that comes from day to day marketing. At anytime the mix represents at anytime the program that the management has evolved to meet the problems with which it is constantly facing in an ever changing, ever challenging market” (Borden 1964, p.6).
The 2 major factors that have significant impact on the marketing mix of Company X are the removal of the textile quota of China in 2005, and the global financial crisis in 2009.
a) Textile Quota Lifted of China in 2005
In the early 2000’s, China was one of the most popular manufacturing countries, mainly because of the low labour cost, sufficient labour supply, better technical skills, and, unlike other Asian countries such as Cambodia and Philippines, no workers’ union. However, China also has its limitation, such as quota restriction which adds on to the cost.
Company X started many years ago in the Philippines and Saipan, where they have established stable labour supplies and strong government relationship as a result of long business development and investment. However, in order to stay competitive in the garment manufacturing market, it is inevitable for Company X to move its production base to China, because all the customers are aiming for the cost reduction due to this change. Giron-Urquiola G. (2005, p.1) found that “Consumers, meanwhile, would see even greater benefits from quota elimination, as they reap the gains from the removal of quota premiums and lower prices resulting from intensified competition.”
In order for Company X to move the production to China, it would have to build and purchase manufacturing facilities, secure labour supply, building local government relationship, as well as convince the customer to accept the new facilities. All these problems are not difficult to solve:
• Build facilities – Company X has extremely strong financial backup, so the main focus here will be selection of location.