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The changing landscape for Chinese small business: the case of ‘‘Bags of Luck’’ Lee Zhuang

Lee Zhuang is a Principal Lecturer in Strategic Management at Staffordshire University, Stoke-on-Trent, UK.

General background
Company history ) in Chinese Pinyin, is located Founded in 1992, Bags of Luck (BoL), or Xingyun Bao ( in a small coastal town, Xiao Min Nan (XMN), in South Eastern Fujian province, People’s Republic of China, halfway between the coastal cities of Xiamen and Quanzhou. As an industrial park, XMN was created out of Yang’s oyster farming village with a population of just under 1,000. The name of the village derived from the fact that most of the indigenous villagers were descendents of a local Yang family. With its geographic proximity to and cultural similarity with Taiwan, XMN was developed at the beginning of the 1990s with the most advanced infrastructure with the aim of attracting Taiwanese investors to set up manufacturing facilities there to take advantage of cheap labour and tax incentives. After 20 years’ of explosive development, XMN has grown to become a bustling modern town hosting over 2,000 manufacturing firms, 80 per cent of which are foreign invested, with a working population of 500,000. Almost 100 per cent of the goods manufactured in XMN are labour intensive products designed abroad and exported to North America and the EU. The products made here include shoes, bags, clothing and small plastic kitchen utensils. In the early phase of development, people of the local oyster farming community filled most of the jobs. However, the local pool of cheap labour soon ran out. Migrant workers, both male and female, now take up over 90 per cent of the manufacturing jobs typically aged between 18 and 25 from the rural areas of Fujian and the less developed provinces of Anhui, Hunan, Jiangxi and Sichuan. BoL was set up as a partnership business between two brothers, Alfie and Ben Zhang, when they were single, aged 27 and 25, respectively. They have an elder brother Adam and an elder sister Becky. Both Adam and Becky are married with one child each. Their father and mother took early retirement in 1995 at the age of 58 and 55, respectively, when their state owned company was sold to Taiwanese investors. Like most Chinese parents, they now live with the family of their oldest son, Adam. After their retirement, Mr and Mrs Zhang have been devoting their time to looking after Adam’s daughter and helping them with housework. They did take some interest in BoL in the early days and helped out during busy periods. Three years ago, their father’s health started to deteriorate. Since then their parents have completely refrained from getting involved in the business.

Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision making. The author/s may have disguised names; financial and other recognizable information to protect confidentiality.

The business idea was conceived when one of their family relatives of the Yang’s village was offered, by the then principal developer of XMN, a ready built but not furnished 4,000 square-metre factory as a compensation for the loss of their oyster farming business. Although not university level educated, the two brothers had an acute business sense and quickly came to a legal and financial settlement with their relative to take over the factoryfacility. Unsurprisingly the settlement included a 20-year employment deal for the four members of the Yang family, the parents and their two sons.

DOI 10.1108/20450621111126783

VOL. 1 NO. 1 2011, pp. 1-12, Q Emerald Group Publishing Limited, ISSN 2045-0621

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EMERALD EMERGING MARKETS CASE STUDIES

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Without any specific technical expertise, the brothers raised RMB 20,000 from friends and relatives, quickly fitted the factory to a basic standard to include an office area, a canteen and toilet facilities. They also bought a...
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