The case study is about Haute Couture Fashion Bhd (HCF) and how it ran into trouble in early 2009. HCF was established in the 1974 with first fully equipped factory in Penang then started out as a small unlisted family business in the clothing manufacturing business. HCF has very quick established as high quality manufacturer of both men’s and women’s clothes.
The case relates, in particular, to the problems currently being faced by HCF. Its new Managing Director, Jeffrey Cheong had just taken over and was immediately and inundated with problems. Two of HCF’s major client Kiki and Houida, two European fashion houses had informed Jeffrey of their attention to pull out contracts with HCF and look towards China as their supplier. HCF is no match to China’s growing economy and this new development will definitely cause the downfall of HCF unless something is done quickly. Loss of Kiki and Houida would mean that HCF would then be incurring losses. Jeffrey had garnered the assistance of his senior management team to brainstorm on possible options HCF can look at.
Although acknowledging that looking into China is inevitable, the team was divided in the approach to be taken. One option is to completely shut down operations in Malaysia and Thailand and move all operation to China. This way, HCF would be able to support its current customers with much lower prices while being competitive. The downside to this option is that HCF will have to retrench its entire staff in Malaysia and Thailand. However the two factories in Jitra and Chieng Mai had very low resale value as the factories were located in rural areas and it would be difficult to sell these factories. The cost of shutting down the factories at both sites would cost HCF RM 1.2 million.
Another option put forth by the Factory Operations Director is to move to China to manufacture clothes for HCF’s current customers at competitive prices. They have come out with two possible ways of expanding into China which