Haute Couture Fashions Berhad

Jeffrey Cheong picks up the folder marked “URGENT” which his secretary had just placed on his table and looks at its contents. The folder contains letters from two of his major clients, KiKi and Houida. Both KiKi and Houida, two European fashion houses were Haute Couture Fashions Berhad (HCF)’s first customers and have been with HCF since its inception. They were writing to Jeffrey to inform him that they may be looking to China to “contract manufacture” for them as the prices there are very competitive.

Jeffrey stares out of his window in contemplation. He is in a dilemma. Loss of its major two clients would be disastrous to HCF. As it stands now, HCF has been experiencing falling margins and profits over the last few years as evidenced in the financial statements enclosed. Loss of KiKi and Houida would mean that HCF will now be incurring losses (see Appendix 1).

As soon as his other clients hear of this new development, they too would be taking similar steps. Jeffrey realises he has to review his strategy quickly if he wants to retain the present clientele. He knows the inevitable. During the late 1990’s and into the early 21st century, China has made inroads into the textile industry and is forecasted to grow further. Following the relaxation of trade barriers, many of the European and American fashion houses are now looking at importing clothes from China at very low prices. This is mainly due to its low operating costs. This had a massive negative impact on many companies operating at higher cost base elsewhere. The previous adverse perception of “Made in China” labels has slowly changed as China now manufactures clothes that are of higher quality at substantially lower operating costs. If Jeffrey wants to survive in this industry, he too must consider moving his operations to China.

Haute Couture Fashions Bhd (HCF)

Haute Couture Fashions was established in the 1974 by the Tan family. Tan Boon Kheong, the patriarch of the Tan family is a skilled...