HCF is a Malaysian fashion company that owns 3 factories. It is considering expanding to China by setting up its own factory or entering a joint venture. Alternatively, it could stay in Malaysia. The document analyzes these options and provides recommendations. It recommends closing the Jitra and Chiang Mai factories, outsourcing production to China to reduce costs, finding new customers, and producing its own clothing label.

1. INTEGRATED CASE STUDY (PAS 3183)
CHINA DOLLS
HAUTE 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

2. AGENDAS
• BACKGROUND OF HCF
• EXPAND TO CHINA
• STAY IN MALAYSIA
• CLOSE DOWN HCF’S FACTORIES
• RECOMMENDATION

3. 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;

4. 1. EXPAND TO CHINA
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 One and half time HCF
Thailand capacity current capacity
Operate After 18 Months 6 Months
Profit Share 100% 30%
Advantages Full Control Low Cost
Disadvantages High Cost Clash of culture

5. Porter's five forces model on HCF

6. 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

7. Evaluation of Porter’s five forces model
• 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.

8. 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 √ RM 9,240 mil 67%
Profit
Overdraft √ RM 1,415 86%

9. 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

10. 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.

11. 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 CHINA
 FINDING MANUFACTURER IN CHINA
RISK/ISSUE ?
 INTELECTUAL PROPERTIES OWNERSHIP

12. 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.

13. 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.

14. 3. CLOSE DOWN HCF’S FACTORIES
Analysis based on place of factories
Jitra, Malaysia Butterworth, Chieng Mai,
Malaysia Thailand
Profit Rural area Strategic location Rural area
Cost of Medium high Demanding More lower
Workers

15. Shutdown Factory
Advantage Disadvantage
Abandon Easiest way Ethic
•Let go then go to China •Would become a haven for
drug addicts
Demolish Good way to leave the place Wasteful
• The people may attract to • Costly
do something new at the land
Sell Can get more profit May be hard to find a buyer
• Avoid from big loss • Buyer may be choosy

16. 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

17. RECOMMENDATIONS
• Close down factory in Chieng Mai and Jitra
• Outsourcing to reduce cost
• Find new customers
• Producing its own label