Hanbo Enterprise Company' Analysis | Free Essay Example

Hanbo Enterprise Company’ Analysis

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Topic: Business & Economics
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Introduction

SWOT analysis of a company basically means the evaluation of the Strength, Weaknesses, Opportunities and Threats of the company. The analysis can determine the area where the company has strengths to deal with competition in the specific industry where the company conducts its business. It also offers the idea of where the company needs to improve its competitive advantage and increase market share.

Hanbo Enterprise Limited company profile

Hanbo Enterprise Limited’s (hereafter ‘the company’) parent company is Mars Garments Limited. The company was founded in 1991 while the parent company (Mars Garments) was established in 1983. The two companies have been successful with their financial performance rapidly increasing. The company has expanded to the international scene with manufacturing plants in Sri Lanka, Cambodia, China and Hong Kong. There are also plans to open a new factory in Vietnam considering the current financial endowment leading to rapid growth. The company employs more than seven thousand workers in all its operational bases.

The corporation is headquartered in Hong Kong. Throughout the 23 years the company has been in operation, it has accumulated immense experience in the apparel sector. The company manufactures women’s clothes, maternity dresses, men clothing and children attire. The assortment affords the company a wide variety of clothes ranging from men’s chemise, women’s tops, trousers, skirts to coats.

SWOT analysis

Strength
  • Financial endowment
  • Trusted and maintained relationships with Mills
  • Strong fabric sourcing and developing opportunities.
  • Innovative research and development department
  • Development of an international network
  • Benchmarking for monitoring productivity
  • Technical team stationed in every factory
Weaknesses
  • Rising operating costs
  • Integration and managing problems
  • Departmental barriers
Opportunities
  • Expansion into existing and emerging markets
  • New product lines based on new technologies
  • Diversification of global portfolio
  • Offshoring into Africa, India and Middle East
  • Reduction of lead time
Threats
  • Competition from emerging competitors
  • Market demand for quality and price
  • Increasingly difficult trading environment
  • Political and economic uncertainty
  • Increasing raw material costs

Strengths

Financial endowment

The company has generated huge revenues from the distribution and sale of its apparel to diverse customers globally. The company produces over 1.2 million pieces per month. The sale of the products earns the company between $50 million and $100 million. The company has a Registered Capital of $75 million. It has established loyal customers in the United States, Canada and Japan. The revenue generated in these markets has enabled the company to have an elaborate plan to venture into new markets particularly in Europe.

Trusted and maintained relationships

During the two decades that the company has been operational, the management has effectively created business relationships with suppliers and outsourcing partners. The most important relationship the company has created and maintained is with the customers who have significant trust in the company products. The company does not have a history of recalled apparel. The quality assurance team effectively performs its role. In addition, the company has created mutual trusting relationship with mills.

Strong fabric sourcing and development of opportunities

The strong bargaining power of the company has ensured that mills supply the company with strong fabric. Consequently, the apparel manufacture is of high quality and long-lasting further enhancing customer and partners’ trust. The relationships with the stakeholders enable the company to expand hence creating more employment opportunities in different global parts. The offshoring of jobs to locations where production costs are lower ensures that the company can avail to the consumers’ quality, and inexpensive products.

Innovative research and development department

The company invests heavily in its research and development department. The human resource function proactively engages in the recruitment and selection of experts in the textile industry. It poaches professionals in the R&D departments of rival companies. It attracts these professionals by offering competitive packages and ensures that the workplace environment is suitable for maintaining the professionals. The expertise contributed by these employees ensures that products manufactured by the company are difficult for competitors to replicate. The R&D staff receives retraining, personal and professional development from the company. The company ensures that the department is a knowledge division. The company meets the training costs of the individuals in this department. The employees in the department are encouraged to keep pace with the changing technology.

Development of an international network

Hanbo has managed to develop a global network in the distribution of its products. The key markets are based in Canada, Japan and US with Europe being the next prime target. The specific principal customers include JC Penney, Target, Macy’s, Gap and A&F, Lane Bryant, Jacob, Mother Works, Express, Harley Davidson, Macys and Goody’s. Other key clients include Abercrombie, CATO, Esprit, Meijer, Belk, Roxy, Quicksilver, Sears and Bass pro Shops among others.

These customers are distributed across an international network. Further, the company has created cordial relations with manufacturing companies in other countries including Sri-Lanka, Kenya, Cambodia and Vietnam. The partners in these countries help the company meet its lead time of 30 days. To ensure that there are no delays for prospective designs; the company has established own sample rooms in Shenzhen and Shanghai. The global network has enabled the company to be influential in the apparel industry due to the diverse and huge customer coverage.

Benchmarks for monitoring productivity

The management employs a variety of strategies to set and assess the productivity of the entire group across its international network. The benchmarks include the production costs, the pieces of apparel produced in each factory and the quality of the products manufactured. The levels of standard across the company are an essential benchmark for the company. Individual managing directors and production managers are answerable to the headquarters regarding the standards, productivity and quality of the apparel in their respective factories. The marketing and sales departments are answerable concerning the volume of monthly sales. The two benchmarks (production and sales) ensure that the company meets the set targets and consequently the profitability of the company.

Technical team stationed in every factory

The main factories are currently based in Shenzhen, Jiangsu, Hong Kong and Cambodia. Other factories engaged in the production of the products are based in Sri-Lanka, Kenya and Vietnam. Technical teams are stationed in each of the main factories on a permanent base. The teams oversee every stage of the manufacturing process. The strategy ensures that the apparel is of the uppermost quality. In the factories where some production (C/O) is assigned, the technical teams are only stationed there during production period as may be necessary.

Weaknesses

Rising operating costs

Some of factors that have increased the operating costs in the garment industry is the increase in minimum wages legislated by different governments, increase in taxation and rising charge on electricity. Some situations force the company to increase the price of the products. Consequently, the sales volume reduces. When the operating costs increase rapidly, companies choose to offshore the production. The setting up of factories adds to the expenditure while retaining the production in the same location reduces the revenue generated. The adverse global economic situation is also a factor that negatively impacts the company.

Integration and managing problems

Hanbo has expanded internationally. The expansion strategy has increased the production volume of the company. However, a major challenge of the move is diversified workforce considering the different cultural settings in different locations (Yen 247). As a result, the company is faced with the challenge of managing and integrating the workforce between the different factories. The managing directors and managers in these factories have different leadership styles posing problems for the headquarters. A major crisis arises when the headquarters chooses to send managers from Hong Kong to factories outside the country. The managers often face resistance from workers in these factories. There is usually lack of cooperation by the local managers who view the move as oppressing as they conceive that the headquarters consider them as incompetent individuals who cannot effectively run the plant.

Departmental barriers

Hanbo being a global company is among the largest apparel companies. Located in different countries, the company has many departments. There are many departments in each factory. The success of an organization largely depends on the cooperation between the departments, management and the employees. Further, the cooperation between the different departments within a factory is fundamental. Hanbo has the logistics department, the technical control (QA) department, the production department, the sample room department, the merchandising department, the material sourcing and control department, the R&D department, the IT support department and the finance department.

Working under these departments are many and different individuals who determine the success or failure of the company. The failure of proper coordination and collaboration between any of two departments is detrimental to the overall performance of the company irrespective of cooperation among all the other departments. Additionally, the large number of departments often leads to inflexibility as managers strictly perform their roles disregarding the impact on other departments. Large companies such as Hanbo have diverse individuals who are bound to miscommunicate due to language barriers. Such a scenario in the past has cost the company significantly due to failures in departmental cooperation.

Opportunities

Expansion into existing and emerging markets

The apparel industry is still unsaturated. The increase in population and changing lifestyle increases the demand for apparels. The existing market in the US, Canada, Hong Kong and Japan creates the most promising market for Hanbo as the company’s brand continue to gain recognition. There are loyal customers and the company has the opportunity to attract prospective customers. There are emerging consumers in the existing markets particularly the youth who have created a different taste for clothing. The company hence has the opportunity to design apparel that suits the taste and preference of this category of consumers.

Hanbo has production lines in Kenya. However, the products are not sold in the country and the African continent yet the apparel business for competitors is thriving in parts of the continent particularly in South Africa, Israel and Kenya. The company hence has an opportunity in the unexplored markets in the continent. There is also potential business in China and South-East Asia. These new regions will increase the market share of the company.

New product lines based on new technologies

In the increasingly competitive technology advancement, technology companies are introducing new technologies to cater for the apparel industry. Hanbo has the opportunity to use technology such as TAS to differentiate from competitors and improve productivity. The available and emerging technologies will facilitate manufacturing new high quality products at reduced costs. The involvement of the R&D staff in utilizing the technologies presents the company with the chance to design products that are demanded by the modern and coming generations. There is an opportunity for the company to implement nanotechnology to manufacture high technology apparel in bulk for use by customers in the airline and nuclear science fields.

Diversification of global portfolio

Currently, the company manufactures apparel only. Considering that the company is financially endowed, it has an opportunity to diversify its products. Contemporarily, the company selects the locations where specific products are to be sold. In this regard, the company has the opportunity to distribute each of the products to the areas where specific products are sold. Since the company has developed consumer loyalty for its brand, additional products will sell in the existing markets. The company may also venture into retailing to ensure that a deficit in the apparel is complemented by revenue generated by retail business and vice versa.

Offshoring into Africa, India and Middle East

Hanbo only offshore the production of apparel to Kenyan companies in the entire African continent. However, Africa is an appropriate production location considering the few non-restrictive regulations as the countries seek to attract investors. In addition, Africa affords readily available and low-cost labor. The manufacturing of apparel in Africa where there is demand for apparel will reduce transportation costs. The same case applies to India and Middle East.

Reduction of lead time

Hanbo’s current lead time is estimated at 30 days. However, the use of modern advanced technology will further reduce the lead time. Most competitors’ lead time is between 45 and 90 days. The reduction of lead time to about 25 days will attract more clients.

Threats

Competition from emerging competitors

The high demand for apparel has seen the rapid increase of apparel manufacturers worldwide. Large companies from other industries are increasing their global portfolio and diversifying their products. These include leading retailers such as Wal-Mart which outsource the production of apparel to countries with low production costs including China. The companies are financially endowed and produce apparel in bulk. Additionally, such companies retail their own products. The strategies eliminated a number of middlemen making the retail price lower while the quality is high. Other emerging investors have also realized the high profitability of apparel manufacturing. They consolidate capital and start small factories increasing competition in the industry.

Market demand for quality and price

The modern consumer is sensitive to both price and quality. Consumers compare the price of a product with the quality. Companies that offer quality products at lower prices often utilize modern advanced technologies that enable them leverage the market. Hanbo’s technologies are relatively old hence unable to compete with emerging companies.

Increasingly difficult trading environment

Globalization has made the availability of apparel easy due to connectivity in terms of communication and transportation of finished products. A consumer in Hong Kong may choose to buy a ready product in India and receive it within days instead of placing an order with Hanbo with a lead time of 30 days. The requirements of most governments and authorities make it hard for the company to conduct business. For instance, the regulations legislated by the Chinese authorities ensures that foreign companies are highly taxed to allow local investors control a huge percentage of the Chinese economy.

Political and economic uncertainty

The internalization of the company to Vietnam and Cambodia offers the company a competitive edge in terms of production costs. However, the political uncertainty does not allow the company to invest heavily in these regions. The global economic turmoil is usually unpredictable forcing the company to retain its assets in liquid form.

Increasing raw material costs

The costs of raw materials have been increasing in recent years. This forces the company to spend more instead of investing in other ventures and assets.

3 year development plan

SWOT analysis typically gives an analyst the insight into the strengths, weaknesses, opportunities and threats that face an organization. As observed in the SWOT analysis above, there is more that Hanbo should do to ensure its increased expansion, performance and development. This is despite the fact that the company is among the leaders in the apparel industry. During the first year, Hanbo should seek means to take advantage of foreign direct investment opportunities available in Asia and the Pacific through ESCAP. ESCAP delivers capacity building and offers practical assistance on demand by investors. The organization facilitates the reduction of trade costs and trade finance.

During the second year, the company should establish factories in parts of Europe to augment the direct supply of company products. The strategy will further enable the establishment and recognition of the company brand. The costs of production in Europe are high. Simultaneously, the majority of the consumers are middle-class earners willing to spend on quality products.

During the third year, the company should fulfill its objective of becoming the global leader in the apparel industry. The goal will only be achieved when the company ensures that the products are available anywhere in the world at appropriate prices and within the shortest time. An effective supply chain will be established where franchising will be essential. The company should ensure that customers can buy the products online. The use of technology is essential in the increasingly competitive market.

Conclusion

Conducting this analysis for Hanbo Enterprise Limited has presented the chance to determine the current situation of the company and what is requires to be done to improve the performance of the company from a financial perspective. Venturing into new markets will further enhance the profitability of the company. The company will be able to remain ahead of competition. The management should ensure that it employs the latest technology to advance the objectives of the company in gaining competitive edge. Consequently, the entire staff should be trained to utilize new technology to be innovative. The company should ensure that cultural settings do not impact the productivity by employing internationally trained management staff. By the end of the three years, the company will have surpassed all its competitors in terms of profitability, competitive advantage and market share following the implementation of the plan.

Works cited

Yen, Hannah. “Importance-Satisfaction-Gap (ISG) Segmentation of Thread Customers in Hong Kong.” The International Management Centres 1.1(1999): 1-330. Print.