HCF Company Essay
Evaluate the option of continue or shutdown of the Malaysian or Thailand operations. Should HCF consider starting its own label? Regarding to the case, HCF have two options either to continue or shutdown operations in Malaysia or Thailand. If they choose to shutdown operation in both Malaysia and Thailand, HCF should consider a few things. Firstly, the shutting down all factories in Malaysia and Thailand would costly around RM4.3 million. The costs are refer to the sale of Penang and Butterworth factories ( RM8.5 million), Chieng Mai and Jitra (RM1.2 million) and redundancy payments around RM3.0 million at minimum. Here, there have advantage and disadvantage of pulling down operation in Malaysia and Thailand. One of the effect of closing down is harm HCF reputation as quality manufacture for both men’s and women’s clothes. In additions, closing down the factories in Malaysia and Thailand causes HCF loss of human capital. As said by Teoh Chin Teh, Factory Operation Director, a large number of employees would have to be retrenched and most of them are working with HCF more than 10 years.
Thus, it will affect to workers if Malaysia factories are closed. Secondly, HCF has an option to close down the factories in Jitra and Chieng Mai only. The costs of shutting down both factories are RM1.2 million. Besides that, Jitra and Chieng Mai are located in rural area and will make HCF hard to find new buyers to sell the factories rather than Penang and Butterworth factories which is located in strategic location. Other than that, HCF can save cost of workers in Jitra and Chieng Mai and concentrated the operation in Penang and Butterworth. Regarding the issue about HCF plan to have their own label, they should take a few consideration before proceed with the planning. First, the cost for setup the label is RM32.1 million (fixed costs and advertising costs). Besides, the probability id producing own label is small about 70% while the successful is only 30%. Thus, HCF should not yet started their own label until the companies getting stable and have profit.