Hong Kong Manufacturing SMEs: Preparing for the Future

52Renley has faced no major regulatory issues andthe company’s experience in Hong Kong andSwitzerland has been similar with both locationsbeing transparent in terms of what is required ofcompanies. In China, the regulatory environmentis more challenging. Government officials take amore active interest in the business and it is likelythat companies will be visited by the Labour Bureau,the Tax office, and Customs officials, who are likelyto tour the company’s factories. Cooperating withthese officials takes time and costs money. In generalterms, doing business in Switzerland and Hong Kongis far simpler than doing business in China.Company StrategyWhile Mr Lau doesn’t view Renley as being all thatsuccessful and comments that the company is “stilllearning,” the reality is that Renley has survivedand grown through some difficult periods. MrLau attributes this record in part to foresight. Hebelieves that whatever the industry, a company’smanagement should forecast for the next 10 years.In the case of Renley he points out that “nowadayseverybody is talking about branding, but we weredoing research and development in Switzerland andstarted a branded watch business long before it wasa very popular strategy. Friends took the view thatour OEM business was good and that we shouldjust focus on that, but I could see that just doingOEM had limited potential. Some of the companiesthat we used to compete with in doing OEM arenow out of business.”As other Hong Kong watch manufacturers weremoving production to the Chinese Mainland in theearly 1990s, Renley decided to differentiate itselffrom the competition by staying in Hong Kong andobtaining facilities in Switzerland to make highervaluewatches. At around the same time, Renleyacquired three Swiss watch brands, including brands,technology, stores, and in one case a factory.Renley’s manufacturing and branded businessesin Switzerland keep it in close contact with theSwiss market, resulting in good contacts with otherindustry players, bankers and other professionalsthat work with watchmakers. In recent years, Renleyhas been more active in selling its branded productsinto the Chinese Mainland. Renley finds that someChinese customers prefer a Hong Kong madewatch because they are generally better quality thanwatches made in Mainland China.Although Renley produces some of its owncomponents, it is principally an assembler with keycomponents purchased from Switzerland, Japan,Taiwan, Thailand, Korea, and China. The companyhas decided not to relocate its main manufacturingto the Chinese Mainland. It sees merit in continuingto do most of its manufacturing in Switzerland andHong Kong. This is due in significant part to thefact that Swiss-made watches and to a less extentHong Kong-made watches can command a pricepremium versus other watches. An advantage ofmanufacturing in Hong Kong is the flexibility tosource components from different supply locationssuch as Japan and the PRD, which allows Renley tofocus more on design.Renley’s strategy is not to chase other companiesin trying to make cheaper and cheaper watches,it is to make better quality watches in Switzerlandand Hong Kong that will sell at a higher price.The strategy is to carve out a niche in makingwatches that are innovative and well designed,and to follow-up with good service. This approachis supported by a research and development staffof 10 and the ability to make watch samples in acontrolled environment that minimises the risk thatdesigns will be appropriated by others.Renley’s retailing activities began in 1999. Asubsidiary, “Global Timepieces,” was set up as aseparate company that would sell a range of watchbrands such as Cartier, Omega, Piaget, and others,not just Renley-owned brands. In Mr Lau’s view, thismade Global Timepieces more competitive as a watchretailer. The opening of the watch retailing businessresulted in Renley being diversified across the watchsector as an OEM, ODM, and OBM company, givingthe company greater depth and strength.