Hong Kong Manufacturing SMEs: Preparing for the Future

62What really differentiates Suga is its focus onspecialised products. These products are notas vulnerable to market fluctuation as generalproducts, and they tend to have a higher profitmargin than general products. By being the leadingmanufacturer of a niche product, Suga becomesmore important to the customers that havedeveloped the markets for those products. This fact,and the investment that is made in developing thespecialised technology, creates barriers to entry inSuga’s markets which means that other companieswould find it harder to compete with Suga. It alsomeans that Suga grows alongside its customers,scaling up in a way that is more measured andlower in risk than if Suga had to add capacity andpunt on where demand might come from. In 2009,specialised products represented 60 per cent ofSuga’s output.Suga’s success is reflected in its Chinese companyname which means the “best integrity.”Adherence to this characteristic played a pivotalrole in Suga’s early success. In 1992, Mr Ng made abusiness pitch to a large Japanese customer whenSuga was small. At that time, the large Japanesecustomer had a new product, the LCD TV, andthey were looking for manufacturers. When Mr Ngmet with the large Japanese customer, the seniorexecutives asked him about his relevant experienceand he commented that he had none in makingLCD televisions, but that the company had otherrelevant experience, was willing to learn, andwould welcome the opportunity to work withthe large Japanese customer and to receive earlysupport from them including instruction as tohow they would like the product to be assembled.Somewhat unexpectedly, the large Japanesecustomer gave Suga the contract even thoughSuga was the smallest bidder. The large Japanesecustomer executives informed Mr Ng that theapproach taken by all the other companies thatthey met with was to say “oh we can do it, noproblem, it’s easy” and the decision was taken togive the work to Suga because Suga was honestand upfront when others were not. Today thelarge Japanese customer is still Suga’s customerand on the back of the commitment made to Sugaby the large Japanese customer, as well as Suga’sperformance for the large Japanese customer,the firm managed to take on a total of three bigJapanese customers in a relatively short periodof time. This spearheaded Suga’s fast growth inbusiness.An unintended positive consequence of managingto secure a few large Japanese companies ascustomers is that they have loyally supported Sugaduring a couple of tough periods by doing thingslike arranging letters of credit for the companyto use to finance its operation during the shortterm.With a letter of credit from a major Japanesecompany, Suga is able to continue to get bankfinancing so that materials could be purchasedwhen needed, for instance.Mr Ng also attributes Suga’s success to theinvestments it has made in developing a world-classERP system and in automating whenever possible.These moves have improved Suga’s manufacturingand operating efficiency, as well as the quality andtimeliness of its management decision-making.To exploit the competitive advantage that comesfrom technological superiority, and to put Suga in aposition of being able to innovate, Suga maintains aleading-edge capability in specialised technology byensuring that its research and development team iswell-trained and that its skills are regularly updated.This includes having the research and developmentteam participate in product developmentcompetitions.Planning is important to Suga, as is the setting of3-to-5-year strategies which are reviewed annually.Monthly planning and review meetings are heldwith the senior management team and during thosemeetings there is an opportunity for cross-functionalcollaboration between business units that otherwisemight not have a structured environment in whichto share ideas. The important discussions that takeplace between the marketing and engineeringteams, for example, sometimes improve newtechnology to make it more attractive to the market.