Hong Kong Manufacturing SMEs: Preparing for the Future

74In the long-run Lever Style plans to developproduction capability outside of MainlandChina, but it may do so by working with partnercompanies rather than “going it alone.” The ideawould be to continue doing the high value-addingwork in design, sourcing, and other services, and tosubcontract the labour intensive work to companiesin Bangladesh or Vietnam, for example. For now,there are plans to open a modern manufacturingfacility in Huizhou, Guangdong Province in late2010, with the prospect of producing 10 milliongarments annually and employing 8,000 workers, 139with a further overseas customer service office to beset up in London.Mr Szeto is keen for the company to be recognisedfor doing things a little differently, for doing thingsin a better and more creative way. He cites rolemodel companies as being Li and Fung in thegarment industry and Dell in terms of changing abusiness model in a “revolutionary way.”Lessons from the Lever Style CaseThere are a number of lessons that can be learnedfrom the Lever Style case.• It is important for firms to play to their strengthsand for owner-managers to do the same. Withprofessional management in the firm, owneroperatorscan do the tasks that play to theirstrengths and leave other tasks to others.• SMEs can successfully undergo generationalchange as long as succession issues are addressedat the right time.• To understand where the firm is comparativelyweak, the firm should benchmark against thebest firms in the industry and to look at what theoutside world is doing.• SMEs can benchmark aspects of their businessagainst leading firms from other industries andcan incorporate processes and systems that workin other industries where possible.139 www.hktdc.com.• Firms should accept that uncertainty will alwaysexist and they should not be constrained byit. Growth can and does occur in uncertainenvironments. What is important is that there arestrategies to deal with uncertainty by engaging inscenario planning and in forward thinking.• Companies need to continually adapt to theirenvironment and not keep unthinkingly doingthe things that worked for them in the past.Wishing that things would be different won’tchange the environment. Adapting is the onlyway to prosper long-term.• Costs should be reduced to the extent that thisis possible, but most SMEs will not have the scaleor the financial firepower to compete with largerfirms on a cost leadership basis. Thus they alsoneed to consider differentiation strategies.• SMEs can avoid fierce competition by choosingto do business in segments that have less directcompetition. Firms need to identify and focus onvalue drivers that will insulate them from purelyprice competition. For most Hong Kong SMEs,this will mean focusing on creativity, innovation,continuous improvement, flexibility, and reductionin lead- times. Being smaller and more nimble, SMEscan often carve out advantages in these areas.• SMEs in the sector should look to add value totheir customers by extending their operations toinclude ODM and OBM if they have the capabilityto do so. Firms that are able to offer theircustomers a wider range of services includingdesign, material sourcing, manufacturing,delivery, customer service, and after-sales serviceare likely to be more attractive.• Doing ODM is likely to be simpler than doingOBM. Building a brand takes a lot of time and isexpensive.• If the firm is able to integrate some of itsactivities or processes with its customers, thenthe customers are unlikely to give their businessto another firm. Such integration requires regularcommunication to understand the needs of thecustomer and to coordinate activities.• It is important to choose the right customers andto not just accept any order that is offered to thefirm. Companies should target customers that