johnson turnaround case study
Case Analysis China Dolls
Issues : the company is about to lose two major customers due to “cheaper” price, namely China.
Alternatives:
1. Move to China
Closing down partially Malaysian and Chieng Mai operations
2. Expand to China
Retain Malaysian operations
Joint venture
3. Develop own label for Malaysian and ASEAN market.
Costs :
i. Set-up costs (investment) ii. Operation costs (labor cost) iii. Sunk costs iv. Opportunity costs
v. Human ‘cost’
Explanations
Cost
Benefit
Other issue
Expand to China
1) Wholly owned
1) Cost of building factory(fully equipment) – RM15 million
2) NPV(over 5 years) – RM6.3
3) Cost of capital used – 8% p.a
1) Capacity of new factory similar with current three factories
2) Ready in 18 month
1) Did not have sufficient funds to fund this expansion.
2) Joint Venture
1) Total cost expansion – RM8 million
2) HCF’s investment – RM2.4 million
1) Almost one and half times of HCF’s current manufacturing
2) Ready in 6 month
1) Joint venture proposed 70/30 % (70% partner)
2) Separate with partner company
Move to China
1) Consider moving its manufacturing in China
2) Imposed to shut down in Butterworth, Jitra and Chiang Mai.
1) Pulling down factories at both sites, Jitra and Chiang Mai – RM1.2 million
2) Board up factories for a cost – RM200, 000
3) Redundancy payment cost – RM3 million(min)
1) Selling Penang and Butterworth factories – RM8.5 million
2) Profit selling will cover up the cost for manufacturing in China.
Develop own label for Malaysian and ASEAN market.
1) HCF were terminate all its contracts with the fashion houses
2) They will closed down Chiang Mai factory
1) Fixed cost Malaysian factories – RM30 million
2) Advertising costs – RM2.1 million per annum
3) Shutting down costs Chiang Mai – RM1.8 million.
1) Good potential in pursuing into this direction
2) HCF did not retrenched all its employees
1) Uphill task, creating
Issues : the company is about to lose two major customers due to “cheaper” price, namely China.
Alternatives:
1. Move to China
Closing down partially Malaysian and Chieng Mai operations
2. Expand to China
Retain Malaysian operations
Joint venture
3. Develop own label for Malaysian and ASEAN market.
Costs :
i. Set-up costs (investment) ii. Operation costs (labor cost) iii. Sunk costs iv. Opportunity costs
v. Human ‘cost’
Explanations
Cost
Benefit
Other issue
Expand to China
1) Wholly owned
1) Cost of building factory(fully equipment) – RM15 million
2) NPV(over 5 years) – RM6.3
3) Cost of capital used – 8% p.a
1) Capacity of new factory similar with current three factories
2) Ready in 18 month
1) Did not have sufficient funds to fund this expansion.
2) Joint Venture
1) Total cost expansion – RM8 million
2) HCF’s investment – RM2.4 million
1) Almost one and half times of HCF’s current manufacturing
2) Ready in 6 month
1) Joint venture proposed 70/30 % (70% partner)
2) Separate with partner company
Move to China
1) Consider moving its manufacturing in China
2) Imposed to shut down in Butterworth, Jitra and Chiang Mai.
1) Pulling down factories at both sites, Jitra and Chiang Mai – RM1.2 million
2) Board up factories for a cost – RM200, 000
3) Redundancy payment cost – RM3 million(min)
1) Selling Penang and Butterworth factories – RM8.5 million
2) Profit selling will cover up the cost for manufacturing in China.
Develop own label for Malaysian and ASEAN market.
1) HCF were terminate all its contracts with the fashion houses
2) They will closed down Chiang Mai factory
1) Fixed cost Malaysian factories – RM30 million
2) Advertising costs – RM2.1 million per annum
3) Shutting down costs Chiang Mai – RM1.8 million.
1) Good potential in pursuing into this direction
2) HCF did not retrenched all its employees
1) Uphill task, creating