Executive summary and conclusion (alternatives) for case analysis report

Case It was early April in 2017. Though some of the spring days were still rather chilly, the central heating had been turned off in the Software Park in the city centre of Qingdao where the headquarters of Goldmyk was located. Ma Shuhua, the CEO of Goldmyk, packed his briefcase and was about to leave for home. At that moment, the telephone rang. It was an enquiry about a customized batch of hats for the Chinese market. The deal would be worth about 600,000 RMB. Coincidentally, this order came at a critical moment, as Goldmyk had been revisiting its strategies, and considering the extension of the company's portfolio to include product lines for the domestic market. Until then the core business had focused exclusively on foreign markets. Under the current circumstances of increasing labour costs and Chinese currency appreciation, the export business had become tougher though. The situation was exacerbated in the wake of weak demand from Europe and the "re-industrialization" of the United States. In the last few months, Ma turned the question over in his mind again and again: should Goldmyk revisit its original principle? He was now asking himself: could today's call mark a new start? He told the customer on the phone hesitantly that he needed to consult with the management team members before replying. After returning home, Ma told his wife about the unexpected order. Unsurprisingly, Mrs Ma reacted pro-actively as she believed that this was an excellent opportunity for starting the extension of their business into the domestic market. The Start of Goldmyk Ma Shuhua graduated from Qingdao University, College of Textiles \& Clothing (Shandong Textile Engineering Institute in the 1990s) with a major in business management. Upon graduation, he found a job at a food company in Linyi, Shandong province. Thanks to his English skills, the company transferred him to its Amsterdam branch. Not before long, however, the company had to face difficulties because of poor management. In 1997, Ma saw that he could not help revert the situation, so he decided to depart from the company. After returning to Qingdao, he did not rush to find a job but planned to start his own company. It happened at the time that a friend of his running a hat factory needed a trustworthy, capable assistant for his export operations. Through friendly consultations, they decided to establish an informal partnership. In the first year the cooperation went very smoothly, and Ma gradually became familiar with the foreign trade business. The next year, Ma's friend withdrew from their partnership, and Ma teamed up with his younger brother and his wife. The three jointly took over the company and started their journey as a family business. Ma and his younger brother held the ownership 50:50, while his wife took the responsibility for sales and marketing. Goldmyk started its operations in a simple office building in the North District of Qingdao. The primary business of the firm consisted of manufacturing customized baseball caps and exporting them directly to foreign clients. At this humble start, Ma could not have anticipated that in the next 20 years, his company Based on this philosophy, he defined the core values of Goldmyk as cooperation, trust, respect and sustainability. Ma strongly believes that staying true to these values as an entrepreneur and being a good person is more important than maximizing profit. He often says: "Be a good man first, and then talk about business." Ma believes that the values and behaviour of a company's leader have a direct influence on the company's culture and employees' behaviour. His low-key attitude and humbleness show a striking contrast to the typical character of a charismatic authority or business leader in China's hierarchical society. When he speaks up, it is always after careful consideration and in a soft voice. He does not drive a luxury car and has no interest in wearing luxury brands. He emphasises that the only way to keep up with times and achieve sustainable development is through lifelong learning. In order to understand changing business trends, as a manager, Ma pays attention to both practical and theoretical developments in his field. This is why he decided to enrol in an EMBA program at the National School of Development at Peking University in 2016. No matter how occupied his business kept him, he never missed a single course. He felt he was thus doing good for his business: "The time spent in the classroom is a good investment". When asked about his hobby, Ma answered with a smile: "I love reading". In his office, there are always a few books on his table. One of his favourite authors is Kazuo Inamori, the founder of the 'amoeba' management method, and Ma admitted that his management philosophy has been definitely influenced by Inamori's theory (Exhibit 2). Attending international events, such as exhibitions and fairs is another way of learning. Ma always tries to use those opportunities to exchange his ideas and experiences with other entrepreneurs in Europe and in the United States. Besides constantly learning, Ma also feels responsible for the growth of his employees. In Ma's opinion, enterprises should not set growth as a primary goal. Instead, managers should ensure employees' development, which then generates organic growth. As he sees it, win-win cooperation should not only exist between the company and its clients but also between the company and its employees. After all, a company is a platform that enables employees to realize their values. Positioning In an era when multinationals poured into China in order to be closer to one of the largest consumer bases in the world, Goldmyk decided to position itself outside of China. This was convenient for Ma with his sufficient English skills and overseas working experience. After several years of persistent effort, Goldmyk gained the loyalty of many customers in the United States and Europe, and more recently the company has also been expanding into Latin American markets. In the meantime, the company and its hats are presented in four languages (Chinese, English, Spanish and Portuguese). The long list of Goldmyk's clients includes wellknown companies such as IXS, TJ MAXX, Marshall, Seattle, Gander MTN, Walmart, BMW, FedEx, Kohler, etc. When asked about Goldmyk's global positioning, Ma explained: "As a businessman, when you decide to start a business, you should be very clear with yourself: what are your strengths and advantages?" After having carefully studied his own resources and the environment of his business in which he was going to operate, Ma decided to start right away with international business, because he thought: Firstly, being active on the Chinese market requires strong public relations, which is something I am not very good at. I'm unskilled in social interactions, such as drinking with customers for trust building. Especially in Shandong province, where drinking culture prevails, you can't seal a deal without a banquet or a dinner party. In China, you cannot succeed in business by simply developing a good product. In addition to the quality, style and price of the product, there are several other factors that you need to take into consideration. On the other hand, doing business with Westerners is relatively simple and does not require so many social engagements. This way, I have more time to focus on company management and business development. The second reason for opting for the international market is that international trends are easier to grasp than Chinese ones. For example, [...] bestsellers are daily necessities, including function-oriented clothing. [...] Baseball caps are worn while watching a baseball game, and fishing caps are used during fishing. The style of these clothing items is more or less fixed, while their colour changes whenever fashion trends change. So it makes sense to follow the pulse of the fashion industry. However, trends tend change very fast on the Chinese market, which makes it difficult to track consumer preferences. It can easily happen that by the time you have discovered the latest trend in China, purchased materials, started producing, and sent the product off to the market, the trend has become outdated. Therefore, without keen insight and a strong aptitude for public relations, doing business in China would hardly be successful. For Ma, catching the opportunity for special events, even if they were just a one-shot game, was another way to generate revenues. A good example is the delivery of the 'MAKE AMERICA GREAT AGAIN' caps as promotion items during the 2016 US presidential election campaign, which had contributed with a big jump to Goldmyk's sales (Exhibit 3). Marketing At the starting phase of the business, Ma relied on his existing customers from his partnership with his friend. These customers would place their orders, and Goldmyk would manufacture the products according to the clients' requirements. Orders at that time were small in quantity and the production process was relatively simple. With the rising popularity of the Internet in the early twenty-first century, Goldmyk began to explore the possibility of gaining new customers via the Internet. At the beginning, they reached out to potential customers directly by inviting them to a company visit. Later, Goldmyk began to promote its products on online sales platforms such as Alibaba and : Made in china (Exhibit 4). After the establishment of the Goldmyk brand, Ma and his team created a website and made significant efforts to increase the number of page visits. Marketing in the foreign trade business mostly depends on international search engines. As the search engine Google was banned in China, Goldmyk used VPN services to connect to overseas networks with the help of specialized technical personnel. Thanks to these efforts, Goldmyk managed to attract customers from around the world. Facing New Challenges Complying With Environmental Regulations The day of August 28, 2017 seemed to be like any other Monday. The Goldmyk team at the headquarters was busy taking orders and discussing business issues. However, the gates of their factory, which were located about 100km away, remained closed, and all the production lines were suspended. The reason for this was quite complex. Pollution had become a key issue in China, and the Chinese government decided to take effective measures to protect the environment at any cost. Factories that did not comply with environmental regulations were forced to shut down. To ensure that local companies comply with environmental standards, the central government sends its officers to nationwide controlling tours. Goldmyk was informed on a short notice of such an inspection delegation from the central government around Qingdao city. Ma decided to close the factory temporarily to avoid potential troubles with the inspection officers. In fact, many local factory owners including one of Goldmyk fabric suppliers suspended their production on those days when the inspection delegation was around, with the aim of reducing emissions, and consequently obtaining better evaluation results. However, from a production perspective, especially in the case of export-oriented projects, suspending production was troublesome. A temporary stop would inevitably result in delayed product delivery, which was a critical element in retaining their customer relationships. Moreover, as the Chinese government was paying more and more attention to environmental issues, Goldmyk needs to prepare for the challenges posed by environmental restrictions. Trade Tensions Between China and the US The majority of Goldmyk's overseas customers are from the US, thus their business is sensitive to the relationship between China and the US. At the time when China's foreign export started to encounter severe challenges due to changing American and European sentiments toward trade deficit with China, Goldmyk also faced its own development bottleneck. In 2015, Goldmyk registered a subsidiary in the United States and found a local company for cooperation in product design and marketing. This is not uncommon: many Chinese companies acquire subsidiaries in the United States and manage them directly. In Goldmyk's case, the cooperation meant that Americans designed the products according to local market demands, and Goldmyk was responsible for production. However, due to differences in cultural background and unfamiliarity with each other's conceptual thinking, there were often communication and management problems between the two teams. Nevertheless, after having adapted to this specific partnership form, the two sides were able to create a win-win situation. Ma was well aware of the fact that a Sino-US trade war would have immediate repercussions on Goldmyk. He needed to have a Plan B since the US clients had voiced their concerns about the daunting possibility of a radical increase in tariffs. OEM to Southeast Asia Around 2010, the traditional Chinese manufacturing industry started to lose its cost advantage due to increasing production and land prices. Chinese manufacturing enterprises have been seeking relocation possibilities by moving their production to cheaper regions such as Vietnam, Laos and other Southeast Asian countries where production costs are still low and environmental regulations are less strict. A friend of Ma is planning to set up factories in Vietnam soon. From him Ma learned that there were already several hat factories in Vietnam run by locals, and by Chinese as well. As far as strategy is concerned, Ma thinks that the establishment of a Southeast Asian branch is inevitable for Goldmyk, not only because of the low labour costs there, but more importantly because it would provide a possibility for avoiding the consequences of the Sino-US trade war. While this seems to be a tempting opportunity, the question still remains: could this indeed be an alternative in case the trade war between China and the US turned worse? Action Follows Heart? Ever since the establishment of Goldmyk, Ma has strictly followed the principle: Goldmyk is an export-focused company. So far so good. Ma believes that the "born global" model has proved to be successful - it has created jobs for locals, earned hard currency when China badly needed it, and above all, Ma felt confident in what he was doing and comfortable about the outcome. At the same time, he could enjoy a good work-life balance. However, while reviewing the current challenges Goldmyk was facing, it seemed to him that it was time to adjust the company's strategy. But where to start? In fact, Ma has already been thinking about introducing a new product line for less fashionable and more functional headwear, such as children's and senior's hats. Could this be the way forward? But when is it a good time to start a new strategy? Ma decided not to wait around any longer. On the morning of the next day, right after Ma arrived in the office, he picked up the phone, dialed the number of the potential client who has contacted him the day before, and had a long and friendly conversation with him