Student assignment: Total Quality Management in XXX International Enterprise Limited

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Abstract

 

There are four major sections of this paper: (1) Background information introduction which describes briefly the company background and the planned structure of this study. (2) The second part is the careful literature review in respect of five major areas, e.g. cross-functional product design and, process management, this paves the theoretical support for the firm. (3) The third part of the assignment is analysis part which is also the major part of the assignment beginning with situational analysis in respect of the business environment of the company and the situational analysis is followed by analysis of the data collected from the original survey regarding the company’s TMQ performance. (4) The last part of the assignment is the conclusion and recommendations based on the analysis.

 

Table of contents

 

List of tables…………………………………………………………………………………………………… 2

List of figures………………………………………………………………………………………………….. 3

List of charts…………………………………………………………………………………………………… 4

Table of contents……………………………………………………………………………………………… 5

  1. CHAPTER 1: INTRODUCTION……………………………………………………………….. 7

1.1           Company background……………………………………………………………………. 7

1.2           Research objectives……………………………………………………………………….. 7

1.3           Paper structure……………………………………………………………………………… 8

  1. CHAPTER 2: LITERATURE REVIEW……………………………………………………… 8

2.1           Cross-functional product design……………………………………………………… 9

2.2           Process management……………………………………………………………………. 10

2.3           Information and feedback…………………………………………………………….. 11

2.4           Cross-functional training………………………………………………………………. 11

2.5           Employee involvement…………………………………………………………………. 12

  1. CHAPTER 3: RESEARCH METHODOLOGY…………………………………………. 12

3.1           Research design………………………………………………………………………….. 12

3.2           Source of data…………………………………………………………………………….. 12

3.3           Sampling……………………………………………………………………………………. 13

3.4           Constraints of this study………………………………………………………………. 13

  1. CHAPTER 4: ANALYSIS……………………………………………………………………….. 13

4.1           Situational analysis………………………………………………………………………. 13

4.1.1     PESTEL analysis…………………………………………………………………… 13

4.1.2     Porter’s Five Forces analysis of high end furniture manufacturing industry16

4.1.2.1Competitive rivalry: Low………………………………………………… 17

4.1.2.2Threat of substitutes: Minimized………………………………………. 18

4.1.2.3The bargaining power of buyers: medium level…………………… 19

4.1.2.4Bargaining power of suppliers: Low…………………………………. 21

4.1.2.5Barriers to entry……………………………………………………………… 21

4.1.2.6Summary of Porter’s Five Forces analysis………………………….. 23

4.1.3     SWOT analysis……………………………………………………………………… 23

4.2           TMQ performance evaluation with original survey………………………….. 24

4.2.1     Section 1: Personal details……………………………………………………… 24

4.2.2     Section 2: Cross-functional product design………………………………. 26

4.2.3     Section 3: Process management………………………………………………. 28

4.2.4     Section 4: Information and feedback………………………………………. 29

4.2.5     Section 5: Cross-functional training…………………………………………. 30

4.2.6     Section 6: Employee involvement……………………………………………. 31

4.3           TMQ issues identified………………………………………………………………….. 33

4.3.1     Young averaging work age among employees (difficulty in socializing new employee to the TMQ mission)………………………………………………………………………………………….. 33

4.3.2     Ineffective leadership in the cross-functional team……………………. 33

4.3.3     Inefficient communication and feedback collection…………………… 34

4.3.4     Lack of cross-functional training…………………………………………….. 34

  1. CHAPTER FIVE: CONCLUDING REMARKS……………………………………….. 34
  2. CHAPTER SIX: RECOMMENDING SOLUTIONS TO TMQ ISSUES………. 35

6.1           Enacting the TMQ mission and socializing new employees to the mission35

6.2           Introduction of Leadership Development Program………………………….. 37

6.3           Open door policy and bonus scheme to encourage feedback provision. 37

6.4           Cross-functional teamwork…………………………………………………………… 37

Appendix 1.0 Authorization letter from GM (General Manager) of XXX International Enterprise Limited       44

Appendix 2.0 TMQ survey in XXX International Enterprise Limited…………………… 45

List of tables

 

Table 1 Sale contribution by the three key customers in XXX International…… 20

Table 2 Summary of Porter’s Five Forces analysis in XXX International……….. 23

Table 3 SWOT analysis of XXX International……………………………………………. 24

 

 

 

List of figures

 

Figure 1 The model of Porter’s Five Forces theory……………………………………… 16

 

 

 

List of charts

 

Chart 1 Gender grouping…………………………………………………………………………. 25

Chart 2 Age grouping………………………………………………………………………………. 25

Chart 3 Working years…………………………………………………………………………….. 26

Chart 4 Communication skills among the cross-functional team members………. 27

Chart 5 The cross-functional team is under effective leadership……………………. 28

Chart 6 Evaluation of the saying: “The management accepts my suggestions at work”   29

Chart 7 Evaluation of the saying: “more advices from our staffs are necessary to improve the final product quality”…………………………………………………………………………………………… 30

Chart 8 Evaluation of the saying: “I am fully awareness of my job duty and responsibilities”      30

Chart 9 Employee evaluation of the work infrastructure………………………………. 31

Chart 10 Answers to question “Whether your suggestion will be considered during your job”     32

Chart 11 Answers to question “Do you agree that you have sufficient empowerment to get more involved in the job at which you are interested?”……………………………………………………….. 32
Total Quality Management in XXX[1] International Enterprise Limited

 

1.        CHAPTER 1: INTRODUCTION

 

1.1    Company background

 

Starting from a trading company based in Hong Kong focusing on the trading   wooden products, furniture, decorative panels, metal parts, speaker cabinets and etc., XXX International Enterprise Limited grasped the early trend of internationalization of China’s manufacturing in the 1990s and began its own production in South China’s Guangdong Province. Now by engaging in the production of quality and luxurious furniture, the company has been expanding its international business quickly in the new century. It has two factories which together account for 1,000,000 sq. ft. in area and by hiring more than 1,800 staffs the company has sufficient capital and talents and other capabilities to expand its business globally (XXX.com.hk 2012). In addition, the company’s two founders, the Yeung brothers are highly supportive about the company’s global expansion rather than confining the company’s business in the current relatively small market in the south East Asia. But one of the major challenges is that the company needs to eliminate the quality issues such as high defect rate as much as possible to gear the company up for the expansion in the major developed markets such as US and EU.

 

1.2    Research objectives

 

What the key considerations in Total Quality Management in literature and theories;

 

Measuring the Total Quality Management performance in XXX International Enterprise Limited

 

Issues faced by XXX International Enterprise Limited in respect of Total Quality Management

 

Analysis of the reasons behind the identified quality issues

 

Suggestions to the improving of Total Quality Management performance in XXX International Enterprise Limited

 

1.3    Paper structure

 

The study will first look into the review of the related theories and literature about the Total Quality Management; then the study will be followed by a careful environmental analysis of the market, macro environment, industrial environments and internal analysis of XXX, and the major component of the study will be to focus on the Total Quality Management of the company in term of issues such as cross-functional product design, process management, supplier quality management, customer involvement, information and feedback, committed leadership, strategic planning, cross-functional training, and employee involvement. And the next part regarding the business strategies includes the selection of general strategies, operation strategies and human resource management strategies. And the last part is to provide some suggestions on how the Total Quality Management of the company could be perfected.

 

2.        CHAPTER 2: LITERATURE REVIEW

 

Total Quality Management, or TQM, refers to a management approach that is aimed at lowering costs and improving production efficiency by making front-line workers responsible for ensuring that the products they produce meet prescribed quality standards (Potterfield 1999, p. 46). According to R. Ashley Rawlins (2008, p. 6), within an organization, management, employees, materials, facilities, processes and equipment all affect quality. Managers must be able to identify these aspects and seek to understand how they interact in the organization. Once a strategy is developed, communicated and the key variables affecting the quality understood, the conversion function can take place. And it is critical to understand the reasons of the quality problems. Based on the view of Dr. Joseph Juran and Dr. W. Edwards Deming, specialists in Japanese Quality argued that approximately 85 per cent of the quality issues are management issues. TQM functions on the premise that the quality of products and processes is the responsibility of everyone who is involved with the creation or consumption of the products or services offered by an organization. In other words, TQM capitalizes on the involvement of management, workforce, suppliers, and even customers, in order to meet or exceed customer expectations. Considering the practices of TQM, Cua, McKone, and Schroeder (2001) identified the nine common TQM practices as cross-functional product design, process management, supplier quality management, customer involvement, information and feedback, committed leadership, strategic planning, cross-functional training, and employee involvement. In the following parts, theories and literature review would be focusing on some of the common TQM practices to support our further discussions we would have in the analysis portion.

 

2.1    Cross-functional product design

 

Product design refers to how a product is conceived, planned, and produced. And it involves the total sum of all the product’s physical characteristics (Pride & Ferrell 2010, p. 358). Cross-functional product design involves cross-functional teams to solve or resolve any issue that may impede the new product design/development project in the company. Cross-functional teams serve to integrate the various activities of the product development effort and help in information-sharing on a regular basis. The frequent integration between persons from two different departments may help them educate each other and thus enhance each other’s capabilities. While in the traditional product design approach one department audits the other department, in a team approach there is collaboration right from the start. An essential benefit of involving various constituencies in product development is that the various departments become familiar with the product early enough (Chary 2009).

 

2.2    Process management

 

Process management refers to the administrative activities aiming at (1) defining a process, (2) establishing responsibilities, (3) evaluating process performance, and (4) identifying opportunities for improvement (businessdictionary.com 2012). Process management is critical when changes are desired. According to G. Kanji (1995), in several large organizations in which total quality management (TQM) has been used successfully to effect change, the senior management did not focus on formal structures and systems, but set up process management teams to solve real business or organization problems. The key to success in this area is to align the employees of the business, their roles and responsibilities with the organization and its processes. And Kanji (1995) believes that when an organization focuses on its key processes, which is the activities and tasks themselves rather than on the abstract issues such as culture and participation, then the change process can begin in earnest. A usual tool in the process management during or to foster change is Business Process Re-engineering, or BPR. Business Process Reengineering method (BPR) is described by Hammer and Champy as ‘the fundamental reconsideration and the radical redesign of organizational processes, in order to achieve drastic improvement of current performance in cost, services and speed’. A five step approach to Business Process Reengineering Davenport (1992) prescribes a five-step approach to the Business Process Reengineering model: (a) Develop the business vision and process objectives; (b) Identify the business processes to be redesigned; (c) Understand and measure the existing processes; (d) Identify IT levers; and (e) Design and build a prototype of the new process. An additional 6th step of the BPR method could also be found as adapting the organizational structure (12manage.com 2012).

 

2.3    Information and feedback

 

‘Feedback’ refers to oral or written developmental advice on performance that ensures the recipient has a better understanding of values, standards, criteria, etc’ (Fry et al, 2003). Feedback should also give management opportunities for reflection and allow them to make specific improvements in future practices. Information and feedback is important to any company that is targeting at improving the TMQ performance. The ultimate goal of a TQM effort is to satisfy not only the shareholders but also the customers, staff, business partners, and suppliers. An effective total quality effort will require the participation of everybody in the company or organization and good communication with other departments is important to get richer information. In a TQM effort, all members of an organization participate in improving the processes, products, services and the culture in which they work. Every employee has valuable and valid knowledge of how their particular job could be done better which is desirable in order to improve the effectiveness of the total quality management efforts (Beckford 2005).

 

2.4    Cross-functional training

 

Two of the primary wastes found in the office environment are two of the seven wastes: overproduction and of waiting. Both tend to be the result of specialization. One of the solutions to both overproduction and waiting is cross-functional training so that an employee is always ready to do the next most important thing for the organization. Cross-functional training creates more value for the customer as well as makes the employee more valuable. Cross-functional training also benefits employees through: Increased variety of work, Better sense of contribution and ownership, Enhanced skill development and Higher morale (agilean.com 2011). And all these benefits are expected to expedite and facilitate the total quality management practices.

 

2.5    Employee involvement

 

A fundamental Total Quality Management precept is that employees must be involved and empowered. Employee involvement means that every employee is regarded as a unique human being, not just a cog in a machine, and each employee is involved in helping the organization meet its goals (urenio.org 2009). Each employee’s input is solicited and valued by his/her management. Employees and management recognize that each employee is involved in running the business. The return on such nominal investments, i.e. investment in the human resource, will come in the form of higher levels of employee motivation, creativity, productivity, and commitment that will move the organization forward with greater profitability.

3.        CHAPTER 3: RESEARCH METHODOLOGY

 

3.1    Research design

 

One major assumption in this study is that with the development of the economy and rapid development in business in China, there are also fast changes in the total quality management which have great influences over the business performance and company business objectives setting for a lot of companies in China. And case study in XXX in the furniture industry focusing on the high end market segment would be a good example showing the total quality management development in China.

 

3.2    Source of data

 

Primary data would be collected in the factory in Chashan Town, Guangdong, P.R. China through interview, observation as well as paper based questionnaire with approval from the general manger of the company in term of an authorization letter. We will use the paper based questionnaire to research the employee involvement and also their thoughts about the total quality management relative issue in the company. Secondary data could be from the reports, company internal reports, books, Internet resource, journals and other publications.

 

3.3    Sampling

 

A sample of 50 employees would be surveyed in random using structured questions to analyze the TMQ performance in XXX. To ensure that there is no discrimination about the gender the difference, we survey 25 male staffs and 25 female staffs.

 

3.4    Constraints of this study

 

One of the key constraints in this study / survey is that in a typical manufacturing company, employees / workers usually focus only on their works within the job specifications and therefore they would have limited knowledge and understanding about the TMQ performance of the company in other departments.

 

4.        CHAPTER 4: ANALYSIS

 

4.1    Situational analysis

 

4.1.1            PESTEL analysis

 

The PEST analysis is a framework that helps collect data about the macroeconomic factors. Macroeconomic factors are the widest factors that are not specific to a company or the company’s industry. Nevertheless these factors affect the company but can not be directly influenced by the company (Haberberg & Rieple 2008, p. 105). The PEST analysis includes four dimensions: political, economic, social and cultural and also the technological factors. (Herzog 2010, p. 27)

Environmental factorsPositive to XXXNegative to XXX
Political factors

 

l  Overall political stability;[2]

 

 

l  Possible wars or regional military conflicts with neighboring countries, such as the Diaoyu Island issue[3] with Japan;

l  Lack of political freedoms[4]

Economic factors

 

l  Continual and fast economic growth; [5]

l  Rapid development of the domestic market for high end furniture; [6]

l  Risk and concerns of a possible debt crisis;[7]
Social and cultural factors

 

l  Increased preference of luxury goods among the Chinese consumers; [8]l  China’s unique cultural traditions;

l  Unique consumer behaviors;

l  Unequal hiring customs, i.e. preference of hiring friends and families;

Technological factors

 

l  Convenient air and sea transportation;

 

4.1.2            Porter’s Five Forces analysis of high end furniture manufacturing industry

 

Figure 1
The model of Porter’s Five Forces theory

Source: Adapted from Porter (1980)

 

The Porter (1980)’s five force model as depicted in the figure has been one of the most widely used models in analyzing the competitive environment by analyzing the five forces, through the application of the model one can assess the forces driving competition in an industry and evaluate the odds of a company successfully entering and competing in an industry. In other words, the model can help measure the industry’s attractiveness for entry or exit, analyze the competitive trends and plot the future strategy (Stahl & Grigsby 1997, p.145). In the following, we will apply this famous industrial competition analysis model to probe into the level of competition in the luxury furniture industry (manufacturing & supply) in China in which XXX International Enterprise Limited operates.

 

 

4.1.2.1      Competitive rivalry: Low

 

Competitive rivalry exists when companies jockey with one another in the pursuit of an advantageous market position. This means that, when one or more companies competing in an industry feels pressure to act or perceives an opportunity to improve their competitive position, competitive rivalry occurs as various companies initiate a series of actions and responses. Competitive rivalry exists because of competitive asymmetry, which describes the fact that companies differ from one another in terms of their resources, capabilities, and core competencies, and the opportunities and threats in their competitive environments and industries (openlearningworld.com 2012). The luxury furniture supplying industry in China is in the early stage of the industry lifecycle. Industry lifecycle is a concept relating to the different stages an industry will go through, from the first product entry to its eventual decline. There are typically five stages in the industry lifecycle. They are defined as: Early Stages Phase (alternative product design and positioning, establishing the range and boundaries of the industry itself); Innovation Phase (Product innovation declines, process innovation begins and a “dominant design” will arrive); Cost or Shakeout Phase (Companies settle on the “dominant design”); Maturity and Decline (Revenues declining; the industry as a whole may be supplanted by a new one) (investopedia.com 2009). And because the luxury furniture industry in China is still on its early development stage based on the industrial lifecycle, the competition level would be lowered. In another word, in the high end furniture manufacturing industry in China, the competitive rivalry is low for three major reasons: first of all, luxury furniture manufacturing is still a new industry in China as traditionally Euro and the US have dominated the design and manufacturing sectors of the high end furniture and though China has provided the needed low cost of labor but such labor are rarely equipped with the needed skills and techniques; secondly, because the industry is at the beginning stage, the focus of most companies are developing their customer base rather than focusing on competing with the competitors for customers; thirdly, the number of luxury furniture manufactures is not big in China though there is no formal and official release of such information but it is the fact perceived and seen commonly accepted in the industry.

 

4.1.2.2      Threat of substitutes: Minimized

 

A substitute is the product of (usually) another industry which meets very similar customer needs to those of the product of the industry in question. The threat from substitutes will depend on the number available and how readily they can be substituted for the product in question (i.e. what the switching costs are). When there are few close substitutes for a product the level of competition will be reduced (such as for patented medicines). The degree of competition from substitutes would depend on:

 

l  How effectively they meet the specific customer need;

l  Their relative price and performance;

l  The cost of switching to the product for buyers;

l  The willingness of buyers to substitute. (Stonehouse, Campbell, Hamill & Purdie 2004)

 

By definition, we can locate some usual substitutes for luxury furniture such as middle end and lower cost furniture. The threat caused by the substitutes for luxury furniture would be minimized for the following reasons: First of all, the best luxury furniture combined with design transforms space, creating an energy and atmosphere that is a joy to inhabit and express the high income or wealthy customers. The greatest design choices are always the ones that reflect the personal style of the customers or the local traditions. That doesn’t mean sticking with what generally known as furniture. Luxury furniture is not an end in itself, the right luxury furniture will enhance living space and travel experience for customers (articledashboard.com 2011) who are able and willing to pay extra for such service and enjoyment. Secondly, the cost of switching to the product for buyers who are frequent consumers of service consisting of luxury furniture could be mostly physiological costs as it is in accordance with our common sense that people moving up to the life with better quality would be naturally resisting to downgrade their life quality unless they could not afford to continue the high quality life style. And therefore, we can say that buyers would generally have less willingness to substitute the luxury furniture.

 

4.1.2.3      The bargaining power of buyers: medium level

 

The power of a buyer generally increases the more he or she buys. This power can be exercised in the demand for discounts or the expectation of the preferential treatment in the supply of goods. A factor to consider here is the relative size of the two parties. Buyer power normally exists only if the volume purchased forms a high proportion of the selling company’s total sale. For instance, the larger supermarket chains have considerable buyer power, particularly over such as the smaller food suppliers (Needle 2004, p. 295). The buyers are powerful when:

 

l  They are concentrated and buy in large volume.

l  The buyer’s purchases are a sizable percentage of the selling industry’s total sales.

l  The supplying industry is comprised of large numbers of relatively small sellers.

l  The item being purchased is sufficiently standardized among sellers that not only can buyers find alternative sellers but also they can switch suppliers at virtually zero cost.

l  The buyers pose a threat of integrating backward to make the industry’s product.

l  The sellers pose little threat of forward integration into the product market of buyers.

l  It is economically feasible for buyers to follow the practice of purchasing the input from several suppliers rather that one (strategy-formulation.24xls.com 2009).

 

The buyers of the luxury furniture have medium bargaining power over the suppliers in China for the following several reasons:

 

First of all, rarely there would be individual buyers purchasing luxury continuously. Also because of the nature of the luxury furniture which involves other important inputs such as designing efforts since the luxury furniture tend to be identical to other furniture, individual buyers would also tend to entrust their orders to the intermediaries such as the procurement company or design company. And therefore, when business customers dominate the customer base of the luxury furniture, they would enjoy strong buyer bargaining power because of the large volume of purchasing they tend to have. Such sale concentration could be seen from most luxury furniture suppliers. For instance, as for XXX International Enterprise Limited, three key customers contribute to more than 90 per cent of the total annual sale.

 

Name of customerPercentage of total sale contributed
Eric Brand40 per cent
HPG[9]30 per cent
PSA[10]22 per cent

Table 1 Sale contribution by the three key customers in XXX International

 

Secondly, as highlighted above in case where the supplying industry is comprised of large numbers of relatively small sellers the buyer bargaining power would tend to be enhanced, but as a matter of fact, in industry in respect of the manufacturing and supply of luxury furniture the situation is in an opposite situation, i.e. the supplying industry is comprised of small numbers of relatively big sellers.

 

Thirdly, though there are a huge number of furniture suppliers and manufacturers in China making furniture supplying to the rest of world, but it seems that the luxury furniture industrial sector is still too young and only a small number of factories are able to provide and supply the qualified high end furniture. And therefore the bargaining power of the buyers is controlled in a medium level.

 

4.1.2.4      Bargaining power of suppliers: Low

Supplier power is the power of an individual supplier to affect the pricing in the marketplace, in their favor. There are many factors that can affect how much power an individual supplier has on buyers in the market. Some of the ways that a supplier can have greater power is when there is only one or a few suppliers supplying a product. Suppliers can gain power if there are high barriers for new entrants. This might include product or service is under patent or unique limiting competition either by law, which is due to expensive R&D costs or a variety of other reasons (computerbusinessresearch.com 2011). The bargaining power of suppliers in the luxury furniture manufacturing industry is low for the following reasons: Firs of all, there is a large number of smaller scaled suppliers supplying the relatively small number of large scaled luxury furniture manufacturers; secondly, because of the higher profitability in the high end industrial sector, there are more and more small and big sized suppliers desiring to enter into the supply of the raw materials and services for the manufacturers of the luxury furniture, and therefore the bargaining power of suppliers would be low.

4.1.2.5      Barriers to entry

 

Factors involved as barriers to entry may be either innocent (e.g., the dominating company’s absolute cost advantage) or deliberate (e.g., high spending on advertising by incumbents make it very expensive for new firms to enter the market). Barriers to entry act as a deterrent against new competitors. They serve as a defensive mechanism that imposes a cost element to new entrants, which incumbents do not have to bear. There are seven sources of barriers to entry:

 

l  Economies of scale

l  Product differentiation

l  Capital requirements

l  Switching costs

l  Access to distribution channels

l  Cost disadvantages

l  Government policy (marsdd.com 2009)

 

The barriers to entry are strong in the luxury and high end furniture manufacturing industry in China for several key reasons. First of all, the economics of scale is obvious in the manufacturing of furniture and in particular for luxury furniture industry. Economies of scale, also called increasing returns to scale, is a term used by economists to refer to the situation in which the cost of producing an additional unit of output (i.e., the marginal cost) of a product (i.e., a good or service) decreases as the volume of output (i.e., the scale of production) increases. It could also be defined as the situation in which an equal percentage increase in all inputs results in output (linfo.org 2006). For a small furniture producer manufacturing several product lines, a small number of assembling line and a dozen of labors could be enough. But for a luxury furniture producer, such as XXX International Enterprise Limited, its production scale could be very large consisting of a number of functional departments and each department needs to be heavily equipped with machines and professional labors. For instance, the Shop drawing department has more than 80 professionals who are specialized in creating and revising the shop drawing according to the customer demands and the company’s own management and production decisions. Therefore the obvious economies of scale in the luxury furniture manufacturing industry would increase the barrier of entry for those outsiders. Secondly, the switching cost is huge. Even in the same furniture industry, companies moving up from middle end furniture production to higher end furniture production would need to invest greatly in the machinery upgrade and salary increase for higher end talents, and therefore the switching cost for outsiders in any industry to enter in or exit the luxury furniture production would be great.

 

4.1.2.6      Summary of Porter’s Five Forces analysis

ForceLevel
Competitive rivalryLow
Threat of substitutesMinimized
The bargaining power of buyersMedium level
Bargaining power of suppliersLow
Barriers to entryHigh

Table 2 Summary of Porter’s Five Forces analysis in XXX International

 

From the above Porter’s Five Forces analysis, we can see that the industrial environment in term of level of competition is favorable for XXX International Enterprise Limited as an existing key player of luxury furniture producer in China with the low competitive rivalry, threat substitutes, bargaining power of suppliers and strong barriers to entry for outsiders. And the only concern seems to be the medium level of the bargaining power of buyers for which the company may not have better solutions since bargaining power of buyers in higher end sectors tend to be high. These conclusions means that the company is operating in a relatively favorable industrial with high competition.

 

4.1.3            SWOT analysis

 

A SWOT analysis refers to the analysis of the Strength, Weakness, Opportunity and Threats of a company. The SWOT analysis according to Randel S. Carlock and Craig E Aronoff (2001, p. 154), the SWOT analysis is an easy tool to use that provides a summary view of the critical internal and external factors that are of strategic importance to a company. The SWOT analysis helps to capture data in order to qualitatively plot the firm on the capabilities / environment framework by developing an understanding of the firm’s strengths (capabilities) and opportunities (external environment). In the following, we will analyze the situation with the theory and review the four sides of the company.

 

Strength

 

l  Industry leadership

l  Labor cost leadership compared to international competitors

l  Economic of scale

l  Sufficient capital and finance support

l  Low competitive rivalry

l  High barriers to entry (to outsiders)

l  Low bargaining power of suppliers

Weakness

 

l  Process inefficiency caused by huge business scale

l  Decision making inefficiency caused by complex hierarchical management structure

l  Low employee involvement

l  Difficult cross departmental communication

Opportunity

 

l  Expanding product lines

l  Expanding customer base

l  Expanding domestic market

Threats

 

l  Threat of potential entry from big players in and outside the furniture industry

l  Increased domestic and international rivalry

Table 3 SWOT analysis of XXX International

 

4.2    TMQ performance evaluation with original survey

 

4.2.1            Section 1: Personal details

 

Chart 1 Gender grouping

 

As mentioned above, to ensure that there is no discrimination about the gender the difference, we survey 25 male staffs and 25 female staffs.

Chart 2 Age grouping

 

In respect of the age configuration, we can see from the above summary that young aged employees (below age of 34) account for more than 50 per cent of the total employees. With a large proportion of young aged staffs, it would become a challenge to the company as it is generally believed that young staffs with less working experience would tend to show less willingness to comply with the company policy and job relevant requirements which would be hard for a company to manage.

 

Chart 3 Working years

 

In addition to this the averaging young age of employee, we can see from the above chart that a half of the respondents are working with the company for only 1 to 2 years indicating that the turnover rate of employees is high in general and there could be problems aroused because of the average young working age because the new employees could contribute to the instability for the management of standards as well as the total quality management.

 

4.2.2            Section 2: Cross-functional product design

 

Cross-functional product design in XXX International Enterprise Limited involves a cross-functional team to solve or resolve any issue that could possibly impede the new product design and development project in the company. The cross-functional team targets to integrate the various activities of the product development effort and assist the information-sharing on a regular basis. And the company believes that the frequent integration and interaction between staffs from two different departments would be able to help them educate each other and thus enhance each other’s capabilities. In this section, we analyze the employees’ review of the company’s cross-functional team in helping the job performance and growth. From the following chart we can see that 34 out of the 50 respondents actually high agree or agree with the view that the cross-functional team members are equipped with good communication skills.

 

Chart 4 Communication skills among the cross-functional team members

 

 

Chart 5 The cross-functional team is under effective leadership

 

But when asked about the leadership of the cross-functional team, it is surprised to learn that the majority of the respondents did not agree at all that the leadership in the cross-functional team is effective which would be elaborated later.

 

4.2.3            Section 3: Process management

 

In term of process management, the company shows strong performance as more than 60% of the respondents either highly agree or somewhat agree with the following options:

 

l  The job responsibilities of most positions in the company are well defined and known to the staffs;

l  The company is running in a consistent process as contributed by each functional department;

l  The company is running in an effective process as contributed by each functional department;

 

And surely this good performance may be well explained by the company’s business nature as a furniture maker involving clear job division by different assembling lines and different functional departments.

 

4.2.4            Section 4: Information and feedback

 

Chart 6 Evaluation of the saying: “The management accepts my suggestions at work”

 

Chart 7 Evaluation of the saying: “more advices from our staffs are necessary to improve the final product quality”

 

In term of the information and feedback, from the answering of the above two questions we can learn that in the company, feedback collection and communication is not effective and even rare though most employees believe that their advices would be able to assist the improvement of the final product quality.

 

4.2.5            Section 5: Cross-functional training

 

Chart 8 Evaluation of the saying: “I am fully awareness of my job duty and responsibilities”

 

While 43 out of 50 respondents actually agree with the view of point that they are fully understandable of the job duty and responsibilities in their job description, but when asked whether they knew the job content and duties of all jobs in their respect department, the number of respondents who either agree or somewhat agree with the statement is only 8 (out of 50). Similarly, when asked whether they are familiar with the other jobs in company, this digit is reduced to 2 (out of 50). Such various results state a very simple truth that the majority of the employees (if the survey well represents the whole company environment) are strongly familiar with their own job roles but they are equipped with little knowing about other people’s jobs nor to mention jobs in other functional departments.

 

4.2.6            Section 6: Employee involvement

 

Chart 9 Employee evaluation of the work infrastructure

 

In respect of the employee evaluation of the working infrastructure which mainly involves the food, daily facilities, and medical services and so on, 29 out of 50 respondents provide positive responses by selecting either “highly satisfied” or “satisfied”. By further talking to the respondents we find out that employees love the living environment provided by the company and they also usually participate the activities held by the company. But in contrast, the situation is totally different in the work life as shown by the results of several survey questions as below.

 

Chart 10 Answers to question “Whether your suggestion will be considered during your job”

 

Chart 11 Answers to question “Do you agree that you have sufficient empowerment to get more involved in the job at which you are interested?”

 

From the above survey results in respect of the employee involvement, we can learn that a large proportion of the respondents are not receiving enough of caring and attention from the management regarding their opinions. On the other hand, employees are also not having sufficient empowerment to carry out the whole jobs that are interested to them.

 

4.3    TMQ issues identified

 

4.3.1            Young averaging work age among employees (difficulty in socializing new employee to the TMQ mission)

 

In addition to this the averaging young age of employee, we also identify that a half of the respondents are working with the company for only 1 to 2 years indicating that the turnover rate of employees is high in general and there could be problems aroused because of the average young working age because the new employees could contribute to the instability for the management of standards as well as the total quality management which could be contributed by the high turnover rate. As a matter of fact, the high turnover rate is even common in the furniture manufacturing industry in particular among the lower end job positions.

 

4.3.2            Ineffective leadership in the cross-functional team

 

As mentioned earlier, the majority of the respondents are not welcoming the leadership shown by the cross-functional team management; we conclude two major bad behaviors identified by the employees:

 

Non-response from the cross-functional team management when there are disputes;

 

Lack of equal treatment from the cross-functional team management

 

Therefore we can see that the leadership in the cross-functional team is not effective at least from the perspective of the employees, one plausible reason is that the leaders are all selected internally from the skilled workers and they are not well trained to do this leadership job.

 

4.3.3            Inefficient communication and feedback collection

 

As indicated previously, the feedback collection is not efficient though the majority of the respondents believe that more advices from the staffs are necessary to improve the final product quality. The fundamental reason behind such inefficient communication and feedback collection could be company’s culture to push strict compliance and also the Chinese culture’s acceptance of high power distance resulting in the employees’ negative attitude to express their different view of points.

 

4.3.4            Lack of cross-functional training

 

As mentioned earlier, cross-functional training creates more value for the customer as well as makes the employee more valuable. Cross-functional training also benefits employees through: Increased variety of work, Better sense of contribution and ownership, Enhanced skill development and higher morale (agilean.com 2011), and therefore, the insufficiency of cross-functional training would keep the company away from these benefits and become a challenge to the company in its way of business growth.

 

5.        CHAPTER FIVE: CONCLUDING REMARKS

It is true that the company is currently operating well in the high end furniture production industry with bright future in term of growing sale digits, the company has well positioned itself as a cost effective supplier of high end furniture to the major western developed economies. But as our survey reviews, there are still TMQ relevant issues that need to be addressed by the company as earlier as possible to better manage the quality issues and assist the company to move further. Focusing on the issues identified, the company needs to turn to a more intergraded and advanced TMQ system that could help the company to resolve the problems found. By resolving these issues, it is expected that company would be more successful. In the following, we will propose some solutions to the respective issue found.

 

6.        CHAPTER SIX: RECOMMENDING SOLUTIONS TO TMQ ISSUES

 

6.1    Enacting the TMQ mission and socializing new employees to the mission

 

For the concept of TMQ to be implemented successfully in the company, there could be two different strategies in response of the TMQ problems: short term based view or long term based view. The short term view is analogous to the many programs that are installed to fix immediate, reactive problems; but the more advised strategy would be a long term based view to consider TMQ as a long term process and therefore the firm has to not only strive to meet the short term targets but to plan for the future regarding what they are planning for the company’s existence in the years to come. Given the discussion above, we are advising the company to adopt a three-step strategy to deal with the average young working age problems. First of all, the company has to develop a clear mission statement stating the TMQ objectives as a key proportion. Even currently, the company has not clearly stated any statement regarding how they vision the TMQ efforts and what objectives TMQ is expected to help achieve. But still such mission has to be clear, short and conclusive, proposed mission statement is given as following:

 

Quality / Mission Statement:

 

Our mission is to enhance our ability to meet the needs and expectations of our customers and employees. XXX International Enterprise Limited is dedicated to the provision of quality products and offering dependable service through continual improvement.

 

Quality Objectives:

 

Provide our customers with products and services that are in compliance with requirements;

Provide products in due course;

Provide our customers with the best pricing and value for their products;

Provide open communications with our customers to meet their needs;

Continually improve our products and service.

 

Though with a company mission like the sample we have proposed above, there are more efforts to be done. A second step is to producing a living document. The enactment of the living document should further expand the company mission or even quantify the quality objectives as described in the mission statement. In the process of developing such living document the company needs to notice that it should not only include the inputs from the investors but also include the inputs from other key stakeholders such as the management, vendors, customers, employees or even the local community. Given the average young working age among the employees, a third step advised to continuously implement the TMQ strategy and keep the good compliance of all the employees with the TMQ mission is to develop a program to socialize the new employees to the mission statement and relevant and organizational philosophy. The benefits of adopting this three-step TMQ strategy would be a lot. And the most obvious benefit is that it provides a mechanism for new employees to quickly get to know what they are expected to adhere to and achieve in relate to the quality management.

 

6.2    Introduction of Leadership Development Program

 

In order to deal with the issue of the ineffective leadership in the cross-functional team and the reason of which is that the leaders are all selected internally from the skilled workers and they are not well trained to do this leadership job., the company could adopt the Leadership Development Program to cultivate the leadership caliber for the team leaders. The company could hire external professionals to develop a leadership development program which is designed to provide the candidates with in-depth experiences, ongoing mentorship, and targeted classroom training across the company’s business, helping them to build the strengths and reduce the weakness in the leadership behaviors.

 

6.3    Open door policy and bonus scheme to encourage feedback provision

 

An open door policy means, literally, that every manager’s door is open to every employee. The purpose of an open door policy is to encourage open communication and feedback provision so that management could obtain advices from the production front line regarding how the product quality could be improved. And another policy to ensure that employees are motivated to provide such feedback is to implement a bonus scheme to make sure that employees’ positive reactions are confirmed and encouraged openly.

 

6.4    Cross-functional teamwork

 

In this study, we had done a preliminary survey on a relatively very small sampling that leads to the discovery of the problems with the cross-functional training; here we propose some steps to enhance the cross-functional teamwork to provide better intelligence support to the company. First of all, the company needs to conduct an assessment of the employees’ current skills and capabilities to determine each employee’s area of functional expertise for team assignments. The company can review performance records, productivity logs and supervisor feedback pertaining to employee performance and pay close attention to team members’ performance appraisals wherein employees and their supervisors identify training and development goals; secondly, the company not only need to locate the right people but also the right assignment. This is to say, the company needs to look for the project inside the firm in which different functional departments and varied skills are needed. In the third step, the company also has to consult with the employees who have the qualified skills the carry out the joint assignment regarding whether they are interested to take part in the task; one more advice herein is to incentivize cross functional teamwork by offering incentives to those who are performing well in the joint assignment.

 

 

 

CHAPTER SEVEN: REFERENCE

 

agilean.com 2011. What are the employee benefits of Agile & Lean in the office? [online] accessed on 7th Aug 2012. available: http://www.agilean.com/resources/faqs/agile_lean_benefits_faq/agile_lean_benefits_faq.htm

 

apana.org.au 2012. China’s Development: Assessing the Implications (2003+). [online] accessed on 7th Aug 2012. available: http://cpds.apana.org.au/Teams/Articles/china_as_economic_engine.htm

 

articledashboard.com 2011. Luxury Furniture And Designer Homeware In South Africa. [online] accessed on 7th Aug 2012. available: http://www.articledashboard.com/Article/Luxury-furniture-and-designer-homeware-in-South-Africa/2097150

 

Beckford J, 2005. Quality, 2nd edition, London : Rutledge Taylor & Frances Group,

 

businessdictionary.com 2012. Process Management. [online] accessed on 7th Aug 2012. available: http://www.businessdictionary.com/definition/process-management.html

 

Carlock, R. S. & Aronoff, C. E. 2001, Strategic Planning for the Family Business: Parallel Planning to Unite the Family and Business. London: Palgrave Macmillan. p. 154

 

cbc.ca 2012. Patrick Brown: In its fight with Japan, China unleashes the mob. [online] accessed on 1st Oct 2012. available: http://www.cbc.ca/news/world/story/2012/09/19/f-vp-brown-china-japan.html

 

computerbusinessresearch.com 2011. Supplier power. [online] accessed on 1st Oct 2012. available: http://www.computerbusinessresearch.com/Home/business-information-systems/supplier-power

 

Cua, K. O., K. E. McKone, & R. G. Schroeder. 2001. Relationships between implementation of TQM, JIT, and TPM and manufacturing performance. Journal of Operations Management 19 (6) 675-694.

 

Chary, S. N. 2009. Production and Operations Management. New Delhi: Tata McGraw Hill Education Private Limited.

 

departures.com 2011. China: The Next Luxury Frontier. [online] accessed on 7th Aug 2012. available: http://www.departures.com/articles/china-the-next-luxury-frontier

 

Fry, H., Ketteridge, S. and S Marshall (eds) 2003. A Handbook for Teaching and Learning in Higher Education, Second edition, London: Routledge p 435

 

ft.com 2012. China’s appetite for luxury unsated. [online] accessed on 7th Aug 2012. available: http://www.ft.com/cms/s/0/3a10ee78-d185-11e1-bbbc-00144feabdc0.html#axzz2Burg151

 

Haberberg, A. & Rieple, A. 2008, Strategic management: theory and application. Oxford: Oxford University Press. p. 105

 

Herzog, C. 2010, Strategic Tools in Dynamic Environments: A Framework. Germany: GRIN Verlag. p. 27

 

huffingtonpost.com 2012. Big Trouble In Big China: Seven And A Half Things To Know. [online] accessed on 7th Aug 2012. available: http://www.huffingtonpost.com/2012/04/25/seven-and-a-half-things-you-need-to-know_n_1454277.html

 

investopedia.com 2009. Definition of ‘Industry Lifecycle’. [online] accessed on 7th Aug 2012. available: http://www.investopedia.com/terms/i/industrylifecycle.asp#axzz2BwOUL3Rg

 

Kanji, G. 1995. Total quality management. New Delhi: Chapman & Hall India.

 

linfo.org 2006. Economies of Scale Definition. [online] accessed on 7th Aug 2012. available: http://www.linfo.org/economies_of_scale.html

 

marsdd.com 2009. Barriers to entry. [online] accessed on 7th Aug 2012. available: http://www.marsdd.com/articles/barriers-to-entry/

 

Needle, D. 2004, Business in Context: An Introduction to Business and Its Environment. New York: Cengage Learning EMEA. p. 295.

 

openlearningworld.com 2012. A Model of Competitive Rivalry. [online] accessed on 7th Aug 2012. available: http://www.openlearningworld.com/books/Competitive%20Strategies/A%20Model%20of%20Competitive%20Rivalry/Competitive%20Rivalry.html

 

Porter, M. E. 1980. Competitve strategy, New York: The free press.

 

Potterfield, T. A. 1999, The Business of Employee Empowerment: Democracy and Ideology in the Workplace. Westport, CT: Quorum Books. p. 46

 

Pride, W. M. & Ferrell, O. C. 2010, Marketing. Mason: South Western, Cengage Learning. p. 358

 

Rawlins, R. A. 2008, Total Quality Management (TQM). London: AuthorHouse.  p. 6

 

reuters.com 2012. Economy of the People’s Republic of China. [online] accessed on 7th Aug 2012. available: http://en.wikipedia.org/wiki/Economy_of_the_People’s_Republic_of_China

 

Stahl, M. J. & Grigsby, D. W. 1997, Strategic management: total quality and global competition. Oxford: Blackwell Publishers Ltd. p.145

 

Stonehouse, G., Campbell, D., Hamill, J. & Purdie, T. 2004. Global and Transnational Business: Strategy and Management. West Sussex: John Wiley  Sons Ltd.

 

strategy-formulation.24xls.com 2009. Bargaining Power Of Buyers. [online] accessed on 7th Aug 2012. available: http://www.strategy-formulation.24xls.com/en112

 

urenio.org 2009. Employee involvement. [online] accessed on 7th Aug 2012. available: http://www.urenio.org/tools/en/employee_involvement.pdf

 

wallstreetpit.com 2011. China’s Political Stability. [online] accessed on 7th Aug 2012. available: http://wallstreetpit.com/61782-chinas-political-stability/

 

XXX.com.hk 2012. COMPANY BRIEF. [online] accessed on 7th Aug 2012. available: http://www.XXX.com.hk/aboutus.asp

 

12manage.com 2012. Business Process Re-Engineering. [online] accessed on 7th Aug 2012. available: http://www.12manage.com/register.asp?RS=cpp&LC=menu_ge

 

 

 

Appendix 1.0 Authorization letter from GM (General Manager) of XXX International Enterprise Limited

 

To whom it may concern,

 

This is to certify that ZZZ is authorized carry out a TMQ survey in XXX International Enterprise Limited during 1-Oct-2012 to 15-Nov-2012. All functional departments, staffs and management should offer necessary assistance where appropriate. All documents requested should not involve the information about any project that is currently under production or quote status.

 

All information and survey results must be for research purpose only.

 

Regards,

 

XXX,

GM (General Manager) on behalf of,

International Enterprise Limited

Appendix 2.0 TMQ survey in XXX International Enterprise Limited

 

Welcome to take part in this questionnaire. This questionnaire is designed to study the Total Quality Management in XXX International Enterprise Limited. Kindly note that this survey is officially approved by the GM of the company, and the answers provided will be kept in secret. Thank you very much for you time.

 

* Only XXX staffs are eligible to take part in this survey.

 

Please tick the most appropriate response based on your personal experience.

 

Section 1: Personal details

 

What is your gender group?

n  Female

n  Male

 

Please select the category that includes your age.

n  24 and under

n  25 – 34

n  35 – 44

n  45 – 54

n  55 – 59

n  60 and above

 

How do you describe your ethnicity?

n  Han

n  Menggu

n  Hui

n  Zang

n  Wei Wu Er

n  Miao

n  Others

 

What is your marital status?

 

n  Married

n  Single

 

Which department / division are you in?

 

n  Customer service department

n  Shop drawing department

n  Cost calculation team

n  Production department: Wood division

n  Production department: Metal division

n  Production department: Sofa division

n  Production department: Painting division

n  Production department: Assembling division

n  Shipment & Delivery department

n  Installation department

n  External fairs management department

n  Finance management department

n  Administration management

n  Personnel management department

n  Technical department

n  Security and secrecy protection department

 

Which management level are you in?

 

n  Common employees

n  Team leader

n  Supervisor

n  Vice division head

n  Division head

n  Vice manager

n  Manager

n  Vice general manager

n  General manager

 

How long have you worked in the company?

 

n  0 – 1 year

n  1 – 2 years

n  2 – 5 years

n  5 – 10 years

n  10 years above

 

Section 2: Cross-functional product design

 

Do you agree with the view that the “the cross-functional team members are equipped with good communication skills”?

 

n  Highly agree

n  Somewhat agree

n  Neutral

n  Somewhat disagree

n  Highly disagree

 

Do you agree with the view that the “the cross-functional team is under effective leadership”?

 

n  Highly agree

n  Somewhat agree

n  Neutral

n  Somewhat disagree

n  Highly disagree

 

Do you agree with the view that the “the cross-functional team members are given sufficient empowerment to do their jobs”?

 

n  Highly agree

n  Somewhat agree

n  Neutral

n  Somewhat disagree

n  Highly disagree

 

Do you agree with the view that the “the cross-functional team is necessary”?

 

n  Highly agree

n  Somewhat agree

n  Neutral

n  Somewhat disagree

n  Highly disagree

 

Section 3: Process management

 

Do you agree with the view that the “the job responsibilities of my position are well defined and known to me”?

 

n  Highly agree

n  Somewhat agree

n  Neutral

n  Somewhat disagree

n  Highly disagree

 

Do you agree with the view that the “the job responsibilities of most positions in the company are well defined and known to the staffs”?

 

n  Highly agree

n  Somewhat agree

n  Neutral

n  Somewhat disagree

n  Highly disagree

 

Do you agree with the view that the “the company is running in a consistent process as contributed by each functional department”?

 

n  Highly agree

n  Somewhat agree

n  Neutral

n  Somewhat disagree

n  Highly disagree

 

Do you agree with the view that the “the company is running in an effective process as contributed by each functional department”?

 

n  Highly agree

n  Somewhat agree

n  Neutral

n  Somewhat disagree

n  Highly disagree

 

Section 4: Information and feedback

 

How true is the saying “the management accepts my suggestions at work”?

 

n  Almost always true

n  Mostly true

n  Sometimes true

n  Rarely true

n  Not at all true

 

How true is the saying “more advices from our staffs are necessary to improve the final product quality”?

 

n  Almost always true

n  Mostly true

n  Sometimes true

n  Rarely true

n  Not at all true

 

 

Section 5: Cross-functional training

 

How do you agree with the saying “I am fully awareness of my job duty and responsibilities”?

 

n  Highly agree

n  Somewhat agree

n  Neutral

n  Somewhat disagree

n  Highly disagree

 

How do you agree with the saying “I am fully awareness of job content and duty of all the jobs within my team”?

 

n  Highly agree

n  Somewhat agree

n  Neutral

n  Somewhat disagree

n  Highly disagree

 

How do you agree with the saying “I am fully awareness of job content and duty of all the jobs within my department”?

 

n  Highly agree

n  Somewhat agree

n  Neutral

n  Somewhat disagree

n  Highly disagree

 

How do you agree with the saying “I am fully awareness of job content and duty of all the jobs within the company”?

 

n  Highly agree

n  Somewhat agree

n  Neutral

n  Somewhat disagree

n  Highly disagree

 

Section 6: Employee involvement

 

How true is the saying “I have the opportunities to do the work best”?

n  Almost always true

n  Mostly true

n  Sometimes true

n  Rarely true

n  Not at all true

 

What is your suggestion about infrastructure to do your work?

n  Highly satisfied

n  Satisfied

n  Neither satisfied nor dissatisfied

n  Dissatisfied

n  Highly Dissatisfied

 

What is your suggestion about the recognition given to you by the management?

 

n  Highly satisfied

n  Satisfied

n  Neither satisfied nor dissatisfied

n  Dissatisfied

n  Highly Dissatisfied

 

Whether your suggestion will be considered during your job

n  Frequently

n  Rarely

n  Occasionally

 

Do you agree that you are utilizing yourself and your potential as a whole to this organization?

n  Highly agree

n  Agree

n  Neither agree nor disagree

n  Disagree

n  Highly Disagree

 

Do you agree that you have sufficient empowerment to get more involved in the job you are interested or utilizing yourself?

 

n  Highly agree

n  Agree

n  Neither agree nor disagree

n  Disagree

n  Highly Disagree

 

 

[1] For the safety and secrecy of the company information, it is decided XXX would be used to replace the real name of the investigated company.

[2] There is a so called ‘Beijing consensus’ which is seen to be characterized by putting political stability and development before other (democratic / human rights) reforms, such focus was believed to contribute to the rapid economic development for the country for the past three decades (apana.org.au 2012).

[3] Known to China as the Diaoyu Islands, and to Japan as the Senkakus, they are suddenly back in the spotlight because the Japanese government last week announced it would purchase three of the islands from the Japanese family that owns the title to them. China regards the change of ownership as an attempt to reinforce Japan’s claim to sovereignty over that part of their mutual waterway and rejected the Tokyo’s position that it was acting to forestall a much more undesirable outcome (cbc.ca 2012).

[4] Given the lack of political freedoms, the Chinese government’s legitimacy rests on its ability to deliver improved living standards and increased economic opportunity to the masses. So far those masses have little to complain about. But that could change, and suddenly (wallstreetpit.com 2011).

[5] In the modern era, China’s influence in the world economy was minimal until the late 1980s. At that time, economic reforms initiated after 1978 began to generate significant and steady growth in investment, consumption and standards of living. As of 2012 China is a major importer of raw materials, manufacturer of basic goods, and exporter of consumer goods (reuters.com 2012).

[6] According to an earlier McKinsey report, the Chinese luxury market will be worth $27 billion by 2015 (up from $12 billion in 2010). At the same time, there is a generation of Chinese consumers who have been accustomed to luxury brands for years—Big Luxury entered China around 1990—and by now their eye is well trained, their fashion sense evolved, their brand knowledge substantial and, importantly, their confidence high. (departures.com 2011).

[7] Like the US counterparts, China’s banks are staggering under the weight of a bunch of bad debts, Reuters reminded. China forced the banks to make these loans to pump up the economy, but now the economy is slowing down anyway, exposing the banks to losses. China has the cash to bail the banks out, but it could be expensive: “Such colossal government spending not only hurts state coffers,” Reuters writes, “it risks fuelling inflation unless the central bank takes counter measures to soak up the extra cash.” Trouble is, China’s banks are still out there lending, including the first-time home-buyers, Bloomberg writes, in an effort to keep the property market afloat (huffingtonpost.com 2012).

[8] Chinese consumers are still spending heavily on luxury silk scarves, expensive handbags and French brandy despite slowing economic growth in the country, according to new sales figures from Hermès and Rémy Cointreau (ft.com 2012).

[9] HPG = Hospitality Purchasing Group, based in HK.

[10] PETER SILLING & ASSOCIATES, a design company based in Germany.