LOVELY PROFESSIONAL UNIVERSITY

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MITTAL SCHOOL OF BUSINESS

Cover Page for Academic Task NO. 3

Course Code: MGN-578 Course Title: International Business Environment

Name of the Faculty Member: : Dr S.K.Kashyap Group: 07

Academic Task No.: 03 Case : Sunton Manufacturing in Cambodia:

EXIT or REMAIN?
Date of Allotment: 30th August 2020 Date of Submission: 15th October’2020

Student’s Name: Amaan Manzoor Student’s Reg. no: 12003295

Class: MBA Trimester: I Section: Q2040 Batch: 2020

Learning Outcomes:

Working on this case was really informative and helpful in understanding the case
and it helped me to develop team work, analytical and discussion skills in me.

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 INTRODUCTION

Sunton, set up in 2000 in Wuxi by Tony Wu, is a Chinese provider of casual wear
and sportswear brands sold in specialty stores and hypermarkets. Anyway the
company was capable to gain numerous focal points through the knitwear area and
their partnership. It is perceived that they offered great types of assistance in four
areas of piece of clothing flexibly chain, in which they consolidated their qualities.
Those being, orders the board, texture sourcing and procurement, manufacturing
and quality control, and warehousing and transportation. Their objective customers
were retailers, shippers, wholesalers and garment supermarkets and their strongest
item were T-shirts, the most famously sold, whose greatest provider was in Jiangsu
Province. Sunton thought about that their item separation was through its plans, an
additional worth, since they were working with designers from Italy and different
nations. They possessed a production line in China, which had not been in activity
since 2010. Furthermore, they worked with 15 to 20 partner factories in China, yet
never put resources into any of them, who were principally situated close to Wuxi
in which numerous providers of shirts and knitwear delivered exclusively for
Sunton. Nevertheless, following six years of working a genuinely steady business,
Wu needed a change. He was sure that he would not like to manage production
lines and clients for an amazing remainder and was ready to make the following
stride.

GLIMPSE CAMBODIAN GARMENT INDUSTRY

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What motivated Tony Wu to set up a factory in Cambodia?

Wu’s thought and improvement of new business was influenced by the global
environment, and the rise of web based business. After the monetary emergency,
there was a trend in the Chinese material industry of moving production lines
abroad, following the closure of its own china-based manufacturing plant in 2010;
he chose to travel to another country to continue his company’s development.

●The internationalization in 2012 would urge Chinese businesses to move from

only selling products to discovering openings all through the whole business chain
where there might be higher offer.

●A companion suggested the monetary zone in Sihanoukville in Cambodia, he

worried about defilement and helpless foundation in the area, and however his
impression of Cambodia was that it was not unreasonably awful.

●He visited the financial zone in October 2013, and he discovered that it was not
run by the government yet by an enormous Chinese endeavor called Hong Dou
Group, and it was open to all organizations not simply Chinese. Despite the fact
that the data gave about running a company in the zone was restricted, Wu chose to
build up the plant.

In January 2017, the originator of Sunton Manufacturing in Wuxi, Jiangsu

Province, China, loaded onto a trip to Cambodia. He needed to handle the
presentation issue of the company's garment producing joint venture (JV) there-
following two years in activity; it had run out of money. In the wake of meeting
with his joint venture accomplice, he inferred that the current joint venture in
Sihanoukville was hopeless. He currently expected to conclude whether to leave
Cambodia or to stay there, though in an alternate city and with another new
partner. Another processing plant would require further speculation. In the event
that he quit Cambodia, could his company could his company survive and develop
in the future?

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CAMBODIAN GARMENT EXPORT TO THE WORLD

CAMBODIAN GARMENT FACTORY TOTAL INVESTMEN

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ANALYSIS:

According to my analysis following are the reason why Sunton Manufacturing

failed to do business in Cambodia and why should the manufacturing unit leave
Cambodia:

 Unskilled workers: Regardless of the training workers for more than six
months, the workers in Cambodia were too slow and unskilled to perform any
job on time
 Corruption in Cambodia: the advantage of operating in Cambodia included
its duty free status for exporting to developed countries and lower labour costs,
but it was becoming quite complicated to start a new business in Cambodia due
to its system of corruption and Wu had to wait for a year to get its
manufacturing unit registered in Cambodia due to corruption.

 The workers in Cambodia were willing to work on hourly basis and they
preferred to be paid according to the working hours worked whereas in China
the workers worked on piece basis system.

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 Wu wasn’t able to perform a watchdog on his business as his partners were
managing and spending on behalf of him. So, he didn’t had an efficient control
over the financial situation of his company and no higher authority was there to
train labour for better efficiency of business, that’s why he lost all his money in
Cambodian outlet.

 Wu could have shifted his business to any other place in Cambodia or would
have started another business there but all the infrastructure in Cambodia was
too expensive and Wu already was out of cash so it was better for Sunton
manufacturing to exit Cambodia and start its business in another country where
less investment is required, commencement of business is easy and labour is
cheap and where Wu would have an active participation in his business.

 Wu was producing tennis T-shits in Cambodia, where there was not a perfect
market for tennis T-shirts within the boundaries of Cambodia. He should have
setup his business in another country like India where the sale of his T-shirts
would have a large buying population within the domestic market and he could
have exported it to other countries also.

How is this case linked to my Course?

The given case has a main link with internationalisation.

 Internationalisation is the process of increasing involvement of enterprises in
international markets.
 Sunton Manufacturing internationalised it market by starting its business in
Sihanoukville, Cambodia, Wu took this step to increase its footprint or
capture greater market share outside of its country of domicile by branching
out into international markets.