April 26, 2016
SCMP - Textile giant Lawsgroup survives the cycles with globalisation and diversification strategy
Chief executive Bosco Law sees Hong Kong’s land shortage as the biggest barrier to development of business in the city
Space, space and more space: that’s what Hong Kong needs to further develop as a business centre, according to the head of one of the city’s biggest companies.
In fact Bosco Law Ching-kit, deputy chairman and chief executive of textiles firm Lawsgroup and Laws Fashion Group, sees the land issue as critical.
“The shortage of land is a problem for everybody. A lot of companies cannot not find good offices, many people cannot find sufficient places to live, retailers cannot find suitable areas to set up shops. We also do not have the land for hospitals and schools for the children,” he said in an interview with the South China Morning Post at his office in Lai Chi Kok.
“This has discouraged businessmen from expanding while youngsters are finding it hard to set up businesses. An increased supply of land is necessary for Hong Kong to develop further,” he said.
Lawsgroup may not be a household name, but the fashion products it makes are. The Hong Kong textile giant is one of the largest in the world with over 20,000 workers sewing clothes for many international brands including GAP, JC Penney and Uniqlo. It also founded the local fashion chain Bossini.
Bosco Law is a grandson of the founder Law Ting-bong, who set up the group with his partners in 1975 as a small factory to make knitwear. Three generations on, the manufacturing operations have largely moved north to the mainland as well as to other parts of the world where labour costs are lower, but the group keeps Hong Kong as its home base for its property and retail businesses.
“Hong Kong is no longer a market for manufacturers to set up factories, but then, our group is a Hong Kong manufacturer setting up factories in China and other markets around the world. Hong Kong is now more suitable for the development of our innovative and lifestyle retail businesses,” he said.
“For the mainland, it is still a good place for a manufacturing business. Although Chinese workers now require higher salaries than those in other markets, mainland workers are very skillful and hardworking. They can sew well and very quickly. The status of China as the world’s factory will not disappear, but will only be upgraded to produce higher quality products.”
Law said that like all manufacturers, Lawsgroup faces economic down cycles when western customers spend less, meaning that exporters and manufacturers from Hong Kong and the mainland feel the heat.
“Our business has been running for over 40 years and we have coped with many economic down cycles. I do not worry too much about the current one. It is true that exports are weak, but then if we take a longer term view, things would always eventually get better. We believe the economies of both the mainland and Hong Kong will do well for the long term,” Law said.
“We expand further and hire more when the economy is good and would cut down expenditure such as marketing costs when the economy is bad. Keeping good cost control is always important for manufacturers and retailers.
“We never take too high a risk, so we never invest in derivative or risky investment products. This is how we have been able to cope with the many economic ups and downs in the past decades,” he said.
Law believes that diversification, innovation and changing with the times are key success factors for manufacturers and any other Hong Kong business.
Setting up factories at the right cost and in the right locations were key factors for Lawsgroup. When China first opened up in 1979, the company’s founder moved quickly to set up plants in Guangdong to benefit from the cheap land and labour.
Then it set up factories in the Philippines, Mexico and Thailand in the 1980s to take advantage of the textile export quotas in place in those countries at the time.
Overseas expansion meant the management team had to face the challenge of dealing with different languages, cultures and government regulations, but the experience that was gained remained useful. As the wages of mainland workers shot up in recent years, Lawsgroup was able to set up factories in Vietnam, Myanmar and Bangladesh.
“Salaries in these new markets are about 50 per cent cheaper than in the mainland. We have expanded our operations worldwide for a few decades already so we have the experience and the talent pool to manufacture in these overseas factories,” Law said.
“Globalisation is important for us to meet our clients’ demands. If a factory in Thailand has a flooding problem, for example, we can immediately shift production to Vietnam or Bangladesh. This has allowed us to have a high capability to export clothes on time,” he said.
Diversification into different business lines is also important. Lawsgroup has retail and property investments, and has turned two of its industrial buildings in Lai Chi Kok into retail shopping malls, D2 Place One and Two, which it promotes as showcases for young fashion designers and innovative industries.
“The three business lines of manufacturing, retail and property investment help offset different business cycles. For example, a falling Chinese yuan helps our manufacturing exports while our retail businesses do well when the yuan is trading strongly,” Law said.
“It also help us to understand our clients better. As we are in the fashion retail business, we can better understand what customers want when we need to manufacture the clothes for them.”
Law said Hong Kong still has good rule of law, which made it an ideal place to do business.