Course title: Creativity and Business Innovation
Instructor: Professor Ali Farhoomand
Assignment 1
Case study: Managing Creativity at Shanghai Tang
Student Name: Tse Ka Cheuk Derek
University ID: 3035066338
Submission date: 16th September, 2013
Executive summary
Founded in Hong Kong, named as one of a very famous TV Drama, Shanghai Tang is a Chinese brand who takes the lead to sell luxury apparels and accessories, targeting the middle to high income group. Recent reports reveal that Shanghai Tang is having problem in being creative and on the other hand, serving the needs of the market. Conflicts are bred between designers and management levels, both are firm on their stance, creating tensions within the company. Another major issue is the stagnant expansion into China market. Despite promoting of modern Chinese chic, US and Europe serve as the major market while China is a highly potential market with the boost of wealthy citizens. The third issue that needs to be addressed is the limits on Chinese manufacturers constrained designers’ creativity. Aiming to pride the “made in China” tag, however, insufficient of sophisticated machines cannot help avoid manufacturing relatively low-quality products.
In this report, the highlighted issues and recommendations will be addressed in a detailed manner. A clear and step-by-step implementation plan will be provide as well. Suggested solution to solve the imbalance between innovation and profit maximization can be recruitment of a creative director. His/her role is to guide junior designers to fit their designs to real business world while allowing certain degree of freedom for them to create their own art work.
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Concerning the problem about the expansion into China market, Shanghai Tang first and foremost task is to know what kind of products that modern Chinese city dwellers need. A brand new product line should be opened to specifically cater the preference of them. Small scale of the line is preferred in this preliminary stage and reviews should be conducted after the launch of the new line of products.
While for the limits of Chinese manufacturers, Shanghai Tang can establish partnership with trustworthy and experienced manufacturer. By injecting capitals and utilizing the manufacturers’ expertise, new machines can be reinforced to provide refinements for the clothing and accessories.
Last but not least, an implementation plan will show you how these recommendations are going to run year by year. This gives a blueprint of how should Shanghai Tang executives respond to remedy the current situation.
Introduction
As a pioneer in selling luxury Chinese-branded apparels, Shanghai Tang consistently provides surprises and delightful experiences to their customers. Despite its unique and defining business nature, some problems seem act as major hindrances for the company’s growth and expansion.
The whole report is clearly structured into four parts. The first part addresses major issues (problems) found out in the company, breaking the issues into tiny segments for the ease of further analysis.
The second part provides recommendation to the company. Rationale of choosing this solution will be stated and a thorough implementation plan will be proposed as well.
Finally, a conclusion will be drawn considering the predicted future of the company.
Issue 1: Balance between creativity and business sense
Designers care about the style, color and the silhouettes of the products they designed. They tend to view and generate products in an artistic sense that they feel comfortable with. In contrast, management levels pay attention on profit maximization, focusing on products that suit customers’ taste. It is clearly known that both of their viewpoints served as core values in the company but it is always difficult to strike a balance between them. Recent committee meeting between designers and managers even create tensions and soon escalated to vigorous debates. No matter it is about the imbalance between creativity and business or the deteriorated relations among employees, both create threats for the company’s future.
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Suggestion 1.1: Promote or hire a creative director
It is noticed that conflicts breed easily between designers and managers when discussing about the approval of products. Designers pay huge amount of effort drafting a product design, thinking this would be the best work of art. Nevertheless, it is always difficult for them to persuade retailed people to accept products that are way too artistic to them.
What is missing in the former committee meeting is a person who can assess the viewpoints of both sides and make a reasonable and rational decision. Shanghai Tang should consider hire or promote a creative director to take up this role, a head of both the retailing and the designing team. The director should also be able to resolve conflicts once atmosphere are intensified.
The director should also be responsible to keep track of the designers’ art work. He/she should spot out whether the clothing is wearable on a daily basis or it is merely an artistic work. A guideline at the early stage of designing will help designers to amend their work easier compared to criticism after the design of the whole product is finished.
On the other hand, the director should allow certain room of creativity and uniqueness provided by the designers. Too many interruptions will lower the morale and turn products to mediocrity.
For internal promotion, Armele Barbier, a French designer with 4 years tenure, can be taken into consideration. His direction is to first satisfy the need of customers and then add his own element of designing into the products. This would be a great idea to balance between creativity and business sense. Moreover, with his expertise in both designing women and men’s wear, he should be able to understand the key elements of the “Shanghai Tang DNA”. This is especially important when we are going promote someone into a management role. The person should be clear about the company’s vision and mission.
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Issue 2: Extension into China market as well as other places around the globe
According to the marketing research conducted by Shanghai Tang, USA and Europe’s customers take up the dominant proportion, contributing 77% and 54% in the US market and Hong Kong market respectively.
With regards to the McKinsey research study, there were 1.6 million wealthy households in China and the figure is expected to increase 16 % annually. Potential customers eager to buy luxury goods can be spot more easily. From this, we can see China is a highly potential market for Shanghai Tang to enter. Yet, regarding the Hong Kong Market, only 23% of the customers are from Mainland China. It shows there are rooms for improvement in order to attract more Chinese customers.
In order to interact with more Chinese customers, there are two ways to do so: expanding the China market itself or attracting Chinese customers in markets in other countries.
Solution 2.1: Create a brand new product-line catering for Chinese customers
Chinese customers are get used to traditional clothing and it is sarcastically they generally prefer apparels that are more modern and not that traditionally Chinese. In order to sustain customers from other countries while attracting more Chinese customers, a brand new product-line can be set up, specifically produce clothing and accessories that fuses the best of Chinese culture with contemporary elements of style. I personally think that Joseph Li, the Chief Designer of Women’s wear, can be in charge of this new product line. As a Hong Kong-born Chinese who grew up in Canada, he must be able to inject some Western (more contemporary) elements into a product that is based on Chinese culture.
This product line should be just in trial period at the onset; focus should still be on the mainstream market. Joseph Li, as the Chief Designer, should still remain on his major role; this line serves as an extra workload to him. Management team could consider increase his salary as compensation.
Solution 2.2: Contemporary renovation in China branches
Apart from product itself, stores in China can be renovated in a more contemporary way. Stores in Hong Kong look a bit too “traditional Chinese” where tables, pillars and floor are all made up of oak. (see appendix I) To cater the taste for Chinese customers, branches there can be renovated into a more modern feeling.
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As renovation may take certain time, in short term, Shanghai Tang can focus on creating the new production line. Later on, when the new line is on the right track, renovation can be considered to further attract Chinese customers.
Issue 3: China’s low production cost sacrifices products’ quality
One of the edges of Shanghai Tang is to proudly present the words “Made in China”. “Made in China” products are usually stereotyped as a mark of shame. Chinese manufacturers will usually do whatever they can to catch a piece of business. Decline in quality and the gradual degradation of a product’s quality over time is a very common issue. Low-quality products and safety issues are huge concerns, and sometimes resulting in recall of products.
To gain back confidence for China-manufactured products, Shanghai Tang wants to let customers see products manufactured in China with pride. Shanghai Tang uses high-quality manufacturers and yet, certain limits on technology and skills constrained designers’ creativity. They are not able to produce certain types of embroidery or stitches and have the right of finishing for some fabrics as they lacked appropriate machines.
As a result, Shanghai Tang needs to sacrifice its product’s quality even though it is running on the high-end products line.
Solution 3.1: Establishing partnership with credible Chinese manufacturers
The problem can be tackled much easier if Shanghai Tang can seek foreign manufacturers for help. But in order to withhold its mission, that is to polish China-made products’ reputation, it will be ironic to find manufacturers in other countries. It is also not optimistic to stay using the current manufactures as it poses constraints to designs and quality of goods and this violates one of the key elements of the “Shanghai Tang DNA”, that is to act as a leading purveyor of Modern Chinese Chic.
Trying to run out of this bottleneck situation, Shanghai Tang can establish partnership with its own manufacturers which are credible and may have cooperated for many years. It would be too risky if Shanghai Tang creates its own manufacturing center in China as no past experience can be followed. Seek partner with a trustworthy manufacturer can hedge the risk and express more opinions on how the products should be made. Shanghai Tang can then inject capital to the manufacturing company, providing training to labors and updating the machineries.
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With the advancement of machines, designers’ creativity can be fully utilized and all the subtle refinements can be added that high-end couture fashion required. Income generated by using these types of new machines can also be shared with Shanghai Tang as a partner of the manufacturing company.
3-year Implementation plan
With regards to the above-mentioned issues and suggestions, here I will present a compiled plan that will clearly show how different suggestions can be implemented.
Conclusion
Using re-configure historical and traditional Chinese culture into a distinctly Chinese brand identity, Shanghai Tang continues to record profit growth in the last few years. Nevertheless, substantial threats such as imbalance between innovations and business sense, inadequate support from Chinese customers and unsophisticated machineries are hindrances for sustaining business growth. By implementing the suggestions progressively and review of performances on a regular basis, Shanghai Tang can maintain its prominent role in the high-end luxury market.
(Word count: 1492)
Appendix I:
Renovation of a HK store of Shanghai Tang
Renovation of a HK store of Shanghai Tang
Reference:
Roy Y.J., C., & Robert G., E (2010). Managing creativity at shanghai tang.
Zhiyan, W., Janet, B., & Jonathan, S. (2013). The brand culture of shanghai tang: An aspiring global brand.
