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Esquel Group

Try telling Marjorie Yang that the sun is setting on Hong Kong's garment industry and she will most likely laugh in your face and then make you eat your words.

And with good reason. As chairman of Esquel Group of Companies, the world's largest manufacturer of men's shirts, she has captained the company through two decades of exponential growth. And rather than slowing down, that growth only looks to be accelerating.

"People look at Hong Kong companies and think the garment industry here doesn't have a future because they are still fixated on the past. They think garment manufacturing only means sweatshops and cheap labour, and that it has no place in an advanced economy like Hong Kong's. Whereas it is not true," she said. "Hong Kong is the instigator of our global operations -- this is where we do a lot of the brainwork and where ideas are generated."

Since Ms Yang returned to Hong Kong from the U.S. in 1978, armed with a math degree from MIT and an M.B.A. from Harvard, to help her Shanghai-born father, Y.L. Yang, run Esquel Group, the company has grown into a global empire operating plants in as remote places as Mauritius.

Today family-owned Esquel's sales top US$500 million made on orders for 48 million shirts a year and 5 million pairs of pants, and other garments, according to Ms Yang.

She attributes the growth to Andy Grove's theory of 'only the paranoid survive.' "We strongly subscribe to that theory. We have to constantly strive to improve ourselves and that has lead to continuous efforts to stay ahead of the competition."

In the early '80s the company decided it needed to focus on quality and started trading up its customer base. It then realised it needed to provide more services to customers and so developed merchandising capabilities. In the '90s it moved from being just an order taker and started to provide more merchandising, especially in fabrics.

"In our drive to get more quality we backward integrated to make fabric. We first started making knit fabric and made a very big investment in a dye yarn mill in china. That allowed us to take over from the Japanese who used to be the main supplier of high quality fabric," she said. The company now farms extra long staple cotton in Xinjiang, western China, which is among the best breeds of cotton in the world.

Its strategy has paid off and its customer base today includes the cream of the industry -- labels like Polo Ralph Lauren, Tommy Hilfiger, Brooks Brothers, Hugo Boss, Nordstrom, Eddie Bauer, Abercrombie & Fitch and Lands' End.

Being from MIT, Ms Yang obviously understands the power of technology, and as such has leveraged its use in her operations. This has helped the company get its products to market faster, reduced wastage in the production process and move goods faster through the supply chain. She has also used technology to reduce energy consumption and better protect the environment.

"Obviously we cannot do anything to reduce the price of oil, but we can do clever things to reduce the consumption of water and energy, and that can be achieved through engineering. We have about 200 engineers running around doing studies which include environmental, including energy, studies, because a large chunk of the problems of the environment comes with inefficient use of energy or resources," she said.

Sharing knowledge

Because of Esquel's IT investments, Ms Yang decided to establish Esquel Technology earlier this year. This has allowed the company to share knowledge and management skills with SOE textile mills in china. She concedes that some people consider sharing trade secrets corporate suicide, but feels such an approach actually benefits the company. "Although we are giving away knowledge, it also puts the pressure on ourselves to run faster," she said.

Sharing knowledge is a philosophy she holds dear to her heart and instils in all her employees. Honesty -- much to the horror of her salesmen -- also extends to her customers, she jokes.

"When I pitch Esquel Technology I'm very careful. I say, 'hey you guys have to understand that just because you buy our software package it ain't going to solve your problems'," she said. "There is no such thing as buying a software package that you simply put in your computer and it improves your productivity. That's what they tell you when they are selling you the software, but it just doesn't work like that. This is not magic. This is like a diet pill. You take it and you still have to go and exercise.

Creating an environment which stimulates a culture where people are willing and eager to share information is vital for a company to excel, and it is a struggle which she says has taken her 20 years to discover.

"It takes a lot of effort to create an environment for people who want to share information," she said. "Nobody feels the necessity to share because hey, the management model is very simple: it? top down, cheap labour and one guy who is the best-educated person. He doesn? need to discuss with anybody because there isn't? anyone else who is as smart or educated as he is."

Now that she has created a workplace where ideas are flying thick and fast, in the last couple of years, the company's results have been growing exponentially. She feels the results are not just the fruit of the past few years' efforts, but really the cumulative efforts of a long incubation period.

Growing the Asian market

About 70 per cent of Esquel's garment sales are to the U.S., a figure which she is aiming to bring down to about 50 per cent. To achieve this, she plans to expand into the Asian market, which is huge and still largely untapped, even when the Mainland is out of the picture.

"We are sitting right in the middle of the Asian market. We are the most efficient, we've got the quality and right price, and time to market advantage," she said.

For the future, Ms Yang said her plan is to practice what she was taught at MIT and Harvard Business School, and that is to apply technology and management.

"To prove my game plan the results are just going to grow exponentially. So long as we stay with our core competence, the next challenge is the supply chain. We feel we still haven't got the full potential out of supply chain management and now we will link the pieces together and that will provide another round of production growth," she said.

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