Introduction
Regardless of how stable and reliable the company’s current state is, it remains vulnerable to external factors and specific crises. Such was the situation surrounding Dalian Xinhe, a Chinese company that underwent a strategic transformation in response to the COVID-19 pandemic. However, once the pandemic subsided, the company faced the decision of whether to retain the changes and expand globally or revert to its original production methods. Based on the evidence presented below, it would be best for Dalian Xinhe to prefer the former option.
Dalian Xinhe and the COVID-19 Outbreak
Before the notorious outbreak, Dalian Xinhe had a long and successful history of garment and ordinary clothing manufacturing. Despite market fluctuations, the overall industry was considered stable and promising (Ivey Business School Foundation [IBSF], 2021). When the COVID-19 epidemic broke out in China, it greatly hindered the industry’s growth.
As the Ivey Business School Foundation (IBSF) (2021) states, retail sales during the first year of the outbreak were more than 30% lower than those in 2019. Not only did the companies’ manufacturing operations experience disruptions to usual supply chains, but quarantine measures established by the government also took their toll (Chakraborty and Biswas, 2020). Namely, the inability of people to leave their homes to shop for clothes led to a decrease in the frequency of visits to retail points. In the context of fixed costs associated with building rent and maintenance, it was a significant blow to companies’ budgets.
For Dalian Xinhe, the situation was dire: disrupted supply chains and the need to close stores reduced offline sales, whereas a lack of expertise led to poor performance in the online market. In this context, the market for medical-protective clothing proved to be the sought-after solution. Firstly, the manufacturing process was not drastically different from Dalian Xinhe’s original specialization (IBSF, 2021). Secondly, there was a substantial shortage of this product, especially at the start of the outbreak (IBSF, 2021). Lastly, the government provided lucrative incentives for private medical clothing manufacturers (IBSF, 2021). Considering these factors, Dalian Xinhe initiated the transition process into this industry.
Strategic Change Process
The transformation process occurred in four steps, based on the specific needs of medical-protective clothing manufacturing. According to the IBSF (2021), the steps included addressing raw material supply, equipment production, personnel training, and the public field. In terms of the former, Dalian Xinhe faced the task of establishing a reliable supply chain of raw materials. To achieve it as soon as possible, the company turned to the government and its business partners for help. The government responded almost immediately, allocating the necessary resources in close proximity and from outside the Dalian Xinhe operating region. In the meantime, due to the company’s history of business operations in the garment industry, Dalian Xinhe secured additional supply chains through its previous and current business partners, ultimately acquiring the desired raw material quantity.
Regarding equipment production, Dalian Xinhe demonstrated operational efficiency and determination. The demand for such equipment sharply increased, along with that for medical clothing, denying Dalian Xinhe the opportunity to acquire the necessary quantity in a single purchase. Therefore, the company had to assign additional personnel to the search activity, gradually expanding the search scope and constantly updating on equipment availability.
The research team was not the sole activity related to personnel reorganization. Specifically, the transformation process prompted the creation of a management team to support the owner in leading it. Apart from that, experts in terms of medical clothing production were hired to train the company’s staff. Lastly, Dalian Xinhe ensured the protection of its employees by implementing anti-COVID measures at its production site.
Public affairs were the last step in the transformation process. The company had to advertise its new specialization and products to inform its potential customers. In this context, the company used the online platform to advertise its products while simultaneously launching a promotional campaign to support the regions most affected by the pandemic. Both approaches proved effective, finalizing Dalian Xinhe’s transformation.
Overall, the main factors that ensured the company’s success in strategic change were the upper management’s expertise and the company’s industry history. A quick, decisive action was instrumental: the company’s executives conducted an analysis and fully committed to the chosen strategy, losing no precious time. In the meantime, the company’s connections and image played a supplementary role in the process, opening more opportunities for Dalian Xinhe to conduct the necessary steps.
Recommendations and a Conclusion
After the initial surge in demand for medical protective clothing, the market in China gradually stabilized. Dalian Xinhe faced the decision of whether to continue its current medical course or transform back to its original business. On the one hand, the pandemic continued to plague other countries, providing growth opportunities. However, it is unknown how long the pandemic will last and how demanding the market will be in terms of protecting medical clothing. On the other hand, the traditional garment market slowly returned to its former state, offering opportunities for the company’s brand development.
In this context, it would be best for Dalian Xinhe to maintain its current production and continue to grow in the medical market. Namely, this is because the crisis’s opportunity has yet to be fully capitalized on. Expanding the business internationally would not only secure profit but also allow the company to build connections and earn global recognition (Akopova, E.S. et al., 2020).
Moreover, in the context of the technological advantages of the modern era, the expansion process is much more reliable, flexible, and efficient (Katsikeas, Leonidou, and Zeriti, 2020). Finally, as mentioned before, connections played a crucial role in Dalian Xinhe’s ability to withstand the downturn. Therefore, international expansion appears much more profitable than returning to domestic operations.
Reference List
Akopova, E. S. et al. (2020) Marketing of healthcare organizations: technologies of public-private partnership. Charlotte: International Age Publishing.
Chakraborty, S., and Biswas, M. C. (2020) ‘Impact of COVID-19 on the textile, apparel and fashion manufacturing industry supply chain: case study on a ready-made garment manufacturing industry’, Journal of Supply Chain Management, Logistics and Procurement, 3(2), pp. 181-199.
Ivey Business School Foundation. (2021) Dalian Xinhe leather clothing strategic transformation in response to Covid 19. London: Ivey Publishing.
Katsikeas, C., Leonidou, L., and Zeriti, A. (2020) ‘Revisiting international marketing strategy in a digital era: opportunities, challenges, and research directions’, International Marketing Review, 37(3), pp. 405-424.
The University of Adelaide. (no date) Enterprise transformation 7056.