Case 16-1 Sand by Saya: The Challenges of a Small Business Going Global
Sand by Saya is a New York–based women’s luxury sandal brand that sells flip-flops with glamorous embellishment sewn on the top and receives rave reviews.(1) It maintains two full-time and two part-time employees in a location of approximately 2,200 square feet.(2) Sand by Saya is sold in nine countries as well as online. The main market of Sand by Saya is the Asia region, especially Japan and China, where Sand by Saya has contracts with major wholesalers and department stores. In the United States, the market channels are mainly their online website and consignment retailers such as Bluefly, Shoptique, and Farfetch.(3)
The CEO of Sand by Saya is a native Japanese entrepreneur named Ms. Sayaka Fukuda. She directs every part of business from product design to sales. Her main employees (both Japanese citizens) are Tsugumi, the office manager and accountant, and Asuka, who is in charge of design and production. Eugene, a college intern from Canada, was the assistant to Asuka dealing with design and production, while Karolina, a French intern, was the assistant to Ms. Fukuda working on marketing and sales part-time. Sand by Saya used to import sandals and embellishments from factories in China and assembled them in its New York office. As Sand by Saya grew, manufacturing was offshored to a Chinese factory owned by a Japanese importer, Mr. Nozawa.
The designs for the 2016 Charm Collection had been finalized in October when in early November, Sayaka told Asuka and Eugene that Mr. Nozawa thought having a cheaper line/collection with a more simple design, possibly using a metal stud technique, would increase sandal sales and the brand’s visibility. Sayaka agreed that she needed to boost sales, and if Mr. Nozawa thought lower-priced sandals would increase business, it was good enough for her. Sayaka asked her staff to develop a new inexpensive product line using modified images from the internet to create a virtual line of sandals that would be marketed to potential buyers. Eugene took issue with this approach, saying you should not try to sell what you do not have. Regardless, Sayaka was the boss, and Asuka insisted that she and Eugene create a new, less expensive sandal line. Asuka and Eugene did remind Sayaka that all production needed to be finished by February. They already had a tight schedule with Mr. Nozawa given the logistics of sending packages back and forth with his Chinese factory, and therefore an additional product line seemed nearly impossible to get out in time.
Mr. Nozawa was right! Orders were now pouring in for the new lines of sandals, including a huge order from Mr. Saito. This was Sayaka’s main buyer, her “Walmart,” and she had to keep him happy. He thought a lower-priced line with similar quality standards would be a huge hit with his retail buyers, and he had received several pre-orders for the sandals just based upon the product descriptions he forwarded from Sayaka to his clients. She did not want to disappoint Mr. Saito and thought Mr. Nozawa could figure out a way to get her order in and make her deadlines.
Mr. Nozawa was very apologetic but also very clear—there was no way that he could, without having already run preproduction and testing, meet her deadlines, especially for the sandals that required studs. He did not carry this type of equipment in his factory, and he would have to order it and then train his employees on its usage. This would also negatively affect his manufacturing costs and therefore his price for making these sandals. Even without his factory being closed for 3 weeks for the New Year, he could not fulfill her needs. Mr. Nowaza did have an idea, though. He had several contacts in Bangladesh, and perhaps they could produce these sandals for her. He provided her with several e-mail addresses, names, and phone numbers and wished her the best.
Several days later, after numerous e-mails and phone calls by Karolina to manufacturers of sandals in Bangladesh both on Mr. Nowaza’s list as well as through her own research, a manufacturer was located. This firm already had stud technology on the premises, had access capacity to meet Sayaka’s production needs, and seem priced well within Sayaka’s per-unit cost. Eugene sent, after a nondisclosure and noncompete agreement were signed by the manufacturer, samples of their current sandal line so they would get an idea as to the quality of the sandal as well as the unique embellishments. Preproduction samples arrived back in New York at Sayaka’s a week later (early February) with a deadline for producing the units requested—Sayaka could meet Mr. Saito’s needs if she signed now!
Everyone in the shop examined the preproduction sandals, and they seemed fine. The workmanship was not as good as Mr. Nowaza’s, but the sandals seemed good enough given the lower price point for this product line. Sayaka quickly signed the papers and e-mailed them back to their new manufacturer and everyone breathed a major sigh of relief—but not for long.
It was early May, and Sayaka was on the phone with Mr. Saito and her voice was serious, and so was the speech coming out of the receiver. Even though Sayaka was speaking softly and deferentially in Japanese, everyone in the room noticed that something was wrong regardless of seeming pleasantries. Their discourse continued for almost an hour. Sayaka finally hung up the phone with a polite voice yet with trembling hands. With a very calm demeanor, Sayaka talked with her two full-time employees, Tsugumi and Asuka, very fast in Japanese. Then she turned to Karolina and Eugene, her part-time employees, and broke the news in English. “Saito will not order with us this year. He is very disappointed in the quality of our new product line. He has decided to discontinue our contract and seek other more quality-conscious suppliers.”
How did this happen? Sayaka and her staff were caught completely off guard, because all of the sandals were drop shipped to the buyers. She and her staff never saw what the sandals actually looked like as they arrived at the buyers, and therefore they had no idea what their buyers and the buyers’ customers were receiving. Saito’s returned sandals arrived a few days later, and Sayaka’s worst fears came to fruition. The sandals were very different from the preproduction sandals they had received from their new manufacturer in Bangladesh. The returned sandals were in very poor shape, used very cheap materials, and just did not fit the Sandals by Saya quality brand image. They certainly could not be sold (and now resold) under her company’s name, and she immediately called her Bangladesh manufacturer to find out why these sandals were substandard.
Speaking in very slow English, Sayaka explained the situation to the head of manufacturing at the Bangladesh plant. His response was curt and to the point. This was the level of quality that every sandal designer firm received from him given the price she had bargained for. His plant had met the prescribed specifications in the contract, and that was that. When Sayaka brought up the issue of the preproduction samples, the head of manufacturing reminded her that these samples had been developed before a price was agreed upon. If she had wanted that quality of sandal, then she should have agreed to the quoted price rather than bargain for a much lower price. From the manufacturer’s perspective, the quality of product fit that price point.
Sayaka then called her lawyer, who talked about such issues as misrepresentation and breach of contract. The bottom line was that Sayaka probably had a winning case, yet Sayaka was not hopeful, given her upfront out-of-pocket legal fees, that she would have to sue in a Bangladesh court, and that it might take anywhere from 6 months to a year to settle the case. More important, even winning a court settlement would not get her reputation back. She sat in her office wondering what she had done to get herself into this mess and how she was now going to get out of it.
Questions
Sand by Saya is a small five-person New York–based business, yet it has gone global. Describe its global operation and the underlying reasoning behind going global.
What is the current stage of corporate globalization of Sand by Saya?
How might international ethics apply in this case between Sayaka and her employees? Between Sayaka and her Bangladesh supplier?
How might cultural differences apply in this case between the Sayaka and her employees? Between Sayaka and her Bangladesh supplier?
Explain Sayaka’s choice of staff using home-, host-, or third-country employees. Does her choice seem to be polycentric, geocentric, or ethnocentric?
Sand by Saya used to import sandals and embellishments from factories in China and assembled them in its New York office, yet it later offshored manufacturing first to China and later to Bangladesh. What are the pros and cons of offshoring this type of work?
What type of training might you recommend for Sayaka and her staff and why?
What are some global trends that may impact Sand by Saya’s human resources policies and operations?
References
(1) Anonymous. (2017, June 7). Sand by Saya. Yelp. Retrieved from https://www.yelp.com/biz/sand-by-saya-manhattan
(2) Anonymous. (n.d.). Sand by Saya. Hoovers. Retrieved June 7, 2017, from http://0-subscriber.hoovers.com.liucat.lib.liu.edu/H/company360/overview.html?companyId=6062371
(3) https://www.sandbysaya.com/pages/where-to-buy, June 7, 2017.
Case created by Herbert Sherman and Theodore Vallas, Department of Management Sciences, School of Business Brooklyn Campus, Long Island University
Case 16-2 The Great Singapore Sale at Jurong Point: Finding and Retaining Bargain Employees
Singapore is an island of 646 square kilometers, about the size of Chicago. It is located at one of the crossroads of the world. Singapore’s strategic position has helped it grow into a major center for trade, communications, and tourism. In just 150 years, Singapore has grown into a thriving center of commerce and industry.(1) Shopping is second to eating as a national pastime in Singapore. The island has an outstanding range of products that are available in shopping malls, department stores, boutiques, and bargain stores. Avid shoppers love the annual Great Singapore Sale, which usually falls in June to July. It has become a legendary annual event for both Singaporeans and visitors alike. Wide ranges of goods, including designer products, are marked down to present a mighty shopping extravaganza. The bargains are genuine and definitely give value for money. Shoppers can also expect private events that are hosted by the distinguished Sotheby’s, Christie’s, Tresors, and Glerums & Bonhams and feature exclusive items, such as works of art and jewelry. Antique rugs and carpets can also be bought at a cheaper price during the Great Singapore Sale.(2)
Jurong Point Shopping Centre (“Jurong Point”) is a leading suburban retail mall situated in the western part of Singapore. Strategically located next to Boon Lay MRT Station and Bus Interchange, Jurong Point serves as the gateway to the Jurong West industrial estate, Singapore’s key educational institutions, and the residential population in the west. Jurong Point in 2014 was the largest suburban mall in Singapore, housing about 450 retailers and showcasing their products and services to 6 million visitors a month. The revamped Jurong Point houses a range of retail zones—expanded and revamped Ginza Delights, Mongkok, Rackets & Track, Korean Street, Malaysia Boleh, Takeaway Alley, Gourmet Garden, and many more. In addition, there are also a 67-bay air-conditioned bus interchange, 11 civic community tenants, and to top it all off, a 610-unit condominium nestled above the retail podium.
Jointly owned by Guthrie GTS Limited and Lee Kim Tah Limited, Jurong Point is poised to take a leap forward to be the “heart of a vibrant community, abuzz with activity and a passion for life, offering WOW experiences for one and all.”(3) Jurong Point Shopping Centre has an HR staff of 3 employees who oversee 160 in-house staff, with an additional 2,500 employees working for the mall’s tenants. Singapore is seeing a growing number of mall projects as more foreign retailers enter the local market, with 13 new malls in the works and scheduled to open between 2014 and 2017. As competition heats up, existing retailers are seeking new and innovative ways to engage and retain their employees.(4)
HR at Jurong Point has launched a number of initiatives to attract the right talent into its fold. One of the most effective means has been the organization’s in-house staff referral program, shares Sally Yap, senior HR and administration manager at Jurong Point Shopping Centre. “They receive cash incentives if the employee is confirmed after three months.” Recruitment efforts do not stop at in-house and operational roles but extend to the tenants. The mall launched its own job portal in 2012 to help its tenants look for staff. It also runs regular recruitment fairs to attract suitable candidates. This additional help is especially valued by the mall’s smaller shops that have resource constraints, shares Yap.(5)
Jurong Point has also beefed up its service levels to keep its customers coming back for more. One of the ways it achieves this is by conducting training programs for its tenants. Employees from the mall’s various outlets are taken through bite-sized modules that focus on areas such as how to serve people better, personal grooming, and basic conversational English. The latter can be a barrier for some staff, so courses like these help them perform their daily tasks better, says Yap. “We treat our tenants like family. We won’t be strong if they are not strong.” The mall is also partnering with Singapore Polytechnic (SP) to offer a service training program for its retail and food-and-beverage staff. In this program, employees undergo 30 hours of training focusing on areas such as retail strategies and operations, visual merchandising, restaurant management and challenges, and menu design and pricing. Upon completion, course participants receive a joint certificate from SP and Jurong Point. “It’s a sweetener that will encourage them to stay at Jurong Point,” Yap says. “It adds value and enhances their employability.”(6)
Jurong Point is fully absorbing the cost of training and hopes to put 500 to 700 service staff through the program’s 2-year pilot phase. It plans to extend it to the mall’s full staff within the next 5 years. According to Yap, the customized training will focus on improving the productivity, emotional intelligence, and entrepreneurial mind-set of in-house and tenant staff.
Once employees are recruited and trained, an employee empowerment program sets the culture for the firm. A bottom-up team approach gives employees the freedom to work out the operational details with their teams. This makes decisions less hierarchical, and employees are also happier, as they are not micromanaged, says Yap. Employees are not limited to the roles that they initially signed up for. If an employee in the operations department is interested in a marketing role, they can get a transfer when the right opportunity arises. This flexibility is appreciated by the organization’s younger employees in particular. “They are more restless and don’t want to be stuck at the computer doing mundane things. We are very open to doing things differently,” says Yap.(7)
The HR team at Jurong Point follows this ethos and takes a nontraditional approach to its role. It works very closely with other departments to push out new ideas and programs. It also serves as the umbrella HR organization for the mall’s tenants and is actively involved in ensuring a consistent culture across the property. Interaction between departments is also encouraged through activities such as overseas trips. “Every department is represented by a team member, and it allows employees to bond outside of work,” says Yap. Quarterly buffet lunches are organized to encourage employees to eat and mingle together while exchanging updates on the latest happenings. “We don’t work in silos and like to come together to support each other,” says Yap.(8)
Questions
Taubman Centers Inc. (TCO) is the owner, manager, and/or lessor of regional, super-regional, and outlet shopping centers in the United States and Asia. They are looking to extend their expertise to booming markets in China and South Korea. Assuming they wanted to break into the Singapore market, what international expansion strategies might they have relative to Jurong Point?
Assuming Taubman was to purchase Jurong Point, what legal and cultural issues must they address in order to facilitate a smooth ownership transition?
Given your answer to question 2, what global staffing issues would Taubman have to immediately address? Longer-term issues?
Human resources play a critical role in Jurong Point’s competitive strategy. What HR functions does the small HR staff focus on? Why?
Jurong Point’s HR staff outsources some of its functions to its tenants. What are those functions, and how does this HR strategy fit Jurong Point’s generic strategy?
Organizational culture seems to be a distinctive competency for Jurong Point. What is their culture, and what HR policies nurture that culture? How might this culture change if Jurong Point were acquired by Taubman?
References
(1) Marimari.com. (2014, August 4). Singapore: General information. Retrieved from http://www.marimari.com/content/singapore/general_info/main.html
(2) Marimari.com. (2014, August 4). Singapore: Shopping. Retrieved from http://www.marimari.com/content/singapore/shopping/main.html
(3) Jurong Point. (2014, August 4). Jurong Point Shopping Centre: Singapore’s largest suburban life style paradise! Retrieved from http://www.jurongpoint.com.sg/corporate/
(4) Ibid.
(5) Selvaretnam, S. V. (2014). At your service. HRM, 14(2), 17.
(6) Ibid, 18.
(7) Ibid, 19.
(8) Ibid.
Case created by Herbert Sherman and Theodore Vallas, Department of Management Sciences, School of Business Brooklyn Campus, Long Island University
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