Challenges of Hong Kong toy manufacturers operating plants in the Pearl River Delta

For years, Hong Kong has been the world’s largest toy exporter. However, as the costs of rent and labor have increased drastically over the past years, Hong Kong toy manufacturers have moved their labor-intensive operations to other lower-wage areas. The Pearl River Delta (PRD) region of the People’s Republic of China (PRC) has been one of their favorite choices for outsourcing because of cheap and available labor. This paper explores, using data culled from interviews with the senior management of five leading Hong Kong toy companies, how some Hong Kong toy manufacturers overcame various strategic management issues after having made the move to the PRD. The results are presented within five major areas of concern: rules and regulations, the less-developed infrastructure, R&D, relationship with suppliers, and new technology, and they are used to show how the manufacturers were able to overcome various strategic constraints in order to accomplish outstanding performance. Supporting data were gathered through factory visits in order to better understand the actual operations within the PRD. This collected experience should be beneficial to other manufacturers interested in operating plants within the PRD.Department of Industrial and Systems Engineerin