Kitchen Best Case Study

Kitchen Best Appliance Co. Ltd was a home electrical appliance company in Hong Kong with its own manufacturing plant in Guangdong province. Chan Dong-hwa founded the company as a 35 year old entrepreneur with some investments from his relatives. In 2008 due to deteriorating health, he had to pass the control of the company to his son. Henry Chan had planned to double the revenues of his father's company, but due to internal crises had a major setback.

Henry Chan, the son of the founder, and the current CEO of the company has received his MBA from an American university. After graduating he worked in US in marketing of electronic appliances. After his father's health had declined, he moved back to Hong Kong to take over the control of the business. Li Qingyang, was the women who loaned his father the money to start the company, and in return she got 25% stake of the company, but no say in everyday operations.

Ma Luk who has been with the Kitchen Best, from almost the very begging, worked his way up from the factory worker to overseeing all the operations in the mainland. And due to his loyalty to the company, he had developed a very close relationship with Chan Dong-hwa. Horatio Sze was a Purchasing and Product Manager. He had joined the company based on the recommendation from his grandmother, Li Qingyand, and reported directly to Ma Luk. Macy Wei was a Quality Control Manager, who Sze trained, and whom she saw as a mentor, but Wei reported to Ma Luk as well.

Bribery and various other kickbacks for personal gain were one of the biggest issues within the organization itself. One of them being the Shago Incident, where Sze had commissioned an outside manufacturing company order for Shago appliances, which ended up being faulty. Later investigation revealed that the factory Sze had commissioned the order to, was owned by his brother-in-law, and in return Sze and his wife got a vacation package to Europe. In-house testing revealed the problems with the microwavable set, but when Wei reported it to Sze, he said he would take care of it, instead nothing was done. She left it at that, at the fear of losing her job.

Another major violation occurred when Henry received an anonymous letter, saying that the order from the German company that Kitchen Best subcontracted to another appliance manufacturer (Qinghua), might have failed the safety inspection. The letter states that proprietor from Qinghua paid of the head of the independent inspection team, in order to pass the inspection. For a fear of losing a large customer, Henry decided to live it at that.

When one of the Kitchen Best customers (Honghua Appliances) decided to switch its management style, due to injection of foreign capital, another issue arose. It was revealed that Ma, had a close relationship with Eddie Lau, who was Honghua's general manager for greater China. Apparently Lau was receiving kickbacks from Ma, in order to get their business,