Extraordinary Endeavors in Turbulent Times: Asian Innovation, Inclusion, and Impact during COVID-19

ASIA BUSINESS COUNCIL HONG KONG UNIVERSITY OF SCIENCE AND TECHNOLOGY 3 5 Esquel Group (Hong Kong) Extraordinary Endeavors in Turbulent Times With this kind of effort, it is not surprising that Esquel’s workers feel safe. The company also gives its employees options and lets them decide whether they want to work from home or go into the office. While the company gives some basic guidelines, employees are encouraged to use their own discretion. Hence, the wellness program and the sense of trust between the company and the workforce contributed in no small part to the mask story. Challenges in the Garment Sector The confluence of innovation, sustainability, and wellness in producing reusable masks is particularly remarkable given that Esquel has been hard hit not only by the pandemic but also by U.S.-China tensions. Since the onset of the pandemic, the company has closed down all factories in Malaysia and Mauritius, one factory in Fenghua, China, and another factory in Sri Lanka. As Tung remarked, “Esquel has experienced several crises since its founding, ranging from the consumer backlash after the 1989 Tiananmen Square incident, to the 1997 Asian financial crisis, to the 2002-2004 SARS outbreak. However, none of these previous crises had the same scale or impact as the current pandemic.” Nevertheless, Tung noted that the crisis is also an opportunity for Esquel to speed up the process of transforming its business, which the company was unable to do previously. For Esquel, around half of its exports went to the United States and just under a third to Europe. During the pandemic, many of Esquel’s customers in the United States requested extensions of the payment cycle – from 30 days to 60 days to 120 days. Some even said that they did not have the money to pay. Esquel helped some of its customers cope with the negative demand shock by assisting with product development, for example by developing clothes with anti-bacterial properties. In addition, it reduced lead time and increased order flexibility so that customers could exhibit more agile responses to fluctuations in demand. For others, Esquel mitigated the impact on its business through credit insurance or decided to sever its relationship with customers before they went bankrupt. In addition, some of Esquel’s customers said that they have plans to move their supply chains away from China because of U.S.-China tensions. As Tung explained, from Esquel’s point of view, if a customer has, for some time, wanted to move away from China, then perhaps the pandemic is a good time to re-evaluate the relationship. In this way, COVID-19 actually gave Esquel the opportunity to evaluate which of its customer relationships would be long-term and which would be more transactional, so that it could focus its resources on the partnerships that are most important. “...One of the things you’ve been told all your life is you should hand in a paper that gets you 95 points out of 100. So you’re very afraid to hand in any kind of work unless you’re sure that it’s near perfect, but that’s a bad habit...If everyone had held on to their work until it was perfect, we would not have made a mask or even half a mask.”