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

Abstract 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.
Key words Toy industry · Strategic management issues ·