Tony Wu of Smart Union

Some lives are extraordinary, and the life of Tony Wu of Smart Union is one such- read this:

Roots:

Child of two unskilled construction workers in Hong Kong.

Received an engineering degree in 1978.

Joined toy industry, and in 1995, set up on his own.

Growth:

Started as middleman, arranged for production of the inexpensive promotional items that are  given away by fast food chains.

Bought a shell company called Smart Union; from the profits, bought a tiny mainland factory in 1997.

Smart Union started out with production of cheap, injection-moulded figurines, then expanded to toys with mechanical and then progressed to toys with electrical parts.

In 2006, it raised $7m and the share price more than doubled in a year.

By the end of 2007, its sales were HK$1 billion- a relatively large firm by local standards.

Storm:

• Huge reinvestment to cover expansion in sales;
  
• Rising cost of inputs;
  
• Enforcement of costly labour laws;
  
• Appreciation of Yuan brings less income-
  

-Reduced profits.

• In 2008, abrupt tightening of credit- working capital of Smart Union reduced by half- Smart Union raises costly loans outside banking system.
  

The End:

In June, 2008, severe rains in Dongguan: floods sweep the city- Smart Union washed out:

More than HK$65m in inventory lost;

Rumours of closure- suppliers stop delivery, workers demand advance salary.

The firm practically shuts down in September, though it has heavy backlog of orders.

Moral:

"I learnt that without confidence, a business is dead", says Tony Wu, who, now out of work, has started on a doctorate.

His thesis is this: What does a company need to grow.

With plenty of thanks to The Economist, where you can read this article.