Kenmold was known for their Project Development System, which provided total solutions to their customers. The system covered the concept discussion, mold design and tooling manufacturing,part manufac-turing,assembly, post processing (painting/packaging),and ship-ment. The making of assembled finished products was complicated. It was a process that not only includes the product's style and function but also the post treatment such as assembling, painting, plating, packaging etc. Customers trusted Kenmold's Project Development System to make new products that would hit the market quickly within a short cycle of development. The key competitive advantage for Kenmold in the Contract R&D market was its ability to quickly take an idea and make it into a final product.
Pool Bike Project
In November of 2001, Kenmold was approached by two investors from Monaco. Kenmold was asked to quote on design, development, and manufacture for a line of exercise pool bikes. The investors had been selling pool bike products for over 15 years and were licensed to sell in the EU and US markets. Kenmold submitted a quote as asked but heard nothing until October 2003. The investors had chosen a competitor instead, and by 2003 were unhappy with the work done. The relationship between the investors and the competitor had ended badly and gone to court. A new development and manufacturing firm was needed to complete the project. Kenmold re-quoted the project and received the order.
Then things turned nasty. The increase in tooling and part costs was communicated with the customer in April of 2005. The customer to the customer in April of 2005. The customer refused to pay the increase in tooling and became angry with Kenmold, but begrudgingly paid the second installment of US$50,000 as per the original contact. The customer arrived in May with a check for US$50,000. Jianwu's partner did not trust the check to clear. The bank informed Kenmold that it would take more than 90 days to clear such a check. By  August of 2005, the customers and Kenmold were in a legal battle. Kenmold was paid only US$110,000 dollars and was still owed more than US$70,000 in tooling and development costs. The customers were using to get the molds and were shopping around for other manufacturers in South East Asia in the mean time. Kenmold, of course, would not release the molds until such time as payment was received in full, and they had recouped the costs invested in the project.
The Future of the Business
Jianwu thought that the Pool Bike project was a sign that Kenmold needed to change its bidding and contract process. The increasing number of international firms contracting R&D services in China meant that Kenmold would likely increase their market and grow with the industry. However, if they wanted to become the industry best
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Without understanding the technologies and the processes of developing the new product -- in this case, the pool-bike -- the client couldn't analyze the costs Kenmold had to incur properly. That caused several misunderstandings: the client believed that small changes in the mold and part would result in equivalently small changes in the costs. But in reality, these changes led to significant design changes in the mold used to build key pieces of the pool bike, greatly increasing the price.
There is a great difference in the way of conducting business. Asian business culture supposes
concessions. They are oriented on long-term relationship, which is why while developing the prototype Kenmold executives believed that their partners will cover all the expenses they incurred for product enhancement Kenmold thought that the client could easily recoup those costs in lowered per-unit costs down the road. We believe western businessmen prefer to know the total outlay from the beginning. For them it is difficult to accept that the price can significantly change. In this case, this resulted in a 50% increase in cost that the client would not pay. The end of the story is dramatic: the "go ahead" from the investors to begin R & D in November of 2003.
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