TO RELOCATE OR NOT TO RELOCATE? A CASE STUDY OF A KOREAN GARMENT MANUFACTURING COMPANY IN INDONESIA

Abstract

Due to the severe competition among neighboring countries and the rapid increase in national
minimum wages, foreign garment manufacturing companies in Indonesia are under pressure.
The yearly increase in minimum wages, as mandated by the Indonesian government, has been
one of the critical factors reducing profit for the manufacturing industry. In this paper, we
investigate the case of one garment manufacturing company as it contemplates the idea of
relocating its operations within Indonesia. An in-depth interview with senior managers of PT
L&B Indonesia reveals that a major consideration for the bold step of relocation after 30
years of operation in West Java Indonesia is the rising cost of labor in the country.
Specifically, this paper discusses some ramifications of relocation as a strategic business
decision considering the case of PT L&B and takes a stance on whether it is a step in the right
direction for the company and for the garment manufacturing sector in general.