Explain about the Clothing and Textile Industry for A Globalized Industry?
This essay is focusing on global business environment in relation to the clothing and textile industry. In order to conduct this essay, the learner has evaluated different sources for collecting secondary data regarding the “clothing industry”. The aim of this essay is to identify the characteristics of this business industry depending on business globalization. This essay will identify whether clothing and textile industry is globalised or regionalised. Apart from this, it will also evaluate whether this industry is core-triad or multi-polar. The learner has also emphasised on the factors, which are justifying the nature of the clothing industry.
Clothing industry has expanded throughout the globe since January 2005 (Filippetti, 2011). It started when the Multi-Fibre Arrangement which had imposed an agreement regarding export practice of developing countries (Cavusgil, Knight and Riesenberger, 2015). According to this agreement, developing countries are able to export clothing products internationally, which allows this industry to be globalized. Major developed countries are associated with globalizing the clothing and textile industry. As the investment of conducting global business is high, large firms of developed countries are primarily able to adopt this practice. Moreover, the reason for adopting this practice is the changing trend of global customer in clothing preference. Economic growth of this particular market is influenced by increasing demand of products in global market (Abramowicz, 2013). Of lately, customers are interested to avail trendy and fashionable products. Therefore, organizations are adopting new technologies by opening manufacturing plants among developing countries. The other reason of adopting this process is the huge market competition. Companies are targeting foreign markets for increasing customer base, which is effective for increasing profitability (Bye, 2010).
Globalization of business refers to the process of worldwide movement for increasing economical and financial aspect. This process allows the companies in reducing their production cost and increasing production quantity as well (Cavusgil, Knight and Riesenberger, 2015). There are different organizations dealing with clothing and textile manufacturing. From the beginning of globalization, clothing and textile industries are focusing on expanding business globally. Thus, clothing industries are manufacturing products for different geographical locations. This industry is having huge customer base and mass consumption rate as well (Morrison, 2011). Moreover, different groups of customers are availing different style of clothing depending on the social culture. Therefore, companies are adopting the social practices of targeted market for expanding business globally. In case of clothing industry, different organizations are manufacturing products. Therefore, market competition of this industry in remarkably high (Rugman and Collinson, 2009). On the other hand, entry cost in this industry is low in case of some geographical location. It influences the companies to target a foreign market for conducting sustainable business in global market. Thus, the clothing industry can be characterised as a globalized market. The revelation started when North American and European market experienced a huge loss of employees in the clothing and textile industry (Cepolina, 2012). Thereafter, the companies of these regions have targeted some geographical locations, which are suitable for retaining employees in this industry. After that, it took 25 years to be stabilised in conducting international trading. The major aim of the companies was to target developing countries, to reduce employee wages. Developing countries such as Afghanistan, American Samoa, India and many more countries are a suitable market place for retaining employees (Filippetti, 2011). Conducting business in such places can effectively increase productivity of clothing industries. The major resources of clothing industry are labour and raw materials. Developing countries are offering mass labour at low cost, which increases profitability of the companies (Kandogan, 2012).
Customer preference is the most significant variable factor, which segregates the market demand for clothing in global market. For example, clothing preference of Australian customers is completely different from Sri-Lankan customers. Therefore, the overall production circuit is different for both the countries (Ghosal, 2013). In order to satisfy both groups of customer, companies need to identify the social needs and customer preferences in an effective manner. Thus, companies are unable to outsource the same product globally. A clothing manufacturing company needs to manufacture products by using required resources depending on the needs of targeted geographical location (Gimet, Guilhon and Roux, 2015). As the clothing industry is rapidly increasing demand, companies are focusing on requirements of the customers. However, the customer requirement remains fragmented, due to variety in designs. Therefore, the companies are focusing on introducing new technologies for providing a wide range of variety to the global customers. Clothing is symbolic for the buyers and it varies depending on self-perception of the customers. When it comes to the global market, a company not only needs to comply with the age, social status, ethnicity and gender, but also needs to consider customers’ preference for clothing. Different researches have evidenced that 27% sales occur from fashion-basic garments, 28% sales occur from fashion garments and 45% sales occur from basic garments (Kirpalani, 2013). Among this segregation, a clothing company needs to identify the needs of targeted customers in global market (Guercini, Ranfagni and Runfola, 2013).
There are different factors such as economy, production, resources, technology and competitive market, which are influencing clothing and textile industries to be globalized. Companies are facing limitations with sufficient resources while conducting business in a developed country. In developed countries, people are reluctant to work with low wages because of huge scope. Therefore, clothing industries needs to invest maximum money in retaining the workforce (Hart-Landsberg, 2013). Apart from that, productivity of employees is also affected by high wages, which in turn reduces organizational profitability. Satisfying customers globally by exporting products can increase organizational cost. Therefore, clothing manufacturers are targeting foreign markets (especially developing countries) for opening manufacturing units. It reduces organizational cost by avoiding exporting cost and high employee wages. Following is the evaluation of these factors for justifying the business pattern of clothing and textile industry (Kandogan, 2012).
Economy:
Clothing products are the most used product by the global customers. The consumption rate of clothing products is rapidly increasing. Companies are manufacturing products depending on the customers’ requirements. Thus, product price of this industry is feasible with product value. It supports economies of this industry to expand in global market in an effective manner (Kapelko and Oude Lansink, 2014). Companies can invest in the foreign market for fulfilling customers’ demand. However, companies need to maintain customers’ preference. Apart from that, in developing countries companies can avail raw materials at low cost. It enables the companies in reducing the production cost, which reflects on the overall organizational profitability of a firm. In case of the China market, the overall production is 5.8 billion meters as of 2015 (Vrontis and Thrassou, 2013). This high rate of production shows that the clothing industry is a growing industry, which is dramatically changing its nature from being regionalized to being globalized. In order to expand a business globally, it is highly important to have a huge economical turnover, which shows business feasibility. As this industry is having a strong economical support and customers’ demand, it is easy for this industry to enter in international market (Kirpalani, 2013). It requires a huge finance for entering in international market. On the other hand, employee and raw materials are also required for this industry. Developed countries are able to invest in international business, but employee retention in the clothing industry is very low in some geographical locations such as Europe and North American. Therefore, it influences these kinds of countries to target another country where employee retention capacity will be much higher. Hiring employees with low wages is beneficial for the companies in relation to strengthening the economical background (Kumar, 2014).
Production:
Market demand of clothing product is very high in global market. Companies are manufacturing huge amount of products in different pattern. In case of textile industry, there is a huge manufacturing rate, which is increasing rapidly for developed countries and developing countries as well (Lee and Choi, 2012). The companies need sufficient amount of resources for manufacturing required clothing products. Moreover, the entire production process needs high technology and huge labour power. In case of developed countries, people are reluctant to work with the clothing industries due to increased work pressure. Moreover, wages for employees is also very low for the developed countries. This is creating a barrier for the companies to conduct business in their domestic location (Obiol, 2014). On the other hand, resources are in high demand, which increases the value. Natural resources such as electricity, water and many resources that are more necessary are depleting, which is harming the domestic business practices of clothing industry (Kumar, 2014). Therefore, clothing industry is targeting developing countries for minimising these issues.
Clothing companies are opening manufacturing units in developing countries for getting the required resources at lower cost (Pal, 2013). At the same time, the market demand of the clothing products is same for this market. When it comes to labour wages, in developing countries companies can get mass labour with low wages, which is effective for increasing business profitability. Apart from that, resources such as raw materials could be purchased at low price. All these factors are justifying the business characteristics of the clothing industry as a globalized industry. On the other hand, producing the product depending on customers’ preference is important for conducting the business globally. From different authentic resources, it is evident that different companies are manufacturing products for different geographical customers (Reiffenrath et al. 2015). Clothing preference of customers is completely dependent on geographical preference. Thus, companies are focusing on customers’ preference rather than just focusing on other segmentations such as socio-cultural, income level, age and gender. Moreover, in developing countries companies can increase their production by lowering production cost in an effective manner. This factor is effectively influencing this industry to globalize rather than just remain regionalized (Strobl and Kohler, 2013).
Resources:
The major resources required for the clothing and textile industry are workforce and raw materials. Different companies of the clothing manufacture industry are targeting developing countries for increasing employee support. Developing countries are full of resources, which can facilitate business expansion of the clothing industry. For example, India is having many strengths and weaknesses, which help foreign companies to produce and deliver products (Vrontis and Thrassou, 2013). India is having a huge labour force, which places the country in 19th rank, in accordance with the global scale (Lee and Choi, 2012). This strength is facilitating the foreign clothing companies in increasing production in an effective manner. When it comes to the other resource, developing countries offer low cost resources. This facility increases the production quantity and market demand of the product as well (Zhang, Kong and Ramu, 2014). Clothing companies aim at lowering the production cost, which is possible by availing the necessary resources at a low price (Kapelko and Oude Lansink, 2014). Research shows that developing countries such as India has cheap labour for manufacturing and exporting clothing products. Likewise, developing countries like India are also having different positivity in relation to labour wages and other resources. Therefore, clothing companies, generally large-scale companies are targeting developing countries for lowering the production cost and increasing the production as well (Cavusgil, Knight and Riesenberger, 2015). Minimising the production cost helps the companies in investing more money for producing larger quantities. It also satisfies the needs and demands of suppliers. On the other hand, by manufacturing products in the home country, impose limitation on production quantity. It is harmful for conducting sustainable business in competitive market (Morrison, 2011).
Technology:
Technological innovation is the most important factor for the cloth manufacturing industry. Companies are improving the production process by incorporating new technologies for increasing production speed. In case of non-sewing processes such as cutting materials, grading materials and assembling materials, automated mechanism are effectively lowering the requirements of labour forces. However, in case of sewing process, it is highly important to involve labour forces for operating the machine (Rugman and Collinson, 2009). In this regard, companies need to increase labour force by 80% in order to fulfil this requirement (Kapelko and Oude Lansink, 2014). As developing countries are suitable for hiring people with adequate knowledge, it is easy for the companies to implement technological innovation with gathering labour force. This limitation of developed countries is influencing them to make the clothing industry globalized. Increasing flexibility of machine is directly affecting labour force requirements. Thus, it is harming the economical condition of the country remarkably (Abramowicz, 2013). By conducting business in a foreign country, it is possible for the companies to improve their own economical factors. Apart from that, companies will also be able to conduct sustainable business with the help of large labour force. Nowadays, developing countries like India, is exporting computer hardware to the developed countries like UK and USA. It means it will be easier for the cloth manufacturing companies to get innovative technology at a lower price by opening manufacturing units in developing countries (Gimet, Guilhon and Roux, 2015). This factor is highly influencing the clothing industry to expand globally.
Competitive market: There are different companies that are offering the same product, thereby increasing market competition in clothing and textile industry. In order to survive in a competitive market, companies need to expand their target markets and customer base. Every company is using the same technology and production procedure for manufacturing the products. Moreover, market competition is influencing the pricing strategy of clothing companies (Hart-Landsberg, 2013). Companies are focusing on delivering quality products to the customers for maintaining business sustainability. The major aim of the companies is to increase loyal customers. It is not possible to increase the customer base by targeting niche segment. It is highly important for clothing industries to expand globally and target global customers by meeting their cultural and personal preference. This particular factor is leading the clothing and textile industries to open manufacturing units in the international market. Here cross border investment occurs for the clothing and textile industry (Kumar, 2014). However, exporting products help in targeting foreign market. In this process companies needs to invest money on transport goods. Apart from that, lowering the manufacturing cost will not be possible by adopting this method. Therefore, opening manufacturing unit is the most profitable matter for increasing business profitability. Expanding business globally also helps the clothing companies to create a brand identity in global market, which helps in getting competitive advantages (Rugman and Collinson, 2009).
The above -discussed factors emphasize that clothing has become globalized in last 25 years. In the early stage of 1990, some countries such as US and Europe have dominated globalization. However, during the phase of 2000 to 2005 increasing information technology has influences companies to globalize rapidly (Zhang, Kong and Ramu, 2014). For example, Singapore, Korea, Taiwan and Hong Kong were able to conduct sustainable businesses within their border (Reiffenrath et al. 2015). Thereafter, these countries have cut down the production cost and starts investing in least-cost countries. The outcome of this strategy increased cloth production of Malaysia, Philippines, Thailand and Indonesia an in effective manner in the phase of 1985 to 1990 (Guercini, Ranfagni and Runfola, 2013). The corporate strategy of clothing industry is to be involved in global production. This strategy only works for developed countries. Small firms of developing countries are unable to invest huge amounts for expanding globally (Zhang, Kong and Ramu, 2014). Therefore, it can be said that globalisation in this industry is driven by the developed countries and large-scale firms. It is not about just relocation of manufacturing unit, but about grabbing the foreign market by investing huge money in advertisement and promotion for conducting sustainable business (Morrison, 2011). Apart from that, large-scale industries are able to invest in adopting innovative technologies. Apart from that, it is also important to train the employees in handling advanced mechanism. It required a huge investment, which is not possible by the small-scale industries.
In current days, people are changing their preference of clothing rapidly. Thus, the retailers are also demanding new fashion statements from the cloth manufacturers. Thus, manufacturers are focusing on fast production of new trends (Pal, 2013). That leads the organizations to operate manufacturing units at the targeted geographical location for lowering down the time investment of transporting the products. Apart from that, building strong communication with suppliers is also possible by adopting this strategy. In an earlier stage, people were unwilling to change their clothing preferences so frequently. Therefore, organizations were able to take their time in production and delivering the product in retail market (Kapelko and Oude Lansink, 2014). This contrast of situation is the prior reason of increasing globalization in clothing and textile industry. The entire process of globalization in the clothing and textile industry is having different impacts on economics of developing countries. Employment of the developing country is increasing effectively in this process. Apart from that, developing countries are able to earn foreign currency, which can facilitate economy of developing countries (Zhang, Kong and Ramu, 2014).
Conclusion
After preparing this essay, we can conclude that Clothing And Textile Industry Can Be Denoted As A Globalized Industry. The reason behind becoming a global industry is to maintain business sustainability. In current days, companies are opening manufacturing plants in foreign countries for reducing the production cost. Moreover, cutting down the employee wages is another target of the firms. In case of developing countries, organizations are able to hire huge labour forces by investing minimum amount. Therefore, it is possible for the companies to reduce the production cost. It is helpful for meeting suppliers demand by increasing production quantity. As the entry process in this industry is having less risk factors, companies are massively implementing this particular strategy. The essay is showing that developed countries are implementing this strategy at a frequent rate in contrast to developed countries.. The reason behind this contrast is high investment requirement. Small firms are unable to invest in large scale. Therefore, large-scale companies are taking the drive to be globalized in this industry. This essay also emphasizes the nature of clothing and textile industry in relation to customers’ preference. Different geographical group of customers are having different preference for clothing. Therefore, companies are expanding their manufacturing units depending on identifying and satisfying the needs of customers in an effective manner.
Reference
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