NOTE: Free essay sample provided on this page should be used for references or sample purposes only. The sample essay is available to anyone, so any direct quoting without mentioning the source will be considered plagiarism by schools, colleges and universities that use plagiarism detection software. To get a completely brand-new, plagiarism-free essay, please use our essay writing service.
One click instant price quote
Because of the intensive use of low-skilled labor in apparel production, transnational companies have limited potential for deriving firm-specific advantages from direct foreign investment in overseas locations. Instead, they have turned to other forms of transnational activity, such as the importing of finished garments, brand name and trademark licensing, and the international subcontracting of assembly operations. These various activities have led to multiple lead firms in buyer-driven commodity chains. There are three types of lead firms in the apparel commodity chain: retailers, marketers, and branded manufacturers (Gereffi, 1997).
As apparel production has become globally dispersed and the competition between these types of firms intensified, each has developed extensive global sourcing capabilities. While "de-verticalizing" out of production, they are fortifying their activities in the high value-added design and marketing segments of the apparel chain, leading to a blurring of the boundaries between these firms and a realignment of interests within the chain. Here's a quick look at where each lead firm stands in apparel sourcing: Retailers. In the past, retailers were the apparel manufacturers' main customers, but now they are increasingly becoming their competitors. As consumers demand better value, retailers have increasingly turned to imports. In 1975, only 12 % of the apparel sold by U.
S. retailers was imported; by 1984, retail stores had doubled their use of imported garments (AAMA, 1984). In 1993, retailers accounted for 48 % of the total value of imports of the top 100 U. S. apparel importers (who collectively represented about one-quarter of all apparel imports).
U. S. apparel marketers, which perform the design and marketing functions but contract out the actual production of apparel to foreign or domestic sources, represented 22 % of the value of these imports in 1993, and domestic producers made up an additional 20 % of the total (Jones, 1995: 25 - 26). The picture in Europe is strikingly similar. European retailers account for fully one-half of all apparel imports, and marketers or designers add roughly another 20 % (Scheffer, 1994: 11 - 12).
Private label lines (or store brands), which refer to merchandise made for specific retailers and sold exclusively in their stores, constituted about 25 % of the total U. S. apparel market in 1993 (Dickerson, 1995: 460). Marketers. These manufacturers without factories include companies like Liz Claiborne, Donna Karan, Ralph Lauren, Tommy Hilfiger, Nautica, and Nike, that literally were born global because most of their sourcing has always been done overseas.
In order to deal with the influx of new competition, marketers have adopted several strategic responses that are altering the content and scope of their global sourcing networks. These measures include: shrinking their supply chains, using fewer but more capable contractors; instructing contractors where to obtain needed components, thus reducing their own purchase and redistribution activities; discontinuing certain support functions (such as pattern grading, marker making and sample making) and reassigning them to contractors; adopting more stringent vendor certification systems to improve performance; and shifting the geography of their sourcing networks from Asia to the western hemisphere. Branded Manufacturers. The decision of many larger manufacturers in developed countries is no longer whether to engage in foreign production, but how to organize and manage it.
These firms supply intermediate inputs (cut fabric, thread, buttons, and other trim) to extensive networks of offshore suppliers, typically located in neighboring countries with reciprocal trade agreements that allow goods assembled offshore to be re-imported with a tariff charged only on the value added by foreign labor. This kind of international subcontracting system exists in every region of the world. It is called the 807 / 9802 program or "production sharing" in the United States (USITC, 1997), where the sourcing networks of U. S. manufacturers are predominantly located in Mexico, Central America, and the Caribbean; in Europe, this is known as outward processing trade (OPT), and the principal suppliers are found in North Africa and Eastern Europe (OETH, 1995); and in Asia, manufacturers from relatively high-wage economies like Hong Kong have outward processing arrangements (OPA) with China and other low-wage nations (Birnbaum, 1993).
A significant counter trend is emerging among established apparel manufacturers, however, who are de-emphasizing their production activities in favor of building up the marketing side of their operations by capitalizing on both brand names and retail outlets. Sara Lee Corporation, one of the largest apparel producers in the United States -- whose stable of famous brand names includes L'eggs hosiery, Hanes, Playtex, Wonderbras, Bali, and Coach leather products, to name a few -- recently announced its plans to "de-vertical ize" its consumer-products divisions, a fundamental reshaping that would move it out of making the brand-name goods it sells (Miller, 1997). Other well known apparel manufacturers like Phillips-Van Heusen and Levi Strauss & Co. are also emphasizing the need to build global brands, frequently through acquisitions of related consumer products lines, while many of their production facilities are being closed or sold to offshore contractors. The strengthening of brand names has led to a new focus on "concept stores" that typically feature all the products offered by manufacturers and marketers, such as Levi Strauss, Nike, Disney, and Warner Bros. These stores provide a direct link between manufacturers and consumers, bypassing the traditional role of retailers.
Levi Strauss, the largest apparel company in the United States, had 126 Levi's retail stores in 1993, all operated by a retail specialist, Designs Inc. Over half of Levi Strauss's profits in 1993 were generated from overseas operations, which included about 900 franchised Levi's shops in 30 countries in Europe, Asia, and Latin America (Warfield et al. , 1995: 80 - 81). Thus, a de-vertical ization of production co-exists with a re-vertical ization of brands and stores.
Free research essays on topics related to: retail stores, levi strauss, brand names, value added, consumer products
Research essay sample on Lead Firms In The Apparel Commodity Chain
