International Sourcing 3

  1. Oceania is made up of:
    Australia and New Zealand
  2. Political systems:
    democracies, communists, kings, sheiks and sultans
  3. most populated countries
    China and India
  4. APEC
    • Asia-Pacific Economics Cooperation was established to facilitate economic growth, cooperation, trade, and investment in the Asia-Pacific region
    • 21 countries
    • also called the Pacific Rim
    • heavy in apparel and textile trade
    • 47% of all global trade
    • do not make treaty obligations or binding commitments
    • attempt to reach a consensus and make commitments on a voluntary basis
    • Goals: free and open trade, encourage investment and create jobs
  5. most developed countries
    Japan and Australia
  6. China
    • largest country in size and largest population
    • 2nd largest economy and 4th largest trading nation
  7. India & China
    • Industry makes up 4% of India's GDP
    • India went from agriculture to service based industries
    • China went from agriculture to manufacturing based industries
  8. Four Groups
    • East Asia (China, South Korea, Taiwan, Japan)
    • Southeast Asia (Hong Kong, the 8 ASEAN countries)
    • South Asia (India, Pakistan, Bangladesh)
    • Oceania (Australia, New Zealand)
  9. Australia
    2nd largest in Asia with relatively small population
  10. India
    3rd largest with the 2nd largest population
  11. East Asia
    • Three countries are developed (Japan, Hong Kong, and Taiwan)
    • Two are nearly developed (Macao and South Korea)
    • One is developing (China)
  12. Southeast Asia
    • One country is developed (Singapore)
    • Six countries are newly developed (Cambodia, Indonesia, Malaysia, Philippines, Thailand & Vietnam)
    • The rest of countries are newly developing (Bangladesh, India, Pakistan, Sri Lanka)
    • No least developed countries
  13. With the MFA eliminated, countries compete for sourcing with other factors:
    • Tariffs schedules
    • Social Responsibility
    • Security of shipments
    • The country's business climate
    • Infrastructure
    • Proximity and access to major markets
    • Availability of low-cost, skilled labor
    • Effective management
    • Product quality
    • Access to competitive suppliers
    • Reliable delivery
    • Service
  14. ASEAN
    • Association of Southeast Asian Nations
    • Members: Brunei, Myanmar, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, Vietnam
    • Goal: to enhance the trade of its members by establishing ASEAN as a single market and production base with open trade among its members by 2020
  15. Singapore
    • One of the wealthier nations ($23,700 GNP)
    • Low unemployment
    • High literacy rate
    • After HK became a part of China, they have seen an increase in financial and marketing activities
    • Limited free trade with the US
  16. Malaysia
    • Improving productivity with technology, developing skilled labor and encouraging better quality
    • Working toward providing product development and branded merchandise
    • 195K employed in the T/A complex
    • They deal with illegal immigrants
    • Has been declining T & A industries in recent yrs and will probably continue due to higher rising labor costs
  17. Philippines
    • Has had problems with economic growth
    • Textile production remains small
    • Apparel employs 400K workers
    • Avg manufacturing costs $6.60/hr as compared to China with $3.00/hr
    • No domestic raw materials
    • - receive emarkers, print them and distribute through FEDEX to the Asian producers
  18. Indonesia
    • Group of islands about 3X the size of Texas
    • 3rd largest democracy between the US and India
    • Political and social responsibility
    • Have had problems with intellectual property
    • Largest producer of T&A in SE Asia
    • 1.2 Mil work in TA complex
  19. Thailand
    • Democracy
    • Several border issues
    • Illegal drug distribution
    • Well development textiles industry
    • Apparel seems to be of better quality with short lead times than many other SE Asian countries
    • Infrastructure is poor
    • Negotiations are underway with the US for a free trade agreement
  20. Vietnam
    • Has developed a large apparel industry
    • Began with lesser quality products, today has developed a better quality environment
    • Free trade agreement with the US
    • Three types of organizations in TA industries:
    • -All state owned (Vinatex)
    • -Private and family owned
    • -Foreign owned
  21. Cambodia
    • Growth as an apparel producer in the last few yrs
    • 75% of their exports are apparel
    • Highly vulnerable to china
  22. India, Bangladesh, Pakistan, Nepal, Sri Lanka
    • Textiles and apparel are the largest employer of manufacturing jobs
    • India, Pakistan, Bangladesh have productivity of 20-25% less than China
    • Problem is distance from major markets
    • EU therefore is their biggest marketplace
  23. Sri Lanka
    • One of the poorest in the world
    • Prolonged civil war
    • Apparel industry has been driving force to increase their economy particularly lingerie and accessories
    • 300K employment
    • Little textile industry which causes longer lead times
    • Free trade India and Pakistan
  24. India
    • Population increasing at 2% per year, may soon become the largest population in world
    • Strength in trade is competency in English (British Rule)
    • Major cotton producer
    • 30% of exports are textiles (3rd largest cotton producer)
    • Textiles is the 2nd largest employer
    • Fashion culture - produce looks that are not ethnic but different
    • 70% of the apparel is made for domestic consumption
    • Increasing middle class
    • High import duties (15-35%)
    • Infrastructure problems
    • Rigid labor laws regarding layoffs and government bureaucracy
    • Well educated workforce including management
    • Apparel is focused on higher-value goods
    • Desire to capitalize on design, accessories, embroidery, and details
  25. Pakistan
    • Like India, high cotton producer especially in home furnishing markets
    • 4th largest cotton producer
    • Doing business can be more difficult than India
    • Drug issues
  26. Bangladesh
    • Poor infrastructure
    • Low productivity
    • Low communications
    • Child labor issues
    • 62% of exports are apparel-decreasing -to China
    • 40% unemployment-lowest per capita GNP in Asia
  27. Low wages are not the only consideration to sourcing to Asia - Others to consider:
    • Rate of productivity
    • Cultural work habits
    • Availability of production equipment
    • Availability of cost- competitive, high-quality fabrics and trimming
    • Lever of service
  28. Australia
    • Highest GDP in the southern hemisphere or Asia
    • Moved from production to consumption
    • FTA with the US in 2004
    • Produces larger quantities of wool fiber and fabric
    • Apparel is small and focused on fashion goods
    • Most apparel is imported
  29. New Zealand
    • Limited domestic production
    • What is produced is high value, high quality primarily for their domestic market
    • Like other developed countries - consumption vs production of apparel
    • Retail markets like to operate a season behind the US and Europe - Purchase end-of-season goods
    • Heavy internet users, but hesitant with buying apparel online
  30. Japan, South Korea, Taiwan
    • Have developed economies and therefore outsource most of their apparel production
    • Have no domestic supply of natural fibers
    • Focus has been on R&D of synthetic materials
  31. Japan
    • Imports 90% of their apparel consumption
    • Imported $19.5Bil apparel products in 2003
    • Consumers look for high quality and fashion goods
    • European luxury brands do well there
    • They consume 41% of the worlds luxury brands
  32. South Korea
    • After the Korean war, SK used a government business approach to growing their economy
    • Government regularly intervenes in the marketplace - more than most countries
    • Outsources most apparel except for the high-end, high-value
    • They like to own the factories where they outsource
  33. Taiwan
    • Like SK, major supplier of man-made fiber and fabric
    • Consider the leader in synthetics
    • Like other developed countries, what they do make is high-end fashion
    • China does not recognize them as a sovereign country but one their territories
    • US now does not recognize them as a separate nation either, but treats them as separate
  34. Hong Kong
    • 3rd largest exporter of textiles and apparel (UK and China)
    • After the MFA and the return to China, HK's quota advantage disappeared and began to compete with China
    • Use of brokers - outside vendors who can coordinate product development to shipping
  35. Li and Fung (Top broker in world)
    • Source products in over 40 countries
    • $5.5B annually
    • Using over 6,000 factories worldwide
  36. China
    • Late 70's, China began moving toawrds a socialist-capitalist economy
    • Today, 100 mil people are considered middle class - at a fraction of the cost of a US middle class family
    • From 1976 to 1996, urban area's population grew from 19% to 30%
    • 100 cities have more than 1 mil people
    • Chongquing - Largest city in world (31 mil)
    • 11 mil apparel employment
    • Issues they are having to deal with; infrastructure problems, rising raw material costs, rising labor rates and land
    • 3rd largest importer of textiles (after the EU and US) reflecting both apparel for export and domestic consumption
    • Import cotton but have abundance of other raw materials for soft goods
    • Today, the largest producer of man-made fibers and competitive in yarns, fabrics and trimmings
    • More than 110K apparel factories with 10% employing more than 5K people
    • 40% of produce is recognized as high quality
    • Self-contained cities - living accommodations, with service industries
    • Unemployment rate - 10%- migration of people from rural areas to the cities
    • 23% of all global trade in textiles and apparel $79B
    • Concern: threat of saturating the world with manufactured products
    • -69% of Australian apparel market
    • -77% of Japanese apparel market
    • WTO in 2001 - meant elimination of quotas
  37. China Retail
    • 2004 restrictions of retail foreign investment were lifted
    • Up-scale retailers opened
    • Mass-market retailers also such as WalMart - 1% of the country's GDP
    • Increasing in product development including technical and creative design
    • Enrollment in university level apparel programs is growing to meet that demand
  38. China Currency exchange
    • Held as a percentage of the US dollar
    • Considering some deregulation which would increase the costs of China's exports
  39. Social Responsibilty
    • A crucial element of international efforts to foster sustainable and equitable development worldwide
    • Two-faced capitalism
    • Corporate Fads
  40. Social Responsibility:
    Influences on morals and ethics
    • Family
    • Friends
    • Religion
    • Education
    • TV
    • Internet
  41. Social Responsibility:
    Codes of Conduct
    Corporate response to include social responsibility in the business decision-making process
  42. Social Responsibility:
    A code of morals or a person, group or profession and its application to decisions and issues of conduct
  43. Social Responsibility:
    Degree of conformity with generally accepted or prescribed standards of goodness, fairness, or rightness in character or conduct
  44. Social Responsibility:
    Maslow's Hierarchy of Needs
    • Physiological: very basic needs such as air, water, food, sleep, sex
    • Safety: establishing stability and consistency in a chaotic world
    • Love and Belongingness
    • Esteem: self-esteem which results from competence or mastery of a task and the attention and recognition that comes from others
    • Self-actualization: the desire to become more and more what one is, to become everything that one is capable of becoming
  45. Social Responsibility:
    Labor Exploitation
    • Men get paid about 20% more than women
    • Less women in executive roles
    • 38% of companies are owned by women
    • Women are more likely to develop power and influence through relationships, teams etc.
    • Men are more self-confident than women
  46. Social Responsibility:
    Labor Exploitation
    • 211 mil children worldwide from the ages 5-14 work
    • Most countries have laws to protect children
  47. Social Responsibility:
    Recommendations for companies to use as Codes of Conduct
    • Statement of the values and goals of their firm
    • Must be top down
    • Clearly communicated to all employees
    • Industry-wide should be developed to lessen confusion and used as a model for smaller organizations
  48. Social Responsibility:
    Human Rights Organizations
    • Labor Unions - AFL-CIO
    • Social Activists
    • Trade Associations - AAFA
Card Set
International Sourcing 3
International Sourcing 3