Globalization Effects In Apparel Industry
Essay Preview: Globalization Effects In Apparel Industry
Report this essay
TABLE OF CONTENTS
TABLE OF CONTENTS
ABOUT THIS DOCUMENT
APPAREL INDUSTRY IN GLOBAL WORLD
Apparel Industry Overview
Lifestyle Industry Overview
Globalization Trends
Globalization – Integration of Functional Activities
FORECAST & PREDICTIONS
5-year Horizon
10-year Horizon
ABOUT THIS DOCUMENT
The pervasiveness of retailing in the western world leaves the industry open for careful analysis. This document is intended to expertly address global effects onto a single sub-industry of retail – specialty apparel. To do so, I will acquire perspective by considering all recent global developments in the industry.

First, this document captures the current environment of the mall-based lifestyle apparel retail industry and unifies these findings to highlight globalization effects on the industry.

Second, the document projects the future landscape of the industry over 5 – 10 years horizon; and states actual choices firms should embrace to better align with the industrys global environment.

APPAREL INDUSTRY IN GLOBAL WORLD
Apparel Industry Overview
As of 2004, the global apparel industry was valued at $768 billion dollars, and the United States made up $172.8 billion or nearly 22% of the total. The competition for these consumer dollars has accelerated with lifting of import quotas on textiles and apparel from most World Trade Organization (WTO) members in January 2005 . Absence of these quotas enables apparel makers to procure high quality merchandise from most reliable suppliers regardless of their country of origin. Nevertheless, many apparel retailers and their suppliers will probably want to maintain diversity of sourcing to avoid being hurt by so called safe-guard, protectionist agreements (e.g. U.S. limits apparel imports from China growth to 7.5% annually). Therefore, in-depth knowledge of global import quotas and duties present another competitive advantage opportunity – creation of more efficient global sourcing capabilities.

At the most basic level, all of these retails supply people with practical attire that is affordable and unlikely to change in the years to come. As such, U.S. apparel industry is mature, saturated, and slow growing (~4% annually). Consolidation has been prevalent in the industry; there were 22 $100+ million mergers and acquisitions in past three years . Firms strive to lower their costs, by gaining leverage in buying power and by achieving better economies of scale in production and marketing. Moreover, ruinous price competition, driven in part by the success of discounters (e.g. Walmart, Value City), means eroded margins. One of the possible solutions to increase margins is becoming global retailer, where is more pricing flexibility and is easier to leverage existing supply-chain infrastructure.

In the realm of rising fashion consciousness, the industry strives to update their assortments swiftly to reflect changing tastes and to offer innovative styles and features that, usually, command a price premium. Therefore, I will slice the industry into two major segments: the standardized retail industry, characterized as a mature one, and the lifestyle retail industry. The latter one consists of firms or even their individual brands that cater to the needs of specific market segments (American Eagle Outfitters to 15-25 years old, Sunwear Pacific to Surfers and skiers, Banana Republic, brand of Gap to young professionals, etc.). The organization within this segment relies heavily on differentiation and not on price. These lifestyle retailers experience much higher margins than box retailers (e.g. return on sales 4% for Walmart vs. 9% average for lifestyle retailers). Additionally, these firms experience 20%+ sales growth vs. 4% growth of apparel industry. As such, I can argue that this sub-segment eluded maturity and is in growth stage. The rest of the paper will focus on the lifestyle apparel industry/segment and globalization effects on it.

Lifestyle Industry Overview
Lifestyle retailers compete, not just against regular box retailers, but also against a plethora of different establishments in other industries: electronics, home furnishings, and category killers like Bed Bath & Beyond. The common denominator is the same consumer disposable income.

The apparel specialty chains are best prune to expand globally for several reasons :
They have relatively small store sizes, so finding appropriate space is less challenging than is the case for mega retailers.
These retailers are generally vertically integrated and, therefore, can leverage their existing supply chain anywhere.
The most successful lifestyle apparel retailers usually have universal appeal. For example, Zara offers fast fashion, which appeals to fashion conscious consumers in all markets. Additionally, these retailers offer escape from dullness and sameness of standard retailers.

In general, the specialty apparel value chain is organized around five main parts: (1) raw material supply (e.g. fibers), (2) components supply (e.g. yarns and fabrics), (3) production networks, (4) export channels, and (5) marketing networks. Some firms have vertically integrated all of them, while the others concentrate on two or three of them. The fashion-oriented goods are made in shorter product cycles, by smaller firms, with a more extensive use of specialized networks for material or service inputs. As a result, vertical integration assures better information sharing and more efficient network performance.

Globalization Trends
According to the United Nations Industrial Development Organization, in global capitalism, the economic activity is international in scope and global in organization . When the firm opens retail stores across borders, it becomes an international organization. But, to become a global company, the firm needs to integrate functional, key business activities between internationally dispersed activities. And, indeed many of todays leading retailers are rapidly becoming more global enterprises. Global sourcing is an imperative for both value-driven (e.g. H&M) and fashion-driven (e.g. Gap) retailers facing fierce price competition in their

Get Your Essay

Cite this page

Apparel Industry And Apparel Retailers. (July 2, 2021). Retrieved from https://www.freeessays.education/apparel-industry-and-apparel-retailers-essay/