Lead Firms in the Apparel Commodity Chain
Uploaded by surfchick on Feb 20, 2005
Lead Firms in the Apparel Commodity Chain
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...