An Evaluation of Taiwanese Clothing Industrys Networking Strategy - Essay Example

1. The proposed of the research project is: An evaluation of Taiwanese Clothing Industry's Networking Strategy: How the companies take advantages of networking strategy to be competitive. 2.1 General Introduction Clothing is one of the oldest and largest export industries in the world. Most nations produce the international textile and apparel market, making this one of the most global of all industries. Apparel is the typical "starter" industry for countries that is export-oriented industrialization, and it played the leading role in East Asia's early export growth. Many questions have been raised, concerning the degree to which international trade can be the fulcrum for sustained economic growth for developing nations (Gereffi, 2002). Since the 1950s, Taiwan has made remarkable economic gains, which is so-called economic miracle. Many countries in the third world have closely studied the phenomenon, especially the countries' model are exported-led development. During the 1960s Taiwan experienced rapid growth with steady prices, without the fluctuations of a boom-bust cycle. Private enterprises, especially small and midsize firms, took full advantage of this environment to start up business. With the growing economic of Taiwan, the inevitability of moving into different industries is also foreseen. The emergence of a global economy where production and consumption are organized and mediated in the world scale has spread all sectors of manufacturing activity in recent decades, especially clothing. This industry has some specific features, which make clothing suitable for implementation of networking strategies by Taiwanese manufacturers. Although, clothing manufacture is a small firm sector, truly global strategies can be pursued only by large companies. That is why networking can be an essential force to unite small businesses to compete on the global market. There is little doubt that clothing trade, employment and production have taken on an increasingly international dimension since 1960s. Meanwhile smaller companies usually cannot compete on geographically remote markets. Business networks help those firms to reach distant customers by sharing expenditures on transportation, production, purchasing, etc. therefore making it possible for SMEs to participate in global trade. Additionally, small businesses usually don't have the resources to make investments into research and development. Innovation is an important part of what it takes to be competitive on a global market. Sharing technological know-how and innovative knowledge is also a strong argument for networking. The economy of Taiwan economy remains export-oriented, it primary depends on an open world trade regime. Networking strategies implemented by Taiwanese clothing manufacturers allow them to remain competitive on a worldwide scale, regardless of their size. Networking strategies help them in three ways: reaching out to distant markets, lowering production costs and sharing knowledge and innovations between members. The next part deals with more detailed description of how it is achieved. 2.2 Networking Strategy A business network can be defined as linkages among firms. It provides external sources for various type of input that complement or substitute for a given firm's inadequacies (Malecki and Tootle 1996). Surprisingly, there are few studies based on strategic linkage and networking (Chen and Tain-Jy, 1998). Business networking is about cooperative relationships between companies. Networking is an adaptation process: it is because interdependent production, logistics, development, and administrative activities and resources need to be modified and coordinated to bring about a better match between the firms in the network (Chen and Chen, 1998). Network resources are particularly useful in entering an early stage of market where institutions that facilitate internationalization are still lacking. Business networking can take a lot of different forms, each one of them with its own purpose, advantages and drawbacks. I will set out only the most common used models, that is: production networks, service networks and lead firm networks (Anonymous, 2004). Production networks are about cooperating in the production of goods by combining resources and skills of networking enterprises. Most of the areas of activity are shared between participants; and the main goal of production networks can be achieving the desirable level and range of production needed for entering new markets, domestic or global. Participants gain knowledge information and production capabilities to increase their competitive advantage on the market worldwide, or to develop new products. Eventually members of such business networks become more inter-related and dependant, which can be seen as a drawback under certain circumstances. Business networks oriented on service improvement consist of companies who wish to unite their resources in providing some kind of services. Expenditures related to research and development, training and marketing are shared between members. Service networks can be used to boost competitiveness of specialized service providers with narrow expertise joining them under diversified network. Service networks are seen by many small companies as the only way of getting on markets of distant geographic locations. Once again members of service networks have to rely heavily on each other to reach economies of scale. Lead firm network is established when a larger company (lead firm) wants to receive a reliable and long-term source of supply. It gathers a network of smaller suppliers around itself ensuring the required quantity, quality and timetable of deliveries. In turn, small members of a lead firm network gain access to guaranteed market and improved production techniques. Additionally lead firm benefits from innovations implemented within small companies. Along with the described classification business networks are also categorized by the structure they use: vertical market networks, horizontal or small firms' networks and internal market or cross-sectional networks (Richter, 1999) Each member of the vertical structures is a supplier to one participant, and in turn is supplied by another firm. Through these chains linked from raw materials to customers each company can focus on a very specialized activity and at the same time be in demand on wider markets. Vertical structures are good when producing a complex product that consists of many details - cars, for example. Horizontal structures are networks of small companies with similar activities gathered to achieve diversification and increase the scale, in which they operate. It is the most suitable for Taiwanese clothing industry as it gives small producers the ability to compete on a global market. Horizontal networks unite efforts of its participants in purchasing, technology sharing, export development and international trade. Finally internal market structures combine efforts of firms that operate on different market sectors to ensure entering n a new market with a new product developed with participants. Cross-sectional networks are implemented on a large scale within industries, where innovations and technical developments are vital for success. Thus, I have described basic types of business networks. Each of these forms can be suitable for certain market environment and desired outcomes. In the context of Taiwanese clothing industry it is appropriate to talk about production networks with horizontal structure, which combines efforts of many small local manufacturers to strive for economies of scale. 3. Area of Research Aim The aim of this research is to give a more clear perspective of the network linkage of Taiwan clothing manufacturers. This research proposal aims to give a brief setting regarding the nature of the networking strategy that manufacturers of clothing in Taiwan apply in their industry, as well as the related literature that would give a direction to the manufacturing companies in the country has to go through. This proposal, and even the totally of the study, proves to be relevance as will be shown in the discussion of related literature, there are no particular text or research that fully provide to the topic. Objectives To examine the manufacturing strategies of a network, its competitive priorities. To give a theoretical evaluation of these networking strategies that could be considered as most applicable to the clothing companies. To suggest improvements that can be made in the management of network-based production systems. To illustrate the importance of this research that could be seen in the shortage of sources that directly connected to the researcher's chosen topic. Justification The academic reason for selecting this topic is that in spite of the vital roles of SMEs in Taiwan, there are relatively few studies on how these clothing firms manage their business network internationally. Therefore, this project will attempt to fill this gap. Networking strategies prove to be effective to support small businesses on the initial stage. However there are ambiguities in the way they should be implemented. This research, through the analysis of success of networking strategies in Taiwanese clothing industries will help to understand how these strategies can be helpful to other small businesses. The business reason for choosing this topic is that trust, by and large, takes a long period to be built up between two parties. It can be valuable to find out how Taiwanese clothing companies conduct the interdependence successfully with suppliers, subcontractors, customers and international brand companies. In addition, in the labor-intensive market, cost is a crucial point of a company. It can be also worthwhile to observe how they tackle the said matter by networking strategy. The personal reason for the topic is that the researcher would like to improve his knowledge of managing business networks in order to boost his family business. 4. Review of Related Literature The next part of the proposal deals with the review of the relevant literature giving special attention to the following themes: reasons for cooperation between companies; specifics of Taiwanese business networks; advantages and drawbacks of interdependence provided with networking strategies; and implications of those strategies. I have chosen these aspects of networking to analyse for they give a clear picture on what questions about networking require further research. There are quite a few of materials that could be indirectly connected with the issue of networking strategy as well as Taiwanese clothing companies. However, it should also be considered that these sources are not directly found in one article or book. Many books and articles concentrate on single issue. Mutual cooperation in business has a long time history, for which networking strategies have been only a small part. The book "Strategies of Cooperation: Managing Alliances, Networks and Joint Ventures" by John Child and David Faulkner offers comprehensive scope on business cooperation: "Cooperative strategy is not new, it has always been with us. It means what it suggests, namely the achievement of an agreement and a plan to work together; not the giving of orders down hierarchies" (1998). Cooperation often becomes the only way on the market for small companies. However networking companies are often implemented with rather stable and 'closely tied to the ground' market players. What brings companies to business networks Child and Faulkner (1998) point out six reasons for use of networks. Firstly, joining with other businesses gives a company better confidence in ever-changing market environment of tomorrow. Simply, it is better to cooperate than compete. The second reason is providing improved flexibility comparing to hierarchical business structures. Next, there is additional capacity given to members of business networks by combined efforts. Greater speed essential for taking temporary business opportunities can also be set as advantage. Obviously resources, skills and information exchange improved in business network offer extra competitive advantage for participants of business networks. While networking strategies are used throughout the world, Taiwanese approach to cooperation is worth distinguishing it amongst others. "Business Networks in Asia: Promises, Doubts, and Perspectives" by Frank-Jurgen Richter characterizes it as follows: "The crucial economic in Asian societies is typically not the individual but rather the network in which the individual is embedded. Asians believe that social relations between economic actors do not impede market functioning but rather promote it" (1999). Taiwanese networking is known for importance of trust between cooperating businesses. Longstanding personal networks link members and strengthen business linkages. Trust and commitment within these networks makes a fundament for commercial relations. Differences between network strategies of Japan, South Korea, Taiwan and United States are analysed in "Networks, Markets, and the Pacific Rim: Studies in Strategy" by Fruin (1998). Along with relational features strategies differ in degrees of formalisation, rule definition and market conformance, quality, and frequency of network interactions. The book shows unique features of Taiwanese companies. For instance, trading companies in Taiwan are not just intermediaries between export manufacturers and the world market. Instead they participate in the production actively from the product development stage. Unparalleled level of interdependence in Taiwanese business networks ensured by trust and commitment has a theoretical justification. David Knoke in its book "Changing Organizations: Business Networks in the New Political Economy" gives the following explanation to the phenomena: "Organizational populations whose members are more closely interconnected may experience faster growth rates, greater survival prospects, and higher carrying capacities" (2001). Nevertheless, the author admits that interdependence also has its dark side: "In their desire to acquire critical resources by forming partnerships, organizations risk losing control of their own destinies" (Knoke, 2001). Dependence on resources provided by business networking can be a constraint to firm's opportunities, especially when its actions are out of network's interests. Indeed, along with advantages networking approach has important implications for Taiwan's small and medium-sized firms, which are known to be weak organizations linked by strong networks. In the same sense, the networking strategy of Taiwan then plays quite an important role in their economy, particularly in the clothing industry. According to an article "Pacific Rim Trade and Development: Historical Environment and Future Prospects" (Huo et al., 1995) the beauty of Asia is that through networking, it can generate much more trade. A lot of these "transactions through connections" are through transnational corporations. According to the same article, there is nothing wrong with this, as long as it facilitates trade; it is an important part of the cultural aspect of Asian trade. But it does cloud the actually measuring of how much value added is being generated and the directions of trade increase. Another serious issue to be taken into consideration when assessing business networks in Taiwan is analysed in the work "Manufacturing Strategies of Network-Based Small Firms: Observations on the Textile Industry in Taiwan" (Chen, 1999). The article discusses that while business networks offer a range of strategies to Taiwanese manufacturers, including capacity and facilities, and giving advantages of flexibility, delivery and cost to members, quality is still a problem. "Although the network constituents are all aware of the importance of quality, under the combined pressures of cost, flexibility, and delivery a common practice is to meet minimum quality standards" (Chen, 1999). Further on, the author argues that taking action to assure quality relies on to it from all the network members. Thus, it is extremely hard to provide high quality, while controlling only a part of the final product produced by business network. While the literature mentioned in this section provides a well-detailed view on what is networking, what are the specifics of regional networking, how it helps Taiwanese companies, and what limits they should beware of, there are still unanswered questions. One of the most important - "What can be done to improve quality in business networks" - requires additional research. Rather than discussing theoretical frameworks, business networking requires practical recommendations on what managers should do to improve the performance of their business networks. Among other crucial questions to be answered is "How governmental policy influences Taiwanese business networks" 5. Research Methodology This section deals with the methodology of the proposed research. Starting from choosing the philosophy of the research, further on goes the design and methodology. As this research is of purely descriptive nature its methods of data collection are both of qualitative (questionnaire) and quantitative nature (in-depth interviews). The next stage, the analysis of the data gathered is described. It is where the implementation of both qualitative and quantitative approaches gives a benefit of better accuracy, allowing verifying gathered data and the results of the analysis. The section is concluded with ethical considerations regarding this research. Research philosophy Perhaps the best philosophy that could be utilized in this research is positivism. Positivism adopts the philosophical stance of the natural scientist (Saunders et al., 2003). Such work will be through an observable social reality and that the end product of such research can be a law-like generalization similar to those produced by the physical and natural scientists. The researcher assumes the role of an objective analyst that makes detached interpretations about those data that have been collected in an apparently value-free manner. There will be an emphasis on a highly structured methodology to facilitate replication and on quantifiable observations that lend themselves to statistical analysis. The assumption in this philosophy is that the researcher is independent and neither affects nor is affected by the subject if the research. Research Design and Methodology This research examines the manufacturing operations of networked clothing firms in Taiwan. A study of this kind may provide information useful to understanding how clothing industry manufacturers in Taiwan operates with their network linkage from other counties. Insights into the operations of networks may also help the government formulate policies, which facilitate the development of the nation's economy. Furthermore, this investigation of manufacturing strategies in Taiwan may provide a range of insights into the Chinese approach to management. Through an in-depth field survey, the researcher examines the manufacturing strategies of the network, discusses its competitive priorities, and suggests several propositions concerning the management of network-based production systems. This study will also always employ the descriptive research method using observation and surveys. In this method it is possible that the study would be cheap and quick. Nonetheless, it would be very hard to rule out alternative explanations and especially infer causations. Descriptive research is a type of research that is primarily concerned with describing the nature or conditions and degree in detail of the present situation (Creswell, 1994). The emphasis in this type of research is to describe rather than to judge or to interpret. This study utilizes two sources of research: primary and secondary. Primary research data will be obtained this new research study. Questionnaire survey and in-depth interviews will be conducted. On the other hand, the secondary research data will be obtained form previous studies on the similar topic. This study will employ qualitative research methods because the researcher intends to find and build theories that will explain the relationship of one variable with another variable through qualitative elements in research. Through this method, qualitative elements that do not have standard measures such as behavior, attitudes, opinions and beliefs of the respondents of the study will be analyzed. The respondents of the study will be composed of randomly selected employees and managers of companies in Taiwan that practices networking strategies. Form this the researcher will purposively select 30 samples. Data Collection The Data collection instrument is a structured questionnaire that is based on Liker scale. A Likert Scale is a rating scale that requires the subject to indicate his or her degree of agreement disagreement with a statement. By rating scale we mean the scales that are usually used to measure attitudes, towards an object, the degree to which an object contains a particular attribute (like or dislike), toward some attribute, or the importance attached to an attribute. The annual income of social class will be illustrate on the presentation of analyzes with regards to the demographic of the respondents. The decision was made to use a questionnaire for the data collection for this project due to the sensitivity of the information being obtained. It is important for the respondents to be open and honest in their responses. The use of the questionnaire provides the project owner with the ability to test the views and attitudes of the managers. The questionnaire was designed to allow the collection of specific information about the participants to conduct statistical analysis, e.g. age, sex, length of time with the company and position in the company. In the interview, open-ended questions were used to obtain as much information as possible about how the interviewee feels about the research topic. Interviews took between one and two hours. The questions being used during the interview have been based on the research questions for this project, they should be reviewed, refined and approved by the project supervisor. The researcher designed a semi-structured interview. Here, the researcher encouraged the interviewee to clarify vague statements and to further elaborate on brief comments. The interviewer did not share his/her own beliefs and opinions. Data analysis Once the measuring instruments have been retrieved, the next activity of the researcher is to process the raw data into quantitative and qualitative forms. Data processing involves input, throughput and output mechanisms. Input involves the response to the measuring instrument of the subjects of the study; throughput includes the statistical procedures and techniques; and output, the results of the study which are presented in data matrix. Finally, statistical treatment will be done by the researcher for the analysis of data for test if there are any differences or relationship in the study on the networking strategy of clothing companies in Taiwan. Ethical considerations In keeping with the appropriate procedures and in the interest of maintaining the integrity of the research, the research had mad every effort to ensure that the ethical guidelines for conducting a study were strictly followed. Prior to commencing with the research, permission was obtained from each employee, customers, suppliers and laborers who participated in the study. In gathering the needed data for the study, the research wrote a letter of request to the office of the subject to secure a permission to conduct the study. After receiving the approval, the researcher preceded in the data gathering by distributing the prepared questionnaires that is the main instrument of the researcher for in the study. All data collected form the respondents were kept in a secure location. The names of the respondents were secured. Information was only recorded as part of the entire group. The objective, purpose and the significance of the study were all relayed to the participants before initiating the research process. Bibliography Anonymous (2004) How to Network Book. Canadian Business Networks. Coalition. Published on May 10, 2004. Available Online (http://strategis.ic.gc.ca/epic/internet/inmfbs-gprea.nsf/en/lu00024e.html) Accessed on June 11, 2005. Bovard, James (1991) Mismanaged Trade. National Review 43 (14), 40. Chen, Homin and Tain-Jy Chen (1998) Network Linkages and Location Choice in Foreign Direct Investment. Journal of International Business Studies 29 (2), 455+. 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