Lulu PLC Clothing Manufacturing In China - Essay Example

 Lulu PLC Clothing Manufacturing In China Introduction Lulu PLC Company is a textile company specialized in manufacturing sector and is based in UK. In the recent years, the company has engaged in business relations targeting international market. Recent developments led to the company developing a manufacturing plant in China. This research intends to study the opportunities and challenges associated with the cultural and political environment in China and which are likely to affect textile industry there. We also intend to study other appropriate business forms for the manufacturing plant. Lastly, we intend to survey the business environment in Brazil, France and Germany as the firm intends to expand her retail industry in the three countries. A conclusion will follow with the available opportunities for natural hedging (if any), and possible hindrances to the success of the manufacturing facility to be opened. Manufacturing in China Rapid economic growth and industrial development has been witnessed in China in the recent past. China is ranked third from the U.S and Germany in the rankings of world’s trading nations. Business organizations intending to exploit business opportunities in China has a mandatory task to understand the prevailing business environment as this may have profound consequences in business development. Cultural and political environment in particular greatly affect any business performance. The government of the People’s Republic of China has over time developed a market economy in the system, which is dominated by socialist characteristics. Socialism in China advocate for collective or state ownership of economic resources and their distribution. Equal opportunities to all characterize the mode of production. This poses a challenge to Lulu Company in that it may take time before adjusting to the common ownership and sharing of production resources (Fogel, 2010, p.18-21). There are two major market trends that are emerging in China’s market that are likely to affect Lulu company’s operations. These are regional integration and world multi-polarization. The NDRC has a plan that is meant to better manage her Foreign Direct Investment in the economy. This plan monitors the national security investment as well as foreign investment. From the policies sighted in the plan, China is advised to give room to foreign investors to own domestic enterprises. This, on the other hand, would work as a boost to Lulu PLC Company’s plan to establish a manufacturing plant. China’s government has been on the forefront in providing equal treatment to both local and foreign countries interested in engaging in business activities with her. This is equally an advantage to the company’s proposal (Chu, 2010, p.5). Hard work, moral uprightness, social life structures and family institution are some of the basic cultural dimensions a company must face whenever she intends to venture into China for business. As earlier noted in the political governance, social collectivism is a major aspect in the country. This means that our company must be in a position to face the aspect of social cooperation. This must be put in consideration in the decisions regarding the kind of products to develop for such groups as the family, schools and also on the management control systems to be adopted. The company must design management control policies most suited in collective working as opposed to individual units (Sebenius and Qian, 2008, p.5). Lastly, the clothing industry has been invaded by the advancement of ICT. China as a country has not been left aside. Accesses of niche markets and the development of higher value design and logistics are the main emerging trends in the industry and thus any competitive company must consider this. Lulu PLC Company must thus consider technological advancement in her move to establish the manufacturing facility in China (McNamara, 2008). Setting Up a Manufacturing Facility in China Clothing and textile industry has been in the lead among the industries that has dominated the economy of China. She has been a leading country in supplying the world market with the commodity. Technology in the industry is relatively low currently, leading to low profit returns. Good development strategies and possible changes in the future would guarantee any foreign company success in venturing into her market. Investment in China would not only boost her textile industry but in a large extent it would also improve the economic position of the country (Qiu, 2005, p. 5). China is drastically enlarging her export sector. This in essence has created a business opportunity to textile industries from even other geographical areas to expand their production facilities. In producing within China, the county is able to meet her broad global export market requirements. This equally suits the expansion of Lulu PLC Company into the country (Biselli, 2009, p.3-4). Textile industry is basically concerned with the manufacturing fiber and processing them to yielding fabrics that are then used in the manufacture of clothing. Cotton is the world’s most important natural fiber. However, technology has led to the innovation of synthetic fibers by forming polymers. There are other natural fibers either from plants, minerals and even animals. In preparation of the fiber for spinning purposes, a number of industries are involved. These form the main business opportunities for a company to venture into if interested in the textile industry. They include cultivating and harvesting, spinning, weaving, preparatory processes, finishing and fabric making. Distributing to Brazil, Germany and France The Lulu PLC Company also wishes to develop distributing networks to already existing retail and wholesale outlets in France, Brazil and Germany. A great competitor in the textile industry to the U.S is Brazil. She leads in cotton production in the common markets in Europe. The Brazilian economy has a good structural arrangement, good technology advancements and embraces trade generalization. There are prospects that the country’s cotton production would be on the rise owing to the addition of agricultural land, and favourable cotton prices in the country (Kiawu,Valdes and MacDonald, 2011, p.1). In Brazil, the best business prospects in textile industry are the manufacture and distribution of children wear, casual wear denim, men and women work wear, home line products and luxury branded products (Barbosa, 2009, p.26). In Germany, textile industry has over time recorded a great decline in the market economics associated with the textile industry and as a result, millions of employee lay-offs are witnessed every year. The trend is worrying and every company intending to venture into the economy must be ready to face the looming crisis. Germany has specialized in production of high value textiles and this has led to the high labour costs incurred. This means that high value differentiated textile products are the main bulk of business in the retail and wholesale industry in the country. Therefore, Lulu PLC Company has only the option of embracing higher technological advancement in order to be competitive in the country (Hausding and Cherif, 2008, p.58). In France, the textile industry is mainly dominated by small and medium enterprises. Recent years has seen the textile industry in the country undergo great transformation. The country is undergoing general trade reorganization. Research, marketing design and marketing strategies are in the change. Changes in social demographic and regulations together with shifting technological situations have at large impacted the French textile industry. Innovation in the industry has taken shape with national production changing to embrace high level technological production. This has led to the greater improvement in productivity thus ranking France’s production on top, with her productivity at seventy percent. She has specialized in improving fibers. France textile workforce industry is majorly dominated by females. The production mainly focuses on men’s wear, children wear, women wear and lingerie accessories. However, protective and safety wear also makes part of the production. Cotton, wool and chemicals form the basic raw materials for natural fibers as well as the synthetic materials used in the industry. Woven or even knitted fabrics are produced from these fibers that are spun into yarn. Manufacturing then takes place through furnishing the fabrics, dying and then printing. Carpets are also made from non-woven textiles, animal fibers and even synthetic filaments (Morris and Barnes, 2008, p.1-2). By the analysis of the three countries, France, Germany and Brazil, it is clear that the retail trade is to a large extent well developed in all of them. However, different structures of political and cultural environments exist. Structural arrangements in textile industry are commendable in Brazil with productivity set to increase with more land set on cotton production. Incentives are also well set for investors in the industry. Also a wide range of products especially for the target group are portrayed here. On the other hand, Germany and France are recorded to be on the declining side in textile industry. Change in production modes and world market trends in general have resulted in the weak trade in textile industry, in the recent past. Also, the currency exchange in the two countries is not stable compared to the rest of the European market players. Therefore, our research would recommend that Lulu PLC company directors invest in Brazil. Her benefits are much more and she has a market for a wide range of products. Possible tradable goods are children wear, casual wear denim, men and women work wear, home line and luxury branded products. Conclusion Over the last five years of business operations, Lulu PLC Company has evolved to master her game in the industrial expansion. She must have developed mechanisms to sustain her competitiveness in the industry. She has developed defensive and proactive mechanisms to meet her business obligations. In the event of investing on foreign markets, every company needs evaluate the following; business competitiveness in home environment, product differentiation, financial strength, technological advancement, economies of scale and managerial expertise. Textile industry is a rather competitive industry especially in the European market as earlier shown. A wide range of activities are included in the whole manufacturing process running to the production of the real fibre, treatment and to the actual production of finished products. Textiles are woven for different purposes that range from traditional applications, clothing, health, automotives, construction and safety among others. This research majored on studying the available mechanisms for business expansion to the Lulu PLC Company. There are a wide range of available opportunities ranging from export to other countries and even actual expansion of production activities in foreign countries. However, there are major factors that must be considered before any company settles on the best practice to adopt. These include consideration of the political, economic, social and cultural factors in play in the countries. Government policies are always dominant in the establishment of any business entity in any country. Cultural beliefs and practices play a major role in understanding any business environment. Political factors such as a patenting, policy making etc also play a major role in business decision. On the proposal of establishing a manufacturing facility in China, Lulu PLC Company is faced with a number of challenges ranging from understanding and adoption of socialistic mode of production and embracing the emerging trends in technological advancements and market polarization. Her major advantage would lay on the fact that China is currently embarking on export expansion. China has also put into place favourable terms for foreign investors to invest in the country. However, the challenge of stiff competition is inevitable as China still leads in the manufacture of textile for the international market. On the other hand, considering expansion to target the already existing retail trade in France, Brazil and Germany entails proper evaluation of the prevailing business environment in these countries, the political and social cultural factors that are likely to affect the business. Export to these markets requires proper evaluation of the competitiveness in product differentiation, target group and the market segmentation in the countries. Our evaluation led to the conclusion that Brazil offers the best opportunity compared to the other countries. Declining business prospects with high chances of currency devaluation in France and Germany are key factors that led to the commendation. The available business forms are raw material production, including import, cultivating and harvesting of cotton, spinning, weaving, preparatory processes, finishing and fabric making. The directors are thus tasked to decide on the best practice to adopt from our recommendation. It is however of paramount importance that the decision made puts into consideration that our analysis basically drew the conclusions from past records. Changes are inevitable in the future either. Bibliography Barbosa, D., 2009. The Importance of the Textile Industry in the Brazilian Economy. Available at: [Accessed 12 November, 2012]. Biselli, M., 2009. China’s Role in the Global Textile Industry. Available at: [Accessed 12 November, 2012]. Chu, A., 2010. Doing business in a changing China: Seeking similarities, respecting differences. PwC View issue 13 Fogel, G.K., 2010. Business Environment in China: Economic, Political, and Cultural Factors. Available at: [Accessed 12 November, 2012]. Hausding, J. and Cherif, C., 2008. Patent Statistics on the World Textile Industry and a Look at Germany's Position. AUTEX Research Journal, Vol. 8, No2, pp. 57-61 Kiawu, J. Valdes, C., and MacDonald, S. 2011. Brazil’s Cotton Industry Economic Reform and Development. 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