Competitive Advantage of America in Garment and Textile Industry - Literature review Example

Competitive Advantage of America in Garment and Textile Industry Michael Porter, the originator of the theory of competitive advantage, starts his argument quoting that there are only two types of competitive advantage, one is low cost and the other being differentiation. According to him competitive advantage comes into the forefront only when a company produces similar products as does its competitors but comparatively at lower costs. When a company is capable of commanding a premium price for a product which may even though be evidently alike the other products referred, still it is noticeably different. As for Porter, the means by which success is achieved is the cost analysis and being clear about the fact of cost drivers in a company. Costs remain crucial when they are based on the differentiation attribute. There is a hike in the costs in case of differentiation as there is an enhancement in the quality, design, features, and more of all, reputation for which expenses are to be incurred. But then there is no use in sustaining these costs until and unless one is able to get theses costs back by the help of a price premium. This means that unless a customer actually uses the product and gives a standard or a value category and differentiates between one and the other product, it can be said that differentiation goes to the waste from the point of view of the company. It can be provided as an example, the very famous case of the American Engineering company, which had won the highly esteemed Baldridge Award in a year, just for its good quality, but the next year it had gone out of business. Quality remains a valuable ingredient until the customers happily pay for it. Once the customers start jumping to other products, quality is of no use and it is to be taken into consideration that the customers have found something really better than the earlier product in the market. The knowledge about costs and the factors which drive them are required by competitive advantage. It is very important to keep in mind that it is only the costs differences in the products of the same type of industry that are taken to be an important aspect in case of competitive advantage. According to Porter’s argument, it is important to study the temperament of costs and the features which drive them because analysing of cost drivers assists the companies to prepare a suitable line of attack to achieve competitive advantage. Porter suggests that the finding of the minimum cost is not the direct difficulty that any company, with the information available to it, can resolve. This search for a better and lower cost is a very complicated and complex task which can either be done in a fine manner or it may even become very poor. But it is for sure that this search can provide for a good base of competitive advantage and better performance. The companies which try to, and even succeed in understanding these factors, and exploit them, can be winners in the competitive market. Porter has described in his work as to how companies take into consideration the cost drivers and how do they have an edge over these cost drivers and prepare a policy for the competitive advantage. For all these factors, Porter’s book had got the award for the best- seller, and he had attained the status of a superior counsellor. This provides for the fact that so many managers have approved of his theory, and have taken into their practice, to find competitive advantage, the methodology that Porter has devised. On the contrary, various economists have found this move to be creating problems within the company, in contemplation with the performance differences. These economists have certain questions in mind that why don’t the flourishing companies buy the unproductive companies and make them learn how to lessen the costs, or why don’t they sell off their proficiency of cost lessening to such unproductive companies. They even think on the fact that why don’t better companies not slash their costs and totally force their competitors out of their markets. They again question on the fact that why the unsuccessful companies not employ the executives or the brains behind the cost drivers of the more successful companies. This of course has happened earlier, e.g. the organisational fight between Volkswagen and General Motors for the effort made by the cost expert Mr. Lopez. Porter has devised a theory called the diamond and according to this theory, a country’s or organisation’s competence which is relied upon steady improvement has in it four important criteria- the conditions of the factors, the conditions of the demands, the supporting and related industries, and a definite planning, organization and competition. Porter describes that taking into account the conditions of the factors; the nation doesn’t get them from the very beginning but generates the most significant means of production, i.e. scientific base and trained labour. It is a belief of Porter that originality is based on the costs rather than the stockpile and efficacy of creation, exploitation and up gradation of these assets. Keeping in mind the company’s or the industry’s demanding requirements the factors need to be highly specialised. Considering the conditions of demand, it can be said that competitive advantage crops up if the customers give a detailed and clearer picture of their demands. It has been thought that the classier and demanding the customers’ demand, the better it is for the industries. The local principles and conditions clearly bring a downfall in the demand importance. The factor of supporting and related companies describes that the supporting companies should be globally competitive. It should have a good cost effective dimension, should be innovative and should welcome up gradation. Taking into consideration the factor of definite planning, organisation and competition it has been provided by Porter that, competitive advantage begins from an amalgamation of organisational means and managerial practices which are liked in the country and these should become the basis of competitive advantage in the industry. Considering the issues of management compensation, company goals and the like, tough neighbouring competitors are an incentive to innovate. Michael Porter also says about the role of the government in the theory of the diamond. He describes the role of the government both as a challenger and also as a catalyst for the nation’s industries. The government should work in such manner tat the industries are forced to perform in a better way and so that the industries gain more profit from the competition in the market. This will bring into the forefront, various hidden strategies of the industries which will be implemented. If the government of a particular country acts as a catalyst in the rivalry of the industries of the nation, it will give rise to higher competition even in the market worldwide. Thus the nation can become the leading industry internally in its own field. Porter stresses on the government’s indirect role rather than the direct role in this case. According to Porter the main objective of the government according to the diamond competitive advantage theory should be to create factors and specialise in it, to promote in changing the product quality or to change the texture, colour etc of the product and to encourage rivalry. All these formalities if done by the government would surely help the industries in gaining. Therefore, for the nation’s growth through its industries the government is advised to follow the footsteps of the diamond theory. The consequences of one aspect of the diamond rely on the other. The particular importance that is laid on the drive is that of the industrial competition within the nation and environmental focus. Thus it can be specified that though the surroundings may make available a preliminary competitive advantage, yet it is the driving force of the diamond that shows the pathway to a persistent competitive advantage producing this structure as an initial attempt to go past the cross-sectional proposition of planning. In the above case, when studied in consideration with the theory of the diamond that Michael Porter has devised, it can be said that all the four elements are not found in the textile and garment industry of America. The four elements of the Porter’s diamond are –factor and demand conditions, industry rivalry and supporting and related industries. While studying the conditions of factors it has been found that America is one of the largest cotton growers of the world. It may come just next to China in this matter. Thus it dose not have to import cotton from the overseas. Most of the cotton farms of America are located in the southern states such as Mississippi and North Carolina. This is another reason why each new week brings in the news of the closure of another industry in America. These textile producers move to the border areas where cloth-making factories already exist. This trend was seen to gather speed after the NAFTA Agreement in which it was declared that taxes would be lowered. Regarding the labour force, America had the capacity of hiring ten Chinese labourers to give his labour for the value of one American. Thus it very well knew how to manage for the labour and that too skilled labour. The Chinese are very good at textile and garment manufacturing since it is their own profession. China being the largest cotton grower of the world was unable to get into textile and garment manufacturing because certain problems. But after the agreement on trade liberalisation, by the World Trade Organisation, all the hurdles were removed and China brought its enormous apparel and textile industry to the very unchanged open market where America stands as one of the competitors. Thus though America has a good base for the marketing of textile and garment business, and though it has surplus of labour, it does not have the mind to work better things, in better ways out of it. It is a belief of Porter that originality is based on the costs rather than the stockpile and efficacy of creation, exploitation and up gradation of these assets. Keeping in mind the company’s or the industry’s demanding requirements the factors need to be highly specialised. Thus America should, in order to gain competitive advantage has to work on it. Next in the diamond of Porter comes the factor of demand. It has been very clearly described by Porter that the existence of competitive advantage crops up if the customers provide with a detailed and clear picture of their demands. Their demands are to be used as the rating for the use of the product. The more the demand the more usefulness the product has. It has been thought that the classier and demanding the customers’ demand, the better it is for the industries. The local principles and conditions clearly bring a downfall in the demand importance. This may be attributed by studying how the demand of the people of America has affected the competitive advantage of the garment and textile industries of America. The demands of the Americans regarding the garment that are using is changing rapidly now- a- days. They have a liking to great fashion rather than the sensitivity of cost. There is little effect of Globalisation on the designers of Milan, Paris and New York. Broadly speaking there is typical fashion which sees a change every week. In such situations the earlier the designs reach the market the more beneficial it becomes since the base line prices don’t matter at this point of time,. This is where the theory of competitive advantage of Michael Porter gets a kick back, as according to him, one of the factors of competitive advantage is low cost. This criterion does not match with that of the case study done on America. There is also seen a steep demand for the higher quality of good suits from the little domestic market in the Fifth Avenue of New York or Savile Row in London. Thus it can be clearly seen that the demand factor of America does not match with that of Porter’s Diamond. The third aspect that needs to be discussed is the rivalry between the industries. In the above case, there is too much of rivalry between the garment companies within America. This proves to be a positive attitude considering the industries in mind.. This is because, Porter’s diamond says in favour of industry rivalry. It says so since Porter feels that if there is competition in the local market then, there always the scope for innovation. There arrive great ideas in the minds of the designers who would create new garments and make their respective industries go way ahead in the market competition. This innovation would give rise to creativity which has been emphasised by Porter’s diamond. This creativity would on the other hand create a rise in the demand structure thus making the industry benefit. At this stage the industry may opt for a price down so as to fulfil the 4contion of competitive advantage. Thus, taking into consideration the above case study of America’s garment industries it can be said that the rivalry which exists between the big industries with the smaller domestic factories would prove fruitful for it to have competitive advantage over other countries. This dimension of Porter’s diamond has been fulfilled by the above case study. Lastly referring to the supporting and related industries, it has been seen that though in the earlier days America stood in the number one position in the Garment market with a very few and that too small industries competing with it, now the situation has changed a lot. China has entered into the market after the agreement of trade liberalisation by the World Trade Organisation that removed all the hurdles in the path. Even in the recent past Sri Lanka has emerged as one of the greatest textile and garment manufacturers of the world. With so many industries coming into the market, America obviously is going to face serious competition in its field of textile and garment industry. As regards the supporting industries, it has been found from the case that various industries are shifting their bases towards the borders where there are more of the cotton farms so that it becomes easier for them to get the raw materials for their industries. Thus one can very easily get the view that there is no shortage of the supporting industries. This is also maintained by the fact that America itself is a cotton producer and that also with a right to compete with the largest cotton producer of the world, i.e. China. All these factors make it clear that there is all the help provided by the supporting industries which America’s textile and garment industry requires. This proves that America’s garment industry has this factor imbibed in it, as given by Porter in his diamond theory, to have competitive advantage. Regarding Porter’s secondary points of government and chance, the case study shows that the government is taking keen interest in providing help to the garment industries of the nation. It has been studied that in the internet driven market of today, where there is lots of rapid change in the products, and mass customerisation, companies like Brook Brothers and Levis have started their analysis on the Dell computer model. By this system in fact customers can order products made exclusively for them. This will happen with a black curtained room, where the customers will be provide with special disposable underclothes which will not change the actual structure of the body, and then by the help of computer graphics , the exact measurement of the customer can be taken. This would result in the providing of the best fitted garment to the customer. All these planning that have come into the minds of the big garment designers is a result of the rivalry between the other garments industries may be in the local market. Thus this can be accredited to the government to allow the local garment makers to come to the market and compete against giant companies. This is very welcoming step taken by the American government. Moreover the government is helping the garment industries by signing new agreements like the NAFTA Agreement which has provided for lowering of taxes for the cotton farmers and the cotton industries. These cotton farms provide for the raw material required by the garment industries. Apart from this America has a good export market of its textiles. This is also with the grace of the American Government. Thus according to the diamond theory of Porter, the government of America should help in create factors and specialise in it, to promote in changing the product quality or to change the texture, colour etc of the product and to encourage rivalry. All these formalities if done by the government would surely help the industries in gaining competitive advantage. Concluding it can be said that what Michael Porter provides for in his theory of competitive advantage which also includes in it the diamond theory, can be considered as a useful tool in the marketing strategies of any industry and the nation as a whole. This provides a guideline in the best possible manner to bring about change and development in the industrial level. According to Porter, what has been understood from his theories, it is clear that he wants that every nation should encourage its industrial groups to bring certain changes and betterment in the market. This change and the new look in the products would give rise to competitions and thus there would enter at this very point, cost adv competitive antage. Regarding America’s role in the textile and garment industry sector, it can be said that the country is too far ahead of the other competitors in this field. This can be shown from the fact that the garment producers now-a-days are increasingly making use of electronic media for ordering, catalogue management methods, automatic distribution centres, liked with those of their customers. It has also been noticed that the best producers of garments have now learnt the means of delivering orders at a notice of few days only. This is something unique in America which has not yet been developed in any competitive market. This is found to be a victory of information technology, flexibility and speed over lower rates of labour. Economists may give their argument by saying that Potter has provided with a descriptive, elaborate, and a just nature of competitive advantage. He, according to the economists, also provides with some programmes and insights which are useful rather than a basic account of the discussion of what exactly differentiates prosperous firms from their less prosperous competitors. So whatsoever in addition to these Porter does, he is not able to give us a healthy rationalization of the decisive determinants of a company’s capability to produce cost on a sustainable method. Thus from the case study, it can be concluded that America has competitive advantage if we do not take into consideration Porter’s theory of competitive advantage. This has already been contemplated with.. But considering the theory of Porter, America has not fulfilled its entire criterion. Therefore, according to the theory, this methodology is not applicable to America and it still stands out as the most efficient and the number one position occupier in the textile and garment industry. The downfall which America had faced a few years back has been grounded to the earth with the passage of time and it still remains the unbeatable in the field of garment and textile industry. References Porter, Michael, The Free Press, NY, 1985 Competitive Advantage. Porter, Michael, SMJ 1991, Towards a Dynamic Theory of Strategy Read More