A Local Small Chinese Textile Business Facing Global Competition - Case Study Example

A Local Small Chinese textile business facing global competition: Effective strategies for increasing its’ competitiveness to face with challenges from the current globalization Name Institution Course Tutor Date Introduction The Chinese textile industry comprise of various production and marketing services of textile products, including auxiliary services that support the manufacture, finishing, marketing, and distribution of such products (Ruffier 2008). Textile products are often unique since there are various end–use markets for these products. China continues to play an important role in the global textile industry. As one of the leading producers of textile across the world, China is recognized as one of the greatest contributors to global trade in textile (Ruffier 2008). There are about 24,000 enterprises in China that have employed about 8 million people. The production capacity for textile products including man-made fibers, cotton and silk is very large in China (Qiu 2005). For the past decade, the global textile industry has experienced a major restructuring, partly due to trade liberalization and growth within the global market. While the production and consumption of textile is expected to increase, a major change has occurred in production and marketing of textile products globally (Cassill, Blanton & Trevor 2007). This shift in the global textile industry has provided challenges for the Chinese textile industry, particularly the local small textile enterprises which are finding it difficult to compete globally. Local small textile firm in China focus mainly on the low-end product markets. They practice poor management and marketing practices. Technology in these firms is less advanced and they report low profit margins (Qiu 2005). Using Sung Sung Weaving & Dyeing Works, a local small textile enterprise as a case study, this paper describes the effective strategies the business can adopt in order to increase its competitiveness and survival in the current globalization trend. A Local Small Chinese textile business Sung Sung Weaving and Dyeing Works was established in 1916 with its factories located in Nan Tso Lin Tsun, Hopei and West Station in China. The enterprise has three main departments: Weaving department, Knitting department, and Dyeing department (Rea’s Far Eastern Manual n.d). The weaving department has around 280 workers and it specializes in the production of carpets and table covers. The knitting department constitute of around 50 workers who are used to produce cotton and silk hose. Lastly, the dyeing department in the company has a capacity of approximately 30 workers. The company has about 400 workers in total (Rea’s Far Eastern Manual n.d). The annual consumption of raw materials by the company is estimated at a value of $400,000. The company purchases cotton yarns from local cotton mills and the Dah Sung Cotton Mill at Nantungchow. The annual output of Sung Sung Weaving and Dyeing Works is valued at $600,000 (Rea’s Far Eastern Manual n.d). Global competitive situation Since China is a large exporter of textile products, it implies that supply in the country exceeds local demand. According to Biselli (2009), the scenario in the textile industry in China has changed in the last decades as the export for textile products has expanded drastically. Since 1990, the exports from China have experienced increased rate of growth more than double the global growth rate (see table 1.1). However, this situation has created a fierce competition among the local textile firms. Because of low barriers to entry, Biselli (2009) argues that excessive entry has increased the competition in textile industry, characterized by price wars and price competition. Figure 1.1: Recent move in the global textile industry Local companies in the Chinese textile industry are fighting for customers and materials, which leads to most of small textile businesses, such as, Sung Sung Weaving and Dyeing Works losing money. Additionally, various levels of technological advancements and current globalization prove to be extremely challenging for the small local textile business in China (Qiu 2005). There are various areas of concern that affect the productivity levels and competiveness of the small textile business in China. They include communication barriers between departments, inadequate use of technology, and failure in product design, production output volume and pricing of textileproducts (Ramdass 2007). Other issues include lack of training and development, non-conformance, pressure of delivery times, low motivation, lack of garment costing, increased absenteeism and turnover, and failure to apply process improvement strategies (Ramdass 2007). These essential issues need to be addressed accordingly by the manufacturer in order to improve its position in the domestic and global textile market. Therefore, to increase its competitiveness in order to survive in the current globalization trend, Sung Sung Weaving and Dyeing Works should consider the following global textile competitive strategies. Global textile competitive strategies The strategic framework for successful textile production in a small local textile business should begin with leadership that compels improvement initiatives. According to Stevenson (2012), change is normally introduced by leadership with strategic vision to drive an organization toward success. Thus, the mission and vision comes from the leadership of the organization. The leadership at Sung Sung Weaving and Dyeing Works should be visionary enough to drive the company towards the achievement of its objectives by transferring the ability to make decision to the workforce (Ramdass 2007). To efficiently improve utilization of business resources in a way that promotes competiveness in the global textile market, the leadership at the enterprise needs to create trust. Through visionary leadership, the business will be able to establish and communicative a realistic and credible vision that develops and improves upon the current situation within the company. The leadership at the business should be proactive and utilize the current threat of globalization as an opportunity towards developing a competitive business (Stevenson 2012). Respect for others and use of effective communication skills should be used to reduce barriers in communication. In addition, sharing and learning should be encouraged in the workplace. This would help increase morale and expose employee capabilities to work towards increasing the business competiveness (Robins & Decenzo 2006). Thus, leadership is essential and has the ability to change the business around by effectively implementing fundamental tactics that would improve the local small textile business. By insisting on leadership that embraces change and focuses on process improvement initiatives, Sung Sung Weaving and Dyeing Works would become dynamic and easily adjust to its operations to face the challenges from the current globalization. Sung Sung Weaving and Dyeing Works also need to adopt performance improvement strategy. In this case, the focus for the textile business should be to implement essential productivity improvement initiatives. Productivity improvement can be achieved in different ways. One of the recommendations proposed by Bheda, Narag and Singla (2003) is the use of work-study principles in the manufacture of textile products. Work study practice is essential in labour intensive operations, such as textile business. Local small textile business has a tendency to use estimated time standards which are not correct most of the time (Biselli 2009). It is important that the business applies scientific work measurement approaches to textile production. It should move towards developing a work-study department or training its supervisors on how to apply such tools (Ramdass 2007). This will help improve productivity and enable the business to compete with other textile companies in the local and international market. Another method the local small textile business can use to improve its productivity is to initiate training for all stakeholders (Cassill et al 2007). The productivity levels in the Sung Sung Weaving and Dyeing Works signifies the need to initiate training and development. Nevertheless, the initiatives to improve productivity would only be effective if management and supervision developed a better understanding of the concepts and actualized the changes (Cassill et al 2007). The textile business could sponsor workers to attend training programmes to help improve their skills and competence in textile production. Alternatively, it could conduct in-house training to enable workers acquire both non-specialized and specialized skills to improve performance (Bheda et al 2003). This would facilitate the implementation of scientific principles of line balancing, ergonomics, workflow layout among others. Additionally, Sung Sung Weaving and Dyeing Works need to initiate technology improvement in its textile operations. The business should upgrade its machinery at different stages in textile production. Areas of innovative machinery the business could implement include computerized laying and cutting of fabric, automated weaving machines, and automated knitting machines the respective departments (Ramdass 2007). This implies that the enterprise should make strategic investments to improve productivity and return of investment. This would place the business in a better position to face the challenges and survive in the current globalization development. Sung Sung Weaving and Dyeing Works should implement a teamwork based production system commonly referred to as the modular system to cope with challenges from globalization. In this system of production, workers work on a single item of clothing at a time. The components of the textile then moves between operators to be completed. Operators working in modular system are often multi-skilled and are responsible for making decisions concerning the system of production (Christopher, Lowson & Peck 2004). The modular according to Castro et al (2004) insists on quality management, teamwork, and improvement initiatives, which are very essential in achieving and maintaining competitiveness textile industry. In addition, it promotes employee morale since group members can practice open communication. The level of reject is zero based because operators are responsible for the production process (Castro et al 2004). The system also encourages self-directed work teams, hence motivates workers to perform various roles formerly pursued only by managers. As such, teams are given the power to make particular changes in their processes of work (Castro et al 2004). However, appropriate level of control should be exercised over self-directed teams in the textile business to ensure that they perform functions and make decisions that match the general goals and objectives of the company (Ramdass 2007). Therefore, before initiating modular manufacturing as a trial run, it should first appreciate the dynamic of teamwork. The business would achieve various benefits from modular manufacturing if it is successfully implemented in the company. One of the benefits is reduction in the cost of textile production through the effort of a multi-skilled team (Biselli 2009). It would also reduce work in progress between textile operations and promotes labour efficiency. This will help the business effectively meet the requirements of customers in terms quick service delivery (Ramdass 2007). The system would also help improve quality production since self-managed team effort ensures that defect rates and repair times are reduced. Additionally, the system would enhance team work which promotes communication between workers and reduces possible barriers between operations (Castro et al 2004). This would indirectly solve the problem of absenteeism and create a better work environment, hence increased productivity and competitiveness for the business in the textile industry both locally and globally. Benchmarking is another technique the textile business can use to improve on its performance so as to increase its competitiveness in the textile industry and the chances of survival in the current globalization. Through benchmarking, Sung Sung Weaving and Dyeing Works would be able to share information with regards to quality management systems, prices, the levels of services, and production systems (Ramdass 2007). As such, the business will able to implement the current textile manufacturing practices within the industry, enabling it to compete favourably against international participants. Benchmarking will also help the company to conduct research in problematic areas within its production activities, which would lead to improving the process of textile production (Bheda et al 2003). Benchmarking would enable the business to compare its current performance outside the organization. While using benchmarking, it would be necessary to scrutinize in depth issues, such as waste levels, operational costs, operator performance, inventory levels and staff turnover. This would then be used as an input for improving the performance of the business and the realization of continuous improvement (Biselli 2009). As such, the company will become competitive by lowering the cost of operations. Innovation and research and design (R&D) is crucial for the local small textile business in China if it has to become competitive and survive in the current globalization trend (Bheda et al 2003). In order to make its presence recognized at the global level with textile brands, products and processes, the business must embrace innovation and R&D. It is a transformation in which the company would need to work with other partners in the industry to ensure that business process innovation is realized (Llach, Bikfalvi & Marques 2009). Innovation activity involves the use of knowledge to improve products or produce new products, also referred to as product innovation. It also embraces the use of improved or new production, or processes in the organization, including organizational or technological innovations (Llach et al 2009). To make innovation have a strong impact in the company, it should be carried out systematically while involving all departments and influencing the strategy strongly. Innovation is likely to increase the survival rate of a local small textile business in China by means of producing more profitable textile products, increasing revenues, and even increasing access to new markets (Ramdass 2007). In this case, when the company realizes growth in sales and profits, it would be an indication of the effects of innovation. It is true that building brands and increasing their impact in the retail market is capital intensive, especially for local small textile business in China. Nevertheless, the promotion of the Chinese brands produced by Sung Sung Weaving and Dyeing Works in the domestic market should be supported with success in retail stores. Eventually, these textile brands would catch the confidence to sell internationally aggressively (Llach et al 2009). Developing innovative products, processes, technologies and applications in textile operations is the key for growth to the company. In addition, R&D initiatives will promote innovation capabilities and ensure survival and prosperity amidst increased globalization. Total quality management (TQM) is a significant organization-wide strategy a small textile business can use to increase its competitive position to face with challenges of globalization (Oakland 2014). The main focus of TQM is customer satisfaction. It is an approach that considers quality improvement as a continuous process to improve the process of conversion, hence continually increasing the level of customer satisfaction (Oakland 2014). The concept of continuous improvement has become popular and widely recognized managerial approach to quality improvement in day-to-day business operations. In this case, Sung Sung Weaving and Dyeing Works should endlessly pursuit quality in textile production by involving everyone in the business. It needs to focus on the customer, employee empowerment, understanding customer definition of quality, and continue to improve its processes (Oakland 2014). Successful implementation of TQM would mean that the business would experience major improvements in quality of textile products and productivity, hence making the business better place to compete both in the domestic and global market. The emphasis of quality management is on avoiding mistakes or making corrections after mistakes have occurred. The business may need to establish a trade-off between investing in failure costs and investing in quality programs. If the business produces poor quality textile products, both internal and external failure costs are likely to be high. This would adversely affect the firm’s profitability (Ramdass 2007). For example, injuries may increase due to defective output and neglected machinery. Additionally, the textile business may experience increase in service costs, warranty costs, discount costs, repair costs, compensation of customers for inferior quality products (Oakland 2014). Therefore, the company should emphasize on quality in order to realize significant reduction in failure costs, hence reduce production costs. Ultimately, this will improve the performance of the business and its competitiveness in the textile industry. Sung Sung Weaving and Dyeing Works may also utilize quality circles to increase its competitiveness and to overcome the challenges from globalization. To perform exceptionally well, the business needs to practice quality circles with finding solutions to problems that are likely to affect output, performance, and profitability (Ramdass 2007). In implementing quality circles, the business will develop a group of employees from the existing workforce, from all the departments. These employees would be expected to meet from time to time in order to discuss issues arising in the production process (Stevenson 2006). Consequently, the group would brainstorm the existing problem and give recommendations on how the problem could be solved. The concept of quality circles focuses on connection of the workforce and promotion of quality management (Stevenson 2006). Following the four basic steps of planning, doing, acting and acting, the business should eventually be in a position to move to improved standard of performance in order to absorb the pressure from globalization. Conclusion Conclusively, China continues to be one of the leaders in the production of textile mill products across the world. Thus, its contribution to global trade in textile is highly recognized. Nevertheless, because of globalization, local small textile enterprises in China are finding it very challenging to cope with stiff competition in the textile industry. In addition, they face many problems that makes difficult for them to achieve a competitive edge in a global textile market. Such problems include but not limited to poor management, use of low technology, low motivation, lack of garment costing, and failure in product design. In order for the small local textile business to survive in the current globalization trend and realize manufacturing excellence, it could utilize the proposed strategies to strategically improve its production process, hence increasing the momentum in achieving a competitive advantage. In particular, visionary leadership, performance improvement, modular system, benchmarking, innovation, R&D, TQM, and quality circles would help ensure survival of the business. This strategic framework offers a realistic approach that the business can implement without extensive financial repercussions. It is highly undoubted that implementing these strategies would help the textile business improve its output performance and greatly differentiate its operations from competitors’ in the industry by major improvements in cost, quality and delivery. These are some of the major areas a small local textile business in china should focus to increase its competitiveness and endurance in the current globalization tendency. Reference List Bheda, R, Narag, A. S & Singla, M. L. 2003, ‘Apparel manufacturing: a strategy for productivity improvement,’ Journal of Fashion Marketing and Management: An International Journal, vol. 7, no. 1, pp. 12-22. Biselli M. 2009, ‘China’s role in the global textile industry,’ Student Research Projects/Outputs, 039-2009. Cassill, L.N, Blanton, A.G & Trevor, L. 2007, ‘Improving Global Market Competitiveness of the Textile Industry Clusters in South Carolina,’ Report to South Carolina Council on Competitiveness. North Carolina. Castro, A. W, Cespón Castro, R, Ibarra Mirón, S & Alonso Martínez, P. U. 2004, ‘Modular manufacturing: an alternative to improve the competitiveness in the clothing industry,’International Journal of clothing science and technology, vol.16, no. 3, pp. 301-309. Christopher, M, Lowson, R & Peck, H. 2004, ‘Creating agile supply chains in the fashion industry,’ International Journal of Retail & Distribution Management, vol. 32, no. 8, pp. 367-376. Llach J, Bikfalvi, A & Marques P. 2009, ‘What are the success factors for Spanish textile firms? An exploratory multiple-case study,’ Fibres & Textiles in Eastern Europe, vol. 17, pp. 7-11. Oakland, J. S. 2014, Total quality management and operational excellence: text with cases. Routledge. Qiu L. D. 2005, ‘China’s Textile and Clothing Industry,’ Hong Kong University of Science and Technology Working Paper, vol. 1, pp. 1-35. Ramdass, M. 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