The External Environment of Coglin Clothing - Assignment Example

Challenges in Internationalisation and Outsourcing Your Name Goes Here: Name of University Here: 1. Describe the external environment of Coglin Clothing. Identify the components of the general and task environment and discuss their impact on organizations generally Identify the environments of most interest to Coglin Clothing. Coglin Clothing as any other Clothing company operates in an environment that is not only competitive but also restrictive in nature. The external environment of Coglin consists of a number of factors and stakeholders that directly and indirectly affects its operations. Stakeholders range from customers, suppliers, competitors, and regulatory bodies among others; while factors range from political, environmental, technological and socio-cultural factors. In general, the external environment represents the major forces outside Coglin Clothing that impact on the success of its operations, products and services. Coglin Clothing faces a challenge-it sees ebb of a lucrative market. For a good number of years, the company has built a thriving business in the textile and clothing industry, specialising in women apparels including scarves, dresses and tops among others. In the textile industry, Coglin is increasingly seeking to lower its cost. Costs are significantly lowered through efficient use of resources, minimisation of labour expenses and input prices (supplies) among others. This means that the company operates in an international context, the company has to take advantage of outsourcing to low cost countries that can provide outsourcing opportunities. Therefore, a number of factors such as the cost of land and labour (among others) determine the cost advantage of a country. Outsourcing to Asian countries has become a trend for global manufacturers, including clothing. However, these countries differ in a number of ways: China has enjoyed a cost advantage for sometime, but most recently, countries such as Singapore, Thailand, Vietnam and Indonesia are becoming even more attractive to global businesses. As a result of these differences, the operation of Coglin in several countries implies that it is facing many different ground rules. Within a particular economic system, Coglin face economic factors that are beyond its control, such as interest rates, recessions and most commonly inflation (Waddell et al., 2007, p.86). Socio-cultural element Since both its consumers and manufacturing systems are distinctly transnational, it is most likely that it has to strictly maintain a positive image in an industry that is characterized by consumers who have a positive involvement with clothing; they attach emotions and identity and tend to have an idiosyncratically negative image of the industry behind. Legal-political element Coglin must abide by the legal and governmental systems of within which it operates. The company is directly affected by a myriad of ethical issues, legal campaigns and monitoring issues. The legal system is also politically manipulated, government regulation emanates from political consultations (Robbins et al., 2008, p.85). International element This is the element that is of increasing significance to Coglin. This element includes economic issues such as fluctuations in interest rates and exchange rates that affect Coglin’s profitability and global competitiveness. For instance, when the domestic currency’s value exceeds that of the foreign currencies, Coglin’s global competitiveness and strategic options become more constrained. Existence of trade barriers in countries like China and development of new agreements significantly influences the company’s global business. Uncertainty, complexity and dynamism Coglin’s external environment is however characterized by uncertainty and dynamism. It is highly challenging to predict future environmental conditions that affect the company. Information asymmetry makes it difficult to monitor the number of elements in the external environment and their degree of congruence. In addition, the external environment is very dynamic, the rate and predictability of its change is much unknown (Bartol et el., 2009, p. 68). 2. Describe the nature of international business, including its meaning, recent trends, managing internationalisation, and managing in an international market A number of datasets and researches on internationalisation are mainly concerned with exporting, importing or internal investment, yet internationalisation is a much wider concept. At the individual level of an enterprise, internationalisation of business begins when the entity first looks outside the home country for opportunities, markets, resources, partners and suppliers. This includes collaboration, research and innovation and learning as well as the conventional activities of import and export together with both inward and outward investment. Common features of internationalised firms include global orientation towards the decision making process, and this in turn is strongly related to their level of exposure to supranational activity. It can be argued that internationalisation process is a closed loop, where previous experience serves as a key driver to future appetite for increased internationalisation. This makes it more challenging go encourage those with no experience to take their baby steps. From the above definition, the issue of internationalization is wide in scope; it ranges from the core of corporate planning and strategising chamber to the sales department’s fulfilment of unsolicited and sporadic orders from overseas. Essentially, this diversity is well reflected in the theories of internationalization, as put forward by researchers. Some studies have focussed on the examination of the internationalization process through the investigation of common patterns in the transformation of domestic activities to become a global company. Such theories assume that internationalization is a process that is not dependent on the actions of individual managers but is very much dependent on general principles of knowledge and the accretion of experience. On the other hand, argue that the ability of an organisation to analyse its current market conditions is significant in the calculation of the optimal solution and the shaping of the internationalization path of the company. Thus, the internationalization of companies is not universal; companies face different conditions and do not use the same decision criteria. This view of the internationalisation process takes into consideration that the environment (mostly external) is too diverse and turbulent for general and universal patterns to exist-internationalisation has its contingencies. Other researchers argue that internationalisation is a social construction, and a competent manager is one who is able to create and develop inimitable perceptions of the market and the industry and devise the exclusivity into real market actions (Bell et al., 2004, p. 27). Business Strategy and Internationalization The small size of the domestic market for ‘niche’ products can appreciably provide a stronger impetus to internationalise among firms, especially knowledge-intensive firms. In such firms, firms’ products and services are developed for international markets and the organisation has a global visualization from the outset. On the contrary, traditional firms generally tend to have a domestic focus and expansion to global markets is mainly reactionary, an evolution process that is driven by unsolicited enquiries, and/or difficulties in the domestic market among other factors (Bell et al., 2004, p. 34). Product Characteristics and Market Opportunities It is apparent that the background to internationalisation and the motivating factors are quite diverse, as they depend on a number of factors. In a particular market, given the nature of the niche products and very limited opportunities, an international orientation is most likely to be a fundamental component of business strategy for some businesses from the onset. New Product Development Process Another important factor is the new product development process. This process is a very significant factor in explaining the reactive or proactive strategy moves in developing new products and markets. The preliminary stage is of course the development of the product offering which is then marketed internationally. 3. Applying the information researched for Questions 1 and 2 (above), identity the external environment factors that would have impacted on a business like Coglin Clothing when attempting to access the Vietnam and Thailand manufacturing scene for its production. The textile industry mainly consists of industries categorised in the following areas: spinning, synthetic fibre, weaving, knitting, garment and the industry of bleaching and dying as well as finishing. The garment industry is by far the largest of all in terms of output. In Thailand, the textile industry has for a long time continued to be an important industry, wit high rates of employment and exports. In addition, it is one of the main industries in the Thai economy. Moreover, Thailand has a highly developed industry that is related to the textile industry. This industry produces many objects within the sector of decorative items, promotional items, gift items, accessories and souvenir items. The industry along with the textile industry is potential sectors for sourcing. Labour Costs Labour costs together with a skilled labour force potentially deliver quality products that are relatively low-priced low have turned Asia into the prime location for companies seeking to offshore production activities. Thailand has a protracted tradition of producing interesting clothing and shoes products for women, men and children. The country is also reputed for the production of suitcases, and bags as well as nylon and other non-natural materials for are other interesting product groups. In addition, Thai producers also have a strong willingness and potential to adapt to current trends in the global markets especially fashion and trends in necklaces, earrings, and bracelets among others The Thai government is aware of the importance of the textile industry and is continuously implementing several projects and programs that are aimed at making the country the most competitive in the region. The government strategy includes: Increase of employment for the industry Availing of funds to exporters through credits and loans Increasing focus on value added products and services Improving of production to international standards Increasing of production efficiency and reduction of production costs in order to increase competitiveness Additionally, related industry such as the fashion industry is aggressively promoted through government projects, in pursuit of turning Bangkok into a fashion city in the region and world fashion centre by 2012. Thus, the improvement of the overall quality of design, development, marketing and production of high quality products is highly encouraged. Such initiatives are going to help produce even cheaper and quality products as a result of a higher level of skilled labour. The Vietnam advantage In Vietnam, the textile industry is now second biggest exporter and is expected to become the biggest. Nevertheless, the recent financial crisis has had a severe impact on Vietnam's textile industry, suppressing it to a slump in demand from key export markets including US, Europe and Japan. The country has cost advantages which come as a result of high quality skills. But the manufacturing advantages in Vietnam stretch beyond labour cost, making the country to have more competitive advantages compared to China. For instance, the country has very good embroidery skills and sewing skills. These skills are a necessity for most designers and manufacturers and Vietnam has maintained its touch with its rich tradition in embroidery and needle work. Location advantages Vietnam’s textile industry is more flexible, making it a great location for smaller manufacturers. Giant manufacturers would prefer China due to its “volume focus”. Also, Vietnam has higher production minimums as compared to countries in the Asian-pacific region. Lower minimums are advantageous for smaller companies to source their operations in Vietnam. 4. Put forward the control measures that face Leethal Fashion Accessories in outsourcing to North Vietnam and Thailand and how should they address them? Intellectual property threat Intellectual property remains a concern for the outsourcing of Leethal Fashion Accessories in North Vietnam. In Vietnam, intellectual property threat is enforced differently in the fashion industry. Therefore, designers can "take inspiration" and this is most likely to be a major driver for influencing industry trends. Both Vietnam and Thailand are affected by global standards on intellectual property. The World Intellectual Property Organization (WIPO) has hailed for stringent enforcement of intellectual property laws within the fashion industry so as to effectively protect companies and level the competition ground within the textile and clothing industries. Practically, it is not easy to take care of everything; Leethal Fashion will need to be faster than its competitors. The advantage however is that the company can switch manufacturing. However preventing the copying of designs is an exigent undertaking (Nieuwoudt, 2011, para.3). Infrastructure development For Vietnam to develop as a more advanced outsourcing location, the textile industry supply chain needs to be carefully analyzed and developed. Direct and indirect costs influence local logistics. Vietnam's textile industry often depend on imported raw materials, this increases costs of production compared to countries Thailand, where such materials are acquired locally. This implies that the management of reverse logistics is also a very challenging undertaking in Vietnam. Therefore, the country lacks procedures, processes and infrastructure that are required to manage repairs, returns and warranties. The high logistical costs in Vietnam remain to be the biggest stumbling blocks in outsourcing of business to the country. By assessing the overall supply chain, rather than a unitary focus on labour costs, it is easier to conclude that small scale designers and manufacturers can take advantage of a flexible environment in Vietnam, but infrastructure and logistics deficiencies demand for further investment to make Vietnam an excellent outsourcing destination (Skov, 2008, p.3). For Thailand, rising labour costs, dilapidated productivity, and the elimination of global quotas have exposed the country to the full forces of international competition. In addition, the country has of late been haunted by social and political instabilities. For Leethal Fashion to effectively operate in such a volatile environment there is need to keep away from the country’s political ground. Another challenge is the ever present threat of competition from other Asian producers, mostly China. The costs of production in Thailand are perceived to be higher than in many competing countries. Leethal Fashion must continue to be serious about fashion; this will allow the products to be irresistible; quality should be a determining factor rather than price. Additionally, Leethal Fashion is likely to face environment protection (Femail, 2011, para.1), commodity inspection rules, foreign exchange laws and non-tariff barrier compliance (Danish Trade Council, 2007,p.4). References Bartol, Tenn, Matthews and Martin, 2009, Management, Sydney, McGraw Hill Bell Jim, Crick, Dave and Young, Stephen, 2004, Small Firm Internationalization and Business Strategy An Exploratory Study of ‘Knowledge-intensive’ and ‘Traditional’ Manufacturing Firms in the UK, May 9, 2011 from http://www.thecommonwealth.org/shared_asp_files/uploadedfiles/50D1407D-E227-487A-9C1F-AA150D46CD65_SME_Business_Strategy.pdf Danish Trade Council, 2007, Sourcing from Thailand The textile industry and The decorative, gift, accessories and promotional items Industry, May 9, 2011 from http://www.ambbangkok.um.dk/NR/rdonlyres/ED442EE8-A02A-45D3-B854-394088AA760E/0/SectorOverviewSourcingfromThailandthetextileindustryMay2007.pdf Femail, 2011, Leethal Fashion Accessories Cool Summer Scarves May 9, 2011 from http://www.femail.com.au/leethal-fashion-summer-scarves.htm Nieuwoudt, Tielman, 2011, Vietnam's Textile Industry - Opportunities and Challenges, May 9, 2011 from http://ezinearticles.com/?Vietnams-Textile-Industry---Opportunities-and-Challenges&id=3041691 ReportLinker, 2011, Prospects for the Textile and Clothing Industry in Thailand, May 9, 2011 from http://www.reportlinker.com/p0189099/Prospects-for-the-Textile-and-Clothing-Industry-in-Thailand.html Robbins, Bergman, Stagg and Coulter, 2009, Management, Sydney, Prentice Hall Skov, Lise, 2008, Ethics and the fashion industry in West Europe, accessed May 9, 2011 from http://www.teid.org.tr/files/downloads/kutuphane/dunyadan/ethics%20and%20the%20fashion%20industry%20in%20west%20europe.pdf Waddell, Devine, Jones and George, 2007, Contemporary management, Sydney, McGraw Hill. 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