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Globalization of the Fashion Industry
Not so long ago, globalization was an only theoretical term businesses used as a "what if" situation. Today, globalization is a reality. Through lowered trade restrictions and increased international cooperation, countries are increasingly affecting one another both culturally and economically. Fashion is one of the largest sectors that has both facilitated globalization and has benefited from this phenomenon. Increases in mass media communication, has meant fashion trends that once took months to move from the catwalks of Paris to the city streets of other countries now can happen almost instantaneously. Pop culture fashion can symbolize an entire culture, such as denim's association with the United States, freedom and democracy. However, with this increased dissemination of fashion, globalization has also resulted in benefits for the industry in general, as well as significant challenges.
This paper explores the concept of globalization in the fashion industry. It begins with a historical overview of globalization and production. The economic reasons why fashion manufacturing has moved from the West to the East is described. The human impact of this globalization shift, including both the advantages and disadvantages that this phenomenon entails, are discussed. Other economic factors are discussed, including financial resources spent on advertisement and production. Fragmentation in the industry is overviewed, with the associated loss of control. A two-part discussion on counterfeiting will be presented. First, the threats of counterfeiting as it relates to globalization in the fashion industry, will be discussed. Second, the counter argument regarding the reality of originality and counterfeiting will be discussed. Lastly, how globalization and counterfeiting applies to democracy will be presented.
Historical Overview of Globalization and Production:
Globalization truly began as early as the 18th century, especially in the textile industries, with the beginning of integration of national economies (Weil, 2002). Kaya (2010) notes, however, that it's only been in the last two or three decades that this phenomenon has intensified. The economic exchanges that once occurred between parties that were relatively independent have now been replaced, thanks to globalization, by highly interdependent and complex industrial production systems, especially in the fashion industry. Economic exchanges are now organized on a globalized scale. Globalization, in general, involves increased: trade, foreign exchange transactions, foreign investment, and migration of people. In addition, these quantitative transactions result in a qualitative change in the way nations operate ("Sweatshops," n.d.).
Recent globalization has seen a significant amount of consumption in developed countries made possible, thanks to production in developing countries. The term 'globalization' wasn't used popularly until the 1990s (Kaya, 2010). Now the global reorganization of manufacturing is commonplace in the fashion industry. Complex networks, including global value chains, is standard for fashion companies. Although their organization may be located in a developed economy, through globalization they have relocated their manufacturing activities in developing countries, which allows the companies to focus on other core business functions, such as design and marketing. This has resulted in an expanded manufacturing employment in these developing countries.
Manufacturing Movement from West to East:
Kaya (2010) notes that the high prevalence of low-skilled labor in Eastern developing countries has made these countries an attractive manufacturing option for Western companies. These reduced labor costs offer a comparative advantage for manufacturing in these countries. Increasing levels of trade, in these countries, leads to greater levels of industrialization, especially in labor-intensive industries like the fashion industry. As manufacturing exports increase in these Eastern countries, the size of their manufacturing employment also increases, creating more competition in the marketplace, which results in even lower production costs.
It was these lower production costs, in the East, that have attracted foreign investment from the West. Low production costs, in the East, are more attractive for many fashion companies than those developing countries' domestic markets or natural resources, according to Kaya (2010). Citing a 2000 U.N. report, Kaya surmises Bangladesh is a prime example of this. Bangladesh is a potential market in and off itself, while also serving as a stepping stone into the larger South Asian market. However, Bangladesh is also a potential base for labor-intensive manufacturing.
This concept of export-oriented foreign direct investment happens as companies relocate their manufacturing production to places like Bangladesh or China, as a means of taking advantage of the lower costs. In the fashion industry, clothes manufactured in the East are then shipped all over the world, rather than trying to capture the domestic market of these countries. Interestingly, some of these Eastern countries have organizations that now also invest in foreign countries, especially other low-cost developing Eastern countries, as their production costs increase in their domestic economy. This phenomenon is exemplified by Korean and Taiwanese firms that are now investing in mainland China.
Emerging economies, over the last two decades, have gradually displaced Western industrialized nations as producers of labor-intensive goods (Amighinia & Rabellotti, 2004). In addition to utilizing lower labor costs in developing Eastern countries, there are other benefits that have driven fashion manufacturing from the West to the East. Looser tax regulations and looser environmental regulations have also been an enticement for many organizations. However, this globalization has had multiple impacts on the human factor of many developing countries.
The Human Impact of Globalization in the Fashion Industry:
Developing countries have increasingly become exporters of manufacturing products, especially products for the fashion industry. One positive benefit, as Kaya (2010) notes, is that as manufacturing exports increase, the earning of low-skilled workers in these developing countries also increase. This results in a higher standard of living for these workers. In addition, to facilitate manufacturing in these developing countries, many of these areas develop critical infrastructure, including roadways and other transportation facilities. Increased earnings in these countries also leads to better public services, such as schools and medical facilities, all improving the quality of life, for the entire community. Despite these positive effects, there are disadvantages that can occur with globalization.
'Sweatshops' are a significant human impact of the globalization of the fashion industry. The term 'sweatshop' has existed since the last half of the nineteenth century. Its basic definition involves a factory or shop where workers are employed for long hours and paid low wages. These places of employment are typically under unhealthy conditions as well ("Sweatshops," n.d.). Many of the fashion industry, manufacturing workers in developing countries "earn less than they need to live, face cramped or unsanitary conditions, and are often subjected to physical, sexual, and verbal abuse. First-hand accounts from factories producing for many designer companies report that people often work more than 100 hours a week, and unions are not permitted" ("Good stuff," 2010).
Abrams (2000) gives an example of just how large the disparity is between what a sweatshop laborer is paid and the retail price of a piece of clothing. In Saipan, at one factory where Tommy Hilfiger shirts were made, a worker is paid £1 for a half-hour of work sewing a shirt. The company will be paid a total of £3, for a shirt that will retail in Europe for £40. This is more than a 1300% mark-up. According to Worldwatch Institute, sweatshop workers in Mexico only earn 85 cents per hour. In Indonesia, these workers only earn 15 cents per hour ("Good stuff," 2010).
Economic Impacts: Advertising vs. Production:
Globalization has not only opened up the potential opportunity for fashion organizations to increase profits through the lower costs of manufacturing in emerging economies, but it also comes with a significant threat. Globalization's primary threat to organizations in the fashion industry is increased competition. This increased competition is part of what drives apparel organizations to seek out lower cost manufacturers in developing countries. Although high-end fashion companies are typically not looking to compete on price point, reduced costs of manufacturing results in more profit per revenue dollar.
This savings in the hard costs of producing the pieces of clothing allows the companies to redeploy those financial resources to other key areas of the business, such as marketing. As Hilton, Choi and Chen (2004) surmise, fashion is what they term 'credence goods.' Credence goods are those items whose quality is difficult to determine both before and after a purchase or use. For the most part, technically unsophisticated customers are not able to assess the quality of fashion items even after they've made a purchase. Instead, the value of these fashion items is built on the credence given by others. These include designers, distributors and other fashionable consumers. Designs, however, is what differentiates fashion products, as opposed to function, therefore the value of these designs lies in the buyer's perception.
By reallocating resources that used to go to manufacturing costs to advertising, companies can further enhance that buyer's perception. Increased marketing efforts in high-end fashion magazines, placing products on celebrities, participation in fashion shows and more can help build the general public's belief that the product is a fashionable item. In an increasingly competitive marketplace, and given the fact that fashion items are credence goods, effective and pervasive marketing can make or break a brand or…[continue]
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