Apparel Industry on the First

Apparel Industry

On the first of October 2001, the North American Industry Classification System defined apparel as belonging to the Manufacturing Industry under the code 315. The apparel industry was then delimited into eight subcategories, based on the particular types of items produced: "315211 Men's and Boys' Cut and Sew Apparel Contractors," "315212 Women's, Girls' and Infants' Cut and Sew Apparel Contractors," "315223 Men's and Boys' Cut and Sew Shirt Manufacturing," "315228 Men's and Boys' Cut and Sew Other Outerwear Manufacturing," "315232 Women's and Girls' Cut and Sew Blouse and Shirt Manufacturing," "315234 Women's and Girls' Cut and Sew Suit, Coat, Tailored Jackets," "315991 Hat, Cap and Millinery Manufacturing" and "315999 Other Apparel Accessories and Other Apparel Manufacturing."

Industry's Dominant Economic Features

The apparel businesses play a rather significant role within the American overall industry. With an estimated number of 184,726 million dollars worth of annual sales, the apparel industry numbers approximately 175,145 establishments and 1,149.355 thousand employees.

With a turnover exceeding 70 billion dollars, the apparel industry is now at its peak and continuously expanding in role, importance in the overall industry and revenues.

Given the potential significant role the apparel leader would play in the American society and economy, numerous producers and retailers compete for the leading positions. Among the best acknowledged producers in the United States are: American Apparel, Armani Exchange, Victoria's Secret, Jones Apparel Group, Giorgio Moraldi, Gucci, Ralph Lauren, Chanel, Dolce&Gabbana and Speedo.

Apparel producers use most of the available channels of distribution to promote and sell their clothing and accessories. They sell the apparel items in their own stores nation and world wide, through intermediary retail businesses and via Internet.

The developing rhythm of the apparel industry is far from being a rapid one; however its ascension is certain. Compared to the fiscal year of 2004, 2005 brought about an increase of 7 per cent in the apparel revenues and importance on the consumers' agenda. The technological implications in the apparel production are numerous, among which are computer made designs or personalized inscriptions, nonetheless the computerized database supporting the entire process of production, distribution and personnel remuneration.

The apparel items presented to the final customer slightly differ from a producer to another. The functioning of the products is highly similar as they all satisfy the same need. However, differences appear regarding pattern, styling, the materials used and means of developing the final outcome.

During the past few years, the leaders on the American apparel business have been able to take a step forward in the domain of advertising. In this order of idea, aside from television commercials and radio announcements, apparel producers organize fashion parades which turn into real demonstrations of elegance. A combination of the classic and new advertising methods led to the creation of television channel Fashion Channel which presents the viewer with the latest clothing collection and insight information.

To sum up, the apparel industry is a sub-industry within the main industry of clothing and manufacturing. Its purpose it to create clothing items for protection against low temperatures as well as trendy outfits and accessories (such as belts, bags and purses, hats and gloves, scarves and even jewelry).

3. Porter's Five Forces

3.1 Threat of Substitute Products

The main concern of apparel producers regards the more common replacement of high quality materials such as silk, leather or fur with synthetic substitutes. These substitutes are cheaper than the original products and are environment friendly in the meaning that they do not require animal scarification in order to obtain them. Another issue of great concern is the frequent replacement of the American workforce with abroad workforce. Outsourcing the available job opportunities is mostly done due to lower costs and higher quality. The consequences of such actions are severe upon the American population, resulting in a dramatic increase of the unemployment rate and bankruptcy of national contractors.

The impact this threat has upon apparel producers is quite significant as it is namely the materials used and the means of producing the final items that define the industry as a whole. In other words, the overall level of strength of the threat of substitute products is a powerful one.

3.2 Intensity of Competitive Rivalry in the Apparel Industry

Rivalry is a rather strong term and the literature on the field fails to present relevant examples of rival companies. The competition, on the other hand, is quite sharp, and apparel producers forcefully struggle to gain additional market segments.

Behind the forces of competition and rivalry lay factors such as the actual position of apparel producers and their desired positions; their own market size and annual turnovers. The most relevant criteria which directly influence the competition between apparel producers are their image on the market and the impression they leave upon their potential customers.

As stated previously, the relationships between apparel manufacturers are based on friendly competition and do not usually result in rivalry. However, the competing force of the threat has a strong impact upon the industry as a whole as it influences manufacturers' behavior one in relationship to another. Therefore, the threat of competitive rivalry has a diminished power over the apparel industry, but, on the other hand, the competition directly influences the industry.

3.3 Threat of New Entrants

There are two particular cases of new entrants. The first case is when companies decide to launch into the apparel business by producing high quality products made from fine materials and promote comparatively lower prices than older firms. To do so, the new company would register immense costs of attracting customers and promoting their items. Added with the large costs of high quality commodities and workforce, the chances of success are rather low.

The second case is when a new company decides to replace the fine materials with synthetic substitutes. Such a situation presents the acknowledged apparel manufacturers with minimal risks as the low quality of the products offered by the new firm would be unable to represent strong competition for the already renowned items.

However difficult it might seem, new entrants can at some point gain the interest of the target market and become strong competitors for the acknowledged apparel manufacturers. But experience tells us that such situations are quite rare and based on the fact that the top hierarchy of American apparel businesses has not suffered significant changes during the past years, one could conclude that the threat of new entrants does not register a high level of strength.

3.4 The Power of Buyers

The largest segment of apparel clientele is represented by Americans who register wages above the medium salary. This allows them, to a certain extent, to define the item line to be produced in the meaning that they can state their opinions and demands. However, the power of conviction that the large audience has upon the apparel production process is rather limited. On the other hand, given the immensity of the movie making industry hosted by the U.S., movie stars are able to impose their own cultures. For apparel manufacturers, having a celebrity wear their item is international advertising which opens numerous future perspectives. These actors or singers can easily influence their fans into acquiring, or not, their clothing from a certain manufacturer. Based on a business relationship with a worldwide acknowledged person, the apparel producer can either gain or lose additional customers.

In a nutshell, the large public does not possess any power over the apparel production process. The apparel industry is however influenced by its wealthiest customers who can set a course of fashion development. The retail prices of the apparel items, along with the contract terms are rarely chanced due to public intervention, therefore, the strength of the threat power of buyers is rather low.

3.5 The Power of Suppliers

The power of suppliers needs to be analyzed from two points-of-view. First of all, one must look at the relationships that define inter-supplier relationships. In this order of ideas, the American supplier market does not encounter situations of monopoly or other unfriendly behavior. The supplier market is defined through friendly competition and a highly developed spirit of fellowship.

The second point-of-view brings about the relationships between suppliers and manufacturers. Given that manufactures entirely depend on suppliers to get them the raw materials, a change of term conditions and prices from the supplier is a significant threat to the apparel producer. Even if today, such a problem does not exist, in the future certain issues could arise leading to serious conflict. That is why the overall level of strength for this force is high.

4. Drivers for Charge in the Broad Environment

The growing importance of apparel items in the today society is supported by several changes in the general environment. These changes occurred in several domains such as society, culture, technology, consumers' demands, marketing strategies and internalization of markets.

4.1 Changes in social concerns, attitudes and lifestyle

Clothing has become more that a means of protecting one's body against low temperatures and evolved into an entire culture. Today, the apparel one wears are regarded as social messages. "Social messages sent by clothing, accessories and decorations can invoke social status, occupation, ethnic and religious affiliation, marital status and sexual availability etc."

4.2 Product innovation and technological changes

The rapid rate of technological development set the course of development in numerous other domains, including apparel. In this order of ides, the technology adherent to the apparel production process is on its path from computer made designs to technologically improved materials' quality. For example, future directions in the apparel industry involve "more types of fiber developed using nanotechnology or smart clothes that incorporate electronics."

4.3 Marketing innovation

The main characteristic of current trade and production is that the items tend to focus more and more on the customers' needs and desires. Apparel producers are today faced with the difficult task of combining the publics' needs with a high quality of work and material as well as with the latest fashion trends. Aside from these, apparel manufacturers are constant contributors to the art of marketing in order to promote their items. Apparel producers have been able to take the advertising campaigns one step further and organize glamorous fashion shows. These fashion presentations are in fact the core of apparel marketing and still represent its main source of prestige and customers.

4.4 Extent of globalization

The effects of globalization upon the apparel industry need to be analyzed from two points-of-view. First, from the production point-of-view, globalization brings about outsourcing of workforce and raw materials from abroad as they imply lower costs that the national resources. On October the 5th, the Sri Lanka Ministry of Finance publicized a press release stating that "According to the Chairman of Sri Lanka Exporters Association, A Sukumaran, exports of Sri Lanka apparel to U.S. registered a growth by 9.5% to U.S. $1,217.5 million from January to September this year"

The other point-of-view is referred to as fashion globalization. The United States have been able to impose their clothing culture upon numerous countries. "At the start of the twenty first century, the preferred garments of young people of both sexes from around the world tend to be jeans, sweatshirts, T-shirts and sneakers. These clothes are also international icons of American culture. The global young wear the same clothing, a phenomenon made possible by new technologies, global commodity advertising of branded leisure clothing, and the cultural and political domination of the United States. The reasons for wearing such clothing vary, but these clothes signify youth, modernity and an eagerness to belong to the newly globalized capitalist world."

5. Companies in the StrongestWeakest Positions

The leading positions in the apparel industry assure the occupants privileges such as international recognition and power as well as immense revenues. Fashionable clothing and accessories belonging to apparel houses of Gucci, Ralph Loren, Chanel, American Apparel, Dolce&Gabbana or Vera Wang have become part of the American culture and nowadays struggle to compete for the title of world's leader on the apparel industry.

5.1 Gucci

Gucci fashion house is "one of the world's most influential fashion houses and a highly profitable business operation." Their position in the apparel industry is given by their great number of customers, turnovers and international recognition. They have opened stores in most parts of the worlds, having headquarters in The United Stares, United Kingdom, Germany, France and Japan.

Gucci Strategies

Prior to the year 2000, Gucci was faced with an economic crisis. In order to overcome it, they were willing to sell the majority of option stocks. The stock options were sold to Prada and to LVMH which aided to the revival of the company. In September 2001, the Gucci Group signed a partnership agreement with the French company PPR and purchased shares from Di Modolo, Balenciaga and Bottega Venetta. In addition, they focused towards collaborations with new and young talented designers, such as Stella McCartney or Alexander McQueen.

Regarding their human resource strategies, it is known that along the years Gucci has not hesitated in letting their employees go and replacing them with better qualified personnel. Aside from the high quality of their products, Gucci also attracted customers through numerous promotional strategies such as price reduction or purchase gifts in the form of accessories (belts and watches.)

5.2 Vera Wang Strategies

Vera Wang, named after its top designer, is an apparel business located in New York, mostly focused on wedding gowns, but also producing clothing for other numerous occasions. The latest strategies adopted by this fashion house involve launching on the market several new products and expanding the product line. The designer intends to launch "an exclusive line of clothing and handbags [...] and also manufacture and market the Vera Wang mattress set."

Nonetheless heroic, launching into a new market is a rather risky action. Given the international reputation of Vera Wang wedding gowns, the outcome of the new product line would also affect the entire Vera Wang image and collections. In this order of ideas, a failure to successfully launch the new items on the market could result in reputation denigration for the fashion house as a whole. Annual sales would decrease drastically, placing Vera Wang in a near bankruptcy situation.

To ensure the success for the company and increase its market segment, in August 2006, Vera Wang signed a business partnership with "mid-tier retailer Kohl's. The duo announced that they are partnering in a premium fashion and lifestyle brand to be called Very Vera by Vera Wang. The line, available in fall 2007, will be sold at 749 Kohl's stores and online at kohls.com."

Vera Wang's leading position is assured by its 300 million dollars annual sales and it's a perfect depiction of the American dream. The means of attracting customers number the impeccable taste and fashion of the gowns and materials used as well as an international guarantee of the best quality.

5.3 Dolce&Gabbana Stategies

Dolce&Gabbana is a "high-end fashion house started by the Italian designers Domenico Dolce and Stefano Gabbana. The company became very popular for their designs in the Hollywood industry" and nowadays possesses stores all over the world.

The latest business strategy adopted by the company was made public in the summer of 2005, when the two founders decided to separate their paths. However, the Board of Directors believed that such separation could be fatal for the company as a whole. Therefore, even if the Dolce and Gabbana chose different paths, "the company will still stay the same, and they will continue to design together."

The position occupied by Dolce&Gabbana in the apparel industry is stated by the large number of customers, the high quality of their products and the impressive annual turnovers. Aside from these, Dolce&Gabbana has been able to become integrant part of the worldwide culture, being referred to in several pop songs by bands such as Black Eyed Peas, LL Cool J, 50 Cent, Kelis or Notorious B.I.G. Aside from pop songs, the Dolce&Gabbana immense success was also acknowledged by numerous specialized magazines, television talk shows documentaries and musicals.