1. Where have most textiles been manufactured in the past decade? Why is that? What does this fact tell you about the nature of competition in the textile industry? 2. Why are some textiles manufacturers moving to Africa? What is the appeal of an African location?(do additional research and respond with specific data) 3. What are some of the disadvantages of producing in Africa? What are some of the continuing advantages of having textile production facilities remain in Asia? 4. Why is Africa heralded as “the final frontier”? Do you think it really will be the final frontier? What are some alternatives to Africa as such a final frontier?
Review the article
below, do additional research and answer these questions.
You should prepare your report according to this format:
Introduction/Context
(write about one page summarizing the case; include
the context and key questions raised in it)
Q1(list the question)
A1(your answer)
Etc.
Conclusion(write no more than one page of your conclusions and observations)
Work cited
Use
list (bullets), graphs, charts, tables, etc. to make your report more effective
(a sample is on Blackboard). Be sure to use data available in the Case
supplemented with additional research. Your report must
be between 4 and 5 pages, 1.5 space with font TNR11
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QUESTIONS:
1. Where have most textiles been manufactured in
the past decade? Why is that? What does this fact tell you about the nature of
competition in the textile industry?
2. Why are some textiles manufacturers moving to
Africa? What is the appeal of an African location?(do additional
research and respond with specific data)
3. What are some of the disadvantages of
producing in Africa? What are some of the continuing advantages of having
textile production facilities remain in Asia?
4. Why is Africa heralded as “the final
frontier”? Do you think it really will be the final frontier? What are
some alternatives to Africa as such a final frontier?
Search for Ever Cheaper Garment
Factories Leads to Africa
From
H&M to Calvin Klein, brands look to Ethiopian factories where pay is as low
as $21 a month
ByCHRISTINA PASSARIELLO andSUZANNE KAPNERUpdated July 12, 2015
ADDIS ABABA,
Ethiopia—At the Radisson Blu hotel here last year, a senior fashion executive
met with several of his top Asian.wsj.com/articles/SB10001424052702304856504579338333022362824″>apparel suppliers. His plea: Open for business in Africa.
“Africa is a huge
opportunity to demonstrate how the industry can work together,†said Colin Browne,
managing director of product supply and Asian sourcing for.wsj.com/VFC”>VF Corp., which owns such brands as Lee, Wrangler and Timberland. He
pointed out to the factory owners a key advantage in Africa: it’s one of the
few places where it’s possible to go from fiber to factory in one place.
Africa is the final
frontier in the global rag trade—the last untapped continent with cheap and
plentiful labor. Ethiopia’s garment sector has no minimum wage, compared with
Bangladesh, where workers earn at least $67 a month, according to the
International Labor Organization. Garment workers in Ethiopia started at about
$21 a month as of last year, the Ethiopian government said.
Most countries in
Africa benefit from a free-trade agreement with the U.S., an arrangement that
saves retailers money. And, unlike other emerging economies such as Vietnam and
Cambodia, many African countries can grow their own cotton, which shortens
production time.
Mr. Browne’s thinking
marks a change of mind-set. For more than a decade, Asia has dominated clothing
manufacturing, churning out cheap clothes on inexpensive labor that are shipped
to malls world-wide.
But over the past few
years, rising production costs in China and several deadly factory accidents like
the.wsj.com/articles/SB10001424127887324874204578441912031665482″>collapse of Rana Plaza two years ago in Bangladesh have forced
apparel companies to hunt for.wsj.com/articles/apparel-retailer-gap-forges-ahead-in-myanmar-1402091240″>alternatives from
Myanmar to Colombia to
Ethiopia.
Ethiopia was recently
identified as a top sourcing destination by apparel companies, according to
McKinsey & Co., which surveyed executives responsible for procuring $70
billion of goods annually—the first time an African country was mentioned
alongside Bangladesh, Vietnam and Myanmar.
Several clothing
giants are beginning to source in Africa. VF expects to start getting some of
its pants sewn in Ethiopia this year. Calvin Klein and Tommy Hilfiger parent
company.wsj.com/PVH”>PVH Corp. has been making some of its clothes in
Kenya for at least four years. Others with sourcing in sub-Saharan Africa
include Wal-Mart Stores Inc., J.C. Penney Co. and Levi Strauss & Co.
Whether or not
Africa’s role as a supplier expands, those efforts show the lengths to which
big apparel makers are willing to go to find new, low-cost sources of
production. Consumers have been conditioned to expect a plentiful supply of
cheap clothing, which has pressured the margins of companies like VF and PVH.
“In the global
economy, light manufacturing is constantly moving,†said World Bank’s Guang Z.
Chen, who was the country director for Ethiopia until last month and is now a
director for several countries across southern Africa. “We see the possibility
of this kind of industry moving away from Asia, because the labor cost is
rising in China rapidly.â€
Chinese garment
workers earned anywhere from $155 to $297 a month as of Jan. 1, the date when
many countries adjust their wages annually, the ILO said.
‘Ethiopia seems to be
the best location from a government, labor and power point of view.’
—M. Raghuraman, an executive at
Brandix Lanka
Garment workers in
China tend to do more sophisticated production while basic cutting and sewing
goes to countries with lower wages.
VF is hoping to
accelerate the move to Africa. It teamed up with its biggest rival, PVH, to try
to convince suppliers to come with them. They invited their 20 best suppliers
from countries such as China, India and Sri Lanka on a 10-day trip in April
2014 with a goal of getting them to invest in opening their own factories in
Africa—with the promise that the American brands would place orders there in
return.
Ethiopia holds the
most promise for developing garment production in Africa, factory owners and
brands say.
“Ethiopia seems to be
the best location from a government, labor and power point of view,â€
says M. Raghuraman, chief executive for corporate marketing and
branding at Brandix Lanka Ltd., Sri Lanka’s largest clothing exporter, which is
interested in Africa’s garment potential.
On the outskirts of
Addis Ababa, the government recently built the $250 million Bole Lemmi
industrial park exclusively for foreign investors in the garment industry.
Giant hangars occupy land where barley, peas and the local grain teff used to
grow.
The work floor of the
Bole Lemmi factories are one level—a safety improvement over the multilevel
factories in Bangladesh that have claimed hundreds of lives in fires and
collapses.
At the MAA Garment
& Textile Factory in Northern Ethiopia, 1,600 workers spin cotton, dye
fabric and sew it into T-shirts, leggings and other basics for international
retailers like Hennes&Maurtiz AB’s H&M chain, Tesco PLC, Asda Stores
Ltd.’s George label, and German clothing company KikTextilien& Non-Food
GmbH.
“Investors are coming
here from Sri Lanka, Bangladesh, China, India and Turkey,†said FassilTadesse,
chief executive of MAA’s parent company, Kebire Enterprises, and president of
the Ethiopian Textile and Garment Manufacturers Association.
So far, Africa barely
registers in garment manufacturing. And it will take years for any other
country to seriously challenge China.
China exported $177
billion of clothes in 2013, according to the World Trade Organization figures
available, nearly eight times more than No. 3 Bangladesh, which took 20 years
to become a powerhouse. (Italy, ranked No. 2, exports slightly more clothing
than Bangladesh.)
Many African countries
lack roads to transport finished clothing, and landlocked Ethiopia doesn’t have
a port. The workforce is untrained in sewing clothes. All of sub-Saharan Africa
accounts for less than 1% of global clothing exports.
Some apparel companies
remain interested despite those hurdles. They are drawn to the cheap labor and
to the inexpensive power, which in many countries is the second-biggest
cost
in neighboring Djibouti to help exports leave the country more quickly.
VF is planning another
trip to Africa this year, after receiving queries from suppliers who weren’t on
the 2014 trip.
William
McRaith, PVH’s chief supply chain officer, spoke about Africa’s potential
at an industry conference last year. “The dynamics of that region are far more
interesting than China was†at a similar point in its development, he said.
—Saabira Chaudhuri
contributed to this article.
.wsj.com/articles/search-for-ever-cheaper-garment-factories-leads-to-africa-1436347982?mod=djem_jiewr_MG_domainid”>http://www.wsj.com/articles/search-for-ever-cheaper-garment-factories-leads-to-africa-1436347982?mod=djem_jiewr_MG_domainid
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