Introduction
Contrasting from history when intercontinental business was reticent for large organizations, the current market is characterized by dealings from both intermediate and large-sized companies (Gerrefi & Memedovic, 2003).
New trade accords have opened operation channels, thus boosting the levels of overseas dealing interactions. These interactions have necessitated new hypothesis, regulations, and practices in the overall production issues which must be plainly understood by managers despite their comprehensive involvement.
There are different levels of worldwide involvement that companies can engage in, for example, cosmopolitan enterprises, global firms, and import-export businesses. Our business if focused on the importation-exportation sector, where we are required to introduce finished apparels into Australia and the EU. In this segment of globalization, products are moved across nationalized boundaries without having the presence of various managers in our coordinating countries.
Our dealing involves trade in apparels, and as the operations and sourcing manager, I am obligated to determine the best source for provisions. It is indispensable to understand the civilization of our trading partners and advance communication channels to amplify competence in transactions (Isik and Broadman, 2007).
I have identified two countries, China and India, in my exploration. I was required to corroborate the comparative advantages of the Indian and Chinese clothes industries. It is compulsory to know the potencies and limitations of the GVC of India and China to guarantee triumph of our group.
Countless nations are closely dependent on the cloth sector to engender revenue and foreign trade for their financial system, and produce employment openings. China governs the apparel market and is the foremost outworker of clothes to the US, depicting a superior percentage to India Gerrefi & Memedovic, 2003).
Background information on comparative advantage
In dealings, comparative advantage discusses the aptitude of a party to produce a creation at a lesser opportunity cost than another business. It is the facility to fabricate a creation with the uppermost proportional efficiency compared to all the other created commodities (Lee, 2000).
The term explains the value that can be created in business for either party, even when one can fabricate all commodities with a slighter quantity of assets. The markets are continuously altering; hence, the fraction of products being fabricated diversely changes while sustaining the significance of comparative advantage.
This would commonly determine whether it would be cost-effective to introduce or produce an article of trade. The principle anticipates the increase in total output if characters focus on activities for which their rewards over the rest are the uppermost, or their shortcomings are the slightest.
Comparative advantage will thus subsist if the business has an ascendancy margin in the production of merchandise, in our case apparels. The opportunity costs of fabrication thus become subordinate. The premise, developed by Ricardo, argues that locations have different factor bequests of assets, land and manual labor.
There is the need to contemplate on and sell the products which exhaustively utilize the factors of production typically available (Gerrefi & Memedovic, 2003). Total productivity and money-spinning benefits would frequently augment if each country specializes in the products they have a plus, even if one population has an unrestricted lead over the other.
The research study
The Indian and Chinese industries both posses benefits and confines due to chronological and institutional circumstances. The rivalry presented between the two countries will create noteworthy inferences for the probable progress of the widespread attire sector (Karpova & Lu, 2009).
To deduce which nation should focus on a product, there is the need to scrutinize the interior opportunity expenditure of the identified countries, in this case China and India. The research involved using the global value chain (GVC) structure to elucidate on the comparative advantages of the two country’s attire industry. There are abundant factors involved in the GVC, including the delivery of fabrics, automation, shipping, and operation of the products.
An examination study was thus conducted to institute the comparative advantage of the Chinese and Indian clothes industries. The study also provides insight on the potency and limitations of the Indian and Chinese GVC. Secondary data, chiefly appraised writings and appropriate websites, from both countries were gathered and separately investigated for the means of the GVC.
Findings
It was observed that several competitive organizations provide difficulties in their penetration in spite of the advancing technology (Lee, D, 2000). While some structures may not be willing to give general information on how they fabricate and distribute their products, other has developed a limited cluster, which ensures remarkably limited countries as business partners.
In China, the clothing industry is amongst the conventional industries which acquire a definite amount of comparative advantage and renowned competitiveness in the intercontinental market (Cukul, 2008, pp. 1). In India it is also seen as a traditional industry, where the advancement of local textile and attire industry is increased. The two countries have fashioned strong competition, which has successfully increased the level of contest in the intercontinental market.
Compared to India, the toil expenditures and export value of china are at a competitive disadvantage. Evaluated against developed regions, the sophisticated ownership of production factors and advancement in technical matters must be fortified (Lee, 2000). However, it is a decisive competitive country among those having substantial cloth fabrication with their technical modernization and optimization of manufacturing foundation.
The apparel trade has profoundly contributed in the industrialization of some countries, including India and Turkey. Monetary openings have led to an enlargement in overseas trade with established countries.
China extended its foreign trade swiftly owing to vertical specialization, which gave it comparative advantages in fresh materials, depicted by a vibrant worldwide demand and significant elevated proficiency content (Cukul, 2008, pp. 5).
China getting integrated in the intercontinental trading market has also given the country protected, and foreseeable export markets. China is helped by the integration into the WTO, thus increase its exporting influence in the larger market, which is in the main advanced than that of India. These accesses into WTO altered the market competitive conditions thus having an outcome on the Chinese apparels industry.
The persistent advance in the efficiency and global competitiveness of china’s mechanized industry have been superior owing to several factors, including, the copious and economical labor supply (Balasubramanyam & Wei, 2005). Therefore, their product rapidly spreads in the comprehensive market. The country has the opening to develop more industrious and better technical-concentrated industries.
There is a concentrated alliance between the Chinese administration and the apparels subdivision, thus facilitating the exporters to under-price its competitors, for example, India, which have slighter pay rates. Data form the UN specifies that the country exports apparels collectively at around 50% less than the other countries.
The availability of accommodating infrastructure and speed in reform-making has additionally developed the diligence. The nonjudgmental employment laws have also contributed in assisting the apparel industry to fine-tune production according to the liveliness of the market (Cukul, 2008, pp. 7). Textile productions are importing modern-day machinery, while the country’s regime sustains home-expansion initiatives while upholding household brands.
The competence and wide-reaching competitiveness of the country faces several retributive factors which may encumber further enhancements in the apparel sector. The country has an inferior banking arrangement which may cause volatility in the world economy (Cukul, 2008, pp. 7).
The monetary industry of china is not well developed, and at times relies on the counsel of the administration which may habitually result in the squandering of capital. Globalization is also unhinged in the country as there are several forces, including elevated foreign capitals, which pressure its adaptability.
The demographics of china are disquieting as their guidelines for child-bearing may mean that the populace may encompass the aged in a few years time (Coster, 2009). The age pyramid would be upturned, as less young persons would be required to sustain the elderly residents.
Fewer Chinese workers are less enthusiastic to toil in the fabric trade than other occupations because of the accessibility of more helpful prospects. The traditional labor source is thus deteriorating, hence, the delivery of raw resources and the resulting introduction of the requirements for production will create auxiliary tests for the Chinese apparel industry.
India has entered the large-scale apparel business without the backing of any foreign aid in the fabrication of apparels, lack of adherent trade agreements with its customers, or any noteworthy role from its universal buyers (Balasubramanyam & Wei, 2005).
The manifestation of design is seen as an underpinning of comparative advantage in India’s attire industry, coupled by the role of the retail segment in systematizing the neighboring Indian market (Tewari, 2006, pp. 2325). China, nevertheless, has superior shares in world exports for both fabric and apparels while India has a comparative plus for clothing.
The findings also pointed out that India had comparative advantages in higher value-added activities, for example, attentiveness in small-order mechanization, instituting local brands, and produce maturity. This contrasts China, which has comparative advantages in more strengthened production of raw materials, financial system of balance, vertically aligned production, and accomplished logistics.
The comparative advantage of India is also subordinate to China in labor expenses (Karpova & Lu, 2009). However, the comparative advantage is limited and has variations in labor; for example, India has comparative plus than china in slighter labor costs. This advantage, however, fades away when we look into the lower level competence and inefficient labor systems in India compared to China.
There are also anxieties from the intensifying labor costs judged by the small values of communal securities in both urban and rural China. Accordingly, china must promote its apparel fabrication by operating more proficient GVC activities, for example, mounting innovative variety mechanization.
Advancement prospects for the apparel business for both countries were recognized, based on the comparative advantage of their industries. In order for both industries to perk up, there needs to be an upgrading in all-inclusive services (Karpova & Lu, 2009). India needs to employ its superior technologies in manufacturing and use the comprehensive production field. More efforts must be placed in reducing the rates of manufacture, especially in improving their procedural expertise and commencing efficiency.
The trade poise of china is superlative to that of China, but both of them exhibit towering invention progress (Balasubramanyam & Wei, 2005). Equally, they also have recently been benefiting from lofty flat reserves of capital. India displays better governance than China’s; yet, the impediments to trade exist in both locations.
Implications
The examination of the comparative advantages of the two countries, based on their GVC network, distinguished the advantages and limitations of the principal fabricators and exporters in the universal cloth market. The finding of this study can assist the group to make decisions on whether it would be apposite to invest in such companies as trade partners.
If an overseas country can supply a cheaper commodity than we can fabricate, then we can make purchases with some of the profits obtained from other activities. However, there are several assumptions underlying the theory (Lee, 2000), for example, ignoring the transportation costs and the presence of externalities.
Comparative advantage absorbs a lot of vitality, as it fluctuates occasionally. While a party may enjoy the benefit of a product for some years, the entry of new parties into the market may bring in the opposition which may disorient the profits gained. Also, the strengthening of the Japanese notes is bound to lessen the profits of clothing exporters. The alterations of foreign exchange issues can prove damaging for any association we intend to have.
The development of more fruitful and technically-intensive groups would amplify the general competitiveness of the Chinese financial structure. The increasing labor costs entail that there may be augmented worldwide competition for a while, but unfortunately, may result in some household acrimonies (Tewari, 2006, pp. 2326).
Under its democratic administration, it is indeed complicated to adapt a freethinking economy and the provision of globalization. Little labor costs do not attest more profits in the present market, particularly when the competitive setting is being altered.
The wavering demographics of china would indicate a decline in financially viable escalation, as the dependency ratio would continue to rise. Thus, the country may dwindle before it realizes its prosperity. The scarcity of workers persist to bring changes in the industries maneuvers, as some cloth fabricators are cutting in their purchaser base, chiefly those who beforehand forced unworkable social obedience requirements (Coster, 2009).
The rules being emphasized on pollution may result in the close of several companies, as the officials close in on environmental matters. Furthermore, there are those who are relocating to other regions where there are lesser labor and land costs and an elevated intensity of job seekers.
There are several strengths that the GVC of the two countries experience, hence require to be amplified more for them to be toughened. Their weaknesses, for example, the soaring redundancy rates in China signify that recruits would be obligated to struggle harder for service opportunities (Balasubramanyam & Wei, 2005), and thus wages are anticipated to fall. For India to contend efficiently with China there is a need for more investment in the restoration sector and engender superior fabrics.
Conclusion
The capacity of the apparel sector to participate worldwide depends on the power and value of the home industry (Gereffi, & Ramaswamy, 2000. There must be resourceful invention of superior products on all divisions of the delivery chain, coupled by the yearning of the government to present efficient functioning conditions, and favor the familial industry in trade concurrences. The nature of antagonism will give the organization approaches to resolve the competitive advantage.
However, the competitiveness of the Indian and Chinese does not mean that this advantage would be sustained (Isik & Broadman, 2007, pp. 3). The structure of the GVC helps in the appreciation of the alterations in the creation, the strategies employed to vary the collective apparel industry, and how diverse countries are incoming and moving up the apparel’s fabricating and exporting procession.
All the players in the value chain must be acknowledged and a level of trust and cooperation identified with the aim of upholding the organization’s businesses. All-embracing global sourcing capabilities must be exaggerated by the company, as the production of apparels goes intercontinental and contest levels intensify (Gerrefi & Memedovic, 2003).
List of References
Balasubramanyam, V & Wei, Y 2005, Textiles and clothing exports from India and China: a comparative analysis, journal of Chinese economic and business studies, volume 3, issue 1, pp 23-37.
Coster, J 2009, Chinese apparel industry repositioning for growth?, just-style. Web.
Cukul, D 2008, “competitive aspects of Turkish and Chinese textile and clothing industries”, 8th global conference on business and economics, October 18-19th 2008, Florence, Italy.
Gerrefi G, & Memedovic, O 2003, The global apparel value chain: what prospects for upgrading by developing countries?, United Nations industrial development organization, Vienna. Web.
Gereffi G, & Ramaswamy K, 2000, India’s apparel exports: the challenge of global markets, The Developing Economies, XXXVIII-2 (2000): 186–210.
Isik G, and Broadman H, 2007, Africa’s silk road: China and India’s new economic frontier, Washington: World Bank publications.
Karpova E, and Lu, Y, 2009, “Comparative advantage of the Indian and Chinese apparel industries: an analysis of the global value chain”, itaa 2009 proceedings, Washington. Web.
Lee, D, 2000, Comparative advantage part1/2, the freeman: ideas on liberty. Web.
Tewari M, 2006, “Adjustment in India’s textile and apparel industry: reworking historical legacies in a post-MFA world” Environment and Planning A 38 (12) pp. 2325 – 2344.