Fashion Business in Today’s
World
A Global Perspective
Objectives:
 Cite
U.S. and world trade trends and policy
 Explain the relationship of textiles and apparel to
developing nations
 Identify the world’s major trading blocs
 Describe international sourcing for U.S. fashion
importing
 Point out international market opportunities for U.S.
fashion exporting
 Explain how to discover offshore sources and
opportunities
Trade Trends and Policy
 Import
penetration: Percentage of
imports in a country’s total market
consumption
 U.S. imports 60% of textile and
apparel goods
 Balance of trade: Relationship
between values of imports and
exports
 Deficit:
imports exceed exports
 Surplus: exports exceed imports
CARGO SHIP
Free Trade
 Goods
flow freely in and out of a
country without government
interference
 Barriers to free trade:
 Tariffs
(duties)
 Quotas: limit goods
 Tariff-rate quotas: certain quantity
imported free
 Voluntary export restraints: applied
by exporting country
 Standards: certain levels of quality
 Subsidies: producers get
government money to lower prices
Protectionism
 Includes
many government-imposed trade
restraints
 Most countries have policies between the
two extremes
 Arguments for protectionism:
 Job
protection
 Strengthen start-up industries
 Compensation for unequal competition
 Maintain strong manufacturing base
 Protect against unsafe or inferior products
 Reduce trade deficit
Dumping
 The
selling of goods at lower
prices in a foreign market than
in the home market
 Illegal to dump in U.S. because
domestic firms cannot compete
 Reasons to dump:
 Create
a market niche
 Drive out competitors
 Lower inventories
 Increase profit by increasing
production
 Retain market share during slack
periods
World Trade Organization
 International
trade accord
that reduces tariffs, quotas,
and other trade barriers of
over 130 countries
 WTO phasing out in 2005
 Eventually all countries are
meant to compete with
almost free trade
 New import access to fibers
and fabrics
Textiles/Apparel and
Developing Nations
 Developing
countries start as agricultural
societies
 Textile/apparel industries are often the first to
form in emerging economies
 Structural adjustment refers to industries and
economies adapting to shifts in competitiveness
 A comparative advantage occurs when one
nation has the ability to produce a product better
than other nations due to specific resources or
materials.
Trade with Developing Nations
 Before
trading with a
developing nation, consider:
 Political
stability
 Economic climate
 Their
purchasing power
 Costs of doing business there
 Infrastructure
(roads, power,
transportation systems, etc.)
 Culture
World’s Major Trade Regions
 Asia-Pacific
includes:
 Japan;
plus India
first to emerge as
an export leader
 Other “Pacific Rim”
countries; limited materials
but highly industrialized
 India; main exporter of
apparel, but accepts no
imports; handicraft work in
homes
European Union and North
Africa
 European
Union (EU) includes 15
developed countries that represent
20% of world’s GDP
 Free trade exists among European
nations; businesses are efficient,
competitive, and innovative
 North African nations do some of
the low-wage production for the
European nations and the U.S.
The Americas
 North American
Free Trade
Agreement (NAFTA) has set up
a free trade zone among the
U.S., Canada, and Mexico
 Trade barriers for textiles and
apparel are being eliminated
 Mexico’s trade is growing
 U.S. is looking toward Central
and South American markets
Item 807/9802
 Section
of the U.S. Tariff Code
that allows manufacturers to
export cut garment pieces for
assembly elsewhere; import
duty paid only on value added
 Developing areas of the
Western Hemisphere have
lower production costs thus
making it cost effective for
contracts with the U.S.
International Sourcing for U.S.
Importing
 Low
wages make international sourcing
desirable for labor-intensive apparel
manufacturing
 Problems with offshore sourcing:
 Hidden
sales, distribution, and
management costs
 Added costs of transportation, insurance,
and import fees; delays in receiving
 Also hard to oversee quality production
 Larger
firms have specific buyers to
source internationally
Buying from Foreign Sources
 Import
merchants buy and import
particular classifications of goods
 Resident sales agents represent and
are paid by foreign manufacturers,
connecting them with import buyers
 Domestically, orders can be written
from export merchants at market
 Export merchants are foreign
wholesalers specializing in goods
from their home countries
Considerations for Foreign
Sources
 Foreign
contractors: Manufacturing hired
overseas by U.S. apparel producers
 Licensing
agreements: Allows U.S. to
produce and market foreign goods
 Franchising: Retail franchises of foreign
firms in U.S.
 Joint
ventures: Agreements that bring skills
or products of two firms together
 Company-owned
foreign facilities: U.S.
subsidiary operated in a foreign country
International Market for U.S.
Exporting
 U.S.
consumers represent
less than 5% of world market
and 25% of buying power
 Freer trade is opening new
markets for U.S. firms
 Currently, U.S. biggest
foreign markets are Japan,
Europe, and Canada
 Closeness to Latin America
will open that market
 Identify
Improving U.S. Export
Competitiveness
overseas markets
 Make long-term commitments
 Customize marketing practices
for cultural differences
 Identify market niche
 Overcome warehousing and
transportation problems
 Offer top service and reliability
 Improve technology
 Invest abroad
Benefits of Exporting
 More
customers
 Market diversification
 Increased profits
 Extended demand for
seasonal products
 Year-round production
 Better domestic methods
learned
 Longer product life cycles
International Retailing
 Cross-border
retailing:
Involves retail company
operations serving customers
in multiple countries
 Greater financial risks, but
licensing and franchising help
reduce risks abroad
 High financial rewards
possible if firms understand
cultural attitudes and
practices
Offshore Sources
 Key
to successful global business is
picking the right countries and
thinking like the locals
 Researching international markets is
same as any market research
 Awareness of cultural differences vital
to success
 International trade shows held in U.S.
have sections by country; shows also
held in various countries
Do You Know . . .
 What
are the benefits of free
trade? What are the
disadvantages?
 In what ways do cultural
differences play a part in
exporting? Importing?