Export Strategy of Apparel Products
| Date | 01 July 2012 |
| DOI | 10.1177/0015732515120202 |
| Author | J.N. Gupta,Vijaya Katti |
| Published date | 01 July 2012 |
| Subject Matter | Article |
Export Strategy of Apparel Products
A Study of High Value Added Products
J.N. Gupta and Vijaya Katti
It has been observed that EU countries get higher unit value
realization (UVR) in their apparel products export by exporting
high value added/differentiated products. The most valuable
activities in the apparel value chain are not related to
manufacturing per se, but are found in the design, branding,
marketing, etc. among other activities within the products.
The study has been undertaken to analyze the export of Indian
apparel products from the point of view of total export value and
unit value realization (UVR). The study focused on top 10 apparel
products being exported from India, which constitute more than
50 per cent of the total value of India’s export of apparel products.
A time series data has been prepared to get the picture of export
of top 10 apparel products from India to the World. For these
products, competitive positions of top 10 exporting countries for
these products were obtained. Comparative calculation of trade
value, quantity and unit value realization (UVR) were carried
out for all the top exporters including India in each of these top
10 products. Further, in these top 10 exporting products, the
analysis was carried out for India’s export destination markets
for the years from 2004 to 2009. To know the competitiveness in
the export of these 10 products, Revealed Comparative Advantage
(RCA) values of these 10 products have been calculated for these
products. Analysis shows that Indian exporters are not able to
get high UVR for their exports. The study attempted to find
destination markets to get high UVR based export for Indian
exporters for enhancing export volume of these products to achieve
growth. The study is concluded with the suggestions from Indian
exporters to improve upon competitiveness by concentrating on
export of high value-added products.
Keywords: Unit Value Realization, Apparel products,
Competitiveness, Export, strategy
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FOREIGN TRADE REVIEW
Introduction
APPAREL industry is a traditional and export industry in the
world. It has attained global character because most nations
produce textile and apparel products and participate in world textile
market. Apparel production is a springboard for national
development, and often is the typical starter industry for countries
engaged in export-oriented industrialization due to its low fixed costs
and emphasis on labour-intensive manufacturing (Gereffi and
Frederick, 2010).
India’s textiles and clothing industry is one of the mainstays of the
national economy. It is also one of the largest contributing sectors of
India’s exports worldwide (Annual Report 2009-10, Ministry of
Textiles). The Vision Statement for the textiles industry for the 11th
Five Year Plan (2007-12), inter alia, envisaged India securing a 7 per
cent share in the global textiles trade by 2012 (www.texmin.gov.in).
The study entails to identify the major markets for top ten apparel
products exported from India, which constitute more than 50 per
cent of the total value of India’s export of apparel products.
The objective of the Study is to analyze and identify India’s major
competitors in these ten apparel products in the global market, UVR
(Unit Value Realization), the growth of export along with destination
markets for India in these products has been carried out.
Literature Review
Gereffi and Frederick (2010) asserted that the removal of quotas
on 1 January 2005 marked the end of over 30 years of restricted access
to the markets of the European Union and North America. Retailers
and other buyers became free to source textiles and apparel in any
amount from any country, subject only to a system of tariffs and a
narrow set of transitional safeguards that expired at the end of 2008.
This caused a tremendous flux in the global geography of apparel
production and trade, and a restructuring of firm strategies seeking
to realign their production and sourcing networks to accommodate
new economic and political realities.
Buyer Driven Nature of Apparel Chain
The apparel industry has been characterized as a buyer driven
commodity chain (Ramaswamy and Gereffi, 1998) where large
EXPORT STRATEGY OF APPAREL PRODUCTS
39
retailers, brand-name marketers and trading companies invest heavily
in design and marketing but leave the actual production to low cost
suppliers who produce according to the specifications given by the
buyers.
Upgradation in the Buyer-Driven Apparel Value Chain
As mentioned above, the apparel industry is the quintessential
example of a buyer-driven production chain marked by power
asymmetries between the producers and global buyers of final apparel
products. The most valuable activities are found in the design, branding,
and marketing of the products. These activities are performed by lead
firms, which are large global retailers and brand owners in the apparel
industry. Beginning in the 1970s, East Asian suppliers extended their
upgrading opportunities in the apparel value chain from simple
assembly to a series of new roles that included OEM (full package)
production, ODM (design), and OBM (brand development) stages
(Gereffi, 1999). As intangible aspects of the value chain (such as
marketing, brand development, and design) have become more
important for the profitability and power of lead firms, and “tangibles”
(production and manufacturing) have increasingly become
“commodities”. This has led to new divisions of labour and hurdles if
suppliers wish to enter these chains (Bair, 2005; Gereffi, Humphrey,
Kaplinsky, & Sturgeon, 2001).
ICRIER (2008) and AEPC Cluster Report (2009) described the
characteristics of the textile and clothing sector in the EU and stated
that the textile and clothing sector in Europe shows that Europe has
been subject to a series of radical transformations over the last years,
due to a combination of technological changes, evolution of the different
production costs, and the emergence of important international
competitors. In response to past competitive challenges, the textile
and clothing industry in Europe has undertaken a process of
restructuring, modernization and technological progress. Companies
have improved their competitiveness by substantially reducing or
ceasing mass production and simple fashion products, and
concentrating instead on a wider variety of products with a higher
value addition. Further, EU countries have improved their
competitiveness by substantially reducing or ceasing mass production
and simple fashion products, and concentrating instead on a wider
variety of products with a higher value addition.
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FOREIGN TRADE REVIEW
China has the advantage of higher labour productivity, cheap
and available raw material, better service & delivery, world class
infrastructure, massive capacity, integrated operations, state-of-
the-art indigenous technology and host of government incentives
(AEPC Cluster Report, 2009). In the China context, Tewari (2006)
found that China’s unit costs are low, and its production scales
enormous, but they are embedded within crucial firm-level abilities
and state investments that have helped enlarge training, induce
technical change and deepen the institutional capacity of local
production networks which have together lowered the risks and
costs of China’s large scale operations in the context of uncertain
markets.
Product-wise micro level studies in UVR area are not enough to
study the issue in detail. An attempt has been made to analyze
product-wise micro level export study in UVR area (having top export
values in India’s apparel export basket) which provides an insight
into export strategy of apparel products. This gap in the literature has
been identified for the study as a strategy point for enhancing India’s
apparel products export.
The study has been undertaken to analyze the export of Indian
apparel products from the point of view of total export value and
unit value realization (UVR). This study focused on top 10 apparel
products exported from India, which constitute more than 50 per
cent of the total value of India’s export of apparel products with the
objectives (i) to study challenges and opportunities in volume based
and high UVR based (in differentiated/high value added) export of
apparel products for Indian apparel exporters, and (ii) to suggest
countries to be focused for apparel products export for achieving high
unit value realization.
Methodology
Following techniques of data collection and analysis were carried
out to examine micro level product basis for India’s top 10 exporting
products (which constitutes more than 50 per cent of India’s apparel
export basket during the year 2008 and 2009). Data have been
considered at six-digit level in product classifications HS Codes 61 &
62 for ten products. The analysis has been done in the following
manner.
EXPORT STRATEGY OF APPAREL PRODUCTS
41
A time series data has been prepared to get the picture of export
of top 10 apparel products from India to the World. For these products,
competitive positions of top 10 exporting countries for these products
were obtained. Then, the comparative calculation of trade value,
quantity and unit value realization (UVR) were carried out for all the
top exporters including India, in each of these top 10 products for the
years from 2004 to 2009. Further, in these top 10 exporting products,
the analysis was carried out for India’s export destination markets.
To know the competitiveness in the export of these 10 products,
exercise of revealed comparative advantage (RCA) of these...
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