Impact of China on Indian Garment Industry
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Impact of China on Indian Garment Industry

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  • dissertation
Impact of China on Indian Garment Industry by Aditya Marwaha A dissertation presented in part consideration for the degree of MA Marketing The University of Nottingham 2008
  • competition among
  • iconic brand
  • competition
  • industry before
  • technological environment
  • indian garment
  • integrated textile
  • production has
  • india
  • industry

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Impact of China on Indian Garment Industry
by
Aditya Marwaha
A dissertation presented in part consideration for the degree of
MA Marketing
The University of Nottingham
2008Abstract
To survive and succeed in garment manufacturing business in today’s era of globalisation and
increasing competition, it is important for firms to analyse the environment in which it is
working. With cutting margins between the cost and the selling price, firms have to make
efforts to decrease their cost. Therefore, various factors, in the form of theories, affecting the
success of a firm and the cost of a product are critically evaluated during the literature
review. The theories are global competition; strategic management; PEST analysis; five
competitor force model; and resource based view. The interviews of garment manufactures
were gained so as to get an insider view of this industry and gain the practical side with their
relation to the theories. Integration of China in the global economy is one of the most
significant developments that is affecting the structure and evolution of the global system.
This research mentions what factors is China ahead of India in the garment industry. A
comparison will be made with the garment industry in China, as they are the biggest
competitor. This industry in India needs to be improved, and for this, various
recommendations are outlined which would help enhance the competitive position of the
Indian garment industry in the period of global competition.Acknowledgement
Before I begin, I would like to thank few people who have supported and guided me
throughout my dissertation. Firstly, I would like to thank my mom, dad and my elder brother
Karan for suggesting me to do research on this topic. It was a great experience for me to
know better about this industry before getting involved into this business. Without your
constant help and support, it would not have been possible for me to complete this research
effectively. Secondly, I would like to thank my Supervisor, Ms. Mona Moufahim, who made
me believe that she was always there to help for my dissertation. Her constant reminders
asking about the updates of my work, fast replies to my e-mails, and also providing detail
suggestions and comments about my work provided me a great vigour. I can never forget the
incident when she had to leave the city for a conference. As I couldn’t meet her early on that
day due to some reason, she met me just before leaving the city to help me with my
dissertation. She brought her luggage in her office and left directly to catch the train. Her
interest and faith in my work and in my efforts eventually motivated me more to complete
this research. Thirdly, I would like to thank my friend Hari, for rendering a helping hand in
the final phase of my dissertation.Table of Contents
ABSTRACT..............................................................................................................................
ACKNOWLEDGEMENTS......................................................................................................
TABLE OF CONTENTS..........................................................................................................
LIST OF TABLES AND FIGURES.........................................................................................
CHAPTER ONE .......................................................................................................................
1. INTRODUCTION ............................................................................................................1
1.1. Research Objectives...................................................................................................2
1.2. Framework of the study.............................................................................................2
1.3. Overview of Textile Sector in the Indian Economy ..................................................3
1.4. Sub-Segments4
1.5. Components in the Value Chain of Textile industry .................................................5
Fibre 5
Yarn5
Cloth/Fabric ................................................................................................................6
Textile Processing Sector............................................................................................6
Readymade Garment...................................................................................................6
1.6. Summary....................................................................................................................7
CHAPTER TWO ......................................................................................................................
2. LITERATURE REVIEW .................................................................................................8
2.1. Brief Hostory of Strategic Management....................................................................9
2.2. Strategy10
2.3. Strategic Management Process................................................................................11
2.4. Internal and External environment analysis ............................................................12
2.5. External analysis......................................................................................................13
Political Environment ...............................................................................................14
Economic Environment ............................................................................................14
Social and Cultural Environment..............................................................................15
Technological Environment......................................................................................15
Threat of New Entrants: ...........................................................................................16
Threat of Substitutes .................................................................................................17
Bargaining Power of Suppliers .................................................................................17
Bargaining Power of Buyers.....................................................................................17
Extent of Industrial Rivalry18
2.6. Internal Analysis19
Resources ..................................................................................................................19
Capabilities ...............................................................................................................20
Core Competencies ...................................................................................................20
2.7. Strategic Management Process in Small and Medium Sized Enterprises ...............21
2.8. Global competition ..................................................................................................22
2.9. Value Chain and Value system................................................................................25
2.10. Clustering................................................................................................................262.11. Summary.................................................................................................................27
CHAPTER THREE ..................................................................................................................
3. METHODOLOGY .........................................................................................................28
3.1. Sources of Data Collection ......................................................................................28
Associated Chambers of Commerce and Industry of India ......................................28
Books and Journals ...................................................................................................29
Internet ......................................................................................................................29
Interviews30
3.2. Why Qualitative research?30
3.3. Advantages of Interviews ........................................................................................32
3.4. Disadvantages of Interviews....................................................................................32
3.5. Approaches to Qualitative Interviewing..................................................................33
3.6. Interviews ................................................................................................................35
Thematizing ..............................................................................................................35
Designing ..................................................................................................................35
Interviewing35
3.6.1.1.Sampling .................................................................................................36
3.6.1.2.Stages of Interview..................................................................................38
Transcribing41
Analysing41
Verifying...................................................................................................................42
Reporting...................................................................................................................41
3.7. Summary..................................................................................................................43
CHAPTER FOUR.....................................................................................................................
4. EXPORT OF GARMENTS FROM INDIA AND CHINA............................................44
4.1. Exports to USA........................................................................................................46
4.2. Exports to Europe ....................................................................................................47
4.3. Major Competitors...................................................................................................49
4.4. Summary..................................................................................................................49
CHAPTER FIVE ......................................................................................................................
5. ANALYSIS/DISCUSSION/RECOMMENDATIONS ..................................................51
5.1. Factors determining Competitive Advantage of India and China ...........................51
Labour: Training, Productivity and Laws ................................................................51
Structure....................................................................................................................56
Infrastructure.............................................................................................................58
Technology ...............................................................................................................60
Raw Materials ...........................................................................................................61
Economies of Scale...................................................................................................63
Foreign Direct Investment ........................................................................................64
Export Finance and Subsidies...................................................................................65
Growing Domestic Market .......................................................................................66
Iconic Brand..............................................................................................................66Competitor or Complement each other.....................................................................67
5.2. Future Prospects of India and China........................................................................67
5.3. Government Schemes Issues - Indian Garment Industry ........................................70
Bureaucratic Hurdles ................................................................................................70
Technology Upgradation Fund Scheme (TUFS) .....................................................70
Scheme for Integrated Textile Parks (SITP) ............................................................71
5.4. Summary..................................................................................................................72
5.5. Recommendations....................................................................................................73
Labour Laws and training facilities ..........................................................................73
Manufacturing Expertise...........................................................................................75
Infrastructure ............................................................................................................76
Brand India................................................................................................................76
Trade Diversification ................................................................................................76
Changes in Existing Schemes and Establishment of SEZ.............................77
5.5.1.1.Bureaucracy reforms................................................................................77
5.5.1.2.TUFS........................................................................................................78
5.5.1.3.SITP.........................................................................................................78
5.5.1.4.Special Economic Zones..........................................................................78
5.6. Summary..................................................................................................................80
CHAPTER SIX.........................................................................................................................
6. CONCLUSION...............................................................................................................81
APPENDIX ..............................................................................................................................
ACRONYMS............................................................................................................83
REFERENCES .....................................................................................................................84List of Tables and Figures
Figure 1 – “The Textiles-Garments Production Chain”
Figure 2 – “Attributes shaping environment to create competitive advantage”
Figure 3 – “World Imports of Readymade Garments: Share of India and China as suppliers”
Figure 4 – “Share of components in total exports of Apparel from India”
Figure 5 – “Percentage Share of India and China as suppliers of Readymade Garments to the
World”
Figure 6 – “Exports of Knit and Woven Garments to the United States of America”
Figure 7 – “Exports of Knit and Woven Garments to the EU15”Chapter 1
Introduction
This research is essential for all existing garment manufacturers and for those who are
interested to start this business in India. It reveals the issues faced by this industry and
highlights the possible recommendations to be applied. Firms can further develop strategies
by looking at the comparative advantage possessed by Indian and Chinese textile and
garment manufacturers highlighted in this research, and therefore manufacture and procure
goods accordingly to sell locally to internationally.
The phase out of WTO agreement on textiles and clothing (ATC) on 1 January 2005 led to
increase in competition among the garment exporting countries around the world. Even
though the global imports of this sector have risen, the production has remained stagnant or
reduced in the medium to high cost countries such as United States, Canada, Mexico, and
Korea. In contrast, low cost countries such as China, India, Bangladesh, and Indonesia
where wages are low, and there is high productivity, pose a strong competitive advantage.
These countries can expand their production as well as export capacities so as to become the
preferred suppliers.
The textile and garment industry involves use of relatively modern technology which is
available at low investment, thereby suiting industrialization in developing countries. At the
same time, it is high value added segment where research and development, and design are
important factors for improving the competitiveness. Many researchers believe that India and
China will dominate the production in this sector (Nordas, 2004, Francois and Spinanger,
2001).
11.1 Research Objectives
To date, very little research has been conducted that analyse the factors affecting growth of
garment industry in India and their competitiveness with the manufacturers in China. This
research offers a perspective focusing on two themes: firstly, the characteristics of India and
China in production of garments in the era of globalisation and their competitive advantage in
various fields, their structure supporting the export profile, and the effects of various policy
regulations; secondly, recommendations for garment manufacturers and the government in
India. These aspects are important to be understood as this sector plays an important role for
the economic development of India and its future growth. The industries competitiveness can
be enhanced only after recognising the areas it is not good at.. These challenges need to be
identified and understood so as to position it successfully in the global competitive
environment.
1.2 Framework of the Study
This chapter highlights the role played by textile and garment industry in the Indian
economy. The various components involved in its supply chain in general are outlined along
with major players of India. The next chapter (literature review) provides a detailed review of
various theories and concepts such as global competition; strategic management; PEST
analysis; five competitor force model; and resource based view. The views of various
theorists have been discussed to understand importance of these concepts in the garment
industry. These theories outline various factors that are directly relevant to determine the
competitive advantage of garment manufacturing firms of India and China. In addition, these
theories are extremely significant to be understood for the success of firms in India. Chapter
three describes the methodology used in collecting the data. The justification of using
interviews as the primary method to collect data has been explained. The process used for
2analysing the information obtained from interviews is also elucidated. Chapter four illustrates
the past and current export trends of the garment industry of India and China to USA and
EU15. The major competitor countries of India have also been mentioned. Chapter five
examines the challenges faced by Indian garment manufacturers to position itself successfully
in the global competition. These have been compared and their competitiveness examined,
with regard to China. Furthermore, various recommendations have been mentioned to
improve the competitive position of Indian garment industry in accordance with global
markets. The final chapter provides concluding remarks of the entire research.
1.3 Overview of Textile Sector in the Indian Economy
In the one trillion dollar Indian economy, the textile and garment industry has emerged as one
of the most important sectors in the Indian Economy in terms of investment, production and
employment. It is directly linked to the rural economy and to the agriculture sector. It has
been estimated that one of every six households in the country, either directly or indirectly
depends upon this sector, (Dhanabhakyam and Shanthi, 2008).
This industry is robust and well established, enjoying huge demand in domestic as well as the
international market. Its capacity has been continuously increasing after dismantling of quota
regime. The major factors in determining success of this industry are economies of scale with
higher productivity and low cost. India has an advantage with the existence of a complete
value chain of textiles with the production of yarn, fibre, fabric, and readymade garments.
The textile sector in India contributes four percent to the gross domestic product (Ministry of
Textiles, 2008). It also contributes 14 percent to the total industry production, with 10.9
percent contribution to index of industrial production (Singh, 2007). This sector is the second
largest employment provider after agriculture employing about 35 million people in the
country (Ministry of Textiles, 2008). In addition, it is also estimated that 50 million people
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