HONG KONG FASHION INDUSTRIES IN THE NEW ECONOMY

Document Sample
scope of work template
							                                                                       Volume 2, Issue 1, Fall 2001


              HONG KONG FASHION INDUSTRIES IN THE NEW ECONOMY

                                        Yi Li and Lei Yao

             Institute of Textiles and Clothing, The Hong Kong Polytechnic University
                              Hung Hom, Kowloon, Hong Kong, China

                                         ABSTRACT

In this paper, the sustainable competitiveness of the Hong Kong Fashion industry (textile and
clothing industry) in the new economy is investigated through a comparison study and model
simulation. We find that the competitiveness of Hong Kong will decrease without intensive
investment to develop key knowledge-based core competencies in facing intensive competition
from developing and developed countries and the threats of regional trade blocs and increased
bargaining power of overseas buyers. To capture the business opportunities and develop
sustainable competitiveness in the new economy, it is essential for the Hong Kong Textile and
Clothing industry to invest and develop knowledge-based core competencies in the areas of
product innovation, design and original brand marketing.

KEYWORDS: Hong Kong, textile and clothing industry, competitiveness, Hong Kong
fashion industry


INTRODUCTION                                        below the world’s average of 5% [1]. In
                                                    world textile trade, the total export value of
In the last few decades, Hong Kong has              textiles was US$151 billion in 1998, with
played an important role in world textile and       the top ten countries accounted for 69.3% of
clothing trade. The total export value in           the global export market share. The leader
world clothing trade was US$180 billion in          was Germany, followed by Hong Kong,
1998, with 62.5% shared by the top ten              Italy, China, Korea, Taiwan, USA, France,
exporting countries. China was the world            Belgium-Luxembourg and Japan. On a
leader, accounting for 16.7% of global              compound basis, total textile and clothing
export market share, followed by Hong               exports from Hong Kong increased by 2.9%
Kong as the second leader with 12.3%                annually between 1992 to 1998, mainly
market share, and further by Italy, US,             attributed to the growth in re-exports from
Germany, Turkey, Mexico, France, UK and             Mainland China. Exports to the USA
Korea. During that year, Hong Kong’s                enjoyed the highest compound growth rate,
domestic export and re-export amounted to           at 7.8% from 1992 to 1998, due to the
US10      billion  and     US$13      billion       establishment of the North American Free
respectively. However, the growth of its            Trade Agreement [1, 2].
total export was 2% between 1992 to 1998,

Article Designation: Scholarly Works            1                                              JTATM
                                                                         Volume 2 , Issue 1, Fall 2001
These statistical data suggest that Hong             through the Internet, which changes their
Kong’s export power has been declining               purchasing behavior. Consumers become (a)
with stronger dependence on re-export. The           more values conscious – looking for more
intensive competition comes from four                added values; (b) more fickle – less brand
major sources: (1) domestic manufacturers            royal but looking for innovative products
within the US, Western Europe and Japan,             and styles; (c) demanding wide products
(2) manufacturers in extended regional trade         ranges and varieties; (d) looking for
blocs, (3) manufacturers in developed Asia           customized products and (e) acknowledging
Pacific Countries, such as China and South           brand importance. Therefore, capability in
Korea, and (4) manufacturers from                    knowledge and technological innovation is
developing economies such as India. Hong             becoming the key for success in the new
Kong has lost its competitiveness against            economy.
developing countries in land, operating and
labor costs, government support and pricing.         With the expectation of China’s entry to the
Hong Kong does not have the advantages of            WTO and the trends of globalization in
countries in the extended regional trade             world trade together with the arrival of the
blocs in terms of geographic location,               new economy, competition among the major
cultural proximity, tariff and quota                 players will be intensified. There is a major
concession, as well as operating costs.              concern of how to sustain competitiveness in
                                                     a more open and free business environment
To combat this situation, Hong Kong Textile          and in a globally networked and knowledge
and Clothing industry players have invested          intensive economy. This paper aims to
in countries in regional trade blocs and             explore this issue by model simulation of the
emerging countries, and/or enhanced                  sustainable competitiveness of the Hong
activities to source from China and                  Kong fashion Textile and Clothing industry
developing countries. Few companies have             against       the      major       competing
invested in developing design and original           countries/regions in terms of strategic
brands. Government investments with                  investment        in     developing      core
industrial support mainly focus on                   competencies.
developing and sustaining the existing
strengths, particularly in developing Internet       SUSTAINABLE COMPETITIVENESS
trading and sourcing capabilities for supply         OF TEXTILES AND CLOTHING
chain management, global sourcing,                   INDUSTRY
production management, logistics and
distribution management, as well as                  The competitiveness of the Textile and
management of compliance issues. This is             Clothing industry in a country or region is
certainly a key area for Hong Kong                   not only dependent on the level of core
competitiveness.       However,       whether        competence of individual enterprises in the
investment in this area alone is sufficient to       industry, but also on the integration of the
sustain the Hong Kong Textile and Clothing           whole supply chain and relevant supporting
industry needs to be explored, especially in         industries, as well as internal and external
the area of new economy.                             business environments.

In the new economy, the rules of                     The core competencies of individual
competition have changed with a number of            enterprises are the fundamental elements for
features: (1) knowledge as the key resource;         the sustainable competitiveness of an
(2) information and Internet communication           industry. Prahalad and Hamel [3] pointed
as the major carrier; (3) innovation as the          out that the current competitiveness of a
lead [15]. At the same time, consumers are           company          derived     from        the
able to obtain a great deal of information           price/performance of existing products.
and access a large variety of products               Future competitiveness derives from the

Article Designation: Scholarly Works             2                                             JTATM
                                                                          Volume 2, Issue 1, Fall 2001
ability to build, at low cost and more                 labor between firms or between units of a
speedily than competitors. At the level of             single firm, for achieving technological
core competence, the goal is to build world            dynamic flexibility; (4) key collections of
leadership in the design and development of            physical, capital, labor, and information
a particular class of product functionality.           resources for the production network are
Jaridan further discussed the hierarchy of             highly geographically concentrated in one or
competencies and defined the terms of                  a few sub-national regions of the host
resources, capabilities, competence, and               countries; (5) the technological learning
core competencies [4]. He argued that each             rests on the conventions of the regional
level in the hierarchy results from                    production system, which guide the
integration of lower level elements. Each              mobilization and maintenance of resources
level encompasses a higher level of value              in mutual engagement between firms. The
added to the corporation. Core competencies            conventions are rooted in local political,
add the highest value since they exploit               cultural and other non-economic forces,
resources and capabilities at the broadest             which determine the quality of the
level across the corporation as a whole.               technology districts.
Also, the higher levels in the hierarchy have
broader scope and are more difficult to                The theory of core competence focuses on
achieve.                                               the     competitiveness      of     individual
In terms of regional competitiveness, Porter           enterprises,    while    the     theory    on
[5, 6] pointed that the enduring competitive           competitiveness of a nation or region
advantages in the global economy lie                   highlights the effects of integration and
increasingly in local things, which distant            dynamic interaction across the industry,
rivals cannot match, including knowledge,              relevant industries and environment (called
relationships and motivation. The modern               clusters). Both theories are equally
economic map of the world is considered to             important for developing an intellectual
be dominated by clusters. A cluster is                 understanding of the competitiveness and
defined as a geographic concentration of               sustainable developments in specific areas
interconnected companies and institutions              of a nation or region. Sustainable
that achieve unusual competitive success in            competitiveness of an industry in a nation
a particular field. Storper [7] pointed out that       or/region shall be determined by the levels
with the growth of world trade, export                 of competencies in individual enterprises
specialization based on specific products              and the collective national/regional learning,
becomes increasingly important. Export                 involvement and commitment to cross
specialization is largely due to product-              industry integration of their competencies.
based “absolute” technological advantages,             On the basis of these theories, we developed
which are renewed through learning in a                a model to describe how a hierarchy of six
variety of dynamic economies. Such export-             factors (dimensions) determines the
oriented absolute advantage industries tend            sustainable competitiveness of the Textile
to be organized into production and                    and Clothing industry in a nation or region
distribution networks combining the                    [16].
advantages of specialization and flexibility,
called “technology districts”. The features of         As shown in Figure 1. Resources, internal
such technology districts are: (1) trade               business environment and external business
specialization is achieved by obtaining                environments are at the bottom level of the
absolute technological scarcity of the                 hierarchy. Resources are the inputs into the
products; (2) the technological scarcity is            industry supply chain, including physical
gained through technological dynamism in               resources such as materials, plant and
the product through continuous learning; (3)           equipment, human resources such as
production networks are organized on the               manpower and knowledge and technology,
basis of an elaborated shift in the division of        financial resources such as capital and social

Article Designation: Scholarly Works               3                                             JTATM
                                                                            Volume 2, Issue 1, Fall 2001
resources such as culture and reputation.                                          companies and human resource management
The internal business environment is a                                             capabilities.
variable representing the impact of the                                            Competencies, at the third level of the
conventions rooted in local economical,                                            hierarchy,     are     the     cross-functional
political, cultural and other non-economic                                         integration and co-operation of capabilities
forces on the competitiveness of the                                               such as a set of skills and know-how
industry. This variable includes factors such                                      resulting from interfaces and integration of
as the political environment, domestic                                             functional capabilities in the industry. This
economy, market opportunities, taxation,                                           variable     includes    factors     such      as
policies for private enterprises, foreign                                          international trade and export capacities,
investment and foreign currency, capital                                           R&D and new product development
market, labor market and physical                                                  abilities, as well as marketing and
infrastructure. The external business                                              management abilities. The competencies of
environment is a variable indicating the                                           an industry may consist of the core
influence of the external (international)                                          competencies in individual enterprises. Core
trading environment on the industry,                                               competencies of an industry, at the highest
including factors such as tariff, quotas and                                       level of the hierarchy, are skills, abilities and
non-tariff barriers to Textile and Clothing                                        areas of knowledge that are shared across
products.                                                                          the industry as collections of competencies.
                                                                                   Core competencies require collective
Capabilities, at the second level of the                                           industrial/ regional learning, involvement
hierarchy, are the abilities of an industry to                                     and commitment to cross enterprise
exploit its resources. Capability is                                               integration, including factors such as design
functionally based and consists of a series of                                     culture, creativity and networking, a flexible
business processes and routines to transform                                       production       network,      trading        and
inputs to outputs including marketing                                              merchandising clusters, a technology and
capabilities, production and machinery                                             product innovation learning network,
capabilities, number of establishments of                                          original branding and an international
                                                                                   marketing culture and capability.


                                                                                                          •Design and creative clusters
                                                                                                          •Original & international brand marketing
                                                                                                          •Product and technology innovation network
                                                                                                          •Flexibly production network
                                                                                                          •Productivity                                        30 variables
                                                                                    Core Competencies     •...


                  Core
                                                     Sustainable Competitiveness




                                                                                                          •International trading/export
                                                                                                          •Ability of new products development and innovation
                                                                                                          •Enterprises management                             30 variables
               competences                                                            Competencies        •...

                                                                                                          •No. of establishment
                                                                                                          •Production capability--yarn, fabric, clothing
                                                                                        Capabilities      •Machinery--spinning, weaving, etc
                                                                                                          •Employment--worker, engineers,manager
                                                                                                                                                               15 variables
                                                                                                          •...
                Competences
                                                                                                          •Physical resources,
                                                                                         Resources        •Human resources,
                                                                                                          •Capital                                              31 variables
                                                                                                          •Knowledge & technology
                  Capability                                                          External Business
                                                                                                          •...

                                                                                        Environment       •Tariff
                                                                                                                                                                3 variables
                                                                                                          •Quota

               External Business Internal Business
                                                                                                          •No-tariff, no-quota trade barriers

   Resources                       Environment
                                                                                      Internal Business   •Physical infrastructure
                 Environment                                                             Environment      •Macro-economic environment
                                                                                                          •Taxation, capital market, foreign currency, and foreign
                                                                                                          investment policy
                                                                                                          •Market opportunities
                                                                                                          •...                                                     98 variables




     Figure 1 Hierarchy of the sustainable                                              Figure 2 Roots of competitiveness
      competitiveness of an industry in a
                nation/region




Article Designation: Scholarly Works                 4                                                                            JTATM
                                                                                                             Volume 2, Issue 1, Fall 2001
A mathematical description of this model             competitiveness, followed by Germany,
has been developed by Li and Yao [16].               France, Japan, the UK, Hong Kong, Italy
Figure 2 shows the structure and                     and China. Indonesia and Thailand are at the
specifications of the model and the number           low end of the list. The reasons of the
of sub-variables in each of the dimensions,          ranking can be illustrated by analyzing the
in which a total of 207 variables are                strength and weakness of individual
included in the model. According to this             countries/regions along the six major
model, extensive research has been carried           dimensions.
to obtain relevant quantitative data and
qualitative information. Majority of the data        Figure 4 shows the position of individual
are obtained from the world competitiveness          countries in the dimensions of internal and
yearbook [8], Asia Pacific Market                    external business environments. USA has
Handbook [9], Consumer Asia 1999 [10],               the best position in internal business
Consumer Europe [11]etc. for the                     environment. UK, Germany and France
dimensions of internal business environment          have the good positions in the upper corner
and resources. For the dimensions of                 of the figure, showing good internal and
capabilities,    competencies     and     core       external business environments. Hong Kong
competencies, the data are obtained or               has a very good internal business
estimated      also   from     The      World        environment but relatively less favorable
Competitiveness Yearbook [8], Almanac of             external business environment. Japan has a
China's textile industry [12], and some              very good external business environment
professional institute reports [1, 2, 13,14].        and good internal business environment as
The data for individual variables are                well. Italy, Korea, Poland, Turkey and
standardized. Ratings on the six dimensions,         Mexico are positioned in the left upper
including internal business environment,             corner of the figure with very good external
external business environment, resources,            business environments but less favorable
capability,     competencies      and     core       internal business environments. Thailand,
competencies, are calculated according to            Indonesia, Korea and China are positioned
the model. The values of these six                   at the left lower corner of the figure,
dimensions are further standardized for the          showing less favorable external and internal
calculation of the overall sustainable               business environments.
competitiveness with specification of
weights according to the levels of individual        In Figure 5, positions in the dimensions of
variables in the competence hierarchy. The           capability and resources are shown for the
overall       ratings     of       sustainable       Textile and Clothing industry of individual
competitiveness of clothing industry are             countries. China has extraordinary capability
generated for fifteen countries (regions) that       but relatively low resources. India has a
are the major players in the global textile          similar position with relatively high
and clothing markets.                                capability but low resources. The USA,
                                                     Germany, Hong Kong, France and UK are
SIMULATION RESULTS AND                               positioned in the right lower corner of the
DISCUSSIONS                                          figure, showing very good resources but less
                                                     strong in capability. Japan, Italy, Turkey,
Figure 3 shows the positions of the overall          Korea, Mexico, Poland, Thailand and
sustainable competitiveness of the Textile           Indonesia are positioned at the left lower
and Clothing industry in 15 nations /                corner of the figure with weaker resources
regions. The USA Textile and Clothing                and lower capability.
industry has the highest sustainable




Article Designation: Scholarly Works             5                                             JTATM
                                                                         Volume 2 , Issue 1, Fall 2001
                                                                2.00
                                Sustainable Competitiveness
                                                                1.50

                                                                1.00

                                                                0.50

                                                                0.00

                                                               -0.50

                                                               -1.00

                                                               -1.50
                                                                                    GERM FRANCE                      HONG                             KOREA TURKEY              MEXICO   POLAND THAILA INDON
                                                                            USA                     JAPAN     UK                    ITALY CHINA                         INDIA
                                                                                    ANY                              KONG                                                                         ND      ESIA



                                                               SC Rating     1.63    0.88   0.68     0.62     0.53   0.38            0.20     -0.05    -0.23    -0.47   -0.48    -0.65    -0.74   -0.99   -1.32


                                                                                                                        Country / Region
                                                              Figure 3 Sustainable competitiveness of clothing industry in the fifteen countries/regions




                                                                         1.5                                                                            China
                                                                  Mexico 1.0     UK                                                                                      3.0
External business environment




                                                                                            USA
                                                                Italy  Japan France Germany
                                                                         0.5
                                                                        Turkey
                                                                         0.0                                                                                             2.0
                                                                                                                       Capability




                                                                    Poland
                                                                  India                 Hong Kong
                                                                        -0.5
                                               Thailand          0                                                                                                                 1.0            2.0         3.0
                                         -2.0   -1.0        -1.0                     1.0           2.0      3.0                        -2.0           -1.0          0.0 1.0
                                                        Korea                                                                                             India
                                          Indonesia
                                                            -1.5
                                                                                                                                                    Japan                                              USA
                                                                           -2.0                                                                           Turkey 0.0
                                                                                                                                                  Mexico                         France
                                                                                                                                                             Korea                           Germany
                                                              China                                                                            Thailand
                                                                           -2.5                                                                              Italy                           Hong Kong
                                                                                                                                                                                UK
                                                                           -3.0                                                             Indonesia Poland -1.0

                                                              Internal business environment                                                                             Resources

                                        Figure 4 Internal and external business                                                                 Figure 5 Capability and resources
                                                     environment




Article Designation: Scholarly Works                                                                                   6                                                                         JTATM
                                                                                                                                                                            Volume 2, Issue 1, Fall 2001
                                           2.0                                                                                         CHINA
                                                                       USA
                                                                                                                                       USA
Core competence                        France          Germany                                                Suscomp
                                                                                                              4.00                     HONGKONG
                                    Italy 1.0            Japan
                                                                                                              3.00

                                                  UK                                Core competenct
                                                                                                              2.00
                                                                                                                              IBE
                                                                                                              1.00

                                    Korea          Hong Kong                                                  0.00

                                            0.0                                                               -1.00
                                                                                                              -2.00

                   -2.0      -1.0 China            1.0           2.0    3.0                                   -3.00


                          India        0.0                                          Competence                                       EBE
                                   Turkey
                          Poland Mexico
                                      -1.0
                                Thailand                                                         Capability              Resources
                            Indonesia
                                           -2.0

                                      Competence

                  Figure 6 Competence and core competence                         Figure 7 Comparison between USA and China
                                                                                            textile-clothing industry




Figure 6 shows that the positions of                                                industry is similar but weaker in comparison
individual countries in the dimensions of                                           with the US in the six dimensions, except
core competence and competence. The USA                                             slightly stronger in capability.
has a superior position in the dimensions of
competence and core competence. Germany,                                            HONG KONG FASHION INDUSTRY
France, Japan, the UK and Hong Kong are                                             IN NEW ECONOMY
positioned at the upper right corner with
very    good      competence     and     core                                       In order to investigate the impact of WTO
competencies. Italy and Korea are                                                   and investment in R&D, Design and
positioned at the left upper corner with very                                       management         on      the      sustainable
good core competencies (especially Italy)                                           competitiveness of the Hong Kong fashion
but weaker competencies. China, India,                                              industry, we carried out a systematic study
Turkey, Mexico, Poland, Thailand and                                                of the scenarios of WTO conditions on
Indonesia are positioned in the left lower                                          quota, tariff and non-tariff barriers [li]. Also,
corner, showing weakness in both                                                    we did a survey of government and industry
competencies and core competencies.                                                 investment      in    R&D,       design      and
                                                                                    marketing/management in the fashion
In Figure 7, the Hong Kong fashion industry                                         industry in various countries/regions and
is compared with the USA and China in the                                           studied the impact of these investments on
six dimensions and overall sustainable                                              various core competencies by using the
competitiveness. The US textile and clothing                                        model.
industry has excellent strength in the six
dimensions of internal and external business                                        Figure 8 shows the comparison of core
environments,       resources,    capability,                                       competencies         across       the      15
competence and core competence, as well as                                          countries/regions in the near future on the
overall sustainable competitiveness. The                                            basis of the current status and investments in
Chinese fashion industry is weak in the                                             the relevant areas. The model predicts that
dimensions of business environment,                                                 the USA shall have the highest core
resources, competence and core competence,                                          competency (Ccomp), followed by Italy,
but has much higher capability, though its                                          France, Japan, UK, Germany, Hong Kong,
overall sustainable competitiveness is                                              China and India. The reason for this ranking
significantly lower. The Hong Kong fashion                                          is that the US shall have the strongest


Article Designation: Scholarly Works                                          7                                                              JTATM
                                                                                                                        Volume 2, Issue 1, Fall 2001
competency in product and technology                                                   core competency in product innovation and
innovation (PID), together with excellent                                              strong competency in design and original
strengths in design and original brand                                                 brand marketing, particularly in Asia. Hong
marketing (OIBM). Italy and France shall                                               Kong is expected to be ranked at the 7th
still maintain the highest rankings in design                                          place in the world and the 2nd place in Asia
and original marketing, but relevantly low                                             in core competency, falling behind USA,
competency in material and technology                                                  Italy, France, Japan, UK, and Germany.
innovation. Japan shall maintain excellent

                                                            Design          OIBM                PID           Ccomp
            3.00

            2.50

            2.00

            1.50

            1.00

            0.50

            0.00

                                                                                                      IA


                                                                                                               O
                                 Y




                                                                 Y




                                                                                 A




                                                                                                                                            D
                                          E




                                                                                                                        Y




                                                                                                                                                    IA
                                                                        G
                                                        K
                   SA




                                                                                           EA
                                                  N




                                                                                                                               D
                                                               AN
                              AL




                                                                                IN




                                                                                                                      KE
                                          C




                                                        U




                                                                                                                                         AN
                                                PA




                                                                                                               IC




                                                                                                                                N
                                                                        N




                                                                                                  D




                                                                                                                                                  ES
           -0.50
                   U




                                                                                       R
                                      AN




                                                                                                                              LA
                                                                      KO




                                                                                                 IN
                                                                            H




                                                                                                            EX
                            IT




                                                                                                                     R
                                                              M




                                                                                     KO
                                              JA




                                                                                                                                        L


                                                                                                                                                N
                                                                            C




                                                                                                                                     AI
                                                                                                                            PO
                                                                                                                    TU
                                     FR




                                                             ER



                                                                     G




                                                                                                                                                O
                                                                                                           M




                                                                                                                                    TH
                                                                   N




                                                                                                                                              D
                                                            G


                                                                   O




                                                                                                                                            IN
                                                                  H




           -1.00

           -1.50

           -2.00

 Figure 8 Change in core competency and competencies in design, original brand marketing, and product
                                            innovation

                                                        QualityM        ITsourcing              MNOM                HETC
               2.00


               1.50


               1.00


               0.50


               0.00
                                                    N
                       SA




                                                                 Y




                                                                                       EA




                                                                                                                                 Y




                                                                                                                                IA
                                                                                                                                 D
                                                                        G




                                                                                                           O
                                 Y


                                          E




                                                         K




                                                                               A




                                                                                                 IA




                                                                                                                                 D
                                                               AN




                                                                                                                  KE
                               AL


                                         C




                                                        U




                                                                             IN
                                                 PA




                                                                                                                               N


                                                                                                                               N
                                                                                                         IC
                                                                        N




                                                                                                                             ES
                                                                                                  D
                      U




                                                                                       R
                                       AN




                                                                                                                            LA


                                                                                                                            LA
                                                                      KO


                                                                            H




                                                                                                IN


                                                                                                       EX
                             IT




                                                                                                                 R
                                              JA




                                                              M




                                                                                     KO




              -0.50
                                                                                                                          N
                                                                            C




                                                                                                                        PO


                                                                                                                         AI
                                                                                                               TU
                                     FR




                                                             ER


                                                                     G




                                                                                                                         O
                                                                                                      M




                                                                                                                      TH
                                                                    N




                                                                                                                       D
                                                            G


                                                                   O




                                                                                                                     IN
                                                                  H




              -1.00


              -1.50


              -2.00

  Figure 9 Change in competencies in quality management, IT-sourcing, multi-national operation, high
                                      education for TC industry




Article Designation: Scholarly Works                                            8                                                                        JTATM
                                                                                                                                    Volume 2, Issue 1, Fall 2001
In the areas of design and original brand            design and branding. The manufacturers in
marketing, Hong Kong shall be ranked at the          these countries have developed strong in-
7th position, but be very weak in product            house R&D capabilities and are also
and technology innovation. On the basis of           extensively in vested in and collaborate with
low investment from both government and              external research and academic institutions.
industry, Hong Kong will fall behind China,          Many of them have restructured operations
South Korea and India in product and                 with less fixed assets but use knowledge
technology innovation.                               based skills to develop and market their
                                                     goods. Western European countries such as
As shown in Figure 9, Hong Kong is
                                                     Italy, France and Germany maintain a
expected to maintain its strengths in quality
                                                     leading position in fashion design and
management (QualityM), International
                                                     original brand marketing. Many domestic
sourcing     (ITsourcing),      multi-national
                                                     manufacturers in these countries create high
operations (MNOM) and high education for
                                                     value-added products by leveraging their
the Textile and Clothing industry (HETC).
                                                     design capabilities and creating/acquiring
Comparing with the developed countries
                                                     brands, and establishing control over
such as the US, Japan and Italy, Hong Kong
                                                     distribution channels to develop competitive
shall have similar level of strengths in these
                                                     advantages in both domestic and
areas, and be even stronger than the major
                                                     international markets.
competitors in international sourcing and
multi-national operations.
                                                     The investments and participation of the
However, Hong Kong’s strength as a                   Hong Kong government and industry on
sourcing and trading center has been                 product innovation are extremely low,
challenged by neighboring developing                 particularly relative to its role in world
countries such as Mainland China. In fact,           textile and clothing trade and the important
China and Germany have replaced Hong                 contribution (42%) of the Textile and
Kong as the world leader in textile and              Clothing industry in domestic exports. If
clothing trade, respectively 1998. With the          such      a    situation    continues,   the
development and widespread use of the                competitiveness of the Hong Kong Textile
Internet e-commerce infrastructure, the              and Clothing industry will be significantly
supply chain has been shortened, buyers and          affected in the new economy.
suppliers are able to easily access the latest
information and communicate with each                CONCLUSION
other directly. The role of geographic
sourcing centers may be replaced by virtual          Through a comparative study and simulation
sourcing centers. With China’s entry to the          model, we find that the sustainable
WTO, Chinese enterprises can be expected             competitiveness of the Hong Kong Textile
to increase direct trading activities with           and Clothing industry will decrease without
overseas buyers. Meanwhile, companies in             intensive investment to develop the key
the Hong Kong Textile and Clothing                   knowledge-based core competencies. Hong
industry     have     widely     experienced         Kong has excellent competitive positions in
competitive threats from neighboring                 the external business environment, internal
countries and the increase of bargaining             business       environment,       resources,
power from buyers.                                   competencies and core competencies, as an
The Textile and Clothing industries in the           international sourcing and trading center,
US, Japan and Western Europe have fully              and multi-national operations. However, the
realized the challenges of the new economy           Hong Kong Textile and Clothing industry is
and very much focused on developing                  facing intensive competition from (1)
sustainable competitiveness for the future in        domestic manufacturers within the US,
three major areas: production innovation,            Western      Europe    and     Japan,    (2)
                                                     manufacturers in extended regional trade

Article Designation: Scholarly Works             9                                             JTATM
                                                                         Volume 2 , Issue 1, Fall 2001
blocs; (3) manufacturers in developed Asia                  Business Review, 1990.May-June p.79-
Pacific countries, such as China and South                  91.
Korea; and (4) manufacturers from
developing economies, such as India. Hong                4. Mansour Javidan, Core Competence:
Kong has lost its competitiveness against                   What Does it Mean in Practice? Long
developing countries in land, operating and                 Range Planning, 1998.31(1), p.60-71.
labor costs, government support and pricing.
Hong Kong does not have the advantages of                5. Michael Porter., On Competition.1998
countries in the extended regional trade                    USA Harvard Business School Press.
blocs in terms of geographic location,
cultural proximity, tariff and quota                     6. Michael Porter , Clusters and The New
concession, as well as operating costs.                     Economics of Competition. Harvard
Increasingly, Hong Kong Textile and                         Business Review, 1998.November -
Clothing industry is facing the threats of                  December p.77-90.
increased bargaining power of overseas
buyers. There are excellent opportunities for            7. Michael Storper, , Regional 'Worlds' of
the Hong Kong Textile and Clothing                          Production: Learning and Innovation in
industry in the neighboring countries, where                the Technology Districts of France, Italy
there are the world’s largest growing                       and the USA. regional Studies, 1992.27.5
markets, in which Hong Kong has                             p.433-455.
geographic and cultural proximity. To
capture the business opportunities and                   8. International Institute for Management
develop sustainable competitiveness in the                  Development, The world competitiveness
new economy, it is essential for the Hong                   yearbook, 2000, Lausanne, Switzerland:
Kong Textile and Clothing industry to invest                International Institute for Management
and     develop     knowledge-based     core                Development
competencies in the areas of product
innovation, design and original brand                    9. Intelligence, A.M., Asia Pacific Market
marketing, which can be largely enhanced                    Handbook 1998.1998?Hong Kong SMI
by the advancement of an Internet e-                        Business Consulting, Asia Market
business infrastructure.                                    Intelligence Ltd.72.

ACKNOWLEDGEMENT                                          10. Anon, Consumer Asia 1999.6ed.1999
                                                             London Euromonitor.43.
We would like to thank The Hong Kong
Polytechnic University for funding this                  11. Anon, Consumer Europe.1997 London:
research through the Area of Strategic                       Euromonitor Publications.346.
Development:       Apparel      Product
Development and Marketing.                               12. Anon, Almanac of China's textile
                                                             industry.1999 Beijing : Fang zhi gong
REFERENCES                                                   ye chu ban she.393-412.

1. WTO, International trade            Statistics        13. Arona Butcher, J.S., Kyle Johnson, etc,
   2000. WTO.p.148-154.                                      Assessment of the Economic Effects on
                                                             the United States of China's Accession
2. Anon, Trends in world textile and                         to the WTO.1999?U.S. International
   clothing    trade.     Textile    Outlook                 Trade     Commission       Washington
   International, 2000. (85) p.128-164.                      DC.p.8-1 to 8-26.

3. C.K. Prahalad, Gary Hamel, The Core                   14. Shi Yu Zhi, WTO and China's Textile
   Competence of the Corporation. Harvard                    Industry in Research Report on China's

Article Designation: Scholarly Works                10                                            JTATM
                                                                             Volume 2, Issue 1, Fall 2001
     Entry into WTO- the Analysis of the
     China's Industries, Ed by Yu Yongding
     and Song Hong, 2000, Beijing, p150-
     213.

15. Gu Qing Liang, Digitized Economy and
    Quick Response in Manufacturing and
    Retailing – Learning and Practice of
    China Clothing Industry, Fashion
    Forum “Digitized Clothing Industry” in
    2001 Shanghai International Fashion
    Culture Festival, Shanghai, April 25-
    26, 2001, pp6-9

16. Yi Li & Lei Yao, Analysis of
    Sustainable Competitiveness of China
    Textile    and      Clothing Industry
    (submitted to JTI, 2001)

AUTHORS’ INFORMATION

Yi Li
Institute of Textiles and Clothing
Hong Kong Polytechnic University
Hung Hom, Kowloon, Hong Kong
tcliyi@polyu.edu.hk

Lei Yao
Institute of Textiles and Clothing
Hong Kong Polytechnic University
Hung Hom, Kowloon, Hong Kong




Article Designation: Scholarly Works         11                        JTATM
                                                  Volume 2, Issue 1, Fall 2001

						
Related docs