SUSTAINABLE COMPETITIVE ADVANTAGE

Sustainable Competitive Advantage and International Production Strategy

Sustainable Competitive Advantage and International Production Strategy

Introduction

The effects of globalization have resulted in an aggressive competition particularly in the manufacturing sector. With the legislative leniencies in trade barriers, global firms have greater access to international markets. The availability of imported products in local markets at cheaper rates than they used to be has led to a greater variety for consumers to choose from. Competitive threats for local manufacturers are no more restricted to localized competitors, but international manufacturers have also become a major player in the market. As a result, local manufacturers striving to sustain their profit margins without compromising on quality and price.

The effect of foreign competition has put immense pressure on local textile and garment industry in UK due to the mass influx of textile goods coming in from South Asian countries including but not limited to Pakistan, Bangladesh, India, China and Thailand. The products from these countries are much cheaper than the local UK products despite being imported. Besides, fabric quality from these countries is much higher than developed countries due to their national specialization in producing cotton and silk (Shaiken, 2011).

Fashion brands in UK and Europe that cater to high-end niche market segments have some benefit as compared to other manufacturers. Their brand equity allows them to charge a higher price. That said the price hike is only possible to a limited percentage, and the inflationary pressures along with increasing wage rates in UK and Europe is putting cost pressures on the companies thus resulting in falling profit margins. Furthermore, high end British fashion brands are facing competition within their target niche from high end American brands, who enjoy greater competitive advantage due to their offshore production strategy (Gereffy & Lee, 2012).The repercussions of global competitive threats have triggered a debate regarding manufacturing the products either locally or offshore. While most American business models have adopted offshore outsourcing strategy in order to become cost effective, British and European producers still prefer to produce near shore or locally (Morganosky, 1988).

Company Overview

Smart Wear is a fashion apparel company based in UK that manufactures and sells high end fashion apparel in UK, Europe and around the world. The company targets high income niche markets and therefore, has high priced products manufactured in low volume. Like most British companies, Smart Wear currently manufactures its products either locally or near shore. It is however, considering a proposal to move some of its production to offshore facility. The paper aims at evaluating risks and incentives involved in the decision and its consequent implications on the overall sustainable competitive advantage that Smart Wear can have.Discussion

The primary aim for manufacturers to move towards offshore production is becoming more competitive by optimizing production and cutting down costs. The strategy is however, a tricky decision for high end apparel manufacturers that enjoy strong brand equity. This is because it is a general perception that goods produced in developing Asian countries are sub par in terms of quality and ...