Coat of Many Countries

As we live in a global economy we can no longer rely on the clothing labels promising a product made in Italy or elsewhere. Products are produced wherever the costs are the lowest whereas the quality stays the same or is even better. It is not surprising that the production of coats is no exception to this international trade phenomenon. A documentary video, which we have seen during the lecture of the international marketing class, shows impressively how international trade functions and how businesses and even nations are affected.

At the MAGIC Show in Las Vegas, where producers present their newest textiles and coat makes to a retailers audience, we have our first insight in the clothing industry. It is obvious which countries play the dominant role in the market. The United States and Italy no longer hold the global leader position anymore. China, India and other low wage countries have taken over the market. Additionally, the rules of production have changed. Nowadays, one single producer hardly ever produces complete coats. In fact, parts of a coat travel more than 60’000 miles and hundreds of hands touch it before it reaches the end customer.

Utex, a major player in the coat market, has successfully followed that trend. It produces coats for the American market, which does not demand the highest but reasonable quality coats for low prices. By following the supply chain of Utex, the international entanglement in the coat market is impressively uncovered.

We start our journey in Paris, where the latest styles and materials are presented. Utex’s managers use the opportunity to get inspired for their future coat models. Production of the coat, however, starts on the other side of the planet, in Australia. The world’s best wool can be found in Australia, the major player of wool production in the global economy. About 6’000 miles away from Australia, the same wool is received by OCN Mills India, the biggest textile producer. Although India used to have a bad reputation in the market caused by poor working conditions and low technology, things have changed in recent years. Fabrics have been modernized and therefore, a more skilled labor base is demanded. The increase in demanded labor quality has raised the wages and helps to develop the country or at least the area around the production site. Compared to living standards in Western Europe or in the U.S. people in India still live under poor conditions and receive unacceptable per hour wages. On the other hand, Indians appreciate the opportunity to work in OCN Mills fabrics since the wages and fringe benefits are higher compared to other workplaces and make possible an acceptable living standard. Producing in India does not obligatory mean low costs in general. Transportation of the goods is an unresolved problem. Due to the slow local bureaucracy and low tech transportation means it is mostly smarter to avoid national product shippings and directly export goods once they are produced.

We further follow the supply chain and arrive at the next station of our coat parts, China. The globalization has already left one’s mark in this market. Not only low-wage jobs are available anymore, the demand for higher skilled workers has already risen in urban areas. The shoulder pads for our suit are produced in the industrial zone of Shenzen, at 6 days a week during 12 hours a day. Finally, all parts of our coat reach Europe over the harbour of Hamburg, Germany, where they are directly shipped to either Rumania or to the former Soviet Union. Not transportation but the mafia poses here the main problem to deal with. The coat is finally assembled by workers earning no more than 2 dollars per hour, which is even less than employees in India receive.

Impressed by this worldwide supply chain and the international entanglement of markets we now want to discuss some of the bases of global trade, its implications and the advantages and disadvantages of such an evolution. The major reason behind international expansion and the import of goods is the search for minimum labour cost at a certain quality level or the highest quality