Analysis of the Firm and Competitive Advantage Essay

Analysis of the Firm and Competitive Advantage - Essay Example It is a series of activities (i.e. a production process) that constitutes a chain creating and building value. The summation of these generated values is called the total value performed by an organization ("Value Chain Analysis"). It is "full range of activities that are required to bring a product from its conception to its end use and beyond" (qtd. in "Basic Concepts"). A value chain is divided into two parts: primary activities and support activities. The former is a collection of essential activities (e.g. inbound logistics, operations, outbound logistics, marketing and sales, service) that builds up the actual production process of a product, while the latter activities (e.g. procurement, technology development, human resources management, and firm infrastructure) bolsters the former, ensuring its effectiveness and productivity ("Value Chain Analysis"). The performers of these activities may be found in a single firm or in various firms in different countries. Global value chains is an internationalization of the production process wherein different countries act as participants in the various stages of production of a particular good. Under this operational system, quality and efficiency of production is optimized since the site of a specific stage of production is in a place where it is done in the most efficient and most economical way ("Global Value Chains"). The modern day textile industry is among those that heavily rely on the global value chain to subsist. With the proliferation of branded and designer clothes, the clothing industry has become a sought-after commodity that requires the specialization of different countries to produce a quality product that satisfies the discriminating preferences of its consumers. Belonging to the buyer-driven type of global value chain, "those wherein large retailers, marketers, and branded manufacturers play pivotal roles in setting up decentralized production networks in various exporting countries." (qtd. in Gereffi and Memedovic 5); the developing countries, which mainly constitutes the exporting countries under this set-up, have a great opportunity in participating in the global business scene. One of the countries that maximize its competency in textile global value chains is China. Endowed with lush flora used as raw materials for producing cloth and populated by hundreds of millions of workforce that receives one of the lowest wage rates in the world, China has definitely an edge in producing textiles and apparels. Statistics have proven that they are indeed the world's top apparel exporter, producing $39.2b worth of apparel in the year 2000, which comprises 14.5% of all her export items. With all these advantages in their favor, Chinese textile firms really have competitive advantage over American companies (Gereffi and Memedovic 29). The Esquel Group, one of China's leading producers of premium cotton shirts, exhibits this competitiveness as against US firms. Though cotton is also grown on American soil, efficiency and economy propels the success of Chinese firms, particularly of Esquel Group. The Esquel Group's Global Value Chain The Esquel Group manufactures clothing for well-known and highly esteemed global brands such as Tommy Hilfiger, Hugo Boss, Brooks Brothers, Abercrombie and Fitch, Nike, Land's End, and Muji. They also supply