Measurement of International Competitiveness of Clothing Industry under the Background of Value Chain Reconstruction

LIUChang(劉暢)1,2,LIUHaifeng

1 School of Management, Fudan University, Shanghai 200433, China 2 School of Business and Management, Shanghai International Studies University, Shanghai 200083, China 3 Department of Public Administration, College of Humanities, Donghua University, Shanghai 200051, China

Abstract: Relying on cheap labor cost advantage, China is locked in the low-end processing link of the global value chain and obtains a lower profit share. With the deepening of the international division of labor, changes in the distribution of national interests and the spread of anti-globalization in some developed countries, the global value chain is undergoing a new round of large-scale reconstruction and emerging economies are trying to penetrate and extend to the high end of the global value chain. Based on the theory of industrial upgrading and global value chain, this paper focuses on the current development of Chinese apparel industry, the mechanism, development and problems of global value chain reconstruction, analyzes the relevant elements in the apparel industry value chain reconstruction, and proposes the application of data envelopment analysis (DEA) competitiveness model in the value chain reconstruction of apparel enterprises. We use the CCR (C2R) model to simulate the improvement of production efficiency. Finally, we put forward corresponding countermeasures and suggestions for the value chain reconstruction from the perspective of improving product competitiveness.

Key words: value chain reconstruction; clothing industry; international competitiveness; measurement

Introduction

Porter[1]first proposed the concept of global value chain in 1985, providing a new perspective for analyzing the industrial development and corporate competitiveness of an economy. Kogut[2]proposed the value-added chain, which is the integration of technology, labor, and raw materials to form the inputs required for production. This process ultimately formed the value chain. Then the production links were assembled into a whole, and the final product completed the value cycle through market transactions and consumption. Subsequently, the 3C model in Ref. [3] for measuring structural dynamic changes, the concept of “inter-industry value chain and intra-industry value chain” in Ref. [4], and the horizontal governance of the industrial cluster chain were proposed as the endogenous complementary viewpoint, which were constantly enriching the breadth and depth of research. Xuan[5]believed that the so-called global value chain referred to the global division of labor from all aspects of design, production, sales and after-sales of goods or services, forming a huge network covering the world. Developing countries are located in the fiercely competitive link with low entry barriers. As a major country’s upgrade strategy, the process of upgrading processes, products, functions, and chains in turn in Ref.[6] is questionable. Most of the backward economies that follow this path did not climb as expected. Moreover, practice has proved that innovation can enable enterprises to achieve leapfrog development. Tanetal.[7]used the data of various sectors of the world’s major economies as empirical objects under the background of global value chain reshaping, and proposed that technological innovation was an important opportunity for less advanced countries to enhance the global value chain. Zhang[8]believed that value chain reconstruction was a process of our country’s companies reconfiguring the original value chain and an adaptive process to external interference. It is an inevitable choice for China. The reconstruction and transition of the value chain has become the only way for China to get rid of the low-end lock of global value chain (GVC) and climb to the high-end. Zhou[9]proposed that restructuring the value chain was neither a complete process from 0 to 1, nor necessarily a process of completely replacing the old value chain with a new value chain. Instead, it followed the following four paths. Control the high-end of the value chain through R & D core technology; make up for shortcomings and promote the optimization of value chain elements; start with key links and find new elements of the value chain; train hard to strengthen the hardness of the existing value chain. Bao[10]believed that the core technology and key component production competition among major countries promoted the restructuring of the global value chain, and the status and influence of core technology and key component product production in the global value chain system continued to rise. In addition, he believed that the integrity of value chain system, networking and scale of the chain had become the key to gaining cross-border competitive advantages.

Affected by the international politics and market competition environment, the global value chain is undergoing a new round of large-scale reconstruction and emerging economies are trying to penetrate and extend to the high end of the global value chain, which are mainly manifested in the continuous deepening of the international division of labor, changes in the distribution of national interests, and the spread of anti-globalization in some developed countries. This paper analyzes the development of Chinese clothing industry from the perspective of global value chain reconstruction, and uses data envelopment analysis (DEA) competitiveness model to analyze the relevant elements of the value chain reconstruction of our country’s clothing industry. The CCR(C2R) model simulates the improvement of production efficiency. This paper puts forward countermeasures and suggestions for value chain reconstruction from the perspective of improving product competitiveness.

1 Value and Significance of Value Chain Reconstruction

In the current global value chain, developed countries rely on their first-mover advantages in technological innovation, human capital and other fields to firmly control the high value-added links at both ends of the “smile curve”, while developing countries and emerging transition economies use the comparative advantage of low-cost factors such as labor, focuses on the production of labor-intensive links such as production, processing, and assembly. With the loss of low-cost advantages and the increasing “capture” and “squeeze” from developed countries, developing countries and emerging transition economies rely on the traditional profit model of high input, high consumption, and high emissions, and they are eager to get through the transformation and upgrading of the global value chain to realize the “counterattack” of the chain position.

The new round of information technology revolution and industrial revolution brought about the transformation of production methods are also promoting the development of global value chains in the direction of fragmentation and decentralization, accelerating the core characteristics of “global production reorganization” and “global industrial transfer” restructuring of global value chains. Therefore, developing countries and emerging economies in transition at the “l(fā)ow end of the value chain” are based on innovation-driven, based on global resource allocation, get through resource accumulation and capacity evolution, breaking the international division of labor dominated by developed countries, and striving to enter the middle of the value chain high-end, to promote structural changes in the global competitive landscape. In the context of global value chain reconstruction, how the industry achieves development and transformation has become the focus of general attention.

2 Our Country’s Garment Industry Development Status and Problems

In the context of the reconstruction of the global value chain, the apparel industry has truly achieved “borderlessness” and global synchronization. The clothing industry not only leads the fashion trend, but also contains soft power such as technology, creative design, and culture that are also areas where countries around the world are competing for strength. Clothing consumption has shifted from a mere sheltering consumer demand for food and clothing to a consumption trend of fashion, culture, brand, and image. The clothing industry is facing pressure from transformation and upgrading, and the growth rate of the industry continues to decline. A relatively obvious M-type consumption structure has appeared in the domestic consumer market. The high-end and low-end consumer markets have grown steadily, while the intermediate market has gradually shrunk. The consumption concept of Chinese consumers has changed: consumption is becoming more rational; consumers are becoming younger, more individualized, and internationalized, paying more attention to product quality and meeting individual needs, and yearning for more high-quality and creative products, more reasonable prices and better shopping experience and services, especially young people pay more attention to personalization and fashion, they hope to establish resonance and emotional links with brands, and express their lifestyle through products. Personalized, subdivided, and differentiated lifestyles make it impossible to unify brand appeals. Many clothing brands will launch younger and stylized sub-line brands, and more and more small and beautiful niche brands will be favored, younger and higher-end will gradually become the mainstream trend of transformation and upgrading of the apparel industry.

According to data from the National Bureau of Statistics of China, from January to December 2019[11], enterprises above designated size in the apparel industry achieved a cumulative operating income of 1 601.033 billion yuan, a year-on-year decrease of 3.45%; total profits of 87.283 billion yuan, a year-on-year decrease of 9.75%; operating income margin was 5.45%, a decrease of 0.38% over the same period in 2018; gross profit margin 15.04%, an increase of 0.21% over the same period in the year of 2018; the three-cost ratio was 8.91%, an increase of 0.20% over the same period in the year of 2018.

However, the manufacturing is a crucial link in the product formation process. Although our country’s apparel industry has gained less trade benefits in this link, there is no denying that it is precisely because of the strong manufacturing capacity of our country’s apparel industry that the industry has quickly integrated into the world economy and made great contributions to our country’s economic development and promotion of social employment.

3 Key Factors to Improve Production Efficiency in the Context of Value Chain Reconstruction

Whether it is an expansion, contraction or adjustment of the global value chain reconstruction, the essence is the evolution and change of the international division of labor. Furthermore, the improvement of the production efficiency of regional enterprises, and the key factors that drive the improvement of production efficiency are viewed from a broad perspective. Supply, demand, and systems can be broken down into categories: talents, policies, R & D, design, production, manufacturing, sales, geographic location and organizational structure.

At the macro-national level, Tang and Li[12]believed that the lack of corresponding measures in terms of talents and policies restricted China’s growth in the value chain. Therefore, the country should formulate corresponding policies and regulations, create a good institutional environment, and build a convenient and fast trading platform, so as to reduce transaction costs, get rid of low-end lock-in, and move toward a high-end position in the value chain.

As far as the transformation of the meso-scale industry is concerned, the manufacturing industry is transforming and upgrading to the service industry, and is repositioned in the value chain (brand manufacturer to original equipment manufacturer), thus forming the value chain reconstruction. Rosca and Bendul[13]believed that all links in the value chain, such as R & D, design, production, manufacturing, sales, and after-sales, could be made into service products for “sale”, and companies must improve the quality of their products while providing services. Thereby promoting the transformation and upgrading of enterprises is from a single manufacturing industry to an emerging service manufacturing industry.

As far as micro-enterprises are concerned, Azmeh and Nadvi[14]studied the behavior of multinational companies represented by emerging economies in Southeast Asia as examples. They believed that multinational companies played a strategic role in shaping the geographic location and organizational structure of global value chains and maintaining global location flexibility. Enterprises must re-adjust the value chain in accordance with their own characteristics, and construct an enterprise value chain suitable for their own development.

From the above analysis, it can be seen that developing countries and emerging transition economies at the “l(fā)ow end of the value chain” are based on innovation-driven and global resource allocation, and get through resource accumulation and capacity evolution, who continue to improve production efficiency and break the dominance of developed countries. These economies’ efforts are making a trend of the international division of labor, striving to be among the mid-to-high end of the value chain, and promoting the process of structural changes in the global competitive landscape.

Under the background of global value chain reconstruction, how to realize the development and transformation of the industry has become the focus of general attention. In the actual production and operation process of enterprises, there are generally multiple inputs and multiple outputs. Static calculation DEA is a linear programming model expressed as the ratio of output to input. By comparing the efficiency of a specific unit with the performance of a group of similar units providing the same service, the efficiency of the service unit is maximized.

4 Clothing Enterprise Production Efficiency Competitiveness Model: Based on DEA

According to the theory of heterogeneous enterprise division of labor and the theory of enterprise production boundaries, the difference in enterprise productivity is a key factor in determining the organizational form of the division of labor and the distribution of benefits from the division of labor. Therefore, for apparel companies, their international competitiveness should depend on the important factor of productivity.

The origin of DEA can be attributed to Farrell[15]. Later, Charnesetal.[16]established a general mathematical programming model based on the concept of Farrell efficiency measurement, and named it DEA. Since then, DEA established the theoretical position of measuring efficiency with no parameters.

In DEA, the organization whose performance is measured is generally called the decision making unit (DMU).

Supposing thatndecision-making unitsDMUj, each decision-making unit has the same m input, the input item quantityxj=(x1j,x2j, …,xmj)T>0; each decision-making unit has the same output, the output itemyj=(y1j,y2j, …,ymj)T, wherei=1, 2, …,m;j=1, 2, …,n;r=1, 2, …,s;

xijis theith input of thejth decision-making unit,xij>0;

yrjis therth output of thejth decision-making unit,yrj>0 .

The following C2R model can be built for any decision-making unitDMUj. The C2R model assumes that theDMUis in a fixed return to scale and is used to measure the total efficiency. We can measure whether the DEA is valid for thej0decision unit.

We can build the following model:

v=(v1,v2, …,vm)≥0,

u=(u1,u2, …,ur)≥0,

r=1, 2, …,s.

The aboveθvalue is the comprehensive efficiency value of the decision-making unit, and the meaning of the economic efficiency problem in the reconstruction of the enterprise value chain is as follows.

(3)θ*<1, the decision-making unit is not DEA effective. At this time, the company’s technical efficiency and scale efficiency are relatively poor.

WhenDMUis in the situation of variable returns to scale, to measure pure technology and scale efficiency, the following BCC (BC2) model is constructed,

ur,vi≥ε≥0,r=1, 2, …,s,

i=1, 2, …,m.

u0has no restriction on positive and negative, in order to simplify the calculation formula and increase the meaning of interpretation, it is converted into dual mode as follows.

r=1, 2，…,s.

θhas no restriction on positive and negative.

(1) Whenu0=0, it is a fixed return to scale.

(2) Whenu0<0, the return to scale is increasing.

(3) Whenu0>0, the return to scale is decreasing.

Through the above analysis, it can be seen that DEA is a linear programming model expressed as the ratio of output to input. By comparing the efficiency of a specific unit with the performance of a group of similar units providing the same service, it attempts to maximize the efficiency of the service unit. In this process, some units that achieve 100% efficiency are called relatively efficient units, and other units that have an efficiency score of less than 100% are called inefficient units.

In this way, when business managers perform value reconstruction, they can use DEA to compare a set of service units, identify relatively inefficient units, measure the severity of inefficiency, and find the methods of reducing inefficiency by comparing inefficiency and efficient units to optimize the value chain and maximize output value.

5 Empirical Analysis of DEA Competitiveness Model

We use the data of clothing industry from the year of 2000 to 2019 in Changshu. In order to briefly verify the above model, we will analyze the four enterprise production factors (or relevant factors can also be added according to actual needs), namely, enterprise production and operation data, enterprise R & D investmentX1, number of researchersX2, operating incomeY1, and cumulative output valueY2. TakingX1andX2as the enterprise input elements andY1andY2as the enterprise output elements, the simulation analysis is carried out through the Deap 2.1 software, and the data in the following Table 1 are obtained.

Table 1 A company’s input and output data in a certain year

Input-oriented DEA, proportional assumption variable returns to scale (VRS), using multi-stage calculation method, the results are shown in Table 2.

Table 2 Efficiency analysis and calculation results of a company’s DEA model

In Table 2, firm represents the sample of 15 in the example, crste represents technical efficiency, also called comprehensive efficiency, vrste represents pure technical efficiency, and scale represents scale efficiency (drs: diminishing returns to scale; -: constant returns to scale; irs: increasing returns to scale), crste=vrste × scale.

The following example illustrates the analysis process of the sample. Taking the sample firm2 as an example, the analysis data are shown in Table 3.

Table 3 Efficiency analysis and calculation results of the sample firm2

The input-output situation of sample firm2: There is an output shortage, that is, the second output should increase by 2 1050.739 than the current one. The first input element has input redundancy of 126.174; the second input element has input redundancy 9.0=3.7+5.3, which means that according to the current output redundancy of the second sample, the first input element can be reduced by 126.174. The second input factor can be reduced by 9.0.

Through the above analysis, we can get the following preliminary conclusions.

(1) If the input factor can be determined by the decision-making unit but the output factor cannot be determined, we can analyze whether the input can be reduced, regardless of whether the output can be increased (because output is an uncontrollable factor of the decision-making unit).

(2) If the output factor can be determined by the decision-making unit, but the input factor cannot be determined, we can analyze whether the output can be increased, regardless of whether the input can be reduced (because the input is an uncontrollable factor of the decision-making unit).

(3) If the pure technical efficiency of the sample unit is 1, but the scale efficiency is less than 1, it means that the technical efficiency of the sample unit itself has no input need to be reduced and no output needs to be increased; the overall efficiency of the sample unit has not reached effective (that is 1), because its scale does not match the input and output, and it needs to increase or decrease the scale.

6 Conclusions

Through the above analysis of the input-output data of apparel companies, the factors that affect the reconstruction of the corporate value chain can be explored from the following factors of production: demand conditions, related supporting industries, corporate strategy and industrial structure.

We should fully exploit human capital and cultivate compound talents. In the path of ascending the value chain, talents are an indispensable factor for the apparel industry. The lack of compound and international textile talents is the restricting element to the improvement of apparel export competitiveness. Therefore, our country’s apparel companies should pay full attention to the importance of talents and the cultivation of technical talents, encourage talents to cultivate innovative capabilities, and fundamentally solve the problem of insufficient R & D capabilities. We could try to elevate the cultivation of human capital to the level of corporate development strategy and launch various activities to cultivate high-end technical talents. For example, we can regularly hold various professional skill seminars, organize employee training, give excellent employees the opportunity to study abroad, encourage employees to carry out various research and development designs, recruit high-educated, high-tech talents, and seize the opportunity to realize an effective cooperation of the enterprise, the university and the research institutions.

We should expand the degree of opening to the outside world and penetrate into the international market. The expansion of foreign market demand can significantly improve our country’s comparative advantage in the division of labor in the global manufacturing value chain. At the same time, actively participating in international division of labor is an important way to enhance the international competitiveness of our country’s manufacturing industry. Therefore, the country should actively support and guide qualified manufacturing enterprises “going out”, continue to expand new areas and new channels for foreign investment and cooperation, and encourage these enterprises to participate in the international division of labor and competition in a higher level and broader field.

We can optimize the structure of export products and enhance international competitiveness. If our country’s apparel companies want to completely get rid of the current dilemma of lack of export competitiveness, we must improve the quality of the products and build the own brand advantages.

The cluster effect should play an important role. We should pay attention to the improvement of the core capabilities of industrial clusters, improve related support systems, guide capital to flow into industrial clusters, promote regional asset integration in the industry, promote cooperation and competition inside and outside the cluster, and become a major factor in attracting investment. By developing manufacturing industry clusters, enterprises can obtain the sharing of resources such as skilled workers, scientific research personnel, and the latest information, so as to give play to the benefits of external economies of scale and improve the comparative advantages of the overall industry.

The economies of scale should be realized by expanding the scale of the industry. Our country’s traditional manufacturing sector has reached a mature production scale. In the future, more attention should be paid to the increase of the added value of its products. To achieve the promotion from the low end of the value chain to the high end, more technology investment is required.

We should pay attention to the supply of raw materials in the market, and enhance the apparel industry’s potential advantages. The large and medium-sized apparel enterprises especially need to strengthen the importance of the cultivation of high-quality raw materials, which plays an important role in promoting the international competitiveness of the apparel industry.

Technological innovation ability and manufacturing enterprise brand building ability are gradually realized by increasing enterprises’ scientific research investment. Apparel companies should continuously improve their independent research and development capabilities, change imitation learning into joint development, actively participate in high value-added production links, and master the development direction of advanced technology in the industry, so as to provide forward-looking guidance on how to promote their own corporate technological progress. The enterprises should adhere to the model and path of independent brand design, display and operation, aim at the high-end market, and break through the traditional economies of scale.

The enterprises should establish a high-standard technology research center. Companies should insist on positioning their products on high value-added product standards. We can research and develop new environmentally friendly materials and use green ecological clothing products as new export growth points to reduce losses caused by green trade barriers in the international market. For example, we can achieve the above goals by accelerating the production of textile environmentally friendly fibers, environmentally friendly textiles, environmentally friendly dyes, and environmentally friendly additives.