Chapter 1 What is Globalization Make sure to know all terms in bold italic and know everything in red The textile and apparel industry provides more employment than any other business segment In this country we are at a disadvantage because most of our production occurs elsewhere Until mid 20th century goods were produced within the domestic economy Textile and apparel production now involves numerous countries Where do things come from Most people don t care as long as they can get it Some are concerned with things like Product of sweatshops child labor slave labor dangerous working conditions and environmental concerns Levels of Trade know difference between these Domestic trade Exchange of goods services within a nation International trade Exchange of goods services between two countries Global trade Many groups cultures and nations involved in production and distribution of products services A primary driver of the growth of international trade of textiles and apparel into global trade is the sourcing products by firms based in developed countries from firms based in developing countries with lower labor costs The following three types of integration are occurring in the international business environment Financial which tends to be globally integrated Trade and investment which tends to be regionally integrated Labor which tends to be nationally regulated Controlling Trade Trade Agreements Established by Governments to encourage regulate or restrict trade between countries Trade Barriers Regulate or restrict trade Import limits tariffs quotas Measuring Levels of Trade Trade is based on imports and exports Trade balance Difference between exports and imports know this Trade surplus means that the value of exports exceeds the value of imports positive trade balance Trade deficit means that the value of imports exceeds the value of exports negative trade balance A trade surplus is sometimes regarded as desirable There is a net gain in revenue that can be invested in domestic resources It is important to note that a trade surplus does not necessarily mean that more products are available for trade than can be consumed domestically A trade deficit is sometimes regarded as undesirable Know that the United States has a trade deficit Most developed countries have a negative trade balance because we don t produce as much as we buy in the textiles and apparel area Measuring Levels of Development of Countries know this Based on country s economic development Know about the World Trade Organization WTO it is a global organization that categorizes countries in different commodities based on how they are doing rich or poor Least developed greatest level of poverty a nation whose gross domestic product per capita and other economic measures are among the lowest in the world has little involvement in industrial development which often involves production of apparel Newly developing poor a nation whose gross domestic product per capita and other measures of well being fall well below the world average but that is beginning to be engaged in industrial development probably related to apparel production Developing transitioning from developing to developed status less poor a nation whose gross domestic product per capita and other measures of well being fall near or slightly below the world average based on the benefits of industrial growth Developed richest a nation whose gross domestic product per capita and other measures of well being fall well above the world average Level of development is described by unemployment rate population below poverty line literacy male female infant mortality life expectancy and GNP as well as GDP Another way of describing countries is first world second world and third world Economics of Development Gross National Product GNP Average output per domestic worker in a nation within that nation Gross national product per capita gross national product of a country divided by the number of people in the population Gross Domestic Product GDP Market value of outputs of products services within country in a year Gross Domestic Product per capita GDP divided by the number of people in the population Purchasing Power Parity PPP Adjusted GDP in each country from Consumer Price Index CPI determines relative buying power of each currency making it much easier to do comparisons between countries When comparing the wellbeing of individual nations it is essential to select the same measures If the GNP of one nation were compared with the GDP of another the results would be of little use in understanding the overall economic picture Newly developing and developing countries are involved with production Developed countries are involved with consumption design and technology Firm A business corporation proprietorship or partnership Manufacturer contractor supplier retailer Changing patterns of trade Past 20th Century firms small family owned Today s 21st Century firms large transnational multinational Mergers and acquisitions vertical integration Changes in textile firms Merger a consolidation of two companies to form a new company Acquisition the purchase of one company by another with no new company being formed A merger is usually friendly An acquisition is sometimes friendly and sometimes not friendly Firms in Textile Complex know structure of textile complex Level 1 Textile Findings Manufacturers All production of fibers yarns fabrics fabric finishing and production of findings Findings apparel materials added to face fabric Many firms are vertically integrated in yarns weaves and finishes Many fabric mills are horizontally integrated Level 2 3 categories of business structure Apparel Manufacturer Contractors apparel production vendors and Retail Product Developer Apparel manufacturers firms engaged in the entire manufacturing process including merchandising line planning design and product development production and wholesale marketing of apparel Less local production sourcing development by contractors The term apparel manufacturer has been replaced by simply apparel firm or brand manager because of the emphasis on marketing nationally and internationally known brands of merchandise Retail Product Dev Individuals or teams who create designs and develop merchandise plans and specifications for retailers private brands sourced from CMT or full package vendors Both in house and outside product development Apparel contractors production vendors firms that take orders for