Fashion
Merchandising
2.04 Understand the Global Nature of Fashion
• Global Trade in the Fashion Industry
• Key terms:,,, export sales agent, franchising, full package
production, import commission house, import merchants,,
international retailing, joint venture, licensing agreements,,
multinational corporations (MNCs), parity,, resident sales
agent, value added
• Global trade trends and policies
• Impact of apparel production for developing nations
• Major trade regions of the world
• International sourcing for U.S. fashion importing
• Market opportunities for U. S. fashion exporting
Global Trade Trends &
Policies
• Globalization is the growth of international
commerce and communications that makes
national boundaries less important, especially
in economic matters
• In recent years, due to trade trends and
government policies, international trade has
grown faster for fashion goods than for any
developing nations
Global Trade Trends &
Policies
• Trade involves imports, exports, and
exchanges of money
• Imports are goods that come into a country
from foreign sources, or what a country buys
from other countries
• Import penetration is the percentage of
imports in a country’s total market
consumption.
• It measures foreign against domestic goods
Global Trade Trends &
Policies
• Imports account for more than 60% of the total
US textile and apparel market
• A country’s balance of trade is the relationship
between the values of its imports and exports,
described as being a deficit or a surplus
• Trade deficit occurs when imports exceed
exports. The US has a large trade deficit
• Trade surplus exists when exports exceed
imports. Japan sends more out than it brings in
Free Trade Vs
Protectionism
• Free trade is a government’s policy of allowing
goods to flow freely in and out of its economy,
without interference.
• Protectionism is the opposite of free trade. It
includes many government imposed trade
restraints
Free Trade VS
Protectionism
• Market disruption: a situation, usually caused
by too many imports, that threatens a
particular industry with products that are in
direct competition with that industry
• Lower sales of domestically-produced goods in
the US and sever price competition has
weakened some industries.
Free Trade Vs
Protectionism
• Transshipping is the rerouting of goods to evade
quota limits
• Dumping is the selling of goods at lower prices in
foreign markets than in the home market.
• The World Trade Organization (WTO) is an
international trade accord that reduces tariffs,
quotas, and other trade barriers around the world
• Agreement of over 150 countries that negotiaties
and enforces global trade rules
• Serves as an international trade court for the
settlement of differences
Impact for Apparel Production
for Developing Nations
• As counties begin to develop, companies form
to make and sell specific products
• Eventually, they enter into the marketplace
which turns into economic growth
• Textile and apparel industries are usually the
first internationally competitive industries to
be formed in emerging economies
Impact for Apparel Production
for Developing Nations
• Structural adjustment refers to the process of
industries and economies adapting to longterm shifts and economies adapting to longterm shifts in competitiveness.
• A comparative advantage is the ability of one
nation to produce a certain goods or services
better than other nations because of specific
circumstances
Trade with Developing
Nations
• Before trading with developing nations,
companies should learn about the other countries’
• Political stability: can influence the degree to which
a country’s laws and regulations are subject to
change and are enforced
• Economic climate affects businesses’ abilities to
earn profits in a reasonable amount of time
• Infrastructure involves the existence and condition
of roads, transportation systems, electricity,
telephones, technology, etc
• A nation’s culture is is set of social norms or values
The World’s Major Trade
Regions
• Asia-Pacific Plus India
• Europe Plus North Africa
• The EU is a family of over 25 European countries
united for economic stability and with common
policies of free trade among the members
The World’s Major Trade
Regions
• The Americas
• The North American Free Trade Agreement
(NAFTA) set up an open trading zone among the
US, Canada, and Mexico
• Value Added is the increase in worth of products as a
result of a particular work activity
• If the cut fabric parts of a jacket are worth $8 each
when they are shipped offshore, and each jacket is
worth $10 when it comes back, the value added while it
was out of the US is $2 per jacket
• Latin American Parity
• Parity is equal monetary value or treatment by the law
• Latin American countries are moving toward full
package production, focusing on supplying design and
sample work, fabrics/findings/trims, all parts of
construction
International sourcing for U.S.
fashion importing
• Purchase through domestic wholesale
importers
• Import merchants buy and import particular
classifications of goods
• A resident sales agent represents and is paid by
a group of foreign manufacturers
• An import commission house also serves as a
brokerage between domestic buyers and
foreign sources
International sourcing for U.S.
fashion importing
• Buying Directly from Foreign Sources
• Export sales representatives represent selected
manufacturers, but do not maintain a wholesale inventory
• Using Foreign Contractors
• Licensing Agreements
• Franchising
• Joint Ventures are agreements that bring necessary skills or
products of two companies together for added strength
• Company-Owned Foreign Facilities
Market Opportunities
1. International retailing, also called cross-border
retailing, involves retail company operations that
serve customers in multiple countries.
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Mail order retailers
Internet retailers
US retailers opening malls in foreign countries
Multinational corporations (MNCs) operate
globally and have direct investments in several
different countries
Market Opportunities
2. Satisfying Market Differences
• Countries that sell goods in another country
must understand the cultural attitudes and
practices of the people in that country
• Differences in languages, beliefs, religion, race,
income distribution patterns, and customs