TAL APPAREL LIMITED:

STEPPING UP THE VALUE

CHAIN
Situation analysis
Due
October 18th, 2013

TEAM A:

Macro-environment
There are several macro-environmental factors at play within the fashion manufacturing
industry. The PESTEL framework has been used to capture the most pertinent:

Political: Chinas accession to WTO threatened TALs role as the commercial gateway to China,
and the sourcing center for the Asian region. The removal of textile quotas promoted industry
rivalry, excess clothing supply, and empowered customers. Consequently, allocation decision
criteria, previously made on the basis of labor cost and quota availability, needed to be reexamined.
Global competition was further intensified by NAFTA in 1994, which brought about the
rise of Mexico as the low-cost manufacturing base for the US. In the year 2001, apparel exports
in Mexico almost tripled.

Economic: Consistent with the law of demand and supply, excess supply drove down prices
within the industry. Consequently, the realization of projected margins within global apparel
manufacturing was limited.

Social: Megatrends indicated a shift from manufacturing to services within the US and other
developed countries triggering a need for labor and low cost production. Retailers scanned the
globe for countries that could meet these requirements in order to preserve their competitive
advantage. This spawned a shift in the production sector of the apparel manufacturing industry.
In the 1950s, production migrated from North America and Western Europe to Japan. Similarly,
in the 70s, production transitioned from Japan to Hong Kong, Taiwan and South Korea, also
known as, the Asian Big Three. Finally, in the 80s, migration occurred from Asian Big
Three to other developing economies. The rise of mass customization is another significant
current trend impacting apparel industry.

Technology: The textile industry is traditionally a low-tech industry. Developments suggest that
information technology is no longer seen as a cost center, rather an enabler capable of cutting

costs via automation and increased use of Supply Chain Management (SCM). Therefore, apparel
manufacturing companies are leveraging information management systems to differentiate
themselves, and protect their margins amidst fierce competition.
An analysis of the market will further address the implications of the macro-environment for
TAL.
Market
Textile Apparel Limited (TAL), a subsidiary to Textile Alliance Limited, was formed in
1983. An increased scale of international business drove the need for a global presence. In the
year 2001, TAL Global Alliance (TGA) was established. TAL controls a significant market share
evidenced by a production capacity of 50 million garments per year, an annual turnover of $590
million, and 11 global factories.
The company operates in a buyer driven industry led by retailers, marketers and branded
manufacturers (Ho, 2005). TALs customers, primarily retailers, are spread across the globe. In
North America, US sales account for 78% of companys revenue and are derived from varied
sources. Department stores such as JC Penney; specialty clothing stores such as Brooks Brothers,
Liz Claiborne, Polo Ralph Lauren, and Banana republic; and catalogue retailers such as Lands
End and L.L. Bean contribute to this figure. In Asia, major retailers include Giordano in Hong
Kong and Crocodile in Singapore. For future growth prospects, wholesale customers are under
consideration.
The primary customer need is maintaining low costs. This is further complicated by
conflicting demands: quick response time, shorter production cycles, on-time performance and
optimal inventory levels. Technological trends and excess supply arising from deregulation has
further compounded the issue, enabling customers to dictate requirements. For example, Lands
End explicitly stated that they are only interested in vertical producers that can supply their
own raw materials, fabrics and trims (Ho, 2005). In an effort to meet these needs, given the
constraints, TAL seeks to add value by leveraging its Made-to-Measure (MTM) and Vendor
Managed Inventory (VMI) capabilities to provide a full supply package.

Competition

TAL can be characterized as one of the largest garment manufacturers in the world and
has in particular established a significant presence in the US market. The company is currently
affected by increasing competition from other Asian countries, Central America, the Caribbean
and Mexico due to Chinas entrance into the WTO, low labor wages and favorable trade tariffs
resulting from regional trade networks. Some other key players in the industry include Ningbo
MH Industry Co Ltd (China), Li Ning (China) and Denmore Garments (the Caribbean). Tals
focus now is to identify strategic options that will let them enjoy long-term sustainable
competitive advantages over the competitors.
Generally, garment manufacturers have competed on the basis of closeness to market, ontime delivery, price and quality. Due to the increased competition on a global basis,
manufacturers are now looking into expanding their product and service portfolios to create
garments out of recycled material or automate business processes using advanced technology
(CollegeGrad). Other manufacturers are merging or moving up the value-chain into retail
themselves.
TAL can be seen as a pioneer in the typically low-tech manufacturing industry, and has
closed exclusive supply contract deals with large US retail customers. As the company
differentiates itself by providing VMI and MTM, it has allowed them to establish close
relationships with their customer base. The fluctuating demand for apparel leaves US retailers
reluctant to sit on large amounts of inventory. Hence, TALs ability to offer flexibility and pullstrategy logistics through IT systems allows the company to block out competitors for large-scale
retailers while also avoiding pure price-based competition. However, this competitive advantage
might eventually serve merely as a qualifier to stay in business as competitors are likely to adopt
such systems as well. The focus might then shift to enhanced optimization and cost minimization
of such systems to gain competitive edge.

Organizational pulse
TALs mission is to leverage its investments in IT initiatives and infrastructures to
maintain its position as the commercial gateway to China and the sourcing hub for the Asian
region. Aiding in its mission is a wide array of resources available to the company. They have

numerous links to major American apparel companies such as Lands End, Brooks Brothers, JC
Penny, and LL Bean. Along with its ties to major American clothing companies, TAL has
developed numerous IT initiatives that allow it to stand out amongst its competitors. They have
developed a sophisticated Vendor Management Inventory (VMI) platform that allowed it to gain
exclusive supply contracts from retail customers. The company was one of the first apparel
manufacturers to develop a comprehensive Supply Chain Management (SCM) system and
Electronic Data Interchange (EDI) standard. TAL invested heavily in developing a custom
tailored Enterprise Resource Planning (ERP) solution by combining Intentia Internationals
Movex platform with a Tradecard web based financial suite. The company has most recently
developed a highly advanced made-to-measure (MTM) system through significant investments
in hardware, software and human resources.
At its essence, TALs basic IT strategy is exploration. Through the development of new
electronic platforms for the fashion industry, TAL hopes to maintain its position as a world leader
despite significant changes in its competitive and regulatory profile. The companys strategy is
to invest heavily in innovative IT initiatives then reap the rewards through marketing the benefits
these initiatives provide to American vendors. Although many of these IT projects took a
significant financial toll on the company during their development, post-development they
provided the resources needed for the company to not only survive, but stand-out in the modern
ultra-competitive and heavily regulatory worldwide apparel market.

Analysis
Based on Porters five forces, the attractiveness of the apparel industry is low to moderate.

References
Brandlacoste. (2012). SWOT and Porter's Five Forces . Retrieved from Brandlacoste:
http://brandlacoste.wordpress.com/2012/01/30/swot-porters/

Bruer, S. M. (2006). Outcomes of Private Label Programs: Brand Loyalty, Supply Chain & Cost
Management. Retrieved from:
http://repository.lib.ncsu.edu/ir/bitstream/1840.16/4766/1/etd.pdf
CollegeGrad. (n.d.) Apparel Manufacturing Industry. Retrieved from
http://www.collegegrad.com/industries/manuf02.shtml
Hidaduggi, Y. (2013, August 01). Porters Five Force. Retrieved from
http://www.slideshare.net/yuvarajhid/porters-five-forces-24847182
Ho, P. (2005). TAL Apparel Limited: Stepping Up the Value Chain. Hong Kong , China.