Mlardalen University Vsters

SCHOOL OF BUSINESS
MIMA International Marketing 2006-05-31
Master Thesis EX0110
Supervisor: Carl G. thunman
Tutor: Claes Jonsson
Group: 1238

The international manufacturing and sourcing pattern and
practices of Swedish garment industry









Authors:
Muhammad Takbeer Hossain
Wajih Ullah Khattak
Fozia Bibi

ABSTRACT
Program Course
International Marketing Master Thesis

Authors
Wajih Ullah Khattak Mohammad Takbeer Hossain Fozia Bibi
To_wajih@yahoo.com Takbeerh@yahoo.com Fozia_to@yahoo.com
+46704777241 +46704778477 +46735552088

Title: The international manufacturing and sourcing pattern and practices of Swedish
garment industry
Problem: This paper is to investigate Why, Where and How the companies are sourcing
and dealing with their international clients.
Purpose: This research paper is aimed to examine and to see how the international
manufacturing and sourcing strategies are used by the Swedish clothing companies and
recommend the new companies how to adopt them in order to get benefit from it.
Method: After a lot of discussion and meetings with our tutor we decided to make a research
about the international manufacturing and outsourcing and the reasons for outsourcing. In the
beginning a market survey was done by roaming around the market and asking questions at
the retail stores, and then we selected some leading companies about which secondary data
and previous studies were done while we gathered the rest of the information directly from
them which were not covered by the previous studies. When the final selection was done
about the companies, information from secondary resources was gathered and some of the
employees were contacted in order to get the information which was not available in
secondary data. After getting the information from the companies, we tried to analyze the
information according to the model.
Usability: This thesis is useful for people who want to know about how the companies make
the international manufacturing and sourcing strategy and also for the companies which want
to review their international manufacturing and sourcing process.
Conclusions: The study of the Swedish garment sector revealed that the primary motive of
companies going abroad is to achieve cost effectiveness and availability of low priced and
good quality raw material, therefore most of the companies before globalization started
business in Hong Kong, Portugal, Turkey, Italy and the Baltic States but after globalization


most of the production is going towards Far East due to much cheaper labor and high quality
raw material. The supply strategy differs among the companies and their business culture,
therefore almost three ways are found; firstly by those companies which acquire their own
brand are investing in foreign market and have overseas offices, secondly some companies
which are running different brands are dealing with independent suppliers and different
producers, the third way of doing business we found in those companies, which dont have
their own brand and keep different type of brands and are targeting variety seeking customers,
they are dealing mostly with agents abroad and few importers within Sweden and rarely give
big orders to suppliers.


Acknowledgement

Completing this master thesis on time seemed impossible most of the times, we are really
thankful to Allah who blessed us with giving us the courage and motivation to complete the
task on time. Many people have been involved in helping us complete this master thesis and
we would like to thank all of them for their kind help and support. We specially thank our
tutor Claes Jonsson who helped us in all the difficult times. We would also like to thank the
following people who took part in our thesis, and without their contribution and support we
could not have achieved the results; our family, friends, and parents for giving us moral
support. Our teachers Tobias Eltebrandt, Charlotta Edlund and Carl Thunman for teaching us
throughout the program and making us work on the master thesis. The employees of the
companies, who responded, helped us in getting the information and giving us some overview
of the market. The opposition group whose creative criticism gave this thesis a good structure.
Without the help of these people we wouldnt have succeeded in completing the thesis how it
is now.

Vsters, Wednesday, 31 May 2006

Muhammad Takbeer Hossain
Wajih Ullah Khattak
Fozia Bibi



Table of contents

Introduction:_______________________________________________________________ 1
Back ground___________________________________________________________________ 1
Problem ______________________________________________________________________ 2
Purpose_______________________________________________________________________ 2
Usability ______________________________________________________________________ 2
Disposition ____________________________________________________________________ 3
Literature review____________________________________________________________ 4
Outsourcing ___________________________________________________________________ 6
International manufacturing strategy: _____________________________________________ 9
Global Sourcing_______________________________________________________________ 10
Feasibility _________________________________________________________________________ 12
Vendor Selection ____________________________________________________________________ 12
Planning___________________________________________________________________________ 12
Transition__________________________________________________________________________ 12
Operations _________________________________________________________________________ 12
Why______________________________________________________________________________ 13
Where ____________________________________________________________________________ 14
How______________________________________________________________________________ 14
Supply strategies ______________________________________________________________ 15
Make or buy decisions________________________________________________________________ 15
Supply base alternatives ______________________________________________________________ 15
Low-cost sourcing ___________________________________________________________________ 16
Theoretical Framework _____________________________________________________ 17
WHY________________________________________________________________________ 18
Where _______________________________________________________________________ 19
How_________________________________________________________________________ 21
Methodology ______________________________________________________________ 23
Study Design:_________________________________________________________________ 25
Interviews____________________________________________________________________ 25
Interviewee selection _________________________________________________________________ 26
Validity and reliability________________________________________________________________ 26
Survey_______________________________________________________________________ 26
Selection __________________________________________________________________________ 26
Empirical Findings_________________________________________________________ 27
Market condition: Comparison to European market ________________________________ 27
Availability of local resources and capabilities: ____________________________________________ 28
Tariff Barriers and Government facilitations_______________________________________________ 30
Delivery Time and Logistics Cost _______________________________________________________ 30
Market Condition: Swedish clothing Industry______________________________________ 30
Availability of local resources and capabilities _____________________________________________ 32
Delivery Time and Logistics Cost _______________________________________________________ 32
Labor cost _________________________________________________________________________ 34


Exports and imports condition: _________________________________________________________ 35
Local market Vsters ________________________________________________________________ 36
Swedish market: examples of leading companies____________________________________ 37
H & M (Hennes & Mauritz) AB ________________________________________________________ 38
KappAhl AB _______________________________________________________________________ 40
JC AB ____________________________________________________________________________ 41
Analysis__________________________________________________________________ 46
Overall Market _______________________________________________________________ 46
European market ____________________________________________________________________ 46
Swedish market _____________________________________________________________________ 46
Why ________________________________________________________________________ 46
Where _______________________________________________________________________ 47
How_________________________________________________________________________ 47
Conclusion _______________________________________________________________ 49
Recommendations _________________________________________________________ 50
References________________________________________________________________ 52
Interviews____________________________________________________________________ 61
Appendix 1 _______________________________________________________________ 62
Questionnaire for survey _______________________________________________________ 62
Replies to survey ___________________________________________________________ 64
Appendix 2 _______________________________________________________________ 69
Questionnaire for Interview through E mail and face to face__________________________ 69
Company Name: ____________________________________________________________________ 70
Answered by:_______________________________________________________________________ 70
Employee designation: _______________________________________________________________ 70
Date of reply: _______________________________________________________________________ 70
Replies to Executive questionnaire _______________________________________________ 72
Company Name: JC AB (head office Gothenburg)__________________________________________ 72
Answered by: Niklas Odequist _________________________________________________________ 72
Employee designation: Production Director _______________________________________________ 72
Company Name: H&M (head office Stockholm) ___________________________________________ 74
Answered by: Per Lundin _____________________________________________________________ 74
Employee designation: H&M Production Dept_____________________________________________ 74
Company Name: KappAhl AB (head office Gothenburg)_____________________________________ 74
Answered by: Lena Bengtsson _________________________________________________________ 74
Employee designation: manager Supply & Sourcing ________________________________________ 74
Company Name: Rock Zone (Vsters) __________________________________________________ 76
Answered by: Mazhar Shah____________________________________________________________ 76
Employee designation: Manager ________________________________________________________ 76
Company Name: Budo& Fitness (Vsters) _______________________________________________ 78
Answered by: Camilla ________________________________________________________________ 78
Employee designation:: Company s owner ________________________________________________ 78
Company Name: Jeans 22: an (Vsters) _________________________________________________ 80
Answered by: Thomas Hndersson_______________________________________________________ 80
Employee designation: Company s owner_________________________________________________ 80



Table of Figures

Figure 1................................................................................................................................17
Figure 2................................................................................................................................25
Figure 3................................................................................................................................29
Figure 4................................................................................................................................30
Figure 5................................................................................................................................32
Figure 6................................................................................................................................33
Figure 7................................................................................................................................33
Figure 8................................................................................................................................34
Figure 9................................................................................................................................35
Figure 11..............................................................................................................................36

Page 1

Introduction:
The objective of this research paper is to investigate international manufacturing and
outsourcing strategies of Swedish clothing industry. We hope that the results of this study
would help the Swedish companies to embark on international business. We will analyze the
global sourcing strategies of the Swedish clothing retailers with their current suppliers in
order to understand how they became international and the factors that lead to this change.
Global sourcing involves setting up production operations in different countries to serve
various markets, for buying and assembling components, parts or finished products worldwide
(Kotabe and Murray 1990; Kotabe and Omura 1989; Moxon 1975). Outsourcing is defined as
the procurement of products or services from sources that are external to the organization
(William M. Lankford 1999, Faramarz Parsa1999). Corporate outsourcing has been
interesting for both academic and practitioners. Many companies realized that the peripheral
functions such as cleaning, transport and facilities management is not one of their core
competences and this can be easily and economically contracted out to different companies.
In recent years it has been done to extreme e.g. outsourcing the HR department and
manufacturing departments as well. Companies have realized their added value is in fewer
firms such as designing and marketing whereas the other functions are inefficient, cost-raising
complexity, which is reducing market competitiveness (Andy Winterton).
Where the companies of today have a lot of opportunities to outsource still they need to have
some guideline about the decisions. As a part of the companys strategic development, the
decision of international manufacturing and outsourcing needs to consider different factors,
including conditions to the final product market, facility, cost, expertise and supply market
condition.
Back ground
Studying the international manufacturing and sourcing side of the clothing industry is of
prime interest and importance for several reasons. This industry has always been immaculate
at making the best out of the opportunities offered by global trade, even while dealing with
the more serious and challenging issues concerning this business. As fashion continues to
change seasonally, it further shortens the already short product life cycle. Companies have to
think twice before outsourcing their production facilities or creating relationships with
suppliers (Datamonitor, Menswear in Sweden Industry Profile).

Page 2

As mentioned earlier, the importance and the opportunities that companies find in outsourcing
and exploiting the offers made by global trade, its becoming necessary for companies to think
twice about their supply strategies. Global sourcing and Organizational Relationship are
intertwined unfasten-ably, and affects each to an appreciable degree when some decision is
made in a sector.
This paper will focus on some of the market leaders how they are sourcing, and which
strategies are they using in global sourcing, and does it affect their supplier relationship in any
way. In order to arrive at appropriate conclusions, we ought to ask a few pertinent questions.
First of all we need to know how the Swedish companies are evaluating their suppliers.
Secondly we want to know how the companies are dealing with the supplier, regarding the
issues of labor employed at the production facilities. This is very vital and hard to neglect
before making a sourcing decision. This paper will also provide the information about the
significance of international purchasing.
Problem
This paper is to investigate Why, Where and How the companies are having international
manufacturing and sourcing strategies in Swedish garment sector.
Purpose
This research paper is aimed to examine and to see how the international manufacturing and
sourcing strategies are used by the Swedish clothing companies and recommend the new
companies how to adopt them in order to get benefit from it.
The main purpose and the side purposes set an agenda for the thesis, which can be
summarized as follow:
To find the country and company specific factors that influenced the
internationalization of the firm in order to understand the WHY.
To find different types of applied sourcing strategies
Which countries were their first choices and did globalization affect the choice
To find out the problems related with international manufacturing and sourcing
To recommend the new companies how to apply the global sourcing strategy.
Usability
This paper will be help to the companies which are not international at the moment and desire
expanding their business through international manufacturing and sourcing. It will help them

Page 3

understand how other companies started international sourcing and manufacturing, what
criteria they took into consideration while choosing to make/buy from abroad and how it
affected their business. This paper can also be used by the producers of Far East countries to
understand what the company look for in producers.
Disposition
This master thesis is the study of International manufacturing and sourcing pattern and
practices of Swedish Garment industry. The research paper is structured in the following
way. The paper starts with the Introduction chapter which deals with the background of the
study, problem statement, purpose and the usability of this research. After the introduction
part in the Literature Review the concepts and the earlier studies about the related problem
are stated in order to have a clear idea about what kind of tools can be used to analyze such
problem. After stating the literature, about the specific problem, in the Theoretical
framework we go much deeper into that selected areas and select the most appropriate theory
with a model already have been used by other scholars in order to understand the international
manufacturing and sourcing strategies in the garment industry with some addition from
sourcing theories. When all the concepts have been explained we include another chapter
Methodology where the way of how the research paper was carried out and which means
were used to collect the information required. Following the theoretical framework and the
model, we include facts and figures with the heading of Empirical findings; examples of the
garment industry as a whole in EU, the overall market structure of Sweden and leading
companies information is given which is further analyzed by the preceding chapter called
Analysis according to the specified model. In the end, separate chapter are made which are
done through the addition and analysis of all related chapter to draw some Conclusion. In
the end of the report, some samples of questionnaires and answers that contributed to this
research paper are given in the Appendix.


Page 4

Literature review
There are three areas that are directly related to our purpose. The three areas can namely be;
the garment retailers of Sweden, their international manufacturing and sourcing strategies.
The first area will provide us with the specific information about the clothing industry
whereas the other two will help us in analyzing and exploring the theoretical ideas and explain
the models with relevant data. Other three areas which will support the thesis and its purpose
academically are; Outsourcing, Global Outsourcing and International Manufacturing.
The companies that are vertically integrated and doing their business in different departments
might be seen as a result of particular industrial context. In the past, given the absence of
developed external markets, organizations (out of necessity) sourced a wide range of upstream
and downstream activities in-house (chandler, 1962). Later, in the wake of globalization,
companies began to outsource their production facilities. This became a big challenge for the
vertically integrated companies. This gave rise to the notion that any part of the value chain
could be outsourced.
Global outsourcing is the tactical use of external resources to perform activities that are
usually handled by in-house employees and capital. It is a executive strategy by which a
company delegates main, non-core functions to expert and professional service providers, or
as Corbett, a top consultant on global outsourcing says, outsourcing is nothing less than the
wholesale restructuring of the corporation around core competencies and outside
relationships (Corbett, 1999).
As outsourcing is a rapidly growing part of the todays business, surveys concluded different
results of its effects on business. A report was generated by the Shreeveport Management
Consultancy (1997) which was based on 500 of UKs private and public sector organizations.
In that survey, 88% of the respondents reported to believe that their business was running
smoothly before they outsourced it. The survey also found out that after outsourcing more
than half of the companies were achieving more profit than before. Another survey which was
done by Lonsdale (1999) concluded that most of the managers were dissatisfied with the
results of outsourcing. After reading what these surveys concluded, it is easy to say that
outsourcing benefits the company in financial terms but somehow for the managers it gets
difficult to control the process which results in dissatisfaction.
In principle outsourcing can provide access to best in the world for particular activities or
components (Quinn et al., 1999). With outsourcing a company is unbounded to the limitation
of their own production in meeting the change in demand capacity. The potential for

Page 5

improved flexibility is not only beneficial for the volume of output but also enable the
organization to change its product line according to the demand in market. In the business of
garments Richardson (1996) explains how rapid information exchange, rather than ownership
of various stages of production, enables the company to respond to the short life cycle and the
changes in trend. Most of the authors (Ozanne & Marg, 1997) (Csoka, L.S., & Hackett, R.
1998) (Brown, Stephen M., Harkins, Philip J., Sullivan, Russell, 1995) (Bassi, Laurie J.,
Benson, George, S., Van Buren, Mark E., & Bugarin, Rosio, 1997) also stated that
outsourcing makes the company focus those areas where they are the best and enables them to
respond to the rapid changes in the market. Studying the supply strategies of different
industries, it is clear that the motor industry and clothing industry have general development
towards the outside supply (Van Hoek, 1999), firms within industry (Blumberg, 1998), and
product characteristics (Fisher, 1997). Companys sourcing strategy depends upon their own
approach to develop competitiveness and its business culture.
A company needs to be consistent with competitive environment and the development of
competitive advantage (Quinn and Hilmer, 1994; Harrigan, 1986). The short term proposition
of the sourcing strategy can be analyzed by using Porters (1980) model of industry analysis.
Within the resource based observation of the firm, resource and capabilities are seen as the
basis for the firms long term strategy and profit (Grant, 1991). The core activities of a
business are essential parts of its capability, the set of business processes that consistently
provide superior value (Stalk et al., 1992).
The conventional international outsourcing emphasize on planned benefits like cost reduction,
cheaper labor cost in low-cost countries have more recently been replaced by productivity,
flexibility, speed and innovation in developing business applications, and access to new
technologies and skills (Wild et al., 1999).
The market for providers of outsourced services of all types is growing rapidly. In 1996,
American firms spent over $100 billion in outsourced business activities. Globally,
outsourcing usage grew by 35 per cent in 1997 and the total market for outsourced services is
expected to increase to $200 billion by the year 2000 (Buss, 1995; Corbett; 1996; Jones, 1997;
Greer et al., 1999).
The trend is for global outsourcing relationships to function more and more as partnerships.
Outsourcing providers are taking increasing responsibility in realms that have traditionally
remained in-house, such as corporate strategy, information management, business investment,
and internal quality initiatives (Sinderman, 1995). Byrne (1996) reported that activities most
frequently outsourced are manufacturing (40 per cent), and transportation and distribution (30

Page 6

per cent). A survey of US CEOs shows that 42 per cent of communication firms, 40 per cent
of computer manufactures, and 37 per cent of semiconductor companies rely on global
outsourcing (Fullar and Millar, 1995; Malhorta, 1997). The reason for high number of
communications that is outsourced is partly due to the lack of communication experts. Most
companies can not afford to hire a communication expert full time, so they outsource this
duty. Payroll, inventory, communication systems, and database functions are just a few of the
many areas that can be outsourced effectively. In another survey conducted by Duncan and
Groves-Rowan (1997), more than 65 per cent of banks surveyed indicated that they were
already involved in at least one type of outsourcing function. ``The five most commonly used
outsourcing functions were taxes, bankruptcy/foreclosures, systems, cashiering, and
insurance'' (Jennings, 1996). Personnel expenses were the primary reason behind banking
outsourcing. However, it also improves operating efficiency and reduces service costs.
How is successful global outsourcing performed? Literature identifies high level approaches
to global outsourcing (Heywood, 1994; Jennings, 1996; Casale and Overton, 1997; Bender,
1999; Corbett, 1999), but not detailed methodologies. Furthermore, there is little statistical
research demonstrating effective global outsourcing tools, methods and outcomes (Kleppes
and Jones, 1999). Additionally, while consultants identify the success of their approach, they
do not identify the failures or problems of their approach as readily (Crowley, 1999). On the
other hand, Lau and Hurley (1997) find a significant relationship between global outsourcing
and profitability margin where they found that Chrysler's profit margin is four times as high
as that of GM due to effective global outsourcing through strategic alliances.
Outsourcing
Outsourcing is a corporate process, having main motive as cost reduction because most of the
firms prefer the suppliers that have low production cost. Most of the companies that are
running their business smoothly and successfully know the importance of outsourcing. They
believe that outsourcing is a tool to drive their business independently along the cost reducing
mechanism. A lot of experiments show that high performance can be achieved through
outsourcing (outsourcing, Acceture consultancy, 1996 - 2006).
There are many advantages of outsourcing that actually depends on the arrangement and
location of organization. There are many reasons of why to outsource; One of the most
important and considerable issue is availing low cost and the reason behind this is the
economy of scale. Most of the companies have core functions, through outsourcing a
company can only focus on these core functions whereas outsourcing the not so profitable

Page 7

functions to supplier which can work more efficiently on those functions. From the supplier
point of view, benefits become special in terms of better security. In the out sourcing supplier
are focusing on these functions to improve the quality of service (The outsourcing
management Zone).
Some of the business processes are non core functions. Outsourcing gives the opportunity in
regarding the business through the network of supplier and also can gain the access in the
market. In the business processes some costs are fixed outsourcing give the possibility to turn
fixed costs into variable costs according to the condition of business.
Most of the American workers are against of outsourcing reasoning as they are eliminating
the jobs in the domestic market, lowering the salary, hurting the nations economy.
According to most of the American companys point of view outsourcing is very good
process and very smart strategy for the business because its good for the nations economy.
According to the corporate executive point of view outsourcing is giving benefits to the
American consumer through reducing the cost of services and goods in some of the
companies along with the lower cost, increase profits and stay competitive in other
companies. According to Some economist point of view outsourcing is giving the advantages
to the American companies as it increase the economic efficiency through concentrating on
those core functions where they are good at, whereas outsource the rest functions to other
countries and workers which they can do efficiently . According to some other economist pint
of view the outsourcing is weakening the American longer economy. They predicts if U.S.
Keeps on moving the software jobs to India and china then America will lose software jobs
and it will decrease the ability of American technological leadership resulting in creating jobs
and wealth(Outsourcing: How Outsourcing Developed).
Communication plays a very important role in the business strategy specially the internet;
phone calls, videoconferencing etc are helping many businesses in moving their production to
country. Fibre optics and satellites making the international calls cheaper also play a very
important role in the business process. International agreement has encouraged the
outsourcing. By the reduction of tariff and the removal of protectionist barriers it made it easy
for the countries to communicate with each other. (Outsourcing: How Outsourcing
Developed)
Operation in overseas reduced the tariffs and barriers. Some of the agreements for example
North American Free Trade Agreement (NAFTA) always support the outsourcing against the
economic threats. (Outsourcing: How Outsourcing Developed)

Page 8

Out sourcing is not a new process; Firstly outsourcing is carried out by the Europeans, by
employing the local people in the Latin American countries. The theory comparative
advantages that was written by David Richardo (Ricardo, 1817) includes the basic of
outsourcing.
There are also some disadvantages of outsourcing. Firstly is political risk .When one company
takes a decision of outsourcing then this factor becomes very important. The second factor is
growing dependence on the third party contractors. Thirdly is difficult to innovate. (Kendra
Parker, 2006)
Actually the outsourcing is a long term phenomenon and the companies that acquire it as a
long term strategy they will be succeeded in the business process. On the other hand that
companies that do not acquire such a strategy in outsourcing regarding the business process
will not succeed. (Kendra Parker, 2006)
In the particular country where there is availability of demand and supply of available sources
the future of outsourcing will be decided through that factor
For example in the cold war all the activities regarding outsourcing were carried out from the
United States and England to Ireland and Israel. As the trend of globalization increases many
other countries participates like China, India Russia, Philippines and South Africa.
China is known as the leader in manufacturing part while in the information technology India
is name firstly considered. (Kendra Parker, 2006)
Outsourcing is not a simple process the introductory part of outsourcing includes complexity,
increased cost and friction in the value chain. All of theses require that the management have
to pay fully attention to that part. Some authors call it as an extraordinary complex process.
Cost savings versus growth, speed versus quality of service delivery, and maintaining
organizational cohesion versus knowledge and innovation are the necessary part of
outsourcing in term of complex serious trade offs (Arvind Singhatiya, 28 October, 2005).
Everybody wants a perfect work in the shortest possible time and without very hard work.
Whats the possibility? The answer lies in outsourcing. Through outsourcing its possible.
Outsourcing saves time and money. (Maynard, Wendy. (2005, June 30).
In today s world all the large and small companies are carrying out outsourcing. All kinds of
business can be beneficial from outsourcing. The businesses that are running very smoothly
in regarding the outsourcing process are very well know about the importance of outsourcing
in their organization .For carrying out business process its very important to know how can
they manage the business process. The task includes how to mange the business process,
how to agree on the payment, time, terms and how the desired results can be gain. Small and

Page 9

large firms both have to pay attention to outsourcing in order to gain leading positions in the
business world. (Thompson, Jack. (2004, December 22).
International manufacturing strategy:
The firms in the global competition level are also assuming international configurations in
order to act according to different activities. Now days this kind of trend is acquiring lots of
firms including small and medium. For both mangers and researchers the internationalization
manufacturing strategies shows that why to follow global strategy, where and how. These
kinds of decisions are in questions, lots of research has been done in relevance to the
questions. In industries, especially in the clothing sector during the last decades with the
strong incidence of labour cost and few opportunities become the factors in downsizing the
employment in all the advanced countries. The manufacturing internationalization is new
process which just in recent has became worth noticing (Ettore Bolisani, Enrico Scarso
(November, 1996).
A strategic decision for the company is very important because its affecting the whole
business. A strategy that is acquired by the company is the way to survive in the business
field. Anders Pehrsson believes this when its happened in the field of strategic Management
and many authors agree with him (Pehrsson, Anders).
Manufacturing strategy is like a concept and it has been evolved from the last 30 years. But
about the clarification of manufacturing strategy there are different arguments and different
concepts that lead to the decreased clarification of manufacturing strategy. In the simplest
form of manufacturing strategy its necessary for the firms to compare its manufacturing
capabilities. The competitive dimensions of manufacturing include cost, quality,
dependability and flexibility. According to the T.J Hill (1993) the price, quality delivery,
product design and variety can be included in the category of order winning criteria. Most of
the writers in the manufacturing strategies has developed these criteria and agree with the T.J
Hill (1993). But T.J Hill (1993) is not in the favour of just these criteria he also prefers other
criterions as well (C.A. Voss 1995).
Cost leadership , differentiation and focus are the porter generic strategies and it can
considered as business priorities in the manufacturing choice and management .At the same
time Stobaugh and Telesio developed three empirically groups; Cost, Technology and market
driven strategies (C.A. Voss 1995).
The strategic choice in manufacturing strategy is also an important area. The key choices
areas in the manufacturing strategy according to the skinner are plant and equipment,

Page 10

production planning and control, labour and stuffing, product design and engineering and
organization and management (C.A. Voss 1995).
The climate change is a global challenge and needs global solution. So that it is necessary to
have an international agreement that can be applied to all the major countries. The agreement
is known as international strategy (Claussen Eileen, President Pew centre on global climate
change).
Global Sourcing
There are two types of sourcing; Firstly, when a firm buys something in the domestic level its
called domestic out sourcing secondly, when a firm buys from abroad then it is called foreign
outsourcing i.e. foreign direct investment (FDI), joint ventures and acquisition. For example
Intel Corporation producing Microchips in wholly own subsidiaries in China, Costa Rica,
Malaysia and the Philippines. Nike gives the example of arms length import strategy and most
of the independent producers in Thailand, Indonesia, Cambodia and Vietnam (Pol Antras,
Elhanan Helpman, 2004).
There is an example of the Barbie doll about Mattels Global sourcing strategy given by citing
Tempest (1996), Feenstra (1998)

Of the $2 export value for the dolls when they leave Hong Kong for the United States, he
writes, about35 cents covers Chinese labor, 65 cents covers the cost of materials [which are
imported from Taiwan, Japan, and the United States], and the remainder covers
transportation and overhead, including profits earned in Hong Kong (p. 36).

World trade organization (1998) provides an example about the manufacturing of an
American car, 30 percent of the car value originates in Korea, 17.5 percent in Japan, 7.5
percent Germany, 4 percent in Taiwan and Singapore, 2.5 percent in the United Kingdom,
and 1.5 percent in Ireland and Barbados. (Pol Antras, Elhanan Helpman, 2004).

From the study by Meltiz (2003), Helpman and Yeaple (2004) it has been shown that the
firms that have low productivity serve only the domestic market on the other hand the firms
that have the high productivity also serve foreign markets.
In the Japaneses industries by Tomiyra (2005b) it has been found that that the firms that are
the most productive level out source internationally but that the firms in the less productive
level outsource domestically. It has been also fond by Tomiura (2005b) that the firms that are

Page 11

in high productivity level prefer FDI, the firms that are in medium productivity level prefer
international outsourcing and the firms that are in low productivity level prefer domestic out
sourcing (Galina A. Schwartz May 9, 2006).
From the literature study, about global telecommunication network, internet and
communication technologies (ICT) it has been shown that the global sourcing is the
reallocation of business process which includes production and services to the lower cost
location, which may be in the foreign country. Actually the business process or services is
most newer phenomenon of outsourcing and from the outsourcing as the work moves through
out the world to find the lowest cost supplier thats why outsourcing is affecting the benefits
of millions. In the global sourcing through the ICT its easy to search the costs for labour and
makes it possible for the workers in one country to work for the firms outside the country
(Harbhajan, Kehal S. Editor).
10% to 35% cost can be reduced by the global sourcing in US companies. It is the reason why
outsourcing and off shoring is so attractive (Tim Minahan special to CIO search.com).
Tradeoffs of cost, performance and risk should be balance concerning the sourcing decisions.
The variability of non pricing including some of the factors such as cross-border freight and
handling fees, complex inventory stocking & handling requirements, multitude of
documentation and regulatory compliance requirements becomes very special when some one
is deciding to outsource globally. The six most important factors regarding the global
sourcing are: Material cost, Transportation cost, inventory carrying cost, cross border taxes,
tariffs & duty costs, supply & operational performance, supply and operational risks. For a
supplier to understand these factors its necessary to have a better knowledge of trade
regulations and geographical landscape. Some variables give the attributes for global sourcing
some of those variables has the resemblance with the supplier management (Tim Minahan).
The purpose of global sourcing methodology should provide a framework that can help in
trouble free outsourcing. The frame work comprises the clear management structure. For the
success of an organization global sourcing methodology is necessary. It is the starting point of
global sourcing effort. A well established methodology provides the basic understanding for
the initial part of global sourcing. For the development of global sourcing methodology there
are variant numbers of methods. But some of those are most important which are: Feasibility,
Vendor Selection, Planning, Transition and Operations (Forbath Theodore, 2006).

Page 12

Feasibility
This phase is carried out with strategic vendors in order to assessing global sourcing readiness
so they can lend their expertise. When there is need to analyzed feasibility then it should be
analyzed in both an annual and as needed bases (Forbath Theodore, 2006).
Vendor Selection
The next step is vendor, when it has been known that specific business and technical process
is suitable for the model. According to this phase global sourcing project management team
should work together in the searching of vendor that has power in some process including
process that are candidates for outsourcing. Single vendor bidding process and competitive
bidding process should consider. Its the responsibility of global sourcing PMO (Project
management organization) to develop tools through which project team can determine which
process is suitable (Forbath Theodore, 2006).
Planning
For a successful transition from the onshore to the offshore model or the operating
environment planning phase lays the ground work. In this stage the organization and vendor
work together to ensure that many phases of transition to operation are well prepared (Forbath
Theodore, 2006).
Transition
The transition phase consists of that process that is defined in the planning phase. In order to
enable the desirable performance in new environment the organization and vendor should
prepare for the offshore transition and need to make adjustments to process and procedures
(Forbath Theodore, 2006).
Operations
Considering the smooth transition operation phase should be Business as usual (Forbath
Theodore, 2006).The communication structure and management work are the key points for
the success of operation phase that are defined in the previous phases (Forbath Theodore,
2006).
For the improvement of production and for the reduction of cost, global sourcing is very well
and effective strategy. Its identified by almost all of the organization for their success and
improvement. The origin of global sourcing firstly appears in 1970 in the U.S. companies
when some of the manufacturing companies start outsourcing their non core products in Asia
since then the trend is going on. Global sourcing has the effective value for all of the business.

Page 13

Today the production is carried out from the higher cost market to the lower cost market and
this process is called global sourcing .Today the global sourcing is a key for the business
strategy in order to corporate through out the world. For some of the firm global sourcing is
considered as tool that can be use for the increment of efficiency and productivity (Global
sourcing 101 Hewitt Quarterly Asia pacific).
Why
According to the Hewitt Associates survey, the primary force for the global sourcing is cost
reduction .There are some other procedures through which advantages can be gain by
adopting the global sourcing includes: Improved productivity level, increased flexibility &
speed, access to new network & customers, access to the global talent pool, acquiring
expertise and keeping up with the competition (Global sourcing 101 Hewitt Quarterly Asia
pacific).
Improved productivity level: Improved productivity level is a tool for global sourcing
strategy. There are two reasons, firstly, off shoring does not only give the permission to
company to pay attention on specific tasks and bring own efficiencies to the table, it also
gives the option to staff members by allowing them to concentrate on the core competences
and also for growing the business .
Increased flexibility and speed
Off shoring gives the possibility to the companies by reduction of cycle time, expanding or
decreasing the projects on a real time basis. So that firms can achieve the tasks in a more
flexible manner and in a certain time. Dell computers, Microsoft , several airlines and most
of telecom companies are using a global sourcing by adopting a follow-the-sun work
pattern that engages teams in ifferent time zones, enabling them to offer a 24-hour service,
seven days a week for the satisfaction of their customers(Global sourcing 101 Hewitt
Quarterly Asia Pacific).
Access to new markets nod customers
Global sourcing gives the ability to access in the emerging markets for example Asia Pacific
and Eastern Europe. Access to the global talent pool: In Asia and Eastern Europe the brightest
and highly skilled people are found. Now a days these highly skilled people are paid less as
compare to the U.S. workers. For example, in Russia an engineer with mathematics degree
will earn US, 650 per month, whereas his or her companion in the U.S. will earn US, 6000 per
month.

Page 14

Acquiring expertise
Global sourcing also shows the experts work. Most of the companies can gain advantages
from an improvement in the quality and value of an operation by adopting services from the
organization with best efficiency and management for specific tasks.
Keeping up with the competition
Competition and the cost management are the reasons for global sourcing. Most of the
companies know if their competitors are going abroad for the low cost and highly skilled
workers then they will follow them. Today the most new technologies such as internet and
voice over IP are making this more advance and easy.
Where
A large number of factors show that there is difference in the sourcing decisions. The factors
including are Geopolitical risk; Language proficiency; Location (travel, time zone); Cultural
compatibility; Government support; Labour cost advantage; Labour pool characteristics;
Infrastructure; Quality initiatives; Communications; Educational system; and Country laws.
(Global sourcing 101 Hewitt Quarterly Asia pacific)
How
This is very critical phase of global sourcing that how to operate and decide a function. In this
decision is making how to develop a model in the global sourcing. Some aspects are: Captive
Processing Centres, Third-Party Providers, Joint Ventures build, Operate, and Transfer
(Global sourcing 101 Hewitt Quarterly Asia pacific).
Captive processing centre
In the captive process centre business processes is carried only for their own multinational
business. During process migration, information security and others the company saves time
and money. Companies that are using captive centre are HSBC, American express and Dell.
Third party providers
In this phase companies outsource their to third party .For example India based Daksh are
providing services to Amozon.com.
Joint ventures Build Operate and Transfer
Through the Build, Operate and Transfer system (BOT), company enters into joint ventures
with third party service provider. Builds the centre, sets the process rolling and helps in

Page 15

process migration are the key roles of third party service provider (Global sourcing 101
Hewitt Quarterly Asia pacific).
Supply strategies
This section will present a more general overview of conceptual research in sourcing
strategies. In todays world, where everything is becoming globalized, the businesses are
impacted deeply by sourcing issues; decreased trade barriers e.g. European Union and the
development in the transportation and information technology. Gadde and Hnkansson (2003)
claim that the emergence of purchasing as a strategically important area for companies
together with more complex logistical solutions has led to the rise of supply chain
management as an important researcher and practitioner field.
The different types of strategies a company can take into consideration or are implementing
for sourcing are stated below;
Make or buy decisions
Of central importance when it comes to supply strategies is the make-or-buy decision about
product components or/and entire products (Gadde and Hkansson, 2003). This is a decision
which involves the opportunity cost, which decides the best option for the companies long
run profit. All companies face problems when choosing between two options, because both of
them have their own advantages and disadvantages e.g. the option of making a product would
take time and it might make the company to perform not so good in the areas where they are
excellent and that potential can go to the areas where they are not so good. On the other hand,
if they choose to outsource, they need to manage relationship and their success will be
dependent on the performance of another company.
Supply base alternatives
From the studies companies have found that having a closer relationship with the suppliers is
beneficial for the company but it is more resource-demanding. There have been some cases
where, in order to cut costs, a company chooses one big supplier rather than buying from
several smaller ones. This allows the company in question to avail the advantage of price-
bargaining due to the economy of scale that buying a lot of material from one sole supplier
brings about (Michael Borrus, 1996).

Page 16

Low-cost sourcing
Cost reduction has been the predominant motive of outsourcing (Ford et al, 1993). While
outsourcing contracts commonly target a minimum of 15% cost saving sometime 20-25%
(Lankford and Parsa, 1999) failure to achieve perceived cost reduction is a frequently
occurred aspect of outsourcing (Cross, 1999; Darling, 1999). Low cost sourcing is gaining
more and more attention now days from the people who are practicing business and the
researchers as well. Trent and Monczka (2003) claims that companies fail to benefit from
what is potentially offered by this kind of sourcing. By this they mean that most of the
companies are interested in low-cost sourcing and are trying to apply this, but still they have
lack of knowledge about how to use it in a profitable or progressive way. Trent and Monczka
(2003) develop a world wide sourcing framework with two types of sourcing strategies, one
is with low scale whereas the other with high scale. Low level/scale is where companies that
are involved in international purchasing go abroad with the primary motive of exploiting the
cheap labour and cheap cost. These companies are more focused with their primary motive
and they sometime have problems with the maintenance of the quality level, delivery
performance and also some long and costly transportation system. Most of the time these
companies also see that after calculating the total cost somehow its almost the same cost and
the low price advantage is gone, due to some problematic issues concerning business in these
areas and other related problems. The second type is where the companies are called global
sourcing. This strategy is taken into consideration not only due to the lower price advantage
but also all other related areas which can affect the business in some way. Some of these
advantages can be: similarity in the culture, high technology relatively to the other country,
easy access to potential markets from there etc.
In an industry such as clothing, where the product life cycle is very short, the demand for
shorter lead times is creating problems for the company to get the supplies from the cheap
labour countries which are mostly situated in the other end of the world. These factors are
affecting the companys supply side very much.

Page 17

Theoretical Framework
This paper will focus on the market leaders of the Swedish garments market and see how they
have gone through the inward internationalization process. According to this research paper
the inward internationalization process can be explained in a way that where and how did they
started international manufacturing and outsourcing. Foreign market entry for manufacturing
and outsourcing strategy depends on a range of techniques. Firstly, the import strategy, they
will use while entering new market. Secondly, which different methods are they using to go
through that market? In the case of individual firm its different because they are connected to
each other in different strategy. In the interrelationship the actors have no choice to move
from the old relationships.
In the network, actors have the opportunity to access to other actors. Another option is also
including in the network that the firm has the opportunity to move towards actors and can
gain the information .Through that information they can develop their own arrangement. The
purpose is to find out more (Why? Where? How?) About the companies that went
international.
International Manufacturing and sourcing strategy
Figure 1

Source: International manufacturing strategies: experiences from the clothing industry Ettore
Bolisani & Enrico Scarso, November 1996.
International manufacturing and
Sourcing
Why?
Where?
Motivations are:
Natural resource seeker
Market seeker
Efficiency seeker
Strategic asset seeker
How?
Depends on:
Tariff barriers and
government facilitations
Availability of local
resources and capabilities
Delivery time and logistics
Cultural/organizational
proximity
By:
Configuration of
the production
resources
Co-ordination
mechanisms
Technological
i t t
International configuration
Of the operating system

Page 18

WHY
According to Porter, the rationale of a global strategy stands on the competitive advantages it
assures (Porter, M.E.1986). Where the Swedish clothing industry is concerned, it is important
to note that the Swedish consumers became demanding and wants to buy cloths that are good
quality and medium price. The companies are trying to make themselves distinguish in the
market among the other competitors. Big parts of the market are people who are buying
clothes that are good quality with average price (Marianne Doff-Kallenius and Ms. Inge
Jense, 2006).
The main motive of international manufacturing and outsourcing can be found out in the
literature which identifies two broad types of import motives; task related and non task related
(Webster and Wind 1972). The first type explains the motives that are directly related to the
product e.g. cost reduction, quality improvement etc. The second one non-task related
explains that still humans are involved in the decision making therefore sometimes the
company might make some decisions that are not directly related to the product e.g. reciprocal
purchasing, pet project purchasing, ego enhancement and so on.
An example of non-task related motives can be explained by the report that was given by
Jackson (1981) where he found out that many of the Israeli importers in UK are importing
from Israel just to support the exporters in their country. This kind of motives for a company
can also be showing that the company is social responsive and they want to produce from
countries where the living standard is too low and there are no jobs availability, so this way
the company is helping the people of that country.
Sweden is not a country with abundance of natural resources which are used for garment
manufacturing and the labor cost is very high. Therefore most of the companies to gain
competitive advantage are going abroad for international manufacturing and outsourcing.
There are few types of behavior for which companies are going abroad, which are explained
below;
Natural resource seeker
These kind of companies go abroad to acquire specific types of resources at a
relatively cheaper cost. In the case of Sweden, labor and natural resources are most
demanded. This is technically a requirement, or best suited for those products that do
not need special competence to produce. Such products could be formal or informal
wears that need intensive labor force. As designers, very high quality is something that

Page 19

can not be achieved with this preference (Ettore Bolisani & Enrico Scarso, November
1996).
Market seeker
Such companies are the one who wants to expand their market share by entering into
new foreign markets which are rich and demanding, but normally has not enough
domestic competition. This not only helps in keeping the costs low but also to
eliminate and understand the domestic culture and getting accepted by the local
customers (Ettore Bolisani & Enrico Scarso, November 1996).
Efficiency seeker
These companies are those that are looking for making the optimum solution for their
business. They are not looking for one specific activity but are actually allocating the
resources where the job is done most efficiently (Ettore Bolisani & Enrico Scarso,
November 1996).
Strategic asset seeker
These companies are expanding their business by acquiring the businesses of foreign
markets. These kinds of acquisitions can be the trade mark or the good will of a
company as well as if there are any valuable agreements in some specialized area of
managerial or technological segment (Ettore Bolisani & Enrico Scarso, November
1996).
The decision of where and how is obviously related to their long term strategies, but still the
relationship must be studies in detail as there are always a lot of options.
Where
Main factor affecting the location of production activities is the availability of nations
specific resources (Grant, R.M.1995). As it has been stated before about the importance of the
labor in the production of garments, therefore the companies should take the countries which
have cheap labor into consideration first.
Location also depends on trade ability issues (Handfield, R.B.1994). Location selection also
depends on many other factors mainly the social culture, legal system, political system, infra
structure of the country etc. sometime the culture plays a quite big role e.g. for many
European countries outsourcing in the Asian countries (India, Pakistan, China and
Bangladesh) is not favorable because of the cultural difference and organizational behavior
whereas in the east Europe ,where the labor cost are not the low but relatively to rest Europe
its low, its better for them to invest (Handfield, R.B.1994).

Page 20

Availability of local resources and capabilities
The availability of minerals and the ability to generate energy are the foundations of
modern technology (Ghauri and Cateora, 2005). The distribution or the availability of
natural resources are not equally endowed neither does the nations requirement for
some natural resource is common. Most of the companies when decide to go outside
of their country are focusing on the countries with the availability of local resources
and capabilities. The companies always consider host countries community service,
education sector, government rules and regulation, weather condition, transportation
and statistic information which will help company doing their business smoothly
(Ghauri and Cateora, 2005).
Delivery time and logistics
When a company is making their product outside of their country they always try to
fix their production, delivery time and logistics. This will make the company
competitive in the global market. Excellent service, high quality goods and time of
delivery helps the company and garments manufactures to rapidly scram their products
after which the specific delivery time and logistics will reduce product cost and save
time (Verghese Paul, Nirma Institute of Technology, Ahmedabad).
Tariff barriers and government facilitations
To encourage the domestic industry and protect the existing industry, government may
establish such barriers to trade as tariff, quotas, boycotts, monetary barriers, non-tariff
barriers and market barriers (Ghauri and Cateora, 2005). Tariff, which are taxes on
imports of commodities into country region, are among the oldest forms of
government intervention in economic activity .They are implemented for two clear
economics purposes. Firstly, they provide revenue for the government. Secondly, they
improve economic returns to firms and suppliers of resources to domestic industry that
face competition from regional imports (Michael J. Ferrantino, 2003). Most probably
host countries protect domestic economy, thats why government provide barriers and
tax, which will affect foreign company from entering their market. Some of the
countries provide facilitation to the foreign companies to enter their market.
There are also some activity dependent relationships that may be positive or negative.
Activity dependent relationships are more important as compared to the strong
personal interrelationships. Interrelationships can be for long periods and during those
periods actors can know each other very well and can build up that relationship in the
form of trust. Trust will give the power of that business relationship by promoting the

Page 21

actors dependences with in the network .In the business relationship interdependences
plays an important role and with the strong of this relation it becomes a high barriers
to entry to new comers. New comers will find it difficult to get involve into that
relationship that is already strong in the network .In the network every business
strategy is different thats why it is very difficult for an outsider to get enter into that
network (Catherine M. Daily).
Cultural/organizational proximity
Organizational culture has been used as a holistic construction that describes the
complexity set of knowledge structures which organization members use to perform
tasks and generate social behavior. Organizational culture affects company structure,
role expectations and job descriptions, which will create opportunity to do better
organizational internal systems. Organizational culture is related with companies
control system, labor cost and multiple competitive sources (Hofstede et al. 1990.
Reichers and Schneider 1990, Gregory 1983).
How
To implement an international manufacturing or outsourcing strategy effectively, substantial
decisions about the configuration of the global operations system, the coordination
mechanisms and the allocation of the technological equipment are required (Flaherty,
M.T.1986).
Configuration of the production resources
This decision deals with the decision of how many and how big plants should be
outsourced. The clothing manufacturing deals with many phases before it is
transformed into the final or semi final product, therefore all of the processes can not
be outsourced abroad. In particular existing links along the value chain and benefits
deriving from the close proximity among different activities can offset the advantage
of an offshore location (Dunning, J.H., 1990s). when the companys intention is of
making the most profit and keeping the costs as low as possible than they go for
investing a big plant which can carry out all the processes, whereas on the other hand
if the company is trying to reduce political risks or make it flexible they prefer sharing
the production facilities among different locations. The design phase or the cutting of
the fabric is mostly done internally or else its outsourced to expert in that field.
Co-ordination mechanisms

Page 22

This is related to which extent is the company giving the authority to the supplier to
work. Coordination can be classified into four types which mainly are resource sharing
structure, decision style, level of control, and risk/reward sharing. Coordination
mechanism is mostly taken into consideration from the point of minimizing cost (Lei
Xu and Benita M. Beamon, February 2006).
McCann and Galbraith (1981) analyze coordination strategies on the bases of three
dimensions: formality (from informal personal meetings to more formal
arrangements), level of control, and decision localization (centralized or
decentralized).
Technological investments
By outsourcing in different countries a company not only is exploiting the competitive
advantage of that country but also is allocating the technological advantage of
different countries where they are running their business. In clothing industry there are
some technological advances such as automated knitting and cutting of the fabrics
which can improve the quality and decrease the cost of production. Before allocating
such resources to countries the company needs to consider process reengineering
seriously. Mainly in the clothing industry these machines have a very minute role, as
most of the processes are needed to be done by labor.
Some of the latest technologies can have a big impact on the clothing industry such as
CAD and telematics. These technologies are a little bit problematic in the recent area
but are useful for single phase but still have the potential of doing the whole process.
Telematics can allow a better management of information flow; they could make the
co-ordination of worldwide activities easier (Gottardi, G. November 1991).
The development and use of networks in internationalization is directly connected with
organizational culture. An important part of the firms international resources is produced and
maintained by related actors in the firms network, as relationships are established with
customers, suppliers, host government officials, intermediaries, etc. taking into consideration
the importance of these actors, if something goes wrong between these actors it would be
difficult for the company to carry out its business. Also the process of internationalization
may itself yield unexpected results (Welch & Welch 1993).

Page 23

Methodology
There are a lot of interesting and attractive fields in both traditional and international
marketing that can be studied, but to be interesting is still not enough and many things should
be taken into consideration, such as access to the information and the ability to give valuable
prescription, recommendation and solutions to the problems which are studied. After
discussing everything in detail in our group, and consulting with Claes Jonsson our tutor we
choose the subject of the thesis The international manufacturing and sourcing strategy of
Swedish garment industry, in consideration of the availability of expected information
channels and the market situation.
The study is focused on the Swedish leading clothing companies as well as the small and
medium companies working in the same sectors to give a practical example of how they
work. The overall market of Sweden should also be analyzed and seen through how does the
garment industry works in European Union therefore this research paper will also give
valuable information about the European Union market as well. In the beginning we were not
sure about which companies to use from Swedish market for case example as getting the
information form the companies is not easy, therefore we contacted almost all the leading
companies and started gathering information about them from secondary sources, but
afterwards when we were answered by the companys representatives and got access to the
information which was having personal contact with the purchasing department we finalized
H&M, JC AB and KappAhl. Besides gathering the information about these big companies we
also contacted and visited small shops in Vsters to analyze the market in a bigger picture,
which helped in analyzing the market situation. Unfortunately these small companies were not
having very formal kind of business and didnt had secondary information resources, most of
them also didnt had companys website, which made it difficult to write about them
specifically, therefore the information that we gathered from them is used in describing the
general market and in the conclusion part. These small companies also had contact with some
agents situated in Stockholm and Gothenburg but as that was not really related to our problem
and purpose therefore those agents were not contacted.
After a thorough research about garments market in Sweden, we took into consideration about
10 companies, to do quantitative survey about them but after getting no response from them
we had to send the questionnaire to about 256 people (the contacts information were collected
from www.wwlink.se) who were related to the clothing industry in order to bypass the gate
keeper of the buying center and be in contact with the actual buyer and financial buyers, this

Page 24

way we got access to 10 buying center members. We have used Google engine
(www.google.com) and (www.wwlink.se) to search for these companies and the employees
contact; the keywords used to search for information about these companys were; Swedish
clothing companies, garments business in Sweden, outsourcing decision Sweden, global
sourcing affects, international clothing chains. Whereas in the second website mentioned, it
was rather easier to search for the companies as it is a Sweden based website and had all the
information about the companies and such information, and its possible for the user to sort
out the results through different aspects, which we did through clothing companies. We
contacted them by phone calls and by sending those emails, and then personal contacts. We
also have talked to the employees of hlns and got the contact of the regional manager of
the company, which helped us a lot in understanding the business decisions of Swedish
garments companies about outsourcing, even though we didnt had enough information about
company hlns, still we got very vital information from the regional manager which helped
us in analyzing all the companies. We also studied the small scale companies which are
operating in Vsters, Sweden. We went to the city centre and distributed our questionnaire
among them and also talked to them about their business that how are they doing their
business and how are they buying from abroad and so on. We think that having detailed
interview with such small companies is easier because in the big companies we got the
problem that here in Vsters the employees didnt had enough information, whereas in these
small companies the number of employees is relatively smaller and getting in contact with
the owner of the company or the higher level manager is not difficult.
Our work plan is simply divided into 2 phases:
1. Doing quantitative survey to add more information to the thesis by going to the
companies asking them questions in Vsters and sending questionnaires to the
companies and this includes also doing research through the internet and journals
about as much as we can about Swedish clothing companies.
2. Doing qualitative interviews with persons, through telephone, E mail and if possible
face to face, (except for hlns we couldnt get face to face interview from other
companies) from the buying departments especially the decision maker in the buying
center in few chosen companies to understand what kind of strategies are they using in
relation to their international sourcing?
The method, that we used, contained both the quantitative and qualitative approach. We
collected literature, articles, related thesis and also other relevant information which was
giving us a clear picture of the companies that are interested in going abroad and start their

Page 25

business internationally, all this information was not directly related to the problem and the
purpose but it helped us a lot in carrying out this thesis e.g. to understand how does the other
industries think before making the decision of outsourcing and also how can one analyze the
information gathered in contrast to outsourcing decisions. After gathering all these
information and the empirical data related to the theoretical frame work and the background
information about the company we tied them together to get the most reliable and relevant
conclusion. We also explained the clothing industry with respect to the supply strategies that a
company can adopt and some points that were taken from the model (see theoretical
framework) which we applied to get the results.
Study Design:
In order to arrive at meaningful results, we needed to find a large sample of the companies so
that we can get the whole picture of the Swedish clothing industry. Our findings from the
reviewed literature and the findings from the survey will be used to elaborate the survey
questions. Our study design can be presented in a graphical form as follow.
Study Design
Figure 2

Interviews
While opting to get information through interviews, we chose to just to get the information
which is not easily accessible through secondary data like publications and other documents.
Swedish clothing
companies
Interviews
Literature study
Survey
Final selection of
companies
Results
Relevant topics for
interviews
Companies selected
for interviews
Relevant subjects
E-mail Contact
Informants
invited

Page 26

Interviewee selection
Since we need to obtain information about the purchasing function, we will try to get the
information from employees with central position. The case companies will probably be
selected which are situated in Vsters, due to easy access. The interview will be conducted
probably from few employees having managerial role in the company, just because that we
need to get the whole picture in general, rather than describing each case in depth.
Validity and reliability
To determine the validity and reliability we need to confirm that the companies we choose
should be able to show the diversity in doing business in the Swedish clothing industry, we
should also try to approach the right and responsible person, and lastly, see if the questions
have been directly related to the area the person in question is involved in.
Survey
As the interviews will be conducted to investigate the specific areas of the industry, we need
the survey for explanatory and descriptive purpose. A questionnaire (which is designed
according to the model in the theoretical framework) will be sent to the companies through E-
mail.
Selection
The first thing that we need to take into consideration before choosing the companies for the
survey is to determine the kind of business they are doing. The companies that we are looking
for can be described as companies that are getting engaged in business of clothing items to
resell. A typical company would be one that is designing and distributing clothes and is using
suppliers in different countries to manufacture in any way, whether directly involved or doing
business through agents.

Page 27

Empirical Findings
In the literature review, we discussed the outsourcing issue and international manufacturing in
general context with some results from different articles and news, now in this part we will
discuss it from the Swedish markets point of view. Our findings and statements will be mainly
focused on the companies that are operating in Swedish market. This will make it easier to
understand that how internationalization process is working in this market and will help in
understanding the market as well.
The textile and the garment industry is an important part of the global economy. Clothing
industry mainly involves manual work and needs extensive labor force. Therefore a company
to be competitive in the market and make profit needs to source their production facilities in a
market where the labor is relatively cheaper. As the world is becoming globalized and
everything has become very easy and faster due to ICT and reliable transportation system, it is
therefore easier to conduct international business than in the past.
To understand the Swedish market its necessary to understand the European market first, so
that we get to know how the industry is working as a whole in this big market after that we
will start explaining only the Swedish market.
Market condition: Comparison to European market
Europeans union has a huge garments and manufacturing industry, garments industry plays
important role in European market. As clothing is the second important need of human being,
therefore the products of clothing industry are in demand as ever. Textile and clothing
industry is mainly affected by globalization, because of the cheap labor cost and raw material
costs in developing countries. Garments products are made mainly from two types of raw
material; first type is natural raw material (cotton, wool, silk, flax, jute) and other side human
made fibers, syntactic fibers, polyester, nylon, acrylic etc (Werner, June 2001). Over the last
15 years, the European textiles and clothing industry has gone through large-scale
restructuring. Advancement of the industry is significant, productivity has improved, and
production has been restructured towards high quality products. However, this change has
also caused decrease of approximately one third of the employment. Further developments are
expected to affect the industry over the coming years including EU enlargement, increased
competitiveness, research, quality, skills, creation and most notably, the removal of import
quotas in 2005 and the challenges and opportunities of a recent round of multilateral talks
(Michael Keenan, Ozcan Saritas and Inge Kroener 2004).

Page 28

In the last two decades European garments and clothing industry faced a lot of competition
and lost employment in the textile industry (Werner, June 2001). More than two million of
peoples are doing job for 177,000 enterprises. Where per year annual turn over 200 billion.
For the last four decades this industry increase 60 times ($6 billion to 342 billion in 2001).But
last 20 years USA and Asia increased dramatically, USA 97.7 and Asia 76.3 percent as
compeer to European countries.
According to EU Enterprise Commissioner Olli Rehn said: The EU textiles and clothing
industry is a sector which has faced permanent competitiveness, restructuring and
modernization challenges over the last fifty years. Now it is going through profound structural
changes. At EU, national and regional levels, we need to provide adequate conditions to help
the sector strengthen its competitiveness and remain a key industry in the EU.
On other hand according to EU Trade Commissioner Pascal Lamy added, With anticipation
and close co-operation with the European industry we can ensure that there is a smooth
transition to a quota-free trade in textiles on 1 January 2005. And we will not leave
developing countries, in particular the poorest and more vulnerable, out in the cold. We will
re-focus our trade preferences so that they can continue to benefit from an open and fair
access to the EU. Source: (European commission)
Asian, Turkey and North Africa garment industry is the main competitors of European
garment industry, basically European garments industry is focusing on higher productivity,
technological innovation, quality, creativity, design and fashion. Developing countries
producers focus on cheap labor cost and their natural raw material. (Michael Keenan, Ozcan
Saritas and Inga Kroener)
Availability of local resources and capabilities:
European Union has lot of resources and capabilities; day by day they are developing their
economy and industrial sector. In present European market is growing up rapidly, some
factors which helped their garments industry sector such as high quality raw materials, new
technology, skilled employee, foreign direct investment and research & development.
According to Werner 2001, the clothing and textile industry in Europe is highly globalized,
with import growth of 12% in 1990 to 23% in 1999 for the textile industry and 30% to 46%
for the clothing industry. This shows there is continuous demand for the clothing and the
textiles in Europe. The consumers are willing and can afford to buy the clothing from the EU
countries. Another reason may be due to low raw material cost compared to the rest on the
other countries like China, Pakistan, India and USA. Available data below shows that EU

Page 29

countries consumed 1.0 million tonnes of ginned cotton between 1999/2000 and 2001 /2002.
This shows there they import less ginned cotton form other countries beside the EU, which
shows that the overall cost (including transportation) of cotton within the EU is probably
cheaper that the other countries like Pakistan, India, China and USA.
Main world Consumers (ginned cotton)
Figure 3

It can be inferred from the above that Sweden being a member of the EU country has a greater
chance on importing from the other EU countries like Lithuania, Poland, and Estonia among
others where there is cheap labour and the raw materials like cotton and the clothing are
produced at a less cost compared to that of USA and Pakistan. Though there may be cheaper
products in China, the proximity and trade barriers make it more advantageous to import from
the EU Countries that the others.
Therefore now days we can see that most of the companies are shifting their production
facilities from developed countries to developing countries where the labor force is cheaper.
Over the last four decades of the 20
th
century, trade in textiles and clothing increased over 60
times (Keenan et al, 2004). UK and the Scandinavian countries show a liking for earlier
British colonies where knowledge of English is common (English is the favored foreign
language in Scandinavia).




Page 30



Total Textile Industry Operator Cost in US$/hour, Summer Autumn 2000
Figure 4
Developed Mediterranean C. & E.
Europe
Asia Africa
Portugal 4.31
Germany 18.10
Italy 14.71
US 14.24
UK 12.72
Israel 7.43
Turkey 2.69
Morocco 1.87
Tunisia 1.65
Hungary 2.63
Poland 2.35
Lithuania 2.23
Estonia 1.53
Taiwan 7.23
Hong Kong 6.10
South Korea 5.32
Thailand 1.18
Malaysia 1.13
China 0.69
India 0.58
Sri Lanka 0.46
Pakistan 0.37
Indonesia 0.32
Mauritius 1.87
RSA (urban) 1.82
Madagascar 0.37
Note: exchange rates as of 25 July 2000
Source: Werner International, 2001
Tariff Barriers and Government facilitations
According to the European Commission on trade and Industry 2006 report, the EU market for
clothing and textile may be regarded as open, and this can be the reason for the rise in import
between 1995 and 1999 by 31%, accounting for about 50% of the general consumption in the
EU. For example according to the report EU tariffs are low: 0.7 % for raw materials, 5.3% for
yarns and fibres, 6.3% for fabrics and 11.9% for clothing, an average of 9%. It can inferred
from the this figures that it may be easier and cheaper to import from the EU member
countries that the other countries like the USA, China and India, as the EU may have different
trade barriers for goods from non member countries.
Delivery Time and Logistics Cost
The delivery of goods within the EU is by three ways, namely, air, water and sea. These are
the main means of importing goods into the EU countries. Available data from some
researchers shows that the logistics cost in the EU range between 11.8% and 12.8% of GDP.
Some countries in the EU like Denmark according to the same source, has 12.9% of GDP
(Dan Magnusson and Patrik Ryden 2002).
Market Condition: Swedish clothing Industry
The Swedish textile and clothing industry is a modern, quality-oriented industry with
advanced technology, continuous product development and a strong environmental

Page 31

awareness. The industry is international, in the supply of raw materials, product adaptation,
production collaboration, marketing and export. There are close to 14,000 people employed in
the textile and clothing industry in Sweden with around 350 companies (greater than five
employees). Most of these companies are geographically concentrated in the south-west of
Sweden (Textiles and clothing to Sweden, Australian Trade Commission 2006).
In Sweden production of clothing may have seen the greatest transformation. Most of the
sewing is done by production partners in other countries. However, the Swedish producers
engage in product design and development, purchase of material, cutting, quality and
environmental policies and supervision, logistics, warehousing and, of course, in marketing
the products under their own well established trademarks. In addition to fashion clothing there
are a number of successful Swedish producers of protective, work and corporate identity
clothing. Here function, quality and design constitute the competitive added values (Textiles
and clothing to Sweden, Australian Trade Commission 2006).
Swedish people are getting more and more fashion conscious which is making the companies
trying to become as distinguish as possible. The plenty of fake products flooding the market is
creating problems for brand identity. The Swedish clothing industry market is about US $
6.06 billion. In 2000, the total sale of garments, footwear and accessories increased by 6%
compared to the year before. Garments accounted for 82.4%; footwear for 14.4%; and
accessories for 3.2% of the total sale (Marianne Doff-Kallenius and Ms. Inge Jense).
If compared to different European countries, Sweden has the most percentage of producing
directly abroad. Almost 70% of Swedish companies have direct overseas manufacturers
whereas 37% for UK and 19% for France. Comparing to other countries, most of
Scandinavian retailers had a long-established practice of direct sourcing from overseas
manufacturers and most of them had made important investments in overseas offices. Most of
the Scandinavian companies are doing their business by highly concentrated sourcing
networks developed through direct relations with overseas manufacturers (Peter Gibbon and
Lotte Thomsen).







Page 32

Services expected from existing suppliers
Figure 5

Strategy UK France Scandinavia
Full-fabric/cloth sourcing
Design services
Minimum capacities
Supplier-managed inventory
Production flexibility
Making regular visits to retailer
Permanent presence at retailer HQ
Product development
Invoicing on 90 days
10
3
0
6
4
2
1
1
1
11
6
1
1
0
0
0
0
0
9
5
2
2
0
0
0
0
0

Availability of local resources and capabilities
With regards to this, the authors are focusing on the income levels of the people and their
access with respect the availability of the clothing shops in the cities and towns. There are
many clothing shops in almost every city and town in Sweden. The income of the people in
Sweden $266.5 billion (2005 est.), purchasing power parity $29,600 (2005 est.).Most of the
lands covered by forests, in other hand raw material grow up barley, wheat, sugar beets; meat,
milk andiron and steel, precision equipment, wood pulp and paper products, processed foods
(The world fact book, Sweden).
Delivery Time and Logistics Cost
The available data shows the various delivery cost and time for the various types of
transportation system in Sweden. The data shows that the air transport cost increased from
199 to 2001 and gradually falling up to 2003. This implies there is a reduction in the cost of
air transport in Sweden.

Page 33

Price index for scheduled domestic air travel, 1996=100
Figure 6


The road transport cost is Sweden, from the data shows a stead increase in cost of road
transport from 2004 to 2005. This means that there is a high demand for road transport in
Sweden.
Price index for freight transport services by road (2004=100)
Figure 7
Year Quarter
Freight transport
services by road
2004 Quarter 1 99.5
Quarter 2 99.7
Quarter 3 100.2
Quarter 4 100.6
Annual Aver. 100.0
2005 Quarter 1 103.2
Quarter 2 103.0
Quarter 3 105.0
Quarter 4 105.3

Page 34

Annual Aver. 104.1
2006 Quarter 1 107.1
Source: Statistics Sweden

Sea transport also keeps on increasing according to the data below. The cost for sea transport
is rapidly increasing since 2004 to the first quarter of 2006.
Price index for freight transport* services by sea (2004=100)
Figure 8

Year Quarter
Freight transport
services by sea
2004 Quarter 1 97.4
Quarter 2 98.9
Quarter 3 100.8
Quarter 4 102.9
Annual Aver. 100.0
2005 Quarter 1 104.7
Quarter 2 111.0
Quarter 3 117.7
Quarter 4 118.9
Annual Aver. 113.1
2006 Quarter 1 119.5
* Excluding oil transport
Source: Statistics Sweden

Labor cost
The available data show that labor cost in Sweden keeps on increasing since the last two
decades. Salaries keep on increasing in Sweden affecting the cost of production in the
country.

Page 35

Average monthly salary
Figure 9
Full-time employees 1973-2005. SEK

Private sector

Public sector
Non-manual workers
Central government
sector
Municipal sector County council sector
Year Total Women Men Total Women Men Total Women Men Total Women Men
2003 29,900 25,400 31,500 24,800 22,700 26,800 19,700 19,300 21,300 24,100 22,300 31,400
2004 31,300 26,500 33,000 25,300 23,200 27,300 20,500 20,100 22,000 24,900 23,000 32,400
2005 32,000 27,400 33,700 25,900 23,900 27,900 21,000 20,600 22,500 25,700 23,700 33,200
Source: Statistics Sweden

1) From 1994 the figures for the municipal sector and the county council sector include both
full- and part-time employees. That is why the salary in 1994 is lower compared to 1993
for "Total".
2) From 1997 the figures for the central government sector include both full- and part-time
employees.
3) Not available.
4) Private sector: Full-time employees in mining, quarrying and manufacturing
Source: Statistics Sweden

Exports and imports condition:
For the information about exports and imports, Sweden imports increases day by day since
2000 to the last Qatar of 2006. Because of production cost and raw material is too much high
in local market as authors mentioned before.


Page 36

Exports, imports and net trade of goods
Figure 10
Millions of SEK, current prices. Trend

Local market Vsters
Besides the big companies, small and medium size companies and individual retailers are also
an important actor of the market. These companies mostly are not buying directly from
manufacturer but normally through agents in Stockholm. After observing and having
interviews with the small shops in Vsters, Sweden it was found that these companies are
also in contact with few manufacturers in Italy, Spain, Poland, Baltic States, Turkey, and East
Europe etc. giving much information about these companies is not easy as most of them dont
have formal websites and information about the companies.
The small and medium size companies that are working in Vsters market have a bit
different approach towards the business than the big companies. Most of them avoid having
direct contact with the producers abroad. They are mainly in contact with middlemen and
agents from Stockholm and Gothenburg. The results that were found, from the survey and
questionnaire distributed among the local retailers, shows that most of the companies went
abroad due to high labor cost and no availability of raw material whereas some companies
also stated that even with having a small labor class still they are not skilled enough to
produce quality products. The companies started buying from different countries with
different attitudes. Mainly these companies are buying from London, Paris, Italy, Portugal and
Greece. Most of the companies took cultural similarity as a priority for making the decision of
outsourcing. Secondly they also stated the importance of shorter lead times and better control
over these independent suppliers. Some of the companies are also affected by the

Page 37

globalization due to which they started buying from the Far East and China, reasoning that the
big competitors were having better products with much lower cost which forced them to buy
from these countries as well. Companies which are dealing with agents have reported not
much problems. Still come of the companies stated that getting information from the
producers is not easy and the paper work required is difficult. Due to the small size and not
enough resources, these small and medium size companies can not have direct relation with
the producers or having their own production abroad, therefore they are only in contact with
independent suppliers and agents.
Swedish market: examples of leading companies
The key players in the Swedish garments are mainly H&M, JC, KappAhl and hlns. H&M
is the only one who is still expanding their international branches, whereas the other leading
players have stopped expanding in the international market and some of them even closed
some of their branches in some countries.
Another problem these companies are facing is the WTO which removed quotas from china
which pressurized the market for a downturn in the prices and high competition. The Chinese
government, in response to European political pressure, has introduced export tariffs.
In general we can say that the companies can be categorized into three different types, first of
all the companies which are having an industrial structure. Such companies will be having one
brand which is their main brand and almost everything in that company is sold with the brand
name. These companies also have the primary motive of exploiting the developing countries
in order to have access to the cheapest possible labor, raw material and other resources. These
big companies can have the incentive of taking the advantage of economy of scales and also
have big buying bargaining buyer to exploit the relationship with the suppliers of the Far East.
These kinds of incentives and advantage for smaller companies are not really an option and
even if they have contacts or suppliers from those countries still its very less.
The second type of business which we can distinguish from the first one is an enterprise
system of business. These businesses mainly have big chain of stores, and their way of doing
business is similar. The products that they offer are mainly in a big variety and have a shorter
product life cycle. This type of company will be marketing different brands which to a
customer might seem as different company. Mostly these companies have different brands,
probably having different stores as well, but the purchasing department is centralized and is
the one which is responsible for the whole business operations and supply chain management.

Page 38

The last type of company that we categorized can come under the ownership structure. The
business culture of these companies will have; same kind of business style, having centralized
command, standardization of supply chain management, focusing on few suppliers but rather
big ones, and taking the suppliers having many services.
H & M (Hennes & Mauritz) AB
The leading and outstanding company which is taking the full advantage of international
purchasing is H&M. H&M (Hennes & Mauritz) is well known all over Europe as a very
successful company selling low-priced fashion clothing and accessories. Erling Persson
established the company in Sweden in 1947, and still the Persson family is on the board. In
the past few years H&M has been one of the most successful companies, expanding firmly.
Hennes & Mauritz (H&M) is mainly involved in the fashion design, and retail sale business.
The company operates stores in 21 countries and is headquartered in Stockholm, Sweden. It
employs about 31,700 people. The company recorded revenues of $7505.9 million during the
fiscal year ended November 2004, an increase of 11.3% over 2003. The raise was largely
attributable to higher amount sales as a result of cheap pricing. The working profit of the
company during fiscal 2004 was $1491.2 million, an increase of 15.7% over fiscal 2003. The
net profit was $1016.9 million during fiscal year 2004, an increase of 13.9% over 2003.
(Source: datamonitor, menswear in Sweden, industry profile, august 2005)
For having low cost they started producing abroad, as the labor cost of the domestic market is
really high plus according to them availability of raw material was also one of the biggest
problems. It started by opening its first store (as Hennes) in Sweden in 1947, the company
entered into the Danish and Norwegian markets in the 1960s and to the British market in
1976. In 1965, after acquisition of Mauritz, the company became Hennes & Mauritz. Since
then, Hennes & Mauritz has been entering into several other European countries successfully,
being present in the USA since the year 2000. Now a day Hennes & Mauritz is operating in
13 countries and has plans of expanding into Eastern Europe. Hennes & Mauritz is a
financially strong company and the approach of the company focuses on continuous growth; a
10-15 % increase in profitability and in the number of new stores per year (Hennes &
Mauritz, Annual report 2002 and 2003).
In H&M the most important driver of competitiveness and profitability is the emphasis on
cost-effective production of goods. As they demand for clothing is relatively higher in
Sweden than the neighboring countries therefore they first start producing from the
neighboring countries in the north and some countries in the mid Europe. After globalization

Page 39

and their investment in some of the neighboring countries specially Germany which is
producing the biggest revenue for H&M they needed to have bigger production facilities and
also this way they could achieve economy of scales, so they took the Far East into
consideration and invested their so that they get good quality and better prices than before.
The head office of H&M is located in Stockholm, Sweden and this is also where company
management and other staff departments (finance, logistics, procurement, HR, etc) are to be
found. In addition, Hennes & Mauritz has 14 country offices with 21 production offices that
are in charge for checking that orders are placed with the right suppliers, for identifying new
suppliers, and for making sure that suppliers make up to the Hennes & Mauritz code of
conduct (EMCC case studies, H&M).
Like many other textile companies H&M as well has shifted their production from one place
to another. When the company first started, almost all production took place in Sweden, but
during the 1960s it shifted to the other Scandinavian countries and the United Kingdom.
Nearly in the 1970s the production moved from there to the Southern Europe mainly Italy and
Portugal. However they were also producing to an extent in Hungary, Poland and former
Yugoslavia. In the mid 1970s production moved to the Far East, where the initial production
office opened in Hong Kong in 1978. At the moment, Hennes & Mauritz has 21 production
offices, which reflect the location of suppliers: 10 are located in Europe, 10 in the Far East,
and one in Africa (EMCC case studies, H&M).
This company (H&M) is one of the best example of moving production to location where
there is good supply of labor, low wages, and good quality. It is comparatively cheaper to
produce in the Far East due to low labor cost, whereas the goods produced there are of good
quality. This can explain the reason of H&M having local offices with local employees. The
first and the important job of the local offices are to coordinate between the internal buying
department and the independent suppliers. The second job is to find and ensure doing business
with new and potential suppliers (Hennes & Mauritz, Annual report 2002 and 2003).
One of the reasons why H&M is so competitive is due to the importance they give to reduce
the lead time and improve logistics. In the past two three years the lead time from the
manufacturer to store has been decreased to about 15% to 20%. This has been achieved
through making the procurement personnel works directly with the production offices and
information and communication technologies (ICT) are a vital tool used to follow sales and
make intelligent choices. In recent years after the removal of the quotas from WTO countries
(China still have Quotas on some of the garment sector) the business of H&M with these

Page 40

countries have been never better, and it seems so that they are happy with their suppliers and
will keep doing business with them for the following years.
KappAhl AB
The business of KappAhl started in 1950 when Per-Olof ("Pelle") Ahl opened a shop selling
coats in a basement near Gothenburg. The idea of selling low price but good quality coats was
soon successful and the sale was about 400 coats daily (KappAhl, Company history). Cash
sales, small profit margins, big volumes, few middlemen and skilled co-workers were the
main strategy of KappAhl which made it famous soon all over the Sweden. In 1963, ten years
after the company came into being; KappAhl has 25 stores and an annual turnover of SEK 50
million (KappAhl, Company history). Still in the 1960s KappAhl was producing within
Sweden with the focus product as coats. In 1985 they step forward to make billion Swedish
kronor. This was their lucky year as KappAhl opened its first store outside Sweden, in
Switzerland. After few years they expanded their business to Norway and after that to
Finland. In 1990 KappAhl was sold to the Swedish Cooperative Union (KF). In 1997
KappAhl acquires the Danish MacCoy chain. Two years later KappAhl opened two stores in
Poland and became famous on the Norwegian. In 2003 KappAhl celebrated its 50th
anniversary. In 2004 KappAhl gets new owners, Nordic Capital and Accent Equity Partners.
KappAhl sells clothes for women, men and children in more than 250 stores in Sweden,
Norway, Finland and Poland. The company generated sales of 3.1 billion in 2004. The
companies operating profit for 2004 was $179.4 million compared with $99.8 million in 2003.
(Source: datamonitor, menswear in Sweden, industry profile, august 2005)
The first countries that KappAhl started purchasing from were countries in Europe like
Portugal, Italy and Greece. After the globalization impact the company now had better chance
to start buying from the better price producers in the Far East. The problem mentioned by the
Lena Bengtsson, Manager of supply and sourcing, about producing in the Far East is longer
lead time as well as they also mentioned that some labor and communication related problems
are also faced by the company.
This concept of selling low priced goods was not possible with producing in the domestic
market as the labor cost was too high and also there was no availability of raw material. Right
after the company started their business they soon became very famous among the people due
to their business concept of selling low priced goods but with high quality which they used to
manage through, low profit margin but high sale, few middle men to cut down the over head
cost and using the skilled employees. To meet this demand the company soon realized that

Page 41

they need to buy from outside the country, therefore they contacted the agents in Italy,
Portugal, Greece and such European countries. The reason behind the company buying from
European producers was; first of all the geographical distance was short, the culture was
almost the same and above all the countries were economically and politically stable. After
globalization, the ever increasing demand of customer and having operations now in countries
other than Sweden, the company searched for suppliers which can provide them with lower
and better quality than the one they already had therefore the started buying from Far East and
as the company had now experience from the past there fore they cut off the middle men and
started buying directly from the producers. Success after success made the company bold
enough to acquire other business therefore they first acquisition they made was of a Danish
company MacCoy.
The companys head office is situated in Mlndal, near Gothenburg (Gteborg). This is where
the work of designing, buying and marketing clothes is coordinated, jointly with a number of
other central tasks. Stock management and distribution to stores in markets are carried out by
the Distribution Centre next door to the head office. Most of the products in KappAhl are
bought from independent suppliers and producers in Asia and Europe. KappAhl is not
producing products by themselves; they are buying from the suppliers abroad. In the
beginning they used to buy through agents, but afterwards when they became used to the
buying process and where familiar with the international purchasing process they started
buying directly from the suppliers. First when they became international they used to buy
from abroad and sell them in the local market but after realizing the potential of the business
they also started selling abroad. The answer behind the motive of going abroad was the same
as for the rest of the firms; they went abroad due to high labor cost.
JC AB
The company JC was founded in 1962 by Gunnar Lenfors in Varberg and Arne Karlsson in
Halmstad with the idea of creating a brand which should serve the young generation. This
idea became very famous among young people and soon on 26
th
march 1962 the company
was registered by the name of Junior Center (JC). During the 1970s, the business became
successful with the market trends and the number of stores started rising. In 1980s the
company was now getting developed and becoming famous especially with their new store
opened in Norway. The business in Norway started profitable and the number of stores also
started to grow, few stores also opened in Germany, the Brother concept was also launched
and the turn over was in billion SEK. In 1999, the company changed from being a voluntary

Page 42

chain stores to company owned and franchise stores. Three stores also opened in Finland that
year. JC was listed on the Stockholm Stock Exchange in 2000 and the Sisters brand was
introduced, with 24 stores.
The company now has 259 stores, of which it owns and operates 85 stores. Stores are located
in Sweden, Norway and Finland. Sales are generated in franchise stores, company stores, and
a wholesale business. The company generated net sales of $1.32 billion in 2004 compared
with $1.29 billion in 2003.
(Source: datamonitor, menswear in Sweden, industry profile, august 2005)
JC sells cloths according to the concept JC, Brothers and Sisters. All these brands have their
clearly defined target market and brand positioning. The main brand of JC which is JC is
presented in all three countries whereas the Brother and Sister brand is sold only in Sweden.
Having these different concepts of three different brands is to follow the customers with their
age. The long term objective of JC is to achieve the annual organic growth which exceeds the
market growth in the surroundings (JC corporate info, Official website).
To make the most of the potential of the JCs concepts, they are trying to constantly focus and
refine their concepts. They are continually working on the enhancement of the JC concept and
its related brands. JC's purpose is to reach an optimal store structure with regard to geography,
location and the proportion of JC-owned stores and franchise stores, which is a continuous
continuing process. The objective requires a continued reformation of the total store portfolio,
to achieve a best possible utilization of both JC-owned stores and franchise stores (JC
corporate info, Official website).
They have three basic concepts for achieving this concept
1. Brand building and marketing: an increased focus on the maintenance of the JC,
Brothers and Sisters brands and sub-brands, to protect a steady stream of serious
customers to the stores. This will mainly be implemented through more aggressive
marketing both locally and nationally. An important tool in this activity is JC's
customer club, which can also be used for local marketing activities.
2. Store efficiency: an increased focus on a more capable utilization of the local
entrepreneurship of the franchisee and the concepts developed by JC. Store efficiency
will be further developed through increased management by objectives and continuous
benchmarking between the stores.
3. Range development: an increased focus on a clearer range and more frequent product
development, together with a higher degree of demand-led control.

Page 43

The purpose of the improved demand led control requires shorter lead time and elastic
purchasing process. They try to achieve this through a continued concentration of the number
of suppliers, more flexible production markets and a more demand-led merchandise
allocation.
Through training and increased internal exchange a good understanding of the whole and the
factors that create success in the sector is a decisive factor for stable development and
profitability. Continuous efforts are made to utilize the organization's total competence and
capability. These include enabling employees to acquire stores.
Operations should be marked by good ethics and environmental consideration
JC has a clear attitude towards environmental and ethical issues. As a result, JC makes high
demands that all operations carried on in JC's name take place in a sound manner. This also
involves high demands on suppliers to comply with JC's ethical and environmental
requirements. JC's active commitment to these issues is seen in its membership of the BSCI
(Business Social Compliance Initiative). This is a union of European retail companies, within
the framework of the EU, which promotes common ethical rules and monitors agreement by
member companies and their suppliers (JC corporate info, official website).
Since the autumn of 2004, JC has a centralized purchasing and production organization center
for all the concepts that are running under the parent company JC. The department is
responsible for the right price purchase, right quality and delivery at the right time.
Our organization has now settled down and in 2005 we were able to work on generating
synergy effects by coordinating purchasing, says Niklas Odequist, Production Director.
The production department was very devoted towards their work in reducing the cost of
purchasing and supplying it on the right time. Even though, they had problems regarding the
import quotas and the higher exchange rate of US dollar, still they managed to improve the
quality of the merchandise and the delivery on right time.
We strengthened the central purchasing process, but above all we increased our presence in
our production countries. Our Hong Kong office was expanded and we also established
ourselves in Hangzhou in central China. Proximity to our purchasing markets is essential and
we increased our purchasing in both China and Bangladesh, says Niklas.
In 2005 JC identified some of their Asian suppliers which were big for them as they needed to
have local presence as well. Most of the suppliers were checked by the quality department not
only for the assurance of the quality and delivery at the right time but also for checking on the
work condition, the strict ethical and environmental requirement. According to their annual

Page 44

report they are also planning to decrease the number of suppliers which got increased in 2005
due to the overwhelming competition by big companies.
We now also have a good geographical spread of production to optimize the mix of cost-
effectiveness and delivery flexibility. says Niklas.
The primary motive of having international purchasing strategy for this company was availing
the cheap labor and the availability of good quality raw material at lower prices. Their central
purchasing department is responsible for the right quality, right price and the delivering at the
right time. JC is trying to have as shorter lead times as possible, and this is one of the reasons
of their competitiveness. Even after some problems with the quota and the exchange rate of
dollar which made the business affected still the company managed to expand their business
in the first country (Hong Kong) where they started their production, and after that they
entered into the Chinese market where they were getting cheaper and good quality raw
material and the labor cost was comparatively cheaper. After entering the Far East, company
realized that they can produce much better quality with relatively cheaper price, therefore they
production was taken away from the first countries towards China and Bangladesh. Another
reason why the company is happy with these countries is that the company is not facing any
problem from the host country and is warmly welcomed. This sudden increase in the Far East
made the company have relation with a lot of suppliers due to the competition in 2005, but
now as they are established and know the good suppliers therefore they have intentions of
decreasing the suppliers number. Besides these big suppliers the company also is doing
business with some suppliers in the Baltic States and Turkey for the fast delivery in the mid
season, and according to the company they will not terminate these suppliers. In the beginning
when the company started their business in new markets for production, the suppliers were
assisted by the company and were helped in different way e.g. having financial support,
transfer of technology, giving them access to other markets to get the know how and how to
be efficient in production, but now days according to the company they are dealing with
independent suppliers which they are not helping in many ways, the reason which the
company gave was that now days the suppliers are more advanced and developed in
technological aspect and have their own way of doing business.
Apart from the Asian suppliers JC also have offices in Istanbul and Florence. In their Annual
report of 2005 its stated that they will try to wound up their business from some of their
offices and relocate it to the Asian offices, whereas the Turkish and the Baltic states offices
will be used for the rapid delivery of the mid season products. This way they will try to keep
up with the latest trends and will keep up to the demand from their Asian offices.

Page 45

Work on demand-led control started in 2004, when a web-based budget planning tool was
introduced into the stores. It provided a fine beginning for designing a system in which
merchandise replacement in the store is based on sales instead of budgeted volumes. This
technique and system resulted in less capital tied up in the stores collection, smaller clearance
sales, improved profitability and not least a higher level of customer service.

Page 46

Analysis
Overall Market
In this chapter we will discuss all the experience we got from studying these companies and
the information that we got from the companies through survey, so that it is possible to
categorize all the companies according to their strategy about why, where and how are the
allocating their internationalization process.
European market
In European market the availability of local resources was found low, still due to high
technological innovations and efficiency the companies are successful and competitive.
Another reason for the European companies to be competitive is there designing skills and
specially their brand names from France, Italy and UK. The growth of developing countries in
textile industry is still a big challenge for these big companies due to much lower prices with
quality products. The countries of European market are trying to protect the local producers
through tariff and barriers on developing countries. Also due to high transportation cost with
in the local market of Europe also increases the price of end product which is also affecting
the competitiveness of these companies to the foreign companies.
Swedish market
From the quantitative research we found out that the lack of natural resources and low
population is a big problem for the garments industry which leaves no other rational option
than to outsource the production and HR departments to foreign countries. Therefore
outsourcing is the most preferred decision in the Scandinavia and Sweden. Even with the
increase of transportation cost day by day is making them outsource as many functions as
possible. According to the statistics of Sweden its been found that imported products have
good demand and is favored by the nation having low demand flexibility. All the information
has been classified according to the model by WHY, WHERE and HOW as shown below;
Why
The main motive of the company as ever has been to decrease the cost and be competitive in
the market, therefore the main reason of the Swedish companies as well is to gain access to
the market with low labor cost and have good quality raw material. Some companies also
have the intention of having production near to big markets so that the lead time and the
transportation cost can be reduced, this way production of such good which have shorter life

Page 47

cycle is mostly produced in the countries which are near to big markets whereas the rest of the
products having longer life cycle are still produced in the Far East, this way the company can
take the full advantage of economy of scales, transportation cost low and delivery at the right
time. We also found some companies which first started the business outside of the countries
due to higher labor cost, of the domestic market, but afterwards when they became stable and
used to the international purchasing they also went to some countries where they acquired the
local chains and brands to get into the market without any resistance by the country or
customers.
Where
The decision of entering a new market for production is not easy and takes time before
making the decision by taking a lot of factors into consideration e.g. labor cots, availability of
natural resources, geographical placement, political risk, economic risk, and cultural
difference/similarity, access to end markets and distance from the end customer. The decision
of entering into a new market not only depends upon the above factors, its also affected a lot
by the organizational behavior/culture and their experience from the past. This way we can
say that having choice of one country might have different motives fro different companies.
The first countries that Swedish companies take into consideration are mostly the European
countries e.g. East Europe, Portugal, Italy, Greece etc. but now days or we can say that after
globalization the company have different attitude towards outsourcing they are trying to
produce at as lower price as possible but also to keep the European suppliers with them in
order to meet the demand which occurs to sudden change in fashion or trend. Keeping these
suppliers in Europe helps them in having the products at the right time because contacting and
changing things in the Far East and than getting the shipment from the suppliers takes a lot of
time which a company can not afford to have. Therefore we can say that the garments
companies need to keep both suppliers, like the European suppliers can be used to produce
those product which have shorter life cycle and the production should be monitored closely,
whereas the Asian suppliers are good for producing in bulk and taking advantage from the
economy of scales and lower prices.
How
About carrying out business in international market, the companies have a lot of different
options especially in the garments industry as the product has to go through different stages
before coming to the end product. The company can outsource the full procedure of the

Page 48

product getting into final shape as well as they can outsource different parts of the process
flow of the production, which depends upon the choice of the company. Outsourcing different
phases to different countries is taking the country best operation into consideration and further
transferring the product to other countries where other processes are very good. However this
is not possible in the reality due to high transportation cost and lead times therefore the
garment companies mostly decentralize all the activities except the designing and few other
important activities.
In general most of the Swedish companies are having independent suppliers, whereas very
few of the companies are having direct investment in the overseas manufacturing. We found
out that there are no formal relations between the Swedish companies and their suppliers as
their relation depends upon informal face to face meetings and the selection been done
through very basic standards.

Page 49

Conclusion
Global outsourcing has been agreed as an important tool to be competitive in the todays
market. Global sourcing is nothing less than the whole sale restructuring of the corporation
around core competencies and outside relationship (Corbett, 1999). The decision to outsource
peripheral functions can lead to competitive advantages in different companies. Outsourcing
to be efficient, the decision taken should be informed. After studying and analyzing the
Swedish garment sector we found out that there are a lot of different ways of outsourcing and
the motive is not the same, but to an extent we found out that the main motive or the force
which is making them go abroad is almost a common factor. Well the firms didnt showed the
same result as the other firms but still it can easily be said that the reason most of the firms
went abroad for production was the unavailability of natural resources, high labor cost and the
weather condition in the country. The process of internationalization which took place in
these companies can be explained in a way that they first looked at the competitive advantage
of the domestic market, which was found low and the way out of this was outsourcing but
before outsourcing the company also needs to see the demand flexibility of the market, which
in case of Sweden was again low this showed a clear decision of outsourcing. After making
the decision of which countries to go, most of the companies took the one which were having
less geographical distance, some of the companies said that the reason of taking the countries
in Europe was because the transportation cost and control was better whereas few of the
companies also claimed that the business culture and the overall culture of the countries was
also found similar thats why they went to those countries. After the decision of which
country the companys needed to make a decision on which suppliers to opt for, as they call it
process capability of supplier, some of the companies helped the suppliers to get advanced
and how to work whereas the other companys didnt interfere into the suppliers business,
now days all of the company are not interfering with the business of independent suppliers.

Page 50

Recommendations
It is important for Swedish garments companies to have direct relation with the manufacturer;
firstly to cut the overhead costs of middle men and secondly for the communication reasons.
Generally it is found that the big firms will most likely import from countries which are
having low labour cost with ignoring the geographical distance as those companies relies on
economy of scale and produce in bulk quantity. The big companies and the big retail chains
are efficient in the purchasing operations using designers and buying centers. They will rarely
buy some ready made garments; mostly they are using their own designers and make the
manufacturer produce according to their choice. A neglected part from the big companies is
also that if they start marketing that the reasons of their production in these Far East countries
is not only task related like reducing the cost and increasing the quality but also non-task
related which is improving the life standard of these developing country. This will help the
company have goodwill in the mind of consumers. Also it has been found while collecting
information form the companies that most of the companies dont give much importance to
the purchasing department whereas marketing department which is responsible for export and
other activities is given much importance and funds. Solving this problem will also help the
companies to get to the best suppliers and have better decisions.
The small and medium size retailers buy their products through agents or fashion fairs. The
fashion world is changing faster than the past and the trends never lasts more than year or so
therefore the small and medium size companies which are trying to be in contact with the
manufacturer themselves should take this into consideration that giving order in the Far East
can result in longer lead time and the product might get delivered after few months which
might be the ending time of that specific trend. One option which has been used by the
companies in the past was to outsource such kind of products to nearby countries (Baltic
States, Portugal, Italy, Poland etc.) and the products which product life cycle is long enough
e.g. formal shirts, children wear, and formal pants etc. can be outsourced to the Far East.
For producers of the developing countries they can come in contact with such companies
through agents which charges commission and can help them in being updated to the trends in
the Sweden and upcoming fashions. As the time and communication are what the companies
in Sweden have problems with producing in Far East therefore the manufacturer should better
try to be in contact with them directly which can reduce the lead time, communication
problems and commissions. The manufacturer should also keep an eye on the upcoming
festivals in Sweden and Europe where they can meet or contact the companies or present

Page 51

themselves and their business. The manufacturer should also keep them updated to new laws
which might have some affect on their business or the relation with such importers from
Sweden or Europe. The manufacturer should also make sure by themselves that there is
nothing going wrong in their production facilities which might not be according to ethics or
some how might affect the credibility of manufacturer in European importers e.g. child labor,
unsafe working conditions, use of chemicals, no proper dumping etc.

Page 52

References

Australian Trade Commission, publication: 2006. Textiles and clothing to Sweden Swedish
Textile and Clothing Industries' Association. Retrieved on 26 Jun. 06 from
http://www.austrade.gov.au/australia/layout/0,,0_S2-1_CLNTXID0019-2_-
3_PWB110764589-4_-5_-6_-7_,00.html

Annual Report, JC 2005 Retrieved on 5
th
may, 2006, from
http://www.jc-online.com/jcinternational/jc2005_eng.pdf

Annual Report, KappAhl 2005 Retrieved on 7
th
may, 2006, from
http://investors.KappAhl.se/index.php?p=start&afw_lang=en

Anders, Pehrsson, (1996). International Strategies in Telecommunications: Models and
Applications. London, GBR: Routledge, 1996. p 7. Retrieved on 20
th
June, 2006, from
http://site.ebrary.com/lib/malardalen/Doc?id=10070736&ppg=20

Assche Arivan; Cirano,; Montreal; Schwartz. Galina .A, May 9, 2006. Input specificity and
global sourcing .University of California Berkely . Retrieved on 19
th
June, 2006, from
http://neumann.hec.ca/pages/ari.van-assche/papers/specificity.pdf

Bolisani Ettore; Scarso Enrico November, (1996). , International manufacturing strategies:
experiences from the clothing industry, International Journal of Operations & Production
Management, Volume: 16 Issue: 11 Page: 71 84. Retrieved on 22 June , 2006 From
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/EmeraldFu
llTextArticle/Articles/0240161105.html

Blumberg D.F . (1998), 'strategic assessment of outsourcing and downsizing in the service
market', Managing service quality, Vol. 8 No.1, pp. 5-- Retrieved on 18 April, 2006, from
http://www.ingentaconnect.com/search/expand?pub=infobike://mcb/108/1998/00000008/000
00001/art00001&unc=

Borrus Michael , May, (1996), Left for Dead: Asian Production Networks and the Revival of
US Electronics Berkeley Roundtable on the International Economy University of California,

Page 53

Berkeley. Retrieved on 5
th
may from
http://www.ap.harvard.edu/mainsite/papers/recoop/borrus/borrus.pdf


Chandler A.D(1962), strategy and structure: chapter in the history of industrial enterprise,
MIT press, Cambridge, MA.

CIA - The World Factbook, The world fact book: Sweden 2005. Retrieved on 26 Jun. 06
from www.cia.gov/cia/publications/factbook/geos/sw.html

Cross. M(1999), getting a grip on outsourcing, Computing, 13 May, pp. 48-50.

Commission of the European Communities Brussels, 29.10.2003, the future of the textiles and
clothing sector in the enlarged European Union. Retrieved on 26th March, 2006, from
http://europa.eu.int/comm/enterprise/textile/euromed.htm


Commission of the European Communities (CEC) (2003a), The Future of the Textiles and
Clothing Sector in the Enlarged European Union, European Commission, COM (2003) 649
final, available at: http://trade-info.cec.eu.int/textiles/documents/178.pdf, .

Consolidated Report 2005 T/C Liberalisation IFM and partners February 2004. Institut
Francais De La Mode (Paris). Retrieved on 22 March, 2006, from
http://europa.eu.int/comm/enterprise/textile/documents/ifm_final_report_2005.pdf

Corbett, M.F. (1999), ``Multiple factors spur outsourcing growth''. Retrieved on 22 June 2006
from
http://www.Outsourcing-Journal.com/issues/jan.

Claussen Eileen , President pew centre on global climate change.
Forging an international strategy Working together because climate change is serious
business .Retrieved on 20
th
June 2006, from
http://www.pewclimate.org/policy_center/policy_maker_s_guide/looking_ahead/ahead_forgi
ng.cfm

Page 54


David, J. (2002), Strategic Sourcing: Benefits, Problems and a Contextual Model.
Dunning, J.H. 1993, The Globalization of Business, the Challenge of the 1990s, Routledge,
London. Nottingham Trent University .Retrieved on 24 March, 2006, from
http://www.emeraldinsight.com

Datamonitor, Menswear in Sweden Industry Profile, Publication date: August 2005. Retrieved
on 26th March, 2006, from
http://dbic.datamonitor.com/industries/profile/?pid=B68DEE81-CFE6-42B6-A396-
98730A1F7F0C

Doff-Kallenius Mariane and Ms. Jense Inge, Market Brief the Swedish Market Seminar
conducted by Borje Risinggard, Import Council, Swedish Federation o/Trade, Philippine
Trade and Training Center; Manila. Retrieved on 27
th
April 2006, from
http://www.philembassy.se/annments/garments.htm

European Foundation for the Improvement of Living and Working Conditions, textile and
clothing: A dying industry or not, Wyattville Road, Loughlinstown, Dublin 18, Ireland.
Retrieved on 21 March, 2006, from
www.eurofound.eu.int

European Foundation for the Improvement of Living and Working Conditions, Sector future:
Policy responses to post-2005 challenges, Wyattville Road, Loughlinstown, Dublin 18,
Ireland. Retrieved on 23 March, 2006, from
www.eurofound.eu.int

European Foundation for the Improvement of Living and Working Conditions, Industrial
change in the textiles and leather sector: Hennes & Mauritz, Wyattville Road, Loughlinstown,
Dublin 18, Ireland. Retrieved on 22 March, 2006, from
www.eurofound.eu.int

Forbath Theodore, (2006). Developing an Effective Global Sourcing Strategy. Retrieved on
20
th
June 2006, From
http://www.cioupdate.com/insights/article.php/3522381

Page 55




Fisher, M.L. (1997), what is the right supply chain for your product, Harvard business
review, March, pp.105-16. Retrieved on 28 March, 2006, from
http://www.bren.ucsb.edu/academics/courses/595T/Readings/Fisher97_ESM%20595T.pdf


Flaherty, M.T., (1986)Coordinating international manufacturing and technology, in Porter
M.E. (Ed.), Chttp://citeseer.ist.psu.edu/context/1053200/0 competition in Global Industries,
Harvard Business School Press, Boston, MA,

Ferrantino Michael.J, September, 2003, Analytical Approaches to Quantifying Economic
Effects of Non-Tariff Measures U.S. International Trade Commission. Retrieved on 12
th
May
2006, from
http://www.farmfoundation.org/projects/documents/Ferrantinopaper9-11-03.pdf

Ghanatabadi F . (2005), Internationalization of Small and Medium-Sized Enterprises in
Iran. Lule University of Technology Thesis Retrieved on 26th March, 2006, from
http://epubl.ltu.se/1402-1544/2005/01/LTU-DT-0501-SE.pdf.,from




Gibbon, P. & Thomsen, L. (2002) Scandinavian clothing retailers' global sourcing patterns
and practices. Copenhagen: CDR Working Paper Sub series no. xxii. 02.14. University
Montpellier, France Thesis. Retrieved on 29 March, 2006, from
http://www.ids.ac.uk/globalvaluechains/publications/clothingchains.pdf



Gottardi, G., Diffusion of information technology and spatial reorganization of firms,
38th North American Meeting of the Regional Science Association, New Orleans, LA, 8-10
November 1991. Retrieved on 30
th
March, 2006, from

Page 56

http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/EmeraldFu
llTextArticle/Articles/0240161105.html,

Gibbon .P and Thomsen.L, New challenges for developing country suppliers in global
clothing chains: A comparative European perspective, University of Montpellier, France.
Retrieved on 27
th
March, 2006, from
http://www.ids.ac.uk/globalvaluechains/publications/



Grant, R.M., (1995) Contemporary Strategy Analysis. Concept, Techniques, Applications,
Blackwell, Cambridge

Global sourcing 101 Hewitt Quarterly Asia pacific Volume 3 Issue 4
Retrieved 20
th
June 2006, From
http://was4.hewitt.com/hewitt/ap/resource/rptspubs/hewittquart/HQ_12/articles/globe_source.
html

Harbhajan, Kehal, S. (Editor). Outsourcing and Offshoring in the 21st Century: A Socio-
Economic Perspective. Hershey, PA, USA: Idea Group Publishing, 2006. p 55. .Retrieved
on 20
th
June, 2006, from
http://site.ebrary.com/lib/malardalen/Doc?id=10116542&ppg=85

Handfield, R.B., US global sourcing: patterns of development, International Journal of
Operations & Production Management, Vol. 14 No. 6, 1994, pp. 40-51. Retrieved on 22
April, 2006, from
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/EmeraldFu
llTextArticle/Pdf/0240140603.pdf



Harrigan, K.R. (1985), Vertical intergration and corporate strategy, Academy of
Management Journal, Vol.28 No. 2, pp.397-425. Retrieved on 25 April, 2006, from
http://www.jstor.org/view/00014273/ap010093/01a00090/0

Page 57



Jackson, Graham. (1982). Exporting from the importers viewpoint. European Journal of
Marketing, 15(3): 3-25.


Kotabe Masaaki , Janet Y. Murray; Journal of International Business Studies. Linking
Product and Process Innovations and Modes of International Sourcing in Global
Competition: A Case of Foreign Multinational Firms. Vol. 21, 1990. Retrieved on 22 April,
2006, from
http://www.questia.com/PM.qst?a=o&se=gglsc&d=5000119604

Keenan Michael, Saritas Ozcan and Kroener Inga (Oct, 2004), A dying industry or not?
The future of the European textiles and clothing industry: foresight Volume 6 Number 5
2004 313-322. Retrieved on 22 Jun. 06 from
http://www.emeraldinsight.com/10.1108/14636680410563016

Lankford, W.M. and Parsa, F. (1999), outsourcing: a primer, Management Decision, Vol. 37
No. 4, pp. 310-16.

Lei Xu and Benita M. Beamon, February 2006 A Global Review of Purchasing and Supply,
the Institute for Supply Management

Minahan T special to CIO search .com, 2000_2006). Global sourcing what you need to
know to make it work. Retrieved on 20th June, 2006 from
http://searchcio.techtarget.com/originalContent/0,289142,sid19_gci918624,00.html


Maynard, W. 2005, June 30 . Outsourcing and Virtual Assistants: Small Business Saviors.
EzineArticles. Retrieved June 20, 2006, from
http://ezinearticles.com/?Outsourcing-and-Virtual-Assistants:-Small-Business-
Saviors&id=47602

Page 58

M. Daily Catherine. (n.d), An empirical examination of the relationship between CEOS and
directors The Ohio State University. Retrieved on June 16, 2006 from
http://coba.shsu.edu/jbs/vol12/no1/12-1-4.htm
Nygren Jan, Chairman of the synthesis project (2004). A synthesis report from the Swedish
technology Foresight project. Choosing strategies for Sweden.
Retrieved on 20th June, 2006, from
http://www.vinnova.se/upload/EPiStorePDF/ChoosingStrategiesForSweden.pdf

Ozanne, Marg R., Dr., (Dun and Bradstreet) Managing Strategic Partnerships for the Virtual
Enterprise, Fortune, Vol. 136, No. 6, September 29, 1997, S-10.

Outsourcing, acceture consultance, 1996 - 2006. Accenture high performance delivered
outsourcing. Retrieved on 19
th
June, 2006 from
http://www.accenture.com/Global/Services/By_Subject/Outsourcing.htm?Player=Media=1

Outsourcing: How Outsourcing Developed; Reasons for Outsourcing and Off shoring;
Consequences of Outsourcing; Responses to Outsourcing.Retrived on 20
th
June, 2006 from
http://encarta.msn.com/encyclopedia_701702628/Outsourcing.html

Porter, M.E, The Competitive Advantage of Nations, Free Press, New York, NY, 1989.

Porter, M.E., Competition in global industries: a conceptual framework, in Porter M.E.
(Ed.), Competition in Global Industries, Harvard Business School Press, Boston, MA, 1986.


Pol Antras ;Elhanan Helpman, 2004, Global Sourcing , Journal of Political Economy ,
vol.112.no.3 .Retrived on 19
th
June ,2006, from
http://post.economics.harvard.edu/faculty/antras/papers/GSJPE.pdf


Parker. K, 2006, June 10 Outsourcing: its Impact on American Jobs market.EzineArticles
.Retrieved on 20
th
June, 2006 from
http://ezinearticles.com/?Outsourcing-:-Its-Impact-on-American-Jobs-Market&id=216879


Page 59

Quinn, J.B., Doorley, T.L. and Paquette, P.C. (1990), technology in services: rethinking
strategic focus, Sloan management review, winter, pp. 79-87. Retrieved on 13 April, 2006,
from
http://sloanreview.mit.edu/smr/issue/1990/winter/7/
Sthl .B, 2000/1, Buying Abroad: The case of inward internationalization processes,
Department of Business Studies, Uppsala University 2000. Retrieved on 27th March, 2006,
from
http://www.ub.uu.se/wop/02801604/0001/

Statistical database, statistics Sweden. Statistiska centralbyrn. Retrieved on 26 June 2006
from
http://www.scb.se/templates/AlphaIndex____2161.asp

Stalk, G., Evans, P. and Shulman, L. (1992), competing on capabilities, Harvard Business
Review, Vol. 70 No. 2, March, pp.55-69.

Singhatiya A 28 October, 2005. Outsourcing: A complex series of tradeoffs
.EzineArticles .Retrieved on 20
th
June. 2006 from
http://ezinearticles.com/?Outsourcing:-a-Complex-Series-of-Tradeoffs&id=88571


The outsourcing management Zone. What is outsourcing.
Retrieved on 20
th
June, 2006 from
http://www.theoutsourcerzone.com/why.htm


Thompson, Jack. 2004, December 22. Project Outsourcing: Why ALL Businesses Should
Consider Outsourcing an Integral Part of Business. EzineArticles. Retrieved 20
th
June, 2006,
from
http://ezinearticles.com/?Project-Outsourcing:-Why-ALL-Businesses-Should-Consider-
Outsourcing-An-Integral-Part-of-Business&id=7475

Van Hoek, R.I. (1999), ' Postponment and the reconfiguration challenge for food supply
chains', Supply chain management, Vol. 4 No. 1, pp.18- Retrieved on 15 April, 2006, from

Page 60

http://www.ingentaconnect.com/search/expand?pub=infobike://mcb/177/1999/00000004/000
00001/art00004&unc=

Voss.C.A, 1995 Alternative paradigms of manufacturing strategies, International Journals
of Operations& Production Management, Vol.15 NO.4, pp.5_16. Retrieved on 20
th
June,
2006, from
http://www.london.edu/assets/documents/PDF/2.3.3.7.5.1_alternative_paradigms.pdf


Webster, Fredrick E., Jr. & Yoram Wind. 1972. organizational buying behavior. Englewood
Cliffs, N.J.: Prentice-Hall.

Working paper of the directorate-general for Agriculture, The cotton sector. European
commission. Retrieved on 26 June 26, 2006 from
http://ec.europa.eu/agriculture/markets/cotton/index_en.htm

World Trade Organisation (2000, 2001, 2002) Rerived on 10th May, 2006, from
www.wto.org.

Werner International (2001) Spinning & Weaving Labour Cost Comparisons. Reston VA and
Brussels.

William M. Lankford, Parsa Faramarz (1999), Outsourcing: a primer Management Decision.
May 1999 Volume: 37 Issue: 4 Page: 310 316. Retrieved on 22 Jun. 06 from
http://www.emeraldinsight.com/10.1108/00251749910269357

Winterton A, Dec 2000, Why outsourcing could be good for you Balance Sheet, MCB UP
Ltd. Retrieved on 22 June 22, 2006 from
http://www.emeraldinsight.com/10.1108/EUM0000000005388



Page 61



Interviews

Interview conducted with Niklas Odequist, Production Director, JC AB. Conducted on 16
th

May, 2006.

Interview conducted with Per Lundin, Production department, H&M. Conducted on 19
th
May,
2006.

Interview conducted with Lena Bengtsson, Manager Supply and sourcing, KappAhl.
Conducted on 22 May, 2006

Page 62

Appendix 1
Questionnaire for survey
COMPANYS NAME: ____________________________________________________

Which kinds of clothing your company has?
Casual
Dressed
Sports
Uniform
Netted clothes
Leather accessories
Others___________________________________.


Which one is the most important when deciding on which market to enter for
production?
Cheap labor---------------
Raw material--------------
Emerging market---------
Potential customers------

How do you supply your garment?
Own production in Sweden
Other production in Sweden
Production at full or divided subsidiary abroad
Purchase directly from manufacturer abroad
Purchase through Swedish agents
Purchase through agents abroad


How important are the following areas in your supplier relationship?
Price:
Less important , Important very important
Quality:
Less important , Important very important

Right delivery in right time:
Less important , Important very important

Communication concerning garments performance:
Less important , Important very important

Communication concerning delivery and production and planning:
Less important , Important very important

The atmosphere in the circumstances:
Less important , Important very important

Page 63


Working circumstance in the production process:
Less important , Important very important


How long time does it take for your supplier from ordering to delivering:
For your quickest supplier ____ weeks
For your slowest supplier ____ weeks
For your normal supplier ____ weeks

About how many suppliers of garments does your company use at the same time?
Less than 5
More than 5
More than 10

Which methods do you use to choose a supplier?
We look at other customers for whom our suppliers are working.
Other purchasing partners recommendations
Visit their exhibition
That they give a favorable price option
Look at their previous sample work
Others__________________________________

Is it common that the garment has to be worked at in different companies before they
are ready?
Yes
No
Dont know

Do you use the strategy that you use two suppliers for the same model- one who
produces biggest part depending on selling and the other who can deliver according to
their need quickly?
Yes
No

To which extent do you outsource the production process?
Making the fabric
Cutting and designing
Sewing to make it semi finished good
Getting packed final product


Page 64

Replies to survey

COMPANYS NAME: Leopold & Bloom (Vsters)
Which kinds of clothing your company has?
Casual
Dressed
Sports
Uniform
Netted clothes
Leather accessories
Others___________________________________.
Which one is the most important when deciding on which market to enter for
production?
Cheap labor---------------
Raw material--------------
Emerging market---------
Potential customers------
How do you supply your garment?
Own production in Sweden
Other production in Sweden
Production at full or divided subsidiary abroad
Purchase directly from manufacturer abroad
Purchase through Swedish agents
Purchase through agents abroad
How important are the following areas in your supplier relationship?
Price:
Less important , Important very important
Quality:
Less important , Important very important

Right delivery in right time:
Less important , Important very important

Page 65


Communication concerning garments performance:
Less important , Important very important

Communication concerning delivery and production and planning:
Less important , Important very important

The atmosphere in the circumstances:
Less important , Important very important

Working circumstance in the production process:
Less important , Important very important

How long time does it take for your supplier from ordering to delivering:
For your quickest supplier 4 weeks
For your slowest supplier 30 weeks
For your normal supplier 20 weeks

About how many suppliers of garments does your company use at the same time?
Less than 5
More than 5
More than 10
Which methods do you use to choose a supplier?
We look at other customers for whom our suppliers are working.
Other purchasing partners recommendations
Visit their exhibition
That they give a favorable price option
Look at their previous sample work
Others: Fashion fares
Is it common that the garment has to be worked at in different companies before they
are ready?
Yes
No
Dont know

Page 66

Do you use the strategy that you use two suppliers for the same model- one who
produces biggest part depending on selling and the other who can deliver according to
their need quickly?
Yes
No
To which extent do you outsource the production process?
Making the fabric
Cutting and designing
Sewing to make it semi finished good
Getting packed final product

COMPANYS NAME: Saks (Vsters)
Which kinds of clothing your company has?
Casual
Dressed
Sports
Uniform
Netted clothes
Leather accessories
Others___________________________________.
Which one is the most important when deciding on which market to enter for
production?
Cheap labor---------------
Raw material--------------
Emerging market---------
Potential customers------
How do you supply your garment?
Own production in Sweden
Other production in Sweden
Production at full or divided subsidiary abroad
Purchase directly from manufacturer abroad
Purchase through Swedish agents
Purchase through agents abroad

Page 67

How important are the following areas in your supplier relationship?
Price:
Less important , Important very important
Quality:
Less important , Important very important

Right delivery in right time:
Less important , Important very important

Communication concerning garments performance:
Less important , Important very important

Communication concerning delivery and production and planning:
Less important , Important very important

The atmosphere in the circumstances:
Less important , Important very important

Working circumstance in the production process:
Less important , Important very important

How long time does it take for your supplier from ordering to delivering:
For your quickest supplier one week
For your slowest supplier weeks
For your normal supplier thirty weeks

About how many suppliers of garments does your company use at the same time?
Less than 5
More than 5
More than 10

Which methods do you use to choose a supplier?
We look at other customers for whom our suppliers are working.
Other purchasing partners recommendations

Page 68

Visit their exhibition
That they give a favorable price option
Look at their previous sample work
Others: They are coming to us.

Is it common that the garment has to be worked at in different companies before they
are ready?
Yes
No
Dont know

Do you use the strategy that you use two suppliers for the same model- one who
produces biggest part depending on selling and the other who can deliver according to
their need quickly?
Yes
No

To which extent do you outsource the production process?
Making the fabric
Cutting and designing
Sewing to make it semi finished good
Getting packed final product

No Answer

Page 69

Appendix 2
Questionnaire for Interview through E mail and face to face
Respective Sir/Madam,

We are students of International marketing program at Mlardalen University; we are doing
our master thesis about Swedish garments sectors under the supervision of our tutor Claes
Jonsson. The purpose of our thesis is to find out about the patterns of Imports that are being
carried out by the Swedish garments industry. The main usability of this thesis is to find out
their strategies and the reasons behind those strategies and further more if some companies
want to reengineer their business process can take help from this thesis.
We would appreciate if you would complete the attached brief survey. Completion of the
survey is expected to take about 10 minutes of your time. The questions are quite general (for
example, when the company realized that they should start producing abroad?). You may omit
any question you prefer not to answer. There are no known or anticipated risks to
participation in this study. Further, all information you provide will be considered confidential
if desired by the company.
The information that we need is purely for academic reason. Your help and contribution to
this thesis will be sincerely appreciated.

Thank you in advance for your interest in this project.

Yours sincerely,
Muhammad Takbeer, E-mail: takbeerh@yahoo.com, Mobile: 0704778477
Wajih Khattak, E-mail: to_wajih@yahoo.com, Mobile: 0704777241



If there is any doubt or question about this questionnaire you can contact us or our tutor
without any hesitation. Our tutor contact number is 0707812755 where as our contact is given
above with the names.

Page 70

Company Name:
Answered by:
Employee designation:
Date of reply:
1. When the company realized that they should start producing abroad?
2. Did the company start first selling abroad or buying from abroad?
3. what was the reason of going abroad
a. high labor cost of the domestic market
b. unskilled labor at the domestic market
c. no availability of raw material in domestic market
d. high cost of production facility e.g. expensive land price, tax system
4. Which countries were first taken into consideration?
5. Was there any specific reason for taking those countries?
a. Cultural similarity
b. Low transportation cost
c. Political stability
d. Economy of the host country
6. After globalization, did the choice of countries got different?
7. Is the choice of country also affected by the customer demand for specific country?
8. If production was taken away, from the first countries to get in, into other countries
what was the reason?
9. Are there any specific problems in producing in Far East countries?
10. Are there any special adaptations required in producing in the Far East countries?
11. Which of the following problems occurs in producing from Far East countries:
a. quality related problems
b. Price related problems
c. Labor related problems
d. Transportation related problems
e. Communication related problems
12. Does the company face problems from the home country government?
13. Are the host country governments helpful? If not than in which aspect?
a. Extra tax on foreign companys

Page 71

b. Entry into the local market
c. Barriers for the labor market
d. Not giving desired location for production
14. What kind of supply strategies are used with the supplier?
a. Licensing and franchising
b. direct investment in the host country
c. Independent suppliers
d. Through agents and whole sale
15. Does the company help the suppliers financially to get the latest technology for
production?

Page 72

Replies to Executive questionnaire
Company Name: JC AB (head office Gothenburg)
Answered by: Niklas Odequist
Employee designation: Production Director
Date of reply: 16/5 2006
1. When the company realized that they should start producing abroad?
30 years ago.
2. Did the company start first selling abroad or buying from abroad?
Buying was first
3. what was the reason of going abroad
a. high labor cost of the domestic market
b. unskilled labor at the domestic market
c. no availability of raw material in domestic market
d. high cost of production facility e.g. expensive land price, tax system
Answer is A and B
4. Which countries were first taken into consideration?
Hong Kong
5. Was there any specific reason for taking those countries?
a. Cultural similarity
b. Low transportation cost
c. Political stability
d. Economy of the host country
Answer: None of above reasons
6. After globalization, did the choice of countries got different?
Answer: Yes, more of production directly in China.
7. Is the choice of country also affected by the customer demand for specific country?
Answer: No
8. If production was taken away, from the first countries to get in, into other countries
what was the reason?
Answer: Better prices.
9. Are there any specific problems in producing in Far East countries?

Page 73

Answer: Production control is more difficult and lead-times due to longer
transportation is longer.
10. Are there any special adaptations required in producing in the Far East countries?
Answer: More preparation in advance such as more initial input of our demands to
manufacturer.
11. Which of the following problems occurs in producing from Far East countries:
a. quality related problems
b. Price related problems
c. Labor related problems
d. Transportation related problems
e. Communication related problems
Answer: D and E
12. Does the company face problems from the home country government?
Answer: NO
13. Are the host country governments helpful? If not than in which aspect?
a. Extra tax on foreign companys
b. Entry into the local market
c. Barriers for the labor market
d. Not giving desired location for production
Answer: -
14. What kind of supply strategies are used with the supplier?
a. Licensing and franchising
b. direct investment in the host country
c. Independent suppliers
d. Through agents and whole sale
Answer: C
15. Does the company help the suppliers financially to get the latest technology for
production?
Answer: Have been in the past. But nowadays, all suppliers are more developed.

Page 74

Company Name: H&M (head office Stockholm)
Answered by: Per Lundin
Employee designation: H&M Production Dept
Date of reply: 19/5 2006
Dear Wajih Khattak,
Subject, your letter with questions concerning Swedish garment sectors.
Answer to your questions,
1. from the start, year 1947
2. Buying abroad
3. a. High labor cost of the domestic market
c. no availability of raw material (material) in domestic market
4. Neighbour countries in north and mid parts of Europe
7. No
8. Better quality, production and lower prices
9. No, there are not any specific problems in producing in Far East countries as we
Have a long experience with producing garments in varies countries during many years.
Quotas was a problem/trade barrier until 31/12 2004, then the world became quota-free
From all WTO countries, except China where quotas still exist on some garment categories.
12. No
15. No
Regards
Per Lundin
H&M Production Dept
Stockholm, Sweden
Company Name: KappAhl AB (head office Gothenburg)
Answered by: Lena Bengtsson
Employee designation: manager Supply & Sourcing
Date of reply: 22/5-2006
1. When the company realized that they should start producing abroad?
We didnt start producing by ourselves, but we bought from suppliers abroad.

Page 75

First through agents and later direct.
2. Did the company start first selling abroad or buying from abroad?
We start first with buying abroad to our shops in Sweden.
3. what was the reason of going abroad
a. high labor cost of the domestic market
b. unskilled labor at the domestic market
c. no availability of raw material in domestic market
d. high cost of production facility e.g. expensive land price, tax system
4. Which countries were first taken into consideration?
Countries in Europe, like Portugal, Italy, Greece
5. Was there any specific reason for taking those countries?
a. Cultural similarity
b. Low transportation cost
c. Political stability
d. Economy of the host country
6. After globalization, did the choice of countries got different?
Yes, we started to buy direct from Far East.
7. Is the choice of country also affected by the customer demand for specific country?
No, the reason is to get the right price.
8. If production was taken away, from the first countries to get in, into other countries
what was the reason? To get better prices
9. Are there any specific problems in producing in Far East countries?
Longer lead-time
10. Are there any special adaptations required in producing in the Far East countries?


11. Which of the following problems occurs in producing from Far East countries:
a. quality related problems
b. Price related problems
c. Labor related problems
d. Transportation related problems
e. Communication related problems
12. Does the company face problems from the home country government?
No

Page 76

13. Are the host country governments helpful? If not than in which aspect?
a. Extra tax on foreign companys
b. Entry into the local market
c. Barriers for the labor market
d. Not giving desired location for production
14. What kind of supply strategies are used with the supplier?
a. Licensing and franchising
b. direct investment in the host country
c. Independent suppliers
d. Through agents and whole sale
15. Does the company help the suppliers financially to get the latest technology for
production? NO
Company Name: Rock Zone (Vsters)
Answered by: Mazhar Shah
Employee designation: Manager
Date of reply: 26_ 05 _2006
1. When the company realized that they should start producing abroad?
Answer: No
2. Did the company start first selling abroad or buying from abroad?
Answer: London, Paris, Italy
3. what was the reason of going abroad
a. high labor cost of the domestic market
b. unskilled labor at the domestic market
c. no availability of raw material in domestic market
d. high cost of production facility e.g. expensive land price, tax system
Answer: A &C
4. Which countries were first taken into consideration?
Answer: London, Paris, Italy
5. Was there any specific reason for taking those countries?
a. Cultural similarity
b. Low transportation cost

Page 77

c. Political stability
d. Economy of the host country
Answer: D
6. After globalization, did the choice of countries got different?
Answer: No
7. Is the choice of country also affected by the customer demand for specific country?
Answer: Yes much
8. If production was taken away, from the first countries to get in, into other countries
what was the reason?
Answer: Price, Quality, Motive
9. Are there any specific problems in producing in Far East countries?
Answer: No
10. Are there any special adaptations required in producing in the Far East countries?
Answer: No
11. Which of the following problems occurs in producing from Far East countries:
a. quality related problems
b. Price related problems
c. Labor related problems
d. Transportation related problems
e. Communication related problems
Answer: No
12. Does the company face problems from the home country government?
Answer: High tax
13. Are the host country governments helpful? If not than in which aspect?
a. Extra tax on foreign companys
b. Entry into the local market
c. Barriers for the labor market
d. Not giving desired location for production
Answer: A
14. What kind of supply strategies are used with the supplier?
a. Licensing and franchising
b. direct investment in the host country
c. Independent suppliers
d. Through agents and whole sale

Page 78

Answer: B
15. Does the company help the suppliers financially to get the latest technology for
production?
Answer: No
Company Name: Budo& Fitness (Vsters)
Answered by: Camilla
Employee designation:: Company s owner
Date of reply: 29_05_2006
1: When the company realized that they should start producing abroad?
Answer: No
2: Did the company start first selling abroad or buying from abroad?
Answer: We were started buying in Sweden.
3: what was the reason of going abroad
a. high labor cost of the domestic market
b. unskilled labor at the domestic market
c. no availability of raw material in domestic market
d. high cost of production facility e.g. expensive land price, tax system
Answer: A
4: Which countries were first taken into consideration?
Answer: Sweden, America; Italy
5: Was there any specific reason for taking those countries?
a. Cultural similarity
b. Low transportation cost
c. Political stability
d. Economy of the host country
Answer: A
6: After globalization, did the choice of countries got different?
Answer: Better quality, low price
7: Is the choice of country also affected by the customer demand for specific country?
Answer: No

Page 79

8: If production was taken away, from the first countries to get in, into other countries
what was the reason?
Answer: Nice clothes, Low price
9: Are there any specific problems in producing in Far East countries?
Answer: No
10:Are there any special adaptations required in producing in the Far East countries?
Answer: No
11: Which of the following problems occurs in producing from Far East countries:
a. quality related problems
b. Price related problems
c. Labor related problems
d. Transportation related problems
e. Communication related problems
Answer: No
12: Does the company face problems from the home country government?
Answer: No
13: Are the host country governments helpful? If not than in which aspect?
a. Extra tax on foreign companys
b. Entry into the local market
c. Barriers for the labor market
d. Not giving desired location for production
Answer: They are helpful
14: What kind of supply strategies is used with the supplier?
a. Licensing and franchising
b. direct investment in the host country
c. Independent suppliers
d. Through agents and whole sale
Answer: D
15: Does the company help the suppliers financially to get the latest technology for
production?
Answer: No

Page 80

Company Name: Jeans 22: an (Vsters)
Answered by: Thomas Hndersson
Employee designation: Company s owner
Date of reply: 27_05_2006
1: When the company realized that they should start producing abroad?
Answer: No
2: Did the company start first selling abroad or buying from abroad?
Answer: From Sweden buying
3: what was the reason of going abroad
a. high labor cost of the domestic market
b. unskilled labor at the domestic market
c. no availability of raw material in domestic market
d. high cost of production facility e.g. expensive land price, tax system
Answer: A&C
4: Which countries were first taken into consideration?
Answer: Thailand
5: Was there any specific reason for taking those countries?
a. Cultural similarity
b. Low transportation cost
c. Political stability
d. Economy of the host country
Answer:D
6: After globalization, did the choice of countries got different?
Answer: No
7: Is the choice of country also affected by the customer demand for specific country?
Answer: Yes
8: If production was taken away, from the first countries to get in, into other countries
what was the reason?
Answer: Depend on price and low quality
9: Are there any specific problems in producing in Far East countries?
Answer: Paper work, information
10: Are there any special adaptations required in producing in the Far East countries?

Page 81

Answer: No
11: Which of the following problems occurs in producing from Far East countries:
a. quality related problems
b. Price related problems
c. Labor related problems
d. Transportation related problems
e. Communication related problems
Answer: No problem
12: Does the company face problems from the home country government?
Answer: No
13: Are the host country governments helpful? If not than in which aspect?
a. Extra tax on foreign companys
b. Entry into the local market
c. Barriers for the labor market
d. Not giving desired location for production
Answer: They are helpful
14: What kind of supply strategies are used with the supplier?
a. Licensing and franchising
b. direct investment in the host country
c. Independent suppliers
d. Through agents and whole sale
Answer: C&D
15: Does the company help the suppliers financially to get the latest technology for
production?
Answer: They solve together