The fashion industry is one of the largest and most complex industries in the world. It is an industry that has been experiencing tremendous growth, with many different players involved in the production, distribution, and consumption of fashion products. However, this growth has come at a cost. Globalization and sustainability are two major issues that have been increasingly affecting the fashion industry. Globalization has led to the expansion of the industry beyond national boundaries, with companies now sourcing raw materials and manufacturing processes from different parts of the world. At the same time, as consumers become more aware of these issues, sustainability in the fashion industry has become a major topic of discussion in recent years, and many fashion companies are taking steps to try to become more sustainable. Sustainable fashion aims to reduce the impact of the fashion industry on the environment, society, and economy by using sustainable materials, producing goods in an ethical and transparent manner, and reducing waste. Although there are difficulties in transformation, these efforts are commendable and can lead to significant positive impacts on the environment and society.
FOREIGN TRADE UNIVERSITY FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS INTERNATIONAL BUSINESS REPORT Globalization and sustainability in fashion industry a case of uniqlo Instructor : PhD.Nguyen Hong Hanh Class : KDOE307 Group number : Hanoi, May 2023 TABLE OF CONTENTS INTRODUCTION SECTION Impacts of globalization on the fashion industry 1.1 Cost reduction in the fashion industry in the last two centuries 1.1.1 From productivity gains to cheap global workforce and the dominance of the Big Three in the emerging world (1800s - 1970s) 1.1.2 The transition of the industry from the Big Three to developing Asian countries (1970s - now) 1.2 The birth of fast fashion and the democratization of fashion’s pace 1.3 Global fast fashion supply chain nowadays and prediction of the future trend 1.3.1 Global fast fashion supply chains nowadays: a complex and fragmented demanddriven system 1.3.2 Predicting the future trend of global fast fashion SECTION Impacts of globalization on the fashion industry’s sustainability .11 2.1 The lack of sustainability due to the global fast fashion industry .11 2.2 An increase in customers’ awareness of sustainability and difficulties in transformation 13 SECTION Global while sustainable – how new models strive to produce globally in a sustainable way 14 3.1 Nearshoring and re-shoring models to be a more sustainable alternative 14 3.2 Producing in off-shore countries 15 3.3 Recycling and reuse .16 3.4 The switch of manufacturing factories to sustainable models 17 3.5 The requirements to overcome today’s obstacles 18 SECTION A case of UNIQLO to achieve a sustainable globalization 19 4.1 Overview of UNIQLO 19 4.2 Globalization process of UNIQLO 20 4.3 Sustainability in the UNIQLO’s globalization .21 CONCLUSION .24 REFERENCES .25 INTRODUCTION The fashion industry is one of the largest and most complex industries in the world It is an industry that has been experiencing tremendous growth, with many different players involved in the production, distribution, and consumption of fashion products However, this growth has come at a cost Globalization and sustainability are two major issues that have been increasingly affecting the fashion industry Globalization has led to the expansion of the industry beyond national boundaries, with companies now sourcing raw materials and manufacturing processes from different parts of the world At the same time, as consumers become more aware of these issues, sustainability in the fashion industry has become a major topic of discussion in recent years, and many fashion companies are taking steps to try to become more sustainable Sustainable fashion aims to reduce the impact of the fashion industry on the environment, society, and economy by using sustainable materials, producing goods in an ethical and transparent manner, and reducing waste Although there are difficulties in transformation, these efforts are commendable and can lead to significant positive impacts on the environment and society In the case of UNIQLO, the company has made significant progress in addressing challenges of globalization and sustainability in the fashion industry Its commitment to be sustainable has set a new standard for the industry, and its adoption of advanced logistics technologies has enabled it to expand rapidly while maintaining high levels of efficiency The report is structured as follows: Section 1: Impacts of globalization on the fashion industry Section 2: Impacts of globalization on the fashion industry’s sustainability Section 3: Global while sustainable – how new models strive to produce globally in a sustainable way Section 4: A case of UNIQLO to achieve a sustainable globalization Our team is eager to receive feedback from PhD.Nguyen Hong Hanh in order to improve the report’s content and structure We are extremely appreciative! SECTION Impacts of globalization on the fashion industry 1.1 Cost reduction in the fashion industry in the last two centuries 1.1.1 From productivity gains to cheap global workforce and the dominance of the Big Three in the emerging world (1800s - 1970s) In the past, mainstream fashion consistently prioritized cost as a means of competing with other brands Over time, customers started to be more accepting of standardized products, leading the industry to rely on productivity gains in higher-income countries as a way of reducing costs, until new offshore opportunities became much more attractive This led to a paradigm shift from a standardization cost reduction paradigm to a new paradigm based on cheap global workforce Before the 1800s, fashion manufacturing was a time-consuming and hand-made process, until the Industrial Revolution forever changed the world of fashion by introducing new technology like the sewing machine and textile machines, which resulted in a dramatic fall in textile manufacturing costs, enabling the production of standardized garments in much higher quantities At that time, productivity gains were the primary strategy in higher-income economies to reduce material and labor costs, which constituted the major share of input costs in the textile sector The introduction of new technological advancements, such as man-made textile fibers, further driven down material costs, with synthetic fibers offering advantages over the traditional cotton, including price competitiveness and the ability to manipulate fiber properties [34] However, as synthetic fibers were easy to produce anywhere in the world, they could not be a competitive advantage for higher-income countries' factories in a context of increasing globalization Labor costs, on the other hand, experienced the most rapid growth among input costs within the textile and apparel industry in the United States during the latter half of the 20th century Till the end of the 1960s, through the application of technological advancements and highly efficient organizational structures, the textile industry began reducing the proportion of labor costs and continued to make ongoing efforts in that regard [10] However, the increase in productivity was insufficient to keep the unit labor cost stable In the US apparel industry, despite actual wages multiplying by nine times from 1953 to 2001, which was nearly three times more than the cost of materials, the percentage of labor costs in total input costs only decreased by approximately 25% Therefore, the total input costs in 2001 were roughly five times more expensive than in 1953, while output prices increased only three times during the same period [49] This means that the industry faced a significant increase in costs, while the increase in output prices was comparatively low Resulting from the inability of higher income countries’ factories to keep up with foreign labor costs, this paradigm of reducing costs through productivity gains shifted from the mid-1960s Retailers started moving their textile and fashion production from higher income countries to emerging countries with a cheaper workforce, mainly in Asia, while still maintaining standardized manufacturing processes The emerging world was especially dominated by the “Big Three” (Hong Kong, South Korea and Taiwan) in the apparel, home furnishing, and footwear industries The exports from the Big Three to higher-income countries increased significantly thanks to the national export-led industrialization strategies, with their apparel exports to the US more than doubling from 1979 to 1984 [45] Together with China and other low-cost contenders, they experienced a significant increase in textile exports All lower-income countries combined went from 23% to 54% of apparel exports and from 10% to 43% of footwear exports from 1970 to 1987, with most of the growth happening in Taiwan and South Korea [9] As soon as they perceived the threat posed by low-wage nations, higher-income countries began implementing measures to safeguard their textile industry They started imposing barriers on Japan as early as the 1950s, in response to its potential for low-cost manufacturing They also signed bilateral agreements with Japan to limit its textile exports after it joined the GATT in 1955 In the 1960s, the Long Term Arrangement Regarding International Trade in Cotton Textiles was established within the framework of the GATT, and this was later replaced by the Multifiber Arrangement (MFA) in 1974 The MFA allowed higher-income nations to place discriminatory restrictions, such as quotas, on imports of textile and apparel products made of cotton, man-made fibers, or wool until 2005 [48] However, the MFA had little impact on the growth of lower-income countries' exports, which continued to increase at a rapid pace Instead of reducing exports from the Big Three, the MFA compelled them to outsource a portion of their production to other countries like China, Vietnam, South Asia, or Africa, in order to take advantage of their unused quotas Until the end of MFA in 2005, the only noticeable impact of the MFA was on the distribution of manufacturing among lower-income countries, enabling less competitive nations to obtain a small portion of it While the MFA barely affected global apparel export volumes, a significant increase occurred since the early 2000s, coinciding with China's joining the WTO Apart from the increasing share, the value of exports also rose at a faster pace than that of the entire industry, including the domestic markets This led to a rise in the import penetration of textiles, apparel, and footwear from lower-income countries to higher-income countries in the period 1970-1986 Although textiles were more localized due to their capital-intensive nature, the import penetration of apparel and footwear grew even faster By 1986, the import penetration of apparel in the US market had already reached approximately 35% [7] 1.1.2 The transition of the industry from the Big Three to developing Asian countries (1970s - now) From then on, there has been a consistent and gradual rise in the degree of import penetration for apparel and footwear in these countries, with some countries being so trade- oriented that they actually import more than they consume for the purpose of reexports [30] Pursuing the same cost-cutting strategy, the influx of these new imports has been primarily originating from countries with lower labor costs, predominantly in Asia According to the WTO, in 2017, almost all of the apparel consumed in the United States was imported (about 97%), with more than three-fourths of it coming from Asia [49] The "Big Three" that once dominated this industry have since become high-income countries, making room for new players China, in particular, has emerged as a major contributor to most countries' imports of apparel and footwear In 2015, China made up nearly 40% of all extra-community imports in the EU [6] The primary reason why China has become the leader in the manufacture of fashion items is its edge in labor costs, which were significantly lower than the Big Three when it first opened up its economy in the 1980s The fashion industry's reliance on low-cost manufacturing to meet the demand of higher-income countries' fashion brands, in a global free-market environment, led to a rapid relocation of production to countries that provided the most promising prospects, especially China However, with China's wages continuously increasing, other countries with cheaper labor costs are now becoming more attractive for manufacturing Despite the fact that China can still move its production to less developed regions inland, its market shares in leading apparel import markets have been declining since the start of the last decade [49] As China's role in textile value chains evolves, it is increasingly retaining a greater share of upstream capital-intensive textile processes like yarn and fabric manufacturing Meanwhile, the assembly of these textiles is being outsourced to countries with lower labor costs, resulting in a rising share of China in these countries' textile imports [37] This shift is in line with the manufacturing trend of continuously relocating to countries with cheaper costs, starting with simpler, low value-added products, as fashion brands seek to gain market share by reducing costs Historically, US brands have been inclined to seek the most economical opportunities, as evidenced by the country's import data The transition from higherincome countries to the Big Three and eventually China for US non-rubber footwear imports from the 1970s to the 1990s is evident, followed by a subsequent shift to emerging contenders, particularly Vietnam [46] As a result, a new reality is shaping in the "Asian era", characterized by a gradual transition from China to other lower-cost countries such as India, Vietnam, and Bangladesh The persistent emphasis on minimizing labor costs has resulted in their decrease to an unprecedented level, now constituting only a small portion of fashion costs [48] Furthermore, the utilization of synthetic fibers, particularly polyester, has been the primary driver of growth in textile fiber input [24], thereby helping to limit material expenses In fact, the price of imported clothing in the US in 2016 was lower than it was in 1990 [37] To sum up, the fashion industry's global supply chains have enabled higher-income countries to consume vast quantities of clothing, accessories, footwear, and home textiles at ever lower prices This has led to a surge in apparel volumes since the start of the century, mainly through manufacturing in low-cost countries using man-made fibers, with China's