Esquel group: Going beyond the traditional approach in the apparel industry

Abstract

The garment industry has gone through enormous changes in recent decades. Once concentrated in the U.S. and other industrialized countries, the garment industry has gradually spread to countries with lower production costs, becoming a worldwide industry whose geographical distribution is constantly changing. One of the countries that grew to become a major player in this industry is China, with US$ 45.76 billion worth of apparel goods exported from China worldwide in 2003. It is predicted that once quota restrictions on the annual quantity of goods that can be imported from China and other developing countries are lifted at the beginning of 2005, China and India will dominate world trade in the global textile and clothing market. As in other industries, technological advances, globalization, and changing business practices are affecting the textile and apparel industry. In an industry characterized with over-capacity, companies must keep seeking for ways to improve their productivity and differentiate themselves from competitors. Even though the textile industry is already highly automated, textile and apparel companies continue to seek to increase productivity through the adoption of computerized equipment, introduction of laborsaving machinery and the invention of new fibers and fabrics that reduce production costs. In addition, the apparel industry is becoming more service-oriented, with increased emphasis on value-added services and quick response to customer demand. This paper provides a brief overview of the apparel industry, as well as how it is affected by various trade barriers, and in particular the elimination of quota restrictions at the beginning of 2005. In addition, the paper presents a case study of Esquel Group, an apparel manufacturer headquartered in Hong Kong, which holds a significant portion of its operations in China. With vertically-integrated operations, a focus on providing customers high-quality products and services, adoption of advanced technologies and supply chain management strategies, and emphasis on ethical values, environmental protection, and the well-being of its employees, Esquel's story is quite unique in an industry that is usually old-fashioned and highly focused on cost reduction. We describe Esquel's goals, values, and operations, and discuss some of the pros and cons of their strategy. In addition, we discuss some of the challenges the company is faced with in the changing environment characterizing the apparel industry.