Textile Value Chains Competitive Advantages of Local Manufacturing
in High-Cost Countries
2015 Master’s Thesis Textile Management
Najoua Maniar Wael Gamaleldin
I Title: Textile Value Chains Competitive Advantages of Local Manufacturing in High-Cost Countries
Thesis No. : 2015.7.05 Publication year: 2015
Authors: Najoua Maniar (s202404), Wael Gamaleldin (S202402) Supervisor: Rudrajeet Pal
Examiner: Daniel Ekwall Abstract
Background
Globalization has forced textile firms to move their manufacturing to low-cost countries to reduce their prices. However, interest in local manufacturing has increased in recent years because of the trend in sustainability and changes in society’s ways of thinking, both of which can bring textile industry manufacturing back to high-cost countries.
Purpose
The purpose of this study is to formulate concepts and theories that can differentiate local manufacturers in high-cost countries from their competitors and identify the key competitive advantages that can lead to successful local production in high-cost countries.
Methodology
Two case studies were conducted of local textile manufacturers in Sweden in this study. Both companies’ value chain activities were examined to determine their competitive advantages.
Empirical data were collected using semi-constructed interviews with key managers in both companies and were analysed using the thematic analysis method.
Findings
The textile industry in high-cost countries can create difference by considering competitive advantages, which are flexible and agile operations, development and innovation, sustainability, combining products and services, and uniqueness and differentiation.
However, the competitive disadvantages of textile manufacturing in high-cost countries, which include scarcity of employees and high costs, should be considered as well.
Keywords: Textile industry, high-cost countries, Sweden, local manufacturing, competitive advantage, value chain, competitive disadvantage, reshoring.
II Acknowledgements
First, I would like to express my sincere thanks to the companies that participated in this study, Industri Textil Job and Ludvig Svensson, for giving me the opportunity and confidence to conduct this study. I especially thank all of the key managers whom I had the privilege of interviewing, and thank them for taking time to meet us.I would like to express my gratitude to my supervisor, Rudrajeet Pall, who inspired me during this thesis work by giving me much appreciated feedback.
My final words of thanks go to my dear husband, my parents, and my children, who supported me continuously throughout my study.
Najoua Maniar
III Acknowledgements
I would like to take this opportunity to express my gratitude to The Swedish Institute, which granted me a scholarship to study in the master’s program at the University of Boras. Without their help and support, I would not have been able to conduct this work.
On the committee, I would like thank Professor Rudrajeet Pal for his help and support in editing relentlessly, and guiding me on the right path.
Finally, I thank my parents, who have always supported me with their continuous prayers, and my wife and two daughters for supporting me emotionally and mentally when I became stuck or needed seclusion.
Wael Gamaleldin
IV Table of Contents
Textile Value Chains Competitive Advantages of Local Manufacturing in High-Cost
Countries ... 1
1 Chapter 1: Introduction ... - 1 -
1.1 Background ... - 1 -
1.2 Problem description ... - 2 -
1.3 Purpose and Research questions ... - 3 -
1.4 Thesis structure ... - 3 -
2 Chapter 2: Literature Review ... - 5 -
2.1 Supply Chain ... - 5 -
2.2 Value Chain ... - 6 -
2.2.1 Value Chain Primary Activities ... - 7 -
2.2.2 Value Chain Support Activities ... - 8 -
2.3 Competitive Advantage ... - 8 -
2.3.1 Competitive advantages of local manufacturing ... - 9 -
2.3.2 Competitive advantages of global manufacturing ... - 13 -
2.3.3 General competitive advantages ... - 13 -
2.4 Local versus Global Manufacturing of Textiles and Clothing ... - 15 -
2.4.1 Local manufacturing ... - 15 -
2.4.2 Competitive disadvantages of local manufacturing ... - 16 -
2.4.3 Global manufacturing ... - 16 -
2.4.4 Competitive disadvantages of global manufacturing ... - 16 -
2.5 Theories ... - 17 -
3 Chapter 3: Methodology ... - 20 -
3.1 Research methodology ... - 20 -
3.2 Research Approach Inductive Research Approach ... - 20 -
3.3 Research Method Qualitative Research Method ... - 21 -
3.3.1 Case Studies ... - 21 -
3.4 Data collection ... - 22 -
3.4.1 Primary data sources ... - 22 -
3.4.2 Secondary data sources ... - 23 -
3.5 Data Analysis ... - 23 -
3.6 Research Evaluation Measures ... - 24 -
3.6.1 External Validity (Generalization) ... - 24 -
3.6.2 Internal Validity ... - 25 -
3.6.3 Reliability ... - 25 -
4 Chapter 4: Results ... - 26 -
4.1 Case Study 1: Industri Textil Job ... - 26 -
4.1.1 Company background ... - 26 -
4.1.2 Supply chain of Industri Textil Job ... - 26 -
4.1.3 Value chain activities ... - 27 -
4.2 Case 2: Ludvig Svensson Company ... - 30 -
4.2.1 Company background ... - 30 -
4.2.2 Ludvig Svensson (Sweden)’s Supply Chain ... - 31 -
4.2.3 Value Chain Activities ... - 31 -
4.3 Summary of the Results ... - 36 -
V
5 Chapter 5: Discussion and Analysis ... - 37 -
5.1 Competitive Advantages of Local Manufacturing ... - 37 -
5.1.1 Flexible and agile operations ... - 37 -
5.1.2 Development and innovation ... - 37 -
5.1.3 Sustainability ... - 38 -
5.2 General Competitive Advantages ... - 39 -
5.2.1 Combining products and services ... - 39 -
5.2.2 Uniqueness and differentiation ... - 40 -
5.3 Competitive Disadvantages of Local Manufacturing ... - 40 -
5.3.1 Scarcity of employees ... - 41 -
5.3.2 High costs ... - 41 -
5.4 State of knowledge ... - 42 -
6 Chapter 6: Conclusions ... - 44 -
6.1 Summary ... - 44 -
6.2 Academic contributions ... - 44 -
6.3 Managerial contributions ... - 44 -
6.4 Limitations and future research ... - 45 -
References ... - 46 -
Appendices ... - 54 -
Appendix A ... - 54 -
List of Interview Questions ... - 54 -
Appendix B ... - 55 -
Interviewees: ... - 55 -
Appendix C: Ludvig Svensson Interviews Coding ... 56
Appendix D: Industri Textil Job Interviews Coding ... 58
VI List of Figures
Figure 1: Structure of the thesis ...- 4 -
Figure 2: Porter’s value chain (by authors)...- 6 -
Figure 3: Gross domestic spending on R&D. Source: OECD (2015b) ... - 10 -
Figure 4: Research Methodology ... - 20 -
Figure 5: Supply Chain of Industri Textil Job (by authors) ... - 27 -
Figure 6: The Supply Chain of Ludvig Svensson (by authors) ... - 31 -
List of Tables Table 1: Summary of the results ... - 36 -
- 1 -
1 Chapter 1: Introduction
In this chapter, the authors offer a brief introduction of the research topic, and introduce some of the literature concepts in the area of investigation.
1.1 Background
The second half of the 20th century witnessed rapid development in global transportation and communications infrastructure, which not only improved people’s ways of life and changed their way of thinking, but also created new manufacturing trends (Heinimann, 1999; Ahearn, 2012). Globalization changed the characteristics of the traditional supply chain, which presented complications and challenges (Meixell & Gargeya, 2005). Companies were interested in outsourcing manufacturing for multiple reasons: to exploit the advantage of reduced prices in countries with low labor costs, to develop higher technology, better quality, or benefits in productivity from sourcing countries other than those available in the country of origin, and to identify new markets in those manufacturing countries themselves (Steinle & Schiele, 2008).
The textile industry had been affected widely by globalization; many companies in high-cost countries around the world have outsourced production, and continued to shift to areas with lower labor costs; from Eastern Europe to North Africa, to Southern Asia, and recently, to Eastern and Western Africa. Low cost labor is the major motive that affects the change in value chains; however, it is not the only reason for this long-term business strategy (Arbi, 2007). At a certain point, most fashion companies competing to maintain low prices realized that outsourcing was a necessity to remain competitive and maintain their market share (Teng &
Jaramillo, 2005), eventhugh global outsourcing was accompanied by new challenges, such as fast fashion, high production volumes, reducing lead times, and low margins, which required new value chain strategies and led to the emergence of new business models (Dalziel, 2010).
However, at the beginning of the 21st century, individuals and societies became more aware of issues of sustainability, and growth in sustainable products has become viable. This public awareness of sustainability in the textile industry, as well as fast fashion concepts, led to new ways of thinking about approaches, such as systems thinking and human needs; it also precipitated new demands for sustainable design, slow fashion, and the resumption of local manufacturing (Fletcher, 2014), which inspired researchers to investigate these new orientations. Accordingly, in October 2012, the European Commission announced new policies, the goal of which was to restore the European manufacturing industry and increase manufacturing’s contribution in the European Union’s (EU) GDP from 16% to 20% (Veugelers, 2013). One innovative application in the area of local manufacturing was the “From Roll to Bag” project. The project adopted the slogan, “We bring apparel production back to Europe,”
and was designed to use new technologies, such as 3D and reality applications, to innovate the fashion e-commerce experience through mass customized orders that could be manufactured and delivered quickly. The project is part of the EU research and innovation scheme, Horizon
- 2 - 2020, and has a total research budget of €80 billion, out of which €1.8 million were allocated to the “From Roll to Bag” project (From Roll To Bag, 2015).
Another project designed to increase local manufacturing in North America is “Apparel Made for You,” the goal of which is to return clothes manufacturing to the USA with the idea that
“Garments can be made profitably in America again.” The project focuses on the online retailing business, which is worth $40 billion USD. This project focuses on two key elements, the first is using a patented waterless and pollution free dyeing process along with printing and labeling technology, The second is producing mass customized garments with zero inventory and no minimum order (Apparel Made for You, 2015).
The growing interest in local manufacturing is motivated by the sustainability approach and the societal paradigm shift that favors such products. This interest provides the opportunity to return textile manufacturing to high-cost countries after decades of globalization in which it was located primarily in developing nations. This requires research and verification of the concepts in which the local textile industry in high cost countries can stand on creating differentiation and matching its competitive advantages and disadvantages with theories.
1.2 Problem description
The researchers conducted a literature search using University of Borås databases, such as Scopus.com and Elsevier.com and various key word combinations, including Europe, Local, High-cost Countries, Textile, Manufacturing, Return, Domestic, Reshoring, and Offshoring.
The search returned some results and several papers discussed the topics of “shoring and reshoring,” which has attracted interest in recent years. Ellram et al. (2013) investigated the factors that affect the choice of manufacturing location and concluded that organizations are beginning to widen their scope in decisions regarding locations, and are concentrating on supply chain aspects and strategic factors. Gray et al. (2013) emphasized the increased interest in studying reshoring, and pointed out that supply chain management researchers need to perform in depth studies of several firms to draw realistic conclusions about the factors that motivate reshoring. Tate et al. (2014) advised enterprises to be flexible and consider future fluctuations when they choose manufacturing locations; they also anticipated that reshoring might be an essential long-term strategy. However, it is still necessary to study reshoring in the textile industry. Martínez-Mora and Merino (2014) studied this phenomenon in the Spanish footwear industry and interpreted it according to changes in both the global economy and market demands. Nevertheless, no research was found that investigated the benefits of reshoring in the textile industry and analyzed the viability of this action.
“Industrial districts in Europe” is another research topic that addresses returning manufacturing to Europe from the perspective of choosing manufacturing locations and the benefits of industrial districts. Dunford (2006) argued that industrial districts play a major role in maintaining the Italian textile and clothing industry, because operations, including design, market research, product development, and high added-value production remained in these core areas. Puig et al. (2009) conducted a study on the Spanish textile industry and concluded that
- 3 - globalization had a significant effect on industrial districts that had caused them to shrink over time; however, these districts survived because of their specialized products and successful operations management. Pla-Barber and Puig (2009) also argued the common understanding of the advantages of industrial districts from the global prospective, and claimed that this advantage has been reduced largely due to the low capacity of these districts and their
vulnerability to global economic threats.
Although recent wide interest in textile local manufacturing, the authors had found few researches that had touched the return of the textile industry to high-cost countries or examined the advantages and disadvantages of this action.
The researchers suppose that determining the competitive advantages and disadvantages of local textile manufacturing in high-cost countries will assist in returning textile manufacturing to Europe and open the door for further research and investigations. Such studies would guide entrepreneurs and new business initiatives to the strengths and weaknesses of the textile manufacturing in their local countries, help them building new business models and sustain them. Thus, this study took one-step in addressing this research gap, and the authors think that many studies supported by social, institutional, and governmental interest in local manufacturing will follow.
1.3 Purpose and Research questions
The purpose of this study is to formulate concepts and theories that can differentiate local manufacturers in high-cost countries from their competitors.
Local manufacturing in high-cost countries refers to those that are based in such countries and produce their products there as well. In this research, the authors concluded concepts that can provide production differentiation in high-cost countries over globally manufactured textiles, and to determine these concepts, the authors identified the competitive advantages and disadvantages of local manufacturing in high-cost countries by linking data from theoretical frameworks and empirical findings. The research question is:
How can local textile manufacturing in high-cost countries create differentiation?
What are the competitive advantages and disadvantages of local manufacturing of textiles in high-cost countries?
1.4 Thesis structure
Figure 1 provides an overview of the structure of this report.
- 4 - Figure 1: Structure of the thesis
The report contains a theoretical discussion and two empirical studies, including the data collected and the analysis of the studies. The Introduction includes the background and problem description, and is followed by the purpose and research questions. Chapter 2 includes the literature reviewof competitive advantages and its links with the Porter value chain. Chapter 3 describes the methodology used in the research, the data collection, and analysis of the results.
Chapter 4 presents the results, in which the two case studies are introduced, including their backgrounds, supply chain and value chain activities. In Chapter 5, the two case studies are analyzed to achieve the purpose of this thesis concluding concepts of competitive advantages and disadvantages of local manufacturing. Finally, in Chapter 6, the research questions are answered and the authors summarize the findings, including possible future studies.
Thesis
Introduction
Literature Review
Case study 1
• IndustriTextil Job
Case study 2
• Ludvik Svensson
Analysis &
conclusions
- 5 -
2 Chapter 2: Literature Review
In this chapter, the authors present state-of-knowledge of data collected from secondary resources such as books, scientific journal articles, and other publications that are relevant to the research topic. The authors had used databases provided by University of Borås Library such as Emerald, and Scopus, in addition to Google scholar searching the keywords of this thesis.
This chapter introduces background information about supply chain, value chain activities defined by Porter’s Value Chain model (1980). Further, discussion of competitive advantage, and state-of-the-art of local, global, and general competitive advantages created by enterprises.
Then a view of global versus local manufacturing, and finally a summary of presented theories.
2.1 Supply Chain
Supply chain had played a significant role in business success over the past fifty years, many multinational companies considered Supply Chain Management (SCM) as a strategic asset in their success (Kozlenkovaa, et al., 2015). Companies had competed to create competitive edge to their products through efficient supply chain (Harrison, et al., 2015).
According to Lummus and Vokurka’s (1999) paper, interest in Supply chain management has grown since the 1980s, when companies realized the importance of building relationships with partners outside their organizations. However, the term “Supply Chain Management”
appeared first in 1982, as Booz & Allen consultants were the leaders in encouraging companies to implement “total supply chain inventories” (Christopher, 1992).
Council of Supply Chain Professionals (CSCMP) had defined Supply chain as “The material and informational interchanges in the logistical process stretching from acquisition of raw materials to delivery of finished products to the end user. All vendors, service providers and customers are links in the supply chain.” (CSCMP, 2013).
The complexity of modern supply chains required an additional effort to manage the flow of material and information. CSCMP had also defined Supply Chain Management as "Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers.” (CSCMP, 2013). SCM works to orchestrate performance between different supply chain partners, linking major business functions. It coordinates product design, sales and marketing, finance, inbound and outbound logistics, production operations, and information technology.
Furthermore, Harrison, et al., (2015) considered additional activities to the supply chain management, such as “Reverse logistics” to return of unwanted goods from a customer to the manufacturer, “Waste management” to handle defected products at any stage of production. In addition, in the recent years “Sustainability” was added as a new concern to SCM as many
- 6 - logistics processing affect the environment such as contracting suppliers using renewable raw materials, comply with ethical labor standards and minimizing carbon dioxide emissions in forms of transportation (Harrison, et al., 2015).
2.2 Value Chain
Porter (1988) defined the value chain as a set of activities that a firm performs to create a valuable product or service for the market. Porter introduced the framework of value chain as a tool to analyze firms’ competitive advantage.
He also divided the value chain into primary and support activities; primary activities are related directly to creating or delivering the product or service, and include five categories:
inbound logistics; operations; outbound logistics; marketing and sales, and service. Porter also categorized support activities as firm infrastructure, human resource management, technology development, and procurement, as shown in Figure 2.
Figure 2: Porter’s value chain (by authors)
Porter’s value chain analysis has been used to analyze an organization’s ability to create value and understand competitive advantage through its activities, and has helped managers identify areas that can be improved to create further value (Stonehouse & Snowdon, 2007). According to Stabell and Fjeldstad (1998), Porter’s value chain analysis has proven to be a reliable technique to analyze firms’ competitive advantages; however, it is more suitable for conventional manufacturing companies than for service industries, such as insurance and financial institutions. They also argued that using unit cost as a unique indication of the success of value chain analysis does not work in all cases, as other factors, such as efficiency and effectiveness, should be considered. Presutti Jr. and Mawhinney (2009) criticized Porter’s model, stating that it is outdated, and has not developed over the past years to include new business activities, such as leadership, corporate culture, and the discipline of supply chain
- 7 - management. The same authors also argued that including such activities in Porter’s model would help achieve value chain success.
Although the model has been criticized, the authors of this thesis found that Porter value chain concept is still being used as a tool to analyze businesseses, it had helped enterprizes determining their added value, helped understanding their activities, and benchmark their competitors. In addition, other researchers added to it to make it more dynamic, recent concepts have emerged from the model, including “Global Value Chains” (GVCs) by Gereffi and Korzeniewicz (1994), and “Value Grid” by Pil and Holweg (2006), which indicates that the Porter value chain model can be developed adding new concepts to it.
GVCs is a term introduced by Gereffi and Korzeniewicz (1994), who implied that globalization affects value chains, extending them geographically through multiple countries and continents, as different production stages are processed in different countries, and companies tend to reconstruct their operations through outsourcing and offshoring activities. The concept of GVCs has spread during recent decades, as there had been a widespread trend in value chain extension and elongation, which is accompanied by new challenges that require a new view of global economics and policies (OECD, 2015a).
In addition, Pil and Holweg (2006) presented the idea of “Value Grid,” which suggests that companies should integrate their views of value chain and shift from a linear to a grid focus, in which they consider three dimensions in value creation: influence of operations, innovation outside current operations, and dynamic change in current value chain.
Linkage between the value and supply chains has been the topic of much research. Holweg and Helo (2014) stated that, despite decades of research, there remains a split between the
“Value Chain” orientation towards value creation and financial tools on one hand, and
“Supply Chain” on the other, which generally considers strategic planning and the efficiency of supply chain operations. The authors also argued that conceptualizing strategies that link these distinct points of view is key in explaining models of company success, and the reasons that supply chain structures work for some companies and fail for others.
2.2.1 Value Chain Primary Activities
According to Porter (1998), all activities conducted by a firm can be categorized as primary or support activities. However, determining whether a value activity is primary or supportive is arbitrary and depends on the nature of the business. Porter defined primary activities as those within the value chain that are related directly to creating or delivering the product or service, and creating the competitive advantage; these are divided into five categories:
Inbound logistics, which are activities associated with receiving, sorting, and distribution of product inputs and raw materials, including material receiving, warehousing, inventory management, and supplier returns.
- 8 - Operations, which refers to all activities involved in transforming inputs into a final product;
in the textile industry, these include a wide range of activities, such as spinning, weaving, finishing, packaging, maintenance, and testing.
Outbound Logistics are the activities concerned with collecting, consolidating, and delivering products to buyers, and include warehousing finished goods, delivery management, vehicles control, order processing, and scheduling.
Marketing and Sales are elements of the value chain connected with offering the product to buyers; it includes advertising, sales, customer relations, and pricing.
Service is the activities offered to the customer to enhance or maintain the product value, such as product assembly, training, spare parts, and product maintenance (Porter, 1998).
2.2.2 Value Chain Support Activities
Porter (1998) also described support activities as those value chain activities that support the primary activities; these include the following:
Procurement refers to the process of purchasing materials and inputs for the firm, but not the purchased articles themselves. It might include raw materials, machinery, supplies, and lab equipment. The procurement process cost is usually small, but its effects on firm performance and the ability to create competitive advantage are significant.
Technology Development includes all forms of technology used within the firm’s various sectors. It is not limited to Research and Development (R&D) alone, but includes technologies used in communication, documentation, machining, transportation, etc.
Human Resource Management consists of the activities associated with recruiting, training, and managing all firm employees. Thus, human resource management has a large influence on a company’s competitive advantage, as it plays a significant role in structuring the skills employees require. However, some companies do not understand the tradeoffs in human resources costs.
Firm infrastructure indicates the ways in which the firm is structured, organized, and its managerial activities, including general management and planning and quality management. A well-organized firm infrastructure can provide a powerful competitive advantage (Porter, 1998).
2.3 Competitive Advantage
Porter (1980) stated in his book, Competitive Strategy: Techniques for Analysing Industries and Competitors that competitive advantage includes achieving lower costs, differentiation, or a successful strategy over competitors, and added that competitive advantage is at the heart of each firm’s performance in competitive markets. Further, in his book Competitive Advantage:
Creating and Sustaining Superior Performance, Porter (1998) specified that creating competitive advantage is achieved through different activities, as follows:
- 9 - Competitive advantage cannot be understood by looking at a firm as a whole. It stems from the many discrete activities a firm performs in designing, producing, marketing, delivering and supporting its product. Each of these activities can contribute to a firm’s relative cost position and create a basis for differentiation. (Porter, 1998, p. 33) Kaleka (2002) argued that because of strong competition among enterprises, it is no longer enough to create a competitive advantage through superiority in only one activity. Excellence in one activity must be accompanied with a reasonable level of advantages in other activities compared to competitors.
Porter (1998) argued that competitive advantages within the same industry differ according to firms’ strategies and orientations. A firm can achieve a competitive advantage over market competitors by serving a specific market segment, which allows the firm to tailor its products and services to create lower costs or diverse services. In addition, companies in similar industries might integrate and collaborate to create a coordinated value chain and thus benefit from a wider scope of competitive advantage. Value activities are linked within the value chain, and this link between activities creates a competitive advantage by optimizing and coordinating different activities. It also usually emphasizes tradeoffs between activities depending on a firm’s strategy (Porter, 1998).
In the following sections, the authors present the most known competitive advantages in the literature classified into three groups, Competitive advantages of local manufacturing, Competitive advantages of global manufacturing, and General competitive advantages.
2.3.1 Competitive advantages of local manufacturing
According to Dana et al. (2007), the traditional EU manufacturing sector, such as the apparel industry, can create a competitive strategy by applying an effective plan that suits manufacturing capabilities, and achieves the business goals of textiles companies. The competitive advantages highlighted in domestic manufacturing are quality control, flexibility, country-of-origin (Dana et al., 2007), R&D and innovation (Roper et al., 2006), high value- added activities (Puig et al., 2009), and sustainability (Karaosman et al., 2014). These are discussed in detail below.
2.3.1.1 R&D and innovation
Fisher et al. (2013) defined innovation as any activity that implements ideas to develop new or improved products or services that can solve specific problems, and develop, compete or differentiate a product in the marketplace. In order to differentiate from competitors and gain a competitive advantage at the same time, companies must engage in R&D and invest in applied research. Further, additional investments in R&D increase a firm’s future opportunities to achieve greater competitive advantages. Knowledge in R&D is an essential source of competitive advantage and value creation within a firm, as competitors can make similar products, but they cannot duplicate the value of knowledge (Henard & MacFadyen, 2006). In addition, Roper et al. (2006) stated that organizations that have knowledge in innovation and
- 10 - R&D can commercialize developed products and processes successfully, which increase the company’s growth. Innovation within a company requires in-house R&D and links with customers, suppliers, competitors, universities, research centres, and other external consultants (Roper et al., 2006). Further, according to Pisano and Shih (2012), it is better to keep manufacturing close to R&D, as it is difficult to modify and complete product design fully when production is located far from R&D. The same authors also argued that choices of design influence choices of manufacturing. Innovation is connected to knowledge generation, which requires experience and face-to-face contact; for that reason, the value added through R&D should be maintained in one location (EMCC, 2008).
According to the European Competitive Report (2013), the advanced manufacturing industries in the EU that engage in R&D and innovation focus on product quality and new technologies.
This helps create unique products and builds competitive advantage in local and global markets.
The report also defined R&D and innovation as the key factors in increasing competitiveness and improving not only differentiated products, but also supply chain and production processes.
Figure 3: Gross domestic spending on R&D. Source: OECD (2015b)
According to the OECD (2015b), a country’s gross domestic spending on R&D is defined as the total nationwide spending on R&D, which is the total spending on the part of local companies, institutes, universities, government, etc. In 2014, Korea had the highest percentage of R&D spending (4.29%) compared to its GDP among OECD countries, followed by Israel at 4.11%. Sweden invested 3.16% of its GDP in R&D in 2014, while EU countries’ average spending was only 1.94% of their GDP in 2014, and the USA spent only 2.74% in 2013 (See Figure 3).
- 11 - 2.3.1.2 High value adding activities
According to Amir (2012), products with high technology components are considered value- added products that can accelerate a company’s profitability. High value-added applications have a strong competitive advantage in the market compared to products that contain lower technology components.
Puig et al. (2009) stated that local manufacturing could create competitive advantage through high value-added activities. In recent years, diversification and high value-added products have been considered as the main competitive advantages in the EU’s textile sector, and in addition, industrial sectors have played an important role in enhancing value-added products in the EU’s textile industry (Buckley & Ghauri, 2004).
The level of value-added activities affects companies’ decisions about where to locate their manufacturing (EMCC, 2008); highly innovative products, such as technical textiles, are growing in the European textile industry, and are among the fastest-developing textile applications that add value to companies located primarily in developed countries (OECD, 2007). According to the European Commission (2014), products with different characteristics and qualities differentiate a company from its competitors. In industrial textiles, world-leading manufacturers of high quality products, including industrial filters, geotextiles, and others textile applications, are located in Europe. According to the EU commission report (2013), technical textiles are considered to be an important sub-sector in the EU and the consumption of technical textiles worldwide is increasing. Technical specifications define the success of the products and R&D determines the competitive advantage of the industry. The uniqueness of this field is the close relationship between the manufacturer and the customer that ensures effective solutions (European Commission, 2013).
2.3.1.3 Quality
Quality is a key competitive advantage in local manufacturing; product quality, and quality standards and delivery requirements are parameters essential in creating competitive advantages that affect decisions regarding manufacturing strategy, which allows control of the production process and provides the ability to solve manufacturing problems that a textile company can face (Dana, et al., 2007).
According to the EMCC (2008), quality and proximity play important roles in the textiles industry, and companies that adopt short delivery times rely on high quality suppliers and manufacturers, both of which are usually located in Europe. Industries in the EU have developed new products, including the technical textiles mentioned, that have improved quality;
the role of the EU is to accelerate this trend to enhance the textile sector in Europe.
2.3.1.4 Flexibility
Flexibility and short lead-times are the main advantages of local manufacturing. According to Dana et al. (2007), domestic manufacturing is favoured in terms of short lead times, as it
- 12 - minimizes transportation and communication. The authors also added that long lead-time is a vital problem in the case of offshoring or outsourcing. Further, partial outsourcing might not be a successful strategy for small garment companies, as their size might not enable those companies to benefit from the advantages of outsourcing. Civan et al. (2006) thinks that to be successful today, companies need to direct their interest to changes in customer requirements, specifically, by providing high quality, low cost products.
Agile manufacturing systems offer companies flexability in terms of product types and quantities, as well as cost reduction (Civan et al., 2006). Karaosman et al. (2014) argued that local manufacturing provides the advantage of manufacturing in small quantities. In Spain, for example, local manufacturers allow designers to produce small quantities and maintain the quality and style of their products, which cannot be accomplished with mass production.
Other advantages of local manufacturing are that it not only ensures the quality and delivery time through local resources, but also creates a local workforce and improves the local economy. This cannot be achieved without the support of government subsidies and financial aid to small and medium sized enterprises (Karaosman et al., 2014). Civan et al. (2006) also stated that agile manufacturing systems increase employees’ power and enhance firms’
competitive ability, thereby increasing their effectivness.
2.3.1.5 Sustainability
The concept of sustainability is an integrative approach that links three central dimensions:
social, economic, and environmental (Imran et al., 2011). The Brundtland Commission’s report defined sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (United Nations, 1987, p. 27).
Local manufacturing offers a competitive advantage, as the supply chain is nearby, which allows better control of production and environmental effects. In addition, local manufacturing enables firms to apply sustainable manufacturing techniques, such as cradle-to-cradle and slow manufacturing (Dana et al., 2007). Recently, the need for sustainable development has become mandatory for companies located in developed countries, as it has become clear that it eliminates waste, saves energy, and reduces other environmental problems (Fraser & Tourelle, 2009). In addition, Karaosman et al. (2014) linked local manufacturing to sustainability, and claimed that energy savings can be realised with the implementation of environmentally friendly materials and higher quality manufactured products.
Lozano (2015) identified a significant number of factors that encourage corporate sustainability (CS). His empirical findings identified the following as the most important internal drivers of CS: proactive leadership, business case, precautionary principle, and company culture, while the most important external factors are customer demands and expectations, regulations and legislation, and society’s increased awareness of environmental issues. In the same article, the author concluded that a large and complex number of factors affect CS orientation, which are challenging for corporate leaders to balance (Lozano, 2015). Epstein and Roy (2001) think that
- 13 - because of pressures and the increasing interest of different stakeholders in, and drivers of CS, it is important for companies’ leaders to understand what influences both costs and revenues, and use managerial frameworks, such as shareholder value analysis and economic value added, wisely to make decisions.
Consumers’ awareness of sustainability has increased and the media has played a major role in this awareness, which has also affected governmental actions and decisions. From this perspective, the interest in improvement is linked to opportunities for competitive advantages (Fraser & Tourelle, 2009). According to the OECD (2008), consumers play an important role in sustainable development and represent a key driver in achieving sustainable production; this can lead to long-term economic growth in parallel with environmental and social benefits.
Consumers now are more aware not only of the production methods of products and health side effects of the use of various goods, but also are aware of production conditions with respect to workers and resources. Karaosman et al. (2014) insisted that consumers’ culture and awareness are important indicators of sustainability issues.
2.3.2 Competitive advantages of global manufacturing
Cost has always been the primary motive for global manufacturing; however, low price products do not guarantee final low cost, as other parameters add to the total cost, such as quality, maintenance, and transportation (Steinle & Schiele, 2008). The global competition in textile markets and the uncertainty in the success of fashion trends have led firms to search continuously for competitive advantages through different benefits and processes (Su et al., 2009). Companies have been able to achieve advantages through outsourcing, including access to more products of better quality and access to new markets in the sourcing countries (Trent &
Monczka, 2003). Outsourcing may also have a higher value advantage, in that it can create brand names, lead to cooperation with other manufacturers, and achieve better organizational structures or increased skills and knowledge (Karahan, 2001; Jin, 2004). According to Birou and Fawcett (1993), global sourcing can also help companies access worldwide technology, achieve better delivery performance and customer services, improve their position in the competition, and establish a foreign presence. The benefits of global manufacturing also include access to new markets for products (MacCormack et al., 2007; Steinle & Schiele, 2008).
Further, when developed countries’ markets are saturated, outsourcing can be a way to open new markets in developing countries (Weidenbaum, 2005).
2.3.3 General competitive advantages
The following section represents competitive advantages abstracted from literature, which are not exclusively relevant to local nor global manufacturing, but in fact, can contribute to any firm’s success.
2.3.3.1 Low cost
Low cost has been the main motive for companies to outsource manufacturing (Jin, 2004; Arbi, 2007; Dalziel, 2010; McCaffrey, 2013). Companies have found outsourcing opportunities in
- 14 - Asian and Eastern European countries attractive, as they offer skilled, but inexpensive labor (Cho & Kang, 2001). The textile and clothing sector is considered a large labor industry, and was the only industry not covered by the General Agreement on Tariffs and Trade. Instead, until the end of 2004, it was regulated by a quota system known as the Multi-Fibre Arrangement (Ernst et al., 2005). As of the beginning of 2005, the World Trade Organization Agreement of Textile and Clothing was initiated (Ahmad & Diaz, 2008), which opened the door to a new wave of outsourcing restructuring, with the result that some countries increased their textile export share, while other countries’ shares decreased (Lu, 2013; Adhikari & Yamamoto, 2008).
Van Der Meulen Rodgers and Berik (2006) claimed that after the elimination of quotas, Asian countries established laws and labor regulations to protect their workers’ environment and improve working conditions to create international competitive advantages.
According to a study by Werner International (2015) of the differences in textile industry labor costs in 2014, Switzerland was the world’s highest at $51.36 USD per hour, while Pakistan and Bangladesh’s labor costs were the cheapest, at an average of $0.62 USD per hour. In China, the primary global textile producer, labor costs have continued to increase from only $0.69 USD in 2000 to $2.10 USD in 2011; currently, they are $2.65 USD, which makes Chinese labor costs close to those in South American and North African countries. Increases in the standard of living in China, together with improved work conditions, as well as an increase in the prices of raw materials led to increased labors costs in China, and forced textile companies to look for other outsourcing solutions in Africa to maintain their current prices (White, 2008).
2.3.3.2 Hybrids of products and services
Ulaga and Reinartz (2011) argued that creating hybrids of products and services can offer firms a competitive advantage. The authors also suggested that manufacturers can create a unique market position over their competitors who offer either a product or service only by using a hybrid approach. Company knowledge and internal resources can be a great help for firms in offering combinations of products and services (Markides & Williamson, 1996).
Ulaga and Reinartz (2011) also added that hyprids of products and services require an understanding of the tools necessary to obtain unmatched resources and build excellent capabilities. The authors concluded that the most critical resources that a company needs to build a hybrid model are product use data, product development assets, experience in product sales, and orgnized field service. In addition, the authors recommended that firms build five critical capabilities: data processing, risk assessment, design-to-service, and hybrid sales and spreading. Combining products and services gives the manufacturer a dual competitive advantage: first, effective differentiation in the market increases due to innovation offered, and second, hybrid designs enable the manufacturer to reduce costs and identify new market opportunities, as resources and capabilities give the company the opportunity to perform activities along the value chain with added value or at a lower cost (Ulaga & Reinartz, 2011).
- 15 - 2.3.3.3 Uniqueness and differentiation
Schnauffer et al. (2001) claimed that very few companies can achieve differentiation over competetors by unique performance. Instead, these companies increase their success by optimal use of their existing capabilities and resources. Karani (2004) argued that an organizational focus on profit will only lead to failure in the long term, and also stated that organizations can generate not only financial benefits, but also advantages in the market through innovation, creativity, and uniqueness. Firms that create unique and different products achieve significant success, and those who can do this can attract niche market segments. An example of this in the textile and fashion industry is the significant success of luxury brands; further, brand reputation is essential for brand differentiation in the market (Riot et al., 2014).
2.4 Local versus Global Manufacturing of Textiles and Clothing
It has not been agreed specifically when globalization began. Wallerstein (2011) claimed that globalization began when humanity did. Others have stated that globalization began between 1870 and 1925, when time zones were implemented, as well as a global system based on the Georgian Calendar, and a unified understanding of time and space (Robertson, 1992). On the other hand, Guillén (2001) claimed that globalization actually began after the Second World War, the launch of the nuclear age, the liberation of colonized countries, and the development of South Asian countries. Many researchers have offered different definitions of globalization during the past decades. Brawley (2009, p. 555) stated: “Globalization refers to a multidimensional process whereby markets, firms, production, and national financial systems are integrated on a global scale.” The OECD defined globalization as follows: “The term globalization is generally used to describe an increasing internationalization of markets for goods and services, the means of production, financial systems, competition, corporations, technology and industries” (OECD, 2013).
Globalization resulted in emerging of the international markets, and led to tense international competition, manufacturers worked to achieve competitive edges. Building on above discussion about competitive advantages, it greatly depends on the product, and company business model.
Cost might be the primary motivation of competition; however, other factors, such as quality or lead-time, are in some cases the main drivers. Companies that outsource globally consider price their main motivation, while those that manufacture locally consider lead-time and agility as the main factors (Jin, 2004); for example, Zara, the pioneer in the “Fast Fashion” business model, produces half of its products in Spain and Portugal (Tokatli, 2008). In addition, the Italian high fashion houses have been manufacturing in Italy because of the nature of their products, which require highly skilled labor and specialized production machinery, in addition to high cost materials by comparison to the labor cost (Bolisani & Scarso, 1996).
2.4.1 Local manufacturing
According to Gordon (2002), local manufacturing is more favorable than is global outsourcing, as outsourcing is not always the right manufacturing strategy, because it may decrease
- 16 - customers’ benefits in terms of quality and flexibility. Puig et al. (2009) insisted that companies with higher value-added operations and production lines can survive the trend of globalization and its negative influences. On the other hand, the same authors stated that other factors, including the increased value of the euro and increased income levels, can lead to a change in cost patterns and accelerate the process of globalization.
Gordon (2002) discussed automated production, as he claimed that in-house manufacturing could be more advantageous for local companies, as they can manufacture high-volume products with highly automated systems. This can differentiate a company from its competitors and prevent its processes from being copied.
2.4.2 Competitive disadvantages of local manufacturing
According to the “Textile industry labor cost report” (Werner International, 2014), eight European countries were among the world’s highest ten in textile labor costs in 2014, which implies that labor costs are the greatest difficulty that textile manufacturing in Europe faces.
Graziani (1998) claimed that European textile laborers are more productive than are their Chinese counterparts; however, this does not offset the cost disadvantage for European manufacturers, especially when we consider the labor-intensive nature of textile and clothing production. Dychtwald (2004) pointed to the effect of the aging labor force as another disadvantage, and predicted that 80% of native-born workers in North America and Western Europe will be more than 50 years old by 2019. The author also estimated that the shortage in the USA’s labor workforce in 2010 will exceed 10 million workers, and the percentage will be higher in Western Europe, where birthrates are below population replacement levels.
Dychtwald also suggested that introducing flexible working programs with respect to place and time to keep older laborers in work after retirement may be a partial solution to the problem.
2.4.3 Global manufacturing
The textile and clothing industry is one of the most globally outsourced industries, and Adhikari and Yamamoto (2008) attributed this to three main reasons. First, most developed and developing countries have used the industry as a source of economic growth, particularly because it requires huge numbers of laborers, most of whom are women. Secondly, the textile and clothing industry does not require high investments or high-level infrastructure. Finally, the textile and clothing industry has been one of the most protected industries in the past fifty years because of various laws and regulations.
2.4.4 Competitive disadvantages of global manufacturing
The previous literature has defined the most significant threats and challenges in global manufacturing and outsourcing. Tate et al. (2014) stated that the low labor and material costs in the first decade of the 21st century motivated outsourcing and offshoring, but the costs in these developing countries were high because of decreased responsiveness and quality.
Kvedaraviciene and Boguslauskas (2010) argued that cultural differences are the main reason for outsourcing problems, in that they play a significant role in selecting manufacturing sites;
- 17 - however, these differences can be transformed into added value given flexibility and the willingness to cooperate. These cross-cultural differences include languages, social behaviors, public attitudes, and different ways of thinking on the part of individuals, companies, and societies (Krishna, 2004).
In addition, practicing business on a global scale can result in various threats, including extended lead times, long material process lines, and dealing with unfamiliar business models (Trent & Monczka, 2002). Unexpected costs, financial difficulties, arbitrary contracts, and unreliable suppliers are other outsourcing challenges (Weidenbaum, 2005). Additional risks of outsourcing include the transfer of knowledge and expertise from buyer to vendors, which can be short term competitors; other disadvantages include migration of investments, services, and production from developed to developing countries, and the number of businesses and jobs lost in developed countries (Dolgui, 2013).
Furthur, Ellram et al. (2013) pointed out risk factors that require consideration when choosing a manufacturing location. The authors grouped these into logistical factors, such as availability, reliability, and stability of transportation costs, and transportation reliability. Supply chain interruption risk factors included distance to customers, terrorism, and disasters. The authors also mentioned country risks, such as global and political uncertainty and instability, environmental issues, and regulation risks.
2.5 Theories
From the above literature review, the authors of this thesis had concluded the following concepts to analyze the primary data.
Supply Chain
Supply chain had played a significant role in business success over the past fifty years, furthermore, many multinational companies considered Supply Chain Management (SCM) as a strategic asset in their success, and companies had competed to create competitive edge to their products through efficient supply chain.
Recently additional activities to the supply chain management, such as “Reverse logistics”
“Waste management” and “Sustainability” were added as a new concern to SCM.
Value Chain
The concept of supply chain management focuses on the flow of goods and services from suppliers to buyer. While value chain is concerned with the value added at different activities and processes that aim to create profitable value for a product.
Michael Porter had defined the value chain as a set of activities that a firm performs to create a valuable product or service for the market. Porter introduced the framework of value chain as a tool to analyze firms’ competitive advantage.
- 18 - Porter’s value chain analysis has been used to analyze an organization’s ability to create value and understand competitive advantage through its activities, and has helped managers identify areas that can be improved to create further value
Porter value chain model was criticized as it is outdated, and has not developed to include new business activities, such as leadership, corporate culture, and the discipline of supply chain management.
Although the model was criticized, the authors of this thesis find the model still able to develop over the years, in addition, new concepts merged from it such as “Global Value Chains” and “Value Grid”.
Value Chain Primary Activities
Porter had categorized firm activities into primary or support activities. Primary activities include inbound logistics, Operations, Outbound Logistics, Marketing and Sales, and finally Service.
Value Chain Support Activities
Porter’s support value chain activities include Procurement, Technology Development, Human Resource Management, and Firm infrastructure.
Competitive Advantage
Porter had stated that competitive advantage includes achieving lower costs, differentiation, or a successful strategy over competitors, and added that competitive advantage is at the heart of each firm’s performance in competitive markets. Porter also assumed that competitive
advantage stems from the many discrete activities a firm performs in designing, producing, marketing, delivering and supporting its product. Each of these activities can contribute to a firm’s relative cost position and create a basis for differentiation.
Based on that the authors present the most known competitive advantages in the literature classified into three groups, Competitive advantages of local manufacturing, global manufacturing, and General.
Competitive advantages of local manufacturing R&D and innovation
High value adding activities Quality
Flexibility Sustainability
Competitive advantages of global manufacturing Create brand names
Cooperation with other manufacturers Access to new technology
Enhance performance Open new markets
- 19 - General competitive advantages
These competitive advantages are not exclusively relevant to local nor global manufacturing, but in fact, can contribute to any firm’s success, these include:
Low cost
Hybrids of products and services Uniqueness and differentiation
Competitive disadvantages of local manufacturing
High labor costs are the greatest difficulty that textile manufacturing in Europe face. The factor of aging labor force as another issue faces local manufacturers. Introducing flexible working programs to keep older laborers in work after retirement may be a partial solution to the problem.
Competitive disadvantages of global manufacturing
Manufacturing globally can be a disadvantage considering the cultural differences in languages, social behaviors, public attitudes, and different ways of thinking. In addition to extended lead times, dealing with unfamiliar business models, and unreliable suppliers.
Additional risks of outsourcing include the transfer of knowledge and expertise from buyer to vendors.
- 20 -
3 Chapter 3: Methodology
This chapter provides a description of the research method, research design, data collection and analysis, and the structure of the thesis. The chapter also discusses the validity and reliability of the research.
3.1 Research methodology
The research methodology of this thesis is presented in Figure 4; each step is described in detail in the following chapters.
To understand the competitive advantages of local manufacturing of textiles in high cost countries, the researchers used an inductive approach in this study. The authors used Porter’s value chain activities as a framework to collect empirical data in two case studies, and a thematic analysis was used to analyze data.
Inductive
Qualitative
Primary:
Semi-structured interviews
Secondary:
Literature, Articles, Internet
Thematic Analysis
Figure 4: Research Methodology 3.2 Research Approach
Inductive Research Approach
The inductive approach involves collecting data and then building a theory that emerges from the data. Thus, inductive research proceeds from observations or findings to the development
Research Approach
Research Method
Data Collection
Data
Analysis
- 21 - of a theoretical framework (Bryman, 2012), Kovacs & Spens, (2005) also states that inductive approach can be from case to result to rule.
In contrast, Saunders et al. (2009) stated about deductive research that it entails developing an idea or hypothesis based on existing theory. Blackstone (2012) defined the deductive approach as one in which the researcher begins with an existing social theory and then analyzes its implications, moving from general ideas (theory) to a more specific one, or from rule to case to result (Kovacs & Spens, 2005).
Bryman (2012) also states that inductive research method tends to build theory from collected data rather than testing existing theory. The author also suggests that inductive strategy might require researcher to go back and forth between data and literature theories to make sense of his findings.Bryman (2012) had argued that it is better to think about inductive and deductive research approaches as directions as there is no clear distinction between them.
3.3 Research Method
Qualitative Research Method
According to Newman and Benz (1998), qualitative research is used to explain a phenomenon.
Qualitative research is based on meanings expressed in words rather than statistics and numbers (Bryman, 2012). Savin-Baden & Major (2013) had stated that qualitative research might collect information through different methods include interviews, observations, note taking, and documents.
Qualitative research method was used in this study; two case studies were used to generate empirical research data. The two case studies were conducted at the Industri Textil Job and Ludvig Svensson companies in Kinna, Sweden.
3.3.1 Case Studies
The case study research strategy aims to interpret dynamics within a specific environment. This type of strategy might include one or many cases and different stages of analysis (Eisenhardt, 1989). Case studies are designed to analyse the context of a phenomenon after thorough studies of the theoretical issues (Kohlbatcher, 2006), they are preferred method to answer why, what, and how questions (Saunders et al., 2009). Eisenhardt (1989) stated that case studies could achieve different purposes; it can offer a description, generate a new theory or test an existing theory, the same author also confirmed that evidence in case studies might be qualitative, quantitative or both
Bryman (2012) argued that case study selection should be based mainly on anticipated learning opportunity. Purposive sampling was used to choose the two case studies in this research. The aim was to provide a comprehensive understanding of local textile manufacturing in high-cost countries. In this context, the authors looked for enterprises that fit with the selection criteria:
Manufacturing textile products.
Majority of their production processes take place in Sweden or other high cost countries.
- 22 -
Their products have significant competitive edge over competitors.
Authors had contacted several companies that can fit above selection criteria by emails, phone calls and direct contacts, however, few of them positively replied.
The authors had the chance to meet Industri Textil Jobb at STARK dagen (job fair) at University of Borås in January 2015; hence, it was an opportunity to discuss the research topic with them. The company management agreed to participate in the research.
Industri Textil Job is a well-known textile manufacturer; it is located in Kinna, Sweden. The company manufactures specialized technical textiles; its customers’ list includes
governmental and industrial entities.
The manufacturing process takes place at headquarters in Kinna, The Company has
subsidiaries in other locations in Europe. Their production methodology counts on providing tailored solutions to their clients, which requires continuous research and development.
The authors could also contact Ludvig Svensson, and they accepted to participate in the research.
Ludvig Svensson is a well-known Swedish textile company and a family business that has local production in Kinna, Sweden for more than 120 years.
The company produces climate screens for the agriculture market in addition to upholstery fabrics for interior textiles. The headquarters are located in Kinna, where most of production is being made, in addition to a new subsidiary in China where specific lines of their products are being manufactured.
Ludvig Svensson has built its own in-house machinery for production of climate screens with customers all over the world that made it a world market leader.
3.4 Data collection
Data can be collected from different sources, but there are mainly two types of data collected:
primary and secondary, both of which can provide advantageous resources to meet the objectives of research questions (Saunders, Lewis, & Thornhill, 2009). The data collected for this thesis (as described below) were based on primary data (semi-structured interviews) and secondary data in the form of peer-reviewed articles and other literature.
3.4.1 Primary data sources
Semi-structured interviews were used as primary data sources. Interviews helped the researchers gather reliable data designed to answer the research questions (Saunders et al., 2009). The aim of the interviews was to explore the topic more openly and to allow interviewees to express their opinions and ideas in their own words (Schuh, 2011). Bryman (2012) had stated that researchers use semi-structured interviews prepare a set of questions covering research topic, while interviewees have the freedom to answer these questions according to their view.
- 23 - Bryman also highlighted that all interviewees are being asked same questions with same wording.
The authors prepared a list of questions to provide structure to the interview, as well as open questions to vary the area of discussion from one interview to another based on the answers of the participant and the flow of the interview. Ten semi-structured interviews were conducted with the key managers and executives of both companies, including the Executive Vice President, Business Area Manager, Production Manager, Purchasing Manager, Planning Manager, and the Chief Technical Officer of Ludvig Svensson. In the case of Industri Textil Job, in addition to the Group Controller, two Business Area Managers and Production Managers were interviewed. All interviews were conducted in English at the companies’ locations, except the interview with the Chief Technical Officer of Ludvig Svensson, which was conducted via Skype.
The interviews discussed in detail the operations activities, the companies’ backgrounds, their value chain components, and current markets. The interviews purpose was to understand the value chain activities in order to extract the competitive advantages of each case study.
Both researchers interviewed all of the managers, and both interviewers recorded and transcribed the conversations and then compared the transcriptions to clarify any ambiguous answers. Each interview required approximately 40 minutes to an hour. Only the key data codes of interest are presented in (Appendix C and D).
3.4.2 Secondary data sources
According to MacQueen (1998), secondary data sources include documents such as books, scientific articles, and other publications that are relevant to the research, and can be important sources of background information. In this thesis, databases, such as Emerald, Scopus, and others available through the University of Borås were used to identify peer-reviewed articles and books. In addition, Google scholar website was used as a search engine using the keywords of this thesis. The web pages of the selected companies were also used to gather additional information about their background and activities.
3.5 Data Analysis
Thematic analysis is common in qualitative research, and is an essential method in identifying and analysing patterns (Clarke & Braun, 2013). Accordingly, thematic analysis is derived from the research questions. Codes are interpreted, analysed, and used to produce data-driven theory or theory-driven analysis. In addition, Flick (2009) insisted that thematic analysis helps identify and create themes. The authors of this research used structured thematic analysis to look for results that emerged from the data collected. The authors identified the nature of the results and conclusions that emerged from the data.
The thematic analysis in this thesis was applied according to the following steps:
