The applicability of cluster theory to Canada's small and medium-sized apparel companies

Campaniaris, Constantine (2013) The applicability of cluster theory to Canada's small and medium-sized apparel companies. Doctoral thesis (PhD), Manchester Metropolitan University.

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Abstract

The Canadian apparel industry has long been challenged by imports from low-wage countries while its exports started to decline since their height in 2002. This situation was exacerbated with trade liberalisation, which started in January 2005. Data from Industry Canada show that in 2010 there were approximately 1,900 apparel companies in operation in Canada, the majority of which are SMEs. This represents about a 30% decrease from 2,700 companies in 2004 and an even more dramatic 71 % reduction in the number of employees from 82,200 in 2004 to 24,200 in 2010. A 2004 study conducted for the Apparel Human Resources Council of the Federal Government of Canada outlined a number of strategies that Canadian apparel companies could pursue, focusing on elements other than manufacturing in the traditional apparel value chain. These strategies seemed to suggest a combination of Porter's "revised" cluster theory where greater collaboration is required throughout the supply chain together with the presence of a local central actor, whose competitive advantage lies, according to Jacobs and DeMan, in functional expertise and relationships. However, as Rosenfeld indicated, while the characteristics of clusters may be present, they may not necessarily be effective clusters. As such, this research study set out to determine whether Porter's cluster theory is now being applied or if it is indeed applicable to Canada's apparel companies. Aside from evaluating current trends in the Canadian apparel industry, the literature review identified some questionable areas in the application of Porter's cluster theory to the apparel industry, including the diminishing role of geographical proximity with globalisation, the Canadian apparel industry'S decreasing location quotient which suggests a competitive disadvantage in the industry for the local economy, and the lack of qualitative information in the study of clusters. Qualitative research undertaken in the form of case studies and expert interviews revealed that cooperation, openness and trust among competitive companies are minimal, information exchange between suppliers and retailers is selective and the social infrastructure within the industry is weak. Essentially, from a cooperative standpoint, the apparel industry is an industry of coalitions driven by benefits to those participating in the coalitions, but it is not a cluster. A quantitative survey conducted among apparel suppliers in Canada revealed that, post trade liberalisation, their competitive focus is on customer service, product development and sourcing. However, according to the expert interviews, most Canadian apparel suppliers not only fail to meet world-class benchmarks but are in danger of extinction unless they develop strategies and skills that will address the current requirements for survival in a globally competitive environment. The analysis of the research findings points to a strategy that is imperative for the survival of the apparel industry: it is a collaborative strategy between suppliers and retailers called "Apparel 2.0". This new business model brings together collaborative concepts, Canadian apparel business data, the research findings published by other authors and the outcomes from fieldwork carried out for the current research. It is a collaborative framework that connects consumer/market intelligence, apparel retail and supply professionals, process, and technology in order to bring apparel to market effectively and efficiently.