Improvement of firm Performance by Achieving Competitive Advantages through Vertical Integration in the Apparel Industry of Bangladesh

Shah Moahmmad Tanvir Monsur and Takahashi Yoshi

Asian Economic and Financial Review, 2012, vol. 2, issue 6, 687-712

Abstract: In the manufacturing step of the global apparel value chain (GAVC) the firms face fierce competition due to availability of low cost labor and hence the opportunity to make higher profit is a tough job. According to Gereffi (1999) a good strategy to overcome this problem is industrial up-gradation through value chain which resembles vertical integration strategy in the study of strategic management. The major theories on strategic management like Porter’s generic competitive strategy, resource based view and capability based view advocates that industrial up-gradation or value chain integration gains competitive advantages for the firms. But no study done on GAVC has neither discussed what should be the relevant competitive advantages for apparel manufacturing firms on the basis of above mentioned theories nor empirically showed how industrial up-gradation can gain competitive advantages and improve firm performances. Therefore, this study has picked up the variables for competitive advantages examining the above mentioned important theories and linked industrial up-gradation and competitive advantages and subsequently with firm performances. This study has done a survey on 180 apparel firms in Bangladesh and by using structural equation modeling it found that industrial up-gradation through value chain has positive influence on competitive advantages and competitive advantages has significant positive influences on firm performances. By analyzing the result, this study recommends the apparel manufacturers in Bangladesh that they should allocate the physical resources and build up human resources in such a way that in future they can vertically integrate. The firms must not stick to the strategy of reduction of labor cost rather they should also try to pursue for other competitive advantages like time, quality, reliability and flexibility. In this way the firm performances would be improved.

Keywords: Industrial up-gradation; vertical integration; generic competitive advantage; resource based view; value chain; competitive advantages. (search for similar items in EconPapers)
Date: 2012
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