Enhancing Economic Sustainability by Markdown Money Supply Contracts in the Fashion Industry: China vs U.S.A

Bin Shen, Tsan-Ming Choi and Chris Kwan-Yu Lo
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Bin Shen: Glorious Sun School of Business and Management, Donghua University, Shanghai 210005, China
Tsan-Ming Choi: Business Division, Institute of Textiles and Clothing, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, China
Chris Kwan-Yu Lo: Business Division, Institute of Textiles and Clothing, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, China

Sustainability, 2015, vol. 8, issue 1, 1-14

Abstract: Supply chain contracts, such as the markdown money policy (MMP), are commonly adopted in the fashion industry. In this paper, we explore how fashion companies can use MMP to enhance economic sustainability from the cross-cultural perspective. We conduct case studies on two fashion firms (suppliers), one from China and one from U.S.A., that are adopting MMP in their respective supply chains. Via semi-structured interviews with staff members and some public data searching of the target companies, we find that the cultural factors, such as power distance and collectivism/individualism, affect contract selection, contract management, supplier–retailer leadership, and supplier–retailer relationship. We use the Hofstede’s national cultural dimensions theory to explain our insights. Specifically, in China, a country with a relatively high degree of power distance and collectivism, the companies tend to care more about the group interest and loyalty. The Chinese fashion companies are more willing to play the leading role in managing the relationships with their retailers, and offer MMP to them. In the U.S.A., a country with a relatively low degree of power distance and individualism, the companies are more likely to emphasize their own interest in trading. In fact, we find that American fashion suppliers tend to bargain with their retailers, and they are less willing to proactively provide the markdown money as a sponsor. Finally, managerial implications are provided, and several future challenges on MMP are examined.

Keywords: markdown money policy; fashion industry; supply chain management; cross-cultural study (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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