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Companies involved in these transactions face various environmental factors including constraints and conflicts with laws and cultures of the world. Businesses that venture into global transactions have to modify their applications, complexity and intensity in the way they operate to be able to cop up with challenges brought up in the global business (Rugman, 2009).
2 Overview of Garment industries in U.S.A
Garment industry specializes in production of wear products. It is also referred to as ready-to-wear industry. Early garment industries relied greatly on hand production due to low level of technology during those periods. Acceptance and use of these garments did away with the custom clothes resulting to growth of the industry. It draws its workforce from the neighborhoods which are protected by trade unions. It employs several people due to the nature of activities involved in production of clothes. It is also rated among the countries income earner industries. This indicates that countries invested in garment production have a higher gross domestic product because of income received from export. Globalization has opened up markets for products and therefore countries whose labor costs are cheap have an advantage over those whose labor cost is expensive. Countries outside U.S.A like china can afford cheap labor hence regulate their production costs. Competitions from other countries selling garments in U.S.A which are cheaper than what is sold by indigenous firms create stiff competition. Open market activities across borders have been the major challenge leading to decline in garment production in U.S.A….
Garment industry trade overseas because operational costs are cheaper. Foreign countries, due to free market, have provided cheap labor, locations and enabling firms to be in good control of their operational costs. From this perspective, US firms enjoys an increase in profits since they have more access to a large market. Garment firms therefore end up relocating to foreign countries that provide cheap and ready resources to produce same quality of products produced in U.S.A. U.S.A garment industry continues to decline due to relocation of firms to seek favorable ground for wealth creation. Garment firms in regions like India have a higher competitive advantage in that they are able to operate at low costs while producing quality products which meet international standard. Such low priced products are preferred than what is locally produced in U.S.A. Current market trends indicate a serious decline in production capacity and size of the garment firms in U.S.A. 3.2 Labor cost Reduction of labor cost by garment firms has been the forefront of their operation. This has been done by completely laying off workers and obtaining experts in fields that require expertise. Labor cost affects final profits to be generated and therefore high labor costs incurred by garment industry prove to be a threat to their efficient operation. In U.S.A the labor laws are strict protecting workers from exploitation (Rugman, 2009). The set minimum wage for every worker makes the firms to equalize their operations at the provided cost that comes with this law.