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IB Unit 2 Case Study

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23 views

IB Unit 2 Case Study

Case study

Uploaded by

dinank1555
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Case Study: Vietnam’s Textile and Apparel Industry in the Global Market

Background:

Vietnam has developed into one of the world’s leading exporters in the textile and apparel
sector, contributing significantly to its economic growth. With its large, low-cost labor
force and access to key international markets, Vietnam has become a preferred
destination for outsourcing in the textile industry. Its major export destinations include the
United States, the European Union, and Japan.

However, Vietnam faces increasing competition from other low-cost producers like
Bangladesh, China, and India. It must also navigate challenges in its supply chain and
growing demands from consumers and global retailers to adopt more sustainable
practices.

Opportunities and Challenges:

• Labor Costs and Competitive Edge: One of Vietnam’s major advantages is its
lower labor costs compared to other textile-producing countries. This has allowed it
to secure contracts with global brands looking to minimize production expenses.
However, as wages slowly rise, there are concerns about how sustainable this cost
advantage will be in the long run.
• Trade Agreements and Market Access: Vietnam has signed a number of trade
agreements that give it preferential access to major markets. These agreements
have helped reduce tariffs and make Vietnamese textile products more
competitive. Still, changes in global trade policies, such as shifts in tariffs or trade
disputes, can pose risks for long-term stability.
• Dependency on Imports for Raw Materials: Although Vietnam is highly efficient in
producing finished garments, it relies heavily on imported raw materials, especially
fabrics and fibers from China. This dependence exposes the industry to supply
chain disruptions and fluctuating costs of imported materials.
• Competition and Industry Upgrades: Vietnam is facing tough competition from
other low-cost producers such as Bangladesh and India. To maintain its
competitive edge, Vietnam must focus on upgrading its production processes,
investing in advanced technology, and possibly moving toward more sustainable
and value-added segments within the textile industry.
Global Context and Vietnam’s Position:

Vietnam’s textile sector thrives in the global market for several reasons. First, its labor-
intensive production model and relatively cheap workforce make it an attractive location
for multinational companies seeking to lower production costs. Additionally, Vietnam’s
geographical proximity to China provides easy access to critical raw materials, while its
strong logistical infrastructure facilitates efficient transportation to key markets
worldwide.

In recent years, Vietnam’s local market has also started to demand more from its apparel
sector. With a growing middle class and increasing urbanization, domestic consumers are
becoming more conscious of style, quality, and sustainability. This presents both a
challenge and an opportunity for Vietnam’s textile producers, who must balance the needs
of export markets with changing domestic tastes.

The country’s ability to attract foreign investment in the textile industry is partly due to its
competitive pricing and efficient production. However, global competition pushes
Vietnamese firms to innovate, improve efficiency, and move toward producing higher-
value products, such as eco-friendly textiles or technologically enhanced apparel.
Moreover, rising expectations for sustainable production, both from international
customers and global regulatory bodies, are influencing the industry’s direction.

Discussion Questions:

1. Competitive Edge in Global Markets:


a. What are the key factors that have contributed to Vietnam becoming a major
player in the global textile industry?
b. Given rising labor costs, how can Vietnam maintain its competitive edge
against other low-cost producers?
2. Trade and Market Access:
a. How have trade agreements influenced Vietnam’s success in exporting
textiles? What challenges might arise if trade policies change in key markets
like the U.S. or the European Union?
3. Supply Chain and Resource Dependence:
a. Vietnam imports much of its raw materials, particularly from China. How
does this dependency affect the competitiveness of its textile industry, and
what strategies could Vietnam implement to reduce this reliance?
4. Innovation and Sustainability:
a. What steps should Vietnamese textile manufacturers take to move up the
value chain and compete with higher-end global producers?
b. How important is sustainable production in shaping the future of Vietnam’s
textile industry, and what role should international consumer demands play
in this transition?
5. Future Prospects:
a. What risks does Vietnam’s textile industry face in the coming years, and how
can the country prepare to mitigate these risks while sustaining growth?
b. Considering the growing competition and potential shifts in global
production preferences, how might Vietnam diversify its economy to reduce
reliance on labor-intensive industries?

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