McCormick+Schmitz Handbook for value chain research on - PACA

The third group of buyers consists of mass merchandisers. These large <strong>chain</strong>s sell goodquality,
medium-priced goods, mostly under their own labels. They buy from some of the
same sources as the second group, but also from low-end producers in the NICs, China,
and other Asian countries.
In the fourth group are the discount <strong>chain</strong>s. These place giant orders <strong>for</strong> low-priced
standardised goods to be sold under their own store brands. They buy from low-cost
suppliers in both established producing countries, such as Mexico and India, and those on
the outer edges of export production, like Kenya or Vietnam.
Finally small importers are continually searching <strong>for</strong> new sources of supply among
countries just beginning to develop their export production capabilities. According to
Gereffi (1994), they serve as “industry scouts”, identifying and testing new sources of
supply.
The European Union (EU) market is somewhat different from that of the US, but it is also
buyer driven. EU buyers are less price sensitive because clothing prices have traditionally
been higher in Europe than in the US. Outlets and, there<strong>for</strong>e, orders tend to be somewhat
smaller. This allows EU buyers to source from countries that have less total capacity, such
as Mauritius.
Despite the predominance of buyer-driven <strong>chain</strong>s in fashion garments, it is not difficult to
find examples of other types of <strong>chain</strong> governance in the clothing industry. Knitwear, such
as T-shirts and socks, are often produced in vertically integrated knitting mills with
sewing units that do the final assembly work. In developing countries with many
producers and a large domestic market, the <strong>chain</strong>s <strong>for</strong> some standard items like men’s and
boy’s shirts are market based or operate through balanced networks. One of the major
tasks of <strong>value</strong> <strong>chain</strong> <strong>research</strong>ers is, there<strong>for</strong>e, to find out how the <strong>chain</strong>s are governed. We
will show later how to do this.
25