34<strong>Market</strong> <strong>Movers</strong>ConclusionTake your partners for the nextadventureThe expiry in January 2005 <strong>of</strong> theMulti Fibre Arrangement (MFA), along-standing quota system thatgoverned volumes <strong>of</strong> world tradein apparel, raised fears in countriessuch as Sri Lanka that the cheapestmanufacturers (China in particular)would decimate their business.China has certainly gained <strong>from</strong>the agreement’s demise – withinsix months its exports <strong>of</strong> apparel toboth the EU and the US increasedby more than 500%. But Sri Lanka’sexports <strong>of</strong> textiles and apparelincreased by 8% in 2005, the firstyear after the quotas ended, andMAS also thrived in the post-MFAenvironment. Between January2005 and 2007 its number <strong>of</strong>employees increased <strong>from</strong> 28,000to 40,000, and it is now Victoria’sSecret’s largest single supplier.To some extent the company hasbenefited <strong>from</strong> a switch in its customers’priorities. From their sharpfocus on price and quality in the1990s, western apparel firms areplacing more emphasis on service,design and innovation. Sri Lanka is“It was the right thing to do. We had absolutely no idea that20 years down the road, the things we were doing would becalled CSR.”Ajay Amalean, Managing Director, MAS Corporate Solutionscertainly not the lowest-cost producer.Average hourly wage rates in theindustry are 35 cents (US), whereasin China they are 25 cents and inBangladesh 16 cents.Western firms too are embracing justthe sort <strong>of</strong> social and environmentalprogrammes that MAS says are part<strong>of</strong> its corporate DNA. By correctlyanticipating which way the marketwas moving, and by adjusting itsapproach accordingly, MAS waswell situated to enjoy a first-moveradvantage when customers camelooking for more than price andquality.MAS’ roster <strong>of</strong> blue-chip customersincludes Marks & Spencer, Gap,Nike and adidas. When, in 2004,Nike was looking for suppliers withwhom the socially and environmentallyconscious American sportswearbrand could link more closely as astrategic partner, MAS was selectedas one <strong>of</strong> eight, the only one inSouth Asia.The challenge for the brothersnow is to anticipate where theapparel business is heading overthe next few years. Compared withIndia and China, Sri Lanka can onlyever be a niche player. But MASanticipated a switch in the industry<strong>from</strong> a frequently confrontationalbuyer-vendor relationship to one<strong>of</strong> ‘strategic partnerships’ and jointventures. Its future is increasinglylinked to those <strong>of</strong> its customers.And these customers are demandingmore and more that they followgood sustainability practices.BOx 8: DIFFERENTIATIONSuccess in the apparel industryonce depended predominantlyon price and quality, buttoday these are taken as agiven and key success factorsinclude design, service andflexibility. Since it was foundedin 1987, MAS has workedhard to deliver against theserising expectations, includingstaying cost-competitivewhile also applying exemplaryemployment standards – nomean feat in Sri Lanka, wherethe cost <strong>of</strong> labour is relativelyhigh. The pressure on cost hasbecome all the greater sincethe end <strong>of</strong> the Multi FibreArrangement. At the sametime, however, MAS has beenable to differentiate itself <strong>from</strong>lower-cost producers by raisingawareness with customers<strong>of</strong> its high labour standardsand the ‘Women Go Beyond’programme. So successful hasMAS been that ‘Women GoBeyond’ has been supportedby major customers like Gapand Victoria’s Secret. MAS hasalso been engaging with theSri Lankan government toencourage it to differentiate thecountry as a source <strong>of</strong> ethicallyproduced apparel.
<strong>Market</strong> <strong>Movers</strong> 35Courtesy <strong>of</strong> MAS