.. OJ "’ d. ‘ j MICHIGAN stME UNIVERSITY LIBRAR b “’0 °’ lllllil:llllll"llllllllllllllllllllllll' : l n l 3 1293 00581 9002 LIBRARY Michigan State i University This is to certify that the thesis entitled BUSINESS PLANNING IN THE U.S. AND SOUTH KOREAN APPAREL INDUSTRIES: AN EXPLORATORY STUDY ; presented by KIMBERLY PARNELLO has been accepted towards fulfillment of the requirements for M.S. Merchandising Management degree in Majo’j motes»; Date EQZW/LM/ ”7’0 04639 MS U is an Affirmative Action/Equal Opportunity Institution PLACE IN RETURN BOX to remove this checkout from your record. TO AVOID FINES return on or hetero ode due. DATE DUE DATE DUE DATE DUE usu Is An Affirmdlve Adm/Equal Opponunlty Institution . 1 BUSINESS PLANNING IN THE U.S. AND SOUTH KOREAN APPAREL INDUSTRIES: AN EXPLORATORY STUDY BY Kimberly Parnello A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of Human Environment and Design 1990 C71) {T t? C) ABSTRACT BUSINESS PLANNING IN THE U.S. AND SOUTH KOREAN APPAREL INDUSTRIES: AN EXPLORATORY STUDY By ,3 ' Kimberly Parnello The purpose of the study was to compare and contrast business planning strategies in U.SI and S. Korean apparel firms. The research was crossrcultural in design and used mail survey methodology. L ; Significant differences were fdhnd in attitudes toward international trade and shorE-range and long-range business planning between the two countries.' In short-range planning, 8. Korean firms emphasized labor projections, break-even point and R.O.I. while U.S. apparel firms concentrated on sales and cash flow'profiections. Consistent patterns of employee involvement in short-range and long- range planning were found among U.S. and S. Korean companies. No differences in competitive business strategies existed between U.S. and S. Korean apparel producers. It appears that U.S. and S. Korean apparel companies are using similar strategies to compete in the global apparel market. ACKNOWLEDGEMENTS The author would like to extend her deepest appreciation to her master's committee chairperson, Dr. Dawn Pysarchik, for her support and efforts throughout the research study and graduate program. Sincere gratitude is also extended to master's committee members, Dr. Brenda Sternquist and Dr. S. Tamer Cavusgil, for their assistance and guidance. The author wishes to thank friends and colleagues for encouragement and support given throughout her master's program. She is grateful to Carrie Part, Augusto Tosi, Marianne Mahoney, Karen Munden and Eydie Garland for their research assistance and friendships. A special thank you is given to her parents, Dr. and Mrs. Robert E. Williams, for teaching her independence and perseverance. A very special acknowledgement to her husband, Tony, and their children, Anne Marie, Kathryn and Michael for their endless patience and love which allowed the completion of this research. iii TABLE OF CONTENTS Page LIST OF TABLES OOOOOOOOOOOOOOOOOOOOO ....... 00...... Vi Chapter I. INTRODUCTIONOOOOOOO0.00...OOOOOOOOOOOOOOOO. 1 Statement of the Problem............. ..... 3 Study Purpose and Objectives.............. 4 Significance Of the StUdYOOOOOOOOOOOOOOOOO 5 Conceptual Framework...................... 6 Theoretical Definitions................... 8 Operational Definitions................... 8 II. REVIEWOF LITEMTURE.OOOOOOOOOOOOOOOOOOOOO. 11 U.S. Apparel Industry.................... 11 Structure of the U.S. Apparel Industry. 11 Import Competition..................... 14 S. Korean Apparel Industry.......... ..... 15 Characteristics of the S. Korean Apparel Industry..................... 16 Export Orientation of the S. Korean Apparel Industry..................... 17 Government Support of the S. Korean Apparel Industry..................... 18 Legislation Affecting the Apparel Industry............................... 19 Meeting the Challenges of World Competition in Apparel Trade........... 22 Business Planning and Risk Management.... 26 Application of Business Planning to the Apparel Industry....................... 29 iv Page III. RESEARCH DESIGN AND METHODOLGY............. 33 Research Design............ ......... ..... 33 Research Objectives...................... 33 Methodology.............................. 34 Questionnaire.......................... 34 Sample Selection......................... 36 Hypotheses and Statistical Analyses...... 36 Group 1................................ 36 Group 2................................ 37 Group 3................................ 38 Group 4................................ 39 85....O...OOO0..OOOOOOCOOOOOOOOOOOOOOOO 40 Sample Characteristics................... 40 IV. RESULTS AND DISCUSSIONOOOOOOO...0.0.00.0... 46 Results.................................. 46 Group 1 Hypotheses..................... 46 Group 2 Hypotheses..................... 50 Group 3 Hypotheses..................... 55 Group 4 Hypotheses..................... 60 Hypothesis 5........................... 66 Discussion............................... 67 V. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS... 77 Summary of Objectives and Methodology.... 77 Summary of Statistical Analysis and Results...OOOOOIOOOOOOOOOOOOOOOOO0....O 79 conCIuSionSe O O O O I O O O O O O O O O O O O O O O O O O O O O O O O 82 Limitations. 0 O O O O O O O O O O O O O O O O O O O O O O O O O O O O 86 Recommendations 0 O O O O I O O O O O O O O O O O O O O O O O O O O 87 Recommendations for U.S. Apparel companies. 0 I O O O O O O O O O O O O O O O O O O O O O O O O O 87 Recommendations for Future Research.... 89 APPENDICES COO...0.0...00......OOOOOOOOOOOOOOOOOOOOO 91 A. U. S O QUESTIONNAIRE O O O O O O O O O O O O O O O O O O O O O O O O O 92 B O S O KOREAN QUESTIONNAIRE O O O O O O O O O O O O O O O O O O O O 9 3 C. APPENDIX TABLES I O O O O O O O O O O O O O O O O O O O O O O O O O O O 94 REFERENCE LISTOOOOOOOOO00......OOOOOOOOOOOOOOOOOOOOO 104 V 10. 11. 12. 13. Definition Legal Form LIST OF TABLES of Apparel Companies............. of Ownership..................... Length of Time in Business.................. Total Annual Sales......... ...... ... ....... . Types of Apparel Produced................... Perception Apparel on Perception Apparel on Perception of the Effect of Low-Cost Imported the U.S. Apparel Industry........ of the Effect of Staple Imported the U.S. Apparel Industry........ of Quality of Exports...... ...... Attitudes Toward Business Planning.......... Importance of Selected Business Factors in Short-Range Business Planning............... Profitability Difference When Short-Range and Long-Range Business Planning is Used.... Profitability Difference When Short-Range and Long-Range Business Planning is Used and Length of Time in Business is Controlled.... Summary of Hypotheses Testing............... vi Page 42 42 44 44 45 48 49 50 53 58 62 65 74 CHAPTER 1 INTRODUCTION The dramatic increase of imported apparel in the U.S. signals the peril of the U.S. apparel industry. In 1984, apparel imports rose 41% while imports of all other manufactured goods rose only 33% (Ghadar, Davidson & Feigenoff, 1987, p. 15). Since 1986, the growth in apparel imports has increased at a rate of twelve percent annually, while consumer demand for apparel in the U.S. has increased only one to two percent annually (American Apparel Manufacturers Association, 1986, p. 3). Consequently, imports have more successfully satisfied U.S. consumer demand, thus reducing U.S. apparel producers' market share. With 57.5% of the 23,237 U.S. apparel manufacturers (SIC 23) employing less than 20 persons, the U.S. apparel industry is a conglomerate of relatively small businesses (AAMA, 1986, p. 9). Characterized by low profit margins, lack of capital, and labor intensity, U.S. apparel firms are particularly vulnerable to changes in the competitive market environment. Given these characteristics, U.S. apparel producers have an increased chance of experiencing business 1 2 failure. Apparel producers having the flexibility to survive significant market shifts often take years to reestablish lost markets. Due to inherent industry characteristics and a large mass market, the U.S. apparel industry has focused on the domestic market. Even as the exchange rate has fluctuated from a weak dollar during the early to mid 70s to a strong dollar during the late 70s and early 80s, no focus on exporting occurred. As a result, U.S. apparel producers have not been prepared to compete in a global market environment (Ghadar et al., 1987). With competitive pressures more acute and complex due to technological advances, global competition and flat demand growth, market boundaries are no longer well-defined and competitive advantages are short-lived (Day, 1986). These factors signal increased competition for U.S. apparel companies and the need to emphasize strategic business planning. Although strategic planning in the apparel industry has not been well studied, findings from studies of small business firms could be applied to the apparel industry. Studies have found that many small firms focus on day-to-day business operations, and most do not engage in long-range planning (Bracker & Pearson, 1986). Flexibility is often listed as one of the advantages of small businesses. However, flexibility must also be planned in order for small 3 businesses to take advantage of changing market environments without overextended financial commitments. Small businesses need to plan sufficient flexibility in marketing strategy in order to adjust for rapid environmental change (Brannen, 1978). Researchers have concluded that strategic planning in anticipation of or adaptation to the business environment is imperative for financial success (Bracker & Pearson, 1986). W The U.S. apparel manufacturers need to refocus their planning strategies in anticipation of increasing global competition. Competition from imports, predominantly from developing and newly industrialized countries (NICs), has been a major cause of the slow growth of the U.S. apparel industry. In 1987, the widening apparel trade deficit peaked at $20.7 billion (U.S. Department of Commerce, 1988a, p. 45-2). S. Korea, the fastest growing NIC with an economic growth rate in 1987 of 12.5% and textiles/apparel as its number one export, continues to be a major threat to U.S. apparel producers (U.S. Department of Commerce, 1988b, p. 3). Growth in the S. Korean apparel industry has resulted in larger and fewer companies. Merging has strengthened S. Korean apparel firms by increasing production capacity resulting in a negative impact on U.S. apparel firms (U.S. 4 Department of Commerce, 1980). Due to the range in sophistication of strategic business planning, it is important to consider planning specific to small firms. Researchers have concluded that successful small businesses plan frequently and for short time periods demonstrating an informal manner of planning (Robinson & Littlejohn, 1981). Because of the small business nature of the apparel industry, an informal method of planning, referred to as business planning, will be the term used in this thesis. d as O ' 'v The purpose of this study is to compare and contrast business planning strategies among samples of U.S. and S. Korean apparel firms. This research study was undertaken to fulfill several specific objectives. 1. Compare and contrast attitudes of U.S. and S. Korean apparel producers toward international apparel trade. 2. Compare and contrast attitudes of U.S. and S. Korean apparel producers toward business planning. 3. Compare and contrast business planning initiatives and competitive strategies in U.S. and S. Korean apparel firms. 4. Determine the relationship between business planning and financial performance in U.S. and S. Korean apparel firms. WM! Although much research has been conducted in the area of strategic business planning, its application to the apparel industry has been limited. Lacking planning research data, apparel companies have used a trial and error approach when conducting business. The results have been the loss of potentially profitable opportunities and apparel company closings. As of 1983, two hundred and fifty U.S. businesses in apparel and related products had failed (Ghadar et al., 1987, p. 13). In seeking to prevent loss of opportunities or failure, a producer can use business planning to determine its direction and guide the allocation of resources (Day, 1984). By comparing business strategies of U.S. apparel companies to those of a successful international competitor, S. Korea, U.S. apparel producers could obtain information which could aid in future planning efforts. S. Korea was chosen for this study because it is a newly industrialized nation with an apparel industry demonstrating an annual growth rate of 8.6% from 1978-1985 as compared to -0.2% for the U.S. apparel industry (United Nations Publishing Division, 1987, p. 325, 578). Typically, as countries reach the newly industrialized stage, significant foreign capital has been earned and further 6 penetration into global markets is planned. This appears to be true of S. Korea since its apparel industry plans to emphasize product quality, upgrade its fashion image and create a fashion capitol to compete worldwide. This translates into increased competition for the U.S. apparel industry (Cantelmi, 1988). o t a wo The essence of business planning is the consideration of current business decisions in relation to probable consequences over time. Business planning requires taking risks in predicting threats to avoid and opportunities to pursue. Through the use of business planning, risks are more effectively managed (Day, 1986). A model developed by MacCrimmon and Wehrung (1986, p. 31) profiles elements of risk management, offering a particularly effective way to manage high risk environments (Figure 1.1). From their study of top level executives, MacCrimmon and Wehrung concluded that the three determinants of risk are lack of control, information and time. In the five phase model, the determinants of risk are outlined, and recommendations for managing risk are identified as recognizing and structuring risks, evaluating risk involvement, correlating company goals with risks, choosing actions for risk management and tracking outcomes of risks. Business planning relates well to a risk management 7 model. Within the planning process, a company assesses, generates, selects and implements business plans. Assessment, a definition of the business and its current competitive and environmental status, is the recognition step in the model. Strategy generation, a consideration of options and sources of competitive advantage in relation to company goals, consists of evaluating and adjusting in relation to the amount of control, information and time available. Strategy selection is the choice of rewards, risks, objectives and resources in the model. In business planning and risk management, one must choose a strategy and predict the general outcomes and personal consequences of that strategy. Implementation, actively using strategic plans in programs and budgets, leads to tracking in the model, which represents a determination of results for the chosen strategy. This model provides a useful tool to interpret risk management in the apparel industry through analysis of resulting planning approaches. Business planning incorporating appropriate risk management can guide decision making to foster a secure competitive future (Day, 1986). 7a Figure 1 . 1 Model of Managing Risk TIME RECOGNIZE ADJUST INFORMATION CONTROL 1 1 Chalices EVENT‘JSQ 'tude Exposure EVALUATE , CHOOSE , GENERAL OUTCOM§§l PERSONAL CONSEQUENCEF TRACK nets. From W (p. 31) by K.R. MacCrimmon and D.A. Wehrung, 1986, New York: The Free Press. 8 Iheeretisal_nefinitigns Business_2leaning_s22hi§tisatien:: In general. planning is the consideration of current business decisions over time (Day, 1986). Planning sophistication levels range from structured, formal, written plans, to unwritten, informal plans, to no plans at all (Bracker & Pearson, 1986). Busine§§_2lanning:: Business planning is an informal manner of planning common to small firms who plan frequently and for short time periods (Robinson and Littlejohn, 1981). Risk management-- Risk management is adjusting for the lack of control, information and time in making business decisions. This adjustment is achieved by assessing, generating, selecting and implementing business plans. Operational Definitigns Einansial_perf2rmanse:: Financial performance is the profit performance of a firm (Cline, 1987) Manufacturer-- A manufacturer performs all business functions necessary to make a product including 9 purchasing raw materials, product design, manufacturing, and financial and marketing activities. Manufacturers' products usually carry the company's name (de la Torre, Jedel, Arpan, Ogram & Toyne, 1978). ant;agtgz;; Contractors cut garment pieces using specified pattern layout and fabric designated by a manufacturer or jobber. They sew and assemble finished garments according to specifications ordered by the firm hiring them. Contractors do not perform any marketing functions or produce goods under their own labels. Generally, contractors supply department stores, mail-order houses, apparel jobbers or manufacturers short of capacity (de la Torre et al., 1978; Greenwood & Murphy, 1978). §ubggntragtgr;; Subcontractors complete production for contractors' over capacity (de la Torre et al., 1978). gobber-- Jobbers are independent middlemen who contract for production of apparel goods which they market to retail outlets. In addition, jobbers select designs, supply fabric and perform all marketing functions (de la Torre et al., 1978). 10 EDQI£21QDQ£_EIQDDIDQ:: Short-range planning is a written or unwritten annual business plan (Bracker & Pearson, 1986). Lengzranss_nlanning:: Long-range planning is a written, 3-5 year business plan. CHAPTER II REVIEW OF LITERATURE W The textile and apparel industries play an important role in the U.S. economy. Similar in volume to the auto industry, the textile/apparel industry generates sales in excess of $48 billion compared to $51 billion for the auto industry. The textile/apparel industries employ 10% of the American manufacturing work force, representing the largest employer of women and minorities. However, due to slow domestic growth and increasing imports, the apparel industry, in particular, has been unable to remain competitive (Ghadar et al., 1987, p. 14). t ucture o .S. A a s The structure of the U.S. apparel industry has made restoring competitiveness challenging. The U.S. apparel industry is comprised of thousands of small, predominantly family-owned, companies averaging less than 100 employees and producing narrow product lines. Compared to other industries, apparel production is labor intensive, even though many jobs in the industry are not highly skilled. 11 12 Low profit margins resulting from small scale operations and intense domestic and foreign competition make the apparel industry especially vulnerable to changes in the economy. Additionally, the rise in the value of the dollar during the late 708 and early 808 combined with the apparel industry's high reinvestment and productivity costs contributed to financial instability (Ghadar et al., 1987). The four basic types of operations in the U.S. apparel industry are manufacturers, contractors, subcontractors and jobbers. Manufacturers perform all business functions such as purchasing, product design, manufacturing, and financial and marketing activities. In addition, products produced usually carry the manufacturer's own name (de la Torre et al., 1978). The largest apparel manufacturers in the U.S. are Levi Strauss, Blue Bell, VF Corporation, Hartmarx Corp. and Cluett, Peabody and Co. (Ghadar et al., 1987). In contrast to manufacturers, contractors do not perform any marketing functions nor produce under their own names. Contractors cut garment pieces, sew and assemble products according to specifications ordered by the firm hiring them. Subcontractors complete production for contractors' over capacity. Typically, contractors and subcontractors supply department stores, mail-order houses, apparel jobbers or manufacturers which are short of capacity (de la Torre et al., 1978). Apparel jobbers are independent entrepreneurs who do 13 not own manufacturing facilities, but contract for the production of apparel goods which they market to retail outlets. Usually, jobbers select designs, supply fabric and perform all marketing functions (de la Torre et al., 1978). Richard D. Robinson (1986) suggests companies analyze their value-added chain in competing internationally. The value-added chain is a group of production processes and services linked together, but often divisible, from initial information gathering to service the final consumer. A firm should concentrate on the value-added chain segment which it does best in order to strenghten its internationally competitive position. In response to imports during the 1970s, some restructuring occurred in the U.S. apparel industry. Apparel producers merged hoping to reduce costs and obtain more clout with retailers and government; larger apparel companies resulted. Productivity and capital increased, and product lines were enlarged and upgraded. As of 1983, thirty companies with $200 million or more in sales accounted for about 40% of U.S. apparel output (Ghadar et al., 1987, p. 13). With restructuring, the apparel industry gained new knowledge and experience. However, this reactive strategy did little to improve the competitive position of the U.S. apparel industry (Standard & Poor's Corporation, 1988). 14 W As apparel producers have experienced increasing competition from imports, companies have begun to emphasize marketing and service and de-emphasize manufacturing. With a marketing and service emphasis, apparel producers have tried to develop export business and recapture domestic business lost to foreign producers. The latest figures available indicate that the number of companies engaged solely in manufacturing from 1977 to 1982 declined 83% while companies involved in all facets of apparel production declined only 16% (Standard & Poor's Corporation, 1988, p. 87). Although a marketing and service emphasis has helped, a lack of competitiveness still exists. From 1983-1987, for every dollar of exported apparel, approximately $19 was imported. 0f the $137 billion U.S. consumers spent on domestic and imported apparel in 1987, 50% was for imports (AAMA, 1988, p. 4). Since 1987, apparel imports have continued to increase, with imported garments estimated to be 53% of the U.S. market (AAMA, 1988, p. 6). Therefore, in a study by Morganosky and Jin (1988), it was not surprising that U.S. apparel manufacturers viewed foreign competition as their number one problem. Apparel lines most affected by import penetration are women's, children's and infants' (WC&I) knit shirts, WC&I woven blouses, men's and boys' (M&B) woven shirts, all 15 sweaters and all coats. In these categories, imports represent over 50% of the items available to U.S. consumers (AAMA, 1988, p. 6). According to the American Apparel Manufacturers Association, 1987 apparel imports amounted to $18,454 million compared to apparel exports of $943 million, creating a U.S. apparel trade deficit of $17,511 million (AAMA, 1988, p. 31). The majority of the imports came from developing and newly industrialized countries (NICs), which produced one out of every three garments sold in the U.S. China, Taiwan, S. Korea and Hong Kong, known as the Big Four, are the major suppliers to the U.S. market, contributing nearly 80% of U.S. apparel imports in 1987. Imports from China alone increased 18% in value while imports from Taiwan, S. Korea and Hong Kong rose 15% in value (U.S. International Trade Commission, 1987, p. 54). NICs, particularly those within the Big Four, continue to invade U.S. markets while the U.S. has limited access to their domestic markets (Dreyfuss, 1987). EI_KQI§§n_AEE§I£l_InQn§££l S. Korea is the seventh largest trading partner of the U.S. Its economic growth rate has been 12% in each of the last two years. Exports, the key factor in this growth, have increased almost 30% annually since 1962 (Clifford, 1988, p. 56). Specifically, textile and apparel exports have been and continue to be the major source of earned 16 foreign exchange (Gale, 1985). Characteristics 9; S, Kgreaa Appagel Indusgzy S. Korean textile and apparel production is structured vertically from raw materials to finished products. Except for U.S. cotton, the S. Korean industry uses domestically produced fibers to supply its apparel industry, which is principally export oriented. Through the use of export trading companies, government sponsored export promotion is fostered to enable the S. Korean textile and apparel industries to be self-sufficient and grow rapidly. As a result, operations have consolidated, and fewer and larger companies have been formed (U.S. Department of Commerce, 1980). Among different industries and between skilled and unskilled labor, S. Korea has a wide variation in wages. Typically, the lowest wages are earned by workers in the production of textiles, wood products, rubber, pottery, electrical machinery, and precision instruments. With government aid and encouragement, S. Korean industry has focused on increased production of commodities, especially to obtain foreign market share. Income earned has been used to further its industrial expansion. 8. Korea has benefited from government assistance, inexpensive labor, and a weak dollar in the early and mid 705 to obtain foreign market share (Bunge, 1982). 17 Expor; Orientatiga 9f S. Kageaa Appagal Industgy Historically, S. Korea followed the development pattern of a typical newly industrialized nation. NICs target export-oriented industries for economic development and enact measures to protect home markets while these industries are growing. Apparel and textiles are among the earliest industries developed by NICs because the raw materials needed are fairly common, capital requirements are low and export earnings are used to further economic development. NICs enter the textile and apparel market with low value-added exports. As the home industry grows, product lines are broadened and upgraded (Ghadar et al., 1987). In the 19605, S. Korea used an export-oriented expansion strategy to encourage economic growth. With inexpensive labor as a competitive advantage, S. Korea developed labor intensive, light industries. Light industry exports, which include apparel and textiles, have contributed more than 50% to growing sales and profits of S. Korean corporations from 1960 through the mid-1970s. As of 1980, textiles and apparel were producing 24% of all manufactured output. These producers paved the way for the heavy industry and chemical production in the late 1970s as S. Korea developed into a newly industrialized nation (Bunge, 1982 p. 29). With the U.S. accounting for 39% of its export market, 18 exports are the primary growth source of S. Korea. From 1962-1980, all exports contributed 3% to Korea's 8.5% annual GNP growth rate. In the textile and apparel industries, exports were $7.5 billion for the first nine months of 1987, an increase of 31% over the same period in 1986 (U.S. Department of Commerce, 1988b, p. 9) S. Korea will continue to promote textile and apparel exports since these key industries account for about one third of its foreign exchange. Government and industry plan to expand overseas investment significantly, replace aging equipment, and increase spending for research and development (U.S. Department of Commerce, 1988b, p. 9). Morganosky and Jin (1988) found that Korean textile and apparel maunfacturers are emphasizing product quality to remain competitive. Considering its export growth and future expansion plans, S. Korea is steadily moving in the direction of a modern, market-oriented trading nation (Clifford, 1988). v a 3 Based on desired export levels, the S. Korean government has a five-year plan to control the textile and apparel industries by allocating new capital, new equipment, government licenses and authorizing production levels (U.S. Department of Commerce, 1980). Textile and apparel imports are only permitted to enter 8. Korea if they are intended for re-export, used in domestic production, or responding to increased domestic consumption. With textiles, if pricing 19 in international markets causes imported raw materials to cost less than domestic, imports are also permitted (Ghadar et al., 1987). In 1984, S. Korea had 2.6 billion dollars in textile exports and .6 billion dollars in textile imports. For apparel in 1984, S. Korea had 4.5 billion dollars in exports and .02 billion dollars in imports. These figures illustrate the large exports and negligible imports in the S. Korean economy (Cline ,1987, p. 53). Even firms licensed and registered as traders may not import general commodities unless they have exported goods valued at at least $1 million. Furthermore, a company's trade license is not renewed unless that company achieves $1 million in export sales annually (Gale, 1985).. With restrictive administrative regulations and high tariff barriers, S. Korea has protected its industries and limited U.S. market access (U.S. Department of Commerce, 1988b). is ' c Currently the legislative framework to control international trade of textiles and apparel is the Multifiber Arrangement (MFA), an umbrella under which countries negogiate bilateral agreements. MFA, established in 1974 by 50 nations, was organized to support orderly expansion of world textile trade. MFA permits imports to have a 6% annual growth rate and allows exporting countries to exceed quota levels through the use of carry-over, a 20 provision permitting a remaining quota balance to be added to another year or one quota classification to be carried over to another (Ghadar et al., 1987). However, MFA has not reduced the impact of imports, as expected. Under the MFA agreement, the majority of apparel product categories are not limited by specific import restraints. If restraints exist, importing countries are often allowed to shift their products from a restricted category to an unrestricted one. Under MFA, quotas were emphasized over tariffs. Quotas are used by developed countries to reduce the market accessibility of exporting countries. However, at the same time, quotas encourage exporters to upgrade the quality and price of products and improve technology (Hester, 1987). Furthermore, emphasizing quotas reduces revenue created with tariffs (Cline, 1987). Rather than being used to avoid market disruption, MFA negogiations generally do not occur until imported products have already disrupted the marketplace (Ghadar et al., 1987). Cline (1987) believes MFA should never have been passed and should not be renewed. MFA represents a breach of GATT principles by allowing discriminatory treatment among countries and by applying quotas rather than tariffs. Because MFA has not been an effective hedge against import competition, additional legislation has been enacted in order to protect and aid domestic apparel manufacturers. 21 This additional legislation includes Item 807 and Item 807A. Item 807 is the foreign assembly of apparel goods made from U.S. fabric. Goods coming under 807 tariff provision must be cut in the U.S., and then reimported with duties charged only on the value added abroad. Item 807A offers quota allotments to eligible countries manufacturing apparel under Item 807 (U.S. Department of Commerce, 1988a). While the apparel industry is one of the most protected U.S. industries, textile and apparel producers are lobbying for more protection against import competition. A free trade agreement has been passed between the U.S. and Canada despite opposition by the textile and apparel industries. Most U.S. textile and apparel producers want access to other countries' markets without reciprocation. U.S. apparel companies believe free trade will further harm apparel producers already impacted by imports. They would have preferred that quotas be assigned to Canadian imports (Wall & Dickerson, 1989). Most recently, the Omnibus Trade Bill and its amendments have passed in August, October and November of 1988. To limit the impact of foreign competition, an amendment to the bill reduces access to U.S. markets for foreign competitors having large trade surpluses with the U.S. Mandatory tariffs and quotas can be imposed to reduce surpluses by 10% a year (Wehr, 1988). However, these mandatory measures will be enforced only if negogiations 22 with foreign competitors fail, and if the world economy is not seriously affected. Supporters of the amendment believe it will open up foreign markets to U.S. exports, while opposers believe it is another protectionistic measure (Wehr, 1988). ge- ' . e =l_e --s o W-. a '1'3 5 To: 1 iee- e- ade One strategy developed by U.S. apparel manufacturers to meet the challenges of increasing global competition is a comprehensive program to shorten production time. Known as the "just in time" (JIT) manufacturing philosophy or the "quick response" (QR) concept, these strategies employ advanced communication systems to hasten feedback from marketers to manufacturers. This results in shorter production time and a quicker response to changing consumer preferences (U.S. Department of Commerce, 1988a). JIT production has been used in Japanese industry for the past 30 years. In Japanese manufacturing, JIT is a planning method for continuous production by having components in the right place at the right time. As a result, inventories are decreased, factory floor space is reserved only for production and overhead is greatly reduced (Tyler, 1986). Applied to the apparel industry, JIT can help address the financial difficulties of U.S. apparel producers. The American Apparel Manufacturers Association states that 23 striving to cut production time in half or less by using JIT methods would reduce costly inventories at all operation levels. Through the use of JIT, expensive production interruptions and waste are minimized, non value-added processes are removed and storage areas are replaced by production processes. Additionally, JIT does not require high capital investment; instead, it emphasizes better management and planning. Most importantly, JIT's ultimate advantage is its reliance on domestic sources, which offers U.S. apparel producers an opportunity to differentiate themselves from foreign competitors (Ghadar et al., 1987). However, the latest DuPont study of JIT indicates that only 50% of the apparel manufacturers are discussing OR or are in the early stages of implementing it (WWD Techno- Marketing Group, 1987, p. 9). Because JIT is a philosophy rather than a system which can be purchased and installed, its adaptation is generally slow. Educating managers and training employees to work as an efficient team are necessary steps. Furthermore, critical to the success of a JIT program is a planned sense of direction, which if instituted by U.S. apparel producers, may well serve as an introduction to the use of business planning (Tyler, 1986). Case study analysis has demonstrated the effectiveness of JIT. In the following cases, manufacturers and retailers worked jointly and experienced success with faster production times. In the men's slacks area, Wal-Mart, 24 Seminole Manufacturing Company and Milliken experienced a sales increase of 47% and a 30% increase in both inventory turns and gross margin returns (Sharp, 1987, p. 9). Early in 1987, Penney's, Lanier Clothes and Burlington Mills yielded sales increases of 59% and a 90% increase in inventory turns in five months. As demonstrated by these cases, the importance of JIT has reached the point where a retailer may choose not to do business with a manufacturer lacking JIT capacity (Sharp, 1987, p. 9). Currently, the role of retailers is changing. Retailers are assuming the traditional functions of apparel manufacturers by handling their own styling, designing, contracting, packaging and shipping. Retailers state that they prefer to do business with U.S. firms but cannot locate U.S. apparel producers who are willing to establish shorter specialty line runs (Ghadar et al., 1987). In addition to using JIT, U.S. apparel companies have responded to increasing competition by using the following sourcing strategies: domestic contracting, domestic production with domestic fabric, domestic production with foreign fabric, foreign contracting with foreign or U.S. fabric, and U.S. owned production completed overseas. Each of these strategies has its own advantages and disadvantages. Domestic contracting increases domestic production, but it also increases the cost of finished products. Domestic production with foreign fabric has the 25 advantage of allowing firms to purchase smaller amounts of fabric from smaller foreign textile companies, but export restrictions may apply and the risk of political instability exists. While foreign contracting generally costs less than domestic production, the lack of management and quality control in addition to tariff restrictions and political instability can make it untenable. Foreign production facilities which are either joint ventures or U.S. manufacturer-owned are a small but growing sourcing arrangement. The initial costs are great, but the benefits of favorable government treatment and tax advantages generally outweigh the initial investment (Ghadar et al., 1987). Item 807, government assisted sourcing, is also available to U.S. apparel producers as a hedge against import competition. Item 807 has been used as a major strategy to combat low labor costs of developing and NICs: however, the disadvantages of poor quality control, lack of technical supervision, inaccessible capital and political risk often outweigh advantages (Ghadar et al., 1987). Additional government programs to assist the U.S. apparel industry have included the export-expansion program and Department of Commerce studies on foreign sales potential and export trading companies. In 1979, export expansion began but it soon proved to be ineffective due to the rise in the value of the dollar. Next, the U.S. 26 Department of Commerce undertook a major study to explore sales potential in 47 countries around the world. The Commerce Department has also examined export trading companies and has begun forming companies to expand U.S. apparel exports. However, in the past they have had little success, again due primarily to the value of the dollar (Ghadar et al., 1987). Due to the high cost of machinery, only a few large apparel firms have been able to use advanced technology to maintain a competitive edge. Although estimates indicate that the apparel industry is 40% automated compared to 5% in the 19605, the new technology is concentrated in a few large companies (Ghadar et al., 1987, p. 75). 1 Leading apparel producers have also attempted to increase their share of the high fashion apparel market. With emphasis on softer fashions for women and activewear for both men and women, this has been somewhat successful in recent years (Ghadar et al., 1987). Businass Planning and 315k Managanant Strategic business planning came into widespread use as a management tool less than fifteen years ago (Paul & Taylor, 1986). A recent study identified four levels of planning sophistication: structured strategic plans, structured operational plans, intuitive plans and unstructured plans. Structured strategic plans are formal, 27 written, long-range plans (3-15 years), which define inside and outside interests, past, present and future performance, environmental analysis and strengths and weaknesses of a firm. Structured operational plans are written, short-range plans of financial, production and personnel operations ranging between 6 months to 2 years. Intuitive plans are unwritten, informal plans based on the intuition and experience of the owner, and finally, unstructured plans are the lack of any measurable structured plans in the firm (Bracker & Pearson, 1986). At all levels of sophistication, effective strategic business planning is the match a firm makes with its environment by knowing its customers, competitors and available technology (Pearson, 1985). This match determines a firm's market effectiveness which is more important than its efficiency (Hofer & Schendel, 1978). Strategic business planning is generally based on the needs and experiences of large firms. However, Robinson and Littlejohn (1981) found planning to be successful for small firms as well. Successful small firm business planning differed from large firm business planning in three important dimensions. Successful small firms planned for shorter time periods (6 months to 2 years): focused planning on the functional areas of finance, promotion and production; and most importantly, used outside planning specialists to save time and provide guidance in reviewing 28 critical issues. A study conducted by Robinson and Littlejohn (1981) employed a sample of 67 small firms attending a planning seminar. The sample consisted of 29 retail firms, 30 service firms and 8 manufacturing firms which had not previously engaged in systematic business planning. Six months following the seminar, total sales, before tax profit, owner compensation and total employment were studied. Statistically significant increases occurred in all the studied areas, indicating that business planning can improve financial success for small firms. Other researchers have concluded that business planning expertise is a developmental process within a company. By collecting relevant data, effectively studying the competition and recognizing when to use established strategies and develop new ones, management will improve its planning skills and will reach a higher level of planning sophistication (Paul & Taylor, 1986; Mintzberg, 1987). As planning skills develop, performance improves. Malik and Basu (1986) found planners outperform nonplanners. As planners learn to assess potential opportunites, set goals and objectives, and select and implement strategy, they earn greater profits and return on investments. Regardless of the length of time a company has been in business, firms with long planning histories financially outperform firms with short planning histories (Bracker & 29 Pearson, 1986). Successful business planning is not only the development and implementation of planning skills but also includes managing risk. When planning, opportunities and threats need to be recognized and evaluated. Depending upon the available time, information and control, planners choose strategies to handle opportunities and threats and predict general outcomes. These chosen strategies are then adjusted and tracked in an effort to manage company risk (MacCrimmon & Wehrung, 1986). Throughout the business planning process, risks are considered. As business planning expertise increases, risk management skills improve (Day, 1986). In the ongoing processes of business planning and risk management, proactive, knowledgeable strategies are developed (Pearson, 1985). Annlicatign of Business Planning IQ nna Appanel lndnstny Generally, manufacturers are less concerned about business planning when they are insulated from foreign competition (Yip, 1984). Import legislation has not effectively protected U.S. apparel manufacturers from foreign competitors. As a result, strategic business management is critical to the U.S. apparel industry in order for manufacturers to effectively respond to aggressive foreign competition and to restructure for the future (Yip, 30 1934). One study analyzed business planning in seventy-three large industrial Fortune 500 companies, including nine apparel firms. Each had a corporate officer with specifically designated planning responsibilities. Researchers concluded it was not clear why apparel, publishing, electronics, shipbuilding, soap, equipment, and entertainment companies were less likely to have a formal planning function (Paul & Taylor, 1986). Prior to the competitive changes of the 19705, planning consisted of an internal financial forecast. However, increasing global competition during the 19705 forced most industries to take the external environment into consideration and to begin a strategic planning process (Paul & Taylor, 1986). Hannay and Steele (1985) studied business planning and competition in seven U.S. industries including fibers, textiles and apparel. They concluded that all seven industries needed to be viewed as world-scale. Planning world-scale means marketing to global markets to generate the sales volume necessary to enlarge research and development programs and modernize facilities. The few U.S. apparel producers who have developed world-scale planning strategies have been effective. In 1983, Levi Strauss implemented global market segmentation to maintain a similar image from country to country. With this strategy, the company had a 500% increase in sales in five 31 years (Kale & Sudharshan, 1987, p. 67). In response to apparel imports and greater fashion awareness, Burlington refocused to increase operating flexibility and innovation. By managing small runs and many styles, Burlington successfully changed the mix of its apparel division, which accounts for more than 50% of its sales (Barns, 1984). In addition to the strategies used by Levi Strauss and Burlington, creating product awareness through advertising and promotion has been recommended. Planning to use relatively inexpensive methods such as trade shows and cooperative advertising can begin to increase the exporting activities of U.S. apparel firms (Hester & Vanden Berghe,1988). ‘ It has been suggested that U.S. apparel producers should lobby for effective government assistance. Ghadar et a1. (1987) suggest that rather than protective measures, negotiations to implement trade agreements with foreign governments, particularly the Big Four, should be encouraged, as well as trade negotiations to progress towards reciprocal access to markets. Cline (1987) suggests the formation of an open trade club with reciprocal liberalization by apparel and textiles suppliers required for admission. These proactive planning ideas could assist in reestablishing competitiveness in the U.S. apparel industry. 32 Another recommended course of action is planning strategically for coordination between textile and apparel manufacturers, their suppliers and consumers (Sease, 1987). According to Goldfeder (1987), working cooperatively and planning coalitions with other companies strengthens a firm. Furthermore, Hester (1987) states that strategic planning among industries to foster basic research and development and advanced technologies would help to develop equitable trade of textiles and apparel which could benefit countries throughout the world. CHAPTER III RESEARCH DESIGN AND METHODOLOGY W Researchers at Michigan State University have responded to the current crisis of aggressive competition in the U.S. apparel industry by studying U.S. and S. Korean apparel companies. The 1986 study used mail survey research to compare U.S. and S. Korean apparel companies' attitudes toward importing/exporting apparel, business planning and productivity analysis, operating ratios, production processing methods, competitive strategies, business characteristics, and work force profiles. Results from the study which focus on business planning and related variables will be used to analyze the hypotheses in this thesis. se 'v 5 This research study was undertaken to fulfill several specific objectives. 1. Compare and contrast attitudes of U.S. and S. Korean apparel producers toward international apparel trade. 33 34 2. Compare and contrast attitudes of U.S. and S. Korean apparel producers toward business planning. 3. Compare and contrast business planning initiatives and competitive strategies in U.S. and S. Korean apparel firms. 4. Determine the relationship between business planning and financial performance in U.S. and S. Korean apparel firms. odo Questignnaire Two parallel, fifty-item, self-report questionnaires were developed specifically for the study (Appendices A & B). The S. Korean survey instrument was translated and printed in Korean to improve comprehension and response accuracy. Following pretesting on samples of S. Korean and U.S. apparel producers, minor revisions were made in the questionnaire to increase question clarity. The final survey instrument was then sent by mail to selected apparel companies in the U.S. and S. Korea. Questionnaires were mailed to 500 presidents of U.S. apparel manufacturing companies; forty usable questionnaires were completed and returned. After adjusting for non- deliverable and incomplete surveys, the response rate was 8.2 percent. One hundred and forty managers or owners of S. Korean 35 apparel companies were sent questionnaires; twenty-three usable questionnaires were completed and returned. In an effort to increase the response rate, S. Korean companies were requested to mail completed questionnaires to one of the researchers in S. Korea. S. Korean questionnaires were then forwarded in toto to researchers at Michigan State University. When received, 8. Korean responses were back translated by personnel unaffiliated with the study. Following adjustment for non-deliverable and incomplete surveys, the response rate for the S. Korean sample was 16.4 percent. Non-response was monitored and follow-up reminders were sent to non-respondents in the U.S. and S. Korea two weeks and four weeks after the initial questionnaires were mailed. Six weeks after the surveys were mailed, U.S. non- respondents were randomly selected and called to request participation in the study. For those indicating that they would not participate, several demographic questions were asked and subsequently compared to sample characteristics. It was determined that non-response bias was not present. While response rates were low, they were not unusual for market research in the apparel industry, particularly a cross-cultural study. A study of New York State apparel and textile manufacturers had a similar response rate of 8.3 percent (McDowell & Hester, 1986). While offering an incentive was not possible, it may have increased the 36 response rate. S m 'o A proportional stratified random sampling technique was used to select national samples of U.S. and S. Korean apparel producers who represented major segments of the men's, women's and children's apparel industry. The U.S. sample was randomly drawn in proportion to the number of apparel companies within each Standard Industrial Classification (SIC). The AnaIigan_Annazal_Mannfa§tnra:§ LEW ' tie and We were the sampling frames from which the U.S. sample was selected. Korean apparel companies were drawn from Th§_12§§_DiI§2§Q£¥ WW and 1W W Hypotnasas and Stagistigal Analysas To compare attitudes affecting business planning in U.S. and S. Korean apparel firms, the following hypotheses were developed. gnaun l Differences exist between U.S. and S. Korean apparel companies' attitudes toward global apparel trade. 37 31.1: 0.8. and 8. Korean apparel companies differ in their perceptions of future increases in 0.8. apparel quotas. Question 3 was analyzed for H1.1. 81.2: 0.8. and 8. Korean apparel companies differ in their perceptions of the effect of low-cost imported apparel on the 0.8. apparel industry. Question 4 was analyzed for H1.2. 81.3: 0.8. and 8. Korean apparel companies differ in their perceptions of the effect of staple imported apparel on the 0.8. apparel industry. Question 5 was analyzed for H1.3. H1.4: 0.8. and 8. Korean apparel companies differ in their perceptions of the quality of imported and domestically produced apparel. Question 6 was analyzed for H1.4. Independent t-tests were used to test hypotheses H1.1 - H1.4. Questions 3 to 6 were answered using a seven-point Likert-type scale (1 = Strongly Agree, 7 = Strongly Disagree). Gggup 2 32.1: 0.8. and 8. Korean apparel companies differ in their attitudes toward business planning. Factor analysis was used to generate the business planning factor (questions 7 to 9) to be analyzed in H2.1 - H2.2. 38 Questions 7 to 9 were answered with a Likert-type scale (1 = Strongly Agree, 7 = Strongly Disagree). Analysis of variance (ANOVA) was used to test hypothesis 82.1. The dependent variable was attitudes about planning, and the independent variable was country (U.S. and S. Korea). 82.2: 0.8. and 8. Korean apparel companies differ in their attitudes toward business planning when length of time in business is controlled. Analysis of covariance (ANOCOVA) was used to test hypothesis 82.2. The dependent variable was attitudes about planning (questions 7 to 9), the independent variable was country (U.S. and S. Korea), and the covariate was length of time in business (question 46). GIQQE 3 Differences exist between U.S. and S. Korean apparel companies' short-range and long-range planning. 83.1: Employee involvement in the development of short- range business plans differs between 0.8. and 8. Korean apparel companies. Question 26 was analyzed for 83.1. 83.2: Business factors used to develop short-range business plans differ between 0.8. and 8. Korean apparel companies. Question 27 was analyzed for 83.2. 39 83.3: Employee involvement in the development of long- range business plans differs between 0.8. and 8. Korean apparel companies. Question 28 was analyzed for 83.3. 83.4: Business factors used to develop long-range business plans differ between 0.8. and 8. Korean apparel companies. Question 29 was analyzed for 83.4. The statistical tests for 83.1 - 83.4 were Hotelling's T2. A seven—point Likert-type scale was used to measure employee involvement in short-range and long-range planning (questions 26 and 28) and to weigh the importance of selected business factors for each planning initiative (questions 27 and 29). §I222_i 84.1: Profitability differs in 0.8. and 8. Korean apparel companies when short-range and long-range planning are utilised. Analysis of variance (ANOVA) was used to test 84.1. The dependent variable was profitability and the independent variables were short-range planning (2 levels), long-range planning (2 levels) and country (U.S. and S. Korea). Separate mean scores were computed for short andlong-range planning (questions 27 and 29). 40 84.2: Controlling for length of time in business, profitability differs in 0.8. and 8. Korean apparel companies when short-range and long-range planning are utilized. Analysis of covariance (ANOCOVA) was used to test 84.2. The dependent variable was profitability; independent variables were short-range planning (2 levels), long-range planning (2 levels), and country (U.S. and S. Korea): and the covariate was length of time in business (question 46). 85: Differences exist between the competitive strategies of 0.8. and 8. Korean apparel companies. Question 24 was analyzed using chi-square analysis. Findings from question 25 provided additional descriptive information in the discussion of 85. e a a 's' 5 After comparing sample characteristics to secondary data sources, researchers determined that both samples were generally representative of their respective industries. Comparison of business definitions of U.S. to S. Korean companies indicated that the majority (80 percent) of U.S. companies were apparel manufacturers, and the S. Korean companies were subcontractors and contractors (48 percent) (Table 1). Analysis of legal forms of ownwership showed the U.S. 41 sample to be predominantly non-family or family-owned, closed corporations (71 percent), and the S. Korean sample to most frequently be sole proprietorships or non-family owned, closed corporations (82 percent) (Table 2). It is interesting to note that privately held forms of business still predominate in both U.S. and S. Korean apparel industries. 42 TABLE 1.--DEFINITION OF APPAREL COMPANIES: U.S. AND S. KOREAN SAMPLES UHIT£D_§TAIE§ SQUIH_KQEEA I! % N % Manufacturers 32 80 10 43.5 Contactors & Subcontractors 7 17.5 11 47.8 Jobbers 1 2.5 2 9 Total 40 100% 23 100% TABLE 2.--LEGAL FORM OF OWNERSHIP: U.S. AND S. KOREAN SAMPLES UNITED STATES SOQTfl KOREA Ii % N % Non-family Owned, Closed Corp. 15 38 9 39 Family Owned Corp. 13 33 2 9 Open Corp. 6 15 2 9 Partnership 2 5 0 0 Sole Proprietorship 2 4 10 43 Other 2 5 0 0 Total 40 100% 23 100% A significant difference in the length of time in business for 0.8. and S. Korean companies was found (p<.001) 43 (Table 3). Due to the relatively recent industrialization of S. Korea, it is not surprising that U.S. companies are older (mean = 51 years) compared to S. Korean companies (mean = 8 years). Due to the age difference between the two samples, it was also not surprising that U.S. companies had significantly higher sales volumes (mean=$34,184,000) than S. Korean companies (mean=$1,007,000) (Table 4). The S. Korean mean was adjusted by deleting one outlying company reporting $200+ million in sales since it distorted significantly the average S. Korean company's sales volume. Major apparel items produced by the U.S. were men's and boys' furnishings and work clothes: and women's, misses', and juniors' outerwear, (74 percent) (Table 5). S. Korean apparel companies produced mainly women's, misses', and juniors' outerwear: and men's and boys' furnishings and work clothing (84 percent). 44 TABLE 3.--LENGTH OF TIME IN BUSINESS: U.S. AND S. KOREAN SAMPLES H Mean DF T-Value United States 36 51.1 56 5.11*** S. Korea 22 8.0 ***p<.001, t-test, pooled-variance, 2-tailed test TABLE 4.--TOTAL ANNUAL SALES: U.S. AND S. KOREAN SAMPLES N Mean DF T-Value United States 27 $34,184,000 40 2.24** S. Korea 15 $1,007,000 **p<.01, t-test, pooled-variance, 2—tailed test 45 TABLE 5.--TYPES OF APPAREL PRODUCED: SAMPLES U.S. AND S. KOREAN Apparel Produced United_§tate§ or a H1 % N1 % Men's, Youth & Boys' 3 3.4 2 5.4 Suits, Coats, and Overcoats Men's 8 Boys' 34 39.0 5 13.5 Furnishings & Work Clothes Women's, Misses' 30 34.5 26 70.3 & Juniors' Outerwear Women's, Misses' & 13 14.9 - - Children's Undergarments Hats, Caps & Millinery 2 2.3 1 2.7 Girls' & Children's 4 4.6 - - Outerwear Fur Goods - - 2 5.4 Miscellaneous Apparel 1 1.2 1 2.7 & Accessories Total 87 100.0% 37 100.0% *Companies produced apparel in more than one category, therefore, totals will be greater than the respective samples for each country. CHAPTER IV RESULTS AND DISCUSSION The focus of this research and the basis for statistical testing was a comparison and contrast of business planning strategies employed by U.S. and S. Korean apparel producers. Specifically, this study investigated attitudes of U.S. and S. Korean apparel companies toward international trade and business planning. Also, business planning initiatives and competitive strategies utilized by U.S. and S. Korean producers were studied, and the relationship between business planning and financial performance in U.S. and S. Korean apparel firms was determined. Variables were analyzed using independent t- tests, analysis of variance (ANOVA), analysis of covariance (ANOCOVA), Hotelling's T2 and chi-square analysis. This chapter presents a discussion of the statistical analysis, hypothesis testing and findings of the study. Group 1 Hypotheses U.S. and S. Korean apparel firms' attitudes toward international trade were compared in group 1 hypotheses. A 46 47 series of seven-point Likert scale statements (1 = Strongly Agree to 7 = Strongly Disagree) were developed, and results of independent t—tests were used to analyze the following sub-hypotheses. 81.1: 0.8. and 8. Korean apparel companies differ in their perceptions of future increases in 0.8. apparel quotas. No significant difference was found in the t-test analysis of question 3 which stated, "In the future U.S. quotas for all imported apparel will have to be tighter than now". Means comparison revealed that both U.S. (mean = 2.4) and S. Korean (mean = 1.7) companies agreed that U.S. quotas will be tighter in the future (Table C-l). Since a significant difference did not result, hypothesis 1.1 was rejected. 81.2: 0.8. and 8. Korean apparel companies differ in their perceptions of the effect of low-cost imported apparel on the 0.8. apparel industry. A significant difference occurred when companies were asked in question 4 to agree/disagree that, "the main problem affecting the U.S. apparel industry is low-cost imported apparel" (p<.001) (Table 6). Results of independent t-tests revealed stronger S. Korean opinion (mean = 1.1) than American (mean = 2.7) regarding the 48 negative impact of low-cost apparel. Hypothesis 1.2 was not rejected. TABLE 6.--PERCEPTION OF THE EFFECT OF LOW-COST IMPORTED APPAREL ON THE U.S. APPAREL INDUSTRY: U.S. AND S. KOREAN SAMPLES "The main problem affecting the U.S. apparel industry is low-cost imported apparel". N Mean DF T-Value United States 40 2.7 56 3.43*** S. Korea 18 1.1 Seven-point Likert scale, 1 = Strongly Agree to 7 = Strongly Disagree ***p<.001, t-test, pooled variance, 2-tailed test 81.3: 0.8. and 8. Korean apparel companies differ in their perceptions of the effect of staple imported apparel on the 0.8. apparel industry. In order for item 5 to be applicable to S. Korean apparel companies, the words "imported" and "imports" were changed to the Korean equivalent of "exported" and "exports." While independent t-tests indicated that 0.8. companies strongly disagreed (mean = 6.1) with the statement "most imported apparel is not high fashion compared to 0.8. produced apparel, therefore, imports don't negatively affect the U.S. apparel industry," S. Korean companies remained 49 neutral (mean = 4.1) (Table 7). Since t-test analysis yielded a significant difference (p<.001), 81.3 was not rejected. TABLE 7.--PERCEPTION OF THE EFFECT OF STAPLE IMPORTED APPAREL ON THE U.S. APPAREL INDUSTRY: U.S. AND S. KOREAN SAMPLES "Most imported (exported) apparel is not high fashion compared to U.S. produced apparel, therefore, imports (exports) don't negatively affect the U.S. apparel industry". N Mean DF T—Value United States 40 6.1 57 4.91*** S. Korea 19 4.1 Seven-point Likert scale, 1 = Strongly Agree to 7 = Strongly Disagree ***p<.001, t-test, pooled variance, 2-tailed test 81.4: 0.8. and 8. Korean apparel companies differ in their perceptions of the quality of imported and domestically produced apparel. Results from independent t-tests for question 6 disclosed a significant difference (p<.001) when companies were asked if the quality of apparel goods produced for export was less than the quality of apparel goods produced for domestic consumption (Table 8). While U.S. companies strongly disagreed (mean = 6.9) that a quality difference 50 existed, S. Korean companies remained neutral on the quality issue (mean = 4.5). Hypothesis 1.4 was not rejected. TABLE 8.--PERCEPTION OF QUALITY OF EXPORTS: U.S. AND S. KOREAN SAMPLES "When my company produces apparel goods for export, the quality is less than the quality of apparel produced for domestic consumption". N Mean DF T-Value United States 17 6.9 35 3.94*** S. Korea 20 4.5 Seven-point Likert scale, 1 = Strongly Agree to 7 = Strongly Disagree ***p<.001, t-test, pooled variance, 2-tailed test Group 2 Hypotheses For group 2 hypotheses, a seven-point Likert-type scale (1 = Strongly Agree to 7 = Strongly Disagree) was used to measure attitudes toward selected business practices. Factor analysis was employed for data reduction and to identify underlying dimensions within the variables (Hair, Anderson, Tatham and Grablowsky, 1979). Varimax rotation was run to reduce ambiguities in the preliminary factor analysis and to obtain the most meaningful variables. With varimax rotation, two factors emerged and were named, “Business Planning" and "Productivity Improvements Through 51 Technology." The criterion used to determine the number of factors was the traditional criterion of "eigenvalue greater than 1.0" (Hair et al., 1979). Since the thrust of this thesis relates to business planning, only the "Business Planning" factor was analyzed for group 2 hypotheses. The factor loading criteria was .35, an appropriate criteria since factor loadings greater than .30 are considered significant (Hair et al., 1979). Each question was weighted by its respective factor loading, and the results were summed and divided by the number of items in the factor scale (Table C-2). Questions 7, 8 and 9 loaded heavily on the "Business Planning" factor. The questions were, "Every month, my company's books are balanced and accounts summarized:" "With my present labor costs, it is necessary for my company to automate in order to remain competitive with other apparel producers:" and, "A long-range business plan is very important, therefore, my company has a written plan of where its business should be in three to five years." The "Business Planning" factor had an eigenvalue of 1.65 (Table C-2). Cronbach's coefficient alpha was run to estimate internal consistency and compute test reliability (Borg & Gall, 1983). Given the sample size and number of items analyzed, the "Business Planning" factor was considered to be reliable with an alpha coefficient of .62. In general, an r equal to .70 to 1.00 is considered to be 52 highly reliable and .20 to .40 is identified as low or unreliable (Amos, Brown, & Mink, 1965). 82.1: 0.8. and 8. Korean apparel companies differ in their attitudes toward business planning. Analysis of variance was run to test 82.1. The dependent variable was the "Business Planning" factor group, (questions 7 to 9), and the independent variable was country (U.S. and S. Korea). Results indicated that significantly different attitudes toward business planning existed between U.S. and S. Korean apparel companies (p<.05) (Table 9). U.S. apparel companies (mean = 2.86) held more positive attitudes toward business planning than did 8. Korean apparel companies (mean = 3.97). While significant differences were found, the R2 value indicated that only 10 percent of the variance was explained by the model. Hypothesis 2.1 was not rejected. 53 TABLE 9.--ATTITUDES TOWARD BUSINESS PLANNING: COMPARISON OF U.S. AND S. KOREAN SAMPLES, ANALYSIS OF VARIANCE RESULTS Business Planning Sum of Mean Factor Squares DF Square F Explained 14.804 1 14.804 5.589* Residual 127.129 48 2.649 Total 141.933 49 2.897 Seven-point Likert scale, 1 = Strongly Agree to 7 = Strongly Disagree *p<.05 MULTIPLE CLASSIFICATION ANALYSIS Grand Mean = 3.30 1;: Mean R2 United States 30 2.86 S. Korea 20 3.97 .104 82.2: 0.8. and 8. Korean apparel companies differ in their attitudes toward business planning when length of time in business is controlled. 54 Analysis of covariance was used to test 82.2. The dependent variable was the "Business Planning" factor group, the independent variable was country (U.S. and S. Korea), and the covariate was length of time in business (question 46). This test was conducted to control for company age which could have influenced attitudes about business planning. Initially, sales volume and length of time in business both were to be included as covariates in hypothesis 2.2. However, Pearson's correlation coefficients indicated that sales volume and length of time in business were highly correlated (.52, p<.0001). Since length of time in business was more highly correlated with the dependent variable (.-27, p<.05) than sales volume (-.16), length of time in business was the covariate utilized in the ANOCOVA model (Hair et. al., 1979). Results indicated that no significant difference existed when length of time in business was controlled, and hypothesis 2.2 was rejected (Table C-3). While no significant difference was found, the model explained slightly more of the variance. The R2 value with the control indicated that about 11 percent of the variance was explained. However, factors other than those tested better explain variation in business planning attitudes. 55 Group 3 Hypotheses In group 3 hypotheses, differences in the development of U.S. and S. Korean short-range and long-range planning were examined. An attempt to standardize the data for group 3 hypotheses was made but proved to be unnecessary. Because responses did not consistently show extreme variances, standardization did not appear to offer more accurate information. Results of Hotelling's T2 tests were used to interpret the following sub-hypotheses. 83.1: Employee involvement in the development of short- range business plans differs between 0.8. and 8. Korean apparel companies. In order to compare and contrast personnel involved in developing short-range business plans for each sample, a series of seven-point Likert-type statements (1 = Total Planning to 7 = No Planning) were tested in question 26. Hotelling's T2 test was run to determine planning level differences. Hotelling's T2 was not significant at the .05 level, therefore, hypothesis 3.1 was rejected (Table C-4). However, due to the small sample size and the exploratory nature of this study, follow-up univariate F-tests were run on the four employee groups. Results indicated a significant difference among production workers (Table C-4). Korean apparel production workers were more involved in 56 short-range business planning than their U.S. counterparts (p<.05). Although one significant difference was found, production workers were the least involved employee group in both U.S. and S. Korean short-range planning. Analysis of mean scores revealed a consistent pattern of employee involvement in both countries: top executives followed by mid-managers, production supervisors and finally, production workers. 83.2: Business factors used to develop short-range business plans differ between 0.8. and 8. Korean apparel companies. Additional information regarding the importance of selected business factors was obtained by developing another series of seven-point Likert scale statements (question 27) (1 = Very Important to 7 = Not Important). Hotelling's T2 analysis was used to determine differences in the importance of business factors used in short-range planning. The model was significant at p<.01 (Table 10). Results of univariate F-tests demonstrated significant differences which indicated that U.S. companies felt sales (p<.001) and cash flow projections (p<.05) were more important than S. Korean firms (Table 10). In contrast, S. Koreans felt labor projections (p<.05), break-even point (p<.01), and 8.0.1. (p<.05) were more important in 57 developing short-range business plans. Hypothesis 3.2 was not rejected. Analysis of mean scores revealed that U.S. apparel producers found sales and earnings projections to be most important in developing short-range business plans while S. Korean apparel companies found productivity projections and break-even point analysis to be most important. 58 TABLE 10.--IMPORTANCE OF SELECTED BUSINESS FACTORS IN SHORT-RANGE BUSINESS PLANNING: U.S. AND S. KOREAN SAMPLES COMPARISON OF SbgrtzRanse_£lanning Business Factors N Univariate F-Ratio Sales Projections United States 34 19.97*** S. Korea 17 Productivity Projections United States 34 1.90 S. Korea 17 Earnings Projections United States 34 .04 S. Korea 17 Cash Flow Projections United States 34 4.48* S. Korea 17 Capital Requirement Projections United States 34 .39 S. Korea 17 Labor Projections United States 34 4.76* S. Korea 17 Market Share United States 34 .11 S. Korea 17 Costs and Expenses United States 34 .24 S. Korea 17 Operating Capacity United States 34 3.59 S. Korea 17 Break-Even Point United States 34 8.08** S. Korea 17 R.O.I. United States 34 4.23* S. Korea 17 Pro-Forma Financial Statements United States 34 .06 S. Korea 17 Seven-point Likert scale, 1 = Very Important to 7 = Not Important Hotelling's T2, exact F = 3.0**, (1,49 DF), *p<.05 **p<.01 ***p<.001 59 83.3: Employee involvement in the development of long-range business plans differs between 0.8. and 8. Korean apparel companies. A series of seven-point Likert-type statements (1 = Total Planning to 7 = No Planning) were tested in question 28 to compare and contrast personnel involved in developing long-range business plans. Hotelling's T2 results were not significant, and hypothesis 3.3 was rejected (Table C-5). However, due to the small sample size and the exploratory nature of this study, follow-up univariate F-tests were run on the four employee groups analyzed. Results indicated that S. Korean apparel production supervisors and workers were more involved in long-range planning than their U.S. counterparts (p<.01). As in short-range planning, analysis of mean scores again revealed a consistent pattern of employee involvement between U.S. and S. Korean apparel companies. In developing long-range business plans, top executives were most often involved, followed by mid-managers, production supervisors and finally, production workers. 83.4: Business factors used to develop long-range business plans differ between 0.8. and 8. Korean apparel companies. Hotelling's T2 analysis was used to determine differences in the importance of business factors used in 60 long-range planning (question 29). In contrast to short- range planning, Hotelling's T2 results for long-range planning were not significant (Table C-6), therefore, hypothesis 3.4 was rejected. Due to the small sample size and the exploratory nature of this study, follow-up univariate F-tests were run on the business factors. Break-even point was the only significant finding (p<.05). Break-even point was more important in long-range planning for S. Korean than for U.S. companies. Analysis of means indicated that U.S. companies considered sales and earnings projections to be most important in developing long-range business plans, while in addition to break-even point, S. Korea felt productivity projections, costs and expenses and operating capacity were most important. Group 4 Hypotheses In group 4 hypotheses, analysis of variance (ANOVA) and analysis of covariance (ANOCOVA) were used to analyze profitability differences (question 47) between 0.8. and S. Korean apparel firms when short-range planning (2 levels) (question 27) and long-range planning (2 levels) (question 29) were used. New variables were created for short-range and long-range planning by computing a mean for all the short-range business factors and all the long-range business factors for each respondent. Two levels of short-range and long-range planning (high level and low level) were then 61 determined by splitting at the respective group mean. Reliabilities were run to evaluate the variables used to measure short-range and long-range planning (Tables C-7 and C-8). In general, an r equal to + .70 to 1.00 is considered to be highly reliable and + .20 to .40 is identified as low or unreliable (Amos et al., 1965). For short-range planning, an overall Cronbach's alpha of .73 indicated a reasonably reliable scale (Table C-7). The long-range planning scale proved to be a very good measure with a Cronbach's alpha of .86 (Table C-8). Cronbach (1951) indicated that alpha, being sensitive to the number of variables used, increases as the number of test items increases. 84.1: Profitability differs in 0.8. and 8. Korean apparel companies when short-range and long-range planning are utilized. Analysis of variance was used to test 84.1. The dependent variable was profitability, and the independent variables were short-range planning (2 levels), long-range planning (2 levels) and country (U.S. and S. Korea). Results produced a significant difference in the two-way interaction between short-range and long-range planning (p<.05) (Table 11). The R2 value (.098) was low indicating that only about 10 percent of the variance was explained by the model. 62 To determine where the significant interaction effects were between short-range and long-range planning levels, a post hoc Scheffe test was run (Hair et al., 1979). Significant differences (p<.05) were identified between two groups: companies with low level short-range and high level long-range planning and companies with high-level short- range and high-level long-range planning (p<.05). 84.1 was not rejected. TABLE 11.--PROFITABILITY DIFFERENCE WHEN SHORT-RANGE AND LONG-RANGE BUSINESS PLANNING IS USED: COMPARISON OF U.S. AND S. KOREAN SAMPLES, ANALYSIS OF VARIANCE RESULTS Profitability Sum of Mean Factor Squares DF Square F Main Effect 123.197 3 41.066 1.413 Country 17.718 1 17.718 .610 Short-range 102.956 1 102.956 3.542 Long-range 3.724 1 3.724 .128 2-Way Interactions 202.707 3 67.569 2.325 Country x Short-range 5.091 1 5.091 .175 Country x Long-range 35.887 1 35.887 1.235 Short-range x Long-range 161.632 1 161.632 5.561* 3-Way Interactions 63.267 1 63.267 2.177 Country x Short-range x Long-range 63.267 1 63.267 2.177 Explained 389.171 7 55.596 1.913 Residual 871.908 30 29.064 Total 1261.079 37 34.083 *p<.05 63 TABLE 11.--CONTINUED. MULTIPLE CLASSIFICATION ANALYSIS Grand Mean = 6.61 N Unadjusted Adjusted for R2 Independents United States 24 6.13 6.07 S.Korea 14 2,53 z,§3 Difference -1.30 -1.46 Short-range Low level 19 8.27 8.40 High level 19 4,25 Ala} Difference 3.32 3.58 Long-range Low level 25 6.96 6.36 High level 13 1,29 7,92 .098 Difference - .33 - .73 TABLE 11.--CONTINUED. SCHEFFE RESULTS 2-Way Interactions Low-level Low-level SR High-level SR High-level SR & LR & high-level & low-level SR & LR planning LR planning LR planning planning 7.2 l5e2* 606 LL* *p<.05 designates significantly different groups 64 84.2: Controlling for length of time in business, profitability differs in 0.8. and 8. Korean apparel companies when short-range and long-range planning are utilised. Analysis of covariance (ANOCOVA) was used to test 84.2. The dependent variable was profitability, and the independent variables were short-range planning (2 levels), long-range planning (2 levels), and country (U.S. and S. Korea). The covariate was length of time in business (question 46). Initially, sales volume as well as length of time in business was to be controlled in hypothesis 4.2. However, Pearson's correlation coefficients indicated that sales volume and length of time in business were highly correlated (.52, p<.0001). Since length of time in business was more highly correlated with the dependent variable (-.38, p<.01) than sales volume (-.24), length of time in business was the covariate employed in the ANOCOVA testing (Hair et. al., 1979). Significant differences resulted when length of time in business was controlled (p<.05) (Table 12). The explained variance increased to 22 percent (p<.05) by controlling for length of time in business. Independently, country, short- range and long-range planning had little effect on profitability, however, after adjusting for length of time in business, profitability increased for 0.8. companies and 65 decreased for S. Korean companies. After controlling for the companies' age, profit differences between low-level and high-level short-range planners increased from 3.1 percent to almost 3.4 percent. Also, profit for low-level long- range planners decreased while profit increased for high- level long-range planners. 84.2 was not rejected. TABLE 12.--PROFITABILITY DIFFERENCE WHEN SHORT-RANGE AND LONG-RANGE BUSINESS PLANNING IS USED AND LENGTH OF TIME IN BUSINESS IS CONTROLLED: COMPARISON OF U.S. AND S. KOREAN SAMPLES, ANALYSIS OF COVARIANCE RESULTS Profitability Sum of Mean Factor Squares DF Square F Main Effect 92.059 3 30.686 1.154 Country 3.297 1 3.297 .124 Short-range 86.816 1 86.816 3.264 Long-range 23.010 1 23.010 .865 Covariate 178.739 1 178.739 6.721* Length of time in business 2-Way Interactions 188.939 3 62.980 2.368 Country x Short-range .016 1 .016 .001 Country x Long-range 87.803 1 87.803 3.301 Short-range x Long-range 86.347 1 86.347 3.247 3-Way Interactions 24.393 1 24.393 .917 Country x Short-range x Long-range Explained 484.130 8 60.516 2.275* Residual 744.681 28 26.596 Total 1228.811 36 34.134 *p<.05 66 TABLE 12.--CONTINUED. MULTIPLE CLASSIFICATION ANALYSIS Grand Mean = 6.76 N Unadjusted Adjusted for R2 Independents & Covariate United States 24 6.13 7.02 S.Korea 13 1‘2; alga Difference -1.80 .73 Short-range Low level 19 8.27 8.40 High level 18 5‘11 alga Difference 3.10 3.37 Long-range Low level 24 7.21 6.08 High level 13 §.SS alga .220 Difference 1.28 -1.94 Hypothesis 5 Competitive strategies of U.S. and S. Korean apparel companies (identified in question 24) formed the basis for testing hypothesis 5. A total of twenty-two strategies were listed and subsequently collapsed into four categories. Following are the four categories with examples of responses (if collapsed): off-shore production: quality including unique and better fabrics, upgraded apparel lines, and superior design: flexible production including shorter lead time, holding inventory for spot shipment, and small lots: and marketing including broader distribution, brand names, and private label. Chi-square analysis was conducted on the 67 four groups. 85: Differences exist between the competitive strategies of 0.8. and 8. Korean apparel companies. The chi-square statistic to determine differences in the competitive strategies of off-shore production, quality, flexible production and marketing was not significant at p<.05 (Table C-9). This finding indicates that U.S. and S. Korean apparel firms were using similar strategies to compete with low-priced imported apparel. 85 was rejected. Discussion In analyzing U.S. and S. Korean apparel companies' attitudes toward international trade, three significant differences occurred. Results from hypothesis 1.2 indicated that while significant differences existed, S. Koreans and Americans agreed that, "The main problem affecting the 0.8. apparel industry is low-cost imported apparel." However, it was surprising to note that S. Korean apparel firms felt that low-cost imported apparel had a more negative impact on the U.S. apparel industry than did American firms. Since U.S. apparel firms are competing increasingly with imports yet have limited access to foreign markets, stronger 0.8. support for this issue was expected (Dreyfuss, 1987). S. Korean apparel manufacturers may see low-cost imported apparel as problematic for themselves as well as U.S. apparel producers. Developing countries and N105 are 68 increasingly exporting to the U.S., consequently, intensifying competition with S. Korean apparel companies in the U.S. market. In contrast, a 1988 study of U.S. and S. Korean apparel and textile manufacturers found that U.S. apparel and textile firms viewed foreign competition as a major industry problem compared to attitudes of S. Korean apparel firms (Morganosky & Jin, 1988). With the U.S. accounting for 39% of S. Korea's export market (U.S. Department of Commerce, 1988b), it may be that S. Korean firms realize the effect of imports on the U.S. apparel industry Results of hypothesis 1.3 indicated a significant difference in U.S. and S. Korean apparel companies' "perceptions of the effect of staple imported apparel on the U.S. apparel industry." U.S. apparel firms felt more strongly than Korean apparel firms that staple imports do negatively affect the U.S. apparel market. Strong U.S. agreement is supported by the fact that since 1987, apparel imports have increased to an estimated 53 percent of the U.S. market (AAMA, 1988). In the staple lines of knit shirts, woven blouses, sweaters and coats, imports represent over 50 percent of the items available to 0.8. consumers (AAMA, 1988). Further, staple textile and apparel exports have positively assisted S. Korea in earning about one third of its foreign exchange (U.S. Department of Commerce, 1988b). 69 In hypothesis 1.4, U.S. apparel companies strongly disagreed, and S. Korean apparel companies remained neutral in answering the statement, "When my company produces apparel goods for export, the quality is less than the quality of apparel produced for domestic consumption." The present finding somewhat disagrees with the findings of Morganosky and Jin (1988) which indicated that S. Korean apparel firms are placing more emphasis on product quality while U.S. apparel companies are less concerned about quality difference. This may signify a trend among S. Korean firms towards improved quality as their industry continues to develop. U.S. apparel firms appear to feel export quality differentials are not apparent. Attitude differences toward business planning between U.S. and S. Korean apparel industries were analyzed in group 2 hypotheses. Results from 82.1 testing indicated that U.S. apparel firms held more positive attitudes toward business planning than S. Korean apparel companies. Additionally, it was speculated that some of this difference might be accounted for by the length of time a company has been in business since U.S. apparel firms have been in business longer than Korean companies. However, when length of time in business was controlled in testing U.S. and S. Korean attitudes towards business planning, no significant differences resulted. Due to the low R2 value (.112), it appears that factors other those tested may better explain 70 the variation in business planning attitudes. Additional insights into business planning attitudes can be gleaned from research related to the impact of global competition. Previous research indicates that manufacturers are less concerned about business planning when they are insulated from foreign competition (Yip, 1984). With strict government regulations on imports, S. Korean apparel companies have been more insulated than U.S. apparel companies (Ghadar et al., 1987) which may help to explain why they are less interested in business planning than American companies. Since import legislation has not effectively protected U.S. apparel firms from foreign competitiors, U.S. firms may now look to sound business planning practices as a means to respond competitively and to restructure for the future (Yip, 1984). In group 3 hypotheses, employee involvement and business factors affecting short-range and long-range planning were studied. Overall, Hotelling's T2 results of employee involvement indicated that no differences existed regarding both countries companies' use of employees in business planning. However, follow-up F-tests of employee group differences determined that S. Korean production workers were more involved in the development of short-range and long-range business plans than 0.8. production workers. Furthermore, when developing long-range planning, S. Korean production supervisors were more involved than their U.S. 71 counterparts. Analysis of business factors used to develop short- range business plans indicated that while U.S. companies use sales and cash flow projections, S. Korean companies felt labor projections, break-even point and R.O.I. were more important. Results in analyzing long-range plan development demonstrated that S. Korean apparel firms agreed break-even point was more important than American apparel firms. All- in-all, when comparing all business factors, none were identified as unimportant by either the U.S. or S. Korean firms, regardless of length of planning horizons. Results of business planning factor analyzed in the present study are supported by a study conducted by Robinson and Littlejohn (1981). Six months.after attending a planning seminar, Robinson and Littlejohn's sample of small manufacturers indicated successful small firm planning focused on finance, promotion and production. In the present study, U.S. apparel companies found the finance area to be necessary in short-range planning with emphasis on sales and cash flow projections. S. Korean apparel companies focused on finance and production in both short- range and long-range business planning. S. Korean short- range planners emphasized labor projections, break-even point and R.O.I., and S. Korean long-range planners placed importance on break-even point. Furthermore, Morganosky and Jin (1988) found that U.S. 72 apparel manufacturers emphasize marketing and advertising in their business practices, while S. Korean apparel firms place more emphasis on product quality, productivity and exporting. Results from both Robinson and Littlejohn (1981) and Morganosky and Jin (1988) may also explain why S. Korea's companies involve production employees in planning more than U.S. companies. 8. Korea's strong emphasis on productivity found in both previous studies may warrant more involvement of production supervisors and workers in short— range and long-range planning. Analysis of group 4 hypotheses indicated profitability differences in U.S. and S. Korean apparel firms when short- range and long-range planning were used. Specifically, Scheffe results determined profitability differed in the interaction between groups with low level short-range planning and high-level long-range planning and those with high-level short-range planning and high-level long-range planning. Additionally, when length of time in business was controlled, significant differences were found in profitability. Previous research has indicated that as a company develops business planning expertise, higher levels of planning sophistication are reached (Paul & Taylor, 1986: Mintzberg, 1987). For example, a low-level short-range planning firm may evolve to a high-level long-range planning firm. As higher levels of planning sophistication develop, 73 regardless of the length of time a company has been in business, planners learn to assess potential opportunites, reduce risks and increase financial performance (Bracker & Pearson, 1986). Present findings partially support previous research that profitability increases as planning level increases in long-range planning efforts, when company age is controlled. In hypothesis 5 the differences in competitive strategies were compared between U.S. and S. Korea. Since no differences were found, it appears S. Korean and U.S. apparel firms are using similar strategies to compete globally. Morganosky and Jin (1988) concluded that the 0.8. is placing more emphasis on marketing while 8. Korea is emphasizing quality. Of the competitive strategies identified by U.S. and S. Korean apparel companies in the present study, over half were applicable to the marketing and quality areas. For additional information responses to question 25, which queried companies on their production processes completed in other countries, were studied. U.S. apparel firms reported that 10.3 percent of total production was completed off-shore while S. Korean apparel firms were not involved in any off-shore production. Additionally, U.S. companies indicated only 4.6 percent of total production was for export whereas S. Korean apparel companies stated 78.8 percent of production was for export. It appears that 0.8. 74 apparel firms have not cultivated world markets as a competitive strategy. At the same time, S. Korea's apparel firms are being supported as a home industry, encouraged to produce domestically and export (Ghadar et al., 1987). TABLE 13.-- SUMMARY OF HYPOTHESES TESTING Hypothesis Test Result Evaluation 81.1: U.S. and S. Korean apparel companies differ in their perceptions of future increases in U.S. apparel quotas. 81.2: 0.8. and S. Korean apparel companies differ in their perceptions of the effect of low-cost imported apparel on the U.S. apparel industry. 81.3: U.S. and S. Korean apparel companies differ in their perceptions of the effect of staple imported apparel on the U.S. apparel industry. 81.4: U.S. and S. Korean apparel companies differ in their perceptions of the quality of imported and domestically produced apparel. 82.1: U.S. and S. Korean apparel companies differ in their attitudes toward business planning. Independent t-test Independent t-test Independent t-test Independent t-test ANOVA Not Rejected Significant Significant Not Rejected Significant Not Rejected Significant Not Rejected Significant Not Rejected 75 TABLE 13.--Continued. Hypothesis Test Result Evaluation 82.2: U.S. and S. Korean apparel companies differ in their attitudes toward business planning when length of time in business is controlled. ANOCOVA 83.1: Employee Hotelling's T2 involvement in the development of short-range business plans differs between U.S. and S. Korean apparel companies. 83.2: Business factors used to develop short-range business plans differ between U.S. and S. Korean apparel companies. Hotelling's T2 83.3: Employee Hotelling's T2 involvement in the development of long-range business plans differs between U.S. and S. Korean apparel companies. 83.4: Business Hotelling's T2 factors used to develop long—range business plans differ between U.S. and S. Korean apparel companies. Not Significant Rejected Not Significant Rejected Not Rejected Significant Not Significant Rejected Not Significant Rejected 76 TABLE l3.--Continued. Hypothesis Test Result Evaluation 84.1: Profitability ANOVA differs in U.S. and S. Korean apparel companies when short-range and long-range planning are utilized. 84.2: Controlling for ANOCOVA length of time in business, profitability differs in U.S. and S. Korean apparel companies when short— range and long-range planning are utilized. 85: Differences exist Chi-square between the competitive strategies of U.S. and S. Korean apparel companies. Significant Not Rejected Significant Not Rejected Not Rejected Significant Note: Significance was established at the p<.05 level. CHAPTER V SUMMARY, CONCLUSIONS AND RECOMMENDATIONS Summany a: ijagtivaa ana Mennodolggy The purpose of this study was to compare and contrast business planning strategies in U.S. and S. Korean apparel firms. Specific research objectives were to: (1) compare and contrast attitudes of 0.8. and S. Korean apparel producers toward international apparel trade: (2) compare and contrast attitudes of U.S. and S. Korean apparel producers toward business planning; (3) compare and contrast business planning initiatives and competitive strategies in U.S. and S. Korean apparel firms: and (4) determine the relationship between business planning and financial performance in U.S. and S. Korean apparel firms. In 1986, researchers at Michigan State University developed a questionnaire to compare and contrast U.S. and S. Korean apparel producers. Two parallel, fifty-item, self-report questionnaires were developed and pretested. Following pretesting, the S. Korean survey was translated and printed in Korean to improve comprehension and response accuracy. Mail survey research was used to obtain 77 78 information on importing/exporting apparel, long-range planning and productivity analysis, operating ratios, production processing methods, competitive strategies, business characteristics, and work force profiles. Proportional stratified random sampling was used to select national samples of U.S. and S. Korean apparel producers who represented major segments of the men's, women's and children's apparel industry. The U.S. sample was selected from the Ananiaan_Annazal_Mannfag§n:az§ Assgsiatign and Standard_and_ngrls_Diresteries. The 8. Korean sample was selected from Tna_lga§_ni;agnary_af Mambers, Konean Gannent and Knitwear Ennor; Associatian and 19 - a us uo K a e & 'tw Manufasturing_£lant§- Of the five hundred questionnaires mailed to presidents of U.S. apparel companies, forty usable questionnaires were completed and returned. An 8.2 percent response rate was attained. One hundred and forty managers or owners of S. Korean apparel companies were mailed surveys. Twenty-three usable questionnaires were returned yielding a 16.4 percent response rate. Follow-up reminders were sent bi-weekly and non-response bias was studied by asking several demographic questions of companies who chose not to participate. Data analysis revealed that the sample was generally representative of the respective industries. Study results pertaining to business planning and related 79 variables were used to address research objectives and hypotheses in this thesis. Summary of srarisrigal Analysis ana Basults Independent t-tests were used to analyze U.S. and S. Korean apparel companies' attitudes concerning international trade. When U.S. and S. Korean attitudes toward increases in U.S. apparel quotas were compared, no significant difference was found. However, attitude differences surfaced with U.S. and S. Korean perceptions of: the effect of low-cost imported apparel, the effect of staple imported apparel, and the quality of apparel produced for export versus that produced for domestic consumption. Interestingly, S. Korean opinion was stronger than U.S. in supporting the statement that low-cost imported apparel was "the main problem affecting the U.S. apparel industry". However, U.S. companies felt more strongly than S. Korean that staple imported apparel was having a negative effect on the U.S. apparel industry. Also, U.S. opinion compared to S. Korean reflected less quality difference between goods produced for domestic use and those produced for export. Factor analysis was used to generate a business planning attitude scale. 0.8. and S. Korean apparel companies' attitudes towards business planning were tested first with analysis of variance and subsequently with analysis of covariance, controlling for length of time in 80 business. The dependent variable was business planning attitudes, and the independent variable was country (U.S. and S. Korea). Results indicated that more positive attitudes toward business planning existed in 0.8. apparel companies. However, with length of time in business controlled, no significant difference resulted. Hotelling's T2 test was used to analyze U.S. and S. Korean differences in short-range and long-range business planning. No significant differences resulted. However, due to the small sample size and the exploratory nature of this study, univariate F-tests were conducted which indicated that Korean production workers were included more often than their U.S. counterparts in developing short-range business planning. Additionally, in long-range business planning, univariate F-tests indicated that both apparel production supervisors and production workers were more involved in S. Korea than in the U.S. However, a consistent pattern of employee involvement was found between the two countries. Top executives were most often involved in establishing short-range and long-range business plans, followed by mid-managers, production supervisors and finally, production workers. Business factors used in short-range and long-range business planning initiatives were compared. When developing short-range plans, U.S. apparel companies felt sales and cash flow projections were more important while 8. 81 Korean apparel firms felt labor projections, break-even point and R.O.I. were more critical. While results of Hotelling's T2 indicated that no significant differences existed in long-range planning, subsequent univariate F- tests revealed that S. Korean apparel firms determined break-even point to be more meaningful than U.S. apparel companies. Overall, when comparing all the business factors, none were viewed as unimportant by either the 0.8. or S. Korean apparel firms. The relationship between business planning and profitability was studied using ANOVA and ANOCOVA. The dependent variable was profitability, and the independent variables were short-range planning (2 levels), long-range planning (2 levels) and country. Significant differences in profitability were present in the two-way interaction of short-range and long-range planning, and Scheffe results specifically located profitability differences between the apparel companies' groups with low-level short-range planning and high-level long-range planning and those with high-level short-range planning and high-level long-range planning. ANOCOVA results indicated that length of time in business had a significant effect on the profitability of apparel companies. Chi-square analysis was used to ascertain differences in competitive strategies employed by U.S. and S. Korean companies. After collapsing the twenty-two responses into 82 four related strategy groupings (off-shore production, quality, flexible production and marketing) no significant differences were found. It appears that U.S. and S. Korean apparel companies are using similar strategies to compete in the global apparel market. Emulsions Although this is an exploratory study with little comparative data available, results from hypothesis testing permit several conclusions to be drawn. First, U.S. and S. Korean opinions toward international trade are in transition. As a result of trade negotiations and current protectionist measures, 8. Korean firms now have a greater awareness of the impact of imports on the 0.8. apparel market. Results of this study indicate that both U.S. and S. Korean companies agree that U.S. quotas will be tighter in the future. Furthermore, companies' attitude responses reveal that some agreement between U.S. and S. Korea exists regarding low-cost apparel imports as "the main problem affecting the U.S. apparel industry." S. Korean agreement was stronger than American. It appears that while U.S. apparel firms view imports as a problem, they are also aware that other problems are affecting their ability to remain competitive. A few larger U.S. apparel firms are implementing world- scale planning strategies rather than concentrating on 83 lobbying for increased protection from imports. Kale & Sudharshan (1987) and Barns (1984) concluded that Levi Strauss and Burlington have begun and will continue to refocus on global trade. However, careful scrutiny of all U.S. apparel firms' business operations is needed in order for industry-wide improvement to occur. A second conclusion is that regardless of international trade problem awareness, U.S. and S. Korean apparel firms continue to further their own economic goals. Results indicate that U.S. apparel firms consider staple apparel imports to be negatively affecting their domestic market. This is supported by the fact that one out of every three garments sold in the 0.8. is from a developing country or NIC (AAMA, 1988). However, with U.S. respondents indicating that only 4.6 percent of total production is for exports, little is being done to balance the trade situation. In contrast, S. Koreans indicated that 78.8 percent of total production is for export. Specifically, textiles and apparel exports have accounted for about one third of S. Korea's foreign exchange (U.S. Department of Commerce, 1988b). While S. Korea realizes the effect of the U.S. import problem, its own economic gains remain central. A third conclusion is that U.S. apparel producers do not see a significant difference between the quality of apparel produced for domestic consumption and that produced for export. S. Korean companies did not agree. This may .l 84 signify a trend among 8. Korean firms towards improved quality as their industry continues to develop (Morganosky & Jin, 1988). U.S. apparel firms appear to feel export quality differentials are not apparent. From the findings of this study, it is possible to draw a fourth conclusion that U.S. apparel companies have a more positive attitude toward business planning than S. Korean apparel firms. Business planning attitudes are related to environment. U.S. apparel companies, exposed to increasing global competition in both domestic and foreign markets may see business planning as a strategy which would reduce risk and increase competitiveness. In the ongoing processes of business planning and risk management, proactive, knowledgeable strategies are developed, and performance improves. S. Korean apparel firms, fundamentally insulated from global competition, also see some importance in strategic planning. Most likely the transition of S. Korea from a developing country to an NIC has increased their awareness of strategic business planning. This conclusion is generally supported by Pearson (1985), Yip (1984) and Bracker & Pearson (1986). A fifth conclusion is that the 0.8. and S. Korean apparel industries approach both short-range and long-range business planning differently. Findings of this study indicate that the U.S. apparel industry uses sales and cash flow projections more frequently than S. Korean companies in 85 short-range planning. In contrast, the S. Korean apparel industry concentrates more on labor projections, break-even point and R.O.I. than does the U.S. apparel industry. A difference in long-range planning is evident with S. Korean apparel firms emphasizing break-even point more than U.S. apparel companies. Morganosky and Jin (1988) reached a similar conclusion. In S. Korea, more involvement by production workers is evident in short-range planning, and more involvement by both production supervisors and workers occurs in long-range planning as compared to U.S. counterparts. However, a consistent pattern of employee involvement emerged. In both countries, top executives are most often involved in establishing short-range and long-range planning, followed by mid-managers, production supervisors and finally production workers. A sixth conclusion is that more sophisticated business planning increases profitability. When length of time in business was controlled, a significant difference in profitability was found among apparel companies. Length of time in business had an effect particularly on the high- level long-range planners. Previous research has stated that business planning expertise is a developmental process within a company. As planning expertise evolves to a more sophisticated level, planners learn to assess potential opportunities, reduce risk and improve performance. This 86 conclusion is consistent with Bracker and Pearson (1986) and Mintzberg (1987). The final conclusion is that U.S. and S. Korean apparel firms are utilizing similar strategies to compete in a global market. This conclusion is an important indicator of the need for business planning especially to develop a market niche. At the same time that U.S. apparel firms demand protectionist measures, they appear to be doing comparatively little to help themselves against global competition. With the exception of somewhat more of a marketing focus, U.S. apparel firms are using the same competitive strategies as S. Korean firms but with less effectiveness. Rather than relying on protectionism, U.S. apparel firms need to examine their business operations and plan for participation in a global economy. In the highly competitive apparel market, a planned sense of direction can foster production improvements to enhance a company's competitive position (Tyler, 1986). Limirations In studying the U.S. and S. Korean apparel companies, three research limitations were evident. First, although one survey was printed in the Korean language, interpretation is always questionable and may have caused less accurate response. Pretesting the questionnaire was conducted to minimize inaccuracies in language 87 interpretation. Secondly, several attempts were made to increase the response rate of this study. Since funding sources did not permit an incentive, apparel businesses were recontacted to encourage participation. However, a low response rate did result which limits the generalizability of the results. Lastly, even though S. Korea is the seventh largest trading partner of the U.S., very little comparative data for the two apparel industries exists. Since the present study is exploratory and analyzed baseline data, related studies could have strenghthened conclusions of this research. W This exploratory study lays the groundwork to further analyze the U.S. apparel industry in light of foreign competitors. A review of the study indicates some recommendations for U.S. apparel producers and future research. d t ns 0 U 0 'es From the findings of this research, collaborative production could be a recommended course of action. Rather than vie for the same competitive advantage, U.S. and S. Korean apparel manufacturers should concentrate on what each does best in order to strengthen their internationally competitive positions (Robinson, 1986). 88 Cline's (1987) suggestion for the establishment of a program of gradual trade liberalization is another viable recommendation. Through development of an open trade club which would require reciprocity for admission, the S. Korean and U.S. apparel industries could begin liberalization of textiles and apparel trade which would benefit the global economy. In view of the export orientation of S. Korean apparel companies and their use of similar competitive strategies, U.S. manufacturers should develop and implement more comprehensive, proactive programs to compete globally. One recommendation is to develop a global market niche by promoting quality design and workmanship with brand-name awareness to reposition U.S. products. Secondly, U.S. apparel producers need to refocus production to meet export needs rather than relying solely on the domestic market. With the limited growth of the domestic market, growing global markets hold much more promise. Additionally, U.S. manufacturers could emphasize small production runs and many styles along with improved JIT delivery. A marketing campaign targeted to domestic and foreign buyers would create awareness of improved manufacturing techniques and assist in competing effectively with S. Korea's emphasis on quality and production. 89 WW}; One recommended course of action is to continue to study the competition, especially the Big Four: China, Taiwan, S. Korea and Hong Kong, as well as developing countries engaged in apparel production. In view of the finding that almost 80 percent of S. Korean production is for export, future research could assist U.S. apparel firms in refocusing for strategic advantage through an understanding of competitors' attitudes, present and future planning strategies and goals. For future research, another recommendation is to establish a relationship with university professors or market researchers interested in the apparel industry in the foreign countries to be studied. This may improve the response rate of future cross-cultural studies. Also, follow-up interviews and company tours could supplement survey findings. More specific research on business planning is warranted for future research. None of the business factors in this research were considered unimportant by either country in regards to short-range and long-range planning. Since a positive attitude towards business planning exists in the U.S. apparel industry, a study of actual business plans could be undertaken including type of plans (short- range or long-range), length of planning horizons, planning form (formal or informal), additional business factors, 90 personnel involvement, implementation and results. Research specifically related to Robinson's value-added chain theory could be helpful in future research in this area (Robinson, 1986). A study to determine the best means of collaborative production for competitive countries could assist manufacturers in adjusting to the global market. Since little information on the apparel industry is available, additional research reports should be prepared and submitted for publication. Future published cross- cultural studies and strategic planning research in the apparel industry would build an information bank to assist educators and ultimately apparel companies. APPENDICES 91 APPENDIX A U.S. QUESTIONNAIRE 92 09 not fill this in. it is for goal", purposes only. 9283 APPENDIX A U.S. APPAREL INDUSTRY SURVEY This is a study conducted by researchers at Nichigan State university. we would appreciate your assistance in completing this questionnaire. The responses to this questionnaire are anonymous, therefore. your answers will be kept in the strictest confidence. None of the data will be released for individual respondents IN THIS SECTION OF THE QUESTIONNAIRE. NE NOULD LIKE TO OBTAIN YOUR ATTITUDES ABOUT SELECTED BUSINESS PRACTICES. PLEASE RESPOND TO THE QUESTIONS FRON YOUR PERSPECTIVE AS AN APPAREL NANUFACTURER. INDICATE YOUR ACREEHENT OR DISACREENENT NITH STATENENTS I TO 14 BY CIRCLINC A NUNBER PRON I I STRONGLY AGREE TO 7 I STRONGLY DISACREE. IF ANY OF THESE QUESTIONS DON'T RELATE TO YOUR BUSINESS. CIRCLE THE X LOCATED NEXT TO EACH STATEHENT UNDER 'NOT APPLICABLE'. FOR EXANPLE. IF YOUR CONPANY DOERENOS PRODUCE APPAREL FOR EXPORT YOU NOULD CIRCLE THE A TO THE RIGHT OF STATENEHT NUH . STRONGLY STRONGLY NOT AGREE OISABREE APPLICABLE 1. Imported apparel 1s generally higher '"' quality for the price than domestically produced apparel. 1 2 3 4 5 6 7 x 2. Quality control standards are not as high for Imported apparel as they are for domestically produced apparel. I 2 3 4 5 6 7 x 3. In the future. U.S. quotas for all Imported apparel will have to be tighter than now. 1 2 3 4 5 d 7 x 4. The main problem affecting the U.S. apparel Industry is low-cost Imported apparel. I 2 3 4 S 6 7 x 5. Host imported apparel Is not high fashion compared to.u.s. produced "apparel. therefore. lgports don't negatively affect the U.S. apparel Industry. 1 2 3 4 S 6 7 x b. Nhen my company produces apparel goods for export. the quality is less than the quality of apparel produced for domestic consumption. 1 2 3 4 S d 7 X 7. Every month. my company's books are balanced and accounts smartzed. 1 z 3 4 s d 7 x O. Ntth my present labor costs. It Is necessary for my company to automate in order to remain competitive with other apparel producers. l 2 3 4 5 6 7 X 9. A long-range business plan Is very Important. therefore. my company has a written plan of where Its business should be In three to five years. I 2 3 4 5 6 7 X 10. Because It Is too expensive to automate when producing apparel. my company hasn't spent a great deal on automation. l 2 3 4 5 6 7 x 11. Because the products produced by my company require a large degree of hand labor. automation would not Increase productivity for my company. 1 2 3 4 s 6 7 x 12. Ny company‘s employees have a great deal of Input into the improvement of plant productivity. For example. suggestions are encouraged from employees for more efficient use of existing machinery. l 2 3 4 5 6 7 x (7) (8) (9) (10) (II) (I?) (13) (1‘) (15} (15) (I?) 5321) I3. I keep abreast of changes in apparel technology by reading industrial Journals and general business publications (for example. A arel world, international Apparel. etc). I4. Because the products produced by my company are high fashion. production runs are short. therefore. automation would not Increase plant productivity. I 2 3 4 S 6 7 X I 2 3 4 5 6 7 X IN THIS SECTION OF THE QUESTIONNAIRE NE NOULD LIKE TO KNON SOHE INFORHATION ABOUT YOUR CONPANY'S APPAREL PRODUCTION PROCESSES. IS. In the construction of a garment. to what degree are the following construction processes completed manually or totall by machine? Circle the number on the scale that best describes t e agree o? automation for each process. Also. in the space provided to the right please Indicate the number of steps required to complete each process. For example. a worker sewing a seam using a sewing machine In a two-step process would be described by a 3 on the scale and a 2 under number of steps. Or. a robot feeding fabric through a sewing machine In a two-step process would be a 7 on the scale and a 2 under number of steps. CONPLETELY NUHBER AUTONATED OE STEPS 3 Pattern making BradIng Narking Inspection of fabrics Lay out Cutting Numbering Bundling Special machining (e.g. fusing) Sewing seaming/closing unit sewing in sleeves edge-stitching pocket setting collar/cuff profile units buttonholing and bartacking other (specify Piece handling (i.e. delivering bundles of pieces to machinists) Finishing. Storage I Shipping pressing cleaning qualIty control baggIng packaging (other than bagging) dispatch for shipping storaging (warehousing) other (specify NNNNNNNN N NNNNNNN NNNNNNNNN UUUUUUUU U UUUUUUU UUUUUUUUU ....5... ‘ .“.... ..‘...... «tenements-amour! GI “REGIME-IMO “0000000 OOOOOOOO O OCOOOOO OOOOOOOO NNNNNNNN NB NNNNNNN NNN‘IN‘BVN 15. Indicate the level of computerization within your company for each of the following business functions. NON-CONPUTERIZED Accounting Payroll Designing the garment Grading and marking Cutting Lay out Inspection of fabrics Production planning (for materials) Norkforce scheduling Cost control Quality control larehouse control Other (specify ) “unturned—Innovate: NNNNNNNNNNNN UUUUUUUUUUUU Db...&‘b‘..b. mummuuuuummuu OGGOOOOOCCQO NNNNNNNNNNNN CONPUTERIZED 'l""7"""' {I9} (20) (21-25) (as-29) (30.13) (34.37) (Jo-41) (as-45) (as-49) (so-5:) (so-s); (SB-5]) (63-65) (66~69) (70.73) (24.77) (2/7.10) (lel-l‘) (2/15'18) (2/l9-2?) (2/23-26) (Z/ZI-JO) (I/Jl-Ja) (2/35-38) (2/19-42) (z/aJ-JS) (:/47-50) (2/5!) (2/52) (Z/SJ) (lell (2/55) (2/56) (2/57) (2/54) (2/59) (Z/SOl (2/61) (3 oil {3 ti 921: 17. Please rank by Importance all equipment your company is scheduled to buy within the next year and within 3 to 5 years which would increase automation or computerization (I - most important. 2 - second in importance. and so on). NITHIN 1 YEAR NITHIN §;§ YEARS I. (2/64-66l 1. _" — (3/7—9) z. (z/sz.ss; 2. (1110-12) 3. (Illa-72) 3. (J/lJ-IS) 4. (2/73-75) 4. (J/Is-Ia) 5. (2/76-78) 5. (3119.21) 18. Has your company ever received government assistance In the operation of its business? Yes No (If no. skip to question 20.) 19. Indicate the level of government assistance used by your company In each of the following areas. GREAT OEAL NONE Loan programs I 2 3 4 S 6 7 Technical assistance I 2 3 4 5 6 7 Tax relief I 2 3 4 5 B 7 Training programs I 2 3 4 5 6 7 Export assistance I 2 3 4 S 6 7 Trade missions I 2 3 4 S 6 7 R B O subsidies I 2 3 4 5 b 7 Other (specify ) I 2 3 4 S 6 7 IN THIS SECTION OF THE QUESTIONNAIRE HE NOULD LIKE TO OBTAIN SONE BACKGROUND INPORHATION ON YOUR CONPANY. 20. On the lines provided. Indicate the three major apparel Items produced by your company. If you know SIC numbers pIease Identify. Also. Indicate the avera e price at which you sell these products to retailers and wholesalers (if you se 1 to wholesalers). NHOLESALE RETAIL mn a 3 mm me: rune: I. (3/31-34) s (s/us-ea) S (J/dJ-SO) 2. (JISI-Sd) 3 (3139-64) 3 (3/57.24; 3. (4/;.;., 3 (4x15.22) S (4/21-30) 21. Nhat percentage of your company’s total apparel production is produced for: domestic markets 1 (om-m (4/34-36) export markets 7355 Total Apparel Production 22. Please rank by Importance the three countries which represent your major export markets? On the lines provided. rank the countries and the percentage of total production (for both domestic and export markets) produced for each country. NOTE: IF YOU DO NOT PRODUCE FOR EXPORT SKIP TO QUESTION 23. COUNTRY g 95 TOTAL PRODUCTION I. ("3"”) x (exec-m 2 . (041-4?) 3 (ans-ca) 3 (”49-51) 1 (052-5!) 23. Nhat percentage of your company's total raw materials are imported? t of total materials are Imported Does not apply 24. Please Indicate the strategy/strategies used by your company to compete with low-priced imported apparel. For example. off-shore production. upgrading apparel lines. etc. (J/Z?) 71/23) (1/24) (3/25) (3/26) (J/Zl) (3/28) (3/29) (3/::; (a/ssos7) (4/58-78) 92hd 25. Does your company have any part of Its production completed in any other .4 '5 country? No Yes (If yes. identify the country/countries and the production process completed in each country. Also. please indicate the percentage of your total apparel production completed in all other countries.) COLAITRY PRODUCTION PROCESS (SIT-9) (mo-m (sue-m (sm-Is) (SIM-l7) (ma-m t of total production is completed In other countries. (mo-22) 26. iiho Is involved In the development of your short-range (annual) business plan? Indicate the degree of involvement of each personnel group. For example. If clerical workers are somewhat Involved In developing your annual business plan circle 4. NOTE: IF YOU DON'T HAVE A SHORT-RANGE BUSINESS PLAN SKIP TO QUESTION 28. TOTAL NO PLANNING PLANNING Top executives I 2 3 4 5 E 7 (5/23) Riddle-level managers I 2 3 4 S E 7 (5m) Production supervisors I 2 3 4 5 S 7 (ms) Production workers I 2 3 4 5 6 7 (506; 0th" (3906"! ) I 2 3 4 b b 7 (5m; 27.Indicate the level of importance of the following areas in the development of your short-range (annual) business plan. For example. if ross margin Is not Important In the development of your annual business plan c rcle 7. VERY NOT INPORTANT INPORTANT Sales projections I 2 3 4 3 (we) Productivity projections I 2 3 4 3 S 7 (5/29) Earnings projections I 2 3 4 S 4 7 ’5’”) Cash flow projections 1 z a a s s 7 ‘5’“) Capital requirement projections I 2 3 4 5 4 7 ‘5’”) Labor projections I 2 3 4 S S 7 (5’32) Narket share I z a a s s 7 ‘5” ’ Costs and expenses I 2 3 4 S B 7 (:32; Operational capacity I z 3 4 s c 7 :50” Break-even point I 2 3 4 S B 7 a Rate of return on investment I 2 3 4 5 d 7 ‘g” ’ One or more pro-forma financial statements I 2 3 4 S S 7 ‘52:) Other (specify 1 z s a s s 7 ‘ ) 2B. Nho is Involved in the formulation of your long-range (three to five year business plan? Indicate the level of Involvement of each personnel group. NOTE: IF YOU DON'T HAVE A LONG RANGE BUSINESS PLAN SKIP TO QUESTION 30.. PTOT‘I C Pm“! C LANN N N N Top executives I I 3 4 3 (SM) Riddle-level managers I 2 3 4 5 6 7 (5x42) Production supervisors I 2 3 4 S d 7 (5m) Production workers I 2 3 4 5 6 7 W“) Other (specify ) I 2 3 4 S 6 7 “"9 29. Indicate the level of Importance of the following areas In the development of your long-range (three to five year) business plan. VERY NOT IMPORTANT IHPORTANT Sales projections 3 4 5 (5m; Productivity projections I 2 3 4 5 S 7 mm Earnings projections I 2 3 4 S B 7 (SM) Cash flow projections I 2 3 4 5 b 7 (5”?) Capital requirement projections I 2 3 4 S S 7 W50) Labor projections I 2 3 4 5 6 7 (5’5” Rarket share growth I 2 3 4 S 6 7 "”0 Costs and expenses I 2 3 4 S S 7 (5.3:: Operational capacity I 2 3 4 S S 7 (5/54) Break-even point 1 2 3 4 5 6 7 (5/55; Rate of return on Investment I 2 3 4 S S 7 (5/56l One or more pro-forms financial statements I 2 3 4 5 S 7 (S/SH Other (specify I 2 3 4 S S 7 (5’58: 30. 31. 32. 33. 34. 35. 36. 37. 922e Nhat are the locations of your company's facilities? On the lines provided please indicate the type of facility your company operates at each location. For example. corporate headquarters in a downtown business district. sawing plant in a rural area. and distribution facility in a suburban area. Downtown business district Industrial complex Suburban area Rural area Other (specify ) Indicate the importance of each of the following factors in your decision to locate your plant(s) In its present location(s). VERY NOT IMPORTANT IMPORTANT Naterials availability 3 a 5 3"'7"" Suitable labor supply I 2 3 4 S 6 7 Lower labor cost I 2 3 4 S S 7 Transportation facilities 1 z 3 4 5 5 7 Plant facility availability I 2 3 4 S b 7 Financing availability I 2 3 4 S 6 7 Tax benefits I 2 3 4 S S 7 Other (specify ) I 2 3 4 S S 7 Please indicate the approximate number of employees employed by your company in each of the following work force groups. Supervisors (labor supervisors) Nanagers Direct Labor Indirect Labor Nhat percentage of your production workers (both direct and Indirect) are full-time or part-time employees? S Full-time production workers 3 Part-time production workers IOU: Total production workers Indicate your ma or source(s) of labor supply by ranking the following labor sources (I-mos mportant. 2-second In Importance. and 3-third In Importance. and so on). Local area Rural area (non-local) Urban area (non-local) Suburban area (non-local) Family members Other (specify ) Are your production workers unionized? Yes (If yes. which labor unions represent your workers?) Nhat is the average number of hours worked per week for the following employees? Top executives hours Riddle-level managers hours Production supervisors hours Production workers (full-time) hours Others (specify hours Do you hire additional production employees during peak seasons? No (If no. skip to question 38) Yes (If yes. please identify the number of full-time production workers hired as additional workers for peak seasons Number 07 Employees and the percent of pay compared to labor wages for your permanent employees.) 1 less pay than permanent workers 1 more pay than permanent workers (5/59) (S/dO) (5/61) (5/62) (5/63) (5/64) (5/65) (5/66) (5/67) (5/68) (5/69) (5/70) (5/27) (5/72) (5/73) (5/74) (5/75-77) (S/7IoBO) (‘/7) I‘ll) (5/9) (d/IO) (S/Il) (d/IZ) (6/13) lG/Il-IS) (6/16-17) (5/16-19) (5/20-21) (SIZI-ZJI (S/Zl-IS) (5/26) (6/27-10) (5/31-34} (6/35-38} 92f 33. Indicate the number of permanent production workers you employed monthly during 1935. Jan. Feb. liar. Apr . Nay June (else-4:) (ms-4s) (wt-so) (6151.54) (ms-sol (ms-m July Aug. Sept. Oct. Nov. Dec. mes-u) (V4740) (sin 4:) (ens-7a) (7/7- IO) (2m - m 39. Indicate the volume of apparel produced by your company monthly during I985. Jan. Feb. liar. Apr. Nay June S __ S __ S __ S S _ 3 (ms-22) (Ila-:0) (ml-Jo) 77/19.“) (MI-54) (ms-m July Aug. Sept. Oct. Nov. Dec. 8 _ S __ S _ _. t __ S _ S (”SJ-IO) (rm-m (ell-ll) (ans-2:) “/21 ~10) (ml-14) 40. Please rank your company's three most frequently used pay systems for production workers and managers (I-most Trequently used. 2-second In frequency. 3-third In frequency.) PRODUCTION NANACERS w SYSTEMS M — (also) (we) Seniority system (A173) (ms) Job-based system (mi (a/so) Nixed system (specify “IQL (a/si) Individual Incentive pay system , am) (we) Broup incentive pay system «#7) (a/sJ) Nerit system (ya) (mt) Profit sharing (me) (am; Organizations bonus plan (our) (em) Other (specify ) 41. Nora specifically. which method of wage payment do you use for production employees? (Indicate the percentage of production workers in each category.) Nourly payment 3 (oar-59) "PCP MUM 1 (snow) 33W 1' ) : (us: . as) r spec y (ms-5a) W! Total production workers 42. Please Indicate the average hourly labor wage or annual salary for your permanent production workers. 3 93 S Hourly wage Annual salary (alas-m 79/742) 43. Please check the benefit plans provided by your company for production workers and managers. Check all that apply. ilhere asked. fill In the average number of days given annually for personal time. vacation. sick leave and holidays for both production workers and managers. PRODUCTION NORKERS NANACERS BENEFIT PLANS (am) (we) Personal time (indicate nimber) (ms-m (9/2Il (ma) Vacation (indicate number) (ms-25) mm mm Paid sick leave (indicate number) (9/3I-JJ) (w!) (we) Paid holidays (Indicate nusber) (”19.”) (ms) (ms) Dental Insurance (pm) (me) Nealth Insurance mm (s/so) Life insurance (mu (ma) Prescription insurance (ms) (use) Retirement pension plan was) (also) Income maintenance (um (me) Other (specify ) 92g; 44. Please indicate the legal form of ownership for your company. Sole proprietorship Partnership Open (public) corporation Closed (private) corporation (If priva‘ely owned.ugs it family owned?) as Other (specify ) 45. Now would you define your business? Apparel manufacturer (designing to finished garment) Contractor Subcontractor Jobber Other (specify ) 45. How long has your firm been In existence? Less than I year Years 47: Please specify the percentage of average selling price that each of the following accounted for during 1935 for your company. Production Costs Raw materials Direct labor Nanufacturing burden Administrative cost (I.e. executive salaries. rent. depreciation. general expenses.etc.) Sales costs 3 (I.e. advertising. sales expenses. sales personnel salaries. freight.etc.) Profit 3 Other (specify I55 3 Selling Price 43. Now do you measure productivity for your company? On the lines provided on the left. rank the three most Important productivity measures for your company (Iumost Important. 2-second in importance. 3-third in importance). List the corresponding productivity ratio or index number on the line directly across from the productivity measure. For example. If you rank output per unit of capital as your company's most important productivity measure write it next to I on the linehat th: left and place 32.7 (your company's index number) on the first line on t e r g t. UIBIIIIBI V RANKEO PRODUCTIVITY PRODUCTIVITY MEASURE RATIO 1. (taxes-:7) (loves-Jo) 2. (moi-so) __ ammo) 3. (lover-is) (id/ao-aa) 49. Please indicate your total annual sales for I935. 7733-3373s I have not been in business long enough to answer this question. 50. Please indicate the title of the person completing this survey. *Title THANK YOU FOR YOUR COOPERATION IN CONPLETING THIS SURVEY. (PISS) (RICO) (9/51) (SIS?) (PICS) (B/Sl) (PICS) (RIOS) (SIC!) (SIC!) (BIC!) 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IIO/SU so. «I e' +144 Mm.) 444 am) wwm mum) 8H ”0152-62) * 0| £955}. Efit§MM QMIN-IC}. APPENDIX C 94 95 TABLE C-1.--PERCEPTION OF FUTURE INCREASES IN U.S. APPAREL QUOTAS: U.S. AND S. KOREAN SAMPLES "In the future, U.S. quotas for all imported apparel will have to be tighter than now". N Mean DF T-Value United States 39 2.4 52 1.4 S. Korea 15 1.7 Seven-point Likert scale, 1 = Strongly Agree to 7 = Strongly Disagree n.s.(p<.05) 96 TABLE C-2.--VARIMAX FACTOR ANALYSIS or ' s Question Factor 1 Factor 2 Communality 7 .29086 .60721** .45847 8 .07595 .36053** .17904 9 .60037 .46997** .64019 10 .41112* -.35155 .29297 11 .71665* -.60747 .94974 12 .46562* .28790 .30001 13 .49321* .27549 .32030 14 .46955* -.35711 .34843 Eigenvalue 1.81 1.65 R2 20.2 18.3 Cronbach's Alpha .66 .62 97 TABLE C-3.--ATTITUDES TOWARD BUSINESS PLANNING WHEN LENGTH OF TIME IN BUSINESS IS CONTROLLED: COMPARISON OF U.S. AND S. KOREAN SAMPLES, ANALYSIS OF COVARIANCE RESULTS Business Planning Factor Sum of Mean Squares DF Square F Main Effect 5.199 1 5.199 1.803 Covariate Length of time 10.434 1 10.434 3.619 in business Explained 15.634 2 7.817 2.711 Residual 123.976 43 2.883 Total 139.610 45 3.102 Seven-point Likert scale, 1 = Strongly Agree to 7 = Strongly Disagree n.s.(p<.05) MULTIPLE CLASSIFICATION ANALYSIS Grand Mean = 3.34 g Unadjusted Adjusted for R2 Independent & Covariate United States 27 2.88 2.99 S. Korea 19 4.00 3.83 .112 It 98 TABLE C-4.--EMPLOYEE GROUP INVOLVEMENT IN SHORT-RANGE BUSINESS PLANNING: COMPARISON OF U.S. AND S. KOREAN SAMPLES Univariate Employee group N Mean F-Ratio Top Executives United States 22 1.6 .09 S. Korea 19 1.5 Mid-Managers United States 22 2.9 1.67 S. Korea 19 2.2 Production Supervisors United States 22 4.7 .96 S. Korea 19 4.1 Production Workers United States 22 6.0 3.93* S. Korea 19 4.9 Seven-point Likert scale, 1 = Total Planning to 7 = No Planning *p<.05 Hotelling's T2, exact F = 1.35, (1,39 DF), n.s.(p<.05) 99 TABLE C-5.--EMPLOYEE GROUP INVOLVEMENT IN LONG-RANGE BUSINESS PLANNING: COMPARISON OF U.S. AND S. KOREAN SAMPLES Univariate Employee group H Mean F-Ratio Top Executives United States 20 1.2 .74 S. Korea 12 1.1 Mid-Managers United States 20 3.0 1.18 S. Korea 12 2.3 Production Supervisors United States 20 5.9 7.99** S. Korea 12 3.9 Production Workers United States 20 6.6 10.08** S. Korea 12 4.7 Seven-point Likert scale, 1 = Total Planning to 7 = No Planning **p<.01 Hotelling's T2, exact F = 2.4, (1,30 DF), n.s.(p<.05) 100 TABLE C-6.--IMPORTANCE OF SELECTED BUSINESS FACTORS IN LONG-RANGE BUSINESS PLANNING: COMPARISON OF U.S. AND S. KOREAN SAMPLE - an in Univariate Business Factors N Mean F-Ratio Sales Projections United States 27 1.5 .45 S. Korea 8 1.9 Productivity Projections United States 27 2.3 2.93 S. Korea 8 1.4 Earnings Projections United States 27 1.3 .40 S. Korea 8 1.5 Cash Flow Projections United States 27 1.9 .38 S. Korea 8 2.1 Capital Requirement Projections United States 27 2.0 .27 S. Korea 8 2.3 Labor Projections United States 27 2.9 3.46 S. Korea 8 1.8 Market Share United States 27 3.0 1.89 S. Korea 8 2.0 Costs and Expenses United States 27 2.0 2.22 S. Korea 8 1.4 Operating Capacity United States 27 2.1 2.39 S. Korea 8 1.4 Break-Even Point United States 27 3.0 4.77* S. Korea 8 1.5 R.O.I. United States 27 2.2 .01 S. Korea 8 2.3 Pro-Forma Financial Statements United States 27 2.1 .01 S. Korea 8 2.1 Seven-point Likert scale, 1 = Very Important to 7 = Not Important Hotelling's T2, exact F = 1.44, (1,33 DF), n.s.(p<.05) *p<.05 101 TABLE C-7.--RELIABILITY COEFFICIENTS--COEFFICIENT ALPHA SHORT-RANGE PLANNING Scale Grouping Coefficient Alpha 10. 11. 12. Sales Projections Productivity Projections Earnings Projections Cash Flow Projections Capital Requirement Projections Labor Projections Market Share Costs and Expenses Operational Capacity Break-even Point Rate of Return on Investment One or More Pro-forma Financial Statements .76 .72 .72 .71 .71 .71 .70 .71 .73 .74 .69 .72 Overall .73 102 TABLE C-8.--RELIABILITY COEFFICIENTS--COEFFICIENT ALPHA LONG-RANGE PLANNING Scale Grouping Coefficient Alpha 1. Sales Projections .86 2. Productivity Projections .84 3. Earnings Projections .85 4. Cash Flow Projections .84 5. Capital Requirement Projections .84 6. Labor Projections .84 7. Market Share .85 8. Costs and Expenses .84 9. Operational Capacity .85 10. Break-even Point .84 11. Rate of Return on Investment .84 12. One or More Pro-forma Financial Statements .86 Overall .86 103 TABLE C-9.--COMPETITIVE STRATEGIES OF U.S. AND S. KOREAN APPAREL COMPANIES, CHI-SQUARE ANALYSIS Strategies U.S. S.Korea Totals Frequency Frequency (Col. %) (Col. %) Off-shore production 6 O 6 (12.50) (0.00) (8.22) Quality 16 14 30 (33.33) (56.00) (41.10) Flexible production 19 10 29 (39.58) (40.00) (39.73) Marketing 7 1 8 (14.58) (4.00) (10.96) Totals 48 25 73 (Row %) (65.75) (34.25) (100.00) Chi-square = 6.86 (3 DF), Contingency coefficient C =.29, n.s.(p<.05) REFERENCE LIST 104 REFERENCE LIST Alexander, C. P. (1988, October 17). Trade: Getting Back into the Game. mine, p. 28. Amara. R- & Lipinski. A- J- (1983). Busins§§_zlanning_fgr en Uncettein Enter . New York: Pergamon Press. American Apparel Manufacturers Association. (1986). Focus. Arlington, VA: Author. American Apparel Manufacturers Association. (1988). Eeene. Arlington, VA: Author. Amos, J. R., Brown, F. L., & Mink, O. R. (1965). Statisticei goneentsI A Besie Progtam. New York: Harper & Row. Arpan, J. S., de la Torre, J., & Toyne, B. (1982). 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