The external environment of the clothing industry is shaped by various factors such as political stability, economic prosperity, and social trends. These factors determine the industry dynamics and impact the decision-making of management. The following analysis sheds light on the external factors affecting the clothing industry.
Political Factors
The political factors have a significant effect on the business environment as local organizations as well as foreign investors make business decisions based on the political outlook of a region. If there is political instability in a region, organizations would find it difficult to supply raw materials, along with the challenge of exporting the clothing products to other countries. Trade sanctions due to political issues are another challenge which can reduce the profitability of the clothing industry. The case of US ban on the Chinese cotton on account of the labor exploitation issue is one example. The ban has lead to disruption in the supply of cotton from China, which has negatively affected the Chinese cotton producers. The businesses had to shift to alternatives for cotton supply as the ban complicated the supply of cotton from China (Dou, Whalen & Chen, 2021). Myanmar clothing industry has also suffered due to political turmoil and military control of the state as factories lay off large number of workers to build pressure for restoration of democracy (Blomberg, 2021).
Economic Factors
There are numerous economic factors that have the potential to disrupt or develop the clothing industry. Economic stability in a country increases sales of clothing businesses as the consumers are able to maintain a high degree of disposable income. On the other hand, economic decline, unemployment rate and increasing inflation has an immediate effect on consumer spending as individuals shift their focus on more basic necessities, refraining from spending on clothing items.
The application of tax on the clothing industry is another factor that determines the degree of profits and sales a business would be able to obtain. The cost of production is likely to alter due to the changes in import policies and exchange rate. Fluctuation of exchange rate and unfavorable trading policies can make it difficult for the businesses to manage the production cost effectively.
Foreign investment in the clothing industry is dependent on the economic conditions of a country, as stable economy would create higher investment opportunities, which would in turn upgrade the industry further (Calabrese & Balchin, 2022).
Social Factors
The social trends heavily influence the manufacturing decisions and strategic planning of the businesses in clothing industry. The composition of the population is another social factor that is taken into consideration by the organizations, as different age groups have different preferences for clothing, while gender also influences buying decisions of the customers. Besides the demographic features of the population, the cultural influences are also important in the clothing sector. Another way that social dynamics affect this industry is when a major event changes the preference and trend of the market, as seen in case of economic decline and pandemic. The clothing industry has observed a rise in the number of people who were looking for affordable clothes in the post recession era, resulting in the strengthening of fast fashion segment. Furthermore, pandemic resulted in an increased preference for second hand clothing, as people were more focused on shopping within a budget (Hoffower, 2022).
Technological Factors
Technology offers massive support to the clothing industry as designing and production are facilitated by technological advancement. Clothing industry has experienced positive developments owing to the new technology that helps in creating designs and fabric, along with offering the businesses the ability to offer customization and using virtual reality for interacting with the customers. Artificial Intelligence (AI) has been particularly useful in the sector and businesses have been using it to create appealing designs for the customer, as well as utilizing it in the process of creation of garments with precision (Sikka, Sarkar & Garg, 2022). Clothing industry has also gained benefit from the increasing use of social media as the companies are able to use digital marketing as a part of their integrated marketing strategy. Social media has opened up a great opportunity for the clothing industry to connect with a large number of customers on an international scale.
Legal Factors
Regulations for clothing industry define the policies and practices adopted by the companies in the segment. Labor laws and worker’s rights defined by the law have to be followed by the organizations. Moreover, the purchasing decisions are also influenced by the legal adherence of the sellers, as exploitation of workers or using child labor can cause issues in business dealings. Sourcing materials from countries that are violating human rights can result in severe backlash for the companies; therefore the management has to ensure that the supply chain processes incorporate those regions where such issues are not rampant. Despite the stance on child labor, there are companies that continue with the use of child labor in the manufacturing process, particularly in the Asian and Pacific regions (International Labour Organization, 2023).
Environmental Factors
The clothing industry has faced many issues in terms of maintaining sustainability and limiting the damaging impact on the environment. Environment protection agencies require the clothing manufacturers to adhere to the sustainable production and eco friendly manufacturing. However, the clothing industry remains among the top contributors to environment damage, due to the carbon emission. Another inevitable outcome of production of clothing is the pollutants being added into the water sources, including the chemicals from dye and other harmful substances.
In addition, the wastage from the industry and its improper management is a major area of concern (Dottle and Gu, 2022). In the US alone, 11.3 million of wastage is generated by the clothing industry on an annual basis, indicating the environmental hazard being created by the sector.
Conclusion
The clothing industry is sensitive to the political, economic and social changes, requiring quick strategic response to the changing external environment. Organizations in the industry need to align their operations with the legal and environmental framework and shape its operations around eco friendly practices to remain sustainable.
References
Blomberg, M. (2021). As Myanmar unions demand sanctions, garment workers fear for their jobs. Reuters. Retrieved from: https://www.reuters.com/article/us-myanmar-crisis-workers-idUSKBN2IS012
Calabrese, L., & Balchin, N. (2022). Foreign Investment and Upgrading in the Garment Sector in Africa and Asia. Global Policy, 13, 34-44.
Dottle, R. & Gu, J. (2022). The Global Glut of Clothing Is an Environmental Crisis. Bloomberg. Retrieved from: https://www.bloomberg.com/graphics/2022-fashion-industry-environmental-impact/
Dou, E., Whalen, J. & Chen, A. (2021). U.S. ban on China’s Xinjiang cotton fractures fashion industry supply chains. Washington Post. Retrieved from: https://www.washingtonpost.com/world/asia_pacific/china-cotton-sanctions-xinjiang-uighurs/2021/02/21/a8a4b128-70ee-11eb-93be-c10813e358a2_story.html
Hoffower, H. (2022). How 2 recessions changed what we wear. Insider. Retrieved from: https://www.businessinsider.com/great-recession-pandemic-influences-fast-fashion-shopping-2022-4
International Labour Organization (2023). Child labour in Asia and the Pacific. Retrieved from: http://ilo.org/ipec/Regionsandcountries/Asia/lang–en/index.htm
Sikka, M. P., Sarkar, A., & Garg, S. (2022). Artificial intelligence (AI) in textile industry operational modernization. Research Journal of Textile and Apparel. Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/RJTA-04-2021-0046