Changing strategic architecture of transnationals the case of textile and apparel industries

CHANGING STRATEGIC

ARCHITECTURE

OF

TRANSNATIOI{ALS: THE

CASE OF

TEXTILE

_{AND APPAREL}

INDUSTRIBS

Refika BAKOGLU M armara U niv e rs ity, Tu rkey

ix;;;:#tr:i,

ABSTRACT

This study aims to show the new patterns of the strategic architecture

of

transnational

_{firms by}

using an

inductive perspective

over

the real

conditions.

For

observing

the

sii\t

in

the

straiegic

piiorities of

transnationals and their _{strategic architectures, the textile end apparel industries are}

_partiiularly

_imporrant

since the effect of globalization can be seen

in

these industries _{firstly and noticeably as being'widespread} worldwide, mature and labor intensive, and the _{fi-rst example of}

_full

global rradc

tibiralizarioi

taking ptace

in 2005- Eight new patterns of _{new strategic architecture of transnaiionals are obsei-ved that}

_could

_also be

reflected to the other industries, especially global ones.

Keywords:

Strategic architecture, transnational

firms,

multi-stake

_{holder initiatives,}

_{corporate social}

responsibility

IN'TRODUCTION

Textile and apparel inilustries are

vital

industries to observe and analyse both global shift, and changes in strategic architecture

of

tra.nsnational corporations (TNC's). One

of

the mzrin reasons

is

being the first

manufacruring industries gaining a global dimension, and eiperiencing the

full

global liberalizatiJn of tracle taking place

in

2005. The other meaningful reasons

of

these are the facts that the industries, especially apparel industry, are _{the most geographically widespread; organizationally very complex containing elements} of _{both very new and very old organizational practices, labour intensive}

_{(oicten, tl-Sl),}

_is

_{locatejmainly}

in

third world and Eastem European Countries, operates in a _{sophisticated sub-contracting system (Wick, 2003)} and

is

mature. The other important reason

is

these industries are the main source

bf

national revenue especially for the developing couhties, having occupied a key position in national industrialization strategies,

although the share

of

these industries

in

world trade very

low with

the percentage

of

5,g

in

2001 (wTO, 2003). Particularly

for

_{some less developed countries, apparel industry'represents large}

_ptlrt

_of

_nation,s

export, indicating the importance of the industry as a key mechanism for the _{integriticin of'u}

_*tion,

""ono*y

to _{globalisation process. For instance, the shares of apparel industry in}

countries' total merchandize exports

are

l8'3.7o

for Bangladesh, 60'2 Vo for El _{Salvador, 50.9 Dominican Republic,.49.gLo for}

_SiLanka;

39.4Vo Tunisia, 24.4vo Romania and 21.2 vo

.fot

Turkey:in 2001

(wro,

2003),

all of

which

*" p;;;;;;

apparet

producers. These reasons may also indicate that observed pattem

_of

_{changing strategic architecture and} global shift in the textile and apparel industries may not be unique to these particular industries, and could be

reflected to the other industries, especially global ones.

Especialiy for the last two decades, apparel _{industry is an industry where intense and severe competition}

has becn experienced

_{at global level, while}

there are,160 producing

counfies

for

30

purchasing counties (Kearney

&

Justice, 2003). This is another reason why these industies _{aie experiencirlg new global strategic}

games earlier, and why intense competition is taking place especially among manufactrirers in globlll marker dominated by limited transnational companies and retiilers.

Global apparel industry _{and.rnarket has been dominated and controlled}

_by

_{multinational}

compariies and

retailer most

of

whibh do-not directly engaged

in

_{production. Products are:mainly manufactured by}

_a

_large number

of

producers

in

_{developing countries as being fragmented industry}

_globilly.

_{Since the}

_t9zo,s

tne

world

has witnessed a process

of

increased'relocation

_of

production

_in

_{apparel inaustry. production for}

shift

in

the

strategic Architecture

of

rextile/Apparel

Transnationals

In the twentieth century,

it

has been witnessed four major shifts on the basis of competitive advantage: from price and volume to quality, than to speed, next to "mass customisation" as Keiman (1993) mentioned. But there seems

to

occur another shift recently, which would be conceptualised as dominating

of

global vaiue chain. Since

TNC's

are main actors in creating global web of value creation activities and have sustainable

competitive advantage stems

from

it,

it

can be

claim

that dominating global value chain

is

the fourth "leverage points" as _{being sustainable competitive advantage source for especially TNC's on top of "global} efficiency, knowledgb leverage and responsiveness" (Bartlett _{and Ghoshal, 1989). Kiernan argued}

_in

_his

1993 article that strategic architecture for high performance firms include the following

s.u.n

.oi.

elements

for

the

twenty

first

century: organizational learning, innovation, constructive contention, empowerment, optimised value potential, corporate sustainability and strategic re-framing. As we incorporated ihe basis of

cornpetitive advantage challenge in the last era with dorninating of global value chain,

it

can be argued that the observed pattern

of

core elements

of

strategic architecture

of

TNC's

have new dimensions. We have

observed eight new elements

of

new strategic architecture

of

TNC's, especially

in

the apparel and textile industry, which are: New implementations of corporate social responsibility, New

*uyr

of

code formation and implementation, Being part of Multi-Staleholder Initiatives as main facilitator

of

Global Ethical.Trade. Formalisation of industries in producing countries, Creation of transnational regulations and legal framework,

New ways

of

preventing new entrants, New ways

of

enlarging market volume,.and New combination to

diminish bargaining power of suppliers. We argue that these _{eight elements of changing strategic architecture}

of TNC's

are being related

with

the new era

of

competitive advantage, as we named

it

as dominating

of

global value chain in industry.

1.

New

Implementations

of

Corporate Social Responsibility:

over rhe past few years, corporare

social responsibility (CSR) has

regained increased

levels

of

attention

by

businesses

and

academic researchers. Especially

_in

Corporate Sustainability literature, achievement

of

long-term sustainability depends on not

only

economic sustainability but also environmental and social sustainability

(Dyllick

&

Flockerts, 2002). CSR could be intelpreted as a realization mechanism

of

environmental sustainability and

social sustainability. Corporate codes

of

conduct are the _{most common means tcj express'4nd implement}

social responsibility (Kolk

&

Van Tulder,2002).

A

number

of

companies have declared their social responsibilities to public by adopting codes

of

conduct.

Although majority

of

these codes

of

conduct are merely unilateral declarations by individual transnational companies (Frankental, 2001), some codes of conducts applications go beyond just _{being declarations. While} some

global

companies

claim that

they' implement and

monitor their

declared codes

of

conduct (for exampleVF Corp.,

H&M

etc), some others have begun to establish or

join

to multi-stakeholder initiatives to

implement the codes

of

conduct that formed by the multi-stakeholder initiatives multilaterally (for example Nike, Adidas, Reebok,

M&S,

Levis, Mothercare, Next, Lis Claiborne, Polo Ralph Lauren etc..y. participating companies

of

multi-stakeholder

initiative

put

social

responsibility

into

practice

by

adopting 'and

implementing codes

of

conduct introduced multilaterally, and moreover they

allow

independent: audits on

their code implementation. Therefore

it

_{could be argued that corporate social responsibility now nieans more} than a PR activity for _{some global firms. Although Frankental (2001) advocatedihat CRS can only have real}

substance.if

it

embraces:all the stakeholders

of

a company,'if

it

is reinforced

by

changes

in

company law relating to governance,

if

it

is rewarded by financial markets,'

if

its definition relates to

thi

goals of social and

ecological sustainability,

if

its implementation is benchmarked and audited,

_if

it

is,open to-public scrutiny,

if

the compliance mechanisms are

in

place, and

if

it

is

embedded across the organization horizontally and vertically,

it

can be argued that now CSR is gaining a _{real context rather than being a theoretical concepr as}

PR tool. These changes in CSR _{implementations may go beyond thb meaning of enhancing the legitimaiy of} the

firm

among its stakeholders (Handelman

&

Arnold,

1999) and develophg positive sJciat res-ponsiUitity

images (Sen

&

Bhattacharya, 2001).

This

statement especially would be more accurate

if

the condition proposed by Frankental were

fully

realized'

2.

New

.\als

of

lode

Formation and Implementdtion:

"Codes of conducr (CC) are being highly contested

in

an environnrent where interest groups hope to manipulate the political or regulatory

p.i".r.

tt

gain preferential treatment"(Costello, 2000: 56). Codes

of

conduct could be defined as -a set

of

standarOs.

rules or guidelines

for

ethical behaviour.

In

the context

of

working condition

in

apparel industry, codes

of

conduct have been drafted that indicate for example _{labour standards that companiLi claim to uphold}

_in

_the workplaces where their goods are _{produced (CCC Tenninology Guide, 2003).}

The OECD lists 246 codes

of

conduct, most

of

which were issued

in

the 1990's. These codes are broadly

defined

as

"commitments

voluntarily

ma.de

by

companies, associations

or

other entities

which

forth standards and principles

for

the conduct

of

business activities

in

the market place" (OECD,

_{2000). Of}

the

246 codes ofconduct' 118 were issued by individual _{companies, g2 by industry and trade associarions, 32 by} partnership between stakeholders

including trade unions

and NGO's

ind

4

by

inter-governmental organization.

Although

the share

of

textile

and apparel industries

in

world

trade

is u.ry l"o* witn

tn"

percentage

of

5,8

in

2001,of the 246 codes

of

conduct,

38

relate

to

the textile

and ciothing industry representing 15.4Vo

of

overall codes

of

conduct. Six

of

these were produced

by

coalitions

of

entities

(thl

multi-stakeholder initiatives) and 32 by _{individual companies- 25 of them from rhe USA (Wick, 2003).} Codes

of

conduct

for

business are not _{new, since businesses have been using them}

_for

_years

_to

_address various

public

concerns such

as

consumer

rights,

product safety,

or

envir"onme","i

_p|"".,i"n.

Some

colporations have developed their own voluntary industry or company codes of conduct, arguing that these

are a substitute for national.or international legal regulation. Voluniary codes tend to

le

timiteO'ii scope and

have vague objectives, and in most cases _{imDlementation is not independently monitored or verified. .fhere} is

a growing _{recognition that voluntary codes are not effective and that regulation}

is required (Ranald, 2002). The codes ofconduct that _{unilaterally declared by individual companies liave been criticised by stakeholders,} especially by trade union _{movements (Barcelona Trade Union Statement, 2003) since they}

_io

_not

include related stakeholders in the process _{of code formation and verification. In the critics of trade union movements}

and some NGO's,

it

is argued that many of the new codes are still public relations exercises and vast majority

of these kinds of codes are not build around _{fundamental intemational labour standards (Kearney}

_&

_Justice,

2003).

Shortly,

codes

of

conduct are

primarily criticized

for

inefficiencies

_{on their}

formation and

implementation process. .

In recent years,

it

is observed that there is a tendency that individual company codes are replaced by multi-stakeholder codes of condrcl, _{which is an agreed code,of conduct that is accompanied by or paft}

of a larger arrangement between companies and NGO's and./or trade union organization. While the former codes were criticized lack of implementation, these codes involve follow-up

u.tiuiti.,

meant to put the code into effect.

3.,Being

Part of

_{Multi-Stakeholder Initiatives as}

_Main

_Facilitator

_of

_{Gtobal Ethical}

Trade:

There are

five

multi-stakeholder initiatives, _{which totally or mainly operate}

_in

_{apparel indusrry as}

lol.lolvs.in'chronological oider: Social Accountability

tnt"*ational-tsAij,

etrrl.ur Trading Initiative (ETI), Fair Labor Association (FLA), _{Fair Wear Foundation}

_lFwFl

_ana

_worte.

_{Rigil;a;;;ii,n't'iln-cl.}

ap"n

from these, although

it

does not have any members fiorn compani".

..

L;ri.i".r

.;;;t;;i;;;,

bi.u"

cto,rr",

lampaign

(c-cCJ

I

also accepted as a multi stakeholder initiative within'this context and considered as the first multi-stakeholder initiative (Wick, 2003).

All

these multi-stakeholder

initiatives

have adopted codes

of

conduct regarding labour conditions in

protucing companies. Although the codes

of

these multi-stakeholder initiatives

haie

slight differences in

details' _{the codes contain common rules, such as no forced labour, no}

discrimination, no child labour, no

excessive

working

hours,

freedom'of

association and the

right to

bargain collectively, health'and safe working _{environment, legally-binding labour contract and payment of a}

_liiing/

legal minimum wage. Unlike the

FLA,

the five _{other code models have very similar set of social standards_. For}

exar-nple, white

6cc, sel,

ETI' FwF

and WRC require

living

wage that provides fqq basic needs, includes

adiitional

discretionary income and takes _{into consideration depende,ltr, inE}

_ruA

_{ebdes asks for only legal minimum wage.}

As mentioned earlier, labor codes

of

conduct are nothing new

in

themselves. From the very beginning

of

industriali4ation some sort

of

regulations against businesies

by

trade unions have emerged.

whai

has ueen particuldrly different sincd the late 1980s

ii

that voluntary _{and self-regulatory corporate codes}

_of

_conduct

have been appeared one

of

the most impbrtant measures to regulate

thi

labour practices of business

(Dae-oup' 2004; 105). Corporate codes

of

conduct have been a

"buizword"

particularly among

NGo,s

seeking more effective strategies for labour rights in _{developing countries on one hand, some of the TNC's has}

been

core element of multi-stakeholder _{initiatives for fgrcing labour rights and better working conditions}

in their suppliers from _{developing countries on the other. TNC;s being part}

_of

_{the multi-stakeholder}

initiatives may

exploit these initiatives

in

order to dominate global. value

.t,uin ur

the

profit-

labour practic" tintuge t as become a core argument based _{on the idea that socially responsible business practices affect}

all the aspects

of

business operations and contribute significantly to corporate productivity and profitability _{by bringing to the}

corporations reduced operating costs, enhanced brand image and repuiation, increased sajes and customer

loyalty, access to _{capital, and overall improved}

_finL:t3l

_{p.-.ro.,run.. rgsR,}

_{ZOo:, BSR, 2002:}

sAI

2003).

This-profit-labor linkage may explain

why

some

TNC's

play

pivotal

role

in

fostering international labor standards _{and setting better}

_working

_conditions

_in

_{theii produ"..,}

_mosrly

_in

developing countries by

involving

in

the multi-stake initiatives and being main actor

in

the "global social partnerrr,ip;,

_1rt"

_term

_of

global social partnership is adopted from the Trade Union Guide to Gl"obalization published in 2001).

4.

Formalisation of

Industrtes

in

Produeing Countries:

Apparel indusrry dominatecl by limited number

of

transnational company and retail chains is also an industry

in

rvhich subcontracting is especially prominent. Very often the design and even the cutting processes are performed quite separately

from

the

sewing process, the later being particularly amenable to intemational subcontracting

(Diiken,

1999). Vast number of developing country firms produce for limited number of _{transnational companies and retail chains}

of developed countries. Textile and apparel industries have been starting poinl to industrialise and integrate to global market for less developed countries like Japan began _{its econornic development by emphasising textile}

and apparel production

in

the I930's and become a model for newcomerr to

th"

gtobat market (Jarnow

&

Dickeron, 1997). Most

of

the governments

in

less developed producing countries assume that textile and

apparel industries are priorities in their countries' development and besides these industries constitutes main source

of

employment and foreign currency

for

these countlies. Therefore,

it

could be argued thar, grear majority

of

national governments in _{less developed countries that are integrated to the globa-i value cha"in}

_of

these industries especially after the 1980's, are unable or unwilling _{to enforce both their own leeislation and}

internationally recognised standards regulating business activities, working conditions and labJur practices

by

considering

full

compliance

with

all

these rules and regulations would negatively affect their national, competitiveness. Under- intense, competition and

price

pressure, producing

compinies

or

suppliers

of

transnationals and__retailers

tend.to

inlo,r.malise

their

operations either deliberafely.

or

compuisory.,Foi

example, about 90Va of all new

job

in Africa were created in the informal sector in the 1990's (Wick. _2003).

Another cxample c:rn be given fronr Turkey, which is one of the leading producer and exporter in the sector.

In

Turkey, while total employment

in

the sector

is

more than 3

million

only 538709 workers representing about 207o of total viorkforce are registered (Kaya, 2003),

At fist

sight, on one hand

it

Seems that these informalisation process work

in

favour of transnationals, which are working under high pressure

for

cost reductions and local responsiveness (Bartlett

_&

_{Ghoshal. l9g9)}

trying

to create a global web

df

value creation activities,

with

different stageS

of

the value chain being dispersed to those _{location around the globe where value added is maximised or where cost of value creation}

are

minimized

(Hill,

2001)-

_'

But on

the

other hand,

it

also generates. important challenges creating opportunities for some and threats

for

_{the others. Therefore trqnqnationals went beyond pR activity in.their} CSR practices aim

to

dominate over the entire value chain including.

In

this context, they require tireir

producei

to

comply

with both

iocal.legisiation

of

producer and

irles

of

the

codes

;;"p;"'J

;y'il;

transnationals concerned. This requirement is functional on the process of formalisation or re-formalisation

of

already infonnalised segment

of

lhe

sector.

For example, Reebok, one

of

the participation company

of

FLA,

monitors their production

unit

in Turkey on ttleir compliance

with

the rules tioth

iefined

in

national legislation and

FLA

code

in

order to assure fonnal business activity and labour practices

in

its

suppliers.

Similar

observation could

be

made

for

other transnational companies,

who

are

the

member

of

rnulti-stakeholder initiatives, like M&S, Next, Levi Strauss, Mothercare etc.

5,

Creation

of

Transnational Regulations

afd

Legal

Framev'ork'

Traninational regulations

set forth rules aiming to regulate activities of TNC's are _{not new. Their roots go back to the Conventions}

_of

the

ILO,

the

OECD

"Guidelines

_of

Multinational Enterprises"

of

1976 revised

in

June 2000.

the

ILO "Tripartite Declaration

of

Principles concerning Multinational Enterprises and Social

policy!

_of

1977 and

number

of

similar

codes

in

the

1970's.

Although

these international instruments.sought

to

protect the

sovereignty of countries by defining the responsibilities of international business (Kearney

&

Juslice, 2003),

they are criticised

by

their lack

of

enforcement and failure to produce positive results

in

practice (Wick,

2003).

As

already mentioned, some

TNC's

especially those participate

in

multi-stakeholder initiative, have been

initiated a kind of new regulation mechanism, which could be defined as a new legal framework in the global activities of TNC's. Participating companies of the _{multi-stakeholder initiatives are liable to put the rules and} codes emposed by the multi-stakeholders into practice in _{their entire supply chain. Therefore these codes are}

binding for all parties both in the _{relalionship between multi-stakeholder initiatives and their member TNC's,} and between TNC's and their suppliers. Since the codes of adapted by a multi-stakeholder initiative are a sorr

of

binding rules

for

the parties concerned, these codes would be considered as

a

sort

of

new regulation mechanism, which transcend national boundaries

within

the framework

of

working conditions

_-J

lubou, practices at global level. The reason why TNC's tend to initiate this sort of practic"Jmay be associated with

their strategy of dominating entire.value chain

will

be discussed

latef

6.

New

Ways

of

Preventing

New

Entranfs.'

Leading companies

in

any market have always tried to prevent potential rivals from entering to their markets as Porter (1979) advocated in his competitive sraregy arguments. But

in

recent years,

it

seems that

TNC's

have began

to

implement new strategy

for

hindering potential entrants and set up proactive and effective influence on their'suppliers.

It

could be said that the

for this aim by TNC's. Trough the intemational sub-contracting system in apparel industry, a great amount

of

income has been transferred to producers in less developed countries.

The income could be considered as the main source of both the capital accumularion for individual suppliers, and wages

for

workers employed by these suppliers. TNC's seems to influence income distribution process

between local employers and enrployees through code of conduct practices indirectly. Prohibition of forcecl

labour, prohibition of child labour, prohibition of discrimination, respect of freedom of association and right

to

bargain collectively, acceptable hours

of

work,

occupational health and safety, and establishment

of

employment relationship are common rules

of

the multi-stakeholder codes

of

conduct. Moreover, living

wages for employees is perquisite for some codes, like ETI's codes. Compliance with these codes inevitably results in increase in production costs of suppliers and decrease in their profit margin.

Another mechanism that TNC's use to prevent potential entrants is that they contact to or supply from high number of producers in order to control growth of local suppliers. For example, the famous retail chain, the Gap, having annual purchasing

of

6.5

billion

Dollars approximately, purchased 200

million

Dollars of

garment products representing only 3Vo of its total purchasing just _{through its Istanbul buying office, that is}

one of _{the biggest buying office in the world, in 2001 ($enkul, 2001). According to the Gap's Isranbul buying} ofhce _{gqneral manager Gtnsan Qetin, Gap has 71 suppliers} in Turkey ($enkul, 2001). But when the actual situation in Turkey is considered this number is higher than the mentioned figure as the suppliers of the Gap

outsource some part

of

their operation

to their

sub-contractors. For example, one

of

the Gap's supqlier, Yegim Tekstil, has tens

of

sub-contractors. As Gap case indicates,

TNC's

purchasing from high numbdr of

'

_{suppliers worldwide instead}

of depending on limited number of suppliers set up a kind of control mechanism .over their suppliers' growth in order,to prevent them from entering to their industry as new competitors.

In this context;

it

is almost impossible for suppliers to enter to the global apparel industry as independent and

new entrants, especially When considered global decline

in

end-product price and severe global competition

in

the industry, that

it

is on ,its own means decrease

in profit

margin

of

suppliers

in

particular. This can be clearly seen from Turkey's the quantity and price index. Between 1994 and 2001, while the quantity index raised

from

100

to

151.1, the price index

fall

down

froni

100

to

85.6, representing 1l.37o increases in quantity, and 5.3Vo decrease in price (Giingdr, 2002).

7.

New

Ways

of

Enlarging Market

Volume:

As

it

has been aiready menrioned, dominating effect of

TNC's

over the

supply chain results

in

increase

in

production costs

of

suppliers mainly

dui

to

code compliance.

Most

of

all

these code

rules

like living

wage, freedom

of

aiiociation,

right

to

bargain

collectively; prohibition of child labour and discrimination etc. leacl to certain amounr of increise in wages

of

employees

in

producing companies on one hand, and impose suppliers to operate on registered base

in

the

sector on the other hand. The implication of this statement is basically that supplier operating in compliance

with both their own national legislation and the codes of conduct imposed by the multi-stakeholder initiatives

pay _{higher wage than the others especially those}

_in

_{the informal part}

_of

_{the sector. All,these mechanisrns} could be considered as new ways

of

enlarging market volume. Informal part

of

the sector where average

wages relatively low may constitute great majority

of

total labour force, 80Vo

in

Turkey case (Kaya, 2003).

This individual

case should not be considered as

a

unique case as Dicken (1999) constantly itates that unregistered employment

is

a common practice especially

in

producing countries particularly

_in

apparel

industry.

At first

sight,

it

could be interpreted as

if

these instruments that lead

to

increase wages operates against

TNC's benefits. But when they are carefully analysed,

it

can also be commended that theie dynamics are new opportunities

for

specifically

TNC's

and

in

general global economy, which would be interpreted as a new instrument

in

overcoming current global crisis

just

like

the Keynesian Policies implied after the Second World War at national levels with a slight difference. The main difference from eariier Keynesian policies may be the fact that the global crisis is tried to overcome by multilateral _{initiatives ut globul level this time}

ratlrer than depending on national governments.

I-lY-y

b.

argued that enlarging market volume is in favour of all the actors in global industry, not only the

TNC's

involved

in

multi-stakeholder initiatives.

It

should be noticed at this point participating

_{TNC's of}

multi-staketrolder initiatives may enforce other TNC's, which have not involved in this

kindof

initiatives yet

adopting

similar

policies

by

also using the power

of

other participating parties

in

the multi-stakeholder

initiatives. One

of

the meaningful examples is _{the campaign against the} GAp Inc. launched bv the Union of

Needletrades, Industrial and Textile Employees

(UMTE)

in the USA and Inrernational

textili

Garmenr and

Leather Workers' Federation (ITGLWF, 2002). GAP has become a member

of ETI

from the besinnine of

2004. Besides some large German retailers like Karstadt-Quella, Otto, Metro and Nekkerman

haie

alrJacly

started social _{model projects related corporate social responsibility, and some large Swedish retailers like}

H&M

and Lindex have been launching similar corporate social responsibility projects with the participation

8.

New Combination

to Diminish

Bargaining

Power

of

Suppliers.'

According

ro

porter's introduction

of

the five-forces framework, the structure

of

an industry determines the state

of

competition

within

that industry and sets the context

for

companies' conduct, namely their strategy: "The collective strength of these forces (Threat of new entrants, bargaining power of suppliers, bargaining power of buyers, treat of substitutes, intensity of rivalry) determines the ultimate profit potential of an industry" (porter, 1980).

In this model competition is determined by the structural conditions of the industry, as outside-in perspecrive. However, Schmalensee (1985) and Rumelt (1991) found that induStry effect was dominated by firm effect as

inside-out perspective. Baden-Fuller and Stopford (1994) showed

that

entrepreneurial organizations in tnature industries generates profits higher than average industry profit by creating innovations that solve old dilemmas like low cost and diversity, quality and productivity, speed and

flexibility

The fact that there are vast numbers of small and medium size enterprises producing for international market

in apparel industry provides dominating TNC's a Fruitful ground to diminish bargaining power

of

suppliers.

While TNC's have internationalised their production opeiations they have been using a variety

of

methods, notably international subcontracting, licensing and other forms of _{non-equity intemational investment, which} do not necessarily involve equity participation (Dicken,1999). Especially major inremational retail chains

and buying groups exert

enormous purchasing

power and

Ieverage

over

clcithing manufacturer as international buying operations are highly concentrated while the production and retailing-ofclothing may be

fragmented in individual markets (Dicken, 1999).

It,seems that dominating companies have found a new and effective combination to diminish bargaining power of supplier with the inside-out perspective.

It

is observed that the importance of buying office has been

increasing in purchasing practices of TNC's particularly in appalel industry. For example, abo,tt20Vo of total exportation

of

Turkey (Yrldrnm, 2002)

in

2001

and

about 33Vo

of

Turkish apparel exportation realised through only foreign buying offices

in

2002 (Qorlu

&

Ozer, 2003).Increasing number of TNC's have been

purchasing their goods through buying offices located in different part

of

the world., In addition to this, like the GAP.case in Turkey, each buying office located in a certain country controls a number of producers both

in

their

location and surroundings.

For

example, Istanbul buying

office

of

the

GAP

controls Morocco,

Tunisia, Egypt, Malta, Romania, Bulgaria, Turkmenistan as

well

as Turkey, and

is

integrated

with

main

buying

office

in

Hong Kong ($enkul, 2001).

In

an industry where demand dominated

by

the purchasing policies of the major multiple retailing chains (Dicken, _{1999) and products manufactured by vast number of}

suppliers,

buying

offices have

vital

roles

in

diminishing bargaining power

of

suppliers.

Buying

offices effectively function in coping with the current challenges of the combination of low cost, quality; variety and

speed enabling

TNC's to

source their inputs

with

required quality and variety at

lowei

cosi

flexibly

and

simultaneously.

CONCLUSION

Today's battle among leading and dominating firms are competing for access to and control over comperence and standards (Hamel

&

Prahalad, 1994) with _{fine-tuned strategic architecture that establishes objectives for} objectives competence

building,

and

is

a tool

for

communicating

with

costumers and, other external constituents (Prahalad

&

Hamel, 1990).

TNC's

in

their effort to gain advantageous position

in

pre-market competition

for

the future (Hamel

&

Prahalad, 1994; Prahalad

&

Hamel, 1990; Prahalad

_&

Hamel, 1994)

seems

to.face with

the challenge

in

changing

their

strategic architecture

in

order

to

create sustained competitive advantage

in

the last

era.

In

recent years

it

is

witnessed that the competitive advantage of

TNC's is

increasingly based on the combination

of

price, volume, quality, speed, mais customisation and

dominating

of

global _{value chain, and especially the changes}

_in

_{strategic architecture}

_{of TNC's}

_{are taking}

place based mainly on dominating of _{global value chain. We observed eight new patterns of the dominatin!}

of

global value

chain

in

the changing strategic architecfure

of

TNC's

in

the new

era

of

competitiv!

advantage,

which are the new

implementations

of

corporate social responsibility,

new

ways

of

code formation and implementation, being

part

of

Multi-Stakeholder Initiatives as main

facilitatoi

of

Global

Ethical Trade, formalisation

of

industries

in

producing countries, creation

of

transnational resulations and legal framework, new ways

of

preventing new entrants, new ways

of

enlarging market

volime,

and new combination to diminish bargaining power of suppliers.

All

these pattbms of being main dominator of global

value chain

is

believed

to

be fourth

"global

leverage

point"

that

will

enable

TNC's

to

gain sustainable competitive advantage that is almost impossible to be copied.

REFERENCES

r

Baden-Fuller, C. and Stopford,

i.

M.

_{(1994), Rejuvenating the Marure Business, London; Intemational}

a a

o

Barcelona Trade Union Statement. (2003), Trade Sector, Barcelona, 16-18 June.

Union Meeting of the Textile-Clothing Mediterranean

Bartlett,

C.A.

and Ghoshal,

S.

(1989), Managing across Borders, Harvard Business School press.

Boston.

Business

for

Social Responsibility, (2003), Business for _{Social Responsibility: Advancing Leadership in}

Responsible Business Pracrices, hrrp://wu,w.bsr.org/clientFiles//llsi. lead.rrril.

Business

for

Social

Responsibility,

(2002), Overview

_of

Corporate

Social

Responsibility, http://www.bsr.ors/BS RResoLrrces/lssueBreifDetail.cf'l'i Docu'nentlD=4gg09

CCC _{Terminology Guide, (2003), www.cleanclothes.or.q/ftp/Monitorinq Ver.ificatiorr}

_Ternr

_guide.nclf Costello, K.W. (2000), Do Codes of Conduct Achieve Their Objective?, The Electricity

louiffi.SS-66.

Qorlu'

M.

and Ozer, Z. (2003), Vergiye Tabi Tutulan Yabancr _{Ahm Ofisleri Aynlma yolunda (Foreign} Buying Offices on the verge of Leaving), Diinya,

l2

May, pp.6.

Dae-oup,

C.

(2004), Demystifying Corporate Codes

of

Conduct: Towards

Critical

Engagement With TNC's. P, Tiwari, C. Dae-oup and E. Shepherd (Eds.). A Critical Guide to Corporate CoJes of Conduct: Voices from the South, Asia Monitor _{Resource Centre, Hong Kong, pp. 103_l l7-.}

Digken,

P.

(1999), Global

Shift:

Transforming

_{the World}

Economy,

Paul

Chapman publishing, Wiltshire.

lfllick,

T. and tlockerts,

K. (2002),

Beyond the Business Case for Corporare Sustainability

_,

Business

Strategy and the Environment,

l

l,

pp.l30-141.

Frankental, P. (2001).,Corporate Social Responsibility-

A

PR Invention?, Corporate Communications: An International

Joumal,

_{6(1 ),} pp.l8-23.

Giingcir,

T.

(2002), Ihracatta

Miktar

Encleksi

ile

Fiyat Endeksi Arasrndaki Fark

Agr;yor

(The

Gap

between the Quantity and Price Index has been Enlargin g), Dilnya,24 September, pp.2.

Hamel,

G.

and Prahalad,

C. K.

(1994), Competing

for

the Future, Harvard Business Scholi press,

Boston.

Handelman,

J'

M.

and Arnold, S.J. (1999), The Role

of

Marketing Actions

with

a Social Dimension: Appeals to the Institutional Environment, Journal of Marketing,63, pp.33_4g.

Hill'

C.W. (2001), International Business: Competing

in

the Global Marketplace,

Irwin-

McGraw-Hill,

Boston.

ITGLWF.

(2002), International Campaign

for

Global Justice

for

Textiles,

Clothing

and Foorwear Workers, 21 November 2002.

Jarnow, J. and Dickeron, K. G. (1997),Inside the Fashion Business,

Menill,

colombos, ohio.

Kaya, E. S. (2003), Turkish Textile _{and Garment Industry, Trade Union Meering of the Textile-Clothing}

Meditenanean Sector, Barcelona, 16-18 June.

Keamey, N' and Justice, D. _{(2003), The New Codes of Conduct: Some Questions and Answers for Trade}

Unionist.

I'

Wick

(Ed.),

Workers'Tool or PR Ploy?: A Guide to Codes of Intemational Labour practice, Friedrich-Ebert-Stiftung and SUDWIND Instirute, Bonn, pp.93- I 14.

Keirnan,

M.

(1993).

The

New

Strategic Architecture: Learning

to

Compete

in

The

Twenty-First Century, Academy of Management Executive,T(l).

a

a

Kolk,

A.

and Van Tulder, R. (2002), The Effectiveness of self-regulation: Corporate Codes of Conduct and Child Labour, European Management Joumal, 20(3), pp. 260-27

l.

OECD Working Party of Trade Committee, (2000), Codes of Corporate Conducr: An Expanded Review

of Their Contents, 7 June 2000.

Porter, M.E. (1979), Horv Competitive Forces Shape Strategyl Harvard Businbss Review, March-April.

Porter, M.E. (1980), Competitive Strategy: Techniques

for

Analysing Industries and Competirors, Free Press.

Prahalad,

C.K,

and Hamel,

G.

(1990), The Core Competence

of

the Corporation,

Haryard

Busir1ess

Review, May-June.

Prahalad, C.K. and Hamel, G. (1994), Strategy as a Field of Srudy: Why Search

for

a New paradigm?, S t rat e gic M anagement. J oumal, | 5, pp.5- I 6.

Ranald,

P.

(2002),

Global

Corporation and Human Rights:

The

Regulatory Debate

in

Australia, Co rporat e Environmental Strategy, 9(3), pp.243-250.

Rumelt, R. (1991), How Much Does Industry'Matter, Strategic Management Journal, 12 (3),

pp.l67-I 68.

Schmalensee, R. (1985), Do Markets Differ Much?, American Economic Review,75, pp.34l-351. Sen, S. and Bhattacharya, C.B. (2001), Does Doing Good Always Lead

to Doing

Better? Consumer Reactions to corporate Social Responsibility, Joumal of Marketing Research,38 (May), pp.225-243. Senkul,

M.

(2001),

Ttirkiye igin

2003 qok Geg. (2003

is

too late

for

Turkey), Finanssal Forum,

l0

December,

pp.7.

I

Social

Accountability International,

(2003), Social

Accountability International

and

SA8000. http://www.cepaa. olq/Overview.cloc

A

Trade

Union

Guide

to

Globalisation, (ZOOt), International Confederation

of

Free Trade Unions, Brussels.

r

Wick,

L

(2003), Workers'

Tool

or

PR Ploy?:

A

Guide

to

Codes

of

International Labour Pracrice.

Friedrich-Ebert.stiftung and SUDWIND Institute, Bonn.

.

WTO, (2003), wwrv.wto.ors/english/r'es e/statis e.its03 toq e.htm.

o

Ytldtnm,

G. (2002), Ihracatrn Yiizde 2O'sini Yabancr Ofisler Yapryor (Forign Offices Realise 20Vo

of

Exportation), Diinya,

l5

October, pp. 8.

a