Transcript Slide 1

GOING AGAINST THE GRAIN:
THE DEMATURITY OF THE
EUROPEAN TEXTILE INDUSTRY
1Fianti
Noor, 2Prof. Paul Smith,
1,2Natalie Stingelin-Stutzmann & 1Stuart Peters
1School
of Engineering & Materials Science
Queen Mary-University of London (UK)
2Department of Materials, Eidgenössische Technische Hochschule Zürich
(Switzerland)
BACKGROUND
MULTI FIBRE AGREMENTS (MFAs)
• The European textile industry has been the object of
industrial transformation since the 1970’s under MFA
– Protection
– Restructuring and modernisation
• Result:
– Improvement of productivity
– Continuous decline of employment
– Declining market
Productivity
120000
100000
Turnover per employee
Euro
80000
60000
40000
20000
02
20
00
20
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
19
80
0
1980-1994: EU-12 (1980-85: reconstructed data for Greece, Spain and Portugal),
1995-2003: EU-15 (Source: Euratex, 2004)
Employment
2,000,000
1,750,000
1,250,000
1,000,000
750,000
500,000
250,000
Textile
Clothing
0
19
73
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
84
19
94
19
99
20
00
20
01
20
02
20
04
20
05
people employed
1,500,000
Employment
Clothing
Textiles
people employed (000)
300
250
200
150
100
Italy
France
Germany
UK
50
0
1995
1996
1997
1998
1999
2000
2001
2002
POST MFAs
• Abolishment of MFA (1 January 2005)
• European Technology Platform for the Future of Textiles
and Clothing (2004)
– Radical technological innovation
– Improve long-term competitiveness of the sector
– to reinforce the position of Europe as a leading global
player
Technology Platform
Industrial Reconfiguration
Chemicals
(synthetic fibres,
finishing
substances, etc)
Textile
equipments
Agriculture
(cotton, wool,
silk)
Intelligent
system of
production
Textile Industry
Design
Advanced
materials,
including micronano materials
and
technologies
Automotive,
aerospace,
aviation
industries
Spinning
Weaving
Knitting
Finishing
Micro, flexible
electronics
Users/Consumers
Army and
armour
industries
Existing supply chain
Sports and
medicals
Emerging supply
chain
geosynthetics
etc
Production processes subject to
discontinuities
Potential Problems
• An old industry with deeply-embedded routines
• Unfavourable structure
– 95% are SMEs with limited research capacity
• Supplier-led innovation sector (Pavitt, 1984)
• Require paradigm change
– technologies, production processes, understanding market
demand, distribution systems, organisations and management
• Growing competition from LDCs even for advanced products
• Rising complexity of process and product innovations
RESEARCH QUESTION
Ferment Phase
Mature Phase
?
• Standardized products,
production ystems,
technologies,
organisational routines
• Customised products
• Under-developed production
systems and organisational
routines
• Mass markets
•Employing emerging
technologies
• Declining market due to
intense competition
•Niche and emerging markets
HOW
FACTORS
• Cost-based competition
• Largely involve process
innovations
Technology
Internal
Market
External
• Centralised organisation
Organisation
•Performance/functional-based
competition
•Largely involve production
innovations
•Decentrelised organisation
THEORETICAL FRAMEWORK
Industrial Maturity-Dematurity
FrameworkAbernathy et al (1978, 1983)
• Maturity is inevitable in the process of industrial evolution
• Key aspects of the ‘maturity trap’ are:
– cost reduction
– economies of scale
– Static or declining market share
– standardization
Maturity-Dematurity Framework
• Maturity can be arrested and, for some circumstances, reversed (dematurity).
• De-maturity has to be pioneered by ” innovations that change an
industry’s basis of competition at the same time that it disrupts
established production competence, marketing and distribution
systems, capital equipment, organisational structures and the skills
of both managers and workers” (Abernathy et al, 1983, p. 109).
• The search for new concepts typically works its way back up through
the same design hierarchy established by the evolution towards
maturity which preceded it.
Evolution of Technology Transilience
Impact on market linkages
High
Niche creation phase
De-maturity
Low
Architectural phase
High
Maturity
Impact on
production
system
De-maturity
Regular phase
Revolutionary phase
Low
Abernathy et al (1983)
Dynamic Capabilities Framework
by Teece et al. (1994, 1997); Teece (1986, 2007)
• An attempt to unveil the foundations of long-run enterprise
success in rapid environmental change
• The firm’s ability to build, integrate and reconfigure internal and
external assets to address rapidly changing environments
• DC origins:
– Routinized behaviour (e.g. NPD, TQC)
– Creative and differentiated entrepreneurial acts
Sensing and seizing opportunities through asset
and capacity reconfiguration
Dynamic Capabilities Framework
• Dynamic capability defines the course of evolution of a
firm as a consequence of chosen long-term competence
development trajectory
• Firm’s asset positions determine its competitive
advantage at any point in time and its evolutionary path
constrains the types of industrial activities in which a firm
can be competitive
• Organizational processes transform the capabilities of
the firm over time.
Framework Discussion
• Abernathy et al. (1978, 1983)
– Built on the evolution of technology and market at industry level
• Teece (1986, 2007) and Teece et al. (1994, 1997)
– A firm level study built on evolutionary and behavioural
economics combined with creative and differentiated
entrepreneurial acts
• Hypotheses
– De-maturity at firm level is a result of well-executed, wellorganised dynamic capabilities
– Maturity-trap is a consequence of under-developed dynamic
capabilities
METHODOLOGY
Approach
• In-depth, longitudinal study to investigate the phenomena
of maturity, de-maturity and maturity- trap in the textile
industry in Europe
• Multiple cases study
• To address “how” question:
– Firm level study
– Long-lived firms (over 125 years)
• To address “factor” question:
– Firm-specific and country-specific
• Comparative analysis
Case Study
• Italy – Marzotto, S.p.A
• The Netherlands – Ten Cate, NV
• Germany – Freudenberg Group
• UK – Hainsworth, Ltd.
TECHNICAL EVOLUTION
Process technology
Working hours
per kg yarn
1000
Hand loom
Development towards maturity
Fly shuttle
100
Spinn.wheel
Working hours
per 100m cloth
1000
Mech loom
Automatic, standardized
machinery
Multiloom weaving
Weaving
100
Require less skilled labour
Hargreaves
Northrop pirn changer
10
10
Spinning jenny
Spinning
Automatic loom
Mule
Projectile
Self actor
1
Jet
E.I Ring frame
1
Ring frame
Auto ring frame
0,1
0,1
OE-rotor spinning
Weaving and spinning technology-OECD (2004)
0,01
1750
0,01
1800
1850
1900
year
1950
2000
Process technology
Working hours
per kg yarn
Working hours
per 100 m cloth
Weaving
Automatic
loom
Projectile
1
Jet
Spinning
0,1
1
Trend in 1900-80
Ring frame
0,1
Auto ring
frame
OE-rotor
spinning
0,01
Trend in 1900-80
Predicted
innovative
pattern
0,01
Trend in 195080
Trend last 2 observation
0,001
1925
0,001
1950
1975
2000
2025
Weaving and spinning technology-future trend (OECD, 2004)
Product Technology
Consumer Technical
Textiles
Textiles
1940’s
Production
technology
Fibre
technology
Functional
Textiles
1960’s
Multifunctional Smart/Intelligent
Textiles
Textiles
1980’s
Processing
technology
2000’s
Finishing Advanced
technology materials
and hybrid
technology
Smart production
THE EVOLUTION OF THE EU TEXTILE
INDUSTRY
• Each country appears to follow unique pattern of
industrial evolution
• Therefore, the evolution is examined on country basis
CASE STUDY 1:
ITALY and MARZOTTO, S.p.A
Statistics
Italy 31%
Italy31.39%
Others EU
69%
Employment 2004
Others EU
68.61%
Turnover 2004
Statistics
70
620
60
600
580
bn Euros
50
560
40
540
30
520
20
500
10
480
0
460
Employment (000)
Textile & Clothing Sector
2000 2001 2002 2003 2004 2005 2006
Turnov er
Production
Imports
Employ ment
Exports
Sistema Moda Italia
Statistics
104
102
Euro
100
98
96
94
Productivity - Italy
92
Europe
90
2001
2002
2003
2004
Year
% of turnover 2006
2005
2006
Statistics: Technical Textiles
15.00%
12.50%
10.00%
12.50%
12.34%
3.15%
2.96%
12.34%
7.50%
5.00%
2.83%
Italy vs Europe
Italy vs World
2.50%
0.00%
2000
2005
2010
76%
74%
80%
70%
63%
61%
55%
60%
50%
39%
40%
30%
21%
20%
10%
3%
3%
0%
Agrotech Meditech Hometech Buildtech Indurtech Mobiltech
&
Geotech
Clotech
Sportech
Others
Innovative Characters
• Traditionally weak in R&D, high-tech industries including the
chemical industry
• R&D is not the main source of innovation in the textile industry but
the purchase of machinery, design, and customer needs
• Local/national equipment suppliers as the source of innovation
• Competitiveness lies on its disintegrated structure, cooperate in
networked clusters, mainly locally situated, to form flexible
specialised firms
Evolution towards maturity
Maturity
Year
1900’s-1920’s
Trend in the
Italian
textile
industry
Adopt ring frame
faster than other
European
countries
Market
Change
Growing market
as a result of
unification of Italy
(1860)
1930’s-1940’s
•Local couturiers began
to gain market as French
and English couture
were unavailable during
the war
•Begin international
market expansion
Competitive
Change
Structural
Change
Increasing
number of
vertically
integrated firms
A few large firms emerge
as a result of mergers
and acquisition
1950’s – 1960’s
1970’s – 1980’s
1990’s – 2000’s
•The height of synthetic
fibre production
•Adopt mass-production
technique imported from
the US as a part of Marshall
Plan
•A leapt on productivity
•Inflation due to a sharp
increase of oil price and
labour costs
•Reach the highest
productivity in Europe
but cause over capacity
•Extensive restructuring
following MFAs
•A further increase in
wages
•Continuous decline of
production,
employment, and
turnover
•Abolishment of MFA
•Export textiles to the US
•The beginning of Italian
luxury fashion industry
sponsored by large textile
firms
•The rise of Italian luxury
fashion
•Market expansion for
ready to wear to the US
•Crisis hits due to MFA
& competition from the
emerging countries
•Expansion to emerging
markets (India, China,
Russia)
•Fast fashion
The beginning of
competitive crises due to
raising labour costs,
obsolete plants and
competition from the Far
East
A wave of merger and
acquisition
•A wave of merger and
acquisition in the luxury
fashion industry
•Relocation to North
African and Eastern
Europe
•Disintegration of structure
•Declining employment
•Forward integration to
clothing manufacturing
•Declining employment
•A decline in number of
firms and employment
•A shift in power
towards buyers
•An increase in
concentration
Maturity-trap
• Transient economic misfortune
– Problems can be solved by re-enforcing the existing
basis of competition i.e. speed of production and
flexibility
• Did not see the decline as a consequence of permanent
changes in demand, technology and competition
• The label “Made in Italy” will remain the industry’s unique
competitiveness despite growing production relocation
and OPT
Maturity-trap
• Local search & local preferences
– Business diversification to clothing and fashion
brands
– Favour local textile equipment makers as the main
source of innovation
 Deter participation in global innovation networks
• Favour process innovation than product innovation
• Less developed technical textile markets among other
textile industry in Europe
MARZOTTO, S.p.A
• The largest textile manufacturer in Italy
• Founded in 1836 in Valdagno, Veneto region as a wool
yarn and fabric manufacturer
• Expanded the business to flax and linen and yarns
fabrics through acquisition in the 1980’s
• Integrated forward to clothing and luxury brands in the
1980’s and 1990’s
• Demerged clothing business in 2005, and subsequently
concentrate on yarn and textile manufacturing
18
66
19
2
19 1
7
19 6
86
19
9
19 7
9
19 8
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Persons
14000
12000
Employment
Net Profit
10000
50
8000
40
6000
30
4000
20
2000
10
0
0
Million Euros
Performance
70
60
Innovativeness
• Amongst the first companies to adopt mass production technique in
the 1950’s in Italy
• The first textile firm in Italy that adopted “made in Italy” computer,
ELFA 9003
• Amongst the first textile firms that integrated forward to clothing
sector
• Early adopter of the latest spinning and weaving technology
• Relatively inactive in the EU research programmes
Patent
3
Product (design)
2
Product (technical innovation)
Process
1
7
0
1961- 1966- 1971- 1976- 1981- 1986- 1991- 1996- 2001- 20061965 1970 1975 1980 1985 1990 1995 2000 2005 2010
CASE STUDY 2:
THE NETHERLANDS / TEN CATE, NV
Statistics
NL 1.3%
NL 2.1%
Others EU
98.70%
Employment 2004
Others EU
97.9%
Turnover 2004
Statistics
180000
160000
Leather, 10%
140000
Clothing ,
30%
Euro
120000
100000
Textile, 60%
60000
Productivity-Netherlands
40000
Productivity-Italy
80000
20000
0
2001
2002
2003
Year
2004
Innovative Characters
• Open for international collaboration
• Opposition (together with Germany and Denmark) to the EU
industrial protection policy
• Concentrated R&D expenditure (DSM, Akzo-Nobel, Philips,
Shell, Unilever)
• The textile industry contributes 0.34 percent of total industry
R&D expenditure
• Chemical and equipment industries are the major source of
information concerning innovation trends
• Textile contributes 60% of the industry population with
technical textile producers being the most innovative ones.
Evolution towards maturity
1200
Textile Industry
Turnover
Total Manufacturing
800
600
400
100
Employment
1000
120
80
Textile Industry
60
Total Manufacturing
40
200
20
0
0
1956 1960 1965 1970 1975 1980 1985 1987 1990 1991
1956 1958 1960 1965 1968 1970 1975 1980 1983 1985 1990 1991
Evolution towards maturity
maturity
Year
1900’s-1920’s
Trend in the
Italian
textile
industry
Preferential
market agreement
with the East
Indies (Indonesia)
was terminated in
1870.
Market
Change
Losing market
protectionism in
the Dutch colony
of East Indies
Competitive
Change
Begin to compete
with Japan over
markets in
Indonesia
Structural
Change
1930’s-1940’s
Dematurity?
1950’s – 1960’s
1970’s – 1980’s
1990’s – 2000’s
•Increased labour costs
•Early rapid decline
•Rapid decline continues
•Extensive restructuring
following MFAs
•Economic slow down
2001-2003
•MFA is abolished in
2005
•Severe decline in
Indonesian market share
•Growing domestic and
international markets
•Losing colonial markets
•A number of companies
begin to shift to interior
textiles and consumer
technical textiles
•Growing market in
technical textiles
•Exploitation of high
added value technical
textiles
Intensified competition
with Japan and Britain
over Indonesian markets
•Begin a rapid decline due
to uncompetitive labour
costs
•Production relocation to
Belgium for low-mid
segments
•A wave of merger and
acquisition
•Relocation to North
America and Eastern
Europe
•Production relocation for
high segment markets
•Merger and acquisition
continues
•Clothing production
largely disappears
•Increased concentration,
the most concentrated in
Europe up to 1980
•Decreased employment
and increased labour costs
Company closures
•Textile companies
dominate the industry
(60%)
•Bipolarity of structure
•Agglomeration of
retailers
Ten Cate, NV
• One of the largest textile manufacturers in the country
• H. Ten Cate Hzn & Co was established as a linen merchant in 1704
in Almelo, Twente region
• Export to the Dutch colonies was the primary markets
• It has undergone two major transitions which transform the company
from a linen to a high tech textile manufacturer for technical uses
• The third transition is underway which may disrupt the existing
production competence and markets
50
4000
45
3500
40
35
3000
30
2500
25
2000
20
1500
1000
500
Employment
15
10
Net Profit
0
5
0
Million Euros
4500
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Employment
Performance
Innovativeness
• Performing distant search
• Setting industrial trend to shift to higher added value textiles
• Performing path breaking change & continuous strategic alignment
involving:
– emerging technologies and markets,
– a combination of internal and external assets to exploit
opportunities
• Active in the EU R&D programmes
• Engage with university research centres
• Fundamentally entrepreneurial by which it shapes business
ecosystems
Technology & market transition
2004
EU Framework Digitex
2008
Acquire Xennia Tech
Functional
digital printing
1987
Acquire Thiolon
Artificial grass
2000, 2001
Acquire Nymplex, Polyloom
Carpet backing
1990
Establish TC Armour
2007, 2008
Acquire Mattex Leisure Industry, Edel Grass
Artificial grass
1998.1999
Buy Ares, Bryte Technology
2007, 2008
Acquire Phoenixx, Roshield, Composix, YLA & CCS
Armour
1986
Acquire Bosta BV (Mega Valves)
1983
Acquire Plasticum BV
1994
Buy Synbra
2005, 2006
Divest Mega Valves, Plasticum, Synbra
Technical
Components
1974
Acquire Nicolon BV
Geotextles
1991
Acquire Mirafi – TC Nicolon USA
1973
1973 License windsurfer
Product development from windsurfing rig & board to outdoor fabrics. Building capability in composites for windsurfing board.
Sport/Outdoor
1970
Dyeing selling
Nomex
1974
Establish Hellenic SA
2004
Acquire Southern Mills
1998
Close down Atlantic Mills; Sell Hellenic SA
1974-1999
1964
JV with Blijdenstijn Willink NV (Permess)
Denim
2005
Divest Permess
1964-2005. From consumer interlinings to industrial filtration and non-woven fabrics
1941
Buy JP Lorey Weaving Mills
Industrial
production
techniques
Textile
merchants
1996
Collaboration with
Southern Mills, Inc
Continuous product and technology development
Protective
clothing
Interlinings
2005
Acquire Polyfelt, Inc
1957
Merger with KSW
Mass production technique 1841-1980's; vertically integrated since 1957
Flexible manufacturing system 1980's -
1704 -1841
1700
1840
1860
1880
1900
1920
1940
1960
1980
2000
2001
2002
2003
2004
2005
2006
Path breaking change
and continuous alignment
•
Opportunity identification in emerging markets
•
Rapid learning process
– Technology, market, distribution system, consumers
– Recombination of assets/factors of production
•
Development
– Internal development
– Actively engage with national, regional and EU research programmes
– Acquisition to complement or reinforce internal technical
capability/capacity
•
Establishment
– Market expansion and product/technology refinement
•
Divestment
– Declining businesses
Patent
16
Printing components
Textile treatment
Sport/outdoor
Procedures & devices
Grass
Composites
Plastics
Textiles
Advanced textiles
14
12
10
8
6
4
2
0
1923
1967
1972
1977
1982
1987
1992
1997
2002
2007
DISCUSSION
Industrial maturity
• In terms of process technology, maturity began in the late 19th
century
• Industrial maturity occurs in different periods in two countries
• Process towards maturity in two different countries appears to
follow different evolutionary paths:
–
–
–
–
–
–
Different primary markets
Different industry structures
Different competitive environment
Different opportunities
Different trade policies (liberal and protectionism)
Different historical background
Maturity-trap
• Active inertia
Suppliers
Customers
• Local search & local
preferences
Active inertia
Local search
• Process innovation
by adopting the
latest equipment
Marzotto
• Existing markets
Distributors
Competitors
• Acquisitions to
expand capacity
and customer base
• A rather static
competence
TEXTILE CLOTHING INDUSTRY
Marzotto-competence statics
1836
Yarns and textile
production
and technology
1980
Cloth making
production
1993: Relocation and
rationalisation
1985
2005
Luxury brands
High quality
yarns and textile
production
and technology
2005:
Demerger
Maturity trap
Will continue to remain
in the same markets,
Expansion to emerging
Economies i.e.
China, Russia, India
De-maturity
New materials
Emerging markets
Synthetic fibres
Protective clothing
High performance fiibres
Geotextiles
Composites
Technical components
Advanced, nano materials
Advanced chemicals
Customers
Suppliers
Armour
Artificial grass
Ten Cate
Emerging processing
technology
Non woven
Distributors
Entrepreneurial,
dynamic capabilities
Competitors
Functional digital printing
New Distributors
TEXTILE-CLOTHING INDUSTRY
Creating new industrial boundaries
New Competitors
Ten Cate-competence dynamics
1841
1964
Textile production
and technology
Technical textile
technology and
chemical processes
Dematurity
1974
Polymers
1987
Composite
materials
Developments on core
concept, engaging emerging
technologies, potentially disrupt
existing production system and
market-technology linkages
2004
Functional
materials
Evolution of Technology Transilience
Impact on market linkages
Niche creation
phase
Architectural
phase
High
De-maturity
Marzotto
Ten Cate
Ten Cate
Low
Marzotto
Regular phase
High
Maturity
De-maturity
Ten Cate
Ten Cate
Low
Revolutionary
phase
Impact on
production
system
CONCLUSION
• The EU efforts to de-mature the textile industry through
technological innovation by supporting revolutionary R&D
programmes should be accompanied by social innovation
• Combination of the two types of innovation are fundamental to break
away from maturity-trap
• Advances in the textile industry have to be complemented by
advances in supplier industries and market industries
• Firms have to develop dynamic capabilities that are fundamentally
entrepreneurial in the process de-maturity
–
–
–
–
Distant search; international networks
Path breaking changes & continuous strategic allignment
Recombination of assets & cospecialisation
Constant change, innovation as a moving target