GOING AGAINST THE GRAIN : THE DEMATURITY OF THE EUROPEAN TEXTILE INDUSTRY 1 Fianti Noor, 2 Prof....
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Transcript of GOING AGAINST THE GRAIN : THE DEMATURITY OF THE EUROPEAN TEXTILE INDUSTRY 1 Fianti Noor, 2 Prof....
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 ScienceQueen 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
0
20000
40000
60000
80000
100000
120000
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Eu
ro
Turnover per employee
1980-1994: EU-12 (1980-85: reconstructed data for Greece, Spain and Portugal),
1995-2003: EU-15 (Source: Euratex, 2004)
0
250,000
500,000
750,000
1,000,000
1,250,000
1,500,000
1,750,000
2,000,000
1973
1974
1975
1976
1977
1978
1979
1980
1984
1994
1999
2000
2001
2002
2004
2005
peo
ple
em
plo
yed
Textile Clothing
Employment
0
50
100
150
200
250
300
350
400
1995 1996 1997 1998 1999 2000 2001 2002
ItalyFranceGermanyUK
0
50
100
150
200
250
300
1995 1996 1997 1998 1999 2000 2001 2002
peo
ple
em
plo
yed
(0
00)
ItalyFranceGermanyUK
Textiles Clothing
Employment
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
Spinning Weaving Knitting Finishing
Users/Consumers
Chemicals (synthetic fibres,
finishing substances, etc)
Agriculture (cotton, wool,
silk)
Advanced materials,
including micro-nano materials
and technologies
Micro, flexible electronics
Automotive, aerospace,
aviation industries
geosyntheticsSports and medicals
Army and armour
industriesetc
Textile Industry
Existing supply chainEmerging supply
chainProduction processes subject to
discontinuities
Design
Textile equipments
Intelligent system of production
Industrial Reconfiguration
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
Mature Phase Ferment Phase
• Standardized products, production ystems, technologies, organisational routines
• Mass markets
• Declining market due to intense competition
• Cost-based competition• Largely involve process innovations
• Centralised organisation
• Customised products
• Under-developed production systems and organisational routines
•Employing emerging technologies
•Niche and emerging markets
•Performance/functional-based competition
•Largely involve production innovations
•Decentrelised organisation
?HOW FACTORS
Technology
Market
Organisation
Internal
External
THEORETICAL FRAMEWORK
• 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
Industrial Maturity-Dematurity FrameworkAbernathy et al (1978, 1983)
• Maturity can be arrested and, for some circumstances, reversed (de-maturity).
• 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.
Maturity-Dematurity Framework
Evolution of Technology Transilience
High
High
Low
LowImpact on production
system
Impact on market linkages
De-maturity
De-maturity
Maturity
Architectural phaseNiche creation phase
Revolutionary phaseRegular phase
Abernathy et al (1983)
Dynamic Capabilities Framework
• 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
by Teece et al. (1994, 1997); Teece (1986, 2007)
• 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.
Dynamic Capabilities Framework
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, well-
organised 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
Weaving and spinning technology-OECD (2004)
year
OE-rotor spinning
Auto ring frame
Ring frameE.I Ring frame
Jet
Projectile
Automatic loom
Fly shuttle
Self actor
Mule
Spinning jenny
Hargreaves
1750 1800 1850 1900 1950 2000
0,01
0,1
1
10
100
1000
0,01
0,1
1
10
100
1000Hand loom
Mech loom
Multiloom weaving
Northrop pirn changer
Development towards maturity
Automatic, standardized machinery
Require less skilled labour
Weaving
Spinning
Spinn.wheelSpinn.wheel
Working hours per 100m cloth
Working hours per kg yarn
Process technology
Process technology
Trend in 1950-80
1925 1950 1975 2000 2025
0,001
0,01
0,1
1
0,001
0,01
0,1
1
Ring frame
Auto ring frame
OE-rotor spinning
Trend in 1900-80
Trend last 2 observation
Trend in 1900-80
Automatic loom
ProjectileJet
Working hoursper kg yarn
Weaving and spinning technology-future trend (OECD, 2004)
Weaving
Spinning
Predicted innovative pattern
Working hours per 100 m cloth
Product Technology
1940’s 1960’s 1980’s 2000’s
Consumer Textiles
Technical Textiles
Functional Textiles
Multifunctional Textiles
Smart/Intelligent Textiles
Fibre technology
Processing technology
Finishing technology
Production technology
Advanced 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
Italy 31%
Others EU 69%
Italy31.39%
Others EU 68.61%
Turnover 2004
Employment 2004
Statistics
Statistics
0
10
20
30
40
50
60
70
2000 2001 2002 2003 2004 2005 2006
bn
Eu
ros
460
480
500
520
540
560
580
600
620
Em
plo
ymen
t (0
00)
Turnov er Production Exports
Imports Employ mentSistema Moda Italia
Textile & Clothing Sector
% of turnover 2006
90
92
94
96
98
100
102
104
2001 2002 2003 2004 2005 2006
Year
Eur
o
Productivity - Italy
Europe
Statistics
3%
61%
74%
21%
55%
39%
76%
63%
3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Agrotech&
Geotech
Meditech Hometech Buildtech Indurtech Mobiltech Clotech Sportech Others
Statistics: Technical Textiles
12.50% 12.34% 12.34%
2.83% 2.96% 3.15%
0.00%
2.50%
5.00%
7.50%
10.00%
12.50%
15.00%
2000 2005 2010
Italy vs Europe
Italy vs World
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
Trend in the Italian textile industry
Adopt ring frame faster than other European countries
•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
Market Change
Growing market as a result of unification of Italy (1860)
•Local couturiers began to gain market as French and English couture were unavailable during the war•Begin international market expansion
•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
Competitive Change
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
Structural Change
Increasing number of vertically integrated firms
A few large firms emerge as a result of mergers and acquisition
•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
MaturityMaturity
Year 1900’s-1920’s 1930’s-1940’s 1950’s – 1960’s 1970’s – 1980’s 1990’s – 2000’s
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
• 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
Maturity-trap
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
Performance
0
2000
4000
6000
8000
10000
12000
14000
1866
1921
1976
1986
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Per
son
s
0
10
20
30
40
50
60
70
Mil
lio
n E
uro
s
Employment
Net Profit
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
0
1
2
3
1961-1965
1966-1970
1971-1975
1976-1980
1981-1985
1986-1990
1991-1995
1996-2000
2001-2005
2006-2010
Product (design)
Product (technical innovation)
Process
7
CASE STUDY 2:
THE NETHERLANDS / TEN CATE, NV
Statistics
NL 1.3%
Others EU 98.70%
NL 2.1%
Others EU 97.9%
Turnover 2004
Employment 2004
Statistics
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
2001 2002 2003 2004
Year
Eur
oProductivity-Netherlands
Productivity-Italy
Textile, 60%
Clothing , 30%
Leather, 10%
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
0
200
400
600
800
1000
1200
1956 1960 1965 1970 1975 1980 1985 1987 1990 1991
Turn
over
Textile Industry
Total Manufacturing
0
20
40
60
80
100
120
1956 1958 1960 1965 1968 1970 1975 1980 1983 1985 1990 1991
Emplo
ymen
t Textile Industry
Total Manufacturing
Trend in the Italian textile industry
Preferential market agreement with the East Indies (Indonesia) was terminated in 1870.
•Increased labour costs•Early rapid decline
•Rapid decline continues•Extensive restructuring following MFAs
•Economic slow down 2001-2003•MFA is abolished in 2005
Market Change
Losing market protectionism in the Dutch colony of East Indies
•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
Competitive Change
Begin to compete with Japan over markets in Indonesia
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
Structural Change
•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
Year 1900’s-1920’s 1930’s-1940’s 1950’s – 1960’s 1970’s – 1980’s 1990’s – 2000’s
maturity Dematurity?
Evolution towards maturity
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
Performance
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Em
plo
ymen
t
0
5
10
15
20
25
30
35
40
45
50
Mil
lio
n E
uro
s
Employment
Net Profit
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
1700 188018601840 19801960194019201900 200220012000 2003 2004 2005 2006
Textile merchants
Industrial production techniques
Interlinings
Denim
Protective clothing
Sport/Outdoor
Geotextles
Technical Components
Armour
Artificial grass
1704 -1841
Mass production technique 1841-1980's; vertically integrated since 1957 Flexible manufacturing system 1980's -
1964-2005. From consumer interlinings to industrial filtration and non-woven fabrics
1964JV with Blijdenstijn Willink NV (Permess)
2005Divest Permess
1974-1999
1957Merger with KSW
1974Establish Hellenic SA
1998Close down Atlantic Mills; Sell Hellenic SA
Continuous product and technology development
1970Dyeing selling
Nomex
1996Collaboration with Southern Mills, Inc
2004Acquire Southern Mills
Functional digital printing
Product development from windsurfing rig & board to outdoor fabrics. Building capability in composites for windsurfing board.
19731973 License windsurfer
1941Buy JP Lorey Weaving Mills
1974Acquire Nicolon BV
1991Acquire Mirafi – TC Nicolon USA
2005Acquire Polyfelt, Inc
1994Buy Synbra
1983Acquire Plasticum BV
1986Acquire Bosta BV (Mega Valves)
1990Establish TC Armour
1998.1999Buy Ares, Bryte Technology
2007, 2008Acquire Phoenixx, Roshield, Composix, YLA & CCS
2005, 2006Divest Mega Valves, Plasticum, Synbra
Carpet backing Artificial grass
1987Acquire Thiolon
2000, 2001Acquire Nymplex, Polyloom
2007, 2008Acquire Mattex Leisure Industry, Edel Grass
2004EU Framework Digitex
2008Acquire Xennia Tech
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
0
2
4
6
8
10
12
14
16
1923 1967 1972 1977 1982 1987 1992 1997 2002 2007
Printing componentsTextile treatment
Sport/outdoorProcedures & devices
GrassComposites
PlasticsTextiles
Advanced textiles
DISCUSSION
Industrial maturity
• In terms of process technology, maturity began in the late 19 th 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
TEXTILE CLOTHING INDUSTRY
Active inertia Local search
• Active inertia
• Local search & local preferences
• Process innovation by adopting the latest equipment
• Existing markets
• Acquisitions to expand capacity and customer base
• A rather static competence
CustomersSuppliers
Distributors Competitors
Marzotto
Yarns and textile production
and technology
Marzotto-competence statics
Cloth makingproduction
Luxury brands
High qualityyarns and textile
productionand technology
1985
2005: Demerger
1836 1980 2005
Will continue to remain in the same markets,
Expansion to emerging Economies i.e.
China, Russia, IndiaMaturity trap
1993: Relocation and rationalisation
Emerging processing technology
De-maturity
CustomersSuppliers
Ten Cate
Distributors Competitors
TEXTILE-CLOTHING INDUSTRY
Geotextiles
Technical components
Protective clothing
Artificial grass
Armour
Emerging marketsNew materials
Synthetic fibres
High performance fiibres
Composites
Advanced, nano materials
Advanced chemicals
Non woven
Functional digital printing
New Distributors New Competitors
Entrepreneurial, dynamic capabilities
Creating new industrial boundaries
Ten Cate-competence dynamics
Textile productionand technology
Technical textiletechnology and
chemical processesPolymers
Composite materials
19741841 1964 1987
Functionalmaterials
2004
Dematurity
Developments on core concept, engaging emerging
technologies, potentially disruptexisting production system and
market-technology linkages
Evolution of Technology Transilience
High
High
Low
LowImpact on production system
Impact on market linkages
De-maturity
De-maturity
Maturity
Architectural phase
Niche creation phase
Revolutionary phase
Regular phase
Marzotto
Marzotto Ten Cate
Ten Cate
Ten Cate
Ten Cate
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