Customized International Investment Decisions:An Exploration into the Textile and Apparel Decision-making Process

Abstract

As textile and apparel companies operate in an interconnected world economy, the new challenge for these companies is to manufacture and market innovative products while considering the entire world as the playing field. Today, the ideal global corporation exploits every new opportunity in the environment, controls every threat that may occur, and creates effective strategies to stay competitive. Often, competitive advantages are established by using by comparative advantages, however, this process requires a vast amount of decision-making and capital. Although companies are investing their time and money, there always exists the possibility of ultimate failure due to long term and short term uncertainty in the environment. Many companies fail to realize the full potential of their foreign investments because they lacked a structured decision-making methodology for international investments.

The complexity of the global environment is evolutionary due to new laws and regulations such as WTO, NAFTA, CBI, ANDEAN and AGOA. For example, several major US textile companies experienced investment failures in Mexico, while taking advantage of the NAFTA regulations. Although failures were experienced when investments were made outside of the home country, it is also clear that staying in one's home country is not automatically the right decision for all types of the textile companies. Failures in international investment decisions have shown that there is an absence of a dimension to address the qualitative aspects of the decision-making process. Therefore, an examination is needed to identify a comprehensive methodology for international investment decisions.

The purposes of this research are to develop:

• A taxonomy of existing methodologies for plant location investment decisions.

• A comprehensive instrument for investment decisions considering the strategy of the company, the organizational culture of the company, the sector where the company operates, and the role of external environment.

• A structured decision-making model for customized international investment decisions, considering companies in different sectors, which pursue different strategies and have different organizational cultures.

• A decision support tool based on the above conceptual model, which incorporates both the quantitative and the qualitative factors to provide an all-inclusive model to the decision maker.

Data for the research was collected in three parts, the literature review, questionnaire and case studies. The sample for survey implementation comprised 17 companies from fiber, textile, apparel and nonwovens sectors. To support the limited survey results, case studies were conducted with 5 of these 17 companies. One additional fiber company outside the survey sample was also included for a total of 6 case studies.

Findings from the study include:

a) published document listing the methodologies for plant location decisions including include scaling, scoring, ranking methods, analytic hierarchy process (AHP) methodology, mathematical programming methods, heuristic algorithms and simulation methods.

b) a Customized Investment Decision-making Instrument to guide the companies in using an effective combination of location factors according to their priorities and specific needs.

c) the conceptual framework for international investment analysis. Data that come from the literature review (Part II & Part III) and the empirical analysis (Part V) were analyzed and a conceptual model was developed for customized international investment decisions.

d) a decision support tool was developed using the conceptual model (Part VI). Microsoft Access® is used as the software for this tool. International Data Sources are found during the development stage of this decision support tool.

Results from this study will assist to the US textile and apparel companies in a way that they will be able to analyze the projected investment locations effectively, considering all characteristics of international investment decisions.