| China has entered WTO. How to dramatically increase the competency in a short period of time so as to meet the challenge after WTO entrance is a critical problem that companies in Chinese textile industry are facing. Generally speaking textile industry is our advantageous industry after WTO but China at this stage don't have garment or textile conglomerate. Current companies in the industry are all in small size, positioned at all links of supplying chain without synergizing. At the same time it is textile manufacturing plants that will enjoy more favorable industry situation while trading companies in the industry will face great pressure.An effective way to expand is through capital expansion, core purpose of which is to develop the business and forge its own competency so as to maximize the profitability. On the other hand, a company's competency will be established step by step through capital expansion. In this article the author will illustrate different ways of capital expansion in garment industry through which core competencies are forged.The conclusion of the article, after analyzing a real case, is that for garment export business a sustainable business model should be a garment supplier providing full service, converted from traditional middleman. The business should be extended to both up dream and down dream which is now limited in trading only. The article is composed of two parts. The first part illustrates that capital expansion is the road that should be followed in business development. In market economy core purpose of all economic activities is to expand profitability of the capital. Competition between companies now is largely a kind of competition of capital employed. Now most of China's garment companies are small and they are eager to expand. Fundamentally what the capital expansion aims to solve is to rationalize the resources so as to increase the profitability of the capital and create more value. Rationalization should be realized through the market mechanism. Indication of capital expansion in business operation is to employed more capital. A company's management level determines whether the capital can be operatedeffectively. Through capital expansion economies of scale can be achieved which will be converted into boosted revenue, big market share, large scale of capital and high market value. A company's scale and it market position determined by its competency will enhance each other. Capital expansion can be categorized as currency capital expansion, production capital expansion and commodity capital expansion. In practice the growth of a business will naturally involve currency capital, production capital and commodity capital. Strategic plan for the future and management mechanism at different levels actually all aim at how to rationalize and synergize all kinds of capital which will finally lead to a business' unique competency.In light of the distinguishing features of garment industry post-WTO and after analyzing the case of Company H, in the second part of the article the author makes a conclusion that a sustainable business model for Company H is to position itself as a full service provider of garment, based on balance of its service capacity and production capacity. The expansion model is illustrated from both inside and outside.Firstly internal expansion largely depends on the cumulative accumulation. Internal expansion model is address from three aspects: product growth, capital turnover and competitive strategy. Secondly external expansion is a kind of superior expansion. Capital operator can build conglomerate or even global business to expand its capital through securities, financing, merge, acquisition and cooperation with banks on the basis of improving quality and efficiency of capital employed. The author will focus on external expansion by means of M&A and cooperation with banks.Capital expansion aims at building core competency of the business while core competency is the result of capital expansion. The concept of establishing... |
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