The report looked at the reasons why Ghana provides significant and cost effective alternatives to production in Asia, of which the proximity to the east coast of the United States is preeminent.
The report also considered economic and cultural conditions in Ghana and their effect on productivity in apparel manufacturing. Finally, the report weighed Ghana government policy toward apparel manufacturing and the general trade stance to determine the effect they have on exports of manufactured apparel from Ghana.An analysis of the foregoing issues indicate that SMOG will benefit from investing in joint venture with one or several of the companies under the now fennec President’s Special Initiative on Apparel to take advantage of AGO while it lasts and to capitalist on the large pool of experts that are available and willing to work in the country. In addition, because Ghana is a lot closer to the LIST than Asia, SMOG can bring products to market faster in absolute terms all things being equal.Introduction Superior Modern Garments is a US;based manufacturer of assorted apparel including uniforms of which the most popular with clients are surgical scrubs. Scrubs are easy to produce because they have very little design element and an be cut by machines out of patterns designed anywhere. SMOG has since its inception maintained all its manufacturing and sales operations in the US relying on skilled labor and utilities available in country’ and importing components and other inputs that are produced more efficiently elsewhere.Over the last few years however, SMOG has been facing increasing competition from manufacturers in countries with lower costs of production notable labor costs.
Rising wage rates in developed countries has forced manufactures across all productive sectors to see ways Of diversifying production. Invariably, this means that Superior Modern Garments, like other manufacturers, has to turn to developing countries where wage rates are still very low even in the formally declared minimum wage rates.Illiteracy and economic growth rates are still very low while population growth rates are relatively high. The traditional and obvious choice for manufacturers has been to move production to the east particularly China and Bangladesh where low labor costs and efficient production techniques are provide competitive advantage over home based-production.
However, there is an increasing drive towards pro-poor especially pro-African reduction under the Trade for Aid slogan that is sweeping across the developed world.Legislation like the Africa Growth and Opportunities Act (AGO) which provide for quota-free and tariff-free exports of over 6,000 goods including manufactured apparel from African countries like Ghana provide a real opportunity for manufacturers to make up for the lack of efficient production. Therefore, if Superior Modern Garments is able to bring its experience in efficient production line and raw material sourcing to Ghana, it might make a windfall by taking advantage of AGO while it lasts and still be competitive if he US does not extend the duration of the law after it elapses in 2015.This report looks at the fiscal and exchange rate regimes in Ghana and the US, the cultural differences and similarities that will facilitate Superior Modern Garments operations in Ghana and specific points of advantage for apparel manufacturing in Ghana visit-;-visit the main global competition in China and other countries in Asia. Overcoming the Asian Advantage Asian countries have enjoyed a competitive advantage in manufacturing largely due to the low labor costs that they offer compared to producers from developed nations.Because most governments in Asia are either authoritarian or totalitarian, workers who are mostly poor and illiterate cannot form effective unions to agitate for better wages.
This is in sharp contrast to their counterparts in developed nations who have legal rights of association that are backed by laws with judicial systems ready to enforce these laws. Figure 1 below illustrates how the low wages, from which Asian countries derive their competitive advantage, have been perpetuated.The diagram traces the path to show how the low wages that give producers and advantage eventually lead to more low wages by reducing global demand eating to falling prices and profits, which in turn lead to cost cutting that ultimately result in the continued payment of low wages. This phenomenon, which has been the main source of advantage for China and other Asian countries is fast eroding under pressure of importers for more ethical manufacturing.
[Pick] SOURCE: Mere, 2009, p. 5 Business System The US is world renowned for its open market system and indeed prior to the global financial crises of 2007/2008 when the US government stepped in with massive bailout packages for automobile manufacturers and financial institutions, government had pretty much stayed out of business. Government sticks to the task of creating an enabling environment for business although the US does have certain protectionist policies for industries defense and agriculture considered vital to the national interest. Un)fortunately, these protectionist policies do not extend to Smog’s area of activity-apparel.
In fact, the US goes beyond denying protection to local apparel manufacturers to grant trade preferences to exporters of apparel to the US. The following paragraph from the SIS Trade Compliance Center website sums p Shania’s international business environment: Outside mining, fishing and forestry, Ghana does not screen FAD although the Ghana Investment Promotion Centre monitors it. Only a few activities, including petty trading and taxi services, are reserved for Ghanaian.Joint ventures are optional. Foreign investors must have minimum capital levels of US$II,OHO for joint ventures and ISSUE,OHO for wholly foreign-owned enterprises, unless engaged solely in exporting Ghanaian goods.
Foreign trading companies must have capital of SUSSEX,OHO, and employ at least ten Ghanaian. NO performance requirements per SE exist. Trade Compliance centre, 2001 ) As aptly described above, Shania’s economy is very much market oriented although there is occasion government intervention mostly under the guise of national interest.In fact, Ghana is arguably the most market-oriented economy in sub-Sahara Africa outside South Africa.
Shania’s political environment is often hailed as a beacon of success and an example of democratic governance in Africa. This combination should enable SMOG to make a near seamless transition to operating in Ghana. 1 Socio-cultural Analysis Both Ghana and the US inherited their official language from the United Kingdom.Therefore, communication between SMOG management at head office and staff on the ground in Ghana should pose no problems at all.
In addition, since the legal systems are similar, SMOG does not need to hire new legal representation although the peculiarities of the Ghanaian System might require a local attorney in much the same way as a local attorney is required in transacting business across states in the US. Still on the legal subject, SMOG can operate with more breathing room as Ghana does not have a culture of litigation nap. Here close to the situation in America where for example sectors order expensive laboratory tests for simple symptoms in a effort to stave off malpractice lawsuits (Hill, 201 1) Americans are much more individualistic and short-term goal driven than their Ghanaian counterparts. For example, in Ghana it is not uncommon for qualified candidates to wait an extra year to enter public universities because of backlogs caused by strikes in previous years. The all to familiar saying in Ghana that literally means “let’s leave it to God” has no equivalent in English or in American culture because it simply does not exist.Thus while Americans ill, or at lease attempt to, cease every single opportunity, Ghanaian will say if it is not meant to be, it is not meant to be. Certainly, some Ghanaian have the American cultural inclination through education or the influence of western media but these are only a small minority.
It is not for nothing that the woman who sold roasted plantain from a tabletop by the roadside in Sacra to you as a child is still operating at the same scale twenty years later. Ghanaian are much more likely to forgo satisfaction today in hopes of a better tomorrow.This orientation toward the long-term in Ghana provides an opportunity for SMOG to boost short-term profits by paying minimum wages and providing incentives like education and profit sharing with employees. Many more Ghanaian go to church on Sunday than Americans do per capita Ghanaian are raised to be religious and to revere leaders – religious or any other kind. From compulsory prayers at school gatherings to mandatory bible knowledge or worship sessions on Wednesday mornings, Ghanaian grow up in Ghana learning to obey authority.Therefore, leaders are seldom questioned in Ghana. This is in sharp contrast to the situation in the US where racers and religious activity are banned in public schools and the only state religious affiliation is the “In God We Trust” inscription on all US dollar bills. Gender issues have come under the spotlight in recentness.
Nowhere is the issue of gender more relevant than in sub-Sahara countries like Ghana. There are still entrenched customs that permit men to inherit their brother’s wives. The women have no say in the matter.Such customs will be very difficult to explain to an American who has no exposure to Africa. In some communities especially where Islam is the dominant religion, women must Reese in a prescribed manner that sometimes interferes with daily activities in the work place. SMOG must negotiate these peculiar set of circumstances with community and opinion leaders if it is to have successful operations in Ghana. For example, a consensus-building visit to the local chief of the catchments area of the factory site will go a long way to foster understanding of Smog’s business.