Page 3: Value chain
A value chain shows all the stages involved in adding value to a product and the links between these stages. The stronger the chain, the more value that will be added in the process of production. This chain is the key to gaining competitive advantage.
The textiles and clothing industry involves a complex value chain. For example, there is a set of processes which develop between actually picking fibre in a cotton field and being able to go into a local store and buy a garment which is liked, which fits, is the right colour and has the right fashion appeal. The illustration below shows the value chain. It is the quality which goes into the value chain that determines its effectiveness. To be successful, the value chain needs to be driven by the market i.e. it must result in providing those benefits which consumers demand and value.
The chain begins with the fibre which is processed before being spun and then (usually) twisted into a product called yarn. The yarn is then woven or knitted to produce what the industry calls “grey fabric.” The next step involves a major change which has various descriptions: bleaching, dyeing, printing and finishing.
All of these transform what was essentially unwearable and unusable into what consumers are happy to have close to their skin. It gives it something which is termed “handle” i.e. strength, the ability to keep its shape and in the case of dyeing it gives colour or in the case of printing it gives it a design. Most importantly for some, it gives the product ironing properties - everytime it is washed, it is also possible to iron it. The material is then classified as “finished fabric.” Finally, it goes into the garment which appears in shops and other retailing outlets. The strength of this chain explains why some garments will be seen as good value for money even though they cost hundreds and thousands of pounds, while others may remain unsold even though they retail at two or three pounds.
Adding the value
If you study the value chain for textiles it is possible to make some important generalisations. On the left-hand side of the value chain, the business is more capital intensive, is less differentiated, has relatively low variety and is inherently more stable. On the right, particularly once we move into garments, we are involved in a business which is relatively labour intensive, which has high levels of differentiation, high levels of variety and changes often. In fact we are in the fashion industry. It is important to appreciate these shifts in the value chain.
In this case study we will focus on the largest part of the Coats Viyella Group - The Thread Business – in order to highlight how it creates a key competitive advantage at the start of the textile industry value chain. Before focusing on The Thread Business, it is helpful to appreciate the Coats Viyella product spread. Coats competes in a variety of product areas across the textile value chain, as well as in precision engineering, with direct customers varying from Ford to the department store shopper. Product groupings are:
- Jaeger Ladieswear
- Jaeger Menswear
- Marks & Spencer private label
- Other contract manufacturing
- Metal dyecasting
- Plastics casting