Case Study: Shenzhou International Group - Business Analysis

This case study analyzes Shenzhou International Group Holdings Ltd., a leading Chinese knitwear manufacturer. The assignment explores global trends in the apparel industry, focusing on the value chain, costs, bargaining power, geographical locations, and institutional roles. It identifies key factors contributing to Shenzhou International's success, including partnerships, innovation, and diversification. The study also examines Vernon's Product Life Cycle theory and transaction cost-minimizing approaches employed by the company. Finally, it discusses the potential implications of establishing operations in the United States, considering market opportunities and challenges. The analysis utilizes information from the provided case study, academic articles, and industry reports to provide a comprehensive understanding of Shenzhou International's business strategies and its position within the global apparel market.

Case Study

Contents
INTRODUCTION.....................................................................................................................................3
PART A......................................................................................................................................................3
Answer to Question 1..............................................................................................................................3
Answer to Question 2..............................................................................................................................4
Answer to Question 3..............................................................................................................................5
Answer to Question 4..............................................................................................................................7
PART B......................................................................................................................................................8
Answer to Question 1..............................................................................................................................8
Answer to Question 2..............................................................................................................................9
CONCLUSION........................................................................................................................................10
REFERENCES........................................................................................................................................11

INTRODUCTION
The apparel industry is among the largest industries that contribute significantly to the
overall growth of an economy. The industry comprises of companies that design and sell
clothing, footwear as well as accessory products. Customers today are always looking for
innovative and unique products in the market (Ahmad and et.al., 2020). The current global trends
in the apparel industry have transformed the way in which businesses conduct their operations on
a daily basis in order to remain relevant in the market. Shenzhou International Group Holdings
Ltd. is a Chinese clothing manufacturer that was founded in the year 2005 by Ma Jianrong. Over
the years, the company has evolved to be the world’s largest manufacturer of knitwear. The
report includes an explanation of the global trends in the apparel industry in terms of value chain
as well as the major factors that have contributed to the success of the respective company.
Lastly, the report also includes a discussion on the impacts of Covid -19 on the aggregate
demand of a selected country.
PART A
Answer to Question 1
A large number of changes within the apparel industry have impacted the way in which
companies work at a global level. There are various trends within the apparel industry that are
changing the way in which various clothing companies operate. The trends within industry have
made it easier for the companies to understand the preferences of the customers and serve their
needs in an effective manner. The different global trends in the apparel industry in terms of value
chain is that it starts with the large retailers with the already established brands and distribution
channels. The different apparel manufacturers do not have access to different brand distribution
channels; therefore, they are very much dependent on the retailers (Alam and et.al., 2019).
Initially, the value chain within the apparel industry started from processing the raw material and
grouping them into various categories. In earlier times, the production of apparel involved
intensive labor but in the recent years, organizations operating in the industry have employed
thousands of people in order to produce clothing items that are fashionable as well as trendy. The
companies are now concentrating on activities that would add value to the customers.

International brands are focused on the considerable growth in the demand within the
global market. Today, the number of suppliers within the market is huge and therefore, while
seeking suppliers, various factors such as labor costs, rate fluctuations, risk control, processing
costs etc. have to be taken into account. Costing plays a very important role when it comes to the
apparel industry in order to establish financial feasibility of manufacturing and producing a
particular design. With the increase in the number of suppliers, their overall power of negotiating
has reduced and therefore, the companies have access to good quality raw materials. The prices
of the products are set accordingly. The costs are also affected by any innovations or latest trends
that come up within the market, such as sustainable fashion. Globally, the preferences as well as
needs of the buyers keep on changing (Chen and et.al., 2017). As a result, the different players
within the market are focused towards constantly innovating their products as well as services so
as to gain a competitive advantage within the industry. The different players are introducing
different trends in apparels such as fast fashion and sustainability. This has led to changes in the
industry with new and innovative ideas being introduced from time to time.
Apparel trends globally, vary from location to location because people across different
geographical locations perceive the fashion trends differently. Both designers as well as apparel
manufacturers produce clothing items as well as accessories that are based on the global trends
but at the same time, they are also in line with the culture of that particular location. Similarly,
people who work in governmental as well as international cooperation roles, also have different
sense of apparel. It can be said that the global trends in the apparel industry influence people in
different locations as well as roles in a significant way.
Answer to Question 2
Having being evolved as the world’s largest knitwear manufacturer, Shenzhou
International, there are many factors that have contributed to the overall success of the company.
The company was committed to developing as well as manufacturing cutting-edge products (Giri
and et.al., 2019). The respective company is focused on flexible operations mechanisms that are
efficient. One of the major factors that contributed to the overall success of Shenzhou
International is building partnerships with multinational and world-class companies. The
company worked in cooperation with these brands in order to build a strong brand image within
the market. The main reason behind this was to build a community with common goals and

objectives. For example, the partnerships of the company with Uniqlo as well as other
international brands such as Nike and Adidas has helped it with improvement in the overall
management process and also, expanded its overall production capacity.
Also, the company has also integrated different techniques in order to improve the overall
manufacturing process. Also, the company has focused on research and development while
manufacturing the apparel products. Not only this, the company is also focused on promoting
sustainability in the market. This has helped it in attracting a greater number of customers
because they are on a look out for clothing products that are sustainable and that there is no harm
caused to the environment. Proper distribution across various regions and making sure that high
quality products are accessible to the customers is another factor that has helped the company in
becoming successful at a global level (Giuffrida and et.al., 2019). The company has taken an
important step wherein it has opened exclusive factories such as Adidas and Nike in order to
safeguard their overall trade secrets. In terms of managing personnel, both the factories were set
apart from each other.
One of the other factors that have also contributed to the overall success of the respective
company, Shenzhou International is adopting the strategy of diversification. The company
constantly focusses on innovating its products as well as services in order to attain its goals as
well as objectives. This is because by adopting this strategy, the comp-any has been able to
expand its business operations across different locations and at the end of September in 2015, the
company set up its apparel factory in Cambodia. And over the view years, the scale of the
factory has expanded to a great level. The respective company has always focused on adhering to
the laws as well as regulations of the country in order to ensure that the business operations run
smoothly.
Corporate social responsibility or CSR activities play a major role and contribute to the
overall success of an organization (Guo, Choi and Shen, 2020). Similarly, Shenzhou
International engaged in different CSR activities in order to gain a competitive advantage in the
market. Other factors such as being committed labor law compliance, employee benefits,
community relationships as well as environmental protection are also some of the factors that
have contributed to the overall success of the company in the market.

Answer to Question 3
Vernon’s Product Lifecycle Theory is a theory that was mainly developed in response to
the model that was put forward in order to explain the observed pattern of international trade.
According to Vernon, there are four stages in the lifecycle of a product. The length of the
different stages varies from product to product. The different stages are explained below –
Stage 1 – The Introduction Stage
When a product has been developed successfully, it is introduced to the customers in the
market (Hasan, Moore and Handfield, 2020). The main reason of the company behind
introducing a new product in the market is to create demand and generate awareness among
customers about the newly launched product. Shenzhou International introduces new products in
the market and uses different approaches to do so. This helps in attracting a greater number of
customers both within China as well as other countries.
Stage 2 – The Growth Stage
This is the second stage wherein the demand for the product increases. This leads to a
reduction in the overall cost of production and an increase in the profits of the company. The
product becomes widely known to the customers and the competitors enter the market. The
respective company took various initiatives that have in turn contributed to its growth.
Stage 3 – The Maturity Stage
At this stage, the product is known and bought by many customers. At this stage, the
level of competition is intense. Due to this, the product is sold at low prices. The respective
company found different opportunities in order to grow their business.
Stage 4 – The Decline Stage
This is the last stage of the product life cycle wherein the market becomes saturated and
the product is no longer sold (Product Life Cycle Stages, 2020). Therefore, in this stage, the
promotion as well as marketing costs are very high. Shenzhou International has faced intense
competition for its products within the market. Due to this, the overall sale of its products also
got affected in the market.
Transaction Cost Minimizing approaches

There are different approaches that the respective company has used in order to minimize
transaction costs (Jia and et.al., 2020). Advancements in technology have helped organizations in
reducing the various transaction costs. This is because with the effective use of the internet, the
companies have been able to reduce unnecessary amounts of cost. The company has presence
across different social media platforms such as Facebook, Instagram and Twitter. By
implementing this strategy, the company has been able to attract a greater number of customers
and provide them with the latest trends of fashion. Apart from this, the company has also set up
an apparel factory in Cambodia which has helped it in reducing overall cost of production of
products and at the same time attract new customers as well. by reducing transaction costs, the
company has been able to stand out in the market and has become one of the largest
manufacturers of knitwear products. As a result, the company has gained a competitive
advantage against other players within the market.
Answer to Question 4
The respective company, Shenzhou International proposed a venture of setting up its
production operations in the United States (Li and Wu, 2017). If the company has built a factory
in the country, the large size of the market as well as the reputation of the various manufacturing
brands in the United Kingdom could have brought a lot of opportunities for the company. It
would have been able to reach out to a new set of customers in the market and serve their needs
in an effective manner. this would have been beneficial for the overall profitability as well as
performance of the company in the US market. the number of opportunities in the US market are
immeasurable. But for the respective company, Shenzhou International, the cost of setting up a
plant in the United States would have been very costly. This is because the US is among the most
expensive markets across the world. Although, the number of orders that the company would
have received in the United States would have been high. But there are also potential obstacles
that the country would have been posed to Shenzhou International. This is because the US
market is very different from that of the Asian countries. This includes in the terms of business
climate, legal institutions, employee competence as well as labor policy. The company would
have faced difficulties in setting up a venture in the US market. in the United States, the local
governments were environmentally conscious and since Shenzhou International was a
traditionally labor-intensive enterprise along with a significant emitter of pollution, the company

would have faced difficulties with not only setting up a venture, but also surviving effectively in
the US market.
It can be said that if the respective company would have considered setting up a venture
in the United States, it would have found low-cost technical workers. This would have made it
easier for the firm to conduct its business operations effectively. but this would have required the
company to review all of its strategies (Li, Chen and Ding, 2019). The number of resources
available in the country is vast and also, since the market size is also vast, the company would
have different opportunities to enhance its overall performance and gain a competitive advantage
in the market. the US market has been one of the most crucial markets in the world for a lot of
world-class brands. Only with their strong capabilities as well as available resources, those
brands were able to sustain in the market. therefore, it can be said that by conducting an effective
research about the market, the company would have been able to identify the opportunities as
well as potential risks that would have otherwise affected the overall business activities of the
firm to a significant level. Not only this, the results of the research would have helped the
company in understanding the needs as well as preferences of the customers in the United States.
PART B
Answer to Question 1
Aggregate demand can be defined as the measurement of the total demand for all the
finished goods as well as services within a particular market (Morris and Staritz, 2017). China
has extra call for aggregates than another kingdom on the earth, but it’s falling amid severe
economic pressures. China Aggregates Net (CAN), which focuses on independent Chinese
aggregates marketplace analysis and information, the improvement of the aggregate’s enterprise
in the international’s maximum populated U.S.A. is carefully connected to the performance of
the home construction and construction gadget market. The strict regulations delivered by the
Chinese authorities to manipulate the unfold of COVID-19 have to this point precipitated a great
discount in economic hobby in particular to Wuhan and Hubei province. It is worth to notice that
26 of 31 Chinese areas have announced prolonged paintings stoppage for non-critical enterprises
(New Year holidays were prolonged; confinement changed into imposed on hundreds of
thousands of citizens and tour regulations inside China have been imposed). The effect of the
coronavirus will by and large hit China's first-area growth. It could amplify the second one

quarter as well if the outbreak lasts longer (until May 2020 if the SARS scenario repeats itself).
The normal impact is likely to lower the Chinese actual GDP increase price in 2020 to approx.
(Munir and et.al., 2018). Five. Four% Various financial studies groups have already cut their
forecasts for 2020 by means of zero.2 to 0.8 percentage points.
Taking the above into account, policymakers an increasing amount of awareness on work
resumption with the intention to stabilize financial growth in 2020. The measures consist of
improved monetary guide, stabilization of labor market situations and family intake as well as
growth in investment spending (Impact of COVID-19 on the Chinese and global economy,
2021). Financial & financial coverage support measures embody intensification of
countercyclical monetary policy intervention, provision of lower borrowing expenses for
affected businesses, mortgage rollover or extension for affected corporations, forbidding lending
withdrawal and provisions of tax postponements or tax reductions for affected businesses
(Muthukumarana and et.al., 2018). Therefore, it can be said that the pandemic has impacted the
aggregate demand of China to a great extent.
Answer to Question 2
Fiscal policy refers to using authorities spending and tax guidelines to persuade economic
situations, particularly macroeconomic conditions, which include combination call for goods and
offerings, employment, inflation, and monetary boom. On the other hand, monetary policy is the
macroeconomic coverage laid down by means of the significant financial institution. It entails
management of cash supply and hobby fee and is the call for facet monetary policy used by the
government of a rustic to gain macroeconomic objectives like inflation, intake, growth and
liquidity.
First, for an immediate coordinated fitness response to suppress transmission and give up
the pandemic. A response that scales up fitness capability for trying out, tracing, quarantine and
treatment, while retaining first responders secure, combined with measures to restrict movement
and make contact with. A reaction that offers familiar access to treatment and vaccines, when
they're equipped. It is essential that evolved countries right now help those much less developed
to bolster their health systems and their reaction potential to prevent transmission. Therefore, it
can be said that the outbreak of the pandemic has resulted into devastating effects for China. And
in order to overcome these effects, it is important that the country should revise its monetary as

well as fiscal policies in order to develop effective strategies (Yang and et.al., 2020). Fiscal
policy is only in a deep recession wherein economic coverage is inadequate to enhance call for.
In a deep recession. Higher authorities spending will now not motive crowding out due to the
fact the private region saving has improved substantially. Also, the financial policy is notably
effective within the classical range whilst the economic system is at excessive ranges of income
and interest charge and utilizes the complete increase within the money supply for transactions
functions thereby elevating countrywide income via the full growth inside the money supply
(Zhu and et.al., 2019). By implementing these recommendations, the country will be able to
eliminate and overcome the impacts of the pandemic and recover quickly.
CONCLUSION
From the above report, it can be concluded that the Chinese apparel industry is one of the
largest industries across the world. The industry offers a large variety of products that are of high
quality for the customers. This has helped the apparel industry in attracting a greater number of
people and thus increase its overall profitability. There can be various challenges that
organizations operating within the apparel industry in China can face and therefore, it is
important to adopt appropriate measures in order to eliminate the risks and overcome them. Also,
the outbreak of the pandemic has also impacted the overall aggregate demand of the country.
This is mainly because of the worldwide lockdown. Therefore, it is recommended that the
country should review its policies in order to develop and implement effective strategies. As a
result, there will be an overall increase in the profitability as well as performance of the
companies operating within the apparel industry of the country.

REFERENCES
Books & Journals
Ahmad, S. and et.al., 2020. Towards sustainable textile and apparel industry: Exploring the role
of business intelligence systems in the era of industry 4.0. Sustainability, 12(7), p.2632.
Alam, M.S. and et.al., 2019. The apparel industry in the post‐Multifiber Arrangement
environment: A review. Review of Development Economics, 23(1), pp.454-474.
Chen, C. and et.al., 2017. Decent work in the Chinese apparel industry: Comparative analysis of
blue-collar and white-collar garment workers. Sustainability, 9(8), p.1344.
Giri, C. and et.al., 2019. A detailed review of artificial intelligence applied in the fashion and
apparel industry. IEEE Access, 7, pp.95376-95396.
Giuffrida, M. and et.al., 2019. Modelling the environmental impact of omni-channel purchasing
in the apparel industry: the role of logistics. International Journal of Logistics Systems
and Management, 34(4), pp.431-456.
Guo, S., Choi, T.M. and Shen, B., 2020. Green product development under competition: A study
of the fashion apparel industry. European Journal of Operational Research, 280(2),
pp.523-538.
Hasan, R., Moore, M. and Handfield, R., 2020. Addressing social issues in commodity markets:
Using cost modeling as an enabler of public policy in the Bangladeshi apparel industry.
Journal of Supply Chain Management, 56(4), pp.25-44.
Jia, F. and et.al., 2020. The circular economy in the textile and apparel industry: A systematic
literature review. Journal of Cleaner Production, 259, p.120728.
Li, B. and Wu, K., 2017. Environmental management system adoption and the operational
performance of firm in the textile and apparel industry of China. Sustainability, 9(6),
p.992.
Li, X., Chen, L. and Ding, X., 2019. Allocation Methodology of Process-Level Carbon Footprint
Calculation in Textile and Apparel Products. Sustainability, 11(16), p.4471.
Morris, M. and Staritz, C., 2017. Industrial upgrading and development in Lesotho’s apparel
industry: global value chains, foreign direct investment, and market diversification.
Oxford Development Studies, 45(3), pp.303-320.
Munir, K. and et.al., 2018. The role of intermediaries in governance of global production
networks: Restructuring work relations in Pakistan’s apparel industry. Human Relations,
71(4), pp.560-583.
Muthukumarana, T.T. and et.al., 2018. Life cycle environmental impacts of the apparel industry
in Sri Lanka: Analysis of the energy sources. Journal of cleaner production, 172,
pp.1346-1357.
Yang, Y. and et.al., 2020. Water footprint assessment of silk apparel in China. Journal of
Cleaner Production, 260, p.121050.
Zhu, S. and et.al., 2019. The upgrading framework in the apparel industry literature: insights
from apparel firms in Ningbo, China. Geografiska Annaler: Series B, Human Geography,
101(3), pp.231-254.
Online
Impact of COVID-19 on the Chinese and global economy. 2021. [Online]. Available through:<
https://ihsmarkit.com/research-analysis/impact-of-covid19-on-the-chinese-and-global-
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Product Life Cycle Stages. 2020. [Online]. Available through:<
https://www.toolshero.com/marketing/product-life-cycle-stages/ >.