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1,571 miles
takes 27 hours to be transported
Land Freight - quicker, cost effective , safer transportation, lesser risks

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8,000 miles
Sea freight - cost effective, take 6+ weeks to be delivered
Air freight - quicker transportation, more expensive, high risks involved

Using both Sea and Air freight to transport the goods enables urban outfitters to choose what products needed to be delivered quicker than others.

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Poltical -

Econmical - 7% year- on - year ecpmmic growth annual growth rate of 20% due to outsourcing

Social - over 60,000 people are working in outstanding in romania and expected to double in 5+ years

Technological - high level of technical skills
-birth place of several technolog software devices
-high quality of education in technology has made romania the hub of outsourcing

Enviromental - Air pollution and water pollution caused by industry are serious enviromental problems in romania
- romania suffers with the consequences of climate change - this can lead to distruptions with the distrobution process of transporting goods

Legal - decreaseing population and increase in corruption

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Pros
- Close to any european location
- Costs less to  transport supplies to and from countries within europe
- good lanaguage skills

Cons
- possiable loss of control over a companies business process
- it has been said that romania finds it incredibly difficult to correct common mistakes  and to turn them around in time
- cheap to manufacture in romania which will lead to poor quality products

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Nov.    20155DEBORAH    WEINSWIG,    EXECUTIVE    DIRECTOR–HEAD    OF    GLOBAL    RETAIL    &    TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COM        US:    917.655.6790        HK:    852.6119.1779        CN:    86.186.1420.3016Copyright    ©    2015    The    Fung    Group.    All    rights    reserved.Sourcing    CountriesN  sweaters    in    the    US    were    imported    from    China,    as    were    90.2%    of    wool    sweaters,    78.9%    of    man-­‐made-­‐fiber    sweaters    and    87.8%    of    other-­‐vegetable-­‐fiber    sweaters.    China’s    significance    for    the    sweater    market    is    large    when    compared    to    the    total    apparel    market.    In    2014,    according    to    the    American    Apparel    &Footwear    Association,    China    accoun

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Nov.    20155DEBORAH    WEINSWIG,    EXECUTIVE    DIRECTOR–HEAD    OF    GLOBAL    RETAIL    &    TECHNOLOGYDEBORAHWEINSWIG@FUNG1937.COM        US:    917.655.6790        HK:    852.6119.1779        CN:    86.186.1420.3016Copyright    ©    2015    The    Fung    Group.    All    rights    reserved.Sourcing    CountriesN  sweaters    in    the    US    were    imported    from    China,    as    were    90.2%    of    wool    sweaters,    78.9%    of    man-­‐made-­‐fiber    sweaters    and    87.8%    of    other-­‐vegetable-­‐fiber    sweaters.    China’s    significance    for    the    sweater    market    is    large    when    compared    to    the    total    apparel    market.    In    2014,    according    to    the    American    Apparel    &Footwear    Association,    China    accoun

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Jungle Scout: Amazon Product Research Made Easy

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Have you done your Amazon product research? Found the product you want to sell? These steps require the effort and time (and the proper resources, like Jungle Scout), but you can work through the challenges. Then you are ready to find the Chinese suppliers to make the product. This is where things get complicated. You are dealing with people halfway around the world, with cultural and language differences, negotiating over your investment of potentially thousands of dollars in inventory with people you likely just met on the internet.

Figuring out how to find a supplier to partner with, how to structure the negotiation, payment, and quality control is a critical step to successfully launching your Amazon business. Gary Huang, CEO of 80/20 Sourcing joined us for a hugely valuable session to share his insights on how to source your Amazon product from China. Gary is an American based in Shanghai, where he teaches Amazon sellers how to save time and money when sourcing from suppliers in China. He's managed multi-mllion dollar sourcing campaigns and worked with hundreds of Chinese suppliers, and his expertise shines through in his webinar. He is giving away a free sourcing bonus pack for Jungle Scout readers who are interested.

Here is the presentation that Gary goes through in the video.

Guan Xi: The Foundation of Chinese Business

Guan Xi roughly translates to "relationships" in Chinese, and is the foundation of business relationships in China. Chinese culture and values are very different from Western practices, and the difference manifests at every turn. Trust, respect, face (as in meeting in person or at least communicating via Skype), and time invested in the relationship will be the foundation of building good relationships with Chinese suppliers.

Guan Xi is an important notion to remember as you deal with Chinese suppliers because you position yourself for a long term business relationship. As a result, suppliers will be more responsive to your requests, will offer more favorable pricing and payment terms, and be more accommodating in fixing problems as they arise.

One important insight that Gary identified is the ethics that Chinese suppliers have. Copying a brand, product, or intellectual property is commonplace. In order to protect yourself against that fate as much as possible, you have to be extremely vigilant about protecting your product and brand. In order to do this, get everything in writing and monitor your listing.

For example, one brand in China took extreme liberties in borrowing Under Armour's branding and logo for their new product line. This example shows that business decisions and ethics have a different standard in China and Western countries.

The one common bridge between you as Amazon seller and the Chinese supplier is the entrepreneurial spirit and desire to make money. If you can align your communication around this common goal, you have found the universal language of.....money.

#1 Choose The Right Supplier

When finding potential suppliers, Alibaba is the behemoth that you should look to first. As the largest online marketplace in China, it has the most quantity of suppliers, but not necessarily high quality. You can send out a Request for Proposal (RFP) to many sellers, but the quality of replies may not be great. Not a problem, this is expected.

Gary calls this the "casting the wide net", and will engage with suppliers based on the replies.

Global Sources is another option for finding suppliers. There is less quantity, but each supplier must pre-qualify, so the quality of supplier is possibly better. There are additional smaller marketplaces, though not worth referencing because most suppliers can be found on Alibaba or Global Sources.

In addition to these online marketplaces, going to trade shows is a great place to find suppliers. The Canton Fair is the largest, held twice a year in China. However, there are industry-specific trade shows in the US and Europe where you can meet Chinese suppliers in person and build Guan Xi, or your business relationship.
How Do You Differentiate Between A Trading Company and Manufacturer?
This is almost a trick question. The answer? You ask them! If you get a straight answer as in yes, they are the factory and only the factory then they likely are. If they give you a funny answer like "we have a partnership with this factory" or something similar then they are likely a trading company.

"The Common Thread" Test: You can also guess whether they are a trading company by looking at their product catalog. There should be a common theme between the products, for example this supplier on Alibaba is called a "Silicone Products Factory", and does indeed sell everything related to silicone:

If a supplier were to sell a variety of unrelated products, that don't share a niche or material in common, then you can assume that it is a trading company. No supplier has the capability to produce a wide variety of products with many different materials.

Furthermore, trading companies are less knowledgeable about the technical details of a product. For example, when Gary was speaking with one trading company and asked questions about the battery life and charging time for an electronics product, they were unable to answer. Clearly they are not making the product themselves!
What are the pros and Cons of a Trading Company?
Trading companies can offer better service, have better English skills, and even a nice showroom in the city. However, in exchange for this, you are paying a higher price for the product. And down the road, if you encounter problems, whose side will the trading company be on? Your side, or the actual manufacturer? Furthermore, trading companies may lack in the trust factor and credibility, where the company may disappear overnight if they are especially shady. In short, quick profits are a key incentive for trading companies, and this is not necessarily to your benefit.

On the other hand, factories can be preferable because they are focused on building long term relationships and can offer cheaper prices.

#2 Negotiate With Your Supplier

Gary shared one truism about sourcing that can be applied to many things in life: "You get what you pay for". The implication here is that there are more at play in a negotiation besides just the final price. For example, you are also negotiating the quality of product, the payment terms, the delivery times, and your relationship with the supplier.

Moreover, every supplier does have a "price floor" below which they can't go below. So if you strong arm a supplier and force them to go below their price floor, there may be negative consequences. This could be cutting corners with cheaper materials, less quality in manufacturing, shoddier packaging, or any number of other things. The main takeaway is to build a long-term relationship.

If you negotiate Chinese suppliers to a price that's too low, quality control becomes an issue. #alibaba Click To Tweet

While you may pay a slightly higher price for the first run of your production, on your second order perhaps you order slightly more in volume and get a slight discount. Remember, negotiating with Chinese suppliers is an ongoing process. It is a common thing, and even expected, in Chinese culture and business.

To start your negotiation, find a fair price upfront, using email, Skype, and/or telephone. The price you negotiate upfront with your first order is only a starting point. Ask for a target price, keep in mind the long term play. If you have an important negotiation to address, in the spirit of Guang Xi and building a business relationship, do it in person if at all possible.

If you do it at the factory in China, or even an international trade show, you are more likely to speak with the factory owner or executive management. This means that problems and challenges can be solved with greater ease, because you are dealing directly with decision makers, and not sales reps.

Gary noted that there are external factors to consider in negotiation, which could work in favor of American buyers. The Chinese yuan depreciated roughly 5% towards the end of 2015, and China's economy overall is slowing. As the US Dollar is worth more in China, this can essentially be applied as a discount to American buyers.

#3 Monitor Your Quality Control:

Quality control in the production process is critical to success of Amazon sellers. Problems may occur for any number of reasons, but you protect yourself if you are able to get an agreement in writing. Do your best to specify materials, measurements, packaging, product quality, and any other specifications in writing. If a problem occurs, and the supplier is at fault, you can refer back to this written agreement for an appropriate refund or credit on future orders.

Quality Control is important to monitor through the entire manufacturing process because errors can surface at any time in the manufacturing process. If a problem does emerge, it is much cheaper and easier to identify the problem in the earliest stages, ideally before production has occurred. Gary created a graph to visualize how costs can increase exponentially if it is identified after a product has been produced and shipped.

Identifying quality issues is easiest at the Supplier Selection phase. When you make your initial contact with the supplier, you can ask some revealing questions to probe the quality of product. For example, Gary recommends the "Country Test". Simply ask the supplier what the main export countries are. The US, UK, Japan and other European countries tend to have higher quality expectations, whereas Middle Eastern countries and African countries have slightly lower quality expectations.

Additionally, request a sample from the supplier before you make any supplier decisions. Alibaba suppliers can photoshop a product or easily over-promise their capabilities. It was funny to come across this Alibaba listing recently: the supplier is not the supplier who makes Jungle Stix, yet they took a photo we posted in a previous blog post, added a watermark, and give the impression that they produce the product. Interestingly, the other product that they include is an image of the main seller of marshmallow sticks, MalloMe:

In order to maintain the highest level of production quality, you want to keep your suppliers accountable through the whole process. Get everything in writing by using a Purchase Order. We used a contract agreement with a template in this blog post, and Gary has a free resource on his site.

Before full production begins, you can ask for a pre-production sample. This is the first product of a production run, before full scale production. But it can be helpful to see as an indication of the entire production quality.

And before anything is shipped to your destination country and Amazon warehouses, you can get a post-production sample. If you don't want to spend the time and money to get a sample shipped directly to you (which may be $50-$100 by air), you can ask for photos and videos sent to you.

Alternatively, a third party inspection agency is a good option to ensure quality control for larger orders (those over $3k-$4k). The service may cost $300, which will get you a thorough report and inspection. Third party inspections are especially helpful if you are working with a new factory. On the second or third production run, you may have already built up Guang Xi and trust and may opt out of an inspection.

Building strong relationships with your Chinese supplier is key to building your future business! Click To Tweet

The important thing to note here is that you still have leverage before you have sent the final portion of your payment. If there are aspects of the order quality that do not meet what was specified in the agreement, the supplier is more willing and likely to take corrective action if they have not received full payment.

In Conclusion:

The one takeaway that Gary recommends to ensure success with suppliers is simply, "Don't Assume Anything." Be as clear as possible in your discussions. And get everything in writing, with the suppliers' acknowledgement in a signed agreement. And once you have the agreement, be proactive in monitoring every aspect of quality control and communications. You are ultimately making an investment in your supplier relationships and product quality, so you want to protect that investment as much as possible.

Most importantly, like most aspects of business, working with Chinese suppliers is predicated on building relationships, or Guang Xi. Your relationship with your supplier is the foundation to your future growth, so approach it with respect and invest the necessary time in building that relationship, and you will be rewarded in kind.

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3 Secrets to Successfully Sourcing From Chinese Suppliers

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Have you done your Amazon product research? Found the product you want to sell? These steps require the effort and time (and the proper resources, like Jungle Scout), but you can work through the challenges. Then you are ready to find the Chinese suppliers to make the product.

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Urban Outfitters, Inc. PESTEL & Environment Analysis

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Urban Outfitters, Inc. PESTEL analysis is a strategic tool to analyze the macro environment of the organization. PESTEL stands for - Political, Economic, Social, Technological, Environmental & Legal factors that impact the macro environment of Urban Outfitters, Inc.. Changes in the macro-environment factors can have a direct impact on not only the Urban Outfitters, Inc.

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About Mihai Patrulescu

Mihai Patrulescu is head of Strategic Analysis at Colliers International in Romania. Prior to this position, he coordinated the economic research activities of UniCredit Romania. In 2015/2016, Mihai was seconded on assignment to the Milan Headquarters of UniCredit, working as a management consultant on the implementation of the bank's strategic plan. He holds a Masters in International Trade, Finance and Development from the Barcelona Graduate School of Economics.

Over the past three years, the Romanian economy has recorded some of the fastest growth rates in the European Union, helped by a rapid expansion of consumer spending.

During this period, retail sales have benefited from what can be considered as a perfect storm of growth catalysts: the VAT rate was reduced from 24 t to 19 per cent (respectively nine per cent for food products), net average wages increased by a cumulated 26 per cent, and interest rates fell to historic lows. Overall, these factors have helped drive consumer confidence back towards levels that were last observed in the pre-2008 period, and which was also reflected in a rapid growth rate of turnover for retail sellers.

Combining all of these factors, consumer spending is very close to a cyclical peak. The fiscal stimulus, which has fuelled the growth of consumer spending, will gradually have to be phased out. The government has put forward a series of measures that will keep up expansion in 2017 (e.g. higher wages in the public sector, a reduction of the general VAT rate to 19 per cent), but the picture for state finances, in 2018, is increasingly more complicated.

The current plans for the 2018 budget risk putting the deficit target of three per cent in danger, unless policymakers also implement a series of revenue-generating policies. The preferred course of action is still unclear, and it is possible that the policy debate will remain front and centre in the second half of the year. Overall, the result will be that fiscal spending will provide a more limited support for consumer spending as we move forward.

Against this background, I believe the Romanian market is taking some important steps towards rebalancing. Export oriented services have become the second most important driver of growth, after a sustained annual growth rate above ten per cent during the past five years. Overall, this shift towards services will warrant a continued rise in consumers' disposable income as well as their spending patterns. The shift towards higher incomes is also evident if we look at the upper-middle segment brands that recently entered the Romanian market: COS, Boggi, Lanidor, Kiehl's or Uterque.

The real estate market is responding closely to the conditions in the real economy. Renewed interest in BPO, SSC and IT services has become a major driver of demand for office space and, consequently, it sets the stage for a renewed interest of retail stores in these development schemes.

At the same time, traditional developments in the retail sector have become much more nuanced. 2017 will record new deliveries of approximately 180,000 sqm of gross leasable space (GLA), down from 240,000 sqm in the previous year. Against this backdrop, the structure of the market is changing. Developers of traditional shopping centres will focus on cities with 100,000-200,000 residents such as Râmnicu Vâlcea or Sibiu, whereas retail parks will be the primary focus for the smaller cities.

During this period, retail schemes in Romania's main cities, such as Bucharest, Cluj Napoca, Timișoara or Iași, will focus primarily on extending the existing space and will concentrate increasingly more on entertainment options. This focus on entertainment will be particularly important in order to maintain the positive evolution of footfall; even as consumers shop increasingly more online. Cinema centres and food courts have been the focus so far, but I believe that there will be an increasing demand for retailers that provide family-oriented entertainment.

Furthermore, fashion brands will remain very active in 2017 and there is strong potential for new players to join our market. Several brands from Poland or Turkey will be at the forefront of this trend, encouraged by the good performance of the already established brands from these markets.

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The views expressed in this opinion editorial are the author's own and do not necessarily reflect Emerging Europe's editorial policy.

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Romanian Market Moving Towards Rebalancing - Emerging-Europe.com

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Over the past three years, the Romanian economy has recorded some of the fastest growth rates in the European Union, helped by a rapid expansion of consumer spending. During this period, retail sales have benefited from what can be considered as a perfect storm of growth catalysts: the VAT rate was reduced from 24 t ...

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The trick is to recognize how IT outsourcers reduce costs and then find ways to share in those savings

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Advantages and Disadvantages of sourcing in local countries

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Delayed shipments, rising labour costs, quality claims and compliance issues are just some of the challenges facing sourcing managers. Add in the need for faster speed to market and 'buy now/wear now' demands, and it's not surprising that some UK fashion brands and retailers are looking to buy closer to home. A recent industry event considered both the opportunities and the challenges for local or near-sourcing.
"You might think that it's cheaper to go to China or India [to source clothing], but what people don't factor in is the cost of going over there, the cost of re-processing when you come back, the fact that if there is a mistake you've already paid for it," Jenny Holloway, CEO of social enterprise Fashion Enter, told delegates at the recent Fashion SVP sourcing event in London.

She also raised the question of whether it is more beneficial to source small quantities closer to home. Fashion enter, an advocate for manufacturing in the UK, carries out sampling, grading and production for some of the country's major fashion brands, including online retailer Asos. It is also a centre for learning and development of skills within the fashion and textiles industry.

The organisation's average order size is 500-800 units, which enables production to be completed within the hour.

"Today that is what the customer is dictating," says Holloway. "We can get fabric in five days, our digital prints from Leicester, we cut it as soon as it arrives, and in two weeks we make the garments and they're delivered. It's so fast now. The traditional spring, summer, autumn and winter transition is gone. It is that fast. It's about what the customer wants and they're not prepared to wait any longer."

Liza Canneford, a consultant and former product director for women's wear brand Jaeger, says her argument for going near-shore when she worked for the upmarket fashion label was quality.

Nearly four years ago when she joined Jaeger, over 60% of its production was in the Far East, primarily China - a country Canneford says the brand was "far too exposed to." Consequently, she set about bringing production closer to home and over a period of three years reduced that to just under 40%.

"The reason we still have that amount coming out of China is because we have so much cashmere and silk and China is one of the best places for that," she explains. "We brought back to Portugal tailoring, jerseys, silk dresses. We also brought production back to Italy, Turkey and Eastern Europe - Romania and Lithuania - for tailoring.

"It's about understanding where to go for what product. We would look at the product design, look at the fabric we wanted to use and then work out the best person was to make that with us. That's where the partnerships come in, and knowing and understanding factories."

UK manufacturing challenges

Sourcing closer to home for Jaeger, however, has not necessarily meant choosing UK manufacturers.

"I would loved to have sourced more from the UK but it is extremely challenging to find really good quality factories [here] at the moment," says Canneford. "We had a target at Jaeger of sourcing 15% of our production from the UK and we couldn't do it because of the quality of the product, of the factories, hygiene standards and CSR compliance - these were some of the big issues we were finding.

"I would rather have a slightly longer lead-time and get a better quality product from Portugal than currently use some of the suppliers we met in the UK. Obviously the UK is changing very rapidly and it's a very shifting picture, so that's something we as buyers need to keep up with as well."

Holloway implores retailers to support a return to manufacturing in the UK but concedes that the huge skills gap in clothing manufacturing in the country isn't helping - a challenge Fashion Enter is trying to resolve through its stitching academies.

"We now have real succession planning going on on the teaching side. We also do factory visits. The buyers today do not understand how factories work, so we do continual personal professional development (CPPD) where we talk about how to construct a garment," she explains.

Aside from the skills shortage, for many retailers and brands there is also the challenge of higher cost when considering manufacturing in the UK.

But Canneford believes "it's about making clothes, it's not just about making fashion".

"We are seeing, working with investors, that people want something made with care and quality. In sportswear too, people want something a bit different. A factory has opened in Wales specialising in denim. There is a lot more of that going on. People want niche brands that specialise in [exciting] product."

Buyer training

While Canneford is an advocate for UK manufacturing, she also argues that the crucial element within sourcing is quality - and, more critically, the relationship a buyer has with its supplier.

"As a large scale high street retailer it's a lot more challenging...but if you're a small start-up, it is really important you build a relationship with your supplier so you know the product they are creating for you and you are creating it together as a team. As a buyer you don't get it right all the time so you might need your supplier to do a favour for you to pull your production through the line. It's a give and take relationship," she explains.

The challenge, however, is ensuring buyers coming into the industry have the right training and knowledge to do the job to the best of their ability - a problem she believes is facing many retailers and brands.

"Sadly, you get a lot of buyers come in as graduates with a fashion or engineering degree that are given a lot of responsibility very very quickly. They aren't fortunate enough to go into a factory and understand how one works and that's a really really critical point.

"We have designers coming in who don't have training in fabric so they're designing garments that are never actually going to work because they're using a fabric that isn't suitable for that construction. You need to get your basics straight before you go in and feel confident talking to your suppliers.

"It's not always about buying a cheaper fabric, it's about garment engineering too and that comes with experience and knowing your job. If you respect your supplier and listen to what they're telling you, you will learn so much. You both have a common goal and that is to make a garment and make money."

Canneford believes this responsibility lies with the retailer. "If we want to succeed in this country in retail, then we have to have buyers who are technically proficient in garment construction."

Brexit implications

At present, around 40% of garments imported into the UK come from countries within the EU and its associated customs union. So while the UK faces up to the challenge of whether it will ever become a viable location to produce mass garments, Mike Flanagan, chief executive of UK-based consultancy Clothesource, throws another conundrum into the mix.

"It is the established policy of the British government that on 30 March 2019 we will erect a customs barrier against countries where 40% of our garments come from, and that roughly one in five lorries coming into the country will be stopped and will be inspected."

As Flanagan has written extensively on just-style, the prospect of disruption to the free flow of goods should be a major concern for apparel importers -especially those in fast fashion.

The prospect of Britain leaving the EU has also led to a tumultuous time for the pound - including higher prices for some retailers. British fashion retailers Next Plc and Karen Millen are just two firms who have said they will have to raise prices by 5% to deal with increasing cost pressures from the devalued pound.

"In terms of the impact of Brexit on near-shore sourcing, already there has been an impact on cost," says Canneford. "A lot of companies had hedged their currencies so the impact wasn't immediate. But there have already been price increases, so European manufacturers are quoting 10-15% on their pricing and some of those have already been put onto product."

Holloway says her concern is for her employees, some of whom are from Europe.Under current Brexit negotiations, the UK government is under pressure to guarantee the residence rights of EU citizens already living in the UK, with many skilled EU workers saying they are likely to leave the country before Brexit even happens.

"I've said to [my staff] I will do everything I can to ensure they have longevity. It's quite damning, and I just can't find such a pool of talent in the UK. I'm on tenterhooks about it."

Canneford says the challenge going forward for retailers and brands will be deciding whether to put their prices up, how they will handle their discounting, and whether they are prepared to take a margin hit.

"All of those decisions need to be made, and then there are the implications we don't even know about yet in terms of borders and getting things through. Again, it's all about the relationship with your European suppliers. How are they feeling about supplying the UK?

"Jaeger went through administration recently and that was the third time some of those European suppliers had been through administration with British companies. And UK law around administration over what happens to manufacturers and creditors is very different to the law in Europe and the US. That is something that needs to be addressed going forward."

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What are the advantages and challenges of local sourcing?

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Delayed shipments, rising labour costs, quality claims and compliance issues are just some of the challenges facing sourcing managers. Add in the need for faster speed to market and 'buy now/wear now' demands, and it's not surprising that some UK fashion brands and retailers are looking to buy closer to home.

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China Manufacturing Pros/Cons

One challenge all companies face today is the need to get new products to the market as quickly and as efficiently as possible.

We are aware that China is one of those markets that offer the ability of manufacturing an extensive variety of products and at the lowest rates. While outsourcing is an attractive proposition, companies using outsourcing services should be aware of the pros and cons.

THE PROS OF MANUFACTURING IN CHINA

Putting your manufacturing unit in China can be advantageous in many ways. To maintain international competitiveness, be strategic. Strategies can be positioned around reducing component costs in existing or future product lines. For American companies the emphasis should be on strategic engagement in manufacturing with Chinese partners, making the investment into people and structures and determining involvement based on indirect as well as all direct costs.

Cost Differentials

One of the key benefits is that outsourcing enables companies to cut operating costs. For instance, training costs can often cut into profits. This is especially the case in high turnover jobs such as customer service call centers. Lower salaries are a part of this benefit, though the benefits go much deeper. For instance, each employee that does not work "on site" means one less computer, and no extra or costlier maintenance costs, so outsourcing may provide a better option.

Cheap Manual Labor

Manpower is possibly the most important resource in any company, and is also one of the largest expenses. By outsourcing to China you can reduce costs by between 30 and 80 percent depending on the labor intensity of the product. These outstanding rates will lower your cost of production exponentially.

Expansion Capabilities

Outsourcing production of a new product can allow you to get to market sooner than if you had to build your own factory, acquire equipment and hire employees. In addition, it can bring production closer to Asian and European markets, in case you're looking to expand your global footprint.

Diversification of Business

When you have the manufacturing team based in China, you additional insights into foreign markets. Most companies who manufacture products in this country are likely to diversify their reach and try some of the common local products and this can help in improving your business growth.

Mass Market

The Asian market is growing at an incredible rate. When your manufacturing unit is in China, it becomes easier to sell into the Chinese market, which expands your global footprint and can lead to massive growth in your company.

THE CONS OF MANUFACTURING IN CHINA

As with any business venture, it is always advisable to analyze the pros and cons. Here are some of the problems you may encounter.

Quality Control

A big issue facing companies considering manufacturing in China is quality control.

China can appear very impressive on the surface in that many products look good, but the many standards and regulations differ from American ordinances. That's why it's important to have an agent in China that can make sure everything is up to par.

Low Quality Materials

Don't rely on low quality materials just to keep your cost in check. Regardless of the amount of manufacturing you plan to do, using low quality materials is not encouraged because it's going to impact the overall reputation of your business.

Copyright Issues

When you have your manufacturing base in China, you have to be very careful regarding copyrights, trademark and plagiarism. Ip law is very different in Asia, and you should work that into any contract that you and your business associates sign.

Language Issues

Most Chinese are not proficient in English. Your business operations could be hindered if neither speaks a common language. If that's the case, you'll need a translator or effective bilingual speakers who can help in establishing the right platform between the two teams. If you can't deal with this problem, it couldlead to some serious issues for your business.

In conclusion

Manufacturing in China is both challenging and changing. If you are investing in China for the long haul, your business strategy needs to be driven by factors other than low costs.

Now that you have an idea of manufacturing in China pros and cons, you can weigh both the aspects and come to your own decision.

If you have any questions about the pros and cons of outsource manufacturing, please feel free to contact Baysource Global today.

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The Pros and Cons of Outsourcing Manufacturing to China - Baysource Global

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China Manufacturing Pros/Cons One challenge all companies face today is the need to get new products to the market as quickly and as efficiently as possible.

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Disclaimer: This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.

There is no doubt that nowadays globalization brings opportunities for companies to expand their business activities easily to take advantages of other country's growth through investing activities. However, before investing to overseas, a company should make a careful examination of the country they are intending to invest in especially the industry related to their investment. Examining the relationship between risks will help to measure the risks the company has to encounter and the information is actually helpful for company in decisions making. Based on factual country information and financial analysis, this assignment will point out main factors that will impact Soundtech Technology's general business activities when it starts business in China - producing low cost sound system for budget cars called "Superaudio". This assignment will start with China background information and then six factors in PESTEL model these include political, economic, social, technology, environment, and legal will be presented. In addition, Soundtech Technology's financial overview that includes financial factors as well as sensitive analysis will be conducted based on the data given. Lastly, some recommendations will be make to help Soundtech Technology in making investment decisions.

1. China background informations

- Area: 9,596,961 sq. km

- Population (July, 2010): 1,330,141,295. Annual growth rate: 0.494 %

- Ethnic groups: Han Chinese is 91.5%, ethnic minority and other nationalities are 8.5%.

- Religions: Officially atheist, Daoist (Taoist), Buddhist, Christian is about 3%-4%, Muslim is approximately 1%-2%.

- Languages: Mandarin is also called Putonghua is the main language in China, plus many local dialects.

- Government: Communist party-led state.

- GDP is $4.814 trillion (2009)

- Per capita GDP is $3,678 (2009)

- GDP real growth rate (2009): 8.7%

- Natural resources: mineral is plentiful including coal, petroleum, mercury, iron ore, natural gas, tin, tungsten, manganese, molybdenum, vanadium, magnetite, antimony, aluminum, lead, zinc, uranium. Moreover, China is the world's largest in hydropower potential.

- Agriculture: China is one of the world's largest producers of rice, wheat, potatoes, corn, peanuts, tea, millet, barley; commercial crops include cotton, other fibers, apples, oilseeds, pork and fish; produces variety of livestock products.

- Types of industry: China is focusing on mining, ore processing and others mineral such as iron, steel, aluminum, and other metals. Consumer product is one of the nation strongest industries. Transportation, electronics, telecommunications equipment as well as commercial space are major sectors.

- Trade: Exports (2009) $1.194 trillion: electrical and other machinery, including data processing equipment, apparel, textiles, iron and steel, optical and medical equipment. Main partners (2008) United States 17.7%, Hong Kong 13.3%, Japan 8.1%, South Korea 5.2%, and Germany 4.1%. Imports (2009) $921.5 billion: electrical and other machinery, oil and mineral fuels, optical and medical equipment, metal ores, plastics, organic chemicals. Main partners (2008) Japan 13.3%, South Korea 9.9%, Taiwan 9.2%, U.S. 7.2%, Germany 4.9%.

Undoubtedly, the electronics is the one of the leading industry in China's manufacturing sector. Sales revenue from China's electronics and IT industries (not including software) is estimated approximately $772.8 billion in 2008, reaching a growth of 28.3% over 2007. According to a statistical report by China's Ministry of Information Industry (MII), sales revenue of China's electronic information industry from January to April 2008 increased by 20.5% over the same period of last year. EE Times-China and ESM-China Market Research Dept predict that from 2006 to 2008, China's electronics industry will maintain a CAGR of 25.5% (global sources.com).

2. PESTEL analysis

An analysis of China's Political, Economic, Social, Technological, Environmental, Legal factors is essential to the strategic management and implementation of the project. The positive and negative effect on the projects initiation and development will be pointed out through the analysis of the external factors.

2.1 Political factors

2.1.1 General information

Currently, China Government is ongoing to promote rule of law. After the Cultural Revolution, a legal system to restrict of official authority and revolutionary excesses has been developed. In 1982, the National People's Congress issued a new state constitution that emphasized the rule of law under which even party leaders are theoretically held accountable.

Since 1979, when the drive to establish a functioning legal system began, more than 300 laws and regulations concerned about economic areas have been promulgated. In the 1990s Legal reform became a government priority. Legislation designed to modernize and professionalize the nation's lawyers, judges, and prisons was issued. The Chinese constitution and laws provide for fundamental human rights, including due process, however in practice these are often ignored. In addition to other judicial reforms, the Constitution was modified in 2004 that include the protection of individual human rights as well as the legally-obtained private property, but it does not clear about how some of these provisions will be implemented. Since this modification, there have been new promulgations in bankruptcy law and anti-monopoly law, and modifications for both company and labor law. Although additional safeguards to citizens have been provided in new criminal and civil laws, previously debated political reforms, including expanding elections to the township level beyond the current trial basis, have been put on hold.

2.1.2 Recent political events

Since Tiananmen, 13 rounds of human rights dialogue between the U.S and China has been conducted. In May 2010, the most recent round was taken placed; topics were turned around religious freedom, the rights of labor, freedom of expression, rule of law, the discrimination of race, and multilateral cooperation as well. A foundation to continue these rounds in the future was adopted by The U.S. and China leading to unanimous approval for the next round of dialogue in China in 2011.

The meetings in Lhasa on March 10th 2008, marking the 49th anniversary of the Tibetan uprising turned violent, and led to protests and unsecure state throughout Tibetan areas and others surrounding provinces. The army and police force monitored strictly Tibetan areas for the safety of the 50th anniversary in 2009 and 51st in 2010 and security was tightened in the border with Nepal.

Armed uprising was ongoing when ethnic violence broke out in Urumqi in Xinjiang Uighur Autonomous Region on July 5, 2009. Security control significantly increased in Urumqi and its surrounding areas and as the result some mosques in Xinjiang were closed. As of early 2010, Urumqi was still under a heavy police control and most Internet and international phone communication were totally cut off.

In recent years, riots have been happened in China that has created the unstable condition for foreign companies' investment in China. However, China Government has taken strict measures to prevent and stop this situation that creates safe environment for foreign investors.

2.2 Economic factors

China's economy has been reformed and opened since 1978. A more pragmatic thinking on many political and socio - economic problems has been approved by the Chinese leadership and therefore the role of ideology in economic policy has been partly reduced. China has transformed its economic into the market-oriented that positively impact not only on China but also on the world. These economic reforms China has implemented over the past 2 decades have profoundly affected both individual initiative and entrepreneurship. As the result the poverty has been significantly reduced and the average income has reached to highest level ever seen. At the beginning of 2010China is ranked as the second-largest economy in the world after overtaking Japan to capture this position. An average economic growth has been sustained over 9.5% for the past 26 years. In 2009, its economy reached to $4.814 trillion was about one-third the size of the U.S. economy. The high economic growth along with higher national income growth may boost demand for Soundtech Technology's products - this is big opportunity for the firm to develop its business.

In the 1980s, the combination of central planning with market-oriented reforms were tried to implement in order to increase productivity, living standards, and technological quality but not lead to negative effect on inflation, unemployment, and budget deficits

In addition, Chinese Government pursued agricultural reforms, dismantling the commune system and introducing a household-based system that provided peasants greater decision-making in agricultural activities. Besides that nonagricultural activities like village enterprises in rural areas were also encouraged. Similarly, the government promoted more self-management for state-owned enterprises in order to increased competition in the marketplace, and create opportunities for China's domestic enterprise directly contact with the foreign ones.

On 20th June 2010, China's central bank set the Yuan exchange rate at higher level after committing to increase the flexibility of exchange rate of its currency. Reference exchange rate of the day was set at 6.7980 Yuan on USD 1 - its strongest level since September 2008, up 0.43% compared with the level of 6.8275 Yuan on 21st June 210. A stronger Yuan would make Chinese exports more expensive, help redress trade balances and bring some reliefs to foreign manufactures struggling to complete. The increase of Yuan exchange rate creates disadvantages for Soundtech Technology when they export their products to overseas markets because it raises the price in term of foreign currency.

Especially, in recent years the cooperative relationship between China and Singapore have been improved within related global and regional organizations such as the ASEAN plus China, Japan and South Korea, the Asia Pacific Economic Cooperation Forum (APEC) and the World Trade Organization (WTO). At the same time, both China and Singapore have conducted beneficial cooperation and put efforts to offer training sessions to a third country and to help their companies or enterprises explore and exploit the world market.

The 20th anniversary of the establishment of diplomatic corporation between China and Singapore is marked in year 2010 as well as the event of China's participation in the ASEAN Free Trade Area (FTA). By taking advantages of all the opportunity from the partners, China is ready to work with Singapore to lift bilateral relations to a "new level" and bring more substantial benefits to the citizens of both countries. For this reason, China Government always makes the best condition to welcome Soundtech Technology to invest in China.

2.3 Social factors

With a population officially over 1.3 billion and an estimated growth rate of 0.494%, China is very concerned about its population growth and has attempted with mixed results to implement a strict birth limitation policy. The government's goal is to stabilize the population in the first half of the 21st century, and 2009 projections from the U.S. Census Bureau are that the Chinese population will peak at around 1.4 billion by 2026. It can be said that China has huge population that supply to the market a profuse workforce which is an opportunity for Sountech Technology to expand its business in China.

Another affecting factor that can be considered is the trend of employment with relation to the unemployment level. The current unemployment rate in China in January 2010 is 4.3% which demonstrates that this project would help the society and in turn the economy by creating positive job opportunities.

Source: tradingeconomic.com

Recently, China Government has increased the minimum wages. On 1st April Guangdong increased the province's minimum wages by an average 13%. Moreover, the southern China province produces about 13% of China's economic output, the most among the country's 32 provinces. Minimum wages in the capital city Guangzhou reached to 860 yuan increased $120 per month from 780 yuan, Wages of other cities in the province would also get a boost, with those in some inland cities up nearly 18%. China Government has increased the minimum wages that is a challenge for Sountech Technology because they have to paid more for labor costs that will decrease business profit.

2.4 Technological factors

Chinese science strategists realize China's greatest opportunities in technology fields such as computers and biotechnology, where creates a chance for China to make innovation in these areas. It cannot be denied that a dense network of trans-Pacific contact have been built by most overseas Chinese students that will boost the cooperation between U.S. and China scientific in coming years. The U.S. space program is regarded as the standard of scientific modernity in China is held annually. China's small but growing space program is national pride of China when its third manned orbit was totally successful in September 2008.

Technology Agreement is the model for bilateral cooperation between The U.S and China in science field. In April 2006 the Science and Technology Agreement was extended by a 5-year agreement was signed. The agreement which includes approximately 60 protocols, memoranda of understanding, agreements, and annexes, is considered as the longest-standing between U.S.-China accords. The agreement encompasses cooperation between U.S. and China in variety fields like marine conservation, renewable energy, and health. Besides the U.S China also has close relationship with Japan and the European Union in science and technology cooperation.

Based on the data supplied by the State Development Planning Commission, during the Ninth Five-year Plan period from1996 to 2000, China has significant technological development. 50,000 projects have been set up under the "Spark Plan". Started in 1986, these projects were actually a technological program in order to enhance the IT level in rural areas.

Since 1996 a total of CNY192.9 billion has been invested in the "Spark Plan" in which CNY3.5 billion was from the Government's Funds, CNY41.9 billion were from loans of banks and CNY147.5 billion from private and other social sectors. Since 1996 the Chinese government has invested CNY3.19 billion in the industrial sector to develop technical innovation projects. In addition, since 1999 the government has been focusing on technological innovation of State-owned enterprises by spending CY19.5 billion worth of treasury bonds

A number of districts for high-tech development have been established for researching and developing technological purpose. For example in 1996 the Silicon Valley was built with an CNY101.5 billion investment in the infrastructure construction. Up to now there have been approximately 17,000 high-tech enterprises operating in those districts, with the employees more than 2.2 million.

2.5 Environmental factors

Undoubtedly, along with China's rapid industrial development are the serious negative impacts on environment these include increasing pollution and decreasing natural resources as well. In 2007, China became the world's largest emitter of carbon dioxide and other gases leading to greenhouse. WTO conducted a report on the quality of air in 272 cities worldwide, pointed out seven out of the ten cities that are the most polluted in the world were in China. In addition based on China's own evaluation, two-thirds of the 402 cities which have been air polluted two-thirds of them moderately or severely so. According to environmental report, there is water polluted in almost all of the nation's rivers to some degree and half of the population is lack of clean water for daily life. By some estimates, there are approximately 300 million people have to use contaminated water for drinking every day.

Water scarcity also is considered as an issue; taking severe water scarcity in Northern China as an example that is actually a serious threat to sustained economic growth. Thus, the government has been working on a project for delivering a large-scale of water from the Yangtze River to northern cities, including Beijing and Tianjin. Some research estimate pollution costs hold the Chinese economy from 7% to 10% of GDP per year.

Currently, like any Government, China's leaders are increasingly paying attention to environmental problems in the country. Realizing the important of environmental protection, The State Environmental Protection Administration was officially upgraded to a ministry-level agency, the Ministry of Environmental Protection in 1998. Recently, China's environmental legislation has been strengthened and some progress in stemming environmental deterioration has also been made. China took part the Asia Pacific Partnership on Clean Development in 2005, which unites industries and government to implement common strategies together that reduce pollution and global climate change. Campaign about pollution control was great invested that a factor contributing to a successful Olympic Beijing 2008, though some of the benefits were just temporary in nature. Thanks to these campaigns the quality of air in some cities has been improved recently.

It can be said that China is participating actively in climate change talks as well as other multilateral environmental negotiations, especially discussions about how developed countries deal with serious environmental issues that help developing countries to a greater extent. China has signed the Basel Convention about transporting and treating hazardous waste; the Montreal Protocol about the Ozone Layer Protection and other major environmental agreements.

As long as China is huge country thus water scarcity is regarded as a big issue that also is the project's disadvantage. Besides that, climate change is considered as one of the major systematic risks for Soundtech Technology because climate change is affecting how companies operate and the products they offer.

2.6 Legal factors

2.6.1 Laws support foreign investors

In order to encourage foreign companies to invest in China, China Government has gradually set up a relative complete law system. In 1979, The Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures was published. 20 years later, the Chinese government has promulgated and issued a series of laws and statutes about the establishment, operation, termination and liquidation of foreign-invested enterprises. The main laws and regulations include the three basic laws â€* The law on Chinese-Foreign Equity Joint Ventures, The Law on Chinese-Foreign Contractual Joint Ventures, and The Law on Wholly Foreign-Owned Enterprises; detailed rules for the implementation of the three basic laws; The Company Law of the People's Republic of China; The Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises; Interim Provisions for Guiding Foreign Investment; Industrial Catalogue for Foreign Investment; Interim Provisions Concerning the Investment within China of Foreign-invested Enterprises, Provisions Regarding the Merger and Separation of Foreign-invested Enterprises, and Liquidation Measures for Enterprises with Foreign Investment. These provide legal bases from which to guarantee the independent operation rights of foreign-funded enterprises and to protect the legitimate rights and interest of both domestic and overseas investors.

Currently, the China's government is considering its existing laws and statutes in accordance with the model of the WTO. It has abolished certain obsolete laws and regulations, and will gradually revise the laws and regulations that are incompatible with the rules of the WTO.

2.6.2 China Tax Regime

Tax law is one of the most important issues that SoundTech Technology needs to understand as the tax regulations have a direct impact on ST's business activities. China is known as one of the most attractive incentives packages in Asia. Tax incentives and other facilities for the manufacturing sector are provided for in the Promotion of Investment.

The data below demonstrates the tax that a medium-size company must pay or be withheld in a given year, as well as measures of the administrative burden in paying taxes. These measures include the number of payments an entrepreneur must make; the number of hours spent preparing, filing, and paying; and the percentage of their profits they must pay in taxes.

Indicator

China

East Asia & Pacific

OECD Average

Payments (number per year)

7

24.6

12.8

Time (hours per year)

504

227.2

194.1

Profit tax (%)

6.3

18.3

16.8

Labor tax and contributions (%)

49.6

10.3

24.4

Other taxes (%)

7.9

7.5

3.3

Total tax rate (% profit)

63.8

36.1

44.5

(Source: www.doingbusiness.org )

2.6.3 Procedures to starting new business in Malaysia

When foreign investors want to set up business in China, they have to wait for approval from the Government for a long time. The challenges of launching a business are shown below which include the number of steps entrepreneurs can expect to go through to launch, the time it takes on average, and the cost and minimum capital required as a percentage of gross national income (GNI) per capita.

Indicators

China

East Asia & Pacific

OECD Average

Procedures (number)

14

8.1

5.7

Time (days)

38

41.0

13.0

Cost (% of income per capita)

4.9

25.8

4.7

Min. capital (% of income per capita)

130.9

21.3

15.5

(Source: www.doingbusiness.org)

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The Chinese economy and a PESTEL analysis

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Published: Disclaimer: This essay has been submitted by a student. This is not an example of the work written by our professional essay writers. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.

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Horace Greeley, the famous early American newspaper editor and founder of the New York Tribune in the mid-1800s, famously responded to the question of how to become rich with the statement "Go West, young man!" The same advice is often slightly reformulated and given today as "Go East, young entrepreneur!" Although people today can argue about the correct direction to go to China from the United States, the essence of the statement still holds true today!

Many people predict that China will be the largest economy in the world in the 21st century and will soon surpass the United States. Although the relative cost of manufacturing in China has risen in recent years, the country is still often the cheapest location for American retailers and manufacturers to source goods or parts.

This article is first in a series exploring how U.S. companies can source goods in China, and it focuses on how those companies that cannot afford to establish overseas offices or manufacturing operations can effectively and efficiently source suppliers in China. We will focus on how a smaller U.S. company can and should go about locating suppliers in China.
Internet Search
The easiest and most cost-effective place to start a search for suppliers in China is on the Internet via search engines such as Bing or Google, and B2B sourcing platforms like Alibaba, Global Sources, and Made-in-China.com. Thousands of suppliers are listed on these sites, and you can streamline your search and increase the number of legitimate sources by filtering results for only those entries labeled as "gold member," "verified supplier," "onsite supplier," or "accredited supplier." Good reviews offer some indication that the supplier is legitimate. Some B2B sourcing platforms have endorsed service provider lists and supplier blacklists. For example, Alibaba has a list of banned members.

Some sites also offer special services to further protect buyers. For example, Global Sources has credit-check services and supplier-capability-assessment services that will provide suppliers' key business information including company status, production capabilities, and product quality.

Be aware that verified suppliers at these sites may only mean that the companies are verified to exist; it does not necessarily mean that their reputation, production capability, or quality have been verified (for example, a gold member at Alibaba is a paid status). Further, while these sites have large directories of "suppliers," some are simply traders or wholesalers, not manufacturers. You won't get the best price from traders or wholesalers, so you need to do your own diligence on potential suppliers.

It is worth mentioning that Global Sources also has China Sourcing Reports (CSRs) that have in-depth studies focused on specific sourcing industries in China. In the CSR, you can find qualified suppliers and their verified contact information. This report also provides industry overviews, top-selling products, and other pricing and market information, although such information may not always be up-to-date.
Social Media
Social media is not necessarily an ideal platform to identify suppliers. Only some suppliers have a social media presence, but they can be a good source for feedback or reviews of potential suppliers. Therefore, be cautious when relying on such platforms and remember to do your own due diligence as the information provided is often unverified, reviews are often anecdotal, and sample sizes may be small.

Also, there are now many professional LinkedIn groups focused on sourcing in China:

In addition, some forums such as the Alibaba forum, Smart China Sourcing at Global Sources, and China Sourcing Blog offer good tips. Finally, be sure to check on any complaints other people may have shared at Ripoff Report.
More AllBusiness: The Top 25 Home-Based Business Ideas 10 Websites Where You Should Have Your Company Profile Listed 25 Frequently Asked Questions on Starting a Business The 10 Most Creative New Business Ideas Out There Trade Shows
Trade shows are another way to find legitimate suppliers. By attending trade shows, you have the opportunity to talk to potential suppliers face to face about their companies, products, production capacity, quality-control procedures, and other key business areas. Such direct interaction can help you evaluate suppliers and verify their abilities.

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Sourcing Goods And Suppliers In China: A How-To Guide For Small Businesses

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By Richard N. Frasch and Charlotte Zhanghaixia Westfall Horace Greeley, the famous early American newspaper editor and founder of the New York Tribune in the mid-1800s, famously responded to the question of how to become rich with the statement "Go West, young man!" The same advice is often slightly reformulated and [...]

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By Ben Richardson
Business reporter, BBC News, Timisoara, Romania

The Romanian town of Timisoara is probably not the first place that springs to mind when you think of Savile Row tailoring and top-quality clothing.
However, the next time you pick up a raincoat from Gieves & Hawkes, or even buy some women's wear from Jaeger or Reiss, there is a good chance that it will have come from the family-managed factory of ModaTim.

Run by Ovidiu Sandor and his sister Animona, the company believes that the "Made in Timisoara" label can match its more prestigious rivals in Milan, Paris and London, especially after Romania joined the EU on 1 January.

"People have an image of Romania as a place with no future, where workers are forced to make clothes," explains Mr Sandor. "I don't think they understand the amount of work and skill that we put in."

Many of the world's main clothing companies have already cottoned on and firms including H&M, Zara, Lacoste and Dolce & Gabbana have all shifted manufacturing to Romanian producers.

This has helped turn Romania into one of the largest suppliers of clothing to its new EU partners, with exports worth more than 3.5bn euros (£2.4bn) a year.

'Quality garment'

ModaTim's factory is a short walk from Timisoara's regal main square, and its squat concrete outline harks back to a Communist past that forced local tailoring businesses to merge and then nationalise their operations.

Despite a cold exterior of chipped paint and industrial grey, the inside of ModaTim is a whirl of noise and colour, as more than 1,100 mostly female workers cut, stitch, press and package.

Many of the workers have been with the company for decades rather than years, and this is where Mr Sandor believes his edge will be when taking on larger and cheaper producers within the EU and in emerging nations including China.

"It takes years to get the skill and experience needed to make a quality garment," he explains as one of the longest-serving line managers embraces his sister and starts telling a story of how the two executives used to run around the factory floor when they were children.

"When people think of a price for clothing, they think of it as a measure of cloth quality," Mr Sandor explains.

"What they don't understand is that fabric is only part of a package that includes cut, sizing and technique."

For example, a key part of any jacket or overcoat is how the original design is sized for production. The more complex the sizing or grading, the better the fit and the more expensive the product.

"At the moment, Asian goods can't match us on this front," Mr Sandor says.

Another factor is the marketing costs of the top brands, especially when you consider that manufacturing usually only accounts for between 5% and 10% of the retail price paid by consumers on the UK High Street, he explains.

Tighter fit

Romania has a long tradition of supplying European clothing firms. Even during the Cold War years, ModaTim sold goods to Western Europe and the US, although that market diminished towards the end of the 1980s.

Timisoara, meanwhile, has always had close links to Western Europe, thanks to its proximity to the Hungarian and Serbian borders, as well as its ethnic German, Hungarian and Serb minorities.

Go for lunch in the centre of town today and you are likely to hear diners speak in Italian or German or bump into executives from companies such as Procter & Gamble, Draexelmaier, and Nestle.

The international nature of Timisoara has helped prepare ModaTim for the challenges of life within the EU, Mr Sandor says, although he admits that the firm will have to keep boosting efficiency as the price of labour rises.

Romania's textile industry may be set for a period of upheaval

Another problem is that with Romania's economy expanding quickly, there has been a decline in the unemployment rate and a squeeze on available workers.

"If I could take on another 100 workers tomorrow, I would," Mr Sandor says in the shadow of the business centre he is building on a plot next to ModaTim.

"But I just can't find them."

More worryingly, and despite Mr Sandor's confidence in the quality of ModaTim's products, industry figures showed that total Romanian textile exports declined between 2004 and 2005.

Analysts are worried that this trend may continue into 2006 and 2007, as fashion firms look for cheaper markets and Asian producers close the quality gap with their European rivals.

Some industry observers predict that EU membership and increased competition may lead to the closure of as many as a quarter of Romania's 8,000 clothing and garment companies.

Fashion split

While doubts may hang over Romania's textile industry as a whole, Mr Sandor believes the EU will help rather than hinder him in carving out a profitable niche for ModaTim.

He explains that most of ModaTim's fabrics come from Italy, the UK or Spain, and the company will now have less paperwork to complete when sending the finished clothes back to its clients.

Simplified border controls will also mean that it can ship a lorryload of 2,000 jackets on Friday and know that it will arrive in Germany on Monday morning.

At the same time, the company should be able to get access to cheaper financing as Romania's economy and interest rates converge with the EU.

"Fashion has split down the middle," says Mr Sandor. "It's either very cheap or very expensive, which is why we have shifted our business to focus on the top end of the market."

"I am not sure how much the consumer really cares about where their goods come from, as long as they are made well."

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BBC NEWS | Business | Made in Romania for the style elite

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By Ben Richardson Business reporter, BBC News, Timisoara, Romania The Romanian town of Timisoara is probably not the first place that springs to mind when you think of Savile Row tailoring and top-quality clothing.

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Pros and cons of outsourcing and sourcing

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Pros and cons of outsourcing and sourcing

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Outsourcing pros and cons, outsourcing pros, cons of outsourcing, disadvantages of outsourcing & effects of outsourcing

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Read this article to find out information about outsourcing pros and cons, outsourcing pros, cons of outsourcing, disadvantages of outsourcing, effects of outsourcing, outsourcing, outsource, offshoring & offshore

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THE PROS:

Urban Outfitters , Anthropologie and Free People all have collections with a socially or environmentally positive impact.

URBN discloses very little about its supply chain and its social and environmental impact.

The company does not share any goals regarding how it is working to improve environmental and social conditions in its supply chain.

URBN is not a part of any multi-stakeholder initiatives and does not publicly share information on its Corporate Social Responsibility (CSR) initiatives.

The company has been embroiled in a number of controversies regarding some of the offensive products it has sold.

/ URBN owns Urban Outfitters, Anthropologie, and Free People.

/ Urban Outfitters has 230 stores, while Anthropologie has 187, and Free People 90.

/ As of January 31, 2014, URBN employed approximately 22,900 people in wholesale and retail.

/ We don't have any information on: how many people the brand employ in their supply chain, lead times, the number of garments made annually and how long their products are designed to last.

/ In 2015 the Huffington Post reported that Urban Outfitters asked some of its salaried employees to volunteer, or work for free, at a fulfillment center in Pennsylvania in anticipation of a busy month.

/ The brand does not disclose a public list of suppliers or the countries in which their suppliers are located.

/ It is unclear if URBN can trace their entire supply chain.

/ The brand does not communicate anything about the impact of their supply chain or what they are trying to do to improve it.

/ The brand does not have a publicly available supplier code of conduct.

/ URBN does have a response to the California Transparency in Supply Chains Act.

/ URBN does not knowingly source or carry products that use cotton originating from Uzbekistan. The brand may terminate their relationship with suppliers if they are found to use cotton originating from Uzbekistan.

/ In 2014 Urban Outfitters received the lowest score possible on a survey conducted by the Responsible Sourcing Network that measured action taken by brands to ensure cotton originating from Uzbekistan was not used in their products.

/ Anthropologie stocks brands produced by artisans but these are hard to distinguish from other products on their website.

/ Good Guide rated Anthropologie and Free People a 4.5 out of 10 for society; This company's social policies, practices and performance place it among the worst 50% of companies rated by GoodGuide.

/ The Urban Outfitters Urban Renewal Collection uses recycled fabrics, deadstock fabrics, vintage, organic cotton and other sustainable materials.

/ Free People has a vegan leather collection.

/ In 2009, Urban Outfitters made an agreement with PETA to stop selling fur in their stores but failed to do so as in January 2011 the store was selling a cardigan trimmed with real fur. They made an agreement to stop selling fur seriously and are taking steps to ensure that this mistake doesn't happen again.

/ PETA campaigned for Free People to cease the use of angora in their products. In response Free People made the following commitment: Free People will immediately cease buying and producing products containing angora fur, and anticipates being completely angora-free by 2016. This will complete a longstanding effort to make the entire URBN portfolio angora-free.

/ URBN does not publicly share any goals to improve its social or environmental impact

/ We don't have any information about whether or not URBN is involved in any multi stakeholder or CSR initiatives.

/ Richard Hayne the URBN CEO received a salary of $1million last year.

/ The Week wrote an article about some of the controversial products URBN has sold. The website claims that these products offended certain groups including blacks, Jews, Native Americans, liberals, conservatives, and eating-disorder awareness groups.

/ After four years, the brand is still involved in a legal battle with The Navajo Nation for alleged trademark infringement, violations of the Indian Arts and Crafts Act, and other allegations.

/ The Urban Outfitters Urban Renewal Collection uses recycled fabrics, deadstock fabrics, vintage, organic cotton etc.

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Urban Outfitters: ethics, sustainability, labor rights data researched by JUST

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THE PROS: Urban Outfitters , Anthropologie and Free People all have collections with a socially or environmentally positive impact. URBN discloses very little about its supply chain and its social and environmental impact. The company does not share any goals regarding how it is working to improve environmental and social conditions in its supply chain.