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Integration in footwear and apparel industry

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Labor-intensive firms, mainly in the apparel and footwear industries, choose to outsource production to countries where labor is abundant (primarily Southeast Asia and the Caribbean). However, those firms do not integrate with their suppliers there. Firms that utilize a more capital-intensive industry, on the other hand, choose to integrate with their suppliers. Explain some possible differences between these two industries. What would explain these choices ? Use this week's lecture and assigned reading to inform your post.

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Solution Summary

The answer to this problem explains the reasons for vertical integration with Southeast Asia and Caribbean companies in footwear and apparel industry . The references related to the answer are also included.

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Labor intensive firms in Southeast Asia and Caribbean are not attractive for US firms for acquisition. First, the American firms in the apparel and footwear industry will have difficulty in recruiting, retaining, and motivating local laborers. The American firms experience huge cultural and legal differences with the labor in Southeast Asia and Caribbean. In contrast capital intensive firms have a lower labor component and seek foreign direct investment in Southeast Asia and Caribbean. ...

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