Upgrading in the global clothing industry: the transformation of Boyner Holding

Abstract

The authors examine the complexity of the structure and corporate practice of Boyner Holding, a Benetton supplier in Turkey as well as a manufacturer and a retailer in its own right. Their analysis has implications concerning the fluid, intricate and dynamic power relationships within the global clothing industry, as well as concerning the availability of upgrading opportunities for corporations in peripheral places such as Turkey. The analysis also points to the current blurring of the traditional distinctions between production-based and distribution-based firms, between full-package manufacturers and original brand name manufacturers and, in fact, between lead firms and their suppliers.

Keywords:

• Clothing manufacturing
• Full-package production
• Brand-name manufacturing
• Clothing retailing
• Globalization
• Networks
• Power relations
• Upgrading
• Firms
• Turkey

Notes

For simplicity, the company is called by its current name Boyner Holding (or simply Boyner) throughout the paper. Moreover, the words individual business organization, firm and corporation are used interchangeably for Boyner. Of all 11 companies, two (Altinyildiz, a manufacturing company; and Çarsi, a department store) receive more attention because they are public companies whose financial data are not as difficult to obtain as that of the remaining nine. Again, the words company and subsidiary are used interchangeably here. Information on Boyner, unless otherwise stated, is based on interviews with Esel Çekin and Serdar Sunat of Boyner Holding, and popular business literature.

The particularities of the Turkish economy, from the specific perspective of food manufacturers and retailers, have been discussed elsewhere (Tokatli & Eldener 2002: 229–233).

The Benetton Group of Companies (which is 67.1 percent owned by Italy's Edizione Holding) is a significant global buyer which uses low-cost networking via informal and flexible agreements with thousands of partners. Benetton's success is believed to be based on a combination of control and flexibility: control over distribution and retailing and design, and flexibility in production (Elson 1989). By using a network of subcontractors and licensees, including Boyner, Benetton is able to hold down overheads, avoid the problems of managing a large labour force and enjoy the lower costs and greater flexibility of smaller firms (Elson 1989).

Levi Strauss & Co. is a lead firm which was especially successful during the 1990s, with sales peaking at US$7 billion in 1996 (Agins 2000). This is the company whose 501 Jeans were the most fashionable jeans for a long time and whose loose-fitting Dockers casual pants were very successful in the early 1990s. Levi Strauss & Co. turned Dockers into a ‘billion dollar business’ in only five years (Agins 2000). In the second half of the 1990s, jeans marketed world-wide by the Gap, Polo and Tommy Hilfiger, together with bargain versions from Sears and J.C. Penney's, chipped away at Levi's market share and Levi's jeans sales dropped to US$6 billion in 1998 (Agins 2000). The result was an unprecedented world-wide restructuring which cost the company US$1 billion and ended up with the closure of half of Levi's factories in the USA and the laying off of thousands of workers (Agins 2000; Rosen 2002). In May 2004, Levi Strauss & Co. announced its decision to sell its Dockers brand (which is sold in 57 countries and generated US$1 billion in sales for Levi Strauss & Co. in 2003 and an additional US$360 million in sales for other wholesalers that licensed the product lines) in order to save its jeans business.

Benetton functions within a three-tiered structure: The manufacturing centre of the group is the high-tech facility at Castrette (Treviso) in Italy which is capable of turning out over 100 million casual and sportswear garments every year. This centre is supported by a first tier of approximately 150 firms which form the productive ‘core’ of the group. This first tier includes suppliers of raw materials, suppliers of unfinished products, production plants and joint ventures. A second tier consists of approximately 1,600 subcontractors. Finally, a third tier includes about 7,200 independent shops distributed in 120 nations through licensing contracts (Perulli 1999).

The distinction between franchising and licensing is not always clear cut. For example, even though in much of the literature Benetton's system is defined as a system of franchising (see Elson 1989; Crewe & Lowe 1996; Perulli 1999), Benetton calls its partners licensees rather than franchisees; a position which became clear when, beginning around 1986, a number of its American partners sued Benetton, charging it with misrepresentation, fraud and violation of franchisee laws in the USA. Benetton argued that the relationships were not subject to franchising laws simply because there were no formal franchise agreements (see Agins 1992). Benetton operates by handshake agreements with its partners. The informality of the agreement is one of the aspects of the firm's enviable flexibility (Peters 2000). Licensees, as outside manufacturers, produce and market the merchandize under a designer trademark, paying a certain percentage of sales back to the lead firm.

For example, the two largest corporations Sabanci Holding and Koç Holding have, respectively, 40 and 81 subsidiaries (Oh & Varcin 2002).

A recent and well-publicized example of such wrongdoing is that of the Uzan family, who took advantage of the diversified nature of its investments (Anon. 2002b).

According to Esel Çekin of Boyner Holding, the advantages of serving the entire spectrum of income groups have been especially clear after September 11, 2001: after this event, the segment of the society which ordinarily depends on shopping abroad turned to Beymen, as some of Beymen's clientele shifted to NetWork and some of NetWork's clientele to Benetton and Çarsi. Despite the shuffling, almost the entire clientele was kept under the Boyner umbrella.

Source: http://www.yfas.com.tr.

See http://www.ekorehber.com/haber.php?.haberno=8427 (in Turkish).

http://www.activefinans.com.

One piece of anecdotal evidence is that Turkish firms have the habit of delaying wage payments and investing the money in the money market. If the finance department can hold on to the wages for an extra day, the most popular short-term investment called the Turkish Lira Repurchase agreements (repo transactions) can, for example, offer impressive overnight interest rates which averaged around 25 percent in 1999 (Akat 2000).