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ACADEMIC PAPER

The diamond approach to the competitiveness of Korea’s apparel industry
Michael Porter and beyond
Byoungho Jin
Oklahoma State University, Oklahoma, USA, and

The diamond approach

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Hwy-Chang Moon
Seoul National University, Seoul, South Korea
AbstractPurpose – The Korean textiles and apparel-related industry has played a major role in the country’s development; however, this sector’s competitiveness is decreasing due mainly to labor costs. As with the country’s economic development, the new sources of competitive factors need to be strategically developed and cultivated. The purpose of this study is to explore what constitutes a country’scompetitiveness in the global apparel market after losing its labor competitiveness and how a country effectively achieves it. Design/methodology/approach – This study employs two competitiveness models, Porter’s diamond model and a generalized double diamond model, as a theoretical framework. Along with two theoretical models, this study employs extensive literature reviews, examples of successful?rms, and four interviews with ?eld practitioners in the Korean apparel industry. Findings – Beginning with Porter four determinants (factor conditions, demand conditions, related and supporting industries, and ?rm strategy, structure, and rivalry), new sources of competitive advantage factors are suggested for the evolving industry. The generalized double diamond model incorporates internationalactivities, which may occur either within a country or outside a country. Utilizing generalized double diamond model, the future directions and solutions for the industry with the identi?ed new competitive factors were suggested. Originality/value – Based on the models and the identi?cation of new competitive factors, the Korean apparel industry is reviewed, and recommendations are made for itscontinued growth in the global marketplace. Implications pertaining to the creation of a dynamic self-reinforcing diamond system were also suggested. Keywords Competitive advantage, Textile industry, South Korea, Modelling Paper type Research paper

Introduction The textiles and apparel-related industry has played a major role in the development and economic success of South Korea (Korea, hereinafter.).This important industry cluster in Korea has accounted for 41 percent of its total exports during 1970 and nearly 30 percent during the 1980 (Dickerson, 1999; Porter, 1998). Korea represents the ?fth largest exporter of textile and apparel-related goods in the world, followed by China, Italy, the US and Germany (Korea Federation of Textile Industries, 2002). However, its contribution to both theKorean and international competitiveness is

Journal of Fashion Marketing and Management Vol. 10 No. 2, 2006 pp. 195-208 q Emerald Group Publishing Limited 1361-2026 DOI 10.1108/13612020610667504

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decreasing due to an increase in labor costs. During 2002, while it still maintained major trade surplus and remained as the country’s largest employer, it only accounted for10.1 percent of the exports, as compared to 41 percent during 1970 (Korea Federation of Textile Industries, 2002). In 2000, the hourly wage of Korea was $5.73, as compared to $0.41 in China, nearly 14 times higher than that of China. Due to high labor costs, more clothing companies have sourced clothing for domestic consumption from lower wage countries (Korea Federation of Textile Industries, 2005).Cheap labor serves as a developing country’s competitive tool in global markets. However, as in the Korean case, cheap labor lasts for only a short time. As with the country’s economic development, the new sources of competitive factors need to be strategically developed and cultivated. Therefore, knowing what constitutes new sources of competitive advantage is critically important to set a…