Founded in 1898 American Apparel has come a long way in the garment industry, the company has expanded and grown with the dynamic of the business environment and has gained goodwill from all the stakeholders. The company is based out of los angles and vertical integration has been a significant part of its operational strategy.
Vertical integration is the process of by which a business organization increase and improve its operations. It involves dividing the same production path into various steps. The process of supply chain is owned by the company at various levels. For example: when the company produces both the end product as well as the required raw material. The supply chain involves four stages: commodities, manufacturing, distribution and retail. This process helps the company reduce the cost of production and manufacture as well as increase the efficiency of the resources by implementing multiple usages.
The company has also established itself as a successful multinational company and owns more than 270 retail stores in 20 countries all around the world. One of the most unique features of American apparel is that it is a company in the fashion industry that has implemented both forward and backward vertical integration a central part. The decision of the management plays an important role in the operation as well as earning the revenue for the company. The organization does most of the work in the line of production starting from cutting of the fabric and sewing it, it also owns several knitting and dyeing services in Southern California. American apparel also owns a distribution warehouse, a wholesale operation. The designing of the garments and the promotional strategies of the company are formulated and implemented is carried out by the company. Starting form advertising, photography and clothing models are from the resources that the company owns.
The advantages are that the business operation using vertical integration achieved extraordinary speed and elasticity as well as in any kind of policy making and decision making process. This process also enables the company to be more innovative in terms of design and fashion trends. It also helps the company to meet the requirements of the customers before the competition. Vertical integration is the process which also reduces the product development cycle.
One of the biggest disadvantages of the process it that it engages a significant amount of capital and also it shifts the focus of the business which may have an impact on the quality of the product or service. If there are some significant changes in the economy like depression then the company will face a huge set back.
Therefore, the tangible factors impacting the vertical integration are firstly the resources like factories, facilities, warehouses etc of the company and the stakeholders like the employees and the managers of the company also has an important role. Some of the intangible factors are: motivation, talent acquisition and organization of implementation of the strategy of vertical integration are responsible for the success of the process.
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