Conclusion

Leader garments- global geographic scale

Subcontracting is performed in a local/domestic scale, while raw material sourcing is

done more on an international scale

Philippines focuses on manufacturing and delivery. Makalot in Taiwan is the one concerned with
design and marketing

Type of governance- market, modular, relational, captive, hierarchy

For deciding this 3 factors- Complexity of Transactions, ability to codify transactions,

capabilities in the supply base

1. Complexity of transactions

Degree of Dependence- all functions are outsourced (manufacturing, raw materials) HIGH

Length of Trading Relationship- long term and exclusive relationships HIGH

Ordering Procedure- inherent relationship no bidding for contracts LOW

Leader does not fall under market type

2. Ability to codify transactions

Price Determination – controlled by leader

Credit Extended – no credit policy

Contractual Relationship- largely dependent on buyer specifications

Inspection- high rate of inspection

Falls under modular or captive

3. Capabilities in the Supply-base

Technical Assistance- low level of assistance except old machinery Unilateral

Communication- online communication internally as well as with gap Multi channel

Outsourcing Payment Terms- works with reputable firms and faces problems very rarely. No
delay

Falls under MODULAR

 ​ rocess upgrading is given emphasis in the Philippines. Product upgrading, functional
P
upgrading, chain upgrading all done by Makalot in Taiwan. A chain may have several types of
topologies depending on the viewpoint of a particular factor.

In this particular case, the relationship of Leader Garments (in conjunction with Makalot) with
Gap and other buyers is modular, but as the chain moves down towards the subcontractors, the
relationship is now more on the “captive” side.