Textile Business: Supply, Demand, and Price

In order to produce the product consumers want, the owners of their company need to make sure there is a balance in their business. They must be informed of the prices of the raw material needed for production of the good and the price they will sell it, the types of product to produce and also the quantity of each according to the demand. These factors are valuable information for all companies that look for success. They all try to reach the equilibrium point where the demand equals the supply, otherwise the problems would be surplus or shortage. An efficient procedure on working must be done, in order to get owners and customers happy.

According to the Cotton Council of America, China, India, and the United States are the three largest cotton producers. Cotton prices can change based on weather conditions, changes in supply and demand. And if prices changes, they affect farmers, spinners, manufacturers, and retailers. For example Arizona reduced its production of cotton due to freezing weather in late 2012 and this affected people in this business. They had to increase their cotton prices because of the scarcity of supply and the increase of demand. This benefited farmers, but not textile companies. These companies had to look for available supply with the lowest price as possible while they’re in competition.

This also benefited workers in the production of cotton by pushing the labor costs up. Workers started to receive higher wages because of the increase of cotton price and also because workers noticed the industry was improving so they asked for higher salaries. This also happened in Arizona, its labor costs went up from $27.43 in 2009 to $28.01 in 2011. This shows how demand can influence the price.

Because of the high cotton prices, retailers had a complicated decision to make. They had to decide what their selling prices would be. If they increase their price, buyers would not purchase as before as when it was cheap, which will make their production unworthy. But if they decrease their prices, buyers would purchase more than before, since the product is cheaper, which will make the retailers lose money. So the solution for the retailers is purchasing less expensive garments from manufactures and cut down on their choice. After a while, if the cotton prices are still high, then retailers have to raise the prices of their products. That’s what happened in Arizona.

Free Enterprise and Government Control

From the 90's, the American government had a direct involvement in the textile industry through its economic policies. Because of the tendency of the high standard of living of the American citizen, salaries were extremely higher than any other emerging country in the textile industry. This is the main reason the United States began to close the major part of the textile industry, including the fact that they could not compete with foreign industries.

                The problem is when the government intervenes in this field. However, the fault is not only the government´s, but also the executives´. Some ask for more government policies for some reasons: they want total guarantee so their business will succeed and others because they want more relief or benefits from the government when competing with other businesses. So, the government took advantage of this request and brought some regulations to order to have control on this industry. Unfortunately these regulations caused many disadvantages. For example, the government limits competition between textile businesses, which leads those national companies to lose the competition against foreign companies. For starters, in the United States the labor costs, raw material costs are higher, and more efficient machinery are limited due to the great high standard of living a government provides to an American. That´s why it´s so hard for an American firm to be successful, since they don´t have enough utility nor a decent gain from the production of materials and services.

It´s just inconvenient for Americans to pay high wages that the government requires. And the worse thing, it´s to know that the money from these paid wages by the Americans are being used by the government to reduce the raw material costs of foreign businesses, where the foreign firms end up winning competition.

Another regulation is the antitrust laws. They don´t let textile companies to improve their methods of producing nor creating new products. The failure of these companies are also because foreign textile firms are free to buy cotton in any market at a lower price than an American firm does.

In conclusion, the government role can affect dramatically the whole future of the textile industry in a country. Its regulations are established in order to benefit citizens but it also can cause huge problems to the companies, like a total failure in this field. So, notably it is better for this industry not to have too much involvement from the government. It would be beneficial for the executives to have a free enterprise in order to have total freedom when producing a good or service and selling it to gain as much as possible. In other words, a country working based on the term laissez faire would be the best choice because it´s when businessmen are totally free to create wealth and to improve the growth of their business.