Why Are Labour-Intensive Factories Surviving in Japan? A Case Study of Apparel Sewing SMEs in the North Iwate

The choice between domestic and foreign production is one of the most important decisions not only for international business management but also for economic diplomacy and industrial policy. The reality is not a binary choice, but some firms use both. Why do companies maintain labour-intensive production in developed countries in the globalised world? To understand business challenges and strategies, this study examines small and medium-sized enterprises (SMEs) in the garment factory agglomeration in the North (Kenpoku) area of Iwate Prefecture, Japan. The in-depth case study, with a special focus on the six competitiveness factors of Japanese apparel firms, recognises that the ‘Made in Japan’ branding strategy is one of the effective ways to attract Japanese customers. This marketing strategy may motivate some firms to consider international market development. However, most Japanese SME apparel manufacturers play the role of original equipment manufacturer (OEM) for specific domestic market-oriented apparel companies. To meet customers’ strict delivery requirements, our case SMEs are developing multi-skilled workers to cope with high-mix small-lot production and fast delivery simultaneously. This management innovation is essential for building long-term business relationships and trust with corporate apparel buyers and surviving competition from products made in China and other developing countries.