A Case Study of Footwear Industry in India

The Indian footwear industry has developed substantial links in the global production network. But, this industry is still dominated by firms that cater largely to the domestic market through the artisanal production system. Specific footwear centres and sections of firms in traditional footwear clusters have established strong relations with the export market. Still, there are only few firms (e.g., Lotus Footwear Ltd., Apache Footwear Ltd. Etc.) that are directly involved in the global production chain of multinational corporation (MNC) in the sports footwear category.. Apart from TATA, no large domestic corporate firm is involved in the footwear production either for export or in the domestic market. The marketing system of export and domestic markets can be aptly compared in the theoretical framework of transaction cost economics (Tesfom et. al, 2003). The key elements of this framework are asset specificity, uncertainty and frequency. In this low technology industry entry barrier is low and asset specificity is largely related to market information. In export market, the market research is largely undertaken by importers (wholesalers, retail chain stores, departmental stores etc.). In the absence of organised market research by wholesalers (along with low development of retail chain stores) direct entry into domestic market requires substantial resources. Second, greater uncertainty exists in the domestic market in the sense of market volatility – lack of information on evolving fashion requirement, demand in particular market and less availability of assurance instruments (letter of credit, agents, quality inspection etc.). Third, importers place relatively larger orders in specific frequency (seasons) whereas domestic wholesalers order in small batches and at less regular frequency. In this scenario, the size of market, type and quality of product to be manufactured broadly determines the choice of production technology in different market segments. However, the process of technology adoption and technical change therein is influenced by the existing institutions with its specific incentive and disincentive structures which are embedded in the culture (caste specificity of traditional footwear production) and other institutions that are