ABSTRACT
This chapter addresses how twofold competitive challenge has been met by German manufacturers. It shows how more and more German firms have looked to overseas production to achieve cost-competitiveness, but also how such firms have capitalized on the geographic proximity of eastern European production sites to add speed of delivery as a complement to cost. The chapter presents how many firms have split their manufacturing, with less price sensitive and more fashionable products manufactured domestically and the remainder sourced overseas. Production is characterized by a high division of labour, by relatively simple production equipment, by low investments, and by a high number of semi-skilled employees. The hitherto large and somewhat efficient East German clothing and textile industries have declined as a result of a lack of modern marketing, and the breakdown of the eastern European market for their products. Outward processing trade is the preferred option for clothing firms who want to outsource production.
