Documenting the American South Logo
Excerpt from Oral History Interview with Gordon Berkstresser III, April 29, 1986. Interview H-0263. Southern Oral History Program Collection (#4007) See Entire Interview >>

Small, flexible companies, and large, capital-rich ones find success in textiles

Berkstresser describes some of the different business models in textiles, offering insights into the dynamics of the industry. Small, specialized producers and large companies with vast resources find paths to productivity, but companies without the flexibility of small firms or the capital of large firms have trouble. He sees the industry moving toward those two poles as the companies in the middle fail.

Citing this Excerpt

Oral History Interview with Gordon Berkstresser III, April 29, 1986. Interview H-0263. Southern Oral History Program Collection (#4007) in the Southern Oral History Program Collection, Southern Historical Collection, Wilson Library, University of North Carolina at Chapel Hill.

Full Text of the Excerpt

I think that one of the things, though, that, looking at the future, that this report that we did for the Office of Technology Assessment really gets into is that, in addition to saying that we've already had a structural change and that now the whole industry is market-driven—people are recognizing that—that the solution is not just to automate, unless you can retain flexibility. Automation by itself is still going to kill you, if you can only produce one thing. The days of Henry Ford being able to say that you can have any car, as long as you like one color—they're gone. But also we have a situation where some people have felt that the only way the industry will survive is if it aggregates and our research here indicates that that is not so.
Do you mean combine, like conglomerates?
Yes. What it comes down to, it's sort of like looking at teachers' salaries and the consumption of alcohol—statistically, they co-vary, but I wouldn't say that one is the cause of the other. We've got the situation here in the textile industry and apparel and so forth where there are going to be structural changes and they are a result of this being market-driven. In some research that we did here, when we looked at value-added productivity as a function of the size of the firm we found that the very small firms, who have a lot of flexibility, who have very little access to large groups of capital, but a lot of flexibility and a[re] very fine-tuned to a small segment of the market—a small firm that produces one product and knows its market well—it's flexible and can respond and can lay off people and hire people back—control its costs tremendously—those people have a moderately high productivity. Way at the other end, the very large firm, with access to huge amounts of capital, with economies of scale, with not as much flexibility, true, but ability to plan out in the future on commodity fabrics like blue jeans, denims. Again, high productivity. It's the poor people in the middle. The big people, again, usually have what we call a product-management type of organization in that—take companies like Burlington, J.P. Stevens, so forth—for each product that they produce, there is a manager who knows that market. He concentrates on that market. There is a product manager for towels, and a product manager for sheets, and a different product manager for blankets even within the blanket, sheet, bedspread thing. Frequently there will be a different product manager because there are that many being produced, you can afford to have an executive at $100,000 managing each of those things. Poor guy in the middle, he's got a problem. He doesn't have the flexibility of the small firm. He's still got a fairly big capital business. He can't just lay off everybody. He's got a plant, he's got certain overhead expenses— [END OF TAPE 1, SIDE A] [TAPE 1, SIDE B] [START OF TAPE 1, SIDE B]
So what I see, and some of the people who are working with me, is not just an aggregation or conglomeration but both ways, that the important thing is you can't just say that every fiber, textile, apparel firm should get bigger. There's some kinds of commodity fabrics and commodity garment—blue jeans, sure, the way to succeed there is to be a Cone, a Burlington, making miles of denim, or to be a Levi Strauss, cutting hundreds of thousands of dozens of blue jeans because it is a commodity market. No question. On the other hand, the way to succeed in the high—style thing is to be more flexible and not get caught with the close—outs and the everything else that happens. And so what I see is an industry that's moving towards the bipolar type of situation. Which, of course, as an educator, I respond to quite favorably because we have some students here who are the type who will go out and compete in a large company in the corporate environment, and they're sophisticated, they'll do very well in that. We have others who will fail miserably in that kind of environment, but who, given the opportunity to be small entrepreneurs, will just take off and go. So I think it's great, from that standpoint. From the standpoint of opportunity, service to the market, that sort of thing. Because you've got all sorts of different elements in this thing, as I say.